October 15, 2001
VIA ELECTRONIC FILING
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: First Banks, Inc. / First Preferred Capital Trust III
Gentlemen:
Attached for electronic filing, please find a Registration Statement on
Form S-2 related to Preferred Securities of First Preferred Capital Trust III,
Subordinated Debentures of First Banks, Inc. and Guarantee of First Banks, Inc.
(the "Company").
On September 20, 2001, the Company submitted a written request to the
Office of Chief Counsel (Ms. Patricia Miller) to obtain a waiver of the
eligibility requirements for the use of Form S-2. The Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2001, was inadvertently filed one
day late due to an oversight. The Office of Chief Counsel (Ms. Patricia Miller)
granted the Company's waiver of the eligibility requirements for the use of Form
S-2 on September 25, 2001.
If you have any questions or comments, please call John Daniels at
(214) 368-9405 or me at (214) 953-5801.
Very truly yours,
/s/ James S. Ryan, III
----------------------
James S. Ryan, III
cc: Allen H. Blake
Lisa K. Vansickle
Frederick W. Scherrer
Gregory A. Billhartz
Alicia P. Boston
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 2001
================================================================================
Registration No. 333-
Registration No. 333- 01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------------------------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------------------------------------------------------
FIRST BANKS, INC. FIRST PREFERRED CAPITAL TRUST III
(Exact Name of Registrant (Exact name of Co-Registrant
as specified in its charter) as specified in its charter)
MISSOURI DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organi incorporation or organization)
43-1175538 APPLIED FOR
(I.R.S. Employer Identification (I.R.S. Employer Identification No.)
135 North Meramec, Clayton, Missouri 63105 (314) 854-4600
(Address, including zip code, and telephone number, including area code, of
registrant's and co-registrant's principal executive office)
--------------------------------------------------------------------------------
ALLEN H. BLAKE
President, Chief Operating Officer, Chief Financial Officer and Secretary
First Banks, Inc.
600 James S. McDonnell Blvd.
Hazelwood, Missouri 63042
(314) 592-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------------------------------------------------------------
With copies to:
JOHN S. DANIELS, ESQ. JAMES S. RYAN, III, ESQ. FREDERICK W. SCHERRER, ESQ.
6440 North Central Expressway Jackson Walker L.L.P. Bryan Cave LLP
Suite 503 901 Main Street, Suite 6000 211 North Broadway, Suite 3600
Dallas, Texas 75206 Dallas, Texas 75202 St. Louis, Missouri 63102-2750
(214) 368-9405 (214) 953-6000 (314) 259-2000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
============================================================ ================= ===================== ==================== ==========
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Offering Registration
Securities To Be Registered Registered(1) Per Unit Price(1) Fee(1) (2)
------------------------------------------------------------ ----------------- --------------------- -------------------- ----------
------------------------------------------------------------ ----------------- --------------------- -------------------- ----------
Preferred Securities of First Preferred Capital Trust III 1,840,000 $25.00 $46,000,000 $11,500
------------------------------------------------------------ ----------------- --------------------- -------------------- ----------
------------------------------------------------------------ ----------------- --------------------- -------------------- ----------
Subordinated Debentures of First Banks, Inc.(3)......... (3)(4) - - -
------------------------------------------------------------ ----------------- --------------------- -------------------- ----------
------------------------------------------------------------ ----------------- --------------------- -------------------- ----------
Guarantee of First Banks, Inc., with respect to Preferred (4) - - -
Securities(4).......................................
============================================================ ================= ===================== ==================== ==========
(1)Includes 240,000 Preferred Securities which may be sold by First Preferred Capital Trust III to cover over-allotments.
(2)Calculated pursuant to Rule 457 under the Securities Act of 1933.
(3)The Subordinated Debentures will be purchased by First Preferred Capital Trust III with the proceeds from the sale of the
Preferred Securities. Such securities may later be distributed for no additional consideration to the holders of the Preferred
Securities of First Preferred Capital Trust III upon its dissolution and the distribution of its assets.
(4)This Registration Statement is deemed to cover the Subordinated Debentures of First Banks, Inc., the rights of holders of
Subordinated Debentures of First Banks, Inc. under the Indenture, and the rights of holders of the Preferred Securities under the
Trust Agreement, the Guarantee and the Expense Agreement entered into by First Banks, Inc. No separate consideration will be
received from the Guarantee.
The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective
date until the Registrants shall file a further amendment which specifically states that the Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
====================================================================================================================================
SUBJECT TO COMPLETION, DATED OCTOBER 15, 2001
PROSPECTUS
1,600,000 Preferred Securities
FIRST PREFERRED CAPITAL TRUST III
% Cumulative Trust Preferred Securities
(Liquidation Amount $25 Per Preferred Security)
Fully, irrevocably and unconditionally guaranteed
on a subordinated basis, as described in this prospectus, by
FIRST BANKS, INC.
-----------------
The preferred securities represent undivided beneficial interests in
the assets of First Preferred Capital Trust III. The trust will invest all of
the proceeds of this offering of preferred securities to purchase % subordinated
debentures due 2031 of First Banks, Inc.
For each of the preferred securities that you own, you will receive
cumulative cash distributions at an annual rate of % on March 31, June 30,
September 30 and December 31 of each year, beginning December 31, 2001 from
payments on the subordinated debentures. We may defer payments of distributions
at any time for up to 20 consecutive quarters. The preferred securities are
effectively subordinated to all of our senior and subordinated indebtedness and
that of our subsidiaries. The subordinated debentures mature and the preferred
securities must be redeemed by December 31, 2031. The trust may redeem the
preferred securities, at a redemption price of $25 per preferred security plus
accrued and unpaid distributions, at any time on or after December 31, 2006, or
earlier under circumstances specified in this prospectus.
We have applied to have the preferred securities designated for
inclusion in the Nasdaq National Market under the symbol "FBNKM." Trading is
expected to commence on or prior to the delivery of the preferred securities.
---------------------------
Investing in the preferred securities involves risks. See "Risk Factors"
beginning on page 9.
The preferred securities are not savings accounts, deposits or
obligations of any bank and are not insured by the Bank Insurance Fund of the
Federal Deposit Insurance Corporation or any other governmental agency.
Per Preferred
Security Total
------------- -----------
Public offering price....................... $25.00 $40,000,000
Proceeds to the trust....................... $25.00 $40,000,000
This is a firm commitment underwriting. First Banks will pay
underwriting commissions of $ per preferred security, or a total of $ , for
arranging the investment in our subordinated debentures. The underwriters have
been granted a 30-day option to purchase up to an additional 240,000 preferred
securities to cover over-allotments, if any.
--------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
--------------------------------------------------------------------------------
Stifel, Nicolaus & Company
Incorporated
Dain Rauscher Wessels
, 2001 Fahnestock & Co. Inc.
FIRST BANKS, INC. AND SUBSIDIARIES
Map of Locations
As of June 30, 2001
-------------------------------------------------------------------------------
First Bank
-------------------------------------------------------------------------------
Central
and
Metro Regional Southern Northern
Missouri Missouri Illinois Illinois
[GRAPHIC OMITTED]
Arnold Beaufort Belleville Bartonville
Ballwin Bismarck Breese Canton
Chesterfield (2) Dutzow Carbondale Chicago
Clayton Fulton Chester (2) Galesburg (2)
Creve Coeur (3) Gerald Columbia Havana
Ellisville Hermann Fairview Heights Hillside
Florissant (3) Middletown Granite City Jacksonville
Kirkwood Montgomery City Greenville Knoxville
Lake St. Louis Morrison Johnston City Peoria (4)
Manchester Owensville Lawrenceville (2) Pittsfield
O'Fallon Park Hills (2) O'Fallon Quincy (2)
Shrewsbury Warrenton Red Bud Roodhouse
St. Charles (3) Washington Salem (2) Springfield
St. Louis City (3) Wentzville Shiloh Sterling
St. Louis County (3) Valmeyer Winchester
St. Peters Vandalia
Warson Woods Waterloo
Webster Groves West Frankfort (2)
First Bank & Trust
-------------------------------------------------------------------------------
Southern Northern
California California Texas
Beverly Hills Campbell Dallas
Encino Concord Irving
Fountain Valley Fairfield McKinney
Fullerton Napa Houston (3)
[GRAPHIC OMITTED] Gardena Oakland
Huntington Beach (2) Rancho Cordova
Irvine Roseville (2)
Laguna Niguel Sacramento
Lakewood San Francisco (4)
Long Beach (3) San Jose
Los Angeles (2) San Mateo
Malibu San Pablo
Marina del Rey San Rafael
Newport Beach Vallejo
Santa Barbara Walnut Creek
Santa Maria
Solvang
Torrance
Ventura
Westlake Village
Woodland Hills
SUMMARY
This summary highlights information contained elsewhere in, or
incorporated by reference into, this prospectus. Because this is a summary, it
may not contain all of the information that is important to you. Therefore, you
should also read the more detailed information set forth in this prospectus, our
financial statements and the other information that is incorporated by reference
in this prospectus. Unless otherwise indicated, the information in this
prospectus assumes that the underwriters will not exercise their option to
purchase additional preferred securities to cover over-allotments.
First Banks, Inc.
Who We Are
First Banks, Inc. is a registered bank holding company incorporated in
Missouri and headquartered in St. Louis County, Missouri. Through the operation
of our subsidiaries, we offer a broad array of financial services to consumer
and commercial customers. Over the years, our organization has grown
significantly, primarily as a result of our acquisition strategy, as well as
through internal growth. We currently have banking operations in California,
Illinois, Missouri and Texas. As of June 30, 2001, we had total assets of $5.90
billion, loans, net of unearned discount, of $4.86 billion, total deposits of
$4.99 billion and total stockholders' equity of $396.4 million.
Through our subsidiary banks, we offer a broad range of commercial and
personal deposit products, including demand, savings, money market and time
deposit accounts. In addition, we market combined basic services for various
customer groups, including packaged accounts for more affluent customers, and
sweep accounts, lock-box deposits and cash management products for commercial
customers. We also offer both consumer and commercial loans. Consumer lending
includes residential real estate, home equity and installment lending.
Commercial lending includes commercial, financial and agricultural loans, real
estate construction and development loans, commercial real estate loans,
asset-based loans, commercial leasing and trade financing. Other financial
services offered include mortgage banking, debit cards, brokerage services,
credit-related insurance, automated teller machines, telephone banking, safe
deposit boxes, escrow and bankruptcy deposit services, stock option services,
and trust, private banking and institutional money management services.
We operate through two subsidiary banks, as follows:
Total Assets
Geographic(Number of)Locations at June 30,
Name at June 30, 2001 2001
--------------------------------------------- ---------------------------------- --------------------
(dollars expressed
in thousands)
First Bank Missouri (44) and Illinois (42) $3,244,560
First Banks America, Inc., and its
subsidiary: California (44) and Texas (6) 2,628,378
First Bank & Trust
Acquisitions may serve to enhance our presence in a given market, to
expand the extent of our market area or to enable us to enter into new or
noncontiguous markets. Initially, we made acquisitions solely within Missouri
and Illinois. However, in the early 1990's, the pricing of acquisitions in these
areas escalated beyond the levels we believed were desirable, causing us to
explore acquisitions in other markets. As a result, in 1994 we acquired a bank
in Texas with total assets of $367.0 million, and between January 1, 1996 and
December 31, 2000, we completed 21 acquisitions in California, with total assets
of approximately $2.1 billion. In addition, in February 2000, we acquired
certain assets and assumed certain liabilities of First Capital Group, Inc., a
commercial leasing company headquartered in Albuquerque, New Mexico. We
currently have two agreements to acquire two more banks in California, which
have combined total assets of approximately $385.8 million, and two agreements
to acquire two more banking companies in Illinois, which have combined total
assets of approximately $616.4 million. We expect the transactions in California
and one of the transactions in Illinois to close during the fourth quarter of
2001 and the other transaction in Illinois to close during the first quarter of
2002.
Our subsidiary banks are wholly owned by their respective parent
companies. We owned 93.16% of First Banks America, Inc., or FBA, at June 30,
2001.
Various trusts, which were created by and are administered by and for
the benefit of Mr. James F. Dierberg, our Chairman of the Board and Chief
Executive Officer, and his adult children, own all of our voting stock. Mr.
Dierberg and his family, therefore, control our management and policies.
Growth Strategy
We believe significant opportunities exist for financial organizations
to grow and prosper by delivering quality products and by providing personal
service to individuals and small to mid-sized businesses. Consequently, we
emphasize continually improving the knowledge and skills of our people,
enhancing our service quality, and making our services competitive in the
marketplace and convenient to our customers. By combining these attributes, we
believe we can realize many of the efficiencies available to larger
organizations and still provide the opportunity for customers to receive the
personalized service that they find attractive in smaller organizations.
At the same time, we recognize that consolidation within the banking
industry and increasing competition from substantially larger banks, as well as
organizations other than banks, create pressures on interest margins and
operating costs. We believe that to counteract these pressures we must operate
efficiently and achieve a greater long-term growth rate than can be accomplished
solely by our marketing and business development efforts. Therefore, we
supplement these growth efforts with acquisitions of other financial services
entities.
Primary responsibility for managing our subsidiary banking units rests
with the officers and directors of each unit. However, in keeping with our
policy, we centralize overall corporate policies, procedures and administrative
functions and provide operational support functions for our subsidiaries. This
practice allows us to achieve operating efficiencies while allowing our
subsidiary banking units to focus on customer service.
Financial Summary
To support our growth strategy, we emphasize consistent earnings
performance, as well as retaining and investing those earnings. Consequently, we
have never paid, and have no present intention of paying, dividends on our
common stock. Furthermore, since 1999 to the present, the dividends paid on our
Class A and B preferred stock has represented less than 2.0% of our net income
before dividends. As a result, between December 31, 1996 and December 31, 2000,
our common stockholders' equity grew at a compound annual growth rate of
approximately 16.5%.
Compound
Growth or
Average
for the
Five Years
As of or for the Ended
Six Months Ended December
June 30, 31, As of or for the Year Ended December 31,
----------------- ------------------------------------------------------------------
2001 2000 2000(1) 2000 1999 1998 1997 1996
---- ---- ------- ---- ---- ---- ---- ----
(dollars in thousands)
Net income.................... $ 20,251 29,259 29.1% $ 56,107 44,178 33,510 33,027 20,218
Loans, net of unearned
discount................. 4,861,943 4,326,393 14.5 4,752,265 3,996,324 3,580,105 3,002,200 2,767,969
Total assets.................. 5,904,203 5,180,472 12.3 5,876,691 4,867,747 4,554,810 4,165,014 3,689,154
Common stockholders' equity... 383,341 308,977 16.5 339,783 281,842 250,300 218,474 184,439
Total stockholders' equity.... 396,404 322,040 8.8 352,846 294,905 263,363 231,537 251,389
Return on average total
stockholders' equity(2).. 10.78% 19.24% 19.9% 17.43% 15.79% 13.64% 12.91% 8.43%
Number of locations........... 136 137 -- 140 135 135 131 126
---------------------
(1) For the period indicated, these figures represent compound annual growth rates of net income, loans, net of unearned discount,
total assets, common stockholders' equity, total stockholders' equity and return on average total stockholders' equity.
(2) Ratios for the six-month period are annualized.
Our address is 135 North Meramec, Clayton, Missouri 63105, and our
telephone number is (314) 854-4600.
First Preferred Capital Trust III
We recently formed the trust as an additional financing subsidiary.
Upon issuance of the preferred securities offered by this prospectus, the
purchasers in this offering will own all of the issued and outstanding preferred
securities of the trust. In exchange for our capital contribution to the trust,
we will own all of the common securities of the trust. The trust exists
exclusively for the following purposes:
o issuing the preferred securities to the public for cash;
o issuing the common securities to us;
o investing the proceeds from the sale of the preferred and common
securities in an equivalent amount of % subordinated
debentures due December 31, 2031, to be issued by us; and
o engaging in activities that are incidental to those listed above.
The trust's address is 135 North Meramec, Clayton, Missouri 63105, and
its telephone number is (314) 854-4600.
The Offering
The issuer.......................... First Preferred Capital Trust III
Securities being offered............ 1,600,000 preferred securities, which
represent preferred undivided
beneficial interests in the assets of
the trust. Those assets will consist
solely of the subordinated debentures
and payments received on the
subordinated debentures. The trust will
sell the preferred securities to the
public for cash. The trust will use that
cash to buy the subordinated debentures
from us.
Offering price...................... $25 per preferred security.
When we will pay distributions
to you......................... Your purchase of the preferred
securities entitles you to receive
cumulative cash distributions at a %
annual rate. Distributions will
accumulate from the date the trust
issues the preferred securities and will
be paid quarterly on March 31, June 30,
September 30 and December 31 of each
year, beginning December 31, 2001. As
long as the preferred securities are
represented by a global security, the
record date for distributions on the
preferred securities will be the
business day prior to the distribution
date. We may defer the payment of cash
distributions, as described below.
When we must redeem the preferred
securities..................... The subordinated debentures will mature
and the preferred securities must be
redeemed by December 31, 2031. We have
the option, however, to shorten the
maturity date to a date not earlier than
December 31, 2006. We will not shorten
the maturity date unless we have
received the prior approval of the
Board of Governors of the Federal
Reserve System, if required.
Redemption of the preferred
securities before December 31,
2031 is possible............... The trust must redeem the preferred
securities when the subordinated
debentures are paid at maturity or upon
any earlier redemption of the
subordinated debentures. We may redeem
all or part of the subordinated
debentures at any time on or after
December 31, 2006. In addition, we may
redeem, at any time, all of the
subordinated debentures if:
o the interest we pay on the
subordinated debentures is no
longer deductible by us for
federal income tax purposes,
the trust becomes subject to
federal income tax, or the trust
becomes or will become subject
to certain other taxes or
governmental charges;
o existing laws or regulations
change in a manner requiring
the trust to register as an
investment company; or
o the capital adequacy guidelines
of the Federal Reserve change so
that the preferred securities
are not eligible to be counted
as Tier I capital.
We may also redeem the subordinated
debentures at any time, and from time to
time, in an amount equal to the
liquidation amount of any preferred
securities we purchase, plus a
proportionate amount of common
securities of the trust, but only in
exchange for a like amount of the
preferred securities and common
securities of the trust then owned by
us.
Redemption of the subordinated
debentures prior to maturity will be
subject to the prior approval of the
Federal Reserve, if approval is then
required. If your preferred securities
are redeemed by the trust, you will
receive the liquidation amount of $25
per preferred security, plus any accrued
and unpaid distributions to the date of
redemption.
We have the option to
extend the interest
payment period................. The trust will rely solely on payments
made by us under the subordinated
debentures to pay distributions on the
preferred securities. As long as we
are not in default under the indenture
relating to the subordinated debentures,
we may, at one or more times, defer
interest payments on the subordinated
debentures for up to 20 consecutive
quarters, but not beyond December 31,
2031. If we defer interest payments on
the subordinated debentures:
o the trust will also defer
distributions on the preferred
securities;
o the distributions you are
entitled to will accumulate; and
o these accumulated distributions
will earn interest at an annual
rate of %, compounded
quarterly, until paid.
At the end of any deferral period, we
will be obligated to pay to the trust
all accrued and unpaid interest under
the subordinated debentures. The trust
will then pay all accumulated and unpaid
distributions to you to the extent that
the trust has received accrued and
unpaid interest under the subordinated
debentures.
You will still be taxed if
distributions on the
preferred securities are
deferred....................... If a deferral of distributions on the
preferred securities occurs, you must
recognize the deferred amounts as
interest income for United States
federal income tax purposes in advance
of receiving these amounts, even if you
are a cash basis taxpayer.
Our guarantee of payment............ We guarantee the trust will use its
assets to pay the distributions on the
preferred securities and the liquidation
amount upon liquidation of the
trust. However, the guarantee does not
apply when the trust does not have
sufficient funds to make the payments.
If we do not make interest payments
on the subordinated debentures, the
trust will not have sufficient funds to
make distributions on the preferred
securities. In this event, your remedy
is to institute a legal proceeding
directly against us for enforcement of
payments under the subordinated
debentures.
We may distribute the
subordinated debentures
directly to you................ We may, at any time, dissolve the trust
and distribute the subordinated
debentures to you, subject to the prior
approval of the Federal Reserve, if
required. If we distribute the
subordinated debentures, we will use our
best efforts to list them on a national
securities exchange or comparable
automated quotation system.
How the securities will rank in
right of payment............... Our obligations under the preferred
securities, subordinated debentures and
guarantee are unsecured and will rank
as follows with regard to right of
payment:
o the preferred securities will
rank equally with the common
securities of the trust. The
trust will pay distributions on
the preferred securities and the
common securities on a pro rata
basis. However, if we default
with respect to the subordinated
debentures, then no
distributions on the common
securities of the trust or our
common stock will be paid until
all accumulated and unpaid
distributions on the preferred
securities have been paid;
o our obligations under the
subordinated debentures and the
guarantee are unsecured and
generally will rank: (1) junior
in priority to our existing and
future senior and senior
subordinated indebtedness, and
(2) equal in priority to our
subordinated debentures
associated with the $143.8
million of trust preferred
securities that our other two
financing subsidiaries currently
have outstanding; and
o because we are a holding
company, the subordinated
debentures and the guarantee
will effectively be subordinated
to all existing and future
liabilities of our subsidiaries
with respect to the assets of
each such subsidiary. These
liabilities include all
depositors' claims, as well as
the subordinated debentures
associated with the $46.0
million of outstanding trust
preferred securities issued by a
financing subsidiary of our
subsidiary, FBA.
Voting rights of the preferred
securities..................... Except in limited circumstances, holders
of the preferred securities will have no
voting rights.
Nasdaq National Market
symbol......................... FBNKM
You will not receive
certificates................... The preferred securities will be
represented by a global security that
will be deposited with and registered in
the name of The Depository Trust
Company, New York, New York, or its
nominee. This means that you will not
receive a certificate for the preferred
securities, and your beneficial
ownership interests will be recorded
through the DTC book-entry system.
How the proceeds of this offering
will be used................... The trust will invest the proceeds from
the sale of the preferred securities
in the subordinated debentures. We
estimate the net proceeds to us from the
sale of the subordinated debentures to
the trust, after deducting
underwriting expenses and commissions,
will be approximately $38.2 million.
We expect to use the net proceeds from
the sale of the subordinated
debentures to reduce indebtedness
currently outstanding under our
revolving credit line. In the future, we
anticipate using amounts remaining
available under the revolving credit
line to finance further expansion,
including pending and potential
acquisitions of banks and other
financial institutions. If at the time
the trust issues the preferred
securities, the net proceeds exceed the
balance outstanding under our revolving
credit line, we will invest the excess
proceeds in short-term investment
securities pending their use for
acquisitions or to reduce future
borrowings under our revolving credit
line.
Before purchasing the preferred securities being offered, you should
carefully consider the "Risk Factors" beginning on page 9.
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data set forth below, insofar asthey relate to the five years ended December 31, 2000,
are derived from our consolidated financial statements, which have been audited by KPMG LLP. The summary consolidated data set forth
below for the six-month periods ended June 30, 2001 and 2000, are derived from unaudited consolidated financial statements. In our
opinion, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results as of and for the
six-month periods indicated have been included. This information is qualified by reference to our consolidated financial statements
included herein, and this information should be read in conjunction with such consolidated financial statements and related notes
thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Results for past periods are
not necessarily indicative of results that may be expected for future periods and results for the six-month period ended June 30,
2001 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2001.
As of or for the
Six Months Ended
June 30, (1) As of or for the Year Ended December 31, (1)
------------------- ---------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- ---------- ------- --------- --------- -------- --------
(dollars expressed in thousands)
Income Statement Data:
Interest income.................................... $ 229,393 201,878 422,826 353,082 327,860 295,101 266,021
Interest expense................................... 104,912 88,058 187,679 158,701 162,179 148,831 141,670
---------- --------- --------- --------- --------- --------- ---------
Net interest income................................ 124,481 113,820 235,147 194,381 165,681 146,270 124,351
Provision for loan losses.......................... 7,110 7,202 14,127 13,073 9,000 11,300 11,494
---------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for loan losses 117,371 106,618 221,020 181,308 156,681 134,970 112,857
Noninterest income................................. 35,898 21,035 42,778 41,650 36,497 25,697 20,721
Noninterest expense................................ 116,016 79,710 171,163 150,807 138,704 110,287 105,741
---------- --------- --------- --------- --------- --------- ---------
Income before provision for income taxes,
minority interest in income of subsidiary
and cumulative effect of change
in accounting principle.......................... 37,253 47,943 92,635 72,151 54,474 50,380 27,837
Provision for income taxes......................... 14,581 17,741 34,482 26,313 19,693 16,083 6,960
---------- --------- --------- --------- --------- -------- --------
Income before minority interest in income of
subsidiary andcumulative effect of
change in accounting principle................... 22,672 30,202 58,153 45,838 34,781 34,297 20,877
Minority interest in income of subsidiary.......... 1,045 943 2,046 1,660 1,271 1,270 659
---------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of change in
accounting principle............................. 21,627 29,259 56,107 44,178 33,510 32,027 20,218
Cumulative effect of change in accounting
principle, net of tax............................ (1,376) -- -- -- -- -- --
---------- --------- --------- --------- --------- --------- ---------
Net income......................................... $ 20,251 29,259 56,107 44,178 33,510 32,027 20,218
========== ========= ========= ========= ========= ========= =========
Dividends:
Preferred stock.................................... $ 328 328 786 786 786 5,067 5,728
Common stock....................................... -- -- -- -- -- -- --
Ratio of total dividends declared to net income.... 1.62% 1.12% 1.40% 1.78% 2.35% 15.34% 28.33%
Balance Sheet Data:
Investment securities.............................. $ 385,010 436,320 563,534 451,647 534,796 795,530 552,801
Loans, net of unearned discounts................... 4,861,943 4,326,393 4,752,265 3,996,324 3,580,105 3,002,200 2,767,969
Total assets....................................... 5,904,203 5,180,472 5,876,691 4,867,747 4,554,810 4,165,014 3,689,154
Total deposits..................................... 4,994,119 4,456,453 5,012,415 4,251,814 3,939,985 3,684,595 3,238,567
Notes payable...................................... 34,500 58,500 83,000 64,000 50,048 55,144 76,330
Guaranteed preferred beneficial interests
in First Banks, Inc. and First Banks
America, Inc. subordinated debentures............ 182,881 127,695 182,849 127,611 127,443 83,183 --
Common stockholders' equity........................ 383,341 308,977 339,783 281,842 250,300 218,474 184,439
Total stockholders' equity......................... 396,404 322,040 352,846 294,905 263,363 231,537 251,389
Earnings Ratios:
Return on average total assets (2)................. 0.70% 1.17% 1.09% 0.95% 0.78% 0.87% 0.57%
Return on average total stockholders' equity (2)... 10.78 19.24 17.43 15.79 13.64 12.91 8.43
Efficiency ratio (3)............................... 72.34 59.11 61.59 63.89 68.60 64.13 72.89
Net interest margin (2) (4)........................ 4.73 4.90 4.93 4.52 4.19 4.09 3.79
Asset Quality Ratios:
Allowance for loan losses to loans................. 1.59 1.80 1.72 1.72 1.70 1.68 1.69
Nonperforming loans to loans (5)................... 1.26 0.85 1.12 0.99 1.22 0.80 1.09
Allowance for loan losses to
nonperforming loans (5).......................... 126.42 211.39 153.47 172.66 140.04 209.88 154.55
Nonperforming assets to loans and
other real estate (6)............................ 1.33 0.89 1.17 1.05 1.32 1.04 1.47
Net loan charge-offs (recoveries)
to average loans (2)............................. 0.48 (0.06) 0.17 0.22 0.05 0.27 0.72
Capital Ratios:
Average total stockholders' equity
to average total assets.......................... 6.48 6.07 6.25 6.00 5.73 6.70 6.79
Total risk-based capital ratio..................... 10.60 10.26 10.21 10.05 10.28 10.26 9.23
Leverage ratio..................................... 7.33 7.80 7.45 7.14 7.77 6.80 5.99
As of or for the
Six Months Ended
June 30, (1) As of or for the Year Ended December 31, (1)
--------------------- ----------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------ ------- ------ ------ ------ ------ ------
Ratio of Earnings to Fixed Charges: (7)
Including interest on deposits..................... 1.34x 1.52x 1.47x 1.43x 1.33x 1.33x 1.19x
Excluding interest on deposits..................... 4.29 5.83 5.51 4.54 4.53 4.32 2.32
------------------------------
(1) The comparability of the selected data presented is affected by the acquisitions of 11 banks and five purchases of branch
offices during the five-year period ended December 31, 2000, including the acquisitions of one bank and one leasing company
completed during the six-month period ended June 30, 2000. These acquisitions were accounted for as purchases and, accordingly,
the selected data includes the financial position and results of operations of each acquired entity only for the periods
subsequent to its respective date of acquisition.
(2) Ratios for the six-month periods are annualized.
(3) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.
(4) Net interest margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average interest-earning
assets.
(5) Nonperforming loans consist of nonaccrual loans and certain loans with restructured terms.
(6) Nonperforming assets consist of nonperforming loans and other real estate.
(7) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income before taxes plus interest and rent expense.
Fixed charges consist of interest and rent expense.
RISK FACTORS
An investment in the preferred securities involves a number of risks.
We urge you to read all of the information contained in this prospectus. In
addition, we urge you to consider carefully the following factors in evaluating
an investment in the trust before you purchase the preferred securities offered
by this prospectus.
Because the trust will rely on the interest payments it receives on the
subordinated debentures to fund all distributions on the preferred securities,
and because the trust may distribute the subordinated debentures in exchange for
the preferred securities, purchasers of the preferred securities are making an
investment decision that relates to the subordinated debentures being issued by
First Banks, Inc. as well as the preferred securities. Purchasers should
carefully review the information in this prospectus about the preferred
securities, the subordinated debentures and the guarantee.
Risks Related to First Banks, Inc.
We pursue acquisitions to supplement internal growth.
We pursue a strategy of supplementing internal growth by acquiring
other financial institutions and related entities in order to achieve certain
size objectives that we believe are necessary to compete effectively with our
larger competitors. However, there are risks associated with this strategy,
including the following:
o With the overall strength of the banking industry, numerous
potential acquirors exist for most acquisition candidates,
creating intense competition, particularly with respect to price.
In many cases this competition involves organizations with
significantly greater resources than we have available;
o Based on our acquisition strategy, we may be exposed to potential
asset quality issues or unknown or contingent liabilities of the
banks or businesses we acquire. If these issues or liabilities
exceed our estimates, our earnings and financial condition may be
adversely affected;
o Prices at which acquisitions can be made fluctuate with market
conditions. We have experienced times during which acquisitions
could not be made in specific markets at prices our management
considered acceptable, and expect that we will experience this
condition in the future in one or more markets;
o Because of our ownership structure, we do not use our common
stock to make acquisitions. This can be a disadvantage in
acquisitions relative to other prospective acquirors in those
instances in which selling stockholders require a tax-free
exchange. Additionally, cash acquisitions by their nature
initially reduce our regulatory capital ratios; and
o The acquisition of other entities generally requires integration
of systems and procedures of the acquired entity in order to make
the transaction economically feasible. This integration process
is complicated and time consuming for us, and it can also be
disruptive to the customers of the acquired business. If the
integration process is not conducted successfully and with
minimal effect on the business and its customers, we may not
realize the anticipated economic benefits of particular
acquisitions within the expected time frame, and we may lose
higher than expected numbers of customers or employees of the
acquired business.
Geographic dispersion creates additional operating requirements.
The geographic distance between the offices of our subsidiaries in
California, Illinois, Missouri, New Mexico and Texas creates additional
operating requirements that are not present in other businesses that operate in
contiguous markets. These operating requirements include:
o Operation of data processing and item processing functions at
remote locations;
o Control of correspondent accounts, reserve balances and wire
transfers in different time zones;
o Providing administrative support, including accounting, human
resources, loan servicing, internal audit and credit review at
significant distances; and
o Establishing and monitoring compliance with our corporate
policies and procedures in different areas.
The geographic distances between our operations increase the cost of
management and make it more difficult to standardize our business practices and
procedures.
Our business is subject to credit risks.
As a financial institution, we are subject to the risk that customers
to whom our subsidiary banks have made loans will be unable to repay these loans
according to their terms and that the collateral securing these loans, if any,
may not have a value equal to amounts owed under the loans. In recent years, we
have reduced our levels of consumer lending and expanded our commercial lending
activities. Our expanded level of commercial lending carries with it greater
credit risk than the credit risk associated with consumer lending. A substantial
portion of the loans made by our subsidiary banks is secured by real estate.
Adverse developments affecting real estate in one or more of our markets could
increase the credit risk associated with our loan portfolio.
If our allowance for loan losses is insufficient to absorb losses in our loan
portfolio, it will adversely affect our financial condition and results of
operations.
Some borrowers may not repay loans that we make to them. This risk is
inherent in the banking business. We maintain an allowance for loan losses to
absorb probable loan losses in our loan portfolio. However, we cannot predict
loan losses with certainty, and we cannot assure you that our allowance will be
sufficient, particularly during an economic downturn. Loan losses in excess of
our allowance would have an adverse effect on our financial condition and
results of operations.
We may be adversely affected by interest rate changes.
Our earnings are derived from the operations of our subsidiaries, and
we are principally dependent on net interest income, calculated as the
difference between interest earned on loans and investments and the interest
expense paid on deposits and other borrowings. Like other banks and financial
institutions, our interest income and interest expense are affected by general
economic conditions and by the policies of regulatory authorities, including the
monetary policies of the Federal Reserve. Changes in the economic environment
may affect loan and deposit pricing, influence the growth rate of loans and
deposits and alter the quality of our loan portfolio. While management has taken
measures, such as employing various financial instruments, including
derivatives, when appropriate, intended to manage the risks of operating in a
changing interest rate environment, there can be no assurance that such measures
will be effective in avoiding undue interest rate risk. There are also costs
associated with these measures and risks that counterparties may not perform
these obligations. Under our current interest rate risk position, our net
interest income could be negatively affected by a decline in interest rates.
Our operating results may be affected by the results of our hedging activities.
To offset the risks associated with the effects of changes in market
interest rates, we enter into transactions designed to hedge our interest rate
risk. Our management determines the nature and quantity of our hedging
transactions by using simulation techniques to model various interest rate
scenarios with respect to our assets and liabilities. Our hedging activities are
affected by our balance sheet composition, current and projected interest rates
and the velocity of changes in rates. While we believe we are properly hedging
our interest rate risk, the accounting for such hedging activities under
accounting principles generally accepted in the United States of America
requires our hedging instruments to be recorded at market value. The effect of
certain of our hedging strategies may result in volatility in our quarterly
earnings as interest rates go up or down. The volatility in earnings is
primarily a result of marking to market certain of our hedging instruments
and/or modifying our overall hedge position. While we believe we are properly
hedging our interest rate risk, we cannot assure you that our hedging
transactions will offset our risks of losses.
Our future success is dependent on our ability to compete effectively in the
highly competitive banking industry.
The financial services business is highly competitive, and we encounter
strong direct competition for deposits, loans and other financial services in
all of our market areas. Our principal competitors include other commercial
banks, savings banks, savings and loan associations, mutual funds, finance
companies, trust companies, insurance companies, leasing companies, credit
unions, mortgage companies, private issuers of debt obligations and suppliers of
other investment alternatives, such as securities firms and financial holding
companies. Many of our non-bank competitors are not subject to the same degree
of regulation as that imposed on bank holding companies, federally insured banks
and national or state chartered banks. As a result, such non-bank competitors
have advantages over us in providing certain services. We also compete with
major multi-bank holding companies which are significantly larger than us and
have greater access to capital and other resources.
We may be adversely affected by recent events.
The events of September 11, 2001 in New York City and Washington, D.C.
are likely to have a negative impact on a domestic economy that was slowing even
prior to those events. If the domestic economy deteriorates, an increase in
delinquencies in our loan portfolio and in loan losses can be expected. The
events of September 11, 2001 may lead to reduced levels of travel, which could
adversely affect our hotel loan and commercial airlines equipment leasing
portfolios. At June 30, 2001, we had $195.1 million in hotel loans and $28.4
million in equipment leases to commercial airlines. We are unable to predict
whether the threat of similar future events or responses to such events will
result in long-term commercial disruptions or will have a long-term adverse
effect on our business, results of operations or financial condition.
Our business may be adversely affected by the highly regulated environment in
which we operate.
We and our subsidiaries are subject to extensive federal and state
legislation, regulation and supervision. Recently enacted, proposed and future
legislation and regulations have had and are expected to continue to have a
significant impact on the financial services industry. Some of the legislative
and regulatory changes may benefit us and our subsidiaries; however, other
changes could increase our costs of doing business or reduce our ability to
compete in certain markets.
We continually encounter technological change, and we may have fewer resources
than many of our competitors to continue to invest in technological
improvements.
The financial services industry is undergoing rapid technological
changes, with frequent introductions of new technology-driven products and
services. In addition to better serving customers, the effective use of
technology increases efficiency and enables financial institutions to reduce
costs. Our future success will depend, in part, upon our ability to address the
needs of our customers by using technology to provide products and services that
will satisfy customer demands for convenience, as well as to create additional
efficiencies in our operations. Many of our competitors have substantially
greater resources to invest in technological improvements. We cannot assure you
that we will be able to effectively implement new technology-driven products and
services or be successful in marketing these products and services to our
customers.
One family maintains voting control over First Banks.
Various trusts, which were created by and are administered by and for
the benefit of Mr. James F. Dierberg, our Chairman and Chief Executive Officer,
and his adult children, own all of our voting stock. Mr. Dierberg and his
family, therefore, control our management and policies. In the event of Mr.
Dierberg's death or disability, Mr. Dierberg's wife will control our
management and policies.
Risks Related to an Investment in the Preferred Securities
If we do not make interest payments under the subordinated debentures, the trust
will be unable to pay distributions and liquidation amounts. The guarantee will
not apply because the guarantee covers payments only if the trust has funds
available.
The trust will depend solely on our interest payments on the
subordinated debentures to make distributions to you on the preferred
securities. If we default on our obligation to pay the principal or interest on
the subordinated debentures, the trust will not have sufficient funds to pay
distributions or the liquidation amount on the preferred securities. In that
case, you will not be able to rely on the guarantee for payment of these amounts
because the guarantee only applies if the trust has sufficient funds to make
distributions on or to pay the liquidation amount of the preferred securities.
Instead, you or the property trustee will have to institute a direct action
against us to enforce the property trustee's rights under the indenture relating
to the subordinated debentures.
Our ability to make interest payments on the subordinated debentures to the
trust may be restricted.
We are a holding company, and substantially all of our assets are held
by our subsidiaries. Our ability to make payments on the subordinated debentures
when due will depend primarily on available cash resources at the bank holding
company level and on dividends from our subsidiaries. The ability of each
banking subsidiary to pay dividends is subject to its profitability, financial
condition, capital expenditures and other cash flow requirements. Furthermore,
the terms of the subordinated debentures associated with the $46.0 million of
trust preferred securities issued by FBA's financing subsidiary prevent FBA from
making dividend payments to us under certain circumstances. Dividend payments or
extensions of credit from our banking subsidiaries are also subject to
regulatory limitations, generally based on capital levels and current and
retained earnings, imposed by the various regulatory agencies with authority
over such subsidiaries. Based on applicable regulatory limitations, our banking
subsidiaries had the capacity to pay a total of approximately $34.2 million in
dividends as of June 30, 2001, subject to our need to maintain adequate capital
ratios at each bank. We may also be precluded from making interest payments on
the subordinated debentures by our regulators in order to address any perceived
deficiencies in liquidity or regulatory capital levels at the holding company
level. Such regulatory action would require us to obtain consent from our
regulators prior to paying dividends on our capital stock or interest on the
subordinated debentures. In the event our regulators withheld their consent to
our payment of interest on the subordinated debentures, we would exercise our
right to defer interest payments on the subordinated debentures, and the trust
would not have funds available to make distributions on the preferred securities
during such period. The commencement of a deferral period would likely cause the
market price of the preferred securities to decline. We cannot assure you that
our subsidiaries will be able to pay dividends in the future or that our
regulators will not attempt to preclude us from making interest payments on the
subordinated debentures.
The subordinated debentures and the guarantee rank lower than most of our other
indebtedness, and our holding company structure effectively subordinates any
claims against us to those of our subsidiaries' creditors.
Our obligations under the subordinated debentures and the guarantee are
unsecured and will rank junior in priority of payment to our existing and future
senior and senior subordinated indebtedness, which totaled $29.5 million at
September 30, 2001, and will rank equally with the subordinated debentures
associated with the $143.8 million of trust preferred securities our other two
financing subsidiaries currently have outstanding. The issuance of the
subordinated debentures and the preferred securities does not limit our ability
or the ability of our subsidiaries to incur additional indebtedness, guarantees
or other liabilities.
Because we are a holding company, the creditors of our subsidiaries,
including depositors and the holders of subordinated debentures associated with
the $46.0 million of trust preferred securities issued by a financing subsidiary
of our subsidiary, FBA, also will have priority over you in any distribution of
each subsidiary's assets in liquidation, reorganization or otherwise.
Accordingly, the subordinated debentures and the guarantee will be effectively
subordinated to all existing and future liabilities of our subsidiaries with
respect to the assets of each such subsidiary, and you should look only to our
assets for payments on the preferred securities and the subordinated debentures.
We have the option to defer interest payments on the subordinated debentures for
substantial periods.
We may, at one or more times, defer interest payments on the
subordinated debentures for up to 20 consecutive quarters. If we defer interest
payments on the subordinated debentures, the trust will defer distributions on
the preferred securities during any deferral period. During a deferral period,
you will be required to recognize as income for federal income tax purposes the
amount approximately equal to the interest that accrues on your proportionate
share of the subordinated debentures held by the trust in the tax year in which
that interest accrues, even though you will not receive these amounts until a
later date. You will also not receive the cash related to any accrued and unpaid
interest from the trust if you sell the preferred securities before the end of
any deferral period. During a deferral period, accrued but unpaid distributions
will increase your tax basis in the preferred securities. If you sell the
preferred securities during a deferral period, your increased tax basis will
decrease the amount of any capital gain or increase the amount of any capital
loss that you may have otherwise realized on the sale. A capital loss, except in
certain limited circumstances, cannot be applied to offset ordinary income. As a
result, deferral of distributions could result in ordinary income, and a related
tax liability for the holder, and a capital loss that may only be used to offset
a capital gain.
We do not currently intend to exercise our right to defer interest
payments on the subordinated debentures. However, if we exercise our right in
the future, the market price of the preferred securities would likely be
adversely affected. The preferred securities may trade at a price that does not
fully reflect the value of accrued but unpaid interest on the subordinated
debentures. If you sell the preferred securities during a deferral period, you
may not receive the same return on investment as someone who continues to hold
the preferred securities. Due to our right to defer interest payments, the
market price of the preferred securities may be more volatile than the market
prices of other securities without the deferral feature.
We have made only limited covenants in the indenture and the trust agreement.
The indenture governing the subordinated debentures and the trust
agreement governing the trust do not require us to maintain any financial ratios
or specified levels of stockholders' equity, revenues, income, cash flow or
liquidity, and therefore do not protect holders of the subordinated debentures
or the preferred securities in the event we experience significant adverse
changes in our financial condition or results of operations. The indenture
prevents us and any subsidiary from incurring, in connection with the issuance
of any trust preferred securities or any similar securities, indebtedness that
is senior in right of payment to the subordinated debentures. The indenture also
limits our ability and the ability of any subsidiary to incur, in connection
with the issuance of any trust preferred securities or any similar securities,
indebtedness that is equal in right of payment with the subordinated debentures.
Except as described above, neither the indenture or the trust agreement limits
our ability or the ability of any subsidiary to incur additional indebtedness
that is senior in right of payment to the subordinated debentures. Therefore,
you should not consider the provisions of these governing instruments as a
significant factor in evaluating whether we will be able to comply with our
obligations under the subordinated debentures or the guarantee.
We may redeem the subordinated debentures before December 31, 2031.
Under the following circumstances, we may redeem the subordinated
debentures before their stated maturity:
o We may redeem the subordinated debentures, in whole or in part, at
any time on or after December 31, 2006.
o We may redeem the subordinated debentures in whole, but not in
part, within 180 days after certain occurrences at any time
during the life of the trust. These occurrences may include
adverse tax, investment company or bank regulatory developments.
See "Description of the Subordinated Debentures -- Redemption."
You should assume that we will exercise our redemption option if we are
able to obtain capital at a lower cost than we must pay on the subordinated
debentures or if it is otherwise in our interest to redeem the subordinated
debentures. If the subordinated debentures are redeemed, the trust must redeem
preferred securities having an aggregate liquidation amount equal to the
aggregate principal amount of subordinated debentures redeemed, and you may not
be able to earn a return that is as high as you were earning on the preferred
securities.
We can distribute the debentures to you, which may have adverse tax consequences
for you and which may adversely affect the market price of the preferred
securities.
The trust may be dissolved at any time before maturity of the
subordinated debentures on December 31, 2031. As a result, and subject to the
terms of the trust agreement, the trustees may distribute the subordinated
debentures to you.
We cannot predict the market prices for the subordinated debentures
that may be distributed in exchange for preferred securities upon liquidation of
the trust. The preferred securities, or the subordinated debentures that you may
receive if the trust is liquidated, may trade at a discount to the price that
you paid to purchase the preferred securities. Because you may receive
subordinated debentures, your investment decision with regard to the preferred
securities will also be an investment decision with regard to the subordinated
debentures. You should carefully review all of the information contained in this
prospectus regarding the subordinated debentures.
Under current interpretations of United States federal income tax laws
supporting classification of the trust as a grantor trust for tax purposes, a
distribution of the subordinated debentures to you upon the dissolution of the
trust would not be a taxable event to you. Nevertheless, if the trust is
classified for United States income tax purposes as an association taxable as a
corporation at the time it is dissolved, the distribution of the subordinated
debentures would be a taxable event to you. In addition, if there is a change in
law, a distribution of subordinated debentures upon the dissolution of the trust
could be a taxable event to you.
You are subject to prepayment risk because possible tax law changes could result
in a redemption of the preferred securities.
Future legislation may be enacted that could adversely affect our
ability to deduct our interest payments on the subordinated debentures for
federal income tax purposes, making redemption of the subordinated debentures
likely and resulting in a redemption of the preferred securities.
From time to time, changes to the federal income tax law have been
proposed that would, among other things, generally deny interest deductions to a
corporate issuer if the debt instrument has a term exceeding 15 years and if the
debt instrument is not reflected as indebtedness on the issuer's consolidated
balance sheet. Other proposed tax law changes would have denied interest
deductions if the debt instrument had a term exceeding 20 years. These proposals
were not enacted into law. Although it is impossible to predict future
proposals, if a future proposal of this sort were to become effective in a form
applicable to already issued and outstanding securities, we could be precluded
from deducting interest on the subordinated debentures. Enactment of this type
of proposal might in turn give rise to a tax event as described under
"Description of the Preferred Securities -- Redemption or Exchange -- Redemption
upon a Tax Event, Investment Company Event or Capital Treatment Event."
Trading characteristics of the preferred securities may create adverse tax
consequences for you.
The preferred securities may trade at a price that does not reflect the
value of accrued but unpaid interest on the underlying subordinated debentures.
If you dispose of your preferred securities between record dates for payments on
the preferred securities, you may have adverse tax consequences. Under these
circumstances, you will be required to include accrued but unpaid interest on
the subordinated debentures allocable to the preferred securities through the
date of disposition in your income as ordinary income if you use the accrual
method of accounting or if this interest represents original issue discount.
If interest on the subordinated debentures is included in income under
the original issue discount provisions, you would add this amount to your
adjusted tax basis in your share of the underlying subordinated debentures
deemed disposed. If your selling price is less than your adjusted tax basis,
which will include all accrued but unpaid original issue discount interest
included in your income, you could recognize a capital loss which, subject to
limited exceptions, cannot be applied to offset ordinary income for federal
income tax purposes. See "Federal Income Tax Consequences" for more information
on possible adverse tax consequences to you.
There is no current public market for the preferred securities and their market
price may be subject to significant fluctuations.
There is currently no public market for the preferred securities. We
have applied to have the preferred securities designated for inclusion in the
Nasdaq National Market, and trading is expected to commence on or prior to
delivery of the preferred securities. However, there is no guarantee that an
active or liquid trading market will develop for the preferred securities or
that the quotation of the preferred securities will continue in the Nasdaq
National Market. If an active trading market does not develop, the market price
and liquidity of the preferred securities will be adversely affected. Even if an
active public market does develop, there is no guarantee that the market price
for the preferred securities will equal or exceed the price you pay for the
preferred securities.
Future trading prices of the preferred securities may be subject to
significant fluctuations in response to prevailing interest rates, our future
operating results and financial condition, the market for similar securities and
general economic and market conditions. The initial public offering price of the
preferred securities has been set at the liquidation amount of the preferred
securities and may be greater than the market price following the offering.
The market price for the preferred securities, or the subordinated
debentures that you may receive in a distribution, is also likely to decline
during any period that we are deferring interest payments on the subordinated
debentures.
You must rely on the property trustee to enforce your rights if there is an
event of default under the indenture.
You may not be able to directly enforce your rights against us if an
event of default under the indenture occurs. If an event of default under the
indenture occurs and is continuing, this event will also be an event of default
under the trust agreement. In that case, you must rely on the enforcement by the
property trustee of its rights as holder of the subordinated debentures. The
holders of a majority in liquidation amount of the preferred securities will
have the right to direct the property trustee to enforce its rights. If the
property trustee does not enforce its rights following an event of default and a
request by the record holders to do so, any record holder may, to the extent
permitted by applicable law, take action directly against us to enforce the
property trustee's rights. If an event of default occurs under the trust
agreement that is attributable to our failure to pay interest or principal on
the subordinated debentures, or if we default under the guarantee, you may
proceed directly against us. You will not be able to exercise directly any other
remedies available to the holders of the subordinated debentures unless the
property trustee fails to do so.
As a holder of preferred securities you have limited voting rights.
Holders of preferred securities have limited voting rights. Your voting
rights pertain primarily to amendments to the trust agreement. In general, only
we can replace or remove any of the trustees. However, if an event of default
under the trust agreement occurs and is continuing, the holders of at least a
majority in aggregate liquidation amount of the preferred securities may replace
the property trustee and the Delaware trustee.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information appearing in this report, in documents incorporated by
reference herein and in documents subsequently filed with the Securities and
Exchange Commission that are not statements of historical fact may include
forward-looking statements with respect to our financial condition, results of
operations and business. These forward-looking statements are subject to certain
risks and uncertainties, not all of which can be predicted or anticipated. These
risks and uncertainties include all of those risks and uncertainties identified
under the heading "Risk Factors" appearing elsewhere in this prospectus. Factors
that may cause our actual results to differ materially from those contemplated
by the forward-looking statements herein include market conditions as well as
conditions affecting the banking industry generally and factors having a
specific impact on us, including but not limited to: the changes in interest
rates; the credit risks associated with consumers who may not repay loans; the
geographic dispersion of our offices; the impact our hedging activities may have
on our operating results; the highly regulated environment in which we operate;
the competitive conditions in the banking industry, including competition from
banking and nonbanking companies; and our ability to respond to changes in
technology. With regard to our efforts to grow through acquisitions, factors
that could affect the accuracy or completeness of forward-looking statements
contained herein include the competition of larger acquirers with greater
resources; fluctuations in the prices at which acquisition targets may be
available for sale; the impact of making acquisitions without using our common
stock; and possible asset quality issues, unknown liabilities or integration
issues with the businesses that we have acquired. Readers of our prospectus
should therefore not place undue reliance on forward-looking statements.
USE OF PROCEEDS
The trust will invest all of the proceeds from the sale of the
preferred securities in the subordinated debentures. We anticipate that the net
proceeds from the sale of the subordinated debentures will be approximately
$38.2 million after deduction of offering expenses estimated to be $275,000 and
underwriting commissions.
We expect to use the net proceeds to reduce indebtedness currently
outstanding under our revolving credit line with a group of unaffiliated banks.
At September 30, 2001, approximately $29.5 million was outstanding under the
revolving credit line. We expect our balance under the revolving credit line to
increase as we consummate pending acquisitions. If at the time the trust issues
the preferred securities, the net proceeds exceed the balance outstanding under
the revolving credit line, we will invest the excess proceeds in short-term
investment securities pending their use for acquisitions or to reduce future
borrowings under the revolving credit line.
The revolving credit line provides for maximum borrowings of $120.0
million. Interest is payable on outstanding principal balances, at a floating
rate equal to, at our option, either the lender's prime rate or the Eurodollar
rate plus a margin determined by the outstanding balance and our net income. The
borrowings outstanding under the revolving credit line mature on August 22,
2002. The revolving credit line is secured by a pledge of the stock of our
banking subsidiaries and a note receivable from FBA. We expect to keep the
revolving credit line available for future borrowings.
In the future, we anticipate using the amounts remaining available
under the credit line to finance further expansion and potential acquisitions of
banks and other financial institutions. Currently, we are a party to agreements
to acquire two California banks having aggregate assets of approximately $385.8
million and two Illinois banks having aggregate assets of approximately $616.4
million. The aggregate cash purchase price for these acquisitions is
approximately $134.6 million. We expect the transactions in California and one
of the transactions in Illinois to close during the fourth quarter of 2001 and
the other transaction in Illinois to close during the first quarter of 2002.
While we are currently evaluating other possible acquisition candidates, there
are no other transactions currently pending.
ACCOUNTING TREATMENT
The trust will be treated, for financial reporting purposes, as our
subsidiary and, accordingly, the accounts of the trust will be included in our
consolidated statements of income as noninterest expense. The preferred
securities will be presented as a separate line item in our consolidated balance
sheet under the caption "Guaranteed preferred beneficial interests in First
Banks, Inc. subordinated debentures," or other similar caption. In addition,
appropriate disclosures about the preferred securities, the guarantee and the
subordinated debentures will be included in the notes to our consolidated
financial statements.
Our future reports filed under the Securities Exchange Act of 1934 will
include a note to the consolidated financial statements stating that:
o the trust is wholly-owned;
o the sole assets of the trust are the subordinated debentures,
specifying the subordinated debentures' outstanding principal
amount, interest rate and maturity date; and
o our obligations described in this prospectus, in the aggregate,
constitute a full, irrevocable and unconditional guarantee on a
subordinated basis by us of the obligations of the trust under
the preferred securities.
We have not included separate financial statements of the trust in this
prospectus. We do not consider that separate financial statements would be
material to holders of preferred securities because we will own all of the
trust's voting securities, the trust has no independent operations and we
guarantee the payments on the preferred securities to the extent described in
this prospectus.
MARKET FOR THE PREFERRED SECURITIES
We have applied to have the preferred securities designated for
inclusion in the Nasdaq National Market under the symbol "FBNKM." Trading is
expected to commence on or prior to the delivery of the preferred securities. We
are not sure, however, whether an active and liquid trading market will develop,
or if developed, will continue. The public offering price and distribution rate
have been determined by negotiations among our representatives and the
underwriters, and the public offering price of the preferred securities may not
be indicative of the market price following the offering. See "Underwriting."
CAPITALIZATION
The following table sets forth (i) our consolidated capitalization atJune 30, 2001 and (ii) our consolidated capitalization
giving effect to the issuance of the preferred securities hereby offered by the trust and our receipt of the net proceeds from the
corresponding sale of the subordinated debentures to the trust, as if the sale of the preferred securities had been consummated on
June 30, 2001, and assuming the underwriters' over-allotment option was not exercised. This data should be read in conjunction with
our consolidated financial statements and notes thereto.
June 30, 2001
--------------------------------------
Actual As Adjusted
---------------- ---------------
Long-Term Debt: (dollars expressed in thousands)
Notes payable(1)...................................................... $ 34,500 $ --
-------- --------
Guaranteed Preferred Beneficial Interests in First Banks, Inc. and First
Banks America, Inc. Subordinated Debentures:
Guaranteed preferred beneficial interests in First Banks, Inc.
subordinated debentures........................................... 143,750 183,750
Guaranteed preferred beneficial interests in First Banks America, Inc.
subordinated debentures........................................... 46,000 46,000
-------- --------
Total guaranteed preferred beneficial interests in subordinated
debentures................................................... 189,750 229,750
Less unamortized expenses relating to the issuance of the preferred
securities........................................................ (6,869) (8,644)
-------- --------
Total guaranteed preferred beneficial interests in subordinated
debentures, net of expenses.................................. 182,881 221,106
-------- --------
Stockholders' Equity:
Preferred stock:
$1.00 par value, 5,000,000 shares authorized, no shares issued and
outstanding.................................................. -- --
Class A convertible, adjustable rate, $20.00 par value, 750,000
shares authorized, 641,082 shares issued and outstanding..... 12,822 12,822
Class B adjustable rate, $1.50 par value, 200,000 shares
authorized, 160,505 shares issued and outstanding............ 241 241
Common stock, $250.00 par value, 25,000 shares authorized,
23,661 shares issued and outstanding........................... 5,915 5,915
Capital surplus....................................................... 2,610 2,610
Retained earnings..................................................... 345,503 345,503
Accumulated other comprehensive income................................ 29,313 29,313
-------- --------
Total stockholders' equity........................................ 396,404 396,404
-------- --------
Total capitalization.............................................. $613,785 $617,510
======== ========
Capital Ratios:(2)(3)
Leverage ratio(4)..................................................... 7.33% 7.33%
Tier I capital ratio.................................................. 8.01 8.01
Total risk based capital ratio........................................ 10.60 11.32
-------------------------------
(1) The proceeds of this offering will be used in their entirety to temporarily reduce the indebtedness outstanding under First
Banks' revolving credit line. See "Use of Proceeds" for a description of the revolving credit line and the amounts outstanding
thereunder as of certain dates.
(2) The capital ratios, as adjusted, are computed including the total estimated net proceeds from the sale of the preferred
securities, in a manner consistent with Federal Reserve regulations.
(3) The preferred securities have been structured to qualify as Tier I capital. However, in calculating the amount of Tier I
qualifying capital, the preferred securities, together with any outstanding cumulative preferred stock of First Banks that
may be outstanding in the future, may only be included up to the amount constituting 25% of Tier I core capital elements
(including the preferred securities). Initially, none of the preferred securities will be considered Tier I capital.
(4) The leverage ratio is Tier I capital divided by average quarterly assets, after deducting intangible assets and net deferred
tax assets in excess of regulatory maximum limits.
SELECTED CONSOLIDATED AND OTHER FINANCIAL DATA
The selected consolidated financial data set forth below, insofar as they relate to the five years ended December 31, 2000,
are derived from our consolidated financial statements, which have been audited by KPMG LLP. The selected consolidated data set
forth below for the six-month periods ended June 30, 2001 and 2000, are derived from unaudited consolidated financial statements.
In our opinion, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results as of and
for the six-month periods indicated have been included. This information is qualified by reference to our consolidated financial
statements included herein, and this information should be read in conjunction with such consolidated financial statements and
related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Results for past
periods are not necessarily indicative of results that may be expected for future periods and results for the six-month period ended
June 30, 2001 are not necessarily indicative of results that may be expected for the entire year ending December 31, 2001.
As of or for the
Six Months Ended
June 30, (1) As of or for the Year Ended December 31, (1)
------------------- ---------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- ---------- ------- --------- --------- -------- --------
(dollars expressed in thousands, except per share data)
Income Statement Data:
Interest income.................................... $ 229,393 201,878 422,826 353,082 327,860 295,101 266,021
Interest expense................................... 104,912 88,058 187,679 158,701 162,179 148,831 141,670
----------- --------- -------- --------- --------- --------- ---------
Net interest income................................ 124,481 113,820 235,147 194,381 165,681 146,270 124,351
Provision for loan losses.......................... 7,110 7,202 14,127 13,073 9,000 11,300 11,494
----------- -------- -------- --------- --------- --------- ---------
Net interest income after provision for loan losses 117,371 106,618 221,020 181,308 156,681 134,970 112,857
Noninterest income................................. 35,898 21,035 42,778 41,650 36,497 25,697 20,721
Noninterest expense................................ 116,016 79,710 171,163 150,807 138,704 110,287 105,741
----------- --------- -------- --------- --------- --------- ---------
Income before provision for income taxes,
minority interest in income of subsidiary
and cumulative effect of change
in accounting principle.......................... 37,253 47,943 92,635 72,151 54,474 50,380 27,837
Provision for income taxes......................... 14,581 17,741 34,482 26,313 19,693 16,083 6,960
----------- --------- -------- --------- --------- --------- ---------
Income before minority interest in income of
subsidiary and cumulative effect of change
in accounting principle.......................... 22,672 30,202 58,153 45,838 34,781 34,297 20,877
Minority interest in income of subsidiary.......... 1,045 943 2,046 1,660 1,271 1,270 659
----------- --------- -------- --------- --------- --------- ---------
Income before cumulative effect of change in
accounting principle............................. 21,627 29,259 56,107 44,178 33,510 32,027 20,218
Cumulative effect of change in
accounting principle, net of tax................. (1,376) -- -- -- -- -- --
----------- --------- -------- --------- --------- --------- ---------
Net income......................................... $ 20,251 29,259 56,107 44,178 33,510 32,027 20,218
=========== ========= ======== ========= ========= ========= =========
Dividends:
Preferred stock.................................... $ 328 328 786 786 786 5,067 5,728
Common stock....................................... -- -- -- -- -- -- --
Ratio of total dividends declared to net income.... 1.62% 1.12% 1.40% 1.78% 2.35% 15.34% 28.33%
Per Share Data:
Earnings per common share:
Basic:
Income before cumulative effect of change in
accounting principle......................... $ 900.21 1,222.71 2,338.04 1,833.91 1,383.04 1,181.69 612.46
Cumulative effect of change in
accounting principle, net of tax............... (58.16) -- -- -- -- -- --
----------- --------- -------- --------- --------- --------- ---------
$ 842.05 1,222.71 2,338.04 1,833.91 1,383.04 1,181.69 612.46
=========== ========= ======== ========= ========= ========= =========
Diluted:
Income before cumulative effect of change in
accounting principle........................ $ 882.65 1,182.47 2,267.41 1,775.47 1,337.09 1,134.28 596.83
Cumulative effect of change in accounting
principle, net of tax....................... (58.16) -- -- -- -- -- --
----------- ---------- --------- --------- --------- --------- ---------
$ 824.49 1,182.47 2,267.41 1,775.47 1,337.09 1,134.28 569.83
=========== ========== ========= ========= ========= ========= =========
As of or for the
Six Months Ended
June 30, (1) As of or for the Year Ended December 31, (1)
--------------------- ---------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- ------ ------- ------ ------ ------
(dollars expressed in thousands)
Weighted average common stock outstanding.......... 23,661 23,661 23,661 23,661 23,661 23,661 23,661
Balance Sheet Data:
Investment securities.............................. $ 385,010 436,320 563,534 451,647 534,796 795,530 552,801
Loans, net of unearned discount.................... 4,861,943 4,326,393 4,752,265 3,996,324 3,580,105 3,002,200 2,767,969
Total assets....................................... 5,904,203 5,180,472 5,876,691 4,867,747 4,554,810 4,165,014 3,689,154
Total deposits..................................... 4,994,119 4,456,453 5,012,415 4,251,814 3,939,985 3,684,595 3,238,567
Notes payable...................................... 34,500 58,500 83,000 64,000 50,048 55,144 76,330
Guaranteed preferred beneficial interests
in First Banks, Inc.
and First Banks America, Inc.
subordinated debentures.......................... 182,881 127,695 182,849 127,611 127,443 83,183 --
Common stockholders' equity........................ 383,341 308,977 339,783 281,842 250,300 218,474 184,439
Total stockholders' equity......................... 396,404 322,040 352,846 294,905 263,363 231,537 251,389
Earnings Ratios:
Return on average total assets (2)................. 0.70% 1.17% 1.09% 0.95% 0.78% 0.87% 0.57%
Return on average total stockholders' equity (2)... 10.78 19.24 17.43 15.79 13.64 12.91 8.43
Efficiency ratio (3)............................... 72.34 59.11 61.59 63.89 68.60 64.13 72.89
Net interest margin (2) (4)........................ 4.73 4.90 4.93 4.52 4.19 4.09 3.79
As of or for the
Six Months Ended
June 30, (1) As of or for the Year Ended December 31, (1)
------------------- ---------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- ------ ------- ------ ------ ------
Asset Quality Ratios:
Allowance for loan losses to loans................. 1.59% 1.80% 1.72% 1.72% 1.70% 1.68% 1.69%
Nonperforming loans to loans (5)................... 1.26 0.85 1.12 0.99 1.22 0.80 1.09
Allowance for loan losses to
nonperforming loans (5).......................... 126.42 211.39 153.47 172.66 140.04 209.88 154.55
Nonperforming assets to loans
and other real estate (6)........................ 1.33 0.89 1.17 1.05 1.32 1.04 1.47
Net loan charge-offs (recoveries)
to average loans (2)............................. 0.48 (0.06) 0.17 0.22 0.05 0.27 0.72
Capital Ratios:
Average total stockholders' equity
to average total assets.......................... 6.48 6.07 6.25 6.00 5.73 6.70 6.79
Total risk-based capital ratio..................... 10.60 10.26 10.21 10.05 10.28 10.26 9.23
Leverage ratio..................................... 7.33 7.80 7.45 7.14 7.77 6.80 5.99
Ratio of Earnings to Fixed Charges: (7)
Including interest on deposits..................... 1.34x 1.52x 1.47x 1.43x 1.33x 1.33x 1.19x
Excluding interest on deposits..................... 4.29 5.83 5.51 4.54 4.53 4.32 2.32
------------------------------
(1) The comparability of the selected data presented is affected by the acquisitions of 11 banks and five purchases of branch
offices during the five-year period ended December 31, 2000, including the acquisitions of one bank and one leasing company
completed during the six-month period ended June 30, 2000. These acquisitions were accounted for as purchases and, accordingly,
the selected data includes the financial position and results of operations of each acquired entity only for the periods
subsequent to its respective date of acquisition.
(2) Ratios for the six-month periods are annualized.
(3) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.
(4) Net interest margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average interest-earning
assets.
(5) Nonperforming loans consist of nonaccrual loans and certain loans with restructured terms.
(6) Nonperforming assets consist of nonperforming loans and other real estate.
(7) For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income before taxes plus
interest and rent expense. Fixed charges consist of interest and rent expense.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following presents management's discussion and analysis of our
financial condition and results of operations as of the dates and for the
periods indicated. You should read this discussion in conjunction with our
"Selected Consolidated and Other Financial Data," our consolidated financial
statements and the related notes thereto, and the other financial data contained
elsewhere in this prospectus.
This discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ significantly from those
anticipated in these forward-looking statements as a result of various factors,
including those discussed in "Risk Factors" contained elsewhere in this
prospectus. See "Special Note Regarding Forward-Looking Statements."
General
We are a registered bank holding company incorporated in Missouri and
headquartered in St. Louis County, Missouri. Through the operation of our
subsidiaries, we offer a broad array of financial services to consumer and
commercial customers. Over the years, our organization has grown significantly,
primarily as a result of our acquisition strategy, as well as through internal
growth. We currently have banking operations in California, Illinois, Missouri
and Texas. As of June 30, 2001, we had total assets of $5.90 billion, loans, net
of unearned discount, of $4.86 billion, total deposits of $4.99 billion and
total stockholders' equity of $396.4 million.
Through our subsidiary banks, we offer a broad range of commercial and
personal deposit products, including demand, savings, money market and time
deposit accounts. In addition, we market combined basic services for various
customer groups, including packaged accounts for more affluent customers, and
sweep accounts, lock-box deposits and cash management products for commercial
customers. We also offer both consumer and commercial loans. Consumer lending
includes residential real estate, home equity and installment lending.
Commercial lending includes commercial, financial and agricultural loans, real
estate construction and development loans, commercial real estate loans,
asset-based loans, commercial leasing and trade financing. Other financial
services offered include mortgage banking, debit cards, brokerage services,
credit-related insurance, automated teller machines, telephone banking, safe
deposit boxes, escrow and bankruptcy deposit services, stock option services,
and trust, private banking and institutional money management services.
We operate through two subsidiary banks as follows:
Geographic (Number of) Locations Total Assets
at June 30, at June 30,
Name 2001 2001
---- ------------------------------ ------------------
(dollars expressed
in thousands)
First Bank Missouri (44) and Illinois (42) $3,244,560
First Banks America, Inc., and its
subsidiary: California (44) and Texas (6) 2,628,378
First Bank & Trust
Our subsidiary banks are wholly owned by their respective parent
companies. We owned 93.16% of First Banks America, Inc., or FBA, at June 30,
2001.
Various trusts, which were created by and are administered by and for
the benefit of Mr. James F. Dierberg, our Chairman of the Board and Chief
Executive Officer, and his adult children, own all of our voting stock. Mr.
Dierberg and his family, therefore, control our management, policies and the
election of our directors.
Primary responsibility for managing our subsidiary banking units rests
with the officers and directors of each unit. However, in keeping with our
policy, we centralize overall corporate policies, procedures and administrative
functions and provide operational support functions for our subsidiaries. This
practice allows us to achieve various operating efficiencies while allowing our
subsidiary banking units to focus on customer service.
In the development of our banking franchise, we emphasize acquiring
other financial institutions as one means of achieving our growth objectives.
Acquisitions may serve to enhance our presence in a given market, to expand the
extent of our market area or to enable us to enter new or noncontiguous markets.
However, by using cash in our acquisitions, the characteristics of the
acquisition arena may, at times, place us at a competitive disadvantage relative
to other acquirers offering stock transactions. This results from the market
attractiveness of other financial institutions' stock and the related advantages
of tax-free exchanges to the selling shareholders. Our acquisition activities
are somewhat sporadic because we may consummate multiple transactions in a
particular period, followed by substantially less active acquisition periods.
Furthermore, the intangible assets recorded in conjunction with these
acquisitions create an immediate reduction in regulatory capital. This
reduction, as required by regulatory policy, provides further financial
disincentives to paying large premiums in cash acquisitions.
Recognizing these facts, we follow certain patterns in our
acquisitions. First, we typically acquire several smaller institutions,
sometimes over an extended period of time, rather than a single larger one. We
attribute this approach to the constraints imposed by the amount of funds
required for a larger transaction, as well as the opportunity to minimize the
aggregate premium required through smaller individual transactions. Secondly, in
some acquisitions, we may acquire institutions having significant asset-quality
problems, and we seek to address the risks of this approach through pricing and
other means. This diminishes their attractiveness to other potential acquirers,
and therefore reduces the amount of acquisition premium required. Finally, we
may pursue our acquisition strategy in other geographic areas, or pursue
internal growth more aggressively because cash transactions are not economically
viable in extremely competitive acquisition markets.
During the five years ended December 31, 2000, we have primarily
concentrated our acquisitions in California, completing 11 acquisitions of banks
and five purchases of branch offices, which provided us with an aggregate of
$1.41 billion in total assets and 32 banking locations as of the dates of
acquisition. These acquisitions have allowed us to significantly expand our
presence throughout the state of California, improve operational efficiencies,
convey a more consistent image and quality of service and more cohesively market
and deliver our products and services. In addition, in February 2000, we
completed our purchase of certain assets and liabilities of First Capital Group,
Inc., or FCG, a multi-state commercial leasing business headquartered in
Albuquerque, New Mexico. We are also expanding our Midwest banking franchise in
2001 with the pending Illinois acquisitions. Management continues to meld the
acquired entities into our operations, systems and culture. Some of the acquired
institutions exhibited elements of financial distress prior to their
acquisitions, which contributed to marginal earnings performance. Generally,
these elements were the result of asset quality problems and/or high noninterest
expenses.
Following our acquisitions, various tasks are necessary to effectively
integrate the acquired entities into our business systems and culture. While the
activities required are specifically dependent upon the individual circumstances
surrounding each acquisition, the majority of our efforts have been concentrated
in areas including, but not limited to:
o improving asset quality, which was primarily associated with
our acquisitions completed in 1996, 1997 and 1998;
o reducing unnecessary and/or excessive expenses including
personnel, data processing and certain other operational related
expenses;
o maintaining, repairing and, in some cases, refurbishing bank
premises necessitated by the deferral of such projects by the
acquired entities;
o renegotiating long-term leases which provide space in excess of
that necessary for banking activities and/or rates in excess of
current market rates, or subleasing excess space to third parties;
o relocating branch offices which are not adequate, conducive or
convenient for banking operations; and
o managing actual or potential litigation that existed with respect
to acquired entities to minimize the overall costs of negotiation,
settlement or litigation.
The post-acquisition process also required the combining of separate
and distinct entities together to form a cohesive organization with common
objectives and focus. We invested significant resources to reorganize staff,
recruit personnel where needed, and establish the direction and focus necessary
for the combined entity to take advantage of the opportunities available to it.
This investment contributed to the increases in noninterest expense during the
five years ended December 31, 2000 and the six months ended June 30, 2001, and
resulted in the creation of new banking entities, which conveyed a more
consistent image and quality of service. The new banking entities provide a
broad array of banking products to their customers and compete effectively in
their marketplaces, even in the presence of other financial institutions with
much greater resources. While some of these modifications did not contribute to
reductions of noninterest expense, they contributed to the commercial and retail
business development efforts of the banks, and ultimately to their overall
profile to improve future profitability.
In conjunction with our acquisition strategy, we were also building the
infrastructure necessary to accomplish our objectives for internal growth. This
process, which began in 1993, required significant increases in the resources
dedicated to commercial and retail business development, financial service
product line and delivery systems, branch development and training, advertising
and marketing programs and administrative and operational support. In addition,
during 1999, we began an internal restructuring process designed to better
position us for future growth and opportunities expected to become available as
consolidation and changes continue in the delivery of financial services. The
magnitude of this project was extensive and covered almost every area of our
organization. Although these efforts have primarily led to increased capital
expenditures and noninterest expenses in the short-term, we anticipate they will
lead to additional internal growth, more efficient operations and improved
profitability over the long term.
In February 1997, our initial financing subsidiary, First Preferred
Capital Trust, issued $86.25 million of 9.25% trust preferred securities, and,
in October 2000, our second financing subsidiary, First Preferred Capital Trust
II, issued $57.5 million of 10.24% trust preferred securities. In addition, in
July 1998, FBA's financing subsidiary, First America Capital Trust, issued $46.0
million of 8.50% trust preferred securities. The trust preferred securities
issued by our financing subsidiaries are publicly held and included in the
Nasdaq National Market. The trust preferred securities issued by FBA's financing
subsidiary are publicly held and traded on the New York Stock Exchange. These
trust preferred securities have no voting rights except in certain limited
circumstances. We pay distributions on these trust preferred securities
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year.
Lending Activities
Our enhanced business development resources assisted in the realignment
of certain acquired loan portfolios, which were skewed toward loan types that
reflected the abilities and experiences of the management of the acquired
entities. In order to achieve a more diversified portfolio, to address
asset-quality issues in our portfolios and to achieve a higher interest yield on
our loan portfolio, we reduced a substantial portion of the loans which were
acquired during this time through payments, refinancing with other financial
institutions, charge-offs, and, in two instances, sales of loans. As a result,
our portfolio of one-to-four family residential real estate loans, after
reaching a maximum of $1.20 billion at December 31, 1995, has decreased over the
past four years from $1.06 billion at December 31, 1996 to $726.5 million at
December 31, 2000, and $706.9 million at June 30, 2001. Similarly, our portfolio
of consumer and installment loans, net of unearned discount, decreased 66.7%
from $333.3 million at December 31, 1996 to $111.0 million at June 30, 2001. For
the six months ended June 30, 2001, the overall decline in our consumer and
installment portfolio also reflects the sale of our student loan and credit card
portfolios, the reduction in new consumer and installment loan volumes and the
repayment of principal on our existing consumer and installment loan portfolio,
all of which are consistent with our objectives of de-emphasizing consumer
lending and further expanding commercial lending.
As these components of our loan portfolio decreased, we replaced them
with more diversified and higher yielding loans that were internally generated
by our business development function. With our acquisitions, we expanded our
business development function into the new market areas in which we were then
operating. Consequently, in spite of relatively large reductions in acquired
portfolios, our aggregate loan portfolio, net of unearned discount, increased
from $2.77 billion at December 31, 1996 to $3.00 billion, $3.58 billion, $4.00
billion and $4.75 billion at December 31, 1997, 1998, 1999 and 2000,
respectively, and to $4.86 billion at June 30, 2001.
Our expanded level of commercial lending carries with it greater credit
risk which, although managed through loan policies and procedures, underwriting
and credit administration, must be recognized through adequate allowances for
loan losses. We associate the increased level of commercial lending activities
with the increase of $13.4 million in nonperforming loans to $53.2 million as of
December 31, 2000, compared to December 31, 1999. However, this increase
primarily results from a small number of credit relationships that were placed
on nonaccrual during the year ended December 31, 2000, reflecting problems that
are specific to these relationships. For the six months ended June 30, 2001, our
nonperforming loans increased $7.8 million to $61.0 million as of June 30, 2001,
compared to December 31, 2000. This increase, while partially attributable to
the overall risk in our loan portfolio, is reflective of cyclical trends
experienced within the banking industry as a result of economic slow down.
In addition to restructuring our loan portfolio, we also have changed
the composition of our deposit base. The majority of our recent deposit
development programs have been directed toward increased transaction accounts,
such as demand and savings accounts, rather than time deposits, and have
emphasized attracting more than one account relationship with customers by
cross-selling to them through packaging various account types and offering
incentives to deposit customers on other deposit or non-deposit services. In
addition, commercial borrowers are encouraged to maintain their operating
deposit accounts with us. At December 31, 1996, total time deposits were $1.81
billion, or 55.9% of total deposits. Although time deposits have continued to
increase to $2.31 billion at December 31, 2000 and decreased slightly to $2.28
billion at June 30, 2001, they represented only 46.0% and 45.6% of total
deposits at December 31, 2000 and June 30, 2001, respectively.
Despite the significant expenses we incurred in the amalgamation of the
acquired entities into our corporate culture and systems, and in the expansion
of our organizational capabilities, the earnings of the acquired entities and
the increased net interest income resulting from the transition in the
composition of our loan and deposit portfolios have contributed to improving net
income. For the years ended December 31, 2000 and 1999, net income was $56.1
million and $44.2 million, respectively, compared with $33.5 million, $33.0
million and $20.2 million in 1998, 1997 and 1996, respectively. For the six
months ended June 30, 2001, net income was $20.3 million, compared to $29.3
million for the comparable period in 2000. The primary factors that led to the
decline in earnings for the six months ended June 30, 2001 were declines in net
interest margin and higher operating expenses, including nonrecurring charges
associated with the establishment of a specific reserve relating to a contingent
liability and the settlement of certain litigation. While net income declined
for the six months ended June 30, 2001, net interest income continued to
increase primarily as a result of increased earning assets generated through
internal loan growth along with our acquisitions completed during 2000. Although
we anticipate certain short-term adverse effects on our operating results
associated with acquisitions, we believe the long-term benefits of our
acquisition program will exceed the short-term issues encountered with some
acquisitions. As such, in addition to concentrating on internal growth through
continued efforts to further develop our corporate infrastructure and product
and service offerings, we expect to continue to identify and pursue
opportunities for growth through acquisitions.
Acquisitions
To enhance our banking franchise, we emphasize acquiring other
financial institutions as a means of accelerating our growth, in order to
significantly expand our presence in a given market, to increase the extent of
our market area or to enter new or noncontiguous market areas. After we
consummate an acquisition, we expect to enhance the franchise of the acquired
entity by supplementing the marketing and business development efforts to
broaden the customer bases, strengthening particular segments of the business or
filling voids in the overall market coverage. We have primarily utilized cash,
borrowings, FBA's voting stock and the issuance of additional trust preferred
securities to meet our growth objectives under our acquisition program.
During the three years ended December 31, 2000, we completed nine
acquisitions of banks and two branch office purchases. As demonstrated below,
our acquisitions during the three years ended December 31, 2000 have primarily
served to increase our presence in markets that we originally entered during
1995. Additionally, we currently have four pending acquisitions that will be
accounted for under the purchase method of accounting. Our two pending
acquisitions in California and two pending acquisitions in Illinois will further
augment our existing markets. These transactions are summarized as follows:
Number
Loans, Net of of
Total Unearned Investment Banking
Entity Closing Date Assets (1) Discount (1) Securities (1) Deposits (1) Locations
------ ------- ---- ---------- ------------ -------------- ------------ ---------
(dollars expressed in thousands)
Pending Acquisitions
--------------------
Charter Pacific Bank
Agoura Hills, California -- $ 107,600 71,400 10,700 94,000 2
BYL Bancorp
Orange, California -- 278,200 151,200 12,300 246,100 7
Union Financial Group, Ltd.
Swansea, Illinois -- 361,000 270,000 62,300 300,800 9
Plains Financial Corporation
Des Plaines, Illinois -- 255,400 149,700 72,700 220,300 4
----------- -------- -------- -------- ----
$ 1,002,200 642,300 158,000 861,200 22
=========== ======== ======== ======== ====
2000
----
The San Francisco Company
San Francisco, California December 31, 2000 $183,800 115,700 38,300 137,700 1
Millennium Bank
San Francisco, California December 29, 2000 117,000 81,700 21,100 104,200 2
Commercial Bank of San Francisco
San Francisco, California October 31, 2000 155,600 97,700 45,500 109,400 1
Bank of Ventura
Ventura, California August 31, 2000 63,800 39,400 15,500 57,300 1
First Capital Group, Inc.
Albuquerque, New Mexico February 29, 2000 64,600 64,600 -- -- 1
Lippo Bank
San Francisco, California February 29, 2000 85,300 40,900 37,400 76,400 3
-------- -------- -------- -------- ----
$670,100 440,000 157,800 485,000 9
======== ======== ======== ======== ====
1999
----
Brentwood Bank of California
Malibu, California branch office September 17, 1999 $ 23,600 6,300 -- 17,300 1
Century Bank
Beverly Hills, California August 31, 1999 156,000 94,800 26,100 132,000 6
Redwood Bancorp
San Francisco, California March 4, 1999 183,900 134,400 34,400 162,900 4
-------- -------- -------- -------- ----
$363,500 235,500 60,500 312,200 11
======== ======== ======== ======== ====
1998
----
Republic Bank
Torrance, California September 15, 1998 $124,100 97,900 7,500 117,200 3
Bank of America
Solvang, California
branch office March 19, 1998 15,500 -- -- 15,500 1
Pacific Bay Bank
San Pablo, California February 2, 1998 38,300 29,700 232 35,200 1
-------- -------- ------- -------- ----
$177,900 127,600 7,732 167,900 5
======== ======== ======= ======== ====
-------------------------
(1) For pending acquisitions, these figures are as of June 30, 2001. For closed
acquisitions, these figures are as of the respective closing date.
We funded these acquisitions from available cash, proceeds from the
sales and maturities of available-for-sale investment securities, borrowings
under our $120.0 million revolving credit line with a group of unaffiliated
banks and the proceeds of the issuance of trust preferred securities.
Pending Acquisitions
On May 23, 2001, FBA and Charter Pacific Bank, or Charter Pacific,
executed a definitive agreement providing for the acquisition of Charter Pacific
by FBA. Under the terms of the agreement, as amended, the shareholders of
Charter Pacific will receive $3.70 per share in cash, or a total of
approximately $19.3 million. Charter Pacific is headquartered in Agoura Hills,
California, and has one other branch office in Beverly Hills, California. At
June 30, 2001, Charter Pacific had $107.6 million in total assets, $71.4 million
in loans, net of unearned discount, $10.7 million in investment securities and
$94.0 million in deposits. We expect this transaction, which is subject to
regulatory approvals and the approval of Charter Pacific's shareholders, will be
completed during the fourth quarter of 2001.
On June 22, 2001, FBA and BYL Bancorp, or BYL, executed a definitive
agreement providing for the acquisition of BYL and its wholly owned banking
subsidiary, BYL Bank Group, by FBA. Under the terms of the agreement, the
shareholders of BYL will receive $18.50 per share in cash, or a total of
approximately $52.0 million. BYL is headquartered in Orange, California, and has
six branches located in Orange and Riverside counties. At June 30, 2001, BYL had
$278.2 million in total assets, $151.2 million in loans, net of unearned
discount, $12.3 million in investment securities and $246.1 million in deposits.
We expect this transaction, which is subject to regulatory approvals, will be
completed during the fourth quarter of 2001.
On July 20, 2001, we executed a definitive agreement with Union
Financial Group, Ltd., or UFG, providing for the acquisition of UFG for a total
purchase price of approximately $26.8 million. Under the terms of the agreement,
the common shareholders of UFG will receive $11.00 per share in cash, or a total
of approximately $18.0 million, subject to a $1.60 per common share escrow to
cover certain contingent liabilities. The shareholders of Series D preferred
stock will receive the stated value of $100,000 per share. UFG is headquartered
in Swansea, Illinois, and operates nine banking offices located in St. Clair,
Madison, Jersey and Macoupin counties. At June 30, 2001, UFG had $361.0 million
in total assets, $270.0 million in loans, net of unearned discount, $62.3
million in investment securities and $300.8 million in deposits. We expect this
transaction, which is subject to regulatory approvals, will be completed during
the fourth quarter of 2001.
On August 2, 2001, we executed a definitive agreement with Plains
Financial Corporation, or PFC, providing for the acquisition of PFC. Under the
terms of the agreement, the shareholders of PFC will receive $293.07 per share
in cash, or a total of approximately $36.5 million. PFC is headquartered in Des
Plaines, Illinois, and has a total of three banking offices in Des Plaines, and
one banking office in Elk Grove, Illinois. At June 30, 2001, PFC had $255.4
million in total assets, $149.7 million in loans, net of unearned discount,
$72.7 million in investment securities and $220.3 million in deposits. We expect
this transaction, which is subject to regulatory approvals, will be completed
during the first quarter of 2002.
Financial Condition and Average Balances
Our average total assets were $5.85 billion for the six months ended
June 30, 2001, compared to $5.04 billion for the six months ended June 30, 2000.
Our total assets were $5.90 billion and $5.88 billion at June 30, 2001 and
December 31, 2000, respectively. The increase in total assets at June 30, 2001
is primarily attributable to internal loan growth, bank premises and equipment,
net of depreciation and amortization, and derivative instruments partially
offset by an anticipated level of account attrition associated with our
acquisitions of Commercial Bank of San Francisco, Millennium Bank and Bank of
San Francisco, which were completed during the fourth quarter of 2000. Loans,
net of unearned discount, increased by $109.7 million, which is further
discussed under "--Loans and Allowance for Loan Losses." Offsetting the
increases in these asset categories was a decrease in investment securities of
$178.5 million to $385.0 million at June 30, 2001 from $563.5 million at
December 31, 2000. We attribute the decrease in investment securities primarily
to the liquidation of certain investment securities held by FBA and a higher
than normal level of investment security calls experienced during the six months
ended June 30, 2001, resulting from the general decline in interest rates. The
funds generated from the reduction of investment securities were utilized to
fund loan growth, with the remaining funds being temporarily invested in cash
and cash equivalents, resulting in an increase of $106.3 million in federal
funds sold to $133.1 million at June 30, 2001 from $26.8 million at December 31,
2000. The increase in assets is also due to derivative instruments of $27.4
million at June 30, 2001, resulting solely from the implementation of Statement
of Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 137 - Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133, an Amendment of FASB Statement No. 133, and SFAS No.
138 - Accounting for Derivative Instruments and Hedging Activities, an Amendment
of FASB Statement No. 133. In addition, bank premises and equipment, net of
depreciation and amortization, increased $11.0 million to $125.8 million at June
30, 2001 from $114.8 million at December 31, 2000. We primarily attribute this
increase to our recent acquisitions as well as the purchase and remodeling of a
new operations center and corporate administrative building. Total deposits
decreased by $20.0 million to $4.99 billion at June 30, 2001 from $5.01 billion
at December 31, 2000, which reflects an anticipated level of account attrition
associated with our acquisitions in the fourth quarter of 2000. Short-term
borrowings increased by $60.6 million to $201.2 million at June 30, 2001 from
$140.6 million at December 31, 2000. This increase reflects a slight increase in
securities sold under agreements to repurchase and a $50.0 million Federal Home
Loan Bank advance drawn as an additional source of funds principally for the
substantial increase in loans held for sale as the general reductions in
interest rates led to substantial refinancing of single family mortgage loans.
Our note payable decreased by $48.5 million to $34.5 million at June 30, 2001
from $83.0 million at December 31, 2000, and was primarily funded with dividends
from our subsidiaries. In addition, the merger of our former subsidiary, First
Bank & Trust, with Bank of San Francisco, effective March 29, 2001, allowed us
to further reduce our note payable through a capital reduction of $23.0 million.
In conjunction with this merger, Bank of San Francisco was renamed First Bank &
Trust. In addition, accrued expenses and other liabilities decreased by $28.6
million to $26.3 million at June 30, 2001 from $54.9 million at December 31,
2000. We attribute the majority of this decrease to our quarterly tax payments
and the timing of certain other routine payments.
Our average total assets were $5.15 billion for the year ended December
31, 2000, compared to $4.66 billion and $4.29 billion for the years ended
December 31, 1999 and 1998, respectively. We attribute the increase of $491.5
million in total average assets for 2000 primarily to our acquisitions completed
during 2000, which provided total assets of $670.1 million, and internal loan
growth resulting from the continued expansion and development of our business
development staff. The acquisitions of Millennium Bank and The San Francisco
Company were completed on December 29, 2000 and December 31, 2000, respectively,
and therefore did not have a significant impact on our average total assets for
the year ended December 31, 2000. These acquisitions alone provided $300.8
million, or 61.2%, of the assets we acquired in 2000. Similarly, we attribute
the increase of $377.6 million in total average assets for 1999 primarily to:
o our acquisitions of Redwood Bancorp and Century Bank, which
provided total assets of $183.9 million and $156.0 million,
respectively;
o our purchase of the deposit accounts of the Malibu, California
banking location of Brentwood Bank of California;
o internal loan growth; and
o the issuance of trust preferred securities in July 1998 by FBA's
financing subsidiary.
The increase in assets for 2000 was primarily funded by an increase in
total average deposits of $412.0 million to $4.48 billion for the year ended
December 31, 2000, a decrease in average investment securities of $22.5 million
to $431.9 million for the year ended December 31, 2000, and an increase of $18.7
million in average short-term borrowings to $106.1 million for the year ended
December 31, 2000. We utilized the majority of the funds generated from our
deposit growth to fund a portion of our loan growth, and the remaining funds
were temporarily invested in federal funds sold, resulting in an increase in
average federal funds sold of $15.0 million to $64.5 million for the year ended
December 31, 2000. Similarly, we funded the increase in assets for 1999 by an
increase in total average deposits of $283.3 million to $4.06 billion for the
year ended December 31, 1999, an increase in average short-term borrowings of
$26.2 million and a decrease in average investment securities of $221.3 million
during 1999.
Loans, net of unearned discount, averaged $4.84 billion and $4.18
billion for the six months ended June 30, 2001 and 2000, respectively. The
increase in loans is primarily attributable to an increase of $120.7 million in
our loans held for sale portfolio to $189.8 million at June 30, 2001 from $69.1
million at December 31, 2000. We primarily attribute this increase to be the
result of a significantly higher volume of residential mortgage loans
originated, including both new fundings as well as refinancings, as a result of
declining interest rates experienced during the first six months of 2001. This
increase was partially offset by a decline in our consumer and installment
portfolio, net of unearned discount, to $111.0 million at June 30, 2001 from
$174.3 million at December 31, 2000. This decrease reflects the sale of our
student loan and credit card portfolios, reductions in new loan volumes and the
repayment of principal on our existing portfolio, and is also consistent with
our objectives of de-emphasizing consumer lending and expanding commercial
lending. In addition, the overall increase in loans, net of unearned discount,
was further offset by anticipated attrition in the loan portfolios associated
with our acquisitions completed during the fourth quarter of 2000.
Loans, net of unearned discount, averaged $4.29 billion, $3.81 billion
and $3.25 billion for the years ended December 31, 2000, 1999 and 1998,
respectively. The acquisitions we completed during 2000 and 1999 provided loans,
net of unearned discount, of $440.0 million and $235.5 million, respectively. In
addition to the growth provided by these acquisitions, for 2000, $360.4 million
of net loan growth was provided by corporate banking business development,
consisting of increases of $192.9 million of commercial, financial and
agricultural loans and $175.9 million of commercial real estate loans, offset by
a decrease of $8.4 million of real estate construction and land development
loans. These overall increases were partially offset by continuing reductions in
consumer and installment loans, net of unearned discount, consisting primarily
of indirect automobile loans, which decreased $64.6 million to $174.3 million at
December 31, 2000. While residential real estate loans have continued to decline
throughout the past three years, these loans increased slightly in 2000 by $20.1
million, primarily as a result of significant volume experienced during the
fourth quarter associated with refinancing activity. These changes result from
the focus we have placed on our business development efforts and the portfolio
repositioning which we began in 1995. This repositioning provided for
substantially all of our residential mortgage loan production to be sold in the
secondary mortgage market and the origination of indirect automobile loans to be
substantially reduced.
Investment securities averaged $428.8 million and $440.4 million for
the six months ended June 30, 2001 and 2000, respectively. Investment securities
averaged $431.9 million, $454.4 million and $675.7 million for the years ended
December 31, 2000, 1999 and 1998, respectively, reflecting decreases of $22.5
million and $221.3 million for the years ended December 31, 2000 and 1999,
respectively. We attribute these decreases primarily to the liquidation of
certain acquired investment securities, to a higher than normal level of calls
experienced during the first six months of 2001 resulting from the general
decline in interest rates and to sales of investment securities available for
sale necessary to provide an additional source of funds for our loan growth. The
investment securities that we obtained in conjunction with our acquisitions
during 1999 and 2000 and that we retained in our portfolio partially offset the
decreases.
We use deposits as our primary funding source and acquire them from a
broad base of local markets, including both individual and corporate customers.
Deposits averaged $4.96 billion and $4.38 billion for the six months ended June
30, 2001 and 2000, respectively, and $4.48 billion, $4.06 billion and $3.78
billion for the years ended December 31, 2000, 1999 and 1998, respectively. We
credit the increases primarily to our acquisitions completed during the
respective periods and the expansion of our deposit product and service
offerings available to our customer base. The overall increase was partially
offset by the divestiture of certain branches in 1999 and 2000, which resulted
in a reduction in First Bank's deposit base of approximately $54.8 million and
$8.8 million, respectively.
During July 1998, FBA's financing subsidiary issued $46.0 million of
8.50% trust preferred securities. Proceeds from this offering, net of
underwriting fees and offering expenses, were approximately $44.0 million and
were used to reduce borrowings, to support possible repurchases of our common
stock from time to time and for general corporate purposes. We temporarily
invested the remaining proceeds in interest-bearing deposits and subsequently
used them to fund our acquisition of Redwood Bancorp completed in March 1999. In
addition, during October 2000, our second financing subsidiary issued $57.5
million of 10.24% trust preferred securities. Proceeds from this offering, net
of underwriting fees and offering expenses, were approximately $55.1 million and
were used to reduce borrowings and subsequently to partially fund our
acquisitions of Commercial Bank of San Francisco in October 2000 and Millenium
Bank in December 2000.
Stockholders' equity averaged $378.9 million and $305.9 million for the
six months ended June 30, 2001 and 2000, respectively, and $321.9 million,
$279.8 million and $245.6 million for the years ended December 31, 2000, 1999
and 1998, respectively.
The increase in stockholders' equity for the six months ended June 30,
2001 is primarily attributable to net income of $20.3 million and an increase in
accumulated other comprehensive income of $23.3 million. The increase in
accumulated other comprehensive income reflects an increase of $13.8 million
associated with our derivative financial instruments as accounted for under SFAS
133, as amended, and an increase of $9.5 million resulting from the change in
unrealized gains and losses on available-for-sale investment securities. We
associate the increase in stockholders' equity for 2000 primarily to net income
of $56.1 million and a $3.7 million increase in accumulated other comprehensive
income, resulting from the change in unrealized gains and losses on
available-for-sale investment securities. The increase was partially offset by
FBA's stock repurchases during 2000 and dividends paid on our Class A and Class
B preferred stock. We associate the increase for 1999 primarily to net income of
$44.2 million and a reduction of the deferred tax asset valuation reserve of
$811,000 relating to the utilization of tax net operating losses incurred by
certain subsidiary banks prior to completing quasi-reorganizations. The increase
was partially offset by a $9.4 million reduction in other comprehensive income,
resulting from the change in unrealized gains and losses on available-for-sale
investment securities, FBA's stock repurchases during 1999 and dividends paid on
our Class A and Class B preferred stock.
The following table sets forth, on a tax-equivalent basis, certain
information relating to our average balance sheets, and reflects the average
yield earned on interest-earning assets, the average cost of interest-bearing
liabilities and the resulting net interest income for the six months ended June
30, 2001 and 2000:
Six Months Ended June 30,
------------------------------------------------------------------------
2001 2000
---------------------------------- -----------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
(dollars expressed in thousands)
ASSETS
------
Interest-earning assets:
Loans (1)(2)(3):
Taxable............................... $4,832,114 212,635 8.87% $4,171,402 185,527 8.94%
Tax-exempt (4)........................ 8,074 434 10.84 9,374 460 9.87
Investment securities:
Taxable............................... 410,287 14,354 7.06 421,437 13,537 6.46
Tax-exempt (4)........................ 18,530 718 7.81 18,968 742 7.87
Federal funds sold and other............. 57,511 1,655 5.80 70,222 2,033 5.82
---------- -------- ---------- --------
Total interest-earning assets....... 5,326,516 229,796 8.70 4,691,403 202,299 8.67
-------- --------
Nonearning assets........................... 524,469 348,529
---------- ----------
Total assets........................ $5,850,985 $5,039,932
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand
deposits............................. $ 466,634 3,480 1.50% $ 422,512 2,885 1.37%
Savings deposits....................... 1,452,496 27,525 3.82 1,241,385 24,070 3.90
Time deposits (3)...................... 2,322,546 68,472 5.95 2,117,271 56,077 5.33
---------- -------- ---------- --------
Total interest-bearing deposits..... 4,241,676 99,477 4.73 3,781,168 83,032 4.42
Short-term borrowings.................... 166,720 3,662 4.43 96,109 2,515 5.26
Notes payable and other.................. 52,753 1,773 6.78 66,869 2,511 7.55
---------- -------- ---------- --------
Total interest-bearing liabilities.. 4,461,149 104,912 4.74 3,944,146 88,058 4.49
-------- --------
Noninterest-bearing liabilities:
Demand deposits.......................... 714,891 602,459
Other liabilities........................ 296,085 187,437
---------- ----------
Total liabilities................... 5,472,125 4,734,042
Stockholders' equity........................ 378,860 305,890
---------- ----------
Total liabilities and
stockholders' equity.............. $5,850,985 $5,039,932
========== ==========
Net interest income......................... 124,884 114,241
======== ========
Interest rate spread........................ 3.96 4.18
Net interest margin......................... 4.73% 4.90%
==== ====
--------------------
(1) For purposes of these computations, nonaccrual loans are included in the average loan amounts.
(2) Interest income on loans includes loan fees.
(3) Interest income/expense includes the effects of interest rate exchange agreements.
(4) Information is presented on a tax-equivalent basis assuming a tax rate of 35%. The tax-equivalent adjustments were
approximately $403,000 and $421,000 for the six months ended June 30, 2001
and 2000, respectively.
The following table sets forth, on a tax-equivalent basis, certain
information relating to our average balance sheet, and reflects the average
yield earned on interest-earning assets, the average cost of interest-bearing
liabilities and the resulting net interest income for the periods indicated.
Years Ended December 31,
2000 1999 1998
----------------------------- ------------------------ ----------------------
Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ---- ------- ------------
(dollars expressed in thousands)
ASSETS
------
Interest-earning assets:
Loans: (1) (2) (3)
Taxable........................ $4,281,290 389,687 9.10% $3,805,351 322,703 8.48% $3,243,183 283,661 8.75%
Tax-exempt (4)................. 9,668 992 10.26 7,157 775 10.83 7,536 794 10.54
Investment securities:
Taxable........................ 412,932 27,331 6.62 435,189 26,206 6.02 657,385 39,898 6.07
Tax-exempt (4)................. 18,996 1,478 7.78 19,247 1,442 7.49 18,318 1,515 8.27
Federal funds sold and other...... 67,498 4,202 6.23 51,342 2,732 5.32 49,362 2,800 5.67
---------- ------- ---------- ------- ---------- -------
Total interest-earning
assets..................... 4,790,384 423,690 8.84 4,318,286 353,858 8.19 3,975,784 328,668 8.27
------- ------- -------
Nonearning assets..................... 364,333 344,942 309,811
---------- ---------- ----------
Total assets................. $5,154,717 $4,663,228 $4,285,595
========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing
demand deposits.............. $ 421,986 5,909 1.40% $ 391,892 5,098 1.30% $ 357,46 35,135 1.44%
Savings deposits............... 1,279,378 51,656 4.04 1,220,425 44,101 3.61 1,076,524 42,591 3.96
Time deposits (3).............. 2,139,305 120,257 5.62 1,899,218 101,653 5.35 1,882,329 108,019 5.74
---------- ------- ---------- ------- ---------- -------
Total interest-bearing
deposits................... 3,840,669 177,822 4.63 3,511,535 150,852 4.30 3,316,316 155,745 4.70
Short-term borrowings............. 106,123 5,881 5.54 87,374 4,220 4.83 61,178 2,959 4.84
Notes payable and other........... 51,897 3,976 7.66 56,376 3,629 6.44 50,718 3,475 6.85
--------- ------- ---------- ------- ---------- -------
Total interest-bearing
liabilities................ 3,998,689 187,679 4.69 3,655,285 158,701 4.34 3,428,212 162,179 4.73
------- ------- -------
Noninterest-bearing liabilities:
Demand deposits................... 634,886 552,029 463,939
Other liabilities................. 199,215 176,102 147,849
---------- --------- ----------
Total liabilities............ 4,832,790 4,383,416 4,040,000
Stockholders' equity.................. 321,927 279,812 245,595
---------- ---------- ----------
Total liabilities and
stockholders' equity........ $5,154,717 $4,663,228 $4,285,595
========== ========== ==========
Net interest income................... 236,011 195,157 166,489
======= ======= =======
Interest rate spread.................. 4.15 3.85 3.54
Net interest margin................... 4.93% 4.52% 4.19%
===== ===== =====
------------------------
(1) For purposes of these computations, nonaccrual loans are included in the average loan amounts.
(2) Interest income on loans includes loan fees.
(3) Interest income/expense includes the effects of interest rate exchange agreements.
(4) Information is presented on a tax-equivalent basis assuming a tax rate of 35%. The tax-equivalent adjustments were
approximately $864,000, $776,000 and $808,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
The following table indicates, on a tax-equivalent basis, the changes
in interest income and interest expense which are attributable to changes in
average volume and changes in average rates, in comparison with the preceding
year. The change in interest due to the combined rate/volume variance has been
allocated to rate and volume changes in proportion to the dollar amounts of the
change in each.
Increase (Decrease) Attributable to Change in:
----------------------------------------------------------------------
Six Months Ended Year Ended Year Ended
June 30, 2001 December 31, 2000 December 31, 1999
Compared to Compared to Compared to
Six Months Ended Year Ended Year Ended
June 30, 2000 December 31, 1999 December 31, 1998
------------------------- ---------------------- -----------------------
Net Net
Volume Rate Change Volume Rate Change Volume Rate Change
------ ---- ------ ------ ---- ------ ------ ---- ------
(dollars expressed in thousands)
Interest earned on:
Loans: (1) (2) (3)
Taxable........................... $31,396 (4,288) 27,108 42,273 24,711 66,984 48,009 (8,967) 39,042
Tax-exempt (4).................... (122) 96 (26) 260 (43) 217 (41) 22 (19)
Investment securities:
Taxable........................... (940) 1,757 817 (1,389) 2,514 1,125 (13,366) (326)(13,692)
Tax-exempt (4).................... (20) (4) (24) (19) 55 36 74 (147) (73)
Federal funds sold................... (338) (373) (711) 881 506 1,387 161 (174) (13)
Other................................ 14 319 333 75 8 83 (59) 4 (55)
------- ------ ------ ------ ------ ------ ------ ------ ------
Total interest income......... 29,990 (2,493) 27,497 42,081 27,751 69,832 34,778 (9,588) 25,190
------- ------ ------ ------ ------ ------ ------ ------ ------
Interest paid on:
Interest-bearing demand deposits..... 312 283 595 405 406 811 480 (517) (37)
Savings deposits..................... 4,856 (1,401) 3,455 2,180 5,375 7,555 5,445 (3,935) 1,510
Time deposits (3) ................... 5,635 6,760 12,395 13,296 5,308 18,604 970 (7,336) (6,366)
Short-term borrowings................ 2,258 (1,111) 1,147 986 675 1,661 1,267 (6) 1,261
Notes payable and other.............. (498) (240) (738) (304) 651 347 371 (217) 154
------- ------ ------ ------ ------ ------ ------ ------ ------
Total interest expense........ 12,563 4,291 16,854 16,563 12,415 28,978 8,533 (12,011) (3,478)
------- ------ ------ ------ ------ ------ ------ ------- ------
Net interest income........... $17,427 (6,784) 10,643 25,518 15,336 40,854 26,245 2,423 28,668
======= ====== ====== ====== ====== ====== ====== ======= ======
------------------------
(1) For purposes of these computations, nonaccrual loans are included in the average loan amounts.
(2) Interest income on loans includes loan fees.
(3) Interest income/expense includes the effect of interest rate exchange agreements.
(4) Information is presented on a tax-equivalent basis assuming a tax rate of 35%.
Net Interest Income
The primary source of our income is net interest income, which is the
difference between the interest earned on our interest-earning assets and the
interest paid on our interest-bearing liabilities. Net interest income
(expressed on a tax-equivalent basis) increased to $124.9 million, or 4.73% of
average interest-earning assets, for the six months ended June 30, 2001, from
$114.2 million, or 4.90% of average interest-earning assets, for the comparable
period in 2000. We credit the increased net interest income primarily to the net
interest-earning assets provided by our aforementioned acquisitions completed
during 2000, internal loan growth, and earnings on our interest rate swap
agreements that we entered into in conjunction with our risk management program.
The overall increase in net interest income was partially offset by reductions
in the prime lending rate that occurred during the first six months of 2001. Net
interest income (expressed on a tax-equivalent basis) increased to $236.0
million, or 4.93% of average interest-earning assets, for the year ended
December 31, 2000, from $195.2 million, or 4.52% of interest-earning assets, and
$166.5 million, or 4.19% of interest-earning assets, for the years ended
December 31, 1999 and 1998, respectively. We credit the increased net interest
income for 2000 primarily to the net interest-earning assets provided by our
acquisitions, internal loan growth and increases in the prime lending rate which
resulted in increased yields on interest-earning assets. During 2000, the cost
of interest-bearing liabilities increased with prevailing interest rates.
However, since this increase was less dramatic than the increase in earnings on
interest-earning assets, it contributed to an improvement in net interest
margins.
Average loans, net of unearned discount, increased by $660.0 million to
$4.84 billion for the six months ended June 30, 2001, from $4.18 billion for the
comparable period in 2000. The yield on our loan portfolio decreased to 8.88%
for the six months ended June 30, 2001, in comparison to 8.95% for the
comparable period in 2000. The increase in the cost of deposits, in conjunction
with the decline in the yield on our loan portfolio, was the major contributor
to the decline in our net interest rate margin of 17 basis points for the six
months ended June 30, 2001, from the comparable period in 2000. We attribute the
decline in yields and our net interest margin primarily to the continued
decreases in the prime lending rate. During the period from December 31, 2000
through June 30, 2001, the Federal Reserve Board decreased the discount rate
several times, resulting in six decreases in the prime rate of interest from
9.50% to 6.75%. This is reflected not only in the rate of interest earned on
loans that are indexed to the prime rate, but also in other assets and
liabilities which either have variable or adjustable rates, or which matured or
repriced during this period. The reduced level of interest income earned on our
loan portfolio as a result of declining interest rates was partially mitigated
by the earnings associated with our interest rate swap agreements. These
agreements provided income of $5.7 million for the six months ended June 30,
2001, in comparison to expense of $1.7 million incurred for the comparable
period in 2000.
Average total loans, net of unearned discount, increased by $480.0
million to $4.29 billion for the year ended December 31, 2000, from $3.81
billion and $3.25 billion for the years ended December 31, 1999 and 1998,
respectively. During the period from June 30, 1999 through December 31, 2000,
the Federal Reserve Board increased the discount rate several times, resulting
in six increases in the prime rate of interest from 7.75% to 9.50%. As a result,
the yield on our loan portfolio increased to 9.10% for the year ended December
31, 2000, from 8.48% for the year ended December 31, 1999, principally as the
result of an increase in prevailing interest rates. However, the improved yield
on our loan portfolio was partially offset by the expense associated with our
interest rate swap agreements that we entered into in conjunction with our risk
management program. Although our net interest margin improved over the three
years ended December 31, 2000, the yield on our loan portfolio declined to 8.48%
for the year ended December 31, 1999, in comparison to 8.75% for the year ended
December 31, 1998. This reduction primarily resulted from the overall decline in
prevailing interest rates that occurred during the fourth quarter of 1998. In
addition, increased competition within our market areas led to reduced lending
rates. The effect of the reduced yield on our loan portfolio was partially
mitigated in 1999 by the earnings impact of our interest rate swap agreements as
well as:
o the reduction of First Bank's deposit base associated with the
divested branches, which was primarily concentrated in certificates
of deposit; and
o a decrease in the cost of interest-bearing liabilities to 4.34%
from 4.73% for the years ended December 31, 1999 and 1998,
respectively.
The aggregate weighted average rate paid on our deposit portfolio
increased to 4.73% for the six months ended June 30, 2001, compared to 4.42% for
the comparable period in 2000. The overall increase reflects increased rates
paid to attract and retain deposits as a result of generally increasing interest
rates during the first six months of 2000 compared to generally decreasing
interest rates during the first six months of 2001, and the high level of
competition within our market areas. For the years ended December 31, 2000, 1999
and 1998, the aggregate weighted average rate paid on our interest-bearing
deposit portfolio was 4.63%, 4.30% and 4.70%, respectively. The increase for
2000 reflects increased rates that we paid to provide a funding source for
continued loan growth, whereas the decrease for 1999 primarily reflects our
ongoing realignment of the deposit portfolio and the reduction of the deposit
base of First Bank. The reduced rates paid on our deposit portfolio in 1999 were
partially offset by increased expense associated with our interest rate swap
agreements. As further discussed under "--Interest Rate Risk Management," for
1999 and 1998, the increased expense associated with our derivative financial
instruments resulted from the liquidation of a portion of the underlying
interest-bearing liabilities. This reduction in interest-bearing liabilities,
primarily associated with our branch divestitures, resulted in the recognition
of a portion of the related deferred losses on our previously terminated
interest rate swap agreements.
The aggregate weighted average rate paid on our note payable decreased
to 6.78% for the six months ended June 30, 2001, compared to 7.55% for the
comparable period in 2000, and increased to 7.66% for the year ended December
31, 2000, from 6.44% and 6.85% for the years ended December 31, 1999 and 1998,
respectively, reflecting changing market interest rates during these periods.
Amounts outstanding under our $120.0 million revolving line of credit with a
group of unaffiliated banks bear interest at the lead bank's corporate base rate
or, at our option, at the Eurodollar rate plus a margin determined by the
outstanding balance and our profitability. Thus, the revolving credit line
represents a relatively high-cost funding source, although it has been mitigated
by the continued reductions in the prime lending rate during the first six
months of 2001, so that increased advances under the revolving credit line have
the effect of increasing our weighted average rate of non-deposit liabilities.
During 2000, we utilized the note payable to fund our acquisitions of Millennium
Bank and Bank of San Francisco, thus resulting in a higher level of borrowings
occurring during the fourth quarter of 2000.
Interest Rate Risk Management
For financial institutions, the maintenance of a satisfactory level of
net interest income is a primary factor in achieving acceptable income levels.
However, the maturity and repricing characteristics of the institution's loan
and investment portfolios, relative to those within its deposit structure, may
differ significantly. The nature of the loan and deposit markets within which a
financial institution operates, and its objectives for business development
within those markets at any point in time influence these characteristics. In
addition, the ability of borrowers to repay loans and depositors to withdraw
funds prior to stated maturity dates introduces divergent option characteristics
which operate primarily as interest rates change. These factors cause various
elements of the institution's balance sheet to react in different manners and at
different times relative to changes in interest rates, thereby leading to
increases or decreases in net interest income over time. Depending upon the
direction and velocity of interest rate movements and their effect on the
specific components of the institution's balance sheet, the effects on net
interest income can be substantial. Consequently, managing a financial
institution requires establishing effective control of the exposure of the
institution to changes in interest rates.
We manage our interest rate risk by:
o maintaining an Asset Liability Committee, or ALCO, responsible
to our Board of Directors, to review the overall interest rate
risk management activity and approve actions taken to reduce risk;
o maintaining an effective simulation model to determine our exposure
to changes in interest rates;
o coordinating the lending, investing and deposit-generating
functions to control the assumption of interest rate risk; and
o employing various financial instruments, including
derivatives, to offset inherent interest rate risk when it
becomes excessive. The objective of these procedures is to
limit the adverse impact that changes in interest rates may
have on our net interest income.
The ALCO has overall responsibility for the effective management of
interest rate risk and the approval of policy guidelines. The ALCO includes our
Chairman and Chief Executive Officer, President and the senior executives of
investments, credit, banking support and finance, and certain other officers.
The Asset Liability Management Group, which monitors interest rate risk,
supports the ALCO, prepares analyses for review by the ALCO and implements
actions which are either specifically directed by the ALCO or established by
policy guidelines.
In managing sensitivity, we strive to reduce the adverse impact on
earnings by managing interest rate risk within internal policy constraints.
Regarding rate sensitivity, our policy is to manage exposure to potential risks
associated with changing interest rates by maintaining a balance sheet posture
in which annual net interest income is not significantly impacted by reasonably
possible near-term changes in interest rates. To measure the effect of interest
rate changes, we project our net income over two one-year horizons on a pro
forma basis. The analysis assumes various scenarios for increases and decreases
in interest rates including both instantaneous and gradual, and parallel and
non-parallel shifts in the yield curve, in varying amounts. For purposes of
arriving at reasonably possible near-term changes in interest rates, we include
scenarios based on actual changes in interest rates, which have occurred over a
two-year period, simulating both a declining and rising interest rate scenario.
We are "asset-sensitive," and our simulation model indicates a loss of projected
net income should interest rates decline. While a decline in interest rates of
less than 100 basis points has a relatively minimal impact on our net interest
income, a decline in interest rates of 100 basis points indicates a projected
pre-tax loss of approximately 1.5% of net interest income, and a decline in
interest rates of 200 basis points indicates a pre-tax projected loss of
approximately 7.0% of net interest income, based on assets and liabilities at
June 30, 2001.
As previously discussed, we utilize derivative financial instruments to
assist in our management of interest rate sensitivity by modifying the
repricing, maturity and option characteristics of certain assets and
liabilities. The derivative financial instruments we hold are summarized as
follows:
June 30, 2001 December 31, 2000 December 31, 1999
------------- ----------------- -----------------
Notional Credit Notional Credit Notional Credit
Amount Exposure Amount Exposure Amount Exposure
------ -------- ------ -------- ------ --------
(dollars expressed in thousands)
Cash flow hedges............... $1,050,000 1,971 1,055,000 3,449 955,000 3,349
Fair value hedges.............. 250,000 5,553 50,000 758 -- --
Interest rate floor agreements. 310,000 5,631 35,000 6 35,000 13
Interest rate cap agreements... 450,000 1,976 450,000 3,753 10,000 26
Interest rate lock commitments. 22,000 -- 4,100 -- 4,600 --
Forward commitments to sell
mortgage-backed securities.. 101,000 -- 32,000 -- 33,000 --
========== ===== ========= ===== ======= =====
The notional amounts of derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
our credit exposure through the use of these instruments. The credit exposure
represents the accounting loss we would incur in the event the counterparties
failed completely to perform according to the terms of the derivative financial
instruments and the collateral held to support the credit exposure was of no
value.
During the six months ended June 30, 2001, the net interest income
realized on our derivative financial instruments was $5.7 million, in comparison
to net interest expense of $1.7 million for the comparable period in 2000.
During 2000, the net interest expense realized on our derivative financial
instruments was $4.7 million, in comparison to net interest income of $430,000
in 1999.
Cash Flow Hedges
Previously, we utilized interest rate swap agreements to extend the
repricing characteristics of certain interest-bearing liabilities to more
closely correspond with our assets, with the objective of stabilizing cash flow,
and accordingly, net interest income, over time. These swap agreements were
terminated in July 1995, November 1996 and July 1997 due to a change in the
composition of our balance sheet, primarily driven by the significant decline in
interest rates experienced during 1995, and the resulting increase in the
principal prepayments of residential mortgage loans. The net interest expense
associated with these agreements, consisting primarily of amortization of
deferred losses, was $5.7 million for the year ended December 31, 1999. There
were no remaining unamortized deferred losses on the terminated swap agreements
at December 31, 1999.
During 1998, we entered into $280.0 million notional amount of interest
rate swap agreements to effectively lengthen the repricing characteristics of
certain interest-earning assets to correspond more closely with their funding
source with the objective of stabilizing cash flow, and accordingly, net
interest income, over time. The swap agreements, which are designated as cash
flow hedges, provide for us to receive a fixed rate of interest and pay an
adjustable rate of interest equivalent to the daily weighted average prime
lending rate minus 2.705%. The terms of the swap agreements provide for us to
pay quarterly and receive payment semiannually. In June 2001, we terminated
$205.0 million notional amount of these swap agreements, which would have
expired in 2002, in order to appropriately modify our overall hedge position in
accordance with our risk management program. In conjunction with the partial
termination of these swap agreements, we recorded a pre-tax gain of $2.8
million. The amount receivable and payable by us under the remaining $75.0
million notional amount of the swap agreements was $1.2 million and $115,000 at
June 30, 2001, respectively. The amount receivable by us under the swap
agreements was $4.1 million at December 31, 2000 and 1999, and the amounts
payable by us under the swap agreements were $744,000 and $770,000 at December
31, 2000 and 1999, respectively.
During May 1999, we entered into $500.0 million notional amount of
interest rate swap agreements with the objective of stabilizing the net interest
margin during the six-month period surrounding the Year 2000 century date
change. The swap agreements provided for us to receive an adjustable rate of
interest equivalent to the daily weighted average 30-day London Interbank
Offering Rate and pay an adjustable rate of interest equivalent to the daily
weighted average prime lending rate minus 2.665%. In January 2000, we determined
these swap agreements were no longer necessary based upon the results of the
Year 2000 transition and terminated these agreements resulting in a cost of
$150,000.
During September 1999, we entered into $175.0 million notional amount
of interest rate swap agreements to effectively lengthen the repricing
characteristics of certain interest-earning assets to correspond more closely
with their funding source with the objective of stabilizing cash flow, and
accordingly, net interest income, over time. The swap agreements, which had been
designated as cash flow hedges, provided for us to receive a fixed rate of
interest and pay an adjustable rate of interest equivalent to the weighted
average prime lending rate minus 2.70%. The terms of the swap agreements
provided for us to pay and receive interest on a quarterly basis. In April 2001,
we terminated these swap agreements, which would have expired in September 2001,
in order to lengthen the period covered by the swaps. In conjunction with the
termination of these swap agreements, we recorded a pre-tax gain of $985,000.
The amount receivable by us under the swap agreements was $119,000 at December
31, 2000 and 1999 and the amounts payable by us under the swap agreements were
$165,000 and $141,000 at December 31, 2000 and 1999, respectively.
During September 2000, March 2001 and April 2001, we entered into
$600.0 million, $200.0 million and $175.0 million notional amount, respectively,
of interest rate swap agreements to effectively lengthen the repricing
characteristics of certain interest-earning assets to correspond more closely
with their funding source with the objective of stabilizing cash flow, and
accordingly, net interest income, over time. The swap agreements, which have
been designated as cash flow hedges, provide for us to receive a fixed rate of
interest and pay an adjustable rate of interest equivalent to the weighted
average prime lending rate minus either 2.70% or 2.82%. The terms of the swap
agreements provide for us to pay and receive interest on a quarterly basis. The
amount receivable by us under the swap agreements was $3.9 million and $1.2
million at June 30, 2001 and December 31, 2000, respectively, and the amount
payable by us under the swap agreements was $3.0 million and $1.2 million at
June 30, 2001 and December 31, 2000, respectively.
The maturity dates, notional amounts, interest rates paid and received
and fair value of our interest rate swap agreements designated as cash flow
hedges as of June 30, 2001 and December 31, 2000 were as follows:
Notional Interest rate Interest rate Fair
Maturity date amount paid received value
------------- ------ ---- -------- -----
(dollars expressed in thousands)
June 30, 2001:
September 16, 2002.............................. $ 75,000 4.05% 5.36% $ 890
September 20, 2004.............................. 600,000 4.05 6.78 24,634
March 21, 2005.................................. 200,000 3.93 5.24 (1,855)
April 2, 2006................................... 175,000 3.93 5.45 (1,871)
---------- ---------
$1,050,000 4.01 6.16 $ 21,798
========== ===== ===== =========
December 31, 2000:
September 27, 2001.............................. $ 175,000 6.80% 6.14% $ 65
June 11, 2002................................... 15,000 6.80 6.00 7
September 16, 2002.............................. 195,000 6.80 5.36 (1,776)
September 18, 2002.............................. 70,000 6.80 5.33 (690)
September 20, 2004.............................. 600,000 6.80 6.78 16,869
---------- ---------
$1,055,000 6.80 5.92 $ 14,475
========== ===== ===== =========
Fair Value Hedges
During September 2000, we entered into $25.0 million notional amount of
one-year interest rate swap agreements and $25.0 million notional amount of five
and one-half year interest rate swap agreements to effectively shorten the
repricing characteristics of certain interest-bearing liabilities with the
objective of stabilizing net interest income over time. The swap agreements,
which have been designated as fair value hedges, provide for us to receive fixed
rates of interest ranging from 6.60% to 7.25% and pay an adjustable rate of
interest equivalent to the three-month London Interbank Offering Rate minus
rates ranging from 0.02% to 0.11%. The terms of the swap agreements provide for
us to pay interest on a quarterly basis and receive interest either on a
semiannual or an annual basis. The amount receivable by us under the swap
agreements was $1.8 million and $1.0 million at June 30, 2001 and December 31,
2000, respectively, and the amount payable by us under the swap agreements was
$68,000 and $119,000 at June 30, 2001 and December 31, 2000, respectively.
During January 2001, we entered into $50.0 million notional amount of
three-year interest rate swap agreements and $150.0 million notional amount of
five-year interest rate swap agreements to effectively shorten the repricing
characteristics of certain interest-bearing liabilities with the objective of
stabilizing net interest income over time. The swap agreements, which have been
designated as fair value hedges, provide for us to receive a fixed rate of
interest and pay an adjustable rate of interest equivalent to the three-month
London Interbank Offering Rate. The terms of the swap agreements provide for us
to pay and receive interest on a quarterly basis. The amount receivable by us
under the swap agreements was $5.2 million at June 30, 2001, and the amount
payable by us under the swap agreements was $2.2 million at June 30, 2001.
The maturity dates, notional amounts, interest rates paid and received
and fair value of our interest rate swap agreements designated as fair value
hedges as of June 30, 2001 and December 31, 2000 were as follows:
Notional Interest rate Interest rate Fair
Maturity date amount paid received value
------------- ------ ---- -------- -----
(dollars expressed in thousands)
June 30, 2001:
September 13, 2001.............................. $ 12,500 3.89% 6.80% $ 70
September 21, 2001.............................. 12,500 3.71 6.60 79
January 9, 2004................................. 50,000 4.80 5.37 (84)
January 9, 2006................................. 150,000 4.80 5.51 (2,073)
March 13, 2006.................................. 12,500 3.80 7.25 86
March 22, 2006.................................. 12,500 3.64 7.20 101
---------- ---------
$ 250,000 4.59 5.77 $ (1,821)
========== ===== ===== =========
December 31, 2000:
September 13, 2001.............................. $ 12,500 6.56% 6.80% $ 42
September 21, 2001.............................. 12,500 6.47 6.60 43
March 13, 2006.................................. 12,500 6.47 7.25 5
March 22, 2006.................................. 12,500 6.39 7.20 6
---------- --------
$ 50,000 6.47 6.96 $ 96
========== ===== ===== =========
Interest Rate Floor Agreements
During January 2001 and March 2001, we entered into $200.0 million and
$75.0 million notional amount, respectively, of four-year interest rate floor
agreements to further stabilize net interest income in the event of a falling
rate scenario. The interest rate floor agreements provide for us to receive a
quarterly adjustable rate of interest equivalent to the differential between the
three-month London Interbank Offering Rate and the strike prices of 5.50% or
5.00%, respectively, should the three-month London Interbank Offering Rate fall
below the respective strike prices. At June 30, 2001, the carrying value of the
interest rate floor agreements, which is included in derivative instruments in
the consolidated balance sheet, was $5.6 million.
Interest Rate Cap Agreements
In conjunction with the interest rate swap agreements that we entered
into in September 2000, we also entered into $450.0 million notional amount of
four-year interest rate cap agreements to limit the net interest expense
associated with our interest rate swap agreements in the event of a rising rate
scenario. The interest rate cap agreements provide for us to receive a quarterly
adjustable rate of interest equivalent to the differential between the
three-month London Interbank Offering Rate and the strike price of 7.50% should
the three-month London Interbank Offering Rate exceed the strike price. At June
30, 2001 and December 31, 2000, the carrying value of these interest rate cap
agreements, which is included in derivative instruments in the consolidated
balance sheet, was $2.0 million and $3.8 million, respectively.
Pledged Collateral
At June 30, 2001 and December 31, 2000, we had pledged investment
securities available for sale with a carrying value of $2.4 million and $8.6
million, respectively, in connection with our interest rate swap agreements. In
addition, at June 30, 2001 and December 31, 2000, we had accepted investment
securities with a fair value of $34.7 million and $19.0 million, respectively,
as collateral in connection with our interest rate swap agreements. We are
permitted by contract to sell or repledge the collateral accepted from our
counterparties, however, at June 30, 2001 and December 31, 2000, we had not sold
or repledged any of this collateral.
Interest Rate Lock Commitments / Forward Commitments to Sell
Mortgage-Backed Securities
Derivative financial instruments issued by us consist of interest rate lock
commitments to originate fixed-rate loans. Commitments to originate fixed-rate
loans consist primarily of residential real estate loans. These net loan
commitments and loans held for sale are hedged with forward contracts to sell
mortgage-backed securities.
Mortgage Banking Activities
Our mortgage banking activities consist of the origination, purchase
and servicing of residential mortgage loans. Generally, we sell our production
of residential mortgage loans in the secondary loan markets. Servicing rights
are retained with respect to conforming fixed-rate residential mortgage loans.
We sell other loans, including adjustable-rate and nonconforming residential
mortgage loans, on a servicing released basis.
For the six months ended June 30, 2001 and 2000, we originated and
purchased loans for resale totaling $757.5 million and $238.5 million, and sold
loans totaling $587.6 million and $185.3 million, respectively. For the three
years ended December 31, 2000, 1999 and 1998, we originated and purchased loans
for resale totaling $532.2 million, $452.9 million and $628.5 million and sold
loans totaling $413.2 million, $507.1 million and $521.0 million, respectively.
The origination and purchase of residential mortgage loans and the related sale
of the loans provides us with additional sources of income including the gain or
loss realized upon sale, the interest income earned while the loan is held
awaiting sale and the ongoing loan servicing fees from the loans sold with
servicing rights retained. Mortgage loans serviced for investors aggregated
$957.4 million at June 30, 2001, and $957.2 million, $957.1 million and $923.0
million at December 31, 2000, 1999 and 1998, respectively.
The gain on mortgage loans originated for resale, including loans sold
and held for sale, was $7.3 million and $3.3 million for the six months ended
June 30, 2001 and 2000, respectively, and $7.8 million, $6.9 million and $5.6
million for the years ended December 31, 2000, 1999 and 1998, respectively. We
determine these gains, net of losses, on a lower of cost or market basis. These
gains are realized at the time of sale. The cost basis reflects: (1) adjustments
of the carrying values of loans held for sale to the lower of cost, adjusted to
include the cost of hedging the loans held for sale, or current market values;
and (2) adjustments for any gains or losses on loan commitments for which the
interest rate has been established, net of anticipated underwriting "fallout,"
adjusted for the cost of hedging these loan commitments. The overall increase
for the six months ended June 30, 2001 is primarily attributable to a
significant increase in the volume of loans originated and sold commensurate
with the continued reductions in mortgage loan rates experienced in the first
six months of 2001. We credit the increases for 2000 and 1999 to the continued
expansion of our mortgage banking activities into the California and Texas
markets.
The interest income on loans held for sale was $5.4 million for the six
months ended June 30, 2001, compared to $1.5 million for the comparable period
in 2000. The interest income on loans held for sale was $3.5 million for the
year ended December 31, 2000, in comparison to $4.9 million and $6.8 million for
the years ended December 31, 1999 and 1998, respectively. The amount of interest
income realized on loans held for sale is a function of the average balance of
loans held for sale, the period for which the loans are held and the prevailing
interest rates when the loans are made. The average balance of loans held for
sale was $149.1 million and $45.1 million for the six months ended June 30, 2001
and 2000, respectively, and $47.0 million, $79.1 million and $102.7 million for
the years ended December 31, 2000, 1999 and 1998, respectively. On an annualized
basis, our yield on the portfolio of loans held for sale was 7.23% and 6.67% for
the six months ended June 30, 2001 and 2000, respectively, and 7.45%, 6.19% and
6.62% for the years ended December 31, 2000, 1999 and 1998, respectively. This
compares with our cost of funds, as a percentage of average interest-bearing
liabilities, of 4.74% and 4.49% for the six months ended June 30, 2001 and 2000,
respectively, and 4.69%, 4.34% and 4.73% for the years ended December 31, 2000,
1999 and 1998, respectively.
We report mortgage loan servicing fees net of amortization of mortgage
servicing rights, interest shortfall and mortgage-backed security guarantee fee
expense. Interest shortfall equals the difference between the interest collected
from a loan-servicing customer upon prepayment of the loan and a full month's
interest that is required to be remitted to the security owner. Loan servicing
fees, net, were $153,000 and $231,000 for the six months ended June 30, 2001 and
2000, respectively, and $486,000, $657,000 and $1.0 million for the years ended
December 31, 2000, 1999 and 1998, respectively. We attribute the decrease in
loan servicing fees for 2001, 2000 and 1999 to increased amortization of
mortgage servicing rights, reduced late charge fees and our strategy of selling
the new production of adjustable-rate and nonconforming residential mortgage
loans on a servicing released basis. In addition, mortgage-backed security
expense increased by $333,000 to $1.2 million from $867,000 for the years ended
December 31, 1999 and 1998, respectively, reflecting the increased level of
serviced loans sold into the secondary market in the form of securities.
Our interest rate risk management policy provides certain hedging
parameters to reduce the interest rate risk exposure arising from changes in
loan prices from the time of commitment until the sale of the security or loan.
To reduce this exposure, we use forward commitments to sell fixed-rate
mortgage-backed securities at a specified date in the future. At June 30, 2001
and December 31, 2000, 1999 and 1998, we had $106.5 million, and $37.6 million,
$31.5 million and $103.1 million, respectively, of loans held for sale and
related commitments, net of committed loan sales and estimated underwriting
fallout, of which $101.0 million, and $32.0 million, $33.0 million and $95.0
million, respectively, were hedged through the use of such forward commitments.
Comparison of Results of Operations for the Six Months Ended June 30, 2001
and 2000
Net Income. Net income was $20.3 million, or $824.49 per common share
on a diluted basis, for the six months ended June 30, 2001, in comparison to
$29.3 million, or $1,182.47 per common share on a diluted basis, for the
comparable period in 2000. The implementation of SFAS 133, as amended, on
January 1, 2001, resulted in the recognition of a cumulative effect of change in
accounting principle of $1.4 million, net of tax, which reduced net income.
Excluding this item, net income was $21.6 million, or $882.65 per common share
on a diluted basis, for the six months ended June 30, 2001. The net interest
rate margin was 4.73% for the six months ended June 30, 2001, in comparison to
4.90% for the comparable period in 2000. The primary factors that led to the
decline in earnings for the six months ended June 30, 2001 were a decrease in
the net interest rate margin and higher operating expenses, including
nonrecurring charges associated with the establishment of a specific reserve
relating to a contingent liability and the settlement of certain litigation. Net
interest income increased primarily as a result of increased earning assets
generated through internal loan growth along with our acquisitions of Lippo
Bank, certain assets of FCG, Bank of Ventura, Commercial Bank of San Francisco,
Millennium Bank and Bank of San Francisco, completed during 2000. However, the
improvement in net interest income was partially offset by six reductions in the
prime lending rate during the first six months of 2001. During the six months
ended June 30, 2001, noninterest income improved to $35.9 million, from $21.0
million for the comparable period in 2000 as further discussed under
"--Noninterest Income."
The improvement in net interest income and noninterest income was
offset by increased operating expenses, which were $116.0 million for the six
months ended June 30, 2001, compared to $79.7 million for the comparable period
in 2000. The increased operating expenses are primarily attributable to:
o the operating expenses of the aforementioned acquisitions subsequent
to their respective acquisition dates;
o increased salaries and employee benefit expenses;
o increased data processing fees;
o increased legal, examination and professional fees;
o increased amortization of intangibles associated with the purchase
of the aforementioned entities;
o a nonrecurring litigation settlement charge; and
o a charge to other expense associated with the establishment of a
specific reserve on an unfunded letter of credit.
Additionally, guaranteed preferred debentures expense of $1.5 million
on the trust preferred securities that our second financing subsidiary issued in
October 2000 further contributed to the overall increase in operating expenses.
These higher operating expenses, exclusive of the litigation settlement and the
specific reserve on the unfunded letter of credit, are reflective of significant
investments that we have made in personnel, technology, capital expenditures and
new business lines in conjunction with our overall strategic growth plan. The
payback on these investments is expected to occur over a longer period of time
through higher and more diversified revenue streams.
Provision for Loan Losses. The provision for loan losses was $7.1
million for the six months ended June 30, 2001, compared to $7.2 million for the
comparable period in 2000. The provisions for loan losses reflect the level of
loan charge-offs and recoveries, the adequacy of the allowance for loan losses
and the effect of economic conditions within our markets. Loan charge-offs were
$15.3 million for the six months ended June 30, 2001, in comparison to $5.0
million for the comparable period in 2000. The increase in loan charge-offs
reflects a single loan in the amount of $4.5 million that was charged-off due to
suspected fraud on the part of the borrower, a $1.4 million charge-off on a
single shared national credit relationship, a $675,000 charge-off with respect
to a loan in an acquired portfolio as well as the effects of the recent general
slow down in economic conditions prevalent within our markets. Loan recoveries
were $3.8 million for the six months ended June 30, 2001, in comparison to $6.2
million for the comparable period in 2000. Nonperforming assets and past-due
loans have increased during the six months ended June 30, 2001, and we
anticipate these trends will continue in the near future. However, we believe
these trends represent normal cyclical trends experienced within the banking
industry during times of economic slow down. Management considered these trends
in its overall assessment of the adequacy of the allowance for loan losses.
Tables summarizing nonperforming assets, past-due loans and charge-off
and recovery experience are presented under "--Loans and Allowance for Loan
Losses."
Noninterest Income and Expense. The following table summarizes
noninterest income and noninterest expense for the six months ended June 30,
2001 and 2000:
June 30, Increase (Decrease)
----------------- -------------------
2001 2000 Amount %
---- ---- ------ --------
(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts and customer service fees.... $ 10,537 9,464 1,073 11.34%
Gain on mortgage loans sold and held for sale.................... 7,332 3,268 4,064 124.36
Credit card fees................................................. 221 91 130 142.86
Gain on sale of credit card portfolio, net of expenses........... 2,275 -- 2,275 100.00
Loan servicing fees, net......................................... 153 231 (78) (33.77)
Net (loss) gain on sales of available-for-sale securities........ (113) 379 (492) (129.82)
Gain on sale of branch, net of expenses.......................... -- 1,355 (1,355) (100.00)
Gain on derivative instruments, net.............................. 5,486 -- 5,486 100.00
Other............................................................ 10,007 6,247 3,760 60.19
--------- -------- -------
Total noninterest income................................... $ 35,898 21,035 14,863 70.66
========= ======== ======= =========
Noninterest expense:
Salaries and employee benefits................................... $ 45,797 35,237 10,560 29.97%
Occupancy, net of rental income.................................. 8,216 6,655 1,561 23.46
Furniture and equipment.......................................... 5,617 5,673 (56) (0.99)
Postage, printing and supplies................................... 2,258 2,183 75 3.44
Data processing fees............................................. 12,951 10,663 2,288 21.46
Legal, examination and professional fees......................... 3,424 2,003 1,421 70.94
Amortization of intangibles associated with the
purchase of subsidiaries....................................... 3,712 2,373 1,339 56.43
Communications................................................... 1,513 1,233 280 22.71
Advertising and business development............................. 3,182 1,661 1,521 91.57
Guaranteed preferred debentures.................................. 8,978 6,012 2,966 49.33
Other............................................................ 20,368 6,017 14,351 238.51
--------- -------- -------
Total noninterest expense.................................. $ 116,016 79,710 36,306 45.55
========= ======== ======= ========
Noninterest Income. Noninterest income was $35.9 million for the six
months ended June 30, 2001, in comparison to $21.0 million for the comparable
period in 2000. Noninterest income consists primarily of service charges on
deposit accounts and customer service fees, mortgage-banking revenues, a gain on
the sale of our credit card portfolio, net gains on derivative instruments and
other income.
Service charges on deposit accounts and customer service fees were
$10.5 million for the six months ended June 30, 2001, in comparison to $9.5
million for the comparable period in 2000. We attribute the increase in service
charges and customer service fees to:
o increased deposit balances provided by internal growth;
o our acquisitions completed during 2000;
o additional products and services available and utilized by our
expanding base of retail and commercial customers;
o increased fee income resulting from revisions of customer service
charge rates, effective June 1, 2000, and enhanced control of fee
waivers; and
o increased income associated with automated teller machine services
and debit cards.
The gain on mortgage loans sold and held for sale was $7.3 million for
the six months ended June 30, 2001, in comparison to $3.3 million for the
comparable period in 2000. The overall increase is primarily attributable to a
significant increase in the volume of loans originated and sold commensurate
with the continued reductions in mortgage loan rates experienced in the first
six months of 2001 as well as the continued expansion of our mortgage banking
activities into new and existing markets.
During the six months ended June 30, 2001, we recorded a $2.3 million
pre-tax gain on the sale of our credit card portfolio. This gain is solely
attributable to the sale of this portfolio consistent with our strategic
decision to exit this product line and enter into an agent relationship with a
larger credit card service provider.
Noninterest income for the six months ended June 30, 2001 included a
net loss on the sale of available-for-sale investment securities of $113,000, in
comparison to a net gain on the sale of available-for-sale investment securities
of $379,000 for the comparable period in 2000. The net loss for 2001 resulted
primarily from the liquidation of certain investment securities held by FBA that
resulted in a loss of $134,000, whereas the net gain in 2000 resulted primarily
from sales of certain investment securities held by acquired institutions that
did not meet our overall investment objectives.
The net gain on derivative instruments of $5.5 million for the six
months ended June 30, 2001 includes $3.8 million of gains resulting from the
termination of certain interest rate swap agreements to adjust our interest rate
hedge position consistent with changes in the portfolio structure and mix. In
addition, the net gain reflects changes in the fair value of our interest rate
cap agreements, interest rate floor agreements and fair value hedges, in
accordance with the requirements of SFAS 133, as amended, which was implemented
on January 1, 2001.
The gain on sale of branch, net of expenses, was $1.4 million for the
six months ended June 30, 2000, and results from the divestiture of one of our
branch locations in central Illinois.
Other income was $10.0 million for the six months ended June 30, 2001,
in comparison to $6.2 million for the comparable period in 2000. We attribute
the primary components of the increase to:
o our acquisitions completed during 2000;
o increased portfolio management fee income of $1.6 million
associated with our Institutional Money Management Division,
which was formed in August 2000;
o increased brokerage revenue, which is primarily associated with the
stock option services acquired in conjunction with our acquisition
of Bank of San Francisco;
o increased rental income of $761,000 associated with our
commercial leasing activities that were acquired in
conjunction with our acquisition of FCG in February 2000; and
o income of approximately $600,000 associated with equipment
leasing activities that were acquired in conjunction with our
acquisition of Bank of San Francisco in December 2000.
Noninterest Expense. Noninterest expense was $116.0 million for the six
months ended June 30, 2001, compared to $79.7 million for the comparable period
in 2000. The increase reflects:
o the noninterest expense of our acquisitions completed during 2000,
including certain nonrecurring expenses associated with those
acquisitions;
o increased salaries and employee benefit expenses;
o increased data processing fees;
o increased legal, examination and professional fees;
o increased amortization of intangibles associated with the purchase
of subsidiaries;
o increased guaranteed preferred debentures expense; and
o increased other expense.
Salaries and employee benefits were $45.8 million for the six months
ended June 30, 2001, in comparison to $35.2 million for the comparable period in
2000. We primarily associate the increase with our 2000 acquisitions. However,
the increase also reflects the competitive environment in the employment market
that has resulted in a higher demand for limited resources, thus escalating
industry salary and employee benefit costs associated with employing and
retaining qualified personnel. In addition, the increase includes various
additions to staff throughout 2000 to enhance executive and senior management
expertise, improve technological support, strengthen centralized operational
functions and expand our product lines.
Occupancy, net of rental income, and furniture and equipment expense
totaled $13.8 million for the six months ended June 30, 2001, in comparison to
$12.3 million for the comparable period in 2000. We primarily attribute the
increase to our aforementioned acquisitions, the relocation of certain branches
and operational areas and increased depreciation expense associated with
numerous capital expenditures, including our new facility that houses various
centralized operations and certain corporate administrative functions.
Data processing fees were $13.0 million for the six months ended June
30, 2001, in comparison to $10.7 million for the comparable period in 2000.
First Services, L.P., a limited partnership indirectly owned by our Chairman and
his adult children, provides data processing and various related services to our
subsidiary banks and us under the terms of data processing agreements. We
attribute the increased data processing fees to growth and technological
advancements consistent with our product and service offerings, continued
upgrades to technological equipment, networks and communication channels, and
certain nonrecurring expenses associated with the data processing conversions of
Redwood Bank, Commercial Bank of San Francisco and Bank of San Francisco,
completed in February 2001, March 2001 and June 2001, respectively.
Legal, examination and professional fees were $3.4 million for the six
months ended June 30, 2001, in comparison to $2.0 million for the comparable
period in 2000. We primarily attribute the increase in these fees to the ongoing
professional services utilized by certain of our acquired entities, increased
professional fees associated with our Institutional Money Management Division,
which was formed in August 2000, and increased legal fees associated with
commercial loan documentation, collection efforts and certain defense
litigation.
Amortization of intangibles associated with the purchase of
subsidiaries was $3.7 million for the six months ended June 30, 2001, in
comparison to $2.4 million for the comparable period in 2000. The increase for
2001 is primarily attributable to amortization of the cost in excess of the fair
value of the net assets acquired for the six acquisitions that we completed
during 2000.
Guaranteed preferred debentures expense was $9.0 million for the six
months ended June 30, 2001, in comparison to $6.0 million for the comparable
period in 2000. The increase for 2001 is solely attributable to the issuance of
trust preferred securities in October 2000 by our second financing subsidiary.
Other expense was $20.4 million for the six months ended June 30, 2001,
in comparison to $6.0 million for the comparable period in 2000. Other expense
encompasses numerous general and administrative expenses including travel, meals
and entertainment, insurance, freight and courier services, correspondent bank
charges, advertising and business development, miscellaneous losses and
recoveries, memberships and subscriptions, transfer agent fees and sales taxes.
We attribute the majority of the increase in other expense to:
o our acquisitions completed during 2000;
o increased advertising and business development expenses
associated with various product and service initiatives and
enhancements;
o increased travel expenses primarily associated with business
development efforts and the ongoing integration of the
recently acquired entities into our corporate culture and
systems;
o a nonrecurring litigation settlement charge in the amount of
$11.5 million associated with a lawsuit brought by an
unaffiliated bank against one of our subsidiaries and certain
individuals related to allegations arising from the employment
by our subsidiary of individuals previously employed by the
plaintiff bank, as well as the conduct of those individuals
while employed by the plaintiff bank;
o the establishment of a $1.2 million specific reserve on an unfunded
letter of credit; and
o overall continued growth and expansion of our banking franchise.
Provision for Income Taxes. The provision for income taxes was $14.6
million for the six months ended June 30, 2001, representing an effective income
tax rate of 39.14%, in comparison to $17.7 million, representing an effective
income tax rate of 37.00%, for the comparable period in 2000. The increase in
the effective income tax rate is primarily attributable to:
o the increase in amortization of intangibles associated
with the purchase of subsidiaries, which is not deductible for
tax purposes; and
o a reduction of the deferred tax asset valuation reserve of
approximately $405,000 related to the utilization of net operating
losses associated with a previously acquired entity, which was
recorded in March 2000.
Comparison of Results of Operations for 2000 and 1999
Net Income. Net income was $56.1 million for the year ended December
31, 2000, compared to $44.2 million for 1999. The earnings progress for 2000 was
primarily driven by increased net interest income generated from our
acquisitions completed throughout 1999 and 2000; the continued growth and
diversification in the composition of our loan portfolio; and increased yields
on interest-earning assets. We funded the overall loan growth primarily through
deposits added through acquisitions and internal deposit growth. Net interest
income (expressed on a tax-equivalent basis) increased to $236.0 million, or
4.93% of average interest-earning assets, from $195.2 million, or 4.52% of
average interest-earning assets, for the years ended December 31, 2000 and 1999,
respectively.
The increase in net income was partially offset by an increased
provision for loan losses and an increase in operating expenses of $20.4 million
for the year ended December 31, 2000, in comparison to 1999. The increased
operating expenses reflect the operating expenses of our 1999 and 2000
acquisitions subsequent to their respective acquisition dates; increased
salaries and employee benefit expenses; increased data processing fees;
increased amortization of intangibles associated with the purchase of
subsidiaries and increased guaranteed preferred debentures expense. A reduction
in legal, examination and professional fees partially offset the increase in
operating expenses.
Provision for Loan Losses. The provision for loan losses was $14.1
million and $13.1 million for the years ended December 31, 2000 and 1999,
respectively. We attribute the increase in the provision for loan losses
primarily to the overall growth in the loan portfolio, both internal and through
acquisitions, as well as a general increase in risk associated with the
continued changing composition of our loan portfolio and an increase in
nonperforming assets, which is further discussed under "--Loans and Allowance
for Loan Losses." Loan charge-offs were $17.1 million for the year ended
December 31, 2000, in comparison to $17.7 million for the year ended December
31, 1999. Included in charge-offs for the year ended December 31, 2000 was $1.6
million relating to a single loan. The overall decrease in loan charge-offs,
excluding the large single-loan charge-off, was indicative of the generally
strong economic conditions prevalent in our markets, as well as management's
continued efforts to effectively monitor and manage our loan portfolio. Loan
recoveries were $9.8 million for the year ended December 31, 2000, in comparison
to $9.3 million for 1999, reflecting continued aggressive collection efforts.
Our acquisitions during 1999 and 2000 provided $3.0 million and $6.1 million,
respectively, in additional allowance for loan losses at their respective
acquisition dates.
The following table represents a summary of loan loss experience and
nonperforming assets for First Bank and First Bank & Trust as of and for the
years ended December 31, 2000 and 1999:
First Bank First Bank & Trust
---------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars expressed in thousands)
Total loans....................................................... $2,694,005 2,527,649 2,058,628 1,469,093
Total assets...................................................... 3,152,885 3,028,046 2,733,545 1,854,827
Provision for loan losses......................................... 12,250 8,890 1,877 4,183
Net loan charge-offs.............................................. 7,007 6,494 201 1,946
Net loan charge-offs as a percentage of average loans............. 0.27% 0.26% 0.01% 0.15%
Nonperforming loans............................................... $ 38,161 23,493 15,005 16,244
Nonperforming assets.............................................. 39,954 25,233 15,699 16,633
Noninterest Income and Expense. The following table summarizes
noninterest income and noninterest expense for the years ended December 31, 2000
and 1999:
December 31, Increase (Decrease)
----------------- -------------------
2000 1999 Amount %
---- ---- ------ --------
(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts and customer service fees.... $ 19,794 17,676 2,118 11.98%
Gain on mortgage loans sold and held for sale.................... 7,806 6,909 897 12.98
Credit card fees................................................. 236 409 (173) (42.30)
Loan servicing fees, net......................................... 486 657 (171) (26.03)
Net gain on sales of available-for-sale securities............... 168 791 (623) (78.76)
Net loss on trading securities................................... -- (303) 303 (100.00)
Gain on sales of branches, net of expenses....................... 1,355 4,406 (3,051) (69.25)
Other............................................................ 12,933 11,105 1,828 16.46
--------- -------- -------
Total noninterest income................................... $ 42,778 41,650 1,128 2.71
========= ======== ======= ========
Noninterest expense:
Salaries and employee benefits................................... $ 73,391 61,524 11,867 19.29%
Occupancy, net of rental income.................................. 14,675 12,518 2,157 17.23
Furniture and equipment.......................................... 11,702 8,520 3,182 37.35
Postage, printing and supplies................................... 4,431 4,244 187 4.41
Data processing fees............................................. 22,359 18,567 3,792 20.42
Legal, examination and professional fees......................... 4,523 9,109 (4,586) (50.35)
Amortization of intangibles associated with
the purchase of subsidiaries.................................... 5,297 4,401 896 20.36
Communications................................................... 2,625 2,488 137 5.51
Advertising and business development............................. 4,331 3,734 597 15.99
Guaranteed preferred debentures.................................. 13,173 12,050 1,123 9.32
Other............................................................ 14,656 13,652 1,004 7.35
--------- -------- -------
Total noninterest expense.................................. $ 171,163 150,807 20,356 13.50
========= ======== ======= ========
Noninterest Income. Noninterest income was $42.8 million for the year
ended December 31, 2000, compared to $41.7 million for 1999. Noninterest income
consists primarily of service charges on deposit accounts and customer service
fees, mortgage banking revenues and other income.
Service charges on deposit accounts and customer service fees increased
to $19.8 million for 2000, from $17.7 million for 1999. We attribute the
increase in service charges and customer service fees to:
o increased deposit balances provided by internal growth;
o our acquisitions completed throughout 1999 and 2000;
o additional products and services available and utilized by our
expanding base of retail and commercial customers;
o increased fee income resulting from revisions of customer
service charge rates effective April 1, 1999 and June 30, 2000,
and enhanced control of fee waivers; and
o increased interchange income associated with automatic teller
machine services and debit and credit cards.
The gain on mortgage loans sold and held for sale increased to $7.8
million from $6.9 million for the years ended December 31, 2000 and 1999,
respectively. We attribute the increase to an increased volume of loans sold and
held for sale, primarily during the fourth quarter of 2000, including fixed rate
residential mortgage loans, which are sold on a servicing retained basis, and
adjustable-rate and non-conforming residential mortgage loans, which are sold on
a servicing released basis.
The net gain on sales of available-for-sale securities was $168,000 and
$791,000 for the years ended December 31, 2000 and 1999, respectively. These
gains resulted from sales of available-for-sale securities necessary to
facilitate the funding of loan growth. The decrease in the net gains reflects
the sales, at a loss, of certain investment securities that did not meet our
overall investment objectives.
The net loss on sales of trading securities was $303,000 for the year
ended December 31, 1999 resulted from the termination of our trading division,
effective December 31, 1998, and the liquidation of all trading securities
during the first quarter of 1999.
The gain on sales of branches, net of expenses, was $1.4 million and
$4.4 million for the years ended December 31, 2000 and 1999, respectively. The
reduction in these gains results from a reduced number of branch divestitures.
During 2000, we divested one of our branch locations in central Illinois,
whereas in 1999, we divested seven branch offices in central and northern
Illinois.
Other income was $12.9 million and $11.1 million for the years ended
December 31, 2000 and 1999, respectively. The increase in other income is
primarily attributable to increased income earned on our investment in
bank-owned life insurance, rental income associated with FCG's leasing
activities and increased rental fees received from First Services, L.P. for the
use of data processing and other equipment owned by us. The increase in rental
fees corresponds to the replacement of our teller system and certain other
technological upgrades, including local and wide area network-based systems,
core processors and item processing equipment that were replaced in 1999 in
preparation for the Year 2000 transition.
Noninterest Expense. Noninterest expense was $171.2 million for the
year ended December 31, 2000, in comparison to $150.8 million for 1999. The
increase reflects:
o the noninterest expense associated with our acquisitions
completed throughout 1999 and 2000 subsequent to their
respective acquisition dates, including certain nonrecurring
expenses associated with those acquisitions;
o increased salaries and employee benefit expenses;
o increased data processing fees;
o increased amortization of intangibles associated with the purchase
of subsidiaries;
o increased guaranteed preferred debentures expense; and
o increased expenses associated with our internal restructuring
process.
The overall increase in noninterest expense was partially offset by a
decrease in legal, examination and professional fees.
During 1999, we began an internal restructuring process designed to
better position us for future growth and opportunities expected to become
available as consolidation and changes continue in the delivery of financial
services. The magnitude of this project was extensive and covered almost every
area of our organization. The primary objectives of the restructuring process
were to:
o redesign the corporate organization to provide clearer lines of
authority which are more conducive to the effective delivery of
services to customers;
o enhance our technological strength to enable us to more
effectively and efficiently provide the products, services and
delivery channels necessary to remain competitive in the
financial services industry of the future;
o establish the infrastructure necessary to better support our
service delivery and business development efforts, and to
provide more efficient, better quality services to customers;
o increase the depth and abilities of all levels of our management
and provide supervision to lead its efforts to accomplish our
corporate objectives; and
o improve internal monitoring systems in order to better assess
the progress of all of our areas in achieving our corporate
objectives.
Although these efforts have primarily led to increased capital
expenditures and noninterest expenses in the short term, we anticipate they will
lead to additional internal growth, more efficient operations and improved
profitability over the long term.
Salaries and employee benefits increased by $11.9 million to $73.4
million from $61.5 million for the years ended December 31, 2000 and 1999,
respectively. We primarily associate the increase with our acquisitions
completed throughout 1999 and 2000 as well as the additional lines of business
that we entered into in 2000, including institutional money management,
international banking and fiduciary deposit management for bankruptcy trustees,
receivers and other estate administrators. However, the increase also reflects
the competitive environment in the employment market that has resulted in a
higher demand for limited resources, thus escalating industry salary and
employee benefit costs associated with employing and retaining qualified
personnel. In addition, the increase includes various additions to our staff to
enhance executive and senior management expertise, improve technological support
and strengthen centralized operational functions.
Occupancy, net of rental income, and furniture and equipment expense
totaled $26.4 million and $21.0 million for the years ended December 31, 2000
and 1999, respectively. The increase is primarily attributable to our
acquisitions, the relocation of certain California and Texas branches and
increased depreciation expense associated with numerous capital expenditures
made throughout 1999, including the implementation of our new teller system. Our
selective elimination of 16 branch offices by sales, mergers or closures during
1999 and 2000 partially offset this increase.
Data processing fees were $22.4 million and $18.6 million for the years
ended December 31, 2000 and 1999, respectively. First Services, L.P., a limited
partnership indirectly owned by our Chairman and his adult children, provides
data processing and various related services to our subsidiary banks and us
under the terms of data processing agreements. We attribute the increased data
processing fees to growth and technological advancements consistent with our
product and service offerings and upgrades to technological equipment, networks
and communication channels.
Legal, examination and professional fees were $4.5 million and $9.1
million for the years ended December 31, 2000 and 1999, respectively. The
decrease in these fees results from a decline in our utilization of external
consultants who provided assistance throughout 1999 associated with the
development and expansion of selected business initiatives. The decrease also
reflects the settlement of certain litigation completed in 1999.
Amortization of intangibles associated with the purchase of
subsidiaries was $5.3 million and $4.4 million for the years ended December 31,
2000 and 1999, respectively. The increase for 2000 is primarily attributable to
amortization of the cost in excess of the fair value of the net assets acquired
of the six acquisitions that we completed during 2000.
Guaranteed preferred debentures expense was $13.2 million and $12.1
million for the years ended December 31, 2000 and 1999, respectively. The
increase for 2000 is solely attributable to the issuance of trust preferred
securities in October 2000.
Other expense was $14.7 million and $13.7 million for the years ended
December 31, 2000 and 1999, respectively. Other expense encompasses numerous
general and administrative expenses including but not limited to travel, meals
and entertainment, insurance, freight and courier services, correspondent bank
charges, miscellaneous losses and recoveries, and sales taxes. The overall
increase in these expenses primarily reflects:
o continued growth and expansion of our banking franchise;
o a $700,000 provision for an estimated loss on equipment underlying
leases associated with a previously acquired entity; and
o a $200,000 provision for estimated losses associated with certain
pending litigation.
Offsetting the overall increase in other expenses in 2000 were
recoveries of $1.8 million from loans of acquired entities that had been fully
charged off prior to the acquisition dates.
Comparison of Results of Operations for 1999 and 1998
Net Income. Net income was $44.2 million for the year ended December
31, 1999, compared to $33.5 million for 1998. We associate the improved
operating results for 1999 with our efforts to realign the composition of our
loan portfolio through further diversification and growth; the improvement in
the composition of the interest-earning assets and interest-bearing liabilities;
the results of our acquisitions of Century Bank and Redwood Bancorp; and the
divestiture of certain branch facilities. Net interest income (expressed on a
tax-equivalent basis) increased to $195.2 million, or 4.52% of average
interest-earning assets, from $166.5 million, or 4.19% of average
interest-earning assets, for 1999 and 1998, respectively.
An increased provision for loan losses and an increase in operating
expenses partially offset the improvement in net income. The increase in
operating expense reflects the additional cost of the trust preferred securities
issued by FBA in July 1998; the continuing expansion of commercial and retail
banking activities; the acquisitions of Century Bank and Redwood Bancorp;
increased legal, examination and professional fees; and increased data
processing fees primarily associated with Year 2000 activities.
Provision for Loan Losses. The provision for loan losses was $13.1 million and
$9.0 million for the years ended December 31, 1999 and 1998, respectively. We
primarily attribute the increase in the provision for loan losses for 1999 to
the continued growth and changing composition of our loan portfolio combined
with an increase in loans charged-off. Net loan charge-offs were $8.4 million
for the year ended December 31, 1999, compared to $1.7 million for 1998. The
increase in net loan charge-offs reflects overall growth in our loan portfolio
and increased risk associated with the continued change in the composition of
our loan portfolio. In addition, nonperforming assets have, in general,
increased at December 31, 1999 and 1998, in comparison to previous periods. The
allowances for loan losses of Century Bank and Redwood Bancorp at their dates of
acquisition added approximately $3.0 million to our consolidated allowance for
loan losses.
The following table represents a summary of loan loss experience and
nonperforming assets for First Bank and First Bank & Trust as of and for the
years ended December 31, 1999 and 1998:
First Bank First Bank & Trust
---------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
(dollars expressed in thousands)
Total loans........................................................ $2,527,649 2,490,556 1,469,093 1,089,966
Total assets....................................................... 3,028,046 3,024,600 1,854,827 1,504,311
Provision for loan losses.......................................... 8,890 7,250 4,183 1,750
Net loan charge-offs............................................... 6,494 1,150 1,946 589
Net loan charge-offs as a percentage of average loans.............. 0.26% 0.05% 0.15% 0.06%
Nonperforming loans................................................ $ 23,493 18,494 16,244 25,044
Nonperforming assets............................................... 25,233 21,268 16,633 25,979
Noninterest Income and Expense. The following table summarizes
noninterest income and noninterest expense for the years ended December 31, 1999
and 1998:
December 31, Increase (Decrease)
--------------- -------------------
1999 1998 Amount %
---- ---- ------ --------
(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts and customer service fees.... $ 17,676 14,876 2,800 18.82%
Gain on mortgage loans sold and held for sale.................... 6,909 5,563 1,346 24.20
Credit card fees................................................. 409 2,999 (2,590) (86.36)
Loan servicing fees, net......................................... 657 1,017 (360) (35.40)
Net gain on sales of available-for-sale securities............... 791 1,466 (675) (46.04)
Net (loss) gain on trading securities............................ (303) 607 (910) (149.92)
Gain on sales of branches, net of expenses....................... 4,406 -- 4,406 --
Other............................................................ 11,105 9,969 1,136 11.40
--------- -------- -------
Total noninterest income................................... $ 41,650 36,497 5,153 14.12
========= ======== ======= =======
Noninterest expense:
Salaries and employee benefits................................... $ 61,524 55,907 5,617 10.05%
Occupancy, net of rental income.................................. 12,518 11,037 1,481 13.42
Furniture and equipment.......................................... 8,520 8,122 398 4.90
Postage, printing and supplies................................... 4,244 5,230 (986) (18.85)
Data processing fees............................................. 18,567 13,917 4,650 33.41
Legal, examination and professional fees......................... 9,109 5,326 3,783 71.03
Credit card...................................................... 667 3,396 (2,729) (80.36)
Amortization of intangibles associated with the
purchase of subsidiaries....................................... 4,401 3,184 1,217 38.22
Communications................................................... 2,488 2,874 (386) (13.43)
Advertising and business development............................. 3,734 4,668 (934) (20.01)
Guaranteed preferred debentures.................................. 12,050 9,842 2,208 22.43
Other............................................................ 12,985 15,201 (2,216) (14.58)
--------- -------- -------
Total noninterest expense.................................. $ 150,807 138,704 12,103 8.73
========= ======== ======= =======
Noninterest Income. Noninterest income was $41.7 million for the year
ended December 31, 1999, compared to $36.5 million for 1998. Noninterest income
consists primarily of service charges on deposit accounts and customer service
fees, mortgage banking revenues and other income.
Service charges on deposit accounts and customer service fees increased
to $17.7 million for 1999, from $14.9 million for 1998. The increase in service
charges and customer service fees is attributable to:
o increased deposit balances provided by internal growth;
o our acquisitions completed throughout 1998 and 1999;
o additional products and services available and utilized by
our expanding base of retail and commercial customers;
o increased fee income resulting from revisions of customer
service charge rates effective April 1, 1999, and enhanced
control of fee waivers; and
o increased interchange income associated with automatic teller
machine services and debit and credit cards.
As described below, this increase was partially offset by the foregone
revenue associated with the divestiture of certain branches in 1999, which
resulted in a reduction in First Bank's deposit base of approximately $54.8
million.
Credit card fees declined to $409,000 for 1999, from $3.0 million for
1998. The reduction in credit card fees primarily results from the liquidation
of our merchant credit card processing operation effective December 31, 1998.
Our mortgage banking revenues consist primarily of loan servicing fees,
net, and gain on mortgage loans sold and held for sale. Loan servicing fees,
net, decreased to $657,000 from $1.0 million for the years ended December 31,
1999 and 1998, respectively. We attribute the decrease in loan servicing fees to
aggregate increases of $698,000 in additional amortization of mortgage servicing
rights, interest shortfall and mortgage-backed security expense. This decrease
in loan servicing fees was partially offset by an increase in loan servicing
fees resulting from the increase in the portfolio of loans serviced for others.
The gain on mortgage loans sold and held for sale increased to $6.9 million from
$5.6 million for 1999 and 1998, respectively. This increase regarding mortgage
loans is attributable to an increased volume of loans sold and held for sale,
including fixed rate residential mortgage loans, which are sold on a servicing
retained basis, and adjustable-rate and non-conforming residential mortgage
loans, which are sold on a servicing released basis.
The net gain on sales of available-for-sale securities was $791,000 and
$1.5 million for the years ended December 31, 1999 and 1998, respectively. These
gains resulted from sales of available-for-sale securities necessary to
facilitate the funding of loan growth.
Net loss on sales of trading securities was $303,000 for the year ended
December 31, 1999, in comparison to a net gain of $607,000 for 1998. The loss
for 1999 resulted from the termination of our trading division, effective
December 31, 1998, and the subsequent liquidation of all trading portfolio
securities during the first quarter of 1999.
The gain on sales of branches, net of expenses, of $4.4 million
resulted from the divestiture of seven branches in the central and northern
Illinois market areas.
Other income was $11.1 million and $10.0 million for the years ended
December 31, 1999 and 1998, respectively. The primary components of the increase
are attributable to increased income earned on our investment in bank-owned life
insurance and expanded brokerage and private banking and trust services. The
bank-owned life insurance income increased to $3.9 million for 1999, in
comparison to $3.1 million for 1998. This increase results from twelve months of
earnings on FBA's investment in bank-owned life insurance in 1999, in comparison
to nine months of earnings in 1998. In addition, trust services income increased
to $1.8 million for 1999 from $1.4 million for 1998 due to the continued
expansion of these services, primarily in California.
Noninterest Expense. Noninterest expense increased to $150.8 million
for the year ended December 31, 1999 from $138.7 million for 1998. The increase
reflects:
o our acquisitions completed throughout 1998 and 1999;
o increased data processing fees primarily associated with our Year
2000 Program;
o increased legal, examination and professional fees; and
o FBA's issuance of trust preferred securities in July 1998.
The overall increase in noninterest expense was partially offset by a
decline in credit card expenses and a reduction in advertising and business
development expenses, postage, printing and supplies expenses and communications
expenses. This is consistent with management's efforts to more effectively
manage these expenditures.
Specifically, salaries and employee benefits increased by $5.6 million
to $61.5 million from $55.9 million for the years ended December 31, 1999 and
1998, respectively. We associate the increase with the newly-acquired banks and
our continued commitment to expanding our commercial, mortgage banking and
retail business development capabilities associated with the expansion and
delivery of our products and services. The overall increase also reflects the
competitive environment in the employment market that has resulted in a higher
demand for limited resources, thus escalating industry salary and employee
benefit costs.
Data processing fees were $18.6 million and $13.9 million for 1999 and
1998, respectively. First Services, L.P., a limited partnership indirectly owned
by our Chairman and his adult children, provides data processing and various
related services to our subsidiary banks and us under the terms of data
processing agreements. We attribute the increase in data processing fees to
growth and technological advancements consistent with our product and service
offerings, increased expenses attributable to communication data lines related
to the expansion of the branch network infrastructure and expenses associated
with our Year 2000 Program.
Legal, examination and professional fees increased by $3.8 million to
$9.1 million in 1999, from $5.3 million in 1998. We attribute the increase in
these fees to our expanded utilization of external consultants in conjunction
with the development and expansion of selected business initiatives. Increased
legal expenditures associated with the settlement of certain litigation further
contributed to the overall increase.
Credit card expenses declined by $2.7 million to $667,000 from $3.4
million for the years ended December 31, 1999 and 1998, respectively. As
previously discussed, this decline primarily results from the liquidation of our
merchant credit card processing operation, effective December 31, 1998.
Amortization of intangibles associated with the purchase of
subsidiaries was $4.4 million and $3.2 million for the years ended December 31,
1999 and 1998, respectively. The increase for 1999 is primarily attributable to
amortization of the cost in excess of the fair value of the net assets acquired
of the acquisitions that we completed during 1999.
Guaranteed preferred debentures increased by $2.2 million to $12.1
million from $9.8 million for the years ended December 31, 1999 and 1998,
respectively. We associate the increase for 1999 with the issuance by FBA's
financing subsidiary of its trust preferred securities in July 1998.
Balance Sheet
Investment Securities
We classify the securities within our investment portfolio as held to
maturity or available for sale. We no longer engage in the trading of investment
securities. Our investment security portfolio consists primarily of securities
designated as available for sale. The investment security portfolio was $385.0
million and $563.5 million at June 30, 2001 and December 31, 2000, respectively,
compared to $451.6 million and $534.8 million at December 31, 1999 and 1998,
respectively. We attribute the decrease in investment securities during the six
months ended June 30, 2001 to the liquidation of certain investment securities
held by FBA and a higher than normal level of investment security calls
resulting from the general decline in interest rates.
Loans and Allowance for Loan Losses
Interest earned on our loan portfolio represents the principal source
of income for our subsidiary banks. Interest and fees on loans were 92.8% and
92.0% of total interest income for the six months ended June 30, 2001 and 2000,
respectively, and 92.3%, 91.5% and 86.7% of total interest income for the years
ended December 31, 2000, 1999 and 1998, respectively. Loans, net of unearned
discount, represented 82.3% and 80.9% of total assets as of June 30, 2001 and
December 31, 2000, respectively, compared to 82.1% and 78.6% of total assets at
December 31, 1999 and 1998, respectively. Total loans, net of unearned discount,
increased $109.7 million to $4.86 billion for the six months ended June 30,
2001, $750.0 million to $4.75 billion for the year ended December 31, 2000, and
$420.0 million to $4.00 billion for the year ended December 31, 1999. We view
the quality, yield and growth of our loan portfolio to be instrumental elements
in determining our profitability.
During the five years ended December 31, 2000, total loans, net of
unearned discount, increased 71.5% from $2.77 billion at December 31, 1996 to
$4.75 billion at December 31, 2000. At June 30, 2001, total loans, net of
unearned discount, were $4.86 billion. Throughout this period, we have
substantially enhanced our capabilities for achieving and managing internal
growth. A key element of this process has been the expansion of our corporate
business development staff, which is responsible for the internal development of
both loan and deposit relationships with commercial customers. While this
process was occurring, in order to achieve more diversification, a higher level
of interest yield and a reduction in interest rate risk within our loan
portfolio, we also focused on repositioning our portfolio. As the corporate
business development effort continued to originate a substantial volume of new
loans, substantially all of our residential mortgage loan production has been
sold in the secondary mortgage market. We have also substantially reduced our
origination of indirect automobile loans. This allowed us to fund part of the
growth in corporate lending through reductions in residential real estate and
indirect automobile lending.
In addition, our acquisitions added substantial portfolios of new
loans. Some of these portfolios, particularly those from acquisitions completed
in 1995, contained significant loan problems, which we anticipated and
considered in our acquisition pricing. As we resolved the asset quality issues,
the portfolios of the acquired entities tended to decline because many of the
resources which would otherwise be directed toward generating new loans were
concentrated on improving or eliminating existing relationships.
This table summarizes the effects of these factors on our loan
portfolio for the six months ended June 30, 2001 and five years ended December
31, 2000:
Increase (Decrease)
Increase (Decrease) for the Year Ended December 31,
for the Six Months -------------------------------------------------
Ended June 30, 2001 2000 1999 1998 1997 1996
------------------- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Internal loan volume increase (decrease):
Commercial lending..................... $ 71,918 360,410 363,486 633,660 378,882 209,251
Residential real estate lending (1).... 101,078 20,137 (126,418) (152,849) (144,707) (164,400)
Consumer lending, net of
unearned discount.................... (63,318) (64,606) (56,349) (30,506) (54,305) (82,231)
Loans provided by acquisitions............. -- 440,000 235,500 127,600 54,361 61,130
--------- ------- -------- -------- -------- --------
Total increase in loans, net of
unearned discount................ $ 109,678 755,941 416,219 577,905 234,231 23,750
========= ======= -======= ======== ======== ========
-------------------------
(1) Includes loans held for sale, which increased $120.7 million for the six months ended June 30, 2001.
Our lending strategy stresses quality, growth and diversification.
Throughout our organization, we employ a common credit underwriting policy. Our
commercial lenders focus principally on small to middle-market companies.
Consumer lenders focus principally on residential loans, including home equity
loans, automobile financing and other consumer financing opportunities arising
out of our branch banking network.
Commercial, financial and agricultural loans include loans that are
made primarily based on the borrowers' general credit strength and ability to
generate cash flows for repayment from income sources even though such loans and
bonds may also be secured by real estate or other assets. Real estate
construction and development loans, primarily relating to residential properties
and commercial properties, represent financing secured by real estate under
construction. Real estate mortgage loans consist primarily of loans secured by
single-family, owner-occupied properties and various types of commercial
properties on which the income from the property is the intended source of
repayment. Consumer and installment loans are loans to individuals and consist
primarily of loans secured by automobiles. Loans held for sale are primarily
fixed and adjustable rate residential loans pending sale in the secondary
mortgage market in the form of a mortgage-backed security, or to various private
third-party investors.
The following table summarizes the composition of our loan portfolio by
major category and the percent of each category to the total portfolio as of the
dates presented:
December 31,
--------------------------------------------------------------------------------------------------------
June 30, 2001 2000 1999 1998 1997 1996
---------------- ------------ --------------- ----------------- -------------- ----------------
Amount % Amount % Amount % Amount % Amount % Amount %
------ - ------ - ------ - ------ - --------- - ------ -
(dollars expressed in thousands)
Commercial, financial
and agricultural......$1,559,990 33.4% $1,496,284 32.0% $1,086,919 27.4% $ 920,007 26.7%$ 621,618 21.1% $ 457,186 16.7%
Real estate construction
and development....... 813,574 17.4 809,682 17.3 795,081 20.1 720,910 20.9 413,107 14.0 289,378 10.5
Real estate mortgage:
One-to-four-family
residential loans... 706,869 15.1 726,474 15.5 720,630 18.2 739,442 21.5 915,205 31.1 1,059,770 38.7
Other real estate
loans............... 1,480,703 31.7 1,476,383 31.5 1,130,939 28.6 789,735 22.9 713,910 24.3 600,810 21.9
Consumer and installment,
net of unearned
discount............ 111,019 2.4 174,337 3.7 225,343 5.7 274,392 8.0 279,279 9.5 333,340 12.2
---------- ----- --------- ------ --------- ----- ---------- ----- -------- ----- ---------- -----
Total loans,
excluding
loans held
for sale......... 4,672,155 100.0% 4,683,160 100.0% 3,958,912 100.0% 3,444,486 100.0% 2,943,119 100.0% 2,740,484 100.0%
===== ===== ===== ===== ===== =====
Loans held for sale...... 189,788 69,105 37,412 135,619 59,081 27,485
---------- ---------- ---------- ---------- ---------- ----------
Total loans........$4,861,943 $4,752,265 $3,996,324 $3,580,105 $3,002,200 $2,767,969
========== ========== ========== ========== ========== ==========
Loans at December 31, 2000 mature as follows:
Over one year
through five
years Over five years
--------------- ---------------
One year Fixed Floating Fixed Floating
or less rate rate rate rate Total
-------- ---- ---- ---- ---- -----
(dollars expressed in thousands)
Commercial, financial and agricultural.................... $ 1,253,183 159,905 54,266 18,524 10,406 1,496,284
Real estate construction and development.................. 775,615 27,314 4,231 206 2,316 809,682
Real estate mortgage...................................... 1,130,611 466,735 317,581 174,650 113,280 2,202,857
Consumer and installment, net of unearned discount........ 45,751 104,364 1,207 21,308 1,707 174,337
Loans held for sale....................................... 69,105 -- -- -- -- 69,105
----------- -------- -------- ------- ------- ---------
Total loans......................................... $ 3,274,265 758,318 377,285 214,688 127,709 4,752,265
=========== ======== ======== ======= ======= =========
The following table is a summary of loan loss experience for the six
months ended June 30, 2001 and 2000, and for the five years ended December 31,
2000:
As of or for the Six
Months Ended June 30, As of or for the Years Ended December 31,
---------------------- ------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Allowance for loan losses,
beginning of period..................... $ 1,592 68,611 68,611 60,970 50,509 46,781 52,665
Acquired allowances for loan losses......... -- 799 6,062 3,008 3,200 30 2,338
---------- --------- --------- --------- --------- --------- ---------
81,592 69,410 74,673 63,978 53,709 46,811 55,003
---------- --------- --------- --------- --------- --------- ---------
Loans charged-off:
Commercial, financial and agricultural.. (14,126) (2,949) (9,768) (10,855) (3,908) (2,308) (8,918)
Real estate construction and development (65) (1) (2,229) (577) (185) (2,242) (1,241)
Real estate mortgage.................... (375) (378) (2,213) (2,561) (2,389) (6,250) (10,308)
Consumer and installment................ (770) (1,642) (2,840) (3,728) (3,701) (6,032) (8,549)
---------- --------- --------- --------- --------- --------- ---------
Total............................. (15,336) (4,970) (17,050) (17,721) (10,183) (16,832) (29,016)
---------- --------- --------- --------- --------- --------- ---------
Recoveries of loans previously charged-off:
Commercial, financial and agricultural.. 1,884 3,684 5,621 3,602 3,417 2,146 2,642
Real estate construction and development 239 244 319 849 342 269 495
Real estate mortgage.................... 846 1,149 1,937 2,357 2,029 3,666 3,255
Consumer and installment................ 806 1,103 1,965 2,473 2,656 3,149 2,908
---------- --------- --------- --------- --------- --------- ---------
Total............................. 3,775 6,180 9,842 9,281 8,444 9,230 9,300
---------- --------- --------- --------- --------- --------- ---------
Net loan (charge-offs) recoveries. (11,561) 1,210 (7,208) (8,440) (1,739) (7,602) (19,716)
---------- --------- --------- --------- --------- --------- ---------
Provision for loan losses................... 7,110 7,202 14,127 13,073 9,000 11,300 11,494
---------- --------- --------- --------- --------- --------- ---------
Allowance for loan losses, end of period.... $ 77,141 77,822 81,592 68,611 60,970 50,509 46,781
========== ========= ========= ========= ========= ========= =========
Loans outstanding, net of unearned discount:
Average................................. $4,840,188 4,180,776 4,290,958 3,812,508 3,250,719 2,846,157 2,726,297
End of period........................... 4,861,943 4,326,393 4,752,265 3,996,324 3,580,105 3,002,200 2,767,969
End of period, excluding loans
held for sale......................... 4,672,155 4,286,326 4,683,160 3,958,912 3,444,486 2,943,119 2,740,484
========== ========= ========= ========= ========= ========= =========
Ratio of allowance for loan losses
to loans outstanding:
Average................................. 1.59% 1.86% 1.90% 1.80% 1.88% 1.77% 1.72%
End of period........................... 1.59 1.80 1.72 1.72 1.70 1.68 1.69
End of period, excluding loans
held for sale......................... 1.65 1.82 1.74 1.73 1.77 1.72 1.71
Ratio of net charge-offs (recoveries)
to average loans outstanding (1)........ 0.48 (0.06) 0.17 0.22 0.05 0.27 0.72
Ratio of current period recoveries to
preceding period's total charge-offs.... 75.96 82.09 55.54 91.14 50.17 31.81 59.54
========== ========== ========= ========= ========= ========= =========
---------------------------
(1) Ratios for the six month period are annualized.
The following table is a summary of the allocation of the allowance for
loan losses for the five years ended December 31, 2000:
As of or for the Years Ended December 31,
------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- --- ----
(dollars expressed in thousands)
Commercial, financial and agricultural............................. $ 32,352 24,898 19,239 14,879 13,579
Real estate construction and development........................... 14,667 13,264 15,073 7,148 4,584
Real estate mortgage............................................... 24,691 20,750 18,774 18,317 14,081
Consumer and installment........................................... 3,142 4,390 5,180 5,089 10,296
Unallocated........................................................ 6,740 5,309 2,704 5,076 4,241
-------- ------ ------ ------ ------
Total........................................................ $ 81,592 68,611 60,970 50,509 46,781
======== ====== ====== ====== ======
Nonperforming assets include nonaccrual loans, restructured loans and
other real estate. The following table presents the categories of nonperforming
assets and certain ratios as of the dates indicated:
June 30, December 31,
-------------------- --------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Commercial, financial and agricultural:
Nonaccrual............................$ 26,887 14,824 22,437 18,397 15,385 4,017 4,113
Restructured terms.................... -- 22 22 29 -- -- 130
Real estate construction
and development:
Nonaccrual............................ 13,316 2,392 11,068 1,886 3,858 4,097 817
Real estate mortgage:
Nonaccrual............................ 17,820 16,398 16,524 16,414 18,858 10,402 24,486
Restructured terms.................... 2,930 2,971 2,952 2,979 5,221 5,456 278
Consumer and installment:
Nonaccrual............................ 58 208 155 32 216 94 440
Restructured terms.................... 7 -- 8 -- -- -- 5
---------- --------- --------- --------- --------- -------- ---------
Total nonperforming loans...... 61,018 36,815 53,166 39,737 43,538 24,066 30,269
Other real estate........................ 3,690 1,903 2,487 2,129 3,709 7,324 10,607
---------- --------- --------- --------- --------- -------- ---------
Total nonperforming assets... $ 64,708 38,718 55,653 41,866 47,247 31,390 40,876
========== ========= ========= ========= ========= ======== =========
Loans, net of unearned discount..........$4,861,943 4,326,393 4,752,265 3,996,324 3,580,105 3,002,20 2,767,969
========== ========= ========= ========= ========= ======== =========
Loans past due 90 days or more
and still accruing.................$ 7,550 3,477 3,009 5,844 4,674 2,725 3,779
========== ========= ========= ========= ========= ======== =========
Ratio of:
Allowance for loan losses to loans.... 1.59% 1.80% 1.72% 1.72% 1.70% 1.68% 1.69%
Nonperforming loans to loans.......... 1.26 0.85 1.12 0.99 1.22 0.80 1.09
Allowance for loan losses to
nonperforming loans................ 126.42 211.39 153.47 172.66 140.04 209.88 154.55
Nonperforming assets to loans and
other real estate.................. 1.33 0.89 1.17 1.05 1.32 1.04 1.47
========== ========= ======== ========= ========= ========= =========
Nonperforming loans, consisting of loans on nonaccrual status and
certain restructured loans, were $61.0 million at June 30, 2001 and $53.2
million at December 31, 2000, in comparison to $39.7 million and $43.5 million
at December 31, 1999 and 1998, respectively. Included in nonaccrual real estate
construction and development loans at June 30, 2001 and December 31, 2000 is a
single borrowing relationship of $12.7 million and $10.9 million, respectively,
relating to a residential and recreational development project that has had
significant financial difficulties. This project experienced inadequate project
financing at inception, project delays and weak project management. Financing
for this project has since been recast, and is presently meeting development
expectations. We attribute the increase in nonperforming and past due loans for
the six months ended June 30, 2001 to be reflective of cyclical trends
experienced within the banking industry as a result of economic slow down.
Consistent with the recent general economic slow down experienced within our
primary markets, we anticipate this trend will continue in the upcoming months.
The increase in nonperforming and past due loans in 2000 primarily resulted from
a small number of credit relationships that were placed on nonaccrual during the
year ended December 31, 2000. These nonperforming loans are symptomatic of
circumstances that are specific to these relationships, and are not indicative
of distress across the broad spectrum of our loan portfolio. As previously
discussed, certain acquired loan portfolios, particularly those acquired during
1995, exhibited varying degrees of distress prior to their acquisition. While
these problems had been identified and considered in our acquisition pricing,
the acquisitions led to an increase in nonperforming assets and problem loans
(as defined below) to $95.0 million at December 31, 1995. Nonperforming assets
and problem loans were reduced to $59.3 million at December 31, 1997. At
December 31, 1998, nonperforming assets and problem loans increased to $68.5
million. We associate the increase for 1998 to two commercial loans totaling
$6.0 million, net of charge-offs; our acquisitions of Republic Bank and Pacific
Bay Bank; and the overall growth of our loan portfolio, principally commercial,
financial and agricultural, real estate construction and development and
commercial real estate loans.
As of June 30, 2001, December 31, 2000 and December 31, 1999, $55.7
million, $50.2 million and $36.3 million, respectively, of loans not included in
the table above were identified by management as having potential credit
problems (problem loans). We attribute the increase primarily to the gradual
slow down and uncertainties that have recently occurred in the economy
surrounding the markets in which we operate. As of December 31, 1998, 1997 and
1996, problem loans totaled $21.3 million, $27.9 million and $31.5 million,
respectively.
Our credit management policies and procedures focus on identifying,
measuring and controlling credit exposure. These procedures employ a
lender-initiated system of rating credits, which is ratified in the loan
approval process and subsequently tested in internal loan reviews, external
audits and regulatory bank examinations. The system requires rating all loans at
the time they are originated, except for homogeneous categories of loans, such
as residential real estate mortgage loans, indirect automobile loans and credit
card loans. These homogeneous loans are assigned an initial rating based on our
experience with each type of loan. We adjust these ratings based on payment
experience subsequent to their origination.
We include adversely rated credits, including loans requiring close
monitoring which would not normally be considered criticized credits by
regulators, on a monthly loan watch list. Loans may be added to our watch list
for reasons that are temporary and correctable, such as the absence of current
financial statements of the borrower or a deficiency in loan documentation.
Other loans are added whenever any adverse circumstance is detected which might
affect the borrower's ability to meet the terms of the loan. The delinquency of
a scheduled loan payment, a deterioration in the borrower's financial condition
identified in a review of periodic financial statements, a decrease in the value
of the collateral securing the loan, or a change in the economic environment
within which the borrower operates could initiate the addition of a loan to the
list. Loans on the watch list require periodic detailed loan status reports
prepared by the responsible officer, which are discussed in formal meetings with
loan review and credit administration staff members. Downgrades of loan risk
ratings may be initiated by the responsible loan officer at any time. However,
upgrades of risk ratings may only be made with the concurrence of selected loan
review and credit administration staff members generally at the time of the
formal watch list review meetings.
Each month, the credit administration department provides management
with detailed lists of loans on the watch list and summaries of the entire loan
portfolio of each subsidiary bank by risk rating. These are coupled with
analyses of changes in the risk profiles of the portfolios, changes in past-due
and nonperforming loans and changes in watch list and classified loans over
time. In this manner, we continually monitor the overall increases or decreases
in the levels of risk in the portfolios. Factors are applied to the loan
portfolios for each category of loan risk to determine acceptable levels of
allowance for loan losses. We derive these factors from the actual loss
experience of our subsidiary banks and from published national surveys of norms
in the industry. The calculated allowances required for the portfolios are then
compared to the actual allowance balances to determine the provisions necessary
to maintain the allowances at appropriate levels. In addition, management
exercises a certain degree of judgment in its analysis of the overall adequacy
of the allowance for losses. In its analysis, management considers the change in
the portfolio, including growth, composition and the ratio of net loans to total
assets, and the economic conditions of the regions in which we operate. Based on
this quantitative and qualitative analysis, provisions are made to the allowance
for loan losses. Such provisions are reflected in our consolidated statements of
income.
We do not engage in lending to foreign countries or activities based in
foreign countries. Additionally, we do not have any concentrations of loans
exceeding 10% of total loans that are not otherwise disclosed in the loan
portfolio composition table. We do not have a material amount of
interest-earning assets that would have been included in nonaccrual, past due or
restructured loans if such assets were loans.
Deposits
Deposits are the primary source of funds for our subsidiary banks. Our
deposits consist principally of core deposits from each bank's local market
areas, including individual and corporate customers. The following table sets
forth the distribution of our average deposit accounts at the dates indicated
and the weighted average interest rates on each category of deposits:
Year Ended December 31,
Six Months Ended ----------------------------------------------------------------------------
June 30, 2001 2000 1999 1998
----------------------- ---------------------- ----------------------- --------------------------
Percent Percent Percent Percent
of of of of
Amount deposits Rate Amount deposits Rate Amount deposits Rate Amount deposits Rate
------ ------------- ------ ------------- ------ -------- ---- ------ -------- ----
(dollars expressed in thousands)
Noninterest-bearing demand.. $ 714,891 14.42% --% $ 634,886 14.18% --% $ 552,029 13.59% --% $ 463,939 12.27% --%
Interest-bearing demand..... 466,634 9.41 1.50 421,986 9.43 1.40 391,892 9.65 1.30 357,463 9.45 1.44
Savings..................... 1,452,496 29.31 3.82 1,279,378 28.59 4.04 1,220,425 30.03 3.61 1,076,524 28.48 3.96
Time deposits .............. 2,322,546 46.86 5.95 2,139,305 47.80 5.62 1,899,218 46.73 5.35 1,882,329 49.80 5.74
---------- ------ ==== ---------- ----- ====== ---------- ------ ====== ---------- ------ ====
Total average deposits $4,956,567 100.00% $4,475,555 100.00% $4,063,564 100.00% $3,780,255 100.00%
========== ====== ========== ====== ========== ====== ========== ======
Capital and Dividends
Historically, we have accumulated capital to support our acquisitions
by retaining most of our earnings. We pay relatively small dividends on our
Class A convertible, adjustable rate preferred stock and our Class B adjustable
rate preferred stock, totaling $786,000 for the years ended December 31, 2000,
1999 and 1998. We have never paid, and have no present intention to pay,
dividends on our common stock.
Management believes as of June 30, 2001, December 31, 2000 and 1999,
our subsidiary banks and we were "well capitalized" as defined by the Federal
Deposit Insurance Corporation Improvement Act of 1991.
In December 1996, we formed our initial financing subsidiary for the
purpose of issuing $86.25 million of trust preferred securities, and in October
2000, we formed our second financing subsidiary for the purpose of issuing $57.5
million of trust preferred securities. In June 1998, FBA formed its financing
subsidiary for the purpose of issuing $46.0 million of trust preferred
securities. For regulatory reporting purposes, these preferred securities are
eligible for inclusion, subject to certain limitations, in our Tier 1 capital.
Because of these limitations, as of June 30, 2001, $62.4 million of these
preferred securities were not includable in Tier 1 capital, although all of this
amount was included in total risk-based capital.
Liquidity
Our liquidity and the liquidity of our subsidiary banks is the ability
to maintain a cash flow which is adequate to fund operations, service debt
obligations and meet obligations and other commitments on a timely basis. Our
subsidiary banks receive funds for liquidity from customer deposits, loan
payments, maturities of loans and investments, sales of investments and
earnings. In addition, we may avail ourselves of other sources of funds by
issuing certificates of deposit in denominations of $100,000 or more, borrowing
federal funds, selling securities sold under agreements to repurchase and
utilizing borrowings from the Federal Home Loan Banks and other borrowings,
including our revolving credit line. The aggregate funds acquired from these
sources were $755.8 million, $723.5 million and $476.8 million at June 30, 2001,
December 31, 2000 and 1999, respectively.
The following table presents the maturity structure of these other
sources of funds, which consists of certificates of deposit of $100,000 or more,
short-term borrowings and our revolving note payable, at June 30, 2001:
June 30, 2001
-------------
(dollars expressed in thousands)
Three months or less......................................................... $ 349,432
Over three months through six months......................................... 94,028
Over six months through twelve months........................................ 126,966
Over twelve months........................................................... 185,358
---------
Total.............................................................. $ 755,784
=========
In addition to these sources of funds, our subsidiary banks have
established borrowing relationships with the Federal Reserve Banks in their
respective districts. These borrowing relationships, which are secured by
commercial loans, provide an additional liquidity facility that may be utilized
for contingency purposes. At June 30, 2001 and December 31, 2000, the borrowing
capacity of our subsidiary banks under these agreements was approximately $1.27
billion and $1.24 billion, respectively. In addition, our subsidiary banks'
borrowing capacity through their relationships with the Federal Home Loan Banks
was approximately $213.6 million and $262.1 million at June 30, 2001 and
December 31, 2000, respectively.
Management believes the available liquidity and operating results of
our subsidiary banks will be sufficient to provide funds for growth and to
permit the distribution of dividends to us sufficient to meet our operating and
debt service requirements, both on a short-term and long-term basis, and to pay
the dividends on the trust preferred securities issued by our financing
subsidiaries and FBA's financing subsidiary.
Effects of New Accounting Standards
In June 1998, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 133 - Accounting for Derivative Instruments and Hedging Activities. In
June 1999 and June 2000, the FASB issued SFAS No. 137 - Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133, an Amendment of FASB Statement No. 133, and SFAS No.
138 - Accounting for Derivative Instruments and Hedging Activities, an Amendment
of FASB Statement No. 133, respectively. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS 133, as amended, requires an entity to recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge in one of three categories. The accounting
for changes in the fair value of a derivative (that is, gains and losses)
depends on the intended use of the derivative and the resulting designation.
Under SFAS 133, as amended, an entity that elects to apply hedge accounting is
required to establish, at the inception of the hedge, the method it will use for
assessing the effectiveness of the hedging derivative and the measurement
approach for determining the ineffective aspect of the hedge. Those methods must
be consistent with the entity's approach to managing risk.
We utilize derivative instruments and hedging activities to assist in
the management of interest rate sensitivity and to modify the repricing,
maturity and option characteristics of certain assets and liabilities. We use
such derivative instruments solely to reduce our interest rate exposure. The
following is a summary of our accounting policies for derivative instruments and
hedging activities under SFAS 133, as amended.
Interest Rate Swap Agreements - Cash Flow Hedges. Interest rate swap
agreements designated as cash flow hedges are accounted for at fair value. The
effective portion of the change in the cash flow hedge's gain or loss is
initially reported as a component of other comprehensive income and subsequently
reclassified into noninterest income when the underlying transaction affects
earnings. The ineffective portion of the change in the cash flow hedge's gain or
loss is recorded in earnings on each monthly measurement date. The swap
agreements are accounted for on an accrual basis with the net interest
differential being recognized as an adjustment to interest income or interest
expense of the related asset or liability.
Interest Rate Swap Agreements - Fair Value Hedges. Interest rate swap
agreements designated as fair value hedges are accounted for at fair value.
Changes in the fair value of the swap agreements are recognized currently in
noninterest income. The change in the fair value on the underlying hedged item
attributable to the hedged risk adjusts the carrying amount of the underlying
hedged item and is also recognized currently in noninterest income. All changes
in fair value are measured on a monthly basis. The swap agreements are accounted
for on an accrual basis with the net interest differential being recognized as
an adjustment to interest income or interest expense of the related asset or
liability.
Interest Rate Cap and Floor Agreements. Interest rate cap and floor
agreements are accounted for at fair value. Changes in the fair value of
interest rate cap and floor agreements are recognized in earnings on each
monthly measurement date.
Interest Rate Lock Commitments. Commitments to originate loans, or
interest rate lock commitments, which primarily consist of commitments to
originate fixed rate residential mortgage loans, are recorded at fair value.
Changes in the fair value are recognized in noninterest income on a monthly
basis.
Forward Contracts to Sell Mortgage-Backed Securities. Forward contracts
to sell mortgage-backed securities are recorded at fair value. Changes in the
fair value of forward contracts to sell mortgage-backed securities are
recognized in noninterest income on a monthly basis.
On January 1, 2001, we implemented SFAS 133, as amended. The
implementation of SFAS 133, as amended, resulted in an increase in derivative
instruments of $12.5 million, an increase in deferred tax liabilities of $5.1
million and an increase in other comprehensive income of $9.1 million. In
addition, we recorded a cumulative effect of change in accounting principle of
$1.4 million, net of taxes of $741,000, as a reduction of net income. The effect
of future derivative transactions as well as further guidance from the
Derivative Implementation Group may result in modifications of our current
assessment of SFAS 133, as amended, and its overall impact on our consolidated
financial statements.
In September 2000, the FASB issued SFAS No. 140 -- Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
a replacement of FASB Statement 125. SFAS No. 140 revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures. SFAS No. 140 provides accounting
and reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities which are based on the consistent application of
a financial-components approach. SFAS No. 140 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001, and is effective for recognition and reclassification of
collateral and for disclosures relating to securitization transactions and
collateral for fiscal years ending after December 15, 2001. On December 31,
2000, we implemented the disclosure requirements of SFAS No. 140, and on March
31, 2001, we implemented the SFAS No. 140 requirements pertaining to transfers
and servicing of financial assets and extinguishments of liabilities. The
implementation of these requirements did not have a material effect on our
consolidated financial statements. In addition, we have evaluated the additional
requirements of SFAS No. 140, which will become effective for fiscal years
ending after December 15, 2001, to determine their potential impact on our
consolidated financial statements. Based upon our analysis, we do not believe
they will have a material effect on our consolidated financial statements.
In July 2001, the FASB issued SFAS No. 141 -- Business Combinations,
and SFAS No. 142 -- Goodwill and Other Intangible Assets. SFAS No. 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. SFAS No. 141 also specifies criteria
intangible assets acquired in a purchase method business combination must meet
to be recognized and reported apart from goodwill. SFAS No. 142 requires that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible
assets with definite useful lives be amortized over their respective estimated
useful lives to their estimated residual values, and reviewed for impairment in
accordance with SFAS No. 121 -- Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. The amortization of goodwill
ceases upon adoption of SFAS No. 142, which for calendar year-end companies,
will be January 1, 2002.
As of January 1, 2002, the date of adoption, we expect to have
unamortized goodwill, exclusive of our pending acquisitions, of approximately
$79.9 million, all of which will be subject to the transition provisions of SFAS
No. 141 and SFAS No. 142. Amortization of intangibles associated with the
purchase of subsidiaries was $3.7 million for the six months ended June 30,
2001, and $5.3 million, $4.4 million and $3.2 million for the years ended
December 31, 2000, 1999 and 1998, respectively. We are currently evaluating the
additional requirements of SFAS No. 141 and SFAS No. 142 to determine their
potential impact on our consolidated financial statements.
Effects of Inflation
Inflation affects financial institutions less than other types of
companies. Financial institutions make relatively few significant asset
acquisitions that are directly affected by changing prices. Instead, the assets
and liabilities are primarily monetary in nature. Consequently, interest rates
are more significant to the performance of financial institutions than the
effect of general inflation levels. While a relationship exists between the
inflation rate and interest rates, we believe this is generally manageable
through our asset-liability management program.
BUSINESS
Who We Are
We are a registered bank holding company incorporated in Missouri and
headquartered in St. Louis County, Missouri. Through the operation of our
subsidiaries, we offer a broad array of financial services to consumer and
commercial customers. Over the years, our organization has grown significantly,
primarily as a result of our acquisition strategy, as well as through internal
growth. We currently have banking operations in California, Illinois, Missouri
and Texas. As of June 30, 2001, we had total assets of $5.90 billion, loans, net
of unearned discount, of $4.86 billion, total deposits of $4.99 billion and
total stockholders' equity of $396.4 million.
Through our subsidiary banks, we offer a broad range of commercial and
personal deposit products, including demand, savings, money market and time
deposit accounts. In addition, we market combined basic services for various
customer groups, including packaged accounts for more affluent customers, and
sweep accounts, lock-box deposits and cash management products for commercial
customers. We also offer both consumer and commercial loans. Consumer lending
includes residential real estate, home equity and installment lending.
Commercial lending includes commercial, financial and agricultural loans, real
estate construction and development loans, commercial real estate loans,
asset-based loans, commercial leasing and trade financing. Other financial
services offered include mortgage banking, debit cards, brokerage services,
credit-related insurance, automated teller machines, telephone banking, safe
deposit boxes, escrow and bankruptcy deposit services, stock option services,
and trust, private banking and institutional money management services.
We operate through two subsidiary banks, as follows:
Total Assets
Geographic (Number of) Locations at June 30,
Name at June 30, 2001 2001
----------------------------------------- -------------------------------------- ------------------
(dollars expressed
in thousands)
First Bank Missouri (44) and Illinois (42) $3,244,560
First Banks America, Inc., and its
subsidiary: California (44) and Texas (6) 2,628,378
First Bank & Trust
Our subsidiary banks are wholly owned by their respective parent
companies. We owned 93.16% of First Banks America, Inc., or FBA, at June 30,
2001.
Various trusts, which were created by and are administered by and for
the benefit of Mr. James F. Dierberg, our Chairman of the Board and Chief
Executive Officer, and his adult children, own all of our voting stock. Mr.
Dierberg and his family, therefore, control our management, policies and the
election of our directors.
Acquisitions
Prior to 1994, we concentrated our acquisitions within the market areas
of eastern Missouri and central and southern Illinois. The premiums required to
successfully pursue acquisitions escalated sharply in 1993, reducing the
economic viability of many potential acquisitions in that area. Recognizing
this, we began to expand the geographic area in which we approached acquisition
candidates. While we were successful in making acquisitions in Chicago and
northern Illinois, we noted that acquisition pricing in Chicago and other areas
being considered was similar to that in our eastern Missouri and central and
southern Illinois acquisition areas. As a result, while we continued to pursue
acquisitions within these areas, we turned much of our attention to institutions
that could be acquired at more attractive prices that were within major
metropolitan areas outside of these market areas. This led to the acquisition of
BancTEXAS Group Inc. in 1994, which had offices in Dallas and Houston, Texas,
and numerous acquisitions of financial institutions that had offices in Los
Angeles, Orange County, Santa Barbara, San Francisco, San Jose, Ventura and
Sacramento, California during the five years ended December 31, 2000. For the
three years ended December 31, 2000, we completed nine acquisitions of banks and
two branch office purchases. These transactions provided total assets of $1.15
billion and 24 banking locations.
Pending Acquisitions
On May 23, 2001, FBA and Charter Pacific Bank, or Charter Pacific,
executed a definitive agreement providing for the acquisition of Charter Pacific
by FBA. Under the terms of the agreement, as amended, the shareholders of
Charter Pacific will receive $3.70 per share in cash, or a total of
approximately $19.3 million. Charter Pacific is headquartered in Agoura Hills,
California, and has one other branch office in Beverly Hills, California. At
June 30, 2001, Charter Pacific had $107.6 million in total assets, $71.4 million
in loans, net of unearned discount, $10.7 million in investment securities and
$94.0 million in deposits. We expect this transaction, which is subject to
regulatory approvals and the approval of Charter Pacific's shareholders, will be
completed during the fourth quarter of 2001.
On June 22, 2001, FBA and BYL Bancorp, or BYL, executed a definitive
agreement providing for the acquisition of BYL and its wholly owned banking
subsidiary, BYL Bank Group, by FBA. Under the terms of the agreement, the
shareholders of BYL will receive $18.50 per share in cash, or a total of
approximately $52.0 million. BYL is headquartered in Orange, California, and has
six branches located in Orange and Riverside counties. At June 30, 2001, BYL had
$278.2 million in total assets, $151.2 million in loans, net of unearned
discount, $12.3 million in investment securities and $246.1 million in deposits.
We expect this transaction, which is subject to regulatory approvals, will be
completed during the fourth quarter of 2001.
On July 20, 2001, we executed a definitive agreement with Union
Financial Group, Ltd., or UFG, providing for the acquisition of UFG for a total
purchase price of approximately $26.8 million. Under the terms of the agreement,
the common shareholders of UFG will receive $11.00 per share in cash, or a total
of approximately $18.0 million, subject to a $1.60 per common share escrow to
cover certain contingent liabilities. The shareholders of Series D preferred
stock will receive the stated value of $100,000 per share. UFG is headquartered
in Swansea, Illinois, and operates nine banking offices located in St. Clair,
Madison, Jersey and Macoupin counties. At June 30, 2001, UFG had $361.0 million
in total assets, $270.0 million in loans, net of unearned discount, $62.3
million in investment securities and $300.8 million in deposits. We expect this
transaction, which is subject to regulatory approvals, will be completed during
the fourth quarter of 2001.
On August 2, 2001, we executed a definitive agreement with Plains
Financial Corporation, or PFC, providing for the acquisition of PFC. Under the
terms of the agreement, the shareholders of PFC will receive $293.07 per share
in cash, or a total of approximately $36.5 million. PFC is headquartered in Des
Plaines, Illinois, and has a total of three banking offices in Des Plaines, and
one banking office in Elk Grove, Illinois. At June 30, 2001, PFC had $255.4
million in total assets, $149.7 million in loans, net of unearned discount,
$72.7 million in investment securities and $220.3 million in deposits. We expect
this transaction, which is subject to regulatory approvals, will be completed
during the first quarter of 2002.
Market Area
As of June 30, 2001, our subsidiary banks' 136 banking facilities were
located throughout eastern Missouri and in Illinois, Texas and California. We
service the St. Louis, Missouri metropolitan area as our primary market area.
Our second and third largest market areas are central and southern Illinois and
southern and northern California, respectively. We also have locations in the
Houston, Dallas, Irving and McKinney, Texas metropolitan areas, rural eastern
Missouri and the greater Chicago, Illinois metropolitan area.
Competition and Branch Banking
Our subsidiary banks engage in highly competitive activities. Those
activities and the geographic markets served primarily involve competition with
other banks, some of which are affiliated with large regional or national
holding companies. Financial institutions compete based upon interest rates
offered on deposit accounts, interest rates charged on loans and other credit
and service charges, the quality of services rendered, the convenience of
banking facilities and, in the case of loans to large commercial borrowers,
relative lending limits.
Our principal competitors include other commercial banks, savings
banks, savings and loan associations, mutual funds, finance companies, trust
companies, insurance companies, leasing companies, credit unions, mortgage
companies, private issuers of debt obligations and suppliers of other investment
alternatives, such as securities firms and financial holding companies. Many of
our non-bank competitors are not subject to the same degree of regulation as
that imposed on bank holding companies, federally insured banks and national or
state chartered banks. As a result, such non-bank competitors have advantages
over us in providing certain services. We also compete with major multi-bank
holding companies, which are significantly larger than us and have greater
access to capital and other resources.
We believe we will continue to face competition in the acquisition of
independent banks and savings banks from bank and financial holding companies.
We often compete with larger financial institutions that have substantially
greater resources available for making acquisitions.
Subject to regulatory approval, commercial banks situated in
California, Illinois, Missouri and Texas are permitted to establish branches
throughout their respective states, thereby creating the potential for
additional competition in our service areas.
Employees
As of September 30, 2001, we employed approximately 1,977 employees.
None of the employees are subject to a collective bargaining agreement. We
consider our relationships with our employees to be good.
Legal Proceedings
In the ordinary course of business, we and our subsidiaries become
involved in legal proceedings. Our management, in consultation with legal
counsel, believes that the ultimate resolution of these proceedings will not
have a material adverse effect on our business, financial condition or results
of operations.
Supervision and Regulation
General. Federal and state laws extensively regulate First Banks and
our subsidiary banks primarily to protect depositors and customers of our
subsidiary banks. To the extent this discussion refers to statutory or
regulatory provisions, it is not intended to summarize all of such provisions
and is qualified in its entirety by reference to the relevant statutory and
regulatory provisions. Changes in applicable laws, regulations or regulatory
policies may have a material effect on our business and prospects. We are unable
to predict the nature or extent of the effects on our business and earnings that
new federal and state legislation or regulation may have. The enactment of the
legislation described below has significantly affected the banking industry
generally and is likely to have ongoing effects on us and our subsidiary banks
in the future.
We are a registered bank holding company under the Bank Holding Company
Act of 1956 and, as such, the Board of Governors of the Federal Reserve System
regulates, supervises and examines us. We file annual reports with the Federal
Reserve and provide to the Federal Reserve additional information as it may
require.
Since First Bank is an institution chartered by the State of Missouri,
the State of Missouri Division of Finance supervises, regulates and examines
First Bank. First Bank & Trust is chartered by the State of California and is
subject to supervision, regulation and examination by the California Department
of Financial Institutions. Our subsidiary banks are also regulated by the
Federal Deposit Insurance Corporation, which provides deposit insurance of up to
$100,000 for each insured depositor.
Bank Holding Company Regulation. First Banks' activities and those of
our subsidiary banks have in the past been limited to the business of banking
and activities "closely related" or "incidental" to banking. Under the
Gramm-Leach-Bliley Act, which was enacted in November 1999 and discussed below,
bank holding companies now have the opportunity to seek broadened authority,
subject to limitations on investment, to engage in activities that are
"financial in nature" if all of its subsidiary depository institutions are well
capitalized, well managed and have at least a satisfactory rating under the
Community Reinvestment Act (discussed briefly below).
We are also subject to capital requirements applied on a consolidated
basis which are substantially similar to those required of our subsidiary banks
(briefly summarized below). The Bank Holding Company Act also requires a bank
holding company to obtain approval from the Federal Reserve before:
o acquiring, directly or indirectly, ownership or control of any
voting shares of another bank or bank holding company if, after
such acquisition, it would own or control more than 5% of such
shares (unless it already owns or controls a majority of such
shares);
o acquiring all or substantially all of the assets of another bank
or bank holding company; or
o merging or consolidating with another bank holding company.
The Federal Reserve will not approve any acquisition, merger or
consolidation that would have a substantially anti-competitive result, unless
the anti-competitive effects of the proposed transaction are clearly outweighed
by a greater public interest in meeting the convenience and needs of the
community to be served. The Federal Reserve also considers capital adequacy and
other financial and managerial factors in reviewing acquisitions and mergers.
Safety and Soundness and Similar Regulations. First Banks is subject to
various regulations and regulatory policies directed at the financial soundness
of our subsidiary banks. These include, but are not limited to, the Federal
Reserve's source of strength policy, which obligates a bank holding company such
as First Banks to provide financial and managerial strength to its subsidiary
banks; restrictions on the nature and size of certain affiliate transactions
between a bank holding company and its subsidiary depository institutions; and
restrictions on extensions of credit by our subsidiary banks to executive
officers, directors, principal stockholders and the related interests of such
persons.
Regulatory Capital Standards. The federal bank regulatory agencies have
adopted substantially similar risk-based and leverage capital guidelines for
banking organizations. Risk-based capital ratios are determined by classifying
assets and specified off-balance-sheet financial instruments into weighted
categories, with higher levels of capital being required for categories deemed
to represent greater risk. Federal Reserve policy also provides that banking
organizations generally, and in particular those that are experiencing internal
growth or actively making acquisitions, are expected to maintain capital
positions that are substantially above the minimum supervisory levels, without
significant reliance on intangible assets.
Under the risk-based capital standard, the minimum consolidated ratio
of total capital to risk-adjusted assets required for bank holding companies is
8%. At least one-f of the total capital must be composed of common equity,
retained earnings, qualifying noncumulative perpetual preferred stock, a limited
amount of qualifying cumulative perpetual preferred stock and minority interests
in the equity accounts of consolidated subsidiaries, less certain items such as
goodwill and certain other intangible assets, which amount is referred to in the
industry as Tier I capital. The remainder may consist of qualifying hybrid
capital instruments, perpetual debt, mandatory convertible debt securities, a
limited amount of subordinated debt, preferred stock that does not qualify as
Tier I capital and a limited amount of loan and lease loss reserves, which
amount is referred to in the industry as Tier II capital.
In addition to the risk-based standard, we are subject to minimum
requirements with respect to the ratio of our Tier I capital to our average
assets less goodwill and certain other intangible assets, or the Leverage Ratio.
Applicable requirements provide for a minimum Leverage Ratio of 3% for bank
holding companies that have the best supervisory rating, while all other bank
holding companies must maintain a minimum Leverage Ratio of at least 4% to 5%.
The OCC and the FDIC have established capital requirements for banks under their
respective jurisdictions that are consistent with those imposed by the Federal
Reserve on bank holding companies.
The following table sets forth our required and actual capital ratios,
as well as those of our subsidiary banks at June 30, 2001 and December 31, 2000:
Actual
-------------------------- To be Well
For Capital Capitalized Under
June 30, December 31, Adequacy Prompt Corrective
2001 2000 Purposes Action Provisions
---------- ------------ -------- -----------------
Total capital (to risk-weighted assets):
First Banks............................ 10.60% 10.21% 8.0% 10.0%
First Bank............................. 10.45 10.71 8.0 10.0
First Bank & Trust..................... 10.70 10.58 8.0 10.0
Bank of San Francisco (1).............. -- 22.38 8.0 10.0
Tier I capital (to risk-weighted assets):
First Banks............................ 8.01 7.56 4.0 6.0
First Bank............................. 9.20 9.46 4.0 6.0
First Bank & Trust..................... 9.45 9.32 4.0 6.0
Bank of San Francisco (1).............. -- 21.42 4.0 6.0
Tier I capital (to average assets):
First Banks............................ 7.33 7.45 3.0 5.0
First Bank............................. 8.10 8.49 3.0 5.0
First Bank & Trust..................... 8.73 9.27 3.0 5.0
Bank of San Francisco (1).............. -- 22.00 3.0 5.0
-----------------------------
(1) Bank of San Francisco was acquired by FBA on December 31, 2000. First Bank & Trust merged with Bank of San Francisco on
March 29, 2001, and Bank of San Francisco was renamed First Bank & Trust.
Prompt Corrective Action. The FDIC Improvement Act requires the federal
bank regulatory agencies to take prompt corrective action in respect to
depository institutions that do not meet minimum capital requirements. A
depository institution's status under the prompt corrective action provisions
depends upon how its capital levels compare to various relevant capital measures
and other factors as established by regulation.
The federal regulatory agencies have adopted regulations establishing
relevant capital measures and relevant capital levels. Under the regulations, a
bank will be:
o "well capitalized" if it has a total capital ratio of 10% or
greater, a Tier I capital ratio of 6% or greater and a
Leverage Ratio of 5% or greater and is not subject to any
order or written directive by any such regulatory authority to
meet and maintain a specific capital level for any capital
measure;
o "adequately capitalized" if it has a total capital ratio of 8%
or greater, a Tier I capital ratio of 4% or greater and a
Leverage Ratio of 4% or greater (3% in certain circumstances);
o "undercapitalized" if it has a total capital ratio of less
than 8%, a Tier I capital ratio of less than 4% or a Leverage
Ratio of less than 4% (3% in certain circumstances);
o "significantly undercapitalized" if it has a total capital
ratio of less than 6%, a Tier I capital ratio of less than 3%
or a Leverage Ratio of less than 3%; and
o "critically undercapitalized" if its tangible equity is
equal to or less than 2% of average quarterly tangible assets.
Under certain circumstances, a depository institution's primary federal
regulatory agency may use its authority to lower the institution's capital
category. The banking agencies are permitted to establish individualized minimum
capital requirements exceeding the general requirements described above.
Generally, failing to maintain the status of "well capitalized" or "adequately
capitalized" subjects a bank to restrictions and limitations on its business
that are progressively more severe.
A bank is prohibited from making any capital distribution (including
payment of a dividend) or paying any management fee to its holding company if
the bank would thereafter be "undercapitalized." Limitations exist for
"undercapitalized" depository institutions, regarding, among other things, asset
growth, acquisitions, branching, new lines of business, acceptance of brokered
deposits and borrowings from the Federal Reserve System. These institutions are
also required to submit a capital restoration plan that includes a guarantee
from the institution's holding company. "Significantly undercapitalized"
depository institutions may be subject to a number of requirements and
restrictions, including orders to sell sufficient voting stock to become
"adequately capitalized," requirements to reduce total assets and cessation of
receipt of deposits from correspondent banks. The appointment of a receiver or
conservator may be required for "critically undercapitalized" institutions.
Dividends. First Banks' primary source of funds in the future is the
dividends, if any, paid by our subsidiary banks. The ability of our subsidiary
banks to pay dividends is limited by federal laws, by regulations promulgated by
the bank regulatory agencies and by principles of prudent bank management. The
terms of the subordinated debentures associated with $47.4 million of trust
preferred securities issued by FBA's financing subsidiary prevent FBA's payment
of dividends to us under certain circumstances, including the deferral by FBA of
interest payments on those subordinated debentures.
Customer Protection. Our subsidiary banks are also subject to consumer
laws and regulations intended to protect consumers in transactions with
depository institutions, as well as other laws or regulations affecting
customers of financial institutions generally. These laws and regulations
mandate various disclosure requirements and substantively regulate the manner in
which financial institutions must deal with their customers. Our subsidiary
banks must comply with numerous regulations in this regard and are subject to
periodic examinations with respect to their compliance with the requirements.
Community Reinvestment Act. The Community Reinvestment Act of 1977
requires that, in connection with examinations of financial institutions within
their jurisdiction, the federal banking regulators must evaluate the record of
the financial institutions in meeting the credit needs of their local
communities, including low and moderate income neighborhoods, consistent with
the safe and sound operation of those banks. These factors are also considered
in evaluating mergers, acquisitions and other applications to expand.
The Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act, or GLB Act,
enacted in 1999, amended and repealed portions of the Glass-Steagall Act and
other federal laws restricting the ability of bank holding companies, securities
firms and insurance companies to affiliate with each other and to enter new
lines of business. The GLB Act established a comprehensive framework to permit
financial companies to expand their activities, including through such
affiliations, and to modify the federal regulatory structure governing some
financial services activities. This authority of financial firms to broaden the
types of financial services offered to customers and to affiliates with other
types of financial services companies may lead to further consolidation in the
financial services industry and is likely to lead to additional competition in
the markets in which we operate and the growth of larger competitors.
The GLB Act also adopted consumer privacy safeguards requiring
financial services providers to disclose their policies regarding the privacy of
customer information to their customers and, subject to some exceptions,
allowing customers to "opt out" of policies permitting such companies to
disclose confidential financial information to non-affiliated third parties.
Final regulations implementing the new privacy standards became effective in
2001. We believe we have devoted sufficient resources to comply with the new
requirements, and we do not expect the privacy requirements will materially or
adversely affect our operations or prospects.
Reserve Requirements; Federal Reserve System and Federal Home Loan Bank
System. The Federal Reserve requires all depository institutions to maintain
reserves against their transaction accounts and non-personal time deposits. The
balances maintained to meet the reserve requirements imposed by the Federal
Reserve may be used to satisfy liquidity requirements. Institutions are
authorized to borrow from the Federal Reserve Bank "discount window," but
Federal Reserve regulations require institutions to exhaust other reasonable
alternative sources of funds, including advances from Federal Home Loan Banks,
before borrowing from the Federal Reserve Bank.
Our subsidiary banks are either members of the Federal Reserve System
(First Bank) and/or the Federal Home Loan Bank System (First Bank and First Bank
& Trust) and are required to hold investments in regional banks within those
systems. Our subsidiary banks were in compliance with these requirements at June
30, 2001, with investments of $10.3 million in stock of the Federal Home Loan
Bank of Des Moines held by First Bank, $2.8 million in stock of the Federal Home
Loan Bank of San Francisco held by First Bank & Trust, and $4.9 million in stock
of the Federal Reserve Bank of St. Louis held by First Bank.
Monetary Policy and Economic Control. The commercial banking business
is affected by legislation, regulatory policies and general economic conditions
as well as the monetary policies of the Federal Reserve. The following
instruments of monetary policy are available to the Federal Reserve:
o changes in the discount rate on member bank borrowings;
o the availability of credit at the "discount window;"
o open market operations;
o the imposition of changes in reserve requirements against deposits
and assets of foreign branches; and
o the imposition of and changes in reserve requirements against
certain borrowings by banks and their affiliates.
These monetary policies are used in varying combinations to influence
overall growth and distributions of bank loans, investments and deposits, and
this use may affect interest rates charged on loans or paid on liabilities. The
monetary policies of the Federal Reserve have had a significant effect on the
operating results of commercial banks and are expected to do so in the future.
Such policies are influenced by various factors, including inflation,
unemployment, and short-term and long-term changes in the international trade
balance and in the fiscal policies of the U.S. Government. We cannot predict the
effect that future changes in monetary policy or in the discount rate on member
bank borrowings will have on our future business and earnings or those of our
subsidiary banks.
MANAGEMENT
Board of Directors and Executive Officers
The members of our Board of Directors and our executive officers are
identified in the following table. Each of the directors was elected or
appointed to serve a one-year term and until his successor has been duly
qualified for office.
Name Age Position
---- --- --------
Directors:
James F. Dierberg 64 Chairman of the Board of Directors and Chief Executive Officer
Allen H. Blake 58 Director and President, Chief Operating Officer, Chief Financial Officer
and Secretary
Michael J. Dierberg 30 Director
Gordon A. Gundaker (1) 67 Director
David L. Steward (1) 50 Director
Hal J. Upbin (1) 62 Director
Douglas H. Yaeger (1) 52 Director
Donald W. Williams 54 Director and Senior Executive Vice President and Chief Credit Officer
Executive Officers Not
Serving as Directors:
Michael F. Hickey 44 Executive Vice President and Chief Information Officer
Terrance M. McCarthy 47 Executive Vice President
Michael F. McWhortor 50 Executive Vice President -- Banking Support
Mark T. Turkcan 45 Executive Vice President -- Mortgage Banking
-----------------------------
(1) Member of the Audit Committee.
James F. Dierberg has served as our Chairman of the Board of Directors
and Chief Executive Officer since 1988. He served as our President from 1979 to
1992 and from 1994 to October 1999. Mr. Dierberg has been the Chairman of the
Board of Directors, President and Chief Executive Officer of FBA since 1994 and
a trustee of our other financing subsidiaries since 1997 and 2000, respectively,
and FBA's financing subsidiary since 1998.
Allen H. Blake has served as our President since October 1999. He has
served as our Chief Operating Officer since 1998, our Chief Financial Officer
since May 2001 and our Secretary since 1988. Mr. Blake was our Senior Vice
President and Chief Financial Officer from 1992 to 1996 and Executive Vice
President and Chief Financial Officer from 1996 to September 1999. Mr. Blake has
served as a trustee of our other financing subsidiaries since 1997 and 2000,
respectively, and FBA's financing subsidiary since 1998.
Michael J. Dierberg serves as a Director. Mr. Dierberg is also Senior
Vice President - Northern California of First Bank & Trust. Prior to joining
First Banks in July 2001, Mr. Dierberg served as an attorney for the Office of
the Comptroller of the Currency in Washington, D.C.
Gordon A. Gundaker serves as a Director. Mr. Gundaker is President and
Chief Executive Officer of Coldwell Banker Gundaker in St. Louis, Missouri.
David L. Steward serves as a Director. Mr. Steward is Chairman of the
Board of Directors, President and Chief Executive Officer of World Wide
Technology, Inc. and Chairman of the Board of Directors of Telcobuy.com (an
affiliate of World Wide Technology, Inc.) in St. Louis, Missouri.
Hal J. Upbin serves as a Director. Mr. Upbin is Chairman of the
Board of Directors, President and Chief Executive Officer of Kellwood Company in
St. Louis, Missouri.
Douglas H. Yaeger serves as a Director. Mr. Yaeger is Chairman of the
Board of Directors, President and Chief Executive Officer of Laclede Gas Company
in St. Louis, Missouri.
Donald W. Williams is our Senior Executive Vice President and Chief
Credit Officer, and has served in various executive capacities with us since
1993. Mr. Williams is also Director, Executive Vice President and Chief Credit
Officer of FBA and Chairman of the Board, President and Chief Executive Officer
of First Bank. He also serves as Chairman of the Board of Directors of First
Capital Group, Inc.
Michael F. Hickey has served as our Executive Vice President and Chief
Information Officer since November 1999. Mr. Hickey has also served as a
Director of First Bank and as the President of First Services, L.P. since
November of 1999. From 1996 to November 1999, Mr. Hickey was Vice President--
Senior Group Manager of Information Systems for Mercantile Bank. Prior to that,
from 1992 to 1996, Mr. Hickey was a Group Manager of Information Systems for
Mercantile Bank.
Terrance M. McCarthy has served in various executive capacities with us
since 1995. Mr. McCarthy is Executive Vice President of First Banks and FBA, and
Chairman of the Board of Directors, President and Chief Executive Officer of
First Bank & Trust.
Michael F. McWhortor has served as our Executive Vice President of
Banking Support since March 2000. Mr. McWhortor was Senior Vice President and
Manager of the Business Intelligence Group of Firstar Bank, N.A. in St. Louis,
Missouri from September 1999 to March 2000, Senior Vice President and Manager of
Retail Banking and Consumer Products of Mercantile Bancorporation, Inc. in St.
Louis, Missouri from 1998 to 1999; Vice President and Manager of Customer
Information Management of Mercantile Bancorporation, Inc. from 1997 to 1998;
Vice President and Regional Manager of the Western Region Credit Card Division
of Bank One Corp. in Phoenix, Arizona from 1996 to 1997; and Chief Financial
Officer of the Western Region Credit Card Division of Bank One Corp in Phoenix,
Arizona from 1995 to 1996.
Mark T. Turkcan serves as our Executive Vice President of Mortgage
Banking, and has been employed in various executive capacities with us since
1990. Mr. Turkcan is also a Director and Executive Vice President of First Bank.
DESCRIPTION OF THE TRUST
The trust is a statutory business trust formed pursuant to the Delaware
Business Trust Act under a trust agreement executed by us, as sponsor for the
trust, and the trustees, and a certificate of trust filed with the Delaware
Secretary of State. The trust agreement will be amended and restated in its
entirety in the form filed as an exhibit to the registration statement of which
this prospectus is a part, as of the date the preferred securities are initially
issued. The trust agreement will be qualified under the Trust Indenture Act of
1939.
The holders of the preferred securities issued pursuant to the offering
described in this prospectus will own all of the issued and outstanding
preferred securities of the trust which have certain prior rights over the other
securities of the trust. We will not initially own any of the preferred
securities. We will acquire common securities in an amount equal to at least 3%
of the total capital of the trust and will initially own, directly or
indirectly, all of the issued and outstanding common securities. The common
securities, together with the preferred securities, are called the trust
securities.
The trust exists exclusively for the purposes of:
o issuing the preferred securities to the public for cash;
o issuing its common securities to us in exchange for our
capitalization of the trust;
o investing the proceeds from the sale of the trust securities in an
equivalent amount of subordinated debentures; and
o engaging in other activities that are incidental to those listed
above.
The rights of the holders of the trust securities are as set forth in
the trust agreement, the Delaware Business Trust Act and the Trust Indenture
Acot. The trust agreement does not permit the trust to borrow money or make any
in vestment other than in the subordinated debentures. Other than with respect
to the trust securities, we have agreed to pay for all debts and obligations and
all costs and expenses of the trust, including the fees and expenses of the
trustees and any income taxes, duties and other governmental charges, and all
costs and expenses related to these charges, to which the trust may become
subject, except for United States withholding taxes that are properly withheld.
The number of trustees of the trust will, pursuant to the Trust
Agreement, initially be five. Three of the trustees, or the Administrative
Trustees, will be persons who are employees or officers of or who are affiliated
with us. These individuals include James F. Dierberg, Allen H. Blake and Lisa K.
Vansickle. The fourth trustee will be an entity that maintains its principal
place of business in the State of Delaware. It is the Delaware trustee.
Initially, Wilmington Trust Company, a Delaware banking corporation, will act as
Delaware trustee. The fifth trustee, called the property trustee, will initially
be State Street Bank and Trust Company of Connecticut, National Association. The
property trustee is the institutional trustee under the trust agreement and acts
as the indenture trustee called for under the applicable provisions of the Trust
Indenture Act. Also for purposes of compliance with the Trust Indenture Act,
State Street Bank and Trust Company of Connecticut, National Association will
act as guarantee trustee and indenture trustee under the guarantee agreement and
the indenture. See "Description of the Subordinated Debentures" and "Description
of the Guarantee." We, as holder of all of the common securities, will have the
right to appoint or remove any trustee unless an event of default under the
indenture has occurred and is continuing, in which case only the holders of the
preferred securities may remove the Delaware trustee or the property trustee.
The trust has a term of approximately 30 years but may terminate earlier as
provided in the trust agreement.
The property trustee will hold the subordinated debentures for the
benefit of the holders of the trust securities and will have the power to
exercise all rights, powers and privileges under the indenture as the holder of
the subordinated debentures. In addition, the property trustee will maintain
exclusive control of a segregated non-interest bearing "payment account"
established with Wilmington Trust Company to hold all payments made on the
subordinated debentures for the benefit of the holders of the trust securities.
The property trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the trust securities out
of funds from the payment account. The guarantee trustee will hold the guarantee
for the benefit of the holders of the preferred securities. We will pay all fees
and expenses related to the trust and the offering of the preferred securities,
including the fees and expenses of the trustees.
DESCRIPTION OF THE PREFERRED SECURITIES
The preferred securities will be issued pursuant to the trust
agreement. For more information about the trust agreement, see "Description of
the Trust" beginning on page 65. State Street Bank and Trust Company of
Connecticut, National Association will act as property trustee for the preferred
securities under the trust agreement for purposes of complying with the
provisions of the Trust Indenture Act. The terms of the preferred securities
will include those stated in the trust agreement and those made part of the
trust agreement by the Trust Indenture Act.
General
The trust agreement authorizes the administrative trustees, on behalf
of the trust, to issue the trust securities, which are comprised of the
preferred securities to be sold to the public and the common securities. We will
own all of the common securities issued by the trust. The trust is not permitted
to issue any securities other than the trust securities or to incur any other
indebtedness.
The preferred securities will represent preferred undivided beneficial
interests in the assets of the trust, and the holders of the preferred
securities will be entitled to a preference over the common securities upon an
event of default with respect to distributions and amounts payable on redemption
or liquidation. The preferred securities will rank equally, and payments on the
preferred securities will be made proportionally, with the common securities,
except as described under " -- Subordination of Common Securities" below.
The property trustee will hold legal title to the subordinated
debentures in trust for the benefit of the holders of the trust securities. We
will guarantee the payment of distributions out of money held by the trust, and
payments upon redemption of the preferred securities or liquidation of the
trust, to the extent described under "Description of the Guarantee." The
guarantee does not cover the payment of any distribution or the liquidation
amount when the trust does not have sufficient funds available to make these
payments.
Distributions
Source of Distributions. The funds of the trust available for
distribution to holders of the preferred securities will be limited to payments
made under the subordinated debentures, which the trust will purchase with the
proceeds from the sale of the trust securities. Distributions will be paid
through the property trustee, which will hold the amounts received from our
interest payments on the subordinated debentures in the payment account for the
benefit of the holders of the trust securities. If we do not make interest
payments on the subordinated debentures, the property trustee will not have
funds available to pay distributions on the preferred securities.
Payment of Distributions. Distributions on the preferred securities
will be payable at the annual rate of % of the $25 stated liquidation amount,
payable quarterly on March 31, June 30, September 30 and December 31 of each
year, to the holders of the preferred securities on the relevant record dates.
So long as the preferred securities are represented by a global security, as
described below, the record date will be the business day immediately preceding
the relevant distribution date. The first distribution date for the preferred
securities will be December 31, 2001.
Distributions will accumulate from the date of issuance, will be
cumulative and will be computed on the basis of a 360-day year of twelve 30-day
months. If the distribution date is not a business day, then payment of the
distributions will be made on the next day that is a business day, without any
additional interest or other payment for the delay. When we use the term
"business day," we mean any day other than a Saturday, a Sunday, a day on which
banking institutions in New York, New York are authorized or required by law,
regulation or executive order to remain closed or a day on which the corporate
trust office of the property trustee or the indenture trustee is closed for
business.
Extension Period. As long as no event of default under the indenture
has occurred and is continuing, we have the right to defer the payment of
interest on the subordinated debentures at any time for a period not exceeding
20 consecutive quarters. We refer to this period of deferral as an "extension
period." No extension period may extend beyond December 31, 2031 or end on a
date other than an interest payment date, which dates are the same as the
distribution dates. If we defer the payment of interest, quarterly distributions
on the preferred securities will also be deferred during any such extension
period. Any deferred distributions under the preferred securities will
accumulate additional amounts at the annual rate of %, compounded quarterly from
the relevant distribution date. The term "distributions" as used in this
prospectus includes those accumulated amounts.
During an extension period, neither we nor any of our subsidiaries may:
o declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to,
any of our capital stock (other than stock dividends, noncash
dividends in connection with the implementation of a stockholder
rights plan, purchases of common stock in connection with
employee benefit plans or in connection with the reclassification
of any class of our capital stock into another class of capital
stock) or allow any of our subsidiaries to do the same with
respect to their capital stock (other than the payment of
dividends or distributions to us or to one of our subsidiaries or
a distribution with respect to the preferred securities issued by
FBA's financing subsidiary in July 1998);
o make any payment of principal, interest or premium on or repay,
repurchase or redeem any debt securities that rank equally with
(including the subordinated debentures issued to our two other
financing subsidiaries), or junior to, the subordinated
debentures or allow any of our subsidiaries to do the same;
o make any guarantee payments with respect to any other guarantee
by us of any other debt securities of any of our subsidiaries if
the guarantee ranks equally with or junior to the subordinated
debentures (other than payments under the guarantee); or
o redeem, purchase or acquire less than all of the subordinated
debentures or any of the preferred securities.
After the termination of any extension period and the payment of all amounts
due, we may elect to begin a new extension period, subject to the above
requirements.
We do not currently intend to exercise our right to defer distributions
on the preferred securities by deferring the payment of interest on the
subordinated debentures.
Redemption or Exchange
General. Subject to the prior approval of the Federal Reserve, if
required, we will have the right to redeem the subordinated debentures:
o in whole at any time, or in part from time to time, on or after
December 31, 2006; or
o at any time, in whole, within 180 days following the occurrence
of a Tax Event, an Investment Company Event or a Capital
Treatment Event, which terms we define below.
o at any time, to the extent of any preferred securities we
purchase plus a proportionate amount of the common securities we
hold.
Mandatory Redemption. Upon our repayment or redemption, in whole or in
part, of any subordinated debentures, whether on December 31, 2031 or earlier,
the property trustee will apply the proceeds to redeem the same amount of the
trust securities, upon not less than 30 days' nor more than 60 days' notice, at
the redemption price. The redemption price will equal 100% of the aggregate
liquidation amount of the trust securities plus accumulated but unpaid
distributions to the date of redemption. If less than all of the subordinated
debentures are to be repaid or redeemed on a date of redemption, then the
proceeds from such repayment or redemption will be allocated to redemption of
preferred securities and common securities proportionately.
Distribution of Subordinated Debentures in Exchange for Preferred
Securities. Upon prior approval of the Federal Reserve, if required, we will
have the right at any time to dissolve, wind-up or terminate the trust and,
after satisfaction of the liabilities of creditors of the trust as provided by
applicable law, including, without limitation, amounts due and owing the
trustees of the trust, cause the subordinated debentures to be distributed
directly to the holders of trust securities in liquidation of the trust.
See "-- Liquidation Distribution Upon Termination."
After the liquidation date fixed for any distribution of subordinated
debentures in exchange for preferred securities:
o those trust securities will no longer be deemed to be
outstanding;
o certificates representing subordinated debentures in a principal
amount equal to the liquidation amount of those preferred
securities will be issued in exchange for the preferred
securities certificates;
o we will use our best efforts to list the subordinated debentures
on the Nasdaq National Market or a national exchange;
o any certificates representing trust securities that are not
surrendered for exchange will be deemed to represent subordinated
debentures with a principal amount equal to the liquidation
amount of those preferred securities, unpaid interest in an
amount equal to the accumulated and unpaid distributions on the
preferred securities and accruing interest at the rate provided
for in the subordinated debentures from the last distribution
date on the preferred securities; and
o all rights of the trust security holders other than the right to
receive subordinated debentures upon surrender of a certificate
representing trust securities will terminate.
We cannot assure you that the market prices for the preferred
securities or the subordinated debentures that may be distributed if a
dissolution and liquidation of the trust were to occur would be favorable. The
preferred securities that an investor may purchase, or the subordinated
debentures that an investor may receive on dissolution and liquidation of the
trust, may trade at a discount to the price that the investor paid to purchase
the preferred securities.
Redemption upon a Tax Event, Investment Company Event or Capital
Treatment Event. If a Tax Event, an Investment Company Event or a Capital
Treatment Event occurs, we will have the right to redeem the subordinated
debentures in whole, but not in part, and thereby cause a mandatory redemption
of the trust securities in whole at the redemption price. If one of these events
occurs and we do not elect to redeem the subordinated debentures, or to dissolve
the trust and cause the subordinated debentures to be distributed to holders of
the trust securities, then the preferred securities will remain outstanding and
additional interest may be payable on the subordinated debentures. See
"Description of the Subordinated Debentures -- Redemption."
"Tax Event" means the receipt by the trust and us of an opinion of
counsel experienced in such matters stating that there is more than an
insubstantial risk that:
o interest payable by us on the subordinated debentures is not, or
within 90 days of the date of the opinion will not be, deductible
by us, in whole or in part, for federal income tax purposes;
o the trust is, or will be within 90 days after the date of the
opinion, subject to federal income tax with respect to income
received or accrued on the subordinated debentures; or
o the trust is, or will be within 90 days after the date of
opinion, subject to more than an immaterial amount of other
taxes, duties, assessments or other governmental charges.
"Investment Company Event" means the receipt by the trust and us of an
opinion of counsel experienced in such matters to the effect that the trust is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act, as a result of a change in law or regulation
or a change in interpretation or application of law or regulation.
"Capital Treatment Event" means the receipt by the trust and us of an
opinion of counsel experienced in such matters to the effect that there is more
than an insubstantial risk of impairment of our ability to treat the preferred
securities as Tier I capital for purposes of the current capital adequacy
guidelines of the Federal Reserve, as a result of any amendment to any laws or
any regulations.
For all of the events described above, we and the trust must request
and receive an opinion of counsel with regard to the event within a reasonable
period of time after we become aware of the possible occurrence of an event of
this kind.
Redemption of Subordinated Debentures in Exchange for Preferred
Securities We Purchase. Upon prior approval of the Federal Reserve, if required,
we will also have the right at any time, and from time to time, to redeem
subordinated debentures in exchange for any preferred securities we may have
purchased in the market. If we elect to surrender any preferred securities
beneficially owned by us in exchange for redemption of a like amount of
subordinated debentures, we will also surrender a proportionate amount of common
securities in exchange for subordinated debentures. Preferred securities owned
by other holders will not be called for redemption at any time when we elect to
exchange trust securities we own to redeem subordinated debentures.
The common securities we surrender will be in the same proportion to
the preferred securities we surrender as are the common securities then
remaining outstanding to the preferred securities then remaining outstanding. In
exchange for the trust securities surrendered by us, the trustee will cause to
be distributed to us subordinated debentures with a principal amount equal to
the liquidation amount of the trust securities, plus any accumulated but unpaid
distributions, if any, then held by the trustee allocable to those trust
securities. After the date of redemption involving an exchange by us, the trust
securities we surrender and the subordinated debentures distributed to us in
exchange will no longer be deemed outstanding.
Redemption Procedures
Preferred securities will be redeemed at the redemption price with the
applicable proceeds from our contemporaneous redemption of the subordinated
debentures. Redemptions of the preferred securities will be made, and the
redemption price will be payable, on each redemption date only to the extent
that the trust has funds available for the payment of the redemption price.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the date of redemption to each holder of trust securities to
be redeemed at its registered address. Unless we default in payment of the
redemption price on the subordinated debentures, interest will cease to
accumulate on the subordinated debentures called for redemption on and after the
date of redemption.
If the trust gives notice of redemption of its trust securities, then
the property trustee, to the extent funds are available, will irrevocably
deposit with the depositary for the trust securities funds sufficient to pay the
aggregate redemption price and will give the depositary for the trust securities
irrevocable instructions and authority to pay the redemption price to the
holders of the trust securities. See "Book-Entry Issuance." If the preferred
securities are no longer in book-entry only form, the property trustee, to the
extent funds are available, will deposit with the designated paying agent for
such preferred securities funds sufficient to pay the aggregate redemption price
and will give the paying agent irrevocable instructions and authority to pay the
redemption price to the holders upon surrender of their certificates evidencing
the preferred securities. Notwithstanding the foregoing, distributions payable
on or prior to the date of redemption for any trust securities called for
redemption will be payable to the holders of the trust securities on the
relevant record dates for the related distribution dates.
If notice of redemption has been given and we have deposited funds as
required, then on the date of the deposit all rights of the holders of the trust
securities called for redemption will cease, except the right to receive the
redemption price, but without interest on such redemption price after the date
of redemption. The trust securities will also cease to be outstanding on the
date of the deposit. If any date fixed for redemption of trust securities is not
a business day, then payment of the redemption price payable on that date will
be made on the next day that is a business day without any additional interest
or other payment in respect of the delay.
If payment of the redemption price in respect of trust securities
called for redemption is improperly withheld or refused and not paid by the
trust, or by us pursuant to the guarantee, distributions on the trust securities
will continue to accumulate at the applicable rate from the date of redemption
originally established by the trust for the trust securities to the date the
redemption price is actually paid. In this case, the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
redemption price. See "Description of the Guarantee."
Payment of the redemption price on the preferred securities and any
distribution of subordinated debentures to holders of preferred securities will
be made to the applicable recordholders as they appear on the register for the
preferred securities on the relevant record date. As long as the preferred
securities are represented by a global security, the record date will be the
business day immediately preceding the date of redemption or liquidation date,
as applicable.
If less than all of the trust securities are to be redeemed, then the
aggregate liquidation amount of the trust securities to be redeemed will be
allocated proportionately to those trust securities based upon the relative
liquidation amounts. The particular preferred securities to be redeemed will be
selected by the property trustee from the outstanding preferred securities not
previously called for redemption by lot. This method may provide for the
redemption of portions equal to $25 or an integral multiple of $25 of the
liquidation amount of the preferred securities. The property trustee will
promptly notify the registrar for the preferred securities in writing of the
preferred securities selected for redemption and, in the case of any preferred
securities selected for partial redemption, the liquidation amount to be
redeemed. If the redemption relates only to preferred securities purchased by us
and being exchanged for a like amount of debentures, then our preferred
securities will be the ones selected for redemption.
Subject to applicable law, and if we are not exercising our right to
defer interest payments on the subordinated debentures, we may, at any time,
purchase outstanding preferred securities.
Subordination of Common Securities
Payment of distributions on, and the redemption price of, the preferred
securities and common securities will be made based on the liquidation amount of
these securities. However, if an event of default under the indenture has
occurred and is continuing, no distributions on or redemption of the common
securities may be made unless payment in full in cash of all accumulated and
unpaid distributions on all of the outstanding preferred securities for all
distribution periods terminating on or before that time, or in the case of
payment of the redemption price, payment of the full amount of the redemption
price on all of the outstanding preferred securities then called for redemption,
has been made or provided for. All funds available to the property trustee will
first be applied to the payment in full in cash of all distributions on, or the
redemption price of, the preferred securities then due and payable.
In the case of the occurrence and continuance of any event of default
under the trust agreement resulting from an event of default under the
indenture, we, as holder of the common securities, will be deemed to have waived
any right to act with respect to that event of default under the trust agreement
until the effect of the event of default has been cured, waived or otherwise
eliminated. Until the event of default under the trust agreement has been so
cured, waived or otherwise eliminated, the property trustee will act solely on
behalf of the holders of the preferred securities and not on our behalf, and
only the holders of the preferred securities will have the right to direct the
property trustee to act on their behalf.
Liquidation Distribution Upon Termination
We will have the right at any time to dissolve, wind-up or terminate
the trust and cause the subordinated debentures to be distributed to the holders
of the preferred securities. This right is subject, however, to us receiving
approval of the Federal Reserve, if required.
In addition, the trust will automatically terminate upon expiration of
its term and will terminate earlier on the first to occur of:
o our bankruptcy, dissolution or liquidation;
o the distribution of a like amount of the subordinated debentures
to the holders of trust securities, if we have given written
direction to the property trustee to terminate the trust;
o redemption of all of the preferred securities as described on page
68 under "-- Redemption or Exchange-- Mandatory Redemption;" or
o the entry of a court order for the dissolution of the trust.
With the exception of a redemption as described on page 68 under "--
Redemption or Exchange -- Mandatory Redemption," if an early termination of the
trust occurs, the trust will be liquidated by the administrative trustees as
expeditiously as they determine to be possible. After satisfaction of
liabilities to creditors of the trust as provided by applicable law, the
trustees will distribute to the holders of trust securities subordinated
debentures:
o in an aggregate stated principal amount equal to the aggregate
stated liquidation amount of the trust securities;
o with an interest rate identical to the distribution rate on the
trust securities; and
o with accrued and unpaid interest equal to accumulated and unpaid
distributions on the trust securities.
However, if the property trustee determines that the distribution is
not practical, then the holders of trust securities will be entitled to receive,
instead of subordinated debentures, a proportionate amount of the liquidation
distribution. The liquidation distribution will be the amount equal to the
aggregate of the liquidation amount plus accumulated and unpaid distributions to
the date of payment. If the liquidation distribution can be paid only in part
because the trust has insufficient assets available to pay in full the aggregate
liquidation distribution, then the amounts payable directly by the trust on the
trust securities will be paid on a proportional basis, based on liquidation
amounts, to us, as the holder of the common securities, and to the holders of
the preferred securities. However, if an event of default under the indenture
has occurred and is continuing, the preferred securities will have a priority
over the common securities. See "-- Subordination of Common Securities."
Under current United States federal income tax law and interpretations
and assuming that the trust is treated as a grantor trust, as is expected, a
distribution of the subordinated debentures should not be a taxable event to
holders of the preferred securities. Should there be a change in law, a change
in legal interpretation, a Tax Event or another circumstance, however, the
distribution could be a taxable event to holders of the preferred securities.
See "Federal Income Tax Consequences -- United States Holders -- Receipt of
Subordinated Debentures or Cash Upon Liquidation of First Preferred Capital
Trust III." If we do not elect to redeem the subordinated debentures prior to
maturity or to liquidate the trust and distribute the subordinated debentures to
holders of the preferred securities, the preferred securities will remain
outstanding until the repayment of the subordinated debentures.
If we elect to dissolve the trust and thus cause the subordinated
debentures to be distributed to holders of the preferred securities in
liquidation of the trust, we will continue to have the right to shorten the
maturity of the subordinated debentures. See "Description of the Subordinated
Debentures-- General."
Liquidation Value
The amount of the liquidation distribution payable on the preferred
securities in the event of any liquidation of the trust is $25 per preferred
security plus accumulated and unpaid distributions to the date of payment, which
may be in the form of a distribution of subordinated debentures having a
liquidation value and accrued interest of an equal amount. See "-- Liquidation
Distribution Upon Termination."
Events of Default; Notice
Any one of the following events constitutes an event of default under
the trust agreement with respect to the preferred securities:
o the occurrence of an event of default under the indenture (see
"Description of the Subordinated Debentures-- Subordinated
Debenture Events of Default");
o a default by the trust in the payment of any distribution when it
becomes due and payable, and continuation of the default
for a period of 30 days;
o a default by the trust in the payment of the redemption price of
any of the trust securities when it becomes due and
payable;
o a default in the performance, or breach, in any material respect,
of any covenant or warranty of the trustees in the trust
agreement, other than those defaults covered in the previous two
points, and continuation of the default or breach for a period of
60 days after there has been given, by registered or certified
mail, to the trustee(s) by the holders of at least 25% in
aggregate liquidation amount of the outstanding preferred
securities, a written notice specifying the default or breach and
requiring it to be remedied and stating that the notice is a
"Notice of Default" under the trust agreement; or
o the occurrence of events of bankruptcy or insolvency with
respect to the property trustee and our failure to appoint a
successor property trustee within 60 days.
Within five business days after the occurrence of any event of default
actually known to the property trustee, the property trustee will transmit
notice of the event of default to the holders of the preferred securities, the
administrative trustees and to us, unless the event of default has been cured or
waived. The administrative trustees and we are required to file annually with
the property trustee a certificate as to whether or not they and we are in
compliance with all the applicable conditions and covenants under the trust
agreement.
If an event of default under the indenture has occurred and is
continuing, the preferred securities will have preference over the common
securities upon termination of the trust. See "-- Subordination of Common
Securities" and "Liquidation Distribution Upon Termination." The existence of an
event of default under the trust agreement does not entitle the holders of
preferred securities to accelerate the maturity thereof, unless the event of
default is caused by the occurrence of an event of default under the indenture
and both the indenture trustee and holders of at least 25% in principal amount
of the subordinated debentures fail to accelerate the maturity thereof.
Removal of the Trustees
Unless an event of default under the indenture has occurred and is
continuing, we may remove any trustee at any time. If an event of default under
the indenture has occurred and is continuing, only the holders of a majority in
liquidation amount of the outstanding preferred securities may remove the
property trustee or the Delaware trustee. The holders of the preferred
securities have no right to vote to appoint, remove or replace the
administrative trustees. These rights are vested exclusively with us as the
holder of the common securities. No resignation or removal of a trustee and no
appointment of a successor trustee will be effective until the successor trustee
accepts the appointment in accordance with the trust agreement.
Co-Trustees and Separate Property Trustee
Unless an event of default under the indenture has occurred and is
continuing, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the trust property may
at the time be located, we will have the power to appoint at any time or times,
and upon written request the property trustee will appoint, one or more persons
or entities either (1) to act as a co-trustee, jointly with the property
trustee, of all or any part of the trust property, or (2) to act as separate
trustee of any trust property. In either case, these trustees will have the
powers that may be provided in the instrument of appointment, and will have
vested in them any property, title, right or power deemed necessary or
desirable, subject to the provisions of the trust agreement. In case an event of
default under the indenture has occurred and is continuing, the property trustee
alone will have power to make the appointment.
Merger or Consolidation of Trustees
Generally, any person or successor to any of the trustees may be a
successor trustee to any of the trustees, including a successor resulting from a
merger or consolidation. However, any successor trustee must meet all of the
qualifications and eligibility standards to act as a trustee.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below. For these purposes, if we consolidate or merge with another
entity, or transfer or sell substantially all of our assets to another entity,
in some cases that transaction may be considered to involve a replacement of the
trust, and the conditions set forth below would apply to such transaction. The
trust may, at our request, with the consent of the administrative trustees and
without the consent of the holders of the preferred securities, the property
trustee or the Delaware trustee, undertake a transaction listed above if the
following conditions are met:
o the successor entity either (a) expressly assumes all of the
obligations of the trust with respect to the preferred
securities, or (b) substitutes for the preferred securities other
securities having substantially the same terms as the preferred
securities (referred to as "successor securities") so long as the
successor securities rank the same in priority as the preferred
securities with respect to distributions and payments upon
liquidation, redemption and otherwise;
o we appoint a trustee of the successor entity possessing
substantially the same powers and duties as the property trustee
in its capacity as the holder of the subordinated debentures;
o the successor securities are listed or traded or will be listed
or traded on any national securities exchange or other
organization on which the preferred securities are then listed,
if any;
o the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the preferred
securities (including any successor securities) in any material
respect;
o the successor entity has a purpose substantially identical to
that of the trust;
o prior to the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, we have received an opinion from
independent counsel that (a) any transaction of this kind does
not adversely affect the rights, preferences and privileges of
the holders of the preferred securities (including any successor
securities) in any material respect, and (b) following the
transaction, neither the trust nor the successor entity will be
required to register as an "investment company" under the
Investment Company Act; and
o we own all of the common securities of the successor entity and
guarantee the obligations of the successor entity under the
successor securities at least to the extent provided by the
guarantee, the subordinated debentures, the trust agreement and
the expense agreement.
Notwithstanding the foregoing, the trust may not, except with the
consent of every holder of the preferred securities, enter into any transaction
of this kind if the transaction would cause the trust or the successor entity
not to be classified as a grantor trust for United States federal income tax
purposes.
Voting Rights; Amendment of Trust Agreement
Except as described below and under "Description of the Guarantee --
Amendments and Assignment" and as otherwise required by the Trust Indenture Act
and the trust agreement, the holders of the preferred securities will have no
voting rights.
The trust agreement may be amended from time to time by us and the
trustees, without the consent of the holders of the preferred securities, in the
following circumstances:
o with respect to acceptance of appointment by a successor trustee;
o to cure any ambiguity, correct or supplement any provisions in
the trust agreement that may be inconsistent with any other
provision, or to make any other provisions with respect to
matters or questions arising under the trust agreement, as long
as the amendment is not inconsistent with the other provisions of
the trust agreement and does not have a material adverse effect
on the interests of any holder of trust securities; or
o to modify, eliminate or add to any provisions of the trust
agreement if necessary to ensure that the trust will be
classified for federal income tax purposes as a grantor trust at
all times that any trust securities are outstanding or to ensure
that the trust will not be required to register as an "investment
company" under the Investment Company Act.
With the consent of the holders of a majority of the aggregate
liquidation amount of the outstanding trust securities, we and the trustees may
amend the trust agreement if the trustees receive an opinion of counsel to the
effect that the amendment or the exercise of any power granted to the trustees
in accordance with the amendment will not affect the trust's status as a grantor
trust for federal income tax purposes or the trust's exemption from status as an
"investment company" under the Investment Company Act. However, without the
consent of each holder of trust securities, the trust agreement may not be
amended to (a) change the amount or timing of any distribution on the trust
securities or otherwise adversely affect the amount of any distribution required
to be made in respect of the trust securities as of a specified date, or (b)
restrict the right of a holder of trust securities to institute suit for the
enforcement of the payment on or after that date.
As long as the property trustee holds any subordinated debentures, the
trustees will not, without obtaining the prior approval of the holders of a
majority in aggregate liquidation amount of all outstanding preferred
securities:
o direct the time, method and place of conducting any proceeding
for any remedy available to the indenture trustee, or executing
any trust or power conferred on the property trustee with respect
to the subordinated debentures;
o waive any past default that is waivable under the indenture;
o exercise any right to rescind or annul a declaration that the
principal of all the subordinated debentures will be due and
payable; or
o consent to any amendment or termination of the indenture or the
subordinated debentures, where the property trustee's consent is
required. However, where a consent under the indenture requires
the consent of each holder of the affected subordinated
debentures, no consent will be given by the property trustee
without the prior consent of each holder of the preferred
securities.
The trustees may not revoke any action previously authorized or
approved by a vote of the holders of the preferred securities except by
subsequent vote of the holders of the preferred securities. The property trustee
will notify each holder of preferred securities of any notice of default with
respect to the subordinated debentures. In addition to obtaining the foregoing
approvals of the holders of the preferred securities, prior to taking any of the
foregoing actions, the trustees must obtain an opinion of counsel experienced in
these matters to the effect that the trust will not be classified as an
association taxable as a corporation for federal income tax purposes on account
of the action.
Any required approval of holders of trust securities may be given at a
meeting or by written consent. The property trustee will cause a notice of any
meeting at which holders of the trust securities are entitled to vote, or of any
matter upon which action by written consent of the holders is to be taken, to be
given to each holder of record of trust securities.
No vote or consent of the holders of preferred securities will be
required for the trust to redeem and cancel its preferred securities in
accordance with the trust agreement.
Notwithstanding the fact that holders of preferred securities are
entitled to vote or consent under any of the circumstances described above, any
of the preferred securities that are owned by us, the trustees or any affiliate
of ours or of any trustee, will, for purposes of the vote or consent, be treated
as if they were not outstanding.
Global Preferred Securities
The preferred securities will be represented by one or more global
preferred securities registered in the name of The Depository Trust Company, New
York, New York, or its nominee. A global preferred security is a security
representing interests of more than one beneficial holder. Ownership of
beneficial interests in the global preferred securities will be reflected in DTC
participant account records through DTC's book-entry transfer and registration
system. Participants are brokers, dealers, or others having accounts with DTC.
Indirect beneficial interests of other persons investing in the preferred
securities will be shown on, and transfers will be effected only through,
records maintained by DTC participants. Except as described below, preferred
securities in definitive form will not be issued in exchange for the global
preferred securities. See "Book-Entry Issuance."
No global preferred security may be exchanged for preferred securities
registered in the names of persons other than DTC or its nominee unless:
o DTC notifies the indenture trustee that it is unwilling or unable
to continue as a depositary for the global preferred security and
we are unable to locate a qualified successor depositary;
o we execute and deliver to the indenture trustee a written order
stating that we elect to terminate the book-entry system
through DTC; or
o there shall have occurred and be continuing an event of default
under the indenture.
Any global preferred security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for definitive certificates registered
in the names as DTC shall direct. It is expected that the instructions will be
based upon directions received by DTC with respect to ownership of beneficial
interests in the global preferred security. If preferred securities are issued
in definitive form, the preferred securities will be in denominations of $25 and
integral multiples of $25 and may be transferred or exchanged at the offices
described below.
Unless and until it is exchanged in whole or in part for the individual
preferred securities represented thereby, a global preferred security may not be
transferred except as a whole by DTC to a nominee of DTC, by a nominee of DTC to
DTC or another nominee of DTC or by DTC or any nominee to a successor depositary
or any nominee of the successor.
Payments on global preferred securities will be made to DTC, as the
depositary for the global preferred securities. If the preferred securities are
issued in definitive form, distributions will be payable by check mailed to the
address of record of the persons entitled to the distribution, and the transfer
of the preferred securities will be registrable, and preferred securities will
be exchangeable for preferred securities of other denominations of a like
aggregate liquidation amount, at the corporate office of the property trustee,
or at the offices of any paying agent or transfer agent appointed by the
administrative trustees. In addition, if the preferred securities are issued in
definitive form, the record dates for payment of distributions will be the 15th
day of the month in which the relevant distribution date occurs. For a
description of the terms of DTC arrangements relating to payments, transfers,
voting rights, redemptions and other notices and other matters, see "Book-Entry
Issuance."
Upon the issuance of one or more global preferred securities, and the
deposit of the global preferred security with or on behalf of DTC or its
nominee, DTC or its nominee will credit, on its book-entry registration and
transfer system, the respective aggregate liquidation amounts of the individual
preferred securities represented by the global preferred security to the
designated accounts of persons that participate in the DTC system. These
participant accounts will be designated by the dealers, underwriters or agents
selling the preferred securities. Ownership of beneficial interests in a global
preferred security will be limited to persons or entities having an account with
DTC or who may hold interests through participants. With respect to interests of
any person or entity that is a DTC participant, ownership of beneficial
interests in a global preferred security will be shown on, and the transfer of
that ownership will be effected only through, records maintained by DTC or its
nominee. With respect to persons or entities who hold interests in a global
preferred security through a participant, the interest and any transfer of the
interest will be shown only on the participant's records. The laws of some
states require that certain purchasers of securities take physical delivery of
securities in definitive form. These laws may impair the ability to transfer
beneficial interests in a global preferred security.
So long as DTC or another depositary, or its nominee, is the registered
owner of the global preferred security, the depositary or the nominee, as the
case may be, will be considered the sole owner or holder of the preferred
securities represented by the global preferred security for all purposes under
the trust agreement. Except as described in this prospectus, owners of
beneficial interests in a global preferred security will not be entitled to have
any of the individual preferred securities represented by the global preferred
security registered in their names, will not receive or be entitled to receive
physical delivery of any of the preferred securities in definitive form and will
not be considered the owners or holders of the preferred securities under the
trust agreement.
None of us, the property trustee, any paying agent or the securities
registrar for the preferred securities will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of the global preferred security representing the
preferred securities or for maintaining, supervising or reviewing any records
relating to the beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of the
liquidation amount or distributions in respect of a global preferred security,
immediately will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the aggregate
liquidation amount of the global preferred security as shown on the records of
DTC or its nominee. We also expect that payments by participants to owners of
beneficial interests in the global preferred security held through the
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." The payments will be the responsibility of
the participants. See "Book-Entry Issuance."
Payment and Paying Agency
Payments in respect of the preferred securities will be made to DTC,
which will credit the relevant accounts of participants on the applicable
distribution dates, or, if any of the preferred securities are not held by DTC,
the payments will be made by check mailed to the address of the holder as listed
on the register of holders of the preferred securities. The paying agent for the
preferred securities will initially be the property trustee and any co-paying
agent chosen by the property trustee and acceptable to us and the administrative
trustees. The paying agent for the preferred securities may resign as paying
agent upon 30 days' written notice to the administrative trustees, the property
trustee and us. If the property trustee no longer is the paying agent for the
preferred securities, the administrative trustees will appoint a successor to
act as paying agent. The successor must be a bank or trust company acceptable to
us and the property trustee.
Registrar and Transfer Agent
The property trustee will act as the registrar and the transfer agent
for the preferred securities. Registration of transfers of preferred securities
will be effected without charge by or on behalf of the trust, but upon payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. The trust and its registrar and transfer agent will
not be required to register or cause to be registered the transfer of preferred
securities after they have been called for redemption.
Information Concerning the Property Trustee
The property trustee undertakes to perform only the duties set forth in
the trust agreement. After the occurrence of an event of default that is
continuing, the property trustee must exercise the same degree of care and skill
as a prudent person exercises or uses in the conduct of its own affairs. The
property trustee is under no obligation to exercise any of the powers vested in
it by the trust agreement at the request of any holder of preferred securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred. If no event of default under the trust
agreement has occurred and is continuing and the property trustee is required to
decide between alternative causes of action, construe ambiguous or inconsistent
provisions in the trust agreement or is unsure of the application of any
provision of the trust agreement, and the matter is not one on which holders of
preferred securities are entitled to vote upon, then the property trustee will
take the action directed in writing by us. If the property trustee is not so
directed, then it will take the action it deems advisable and in the best
interests of the holders of the trust securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
Miscellaneous
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the trust in such a way that:
o the trust will not be deemed to be an "investment company"
required to be registered under the Investment Company Act;
o the trust will not be classified as an association taxable as a
corporation for federal income tax purposes; and
o the subordinated debentures will be treated by us as indebtedness
for federal income tax purposes.
In this regard, we and the administrative trustees are authorized to
take any action not inconsistent with applicable law, the certificate of trust
or the trust agreement, that we and the administrative trustees determine to be
necessary or desirable for these purposes. The administrative trustees may
assist in including or listing the preferred securities in the Nasdaq National
Market or on a national securities exchange.
Holders of the preferred securities have no preemptive or similar
rights. The trust agreement and the trust securities will be governed by
Delaware law.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Concurrently with the issuance of the preferred securities, the trust
will invest the proceeds from the sale of the trust securities in the
subordinated debentures issued by us. The subordinated debentures will be issued
as unsecured debt under the indenture between us and State Street Bank and Trust
Company of Connecticut, National Association, as indenture trustee. The
indenture will be qualified under the Trust Indenture Act.
The following discussion is subject to, and is qualified in its
entirety by reference to, the indenture and to the Trust Indenture Act. We urge
prospective investors to read the form of the indenture, which is filed as an
exhibit to the registration statement of which this prospectus forms a part.
General
The subordinated debentures will be limited in aggregate principal
amount to $41,237,125 or $47,422,700 if the Underwriters' over-allotment option
is exercised in full. This amount represents the sum of the aggregate stated
liquidation amounts of the trust securities. The subordinated debentures will
bear interest at the annual rate of % of the principal amount. The interest will
be payable quarterly on March 31, June 30, September 30 and December 31 of each
year, beginning December 31, 2001, to the person in whose name each subordinated
debenture is registered at the close of business on the 15th day of the last
month of the calendar quarter. It is anticipated that, until the liquidation, if
any, of the trust, the subordinated debentures will be held in the name of the
property trustee in trust for the benefit of the holders of the trust
securities.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months. If any date on which interest
is payable on the subordinated debentures is not a business day, then payment of
interest will be made on the next day that is a business day without any
additional interest or other payment in respect of the delay. Accrued interest
that is not paid on the applicable interest payment date will bear additional
interest on the amount due at the annual rate of %, compounded quarterly.
The subordinated debentures will mature on December 31, 2031, the
stated maturity date. We may shorten this date once at any time to any date not
earlier than December 31, 2006, subject to the prior approval of the Federal
Reserve, if required.
We will give notice to the indenture trustee and the holders of the
subordinated debentures, no more than 180 days and no less than 30 days prior to
the effectiveness of any change in the stated maturity date. We will not have
the right to redeem the subordinated debentures from the trust until after
December 31, 2006, except if (a) a Tax Event, an Investment Company Event or a
Capital Treatment Event, which terms are defined on page 69, has occurred, or
(b) we repurchase preferred securities in the market, in which case we can elect
to redeem subordinated debentures specifically in exchange for a like amount of
preferred securities owned by us plus a proportionate amount of common
securities.
The subordinated debentures will be unsecured and will rank junior to
all of our senior and subordinated debt, including indebtedness we may incur in
the future. Because we are a holding company, our right to participate in any
distribution of assets of any of our subsidiaries, upon any subsidiary's
liquidation or reorganization or otherwise, and thus the ability of holders of
the subordinated debentures to benefit indirectly from any distribution by a
subsidiary, is subject to the prior claim of creditors of the subsidiary, except
to the extent that we may be recognized as a creditor of the subsidiary. The
subordinated debentures will, therefore, be effectively subordinated to all
existing and future liabilities of our subsidiaries, and holders of subordinated
debentures should look only to our assets for payment. The indenture does not
limit our ability to incur or issue secured or unsecured senior and junior debt.
See "-- Subordination."
The indenture does not contain provisions that afford holders of the
subordinated debentures protection in the event of a highly leveraged
transaction or other similar transaction involving us, nor does it require us to
maintain or achieve any financial performance levels or to obtain or maintain
any credit rating on the subordinated debentures.
Option to Extend Interest Payment Period
As long as no event of default under the indenture has occurred and is
continuing, we have the right under the indenture to defer the payment of
interest on the subordinated debentures at any time for a period not exceeding
20 consecutive quarters. However, no extension period may extend beyond the
stated maturity of the subordinated debentures or end on a date other than a
date interest is normally due. At the end of an extension period, we must pay
all interest then accrued and unpaid, together with interest thereon at the
annual rate of %, compounded quarterly. During an extension period, interest
will continue to accrue and holders of subordinated debentures, or the holders
of preferred securities if they are then outstanding, will be required to accrue
and recognize as income for federal income tax purposes the accrued but unpaid
interest amounts in the year in which such amounts accrued. See "Federal Income
Tax Consequences."
During an extension period, neither we nor any of our subsidiaries may:
o declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to,
any of our capital stock (other than stock dividends, noncash
dividends in connection with the implementation of a stockholder
rights plan, purchases of common stock in connection with
employee benefit plans or in connection with the
reclassifications of any class of our capital stock into another
class of capital stock) with respect to their capital stock
(other than payment of dividends or distributions to us or to one
of our subsidiaries or a distribution with respect to the
preferred securities issued by FBA's financing subsidiary in
July 1998);
o make any payment of principal, interest or premium on, or repay,
repurchase or redeem any debt securities that rank equally with
(including the subordinated debentures issued to our two other
financing subsidiaries), or junior to the subordinated
debentures;
o make any guarantee payments with respect to any other guarantee
by us of any other debt securities of any of our subsidiaries if
the guarantee ranks equally with or junior to the subordinated
debentures (other than payments under the guarantee); or
o redeem, purchase or acquire less than all of the subordinated
debentures or any of the preferred securities.
Prior to the termination of any extension period, so long as no event
of default under the indenture is continuing, we may further defer the payment
of interest subject to the above stated requirements. Upon the termination of
any extension period and the payment of all amounts then due, we may elect to
begin a new extension period at any time. We do not currently intend to exercise
our right to defer payments of interest on the subordinated debentures.
We must give the property trustee, the administrative trustees and the
indenture trustee notice of our election of an extension period at least two
business days prior to the earlier of (a) the next date on which distributions
on the trust securities would have been payable except for the election to begin
an extension period, or (b) the date we are required to give notice of the
record date, or the date the distributions are payable, to the Nasdaq National
Market, or other applicable self-regulatory organization, or to holders of the
preferred securities, but in any event at least one business day prior to the
record date. If the property trustee is not the only registered holder of the
debentures, then this notice must also be given to the holders of the
debentures.
Other than as described above, there is no limitation on the number of
times that we may elect to begin an extension period.
Additional Sums to be Paid as a Result of Additional Taxes
If the trust or the property trustee is required to pay any additional
taxes, duties, assessments or other governmental charges as a result of the
occurrence of a Tax Event, we will pay as additional interest on the
subordinated debentures any amounts which may be required so that the net
amounts received and retained by the trust after paying any additional taxes,
duties, assessments or other governmental charges will not be less than the
amounts the trust and the property trustee would have received had the
additional taxes, duties, assessments or other governmental charges not been
imposed.
Redemption
Subject to prior approval of the Federal Reserve, if required, we may
redeem the subordinated debentures prior to maturity:
o in whole at any time, or in part from time to time, on or after
December 31, 2006; or
o at any time, in whole, within 180 days following the occurrence
of a Tax Event, an Investment Company Event or a Capital
Treatment Event.
In each case we will pay a redemption price equal to the accrued and
unpaid interest on the subordinated debentures so redeemed to the date fixed for
redemption, plus 100% of the principal amount of the redeemed subordinated
debentures.
We may also redeem the debentures prior to maturity at any time, and
from time to time, to the extent of any preferred securities we purchase, plus a
proportionate amount of the common securities we hold.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of subordinated
debentures to be redeemed at its registered address. Redemption of less than all
outstanding subordinated debentures must be effected by lot. Unless we default
in payment of the redemption price for the subordinated debentures, on and after
the redemption date interest will no longer accrue on the subordinated
debentures or the portions of the subordinated debentures called for redemption.
The subordinated debentures will not be subject to any sinking fund.
Distribution Upon Liquidation
As described under "Description of the Preferred Securities --
Liquidation Distribution Upon Termination," under certain circumstances and with
the Federal Reserve's approval, the subordinated debentures may be distributed
to the holders of the preferred securities in liquidation of the trust after
satisfaction of liabilities to creditors of the trust. If this occurs, we will
use our best efforts to include the subordinated debentures in the Nasdaq
National Market or list them on a national securities exchange or national
quotation system on which the preferred securities are then listed, if any.
There can be no assurance as to the market price of any subordinated debentures
that may be distributed to the holders of preferred securities.
Restrictions on Payments
We are restricted from making certain payments (as described below) if
we have chosen to defer payment of interest on the subordinated debentures, if
an event of default has occurred and is continuing under the indenture, or if we
are in default with respect to our obligations under the guarantee.
If any of these events occur, neither we nor any of our subsidiaries
will:
o declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to,
any of our capital stock (other than stock dividends, noncash
dividends in connection with the implementation of a stockholder
rights plan, purchases of common stock in connection with
employee benefit plans or in connection with the reclassification
of any class of our capital stock into another class of capital
stock), or allow any of our subsidiaries to do the same with
respect to their capital stock (other than payment of dividends
or distributions to us or to one of our subsidiaries or a
distribution with respect to the preferred securities issued by
FBA's financing subsidiary in July 1998);
o make any payment of principal, interest or premium on, or repay
or repurchase or redeem any debt securities that rank equally
with (including the subordinated debentures issued to our two
other financing subsidiaries), or junior to the subordinated
debentures;
o make any guarantee payments with respect to any guarantee by us
of the debt securities of any of our subsidiaries if the
guarantee ranks equally with or junior to the subordinated
debentures (other than payments under the guarantee); or
o redeem, purchase or acquire less than all of the subordinated
debentures or any of the preferred securities.
Subordination
The subordinated debentures are subordinated and junior in right of
payment to all of our senior and subordinated debt, as defined below. Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up or reorganization of First Banks, whether voluntary or
involuntary in bankruptcy, insolvency, receivership or other proceedings in
connection with any insolvency or bankruptcy proceedings, the holders of our
senior and subordinated debt will first be entitled to receive payment in full
of principal and interest before the holders of subordinated debentures will be
entitled to receive or retain any payment in respect of the subordinated
debentures.
If the maturity of any subordinated debentures is accelerated and our
senior and subordinated debt is also accelerated, the holders of all of our
senior and subordinated debt outstanding at the time of the acceleration will
also be entitled to first receive payment in full of all amounts due to them,
including any amounts due upon acceleration, before the holders of the
subordinated debentures will be entitled to receive or retain any principal or
interest payments on the subordinated debentures.
No payments of principal or interest on the subordinated debentures may
be made if there has occurred and is continuing a default in any payment with
respect to any of our senior or subordinated debt or an event of default with
respect to any of our senior or subordinated debt resulting in the acceleration
of the maturity of the senior or subordinated debt, or if any judicial
proceeding is pending with respect to any default.
The term "debt" means, with respect to any person, whether recourse is
to all or a portion of the assets of the person and whether or not contingent:
o every obligation of the person for money borrowed;
o every obligation of the person evidenced by bonds, debentures,
notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets
or businesses;
o every reimbursement obligation of the person with respect to
letters of credit, bankers' acceptances or similar facilities
issued for the account of the person;
o every obligation of the person issued or assumed as the deferred
purchase price of property or services, excluding trade accounts
payable or accrued liabilities arising in the ordinary course of
business;
o every capital lease obligation of the person; and
o every obligation of the type referred to in the first five points
of another person and all dividends of another person the payment
of which, in either case, the first person has guaranteed or is
responsible or liable, directly or indirectly, as obligor or
otherwise.
The term "senior debt" means the principal of, and premium and
interest, including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us, on, debt, whether incurred on
or prior to the date of the indenture or incurred after the date. However,
senior debt will not be deemed to include:
o any debt where it is provided in the instrument creating the debt
that the obligations are not superior in right of payment to the
subordinated debentures or to other debt which is equal with, or
subordinated to, the subordinated debentures, including our 9.25%
subordinated debentures due 2027 and our 10.24% subordinated
debentures due 2030, issued to our two other financing
subsidiaries;
o any of our debt that when incurred and without regard to any
election under the federal bankruptcy laws, was without
recourse to us;
o any debt of ours to any of our subsidiaries;
o any debt to any of our employees;
o any debt that by its terms is subordinated to trade accounts
payable or accrued liabilities arising in the ordinary course of
business to the extent that payments made to the holders of the
debt by the holders of the subordinated debentures as a result of
the subordination provisions of the indenture would be greater
than they otherwise would have been as a result of any obligation
of the holders to pay amounts over to the obligees on the trade
accounts payable or accrued liabilities arising in the ordinary
course of business as a result of subordination provisions to
which the debt is subject; and
o debt which constitutes subordinated debt.
The term "subordinated debt" means the principal of, and premium and
interest, including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us, on, debt. Subordinated debt
includes debt incurred on or prior to the date of the indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other debt of ours, other than the subordinated debentures. However,
subordinated debt will not be deemed to include:
o any of our debt which when incurred and without regard to any
election under the federal bankruptcy laws was without
recourse to us;
o any debt of ours to any of our subsidiaries;
o any debt to any of our employees;
o any debt which by its terms is subordinated to trade accounts
payable or accrued liabilities arising in the ordinary course of
business to the extent that payments made to the holders of the
debt by the holders of the subordinated debentures as a result of
the subordination provisions of the indenture would be greater
than they otherwise would have been as a result of any obligation
of the holders to pay amounts over to the obligees on the trade
accounts payable or accrued liabilities arising in the ordinary
course of business as a result of subordination provisions to
which the debt is subject;
o debt which constitutes senior debt; and
o any debt of ours under debt securities (and guarantees in respect
of these debt securities) initially issued to any trust, or a
trustee of a trust, partnership or other entity affiliated with
us that is, directly or indirectly, our financing subsidiary in
connection with the issuance by that entity of preferred
securities or other securities which are intended to qualify for
"Tier I" capital treatment, (such as the approximately $88.9
million of 9.25% subordinated debentures due 2027 that we issued
to one of our other financing subsidiaries in 1997, the
approximately $59.3 million of 10.24% subordinated debentures due
2030 that we issued to one of our other financing subsidiaries in
2000 and the approximately $47.4 million of 8.50% subordinated
debentures due 2028 that FBA issued to its financing subsidiary
in 1998).
We expect from time to time to incur additional indebtedness, and,
except in certain circumstances, there is no limitation under the indenture on
the amount we may incur. We had consolidated senior and senior subordinated debt
of $29.5 million outstanding principal amount at September 30, 2001. Although a
portion of these amounts is expected to be repaid with a portion of the proceeds
from the sale of the subordinated debentures, we expect to incur additional
senior or subordinated debt in the future.
Payment and Paying Agents
Generally, payment of principal of and interest on the subordinated
debentures will be made at the office of the indenture trustee in Hartford,
Connecticut. However, we have the option to make payment of any interest by (a)
check mailed to the address of the person entitled to payment at the address
listed in the register of holders of the subordinated debentures, or (b) wire
transfer to an account maintained by the person entitled thereto as specified in
the register of holders of the subordinated debentures, provided that proper
transfer instructions have been received by the applicable record date. Payment
of any interest on subordinated debentures will be made to the person in whose
name the subordinated debenture is registered at the close of business on the
regular record date for the interest payment, except in the case of defaulted
interest.
Any moneys deposited with the indenture trustee or any paying agent for
the subordinated debentures, or then held by us in trust, for the payment of the
principal of or interest on the subordinated debentures and remaining unclaimed
for two years after the principal or interest has become due and payable, will
be repaid to us on June 30 of each year. If we hold any of this money in trust,
then it will be discharged from the trust to us and the holder of the
subordinated debenture will thereafter look, as a general unsecured creditor,
only to us for payment.
Registrar and Transfer Agent
The indenture trustee will act as the registrar and the transfer agent
for the subordinated debentures. Subordinated debentures may be presented for
registration of transfer, with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed, at the office of the
registrar. Provided that we maintain a transfer agent in Wilmington, Delaware,
we may rescind the designation of any transfer agent or approve a change in the
location through which any transfer agent acts. We may at any time designate
additional transfer agents with respect to the subordinated debentures.
If we redeem any of the subordinated debentures, neither we nor the
indenture trustee will be required to (a) issue, register the transfer of or
exchange any subordinated debentures during a period beginning at the opening of
business 15 days before the day of the mailing of and ending at the close of
business on the day of the mailing of the relevant notice of redemption, or (b)
transfer or exchange any subordinated debentures so selected for redemption,
except, in the case of any subordinated debentures being redeemed in part, any
portion not to be redeemed.
Modification of Indenture
We and the indenture trustee may, from time to time without the consent
of the holders of the subordinated debentures, amend, waive our rights under or
supplement the indenture for purposes which do not materially adversely affect
the rights of the holders of the subordinated debentures. Other changes may be
made by us and the indenture trustee with the consent of the holders of a
majority in principal amount of the outstanding subordinated debentures.
However, without the consent of the holder of each outstanding subordinated
debenture affected by the proposed modification, no modification may:
o extend the maturity date of the subordinated debentures; or
o reduce the principal amount or the rate or extend the time of
payment of interest; or
o reduce the percentage of principal amount of subordinated
debentures required to amend the indenture.
As long as any of the preferred securities remain outstanding, no
modification of the indenture may be made that requires the consent of the
holders of the subordinated debentures, no termination of the indenture may
occur, and no waiver of any event of default under the indenture may be
effective, without the prior consent of the holders of a majority of the
aggregate liquidation amount of the preferred securities.
Subordinated Debenture Events of Default
The indenture provides that any one or more of the following events
with respect to the subordinated debentures that has occurred and is continuing
constitutes an event of default under the indenture:
o our failure to pay any interest on the subordinated debentures for
30 days after the due date, except where we have properly
deferred the interest payment;
o our failure to pay any principal on the subordinated debentures
when due whether at maturity, upon redemption or otherwise;
o our failure to observe or perform in any material respect any
other covenants or agreements contained in the indenture for 90
days after written notice to us from the indenture trustee or the
holders of at least 25% in aggregate outstanding principal amount
of the subordinated debentures; or
o our bankruptcy, insolvency or similar reorganizations in
bankruptcy or dissolution of the trust.
The holders of a majority of the aggregate outstanding principal amount
of the subordinated debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the indenture
trustee. The indenture trustee, or the holders of at least 25% in aggregate
outstanding principal amount of the subordinated debentures, may declare the
principal due and payable immediately upon an event of default under the
indenture. The holders of a majority of the outstanding principal amount of the
subordinated debentures may rescind and annul the declaration and waive the
default if the default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration, has
been deposited with the indenture trustee as long as the holders of a majority
in liquidation amount of the trust securities have consented to the waiver of
default. The holders may not annul the declaration and waive a default if the
default is the non-payment of the principal of the subordinated debentures which
has become due solely by the acceleration.
So long as the property trustee is the holder of the debentures, if an
event of default under the indenture has occurred and is continuing, the
property trustee will have the right to declare the principal of and the
interest on the subordinated debentures, and any other amounts payable under the
indenture, to be immediately due and payable and to enforce its other rights as
a creditor with respect to the subordinated debentures.
We are required to file annually with the indenture trustee a
certificate as to whether or not we are in compliance with all of the conditions
and covenants applicable to us under the indenture.
Enforcement of Certain Rights by Holders of the Preferred Securities
If an event of default under the indenture has occurred and is
continuing and the event is attributable to the failure by us to pay interest on
or principal of the subordinated debentures on the date on which the payment is
due and payable, then a holder of preferred securities may institute a direct
action against us to compel us to make the payment. We may not amend the
indenture to remove the foregoing right to bring a direct action without the
prior written consent of all of the holders of the preferred securities. If the
right to bring a direct action is removed, the trust may become subject to the
reporting obligations under the Securities Exchange Act of 1934.
The holders of the preferred securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the subordinated debentures unless there has been an
event of default under the trust agreement. See "Description of the Preferred
Securities -- Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
We may not consolidate with or merge into any other entity or convey or
transfer our properties and assets substantially as an entirety to any entity,
and no entity may be consolidated with or merged into us or sell, convey,
transfer or otherwise dispose of its properties and assets substantially as an
entirety to us, unless:
o if we consolidate with or merge into another person or convey or
transfer our properties and assets substantially as an entirety
to any person, the successor person is organized under the laws
of the United States or any state or the District of Columbia,
and the successor person expressly assumes by supplemental
indenture our obligations on the subordinated debentures;
o immediately after the transaction, no event of default under the
indenture, and no event which, after notice or lapse of time, or
both, would become an event of default under the indenture, has
occurred and is continuing; and
o other conditions as prescribed in the indenture are met.
Under certain circumstances, if we consolidate or merge with another
entity, or transfer or sell substantially all of our assets to another entity,
such transaction may be considered to involve a replacement of the trust, and
the provisions of the trust agreement relating to a replacement of the trust
would apply to such transaction. See "Description of the Preferred Securities --
Mergers, Consolidations, Amalgamations or Replacements of the Trust."
Satisfaction and Discharge
The indenture will cease to be of further effect and we will be deemed
to have satisfied and discharged our obligations under the indenture when all
subordinated debentures not previously delivered to the indenture trustee for
cancellation:
o have become due and payable; or
o will become due and payable at their stated maturity within one
year or are to be called for redemption within one year, and we
deposit or cause to be deposited with the indenture trustee
funds, in trust, for the purpose and in an amount sufficient to
pay and discharge the entire indebtedness on the subordinated
debentures not previously delivered to the indenture trustee for
cancellation, for the principal and interest due to the date of
the deposit or to the stated maturity or redemption date, as the
case may be.
We may still be required to provide officers' certificates and opinions
of counsel and pay fees and expenses due after these events occur.
Governing Law
The indenture and the subordinated debentures will be governed by and
construed in accordance with Missouri law.
Information Concerning the Indenture Trustee
The indenture trustee is subject to all the duties and responsibilities
specified with respect to an indenture trustee under the Trust Indenture Act.
Subject to these provisions, the indenture trustee is under no obligation to
exercise any of the powers vested in it by the indenture at the request of any
holder of subordinated debentures, unless offered reasonable security or
indemnity by the holder against the costs, expenses and liabilities which might
be incurred. The indenture trustee is not required to expend or risk its own
funds or otherwise incur personal financial liability in the performance of its
duties if the indenture trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
Miscellaneous
We have agreed, pursuant to the indenture, for so long as preferred
securities remain outstanding:
o to maintain directly or indirectly 100% ownership of the common
securities of the trust, except that certain successors that are
permitted pursuant to the indenture may succeed to our ownership
of the common securities;
o not to voluntarily terminate, wind up or liquidate the trust
without prior approval of the Federal Reserve, if required;
o to use our reasonable efforts to cause the trust (a) to remain a
business trust (and to avoid involuntary termination, winding up
or liquidation), except in connection with a distribution of
subordinated debentures, the redemption of all of the trust
securities of the trust or mergers, consolidations or
amalgamations, each as permitted by the trust agreement; and (b)
to otherwise continue not to be treated as an association taxable
as a corporation or partnership for federal income tax purposes;
o to use our reasonable efforts to cause each holder of trust
securities to be treated as owning an individual beneficial
interest in the subordinated debentures;
o to use our best efforts to maintain the eligibility of the
preferred securities for inclusion, quotation or listing in the
Nasdaq National Market or on any national securities exchange or
other organization for as long as the preferred securities are
outstanding;
o not to issue or incur, directly or indirectly, additional trust
preferred securities that are senior in right of payment to
the preferred securities; and
o not to issue or incur, directly or indirectly, any additional
indebtedness in connection with the issuance of additional trust
preferred securities or similar securities that are equal in
right of payment to the subordinated debentures unless:
the pro forma sum of all outstanding debt issued by us or
any of our subsidiaries in connection with any trust
preferred securities issued by any of our financing
subsidiaries, including the subordinated debentures and the
maximum liquidation amount of the additional trust preferred
or similar securities that we or our financing subsidiaries
are then issuing, plus our total long-term debt, excluding
any long term debt which, by its terms, is expressly stated
to be junior and subordinate to the subordinated debentures
is less than 65% of
the sum of our equity excluding any amount of accumulated other
comprehensive income or loss plus any long-term debt which, by
its terms, is expressly stated to be junior and subordinate to
the subordinated debentures, in each case on a consolidated basis
at the time of issuance; and
o not to pay dividends on, purchase, redeem, retire or make any
distributions with respect to our common stock if doing so
would cause the quotient referred to in the immediately preceding
point to exceed 60%.
BOOK-ENTRY ISSUANCE
General
DTC will act as securities depositary for the preferred securities and
may act as securities depositary for all of the subordinated debentures in the
event of the distribution of the subordinated debentures to the holders of
preferred securities. Except as described below, the preferred securities will
be issued only as registered securities in the name of DTC's nominee, Cede & Co.
One or more global preferred securities will be issued for the preferred
securities and will be deposited with DTC.
DTC is a limited purpose trust company organized under New York banking
law, a "banking organization" within the meaning of the New York banking law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to Section 17A of the Securities Exchange Act of 1934. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its direct participants and by
the New York Stock Exchange, the American Stock Exchange and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to indirect participants, such as securities brokers and dealers,
banks and trust companies that clear through or maintain custodial relationships
with direct participants, either directly or indirectly. The rules applicable to
DTC and its participants are on file with the SEC.
Purchases of preferred securities within the DTC system must be made by
or through direct participants, which will receive a credit for the preferred
securities on DTC's records. The ownership interest of each actual purchaser of
each preferred security is in turn to be recorded on the direct and indirect
participants' records. Beneficial owners will not receive written confirmation
from DTC of their purchases, but beneficial owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the direct or indirect participants through
which the beneficial owners purchased preferred securities. Transfers of
ownership interests in the preferred securities are to be accomplished by
entries made on the books of participants acting on behalf of beneficial owners.
Beneficial owners will not receive certificates representing their ownership
interest in preferred securities, except if use of the book-entry-only system
for the preferred securities is discontinued.
DTC will have no knowledge of the actual beneficial owners of the
preferred securities; DTC's records reflect only the identity of the direct
participants to whose accounts the preferred securities are credited, which may
or may not be the beneficial owners. The participants will remain responsible
for keeping account of their holdings on behalf of their customers.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that we believe to be accurate, but we and
the trust assume no responsibility for the accuracy thereof. Neither we nor the
trust have any responsibility for the performance by DTC or its participants of
their respective obligations as described in this prospectus or under the rules
and procedures governing their respective operations.
Notices and Voting
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct and
indirect participants to beneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder
of the preferred securities. If less than all of the preferred securities are
being redeemed, the amount to be redeemed will be determined in accordance with
the trust agreement.
Although voting with respect to the preferred securities is limited to
the holders of record of the preferred securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to preferred securities. Under its usual procedures, DTC would mail an
omnibus proxy to the property trustee as soon as possible after the record date.
The omnibus proxy assigns Cede & Co.'s consenting or voting rights to those
direct participants to whose accounts the preferred securities are credited on
the record date.
Distribution of Funds
The property trustee will make distribution payments on the preferred
securities to DTC. DTC's practice is to credit direct participants' accounts on
the relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payments
on the payment date. Payments by participants to beneficial owners will be
governed by standing instructions and customary practices and will be the
responsibility of the participant and not of DTC, the property trustee, the
trust or us, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to DTC is the responsibility
of the property trustee, disbursement of the payments to direct participants is
the responsibility of DTC, and disbursements of the payments to the beneficial
owners is the responsibility of direct and indirect participants.
Successor Depositaries and Termination of Book-Entry System
DTC may discontinue providing its services with respect to any of the
preferred securities at any time by giving reasonable notice to the property
trustee or us. If no successor securities depositary is obtained, definitive
certificates representing the preferred securities are required to be printed
and delivered. We also have the option to discontinue use of the system of
book-entry transfers through DTC, or a successor depositary. After an event of
default under the indenture, the holders of a majority in liquidation amount of
preferred securities may determine to discontinue the system of book-entry
transfers through DTC. In these events, definitive certificates for the
preferred securities will be printed and delivered.
DESCRIPTION OF THE GUARANTEE
The preferred securities guarantee agreement will be executed and
delivered by us concurrently with the issuance of the preferred securities for
the benefit of the holders of the preferred securities. The guarantee agreement
will be qualified as an indenture under the Trust Indenture Act. State Street
Bank and Trust Company of Connecticut, National Association, the guarantee
trustee, will act as trustee for purposes of complying with the provisions of
the Trust Indenture Act, and will also hold the guarantee for the benefit of the
holders of the preferred securities. Prospective investors are urged to read the
form of the guarantee agreement, which has been filed as an exhibit to the
registration statement of which this prospectus forms a part.
General
We agree to pay in full on a subordinated basis, to the extent
described in the guarantee agreement, the guarantee payments (as defined below)
to the holders of the preferred securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the trust may have or assert
other than the defense of payment.
The following payments with respect to the preferred securities are
called the "guarantee payments" and, to the extent not paid or made by the trust
and to the extent that the trust has funds available for those distributions,
will be subject to the guarantee:
o any accumulated and unpaid distributions required to be paid on
the preferred securities;
o with respect to any preferred securities called for redemption,
the redemption price; and
o upon a voluntary or involuntary dissolution, winding up or
termination of the trust (other than in connection with the
distribution of subordinated debentures to the holders of
preferred securities in exchange for preferred securities), the
lesser of:
(a) the amount of the liquidation distribution; and
(b) the amount of assets of the trust remaining available for
distribution to holders of preferred securities in
liquidation of the trust.
We may satisfy our obligations to make a guarantee payment by making a
direct payment of the required amounts to the holders of the preferred
securities or by causing the trust to pay the amounts to the holders.
The guarantee agreement is a guarantee, on a subordinated basis, of the
guarantee payments, but the guarantee only applies to the extent the trust has
funds available for those distributions. If we do not make interest payments on
the subordinated debentures purchased by the trust, the trust will not have
funds available to make the distributions and will not pay distributions on the
preferred securities.
Status of the Guarantee
The guarantee constitutes our unsecured obligation that ranks
subordinate and junior in right of payment to all of our senior and subordinated
debt in the same manner as the subordinated debentures and senior to our capital
stock. We expect to incur additional indebtedness in the future, although we
have no specific plans in this regard presently, and neither the indenture nor
the trust agreement limits the amounts of the obligations that we may incur.
The guarantee constitutes a guarantee of payment and not of collection.
If we fail to make guarantee payments when required, holders of preferred
securities may institute a legal proceeding directly against us to enforce their
rights under the guarantee without first instituting a legal proceeding against
any other person or entity.
The guarantee will not be discharged except by payment of the guarantee
payments in full to the extent not paid by the trust or upon distribution of the
subordinated debentures to the holders of the preferred securities. Because we
are a bank holding company, our right to participate in any distribution of
assets of any subsidiary upon the subsidiary's liquidation or reorganization or
otherwise is subject to the prior claims of creditors of that subsidiary, except
to the extent we may be recognized as a creditor of that subsidiary. Our
obligations under the guarantee, therefore, will be effectively subordinated to
all existing and future liabilities of our subsidiaries, and claimants should
look only to our assets for payments under the guarantee.
Amendments and Assignment
Except with respect to any changes that do not materially adversely
affect the rights of holders of the preferred securities, in which case no vote
will be required, the guarantee may be amended only with the prior approval of
the holders of a majority of the aggregate liquidation amount of the outstanding
preferred securities. See "Description of the Preferred Securities -- Voting
Rights; Amendment of Trust Agreement."
Events of Default; Remedies
An event of default under the guarantee agreement will occur upon our
failure to make any required guarantee payments or to perform any other
obligations under the guarantee. If the guarantee trustee obtains actual
knowledge that an event of default has occurred and is continuing, the guarantee
trustee must enforce the guarantees for the benefit of the holders of the
preferred securities. The holders of a majority in aggregate liquidation amount
of the preferred securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the guarantee
trustee in respect of the guarantee and may direct the exercise of any power
conferred upon the guarantee trustee under the guarantee agreement.
Any holder of preferred securities may institute and prosecute a legal
proceeding directly against us to enforce its rights under the guarantee without
first instituting a legal proceeding against the trust, the guarantee trustee or
any other person or entity.
We are required to provide to the guarantee trustee annually a
certificate as to whether or not we are in compliance with all of the conditions
and covenants applicable to us under the guarantee agreement.
Termination of the Guarantee
The guarantee will terminate and be of no further force and effect
upon:
o full payment of the redemption price of the preferred securities;
o full payment of the amounts payable upon liquidation of the
trust; or
o distribution of the subordinated debentures to the holders of
the preferred securities.
If at any time any holder of the preferred securities must restore
payment of any sums paid under the preferred securities or the guarantee, the
guarantee will continue to be effective or will be reinstated with respect to
such amounts.
Information Concerning the Guarantee Trustee
The guarantee trustee, other than during the occurrence and continuance
of our default in performance of the guarantee, undertakes to perform only those
duties as are specifically set forth in the guarantee. When an event of default
has occurred and is continuing, the guarantee trustee must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. The guarantee trustee is under no obligation
to exercise any of the powers vested in it by the guarantee at the request of
any holder of any preferred securities unless it is offered reasonable security
and indemnity against the costs, expenses and liabilities that might be incurred
thereby; but this does not relieve the guarantee trustee of its obligations to
exercise the rights and powers under the guarantee in the event of a default.
Expense Agreement
We will, pursuant to the agreement as to expenses and liabilities
entered into by us and the trust under the trust agreement, irrevocably and
unconditionally guarantee to each person or entity to whom the trust becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the trust, other than obligations of the trust to pay to the holders of the
preferred securities or other similar interests in the trust of the amounts due
to the holders pursuant to the terms of the preferred securities or other
similar interests, as the case may be. Third party creditors of the trust may
proceed directly against us under the expense agreement, regardless of whether
they had notice of the expense agreement.
Governing Law
The guarantee will be governed by Missouri law.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SUBORDINATED DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
We irrevocably guarantee, as and to the extent described in this
prospectus, payments of distributions and other amounts due on the preferred
securities, to the extent the trust has funds available for the payment of these
amounts. We and the trust believe that, taken together, our obligations under
the subordinated debentures, the indenture, the trust agreement, the expense
agreement and the guarantee agreement provide, in the aggregate, a full,
irrevocable and unconditional guarantee, on a subordinated basis, of payment of
distributions and other amounts due on the preferred securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes a guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the obligations of the trust under the preferred
securities.
If and to the extent that we do not make payments on the subordinated
debentures, the trust will not pay distributions or other amounts due on the
preferred securities. The guarantee does not cover payment of distributions when
the trust does not have sufficient funds to pay the distributions. In this
event, the remedy of a holder of preferred securities is to institute a legal
proceeding directly against us for enforcement of payment of the distributions
to the holder. Our obligations under the guarantee are subordinated and junior
in right of payment to all of our other indebtedness.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
the subordinated debentures, these payments will be sufficient to cover
distributions and other payments due on the preferred securities, primarily
because:
o the aggregate principal amount of the subordinated debentures
will be equal to the sum of the aggregate stated liquidation
amount of the trust securities;
o the interest rate and interest and other payment dates on the
subordinated debentures will match the distribution rate and
distribution and other payment dates for the preferred
securities;
o we will pay for any and all costs, expenses and liabilities of
the trust, except the obligations of the trust to pay to holders
of the preferred securities the amounts due to the holders
pursuant to the terms of the preferred securities; and
o the trust will not engage in any activity that is not consistent
with the limited purposes of the trust.
Enforcement Rights of Holders of Preferred Securities
A holder of any preferred security may institute a legal proceeding
directly against us to enforce its rights under the guarantee without first
instituting a legal proceeding against the guarantee trustee, the trust or any
other person. A default or event of default under any of our senior or
subordinated debt would not constitute a default or event of default under the
trust agreement. In the event, however, of payment defaults under, or
acceleration of, our senior or subordinated debt, the subordination provisions
of the indenture provide that no payments may be made in respect of the
subordinated debentures until the obligations have been paid in full or any
payment default has been cured or waived. Failure to make required payments on
the subordinated debentures would constitute an event of default under the trust
agreement.
Limited Purpose of the Trust
The preferred securities evidence preferred undivided beneficial
interests in the assets of the trust. The trust exists for the exclusive
purposes of issuing the trust securities, investing the proceeds thereof in
subordinated debentures and engaging in only those other activities necessary,
advisable or incidental thereto. A principal difference between the rights of a
holder of a preferred security and the rights of a holder of a subordinated
debenture is that a holder of a subordinated debenture is entitled to receive
from us the principal amount of and interest accrued on subordinated debentures
held, while a holder of preferred securities is entitled to receive
distributions from the trust (or from us under the guarantee) if and to the
extent the trust has funds available for the payment of the distributions.
Rights Upon Termination
Upon any voluntary or involuntary termination, winding-up or
liquidation of the trust involving the liquidation of the subordinated
debentures, the holders of the preferred securities will be entitled to receive,
out of assets held by the trust, the liquidation distribution in cash. See
"Description of the Preferred Securities -- Liquidation Distribution Upon
Termination."
Upon our voluntary or involuntary liquidation or bankruptcy, the
property trustee, as holder of the subordinated debentures, would be a
subordinated creditor of ours. Therefore, the property trustee would be
subordinated in right of payment to all of our senior and subordinated debt, but
is entitled to receive payment in full of principal and interest before any of
our stockholders receive payments or distributions. Since we are the guarantor
under the guarantee and have agreed to pay for all costs, expenses and
liabilities of the trust other than the obligations of the trust to pay to
holders of the preferred securities the amounts due to the holders pursuant to
the terms of the preferred securities, the positions of a holder of the
preferred securities and a holder of the subordinated debentures relative to our
other creditors and to our stockholders in the event of liquidation or
bankruptcy are expected to be substantially the same.
FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion is the opinion of Jackson Walker L.L.P.,
Dallas, Texas, as First Banks' counsel ("Tax Counsel"), concerning the material
United States federal income tax consequences of the purchase, ownership and
disposition of preferred securities. The opinion of Tax Counsel is based on the
representations, facts and assumptions set forth in this prospectus, on certain
factual certifications of First Banks' management and the administrative
trustees of First Preferred Capital Trust III, and on certain assumptions and
qualifications set forth in its opinion.
The following discussion is general and may not apply to your
particular circumstances for any of the following, or other, reasons:
o This discussion is based on United States federal income tax
laws, including the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury regulations promulgated thereunder and
administrative and judicial interpretations of these authorities,
in effect as of the date of this prospectus. Changes to any of
these laws, possibly on a retroactive basis, after this date may
affect the tax consequences described below.
o This discussion addresses only preferred securities acquired at
original issuance at the original offering price and held as
capital assets, within the meaning of United States federal
income tax law. It does not discuss all of the tax consequences
that may be relevant to purchasers of preferred securities who
are subject to special rules, such as banks, savings institutions
and certain other financial institutions, real estate investment
trusts, regulated investment companies, insurance companies,
brokers and dealers in securities or currencies, certain
securities traders, tax-exempt investors, individual retirement
accounts, certain tax-deferred accounts and foreign investors.
This discussion also does not address tax consequences that may
be relevant to a purchaser in light of the purchaser's
particular circumstances, such as a purchaser holding a trust
preferred security as a position in a straddle, hedge,
conversion or other integrated investment.
o This discussion does not address:
(a) The income tax consequences to stockholders in, or
partners or beneficiaries of, a purchaser of preferred
securities;
(b) the United States alternative minimum tax consequences
or other collateral tax consequences of purchasing,
owning and disposing of preferred securities; or
(c) any state, local or foreign tax consequences of
purchasing, owning and disposing of preferred securities.
The authorities on which this discussion is based are subject to
various interpretations, and the opinions of Tax Counsel are not binding on the
Internal Revenue Service (the "IRS") or the courts, either of which could take a
contrary position. Moreover, no rulings have been or will be sought from the IRS
with respect to the transactions described herein. Accordingly, no assurance can
be given to prospective investors that the IRS will not challenge the opinions
expressed herein or that a court would not sustain such a challenge.
We advise you to consult your own tax advisors regarding the tax consequences of
purchasing, owning and disposing of the preferred securities based on your
particular circumstances and the relevant taxing jurisdiction.
United States Holders
In General. For purposes of the following discussion, a United States
Holder (a "Holder") means:
o a citizen or individual resident of the United States;
o a corporation or partnership created or organized in or under
the laws of the United States or any political subdivision;
o an estate the income of which is includible in its gross income
for United States federal income tax purposes without regard
to its source; or
o a trust if a court within the United States is able to exercise
primary supervision over its administration and at least one
United States person has the authority to control all substantial
decisions of the trust.
Characterization of First Preferred Capital Trust III. Tax Counsel is
of the opinion that First Preferred Capital Trust III will be characterized for
United States federal income tax purposes as a grantor trust. Accordingly, for
United States federal income tax purposes, a Holder of a trust preferred
security will be considered the beneficial owner of an undivided interest in the
subordinated debentures owned by First Preferred Capital Trust III, and will be
required to include on its United States federal income tax return all income or
gain recognized for United States federal income tax purposes with respect to
its share of the subordinated debentures in accordance with its method of
accounting. As discussed below, if the subordinated debentures were determined
to be subject to the original issue discount ("OID") rules, a Holder would
instead be required to include in gross income any OID accrued on a daily basis
with respect to its allocable share of the subordinated debentures whether or
not cash was actually distributed to the Holder.
Characterization of the Subordinated Debentures. Tax Counsel is of the
opinion that the subordinated debentures are debt of First Banks for United
States federal income tax purposes. By acceptance of a beneficial interest in a
trust preferred security, a Holder agrees to treat the subordinated debentures
as First Banks' debt and the preferred securities as evidence of a beneficial
ownership interest in the subordinated debentures. The remainder of this
discussion assumes that the subordinated debentures will be classified as debt
for United States federal income tax purposes.
Interest Income and Original Issue Discount. Under the terms of the
subordinated debentures, we have the ability to defer payments of interest from
time to time by extending the interest payment period for a period not exceeding
20 consecutive quarterly periods, but not beyond the stated maturity of the
subordinated debentures. Treasury regulations provide that debt instruments like
the subordinated debentures, assuming they will be issued at face value, will
not be considered issued with OID, even if their issuer can defer payments of
interest, if the likelihood of any deferral is "remote."
Based on our factual representations to Tax Counsel, Tax Counsel is of
the opinion, and this discussion assumes, that, as of the date of this
prospectus, the likelihood of us deferring payments of interest is "remote"
within the meaning of the applicable Treasury regulations. This conclusion is
based in part on the fact that exercising that option would (1) prevent us from
declaring dividends on our common stock and from making any payments with
respect to debt securities that rank equally with or junior to the subordinated
debentures, and (2) adversely effect our subsequent cost of and ability to raise
capital. Therefore, Tax Counsel is of the opinion, and we believe and will take
the position, that the subordinated debentures will not be treated as issued
with OID by reason of the deferral option alone. Rather, Holders will be taxed
on stated interest on the subordinated debentures when it is paid or accrued in
accordance with each Holder's method of accounting for United States federal
income tax purposes. This issue has not been interpreted by any court decisions
or addressed in any published rulings or interpretations issued by the IRS, and
it is possible that the IRS could take a position contrary to the conclusions
herein.
If we exercise our option to defer payments of interest, the
subordinated debentures would be treated as redeemed and reissued for OID
purposes. The sum of the remaining interest payments, and any de minimis OID, on
the subordinated debentures would thereafter be treated as OID. The OID would
accrue, and be includible in a Holder's taxable income, on a daily economic
accrual basis, regardless of a Holder's method of accounting for income tax
purposes, over the remaining term of the subordinated debentures, including any
period of interest deferral, without regard to the timing of payments under the
subordinated debentures. The amount of OID that would accrue in any period would
approximately equal the amount of interest that accrued on the subordinated
debentures in that period at the stated interest rate. Consequently, during any
period of interest deferral, a Holder will include OID in gross income in
advance of the receipt of cash, and if a Holder disposes of a trust preferred
security prior to the record date for payment of distributions on the
subordinated debentures following that deferral period, a Holder will be subject
to income tax on OID accrued through the date of disposition and not previously
included in income, but will not receive cash from First Preferred Capital Trust
III with respect to the OID.
The Treasury regulations referred to above have not been interpreted by
any court decisions or addressed in any ruling or other pronouncements of the
IRS, and it is possible that the IRS could take a position contrary to the
conclusions herein. If the possibility that we would exercise our option to
defer payments of interest is determined not to be remote, the subordinated
debentures would be treated as initially issued with OID in an amount equal to
the aggregate stated interest, plus any de minimis OID, over the term of the
subordinated debentures. A Holder would include that OID in its taxable income,
over the term of the subordinated debentures, on a daily economic accrual basis.
Characterization of Income. Because for United States federal income
tax purposes the income underlying the preferred securities will, in the opinion
of Tax Counsel, be characterized as interest, and not as dividends, a corporate
Holder of preferred securities will not be entitled to a dividends-received
deduction for any income it recognizes with respect to the preferred securities.
Receipt of Subordinated Debentures or Cash Upon Liquidation of First
Preferred Capital Trust III. Under the circumstances described above under
"Description of the Preferred Securities," First Preferred Capital Trust III may
distribute a pro-rata share of the subordinated debentures to Holders in
exchange for their preferred securities and in liquidation of First Preferred
Capital Trust III. Except as discussed below, that type of a distribution would
not be a taxable event for United States federal income tax purposes, and
consequently a Holder would have an aggregate adjusted basis in the subordinated
debentures received equal to the Holder's aggregate adjusted basis in the
Holder's preferred securities. A Holder's adjusted tax basis in the preferred
securities generally will be its initial purchase price, increased by OID, if
any, previously includible in a Holder's gross income to the date of disposition
and decreased by payments, if any, received on the preferred securities in
respect of OID to the date of disposition. A Holder would have a holding period
in the subordinated debentures received in the liquidation that includes the
period during which the Holder held the preferred securities. After a
distribution of subordinated debentures to Holders, a Holder would recognize
interest income in respect of the subordinated debentures received in the manner
described above under "-- Interest Income and Original Issue Discount."
Under circumstances described above under "Description of the Preferred
Securities -- Redemption," First Banks may redeem subordinated debentures for
cash, the proceeds of which would be distributed to Holders in redemption of
their preferred securities. The redemption, to the extent that it constitutes a
complete redemption, would be taxable for United States federal income tax
purposes, and a Holder would recognize gain or loss as if it had sold the
preferred securities for cash. Such gain or loss would amount to the difference
between the cash received upon redemption and the Holder's adjusted tax basis in
the preferred securities. See "-- Sales of Preferred Securities" below.
Sales of Preferred Securities. Upon the sale or other taxable
disposition, including a redemption for cash, of the preferred securities, a
Holder will recognize gain or loss in an amount equal to the difference between
its adjusted tax basis in the preferred securities, as defined above, and the
amount realized in the sale, except to the extent of any amount received in
respect of accrued but unpaid interest or OID not previously included in income.
The gain or loss generally will be a capital gain or loss, and will be a
long-term capital gain or loss if the Holder has held the preferred securities
for more than one year prior to the date of disposition.
The preferred securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest, or OID, with respect to the
underlying subordinated debentures. A Holder who disposes of its preferred
securities between record dates for payments of distributions thereon will be
required to include in its taxable income for United States federal income tax
purposes (1) any portion of the amount realized that is attributable to the
accrued but unpaid interest to the extent not previously included in income or
(2) any amount of OID, in either case, that has accrued on its pro rata share of
the underlying subordinated debentures during the taxable year of sale through
the date of disposition. Any income inclusion will increase a Holder's adjusted
tax basis in the preferred securities of which it disposes. To the extent that
the amount realized in the sale is less than a Holder's adjusted tax basis, a
Holder will recognize a capital loss. Subject to certain limited exceptions
applicable to non-corporate taxpayers, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
Effect of Possible Changes in Tax Laws
In a case filed in the U.S. Tax Court, Enron Corp. v. Commissioner, Tax
Court Docket No. 6149-98, the IRS challenged the deductibility for federal
income tax purposes of interest paid on securities which are similar, but not
identical, to the subordinated debentures. The parties filed a stipulation of
settled issues, a portion of which stipulated that there shall be no adjustment
for the interest deducted by the taxpayer with respect to the securities. It is
nevertheless possible that the IRS could still challenge the deductibility of
interest paid on the subordinated debentures, which, if such challenge were
litigated resulting in the IRS's position being sustained, would trigger a Tax
Event and possibly a redemption of the subordinated debentures.
In addition, Congress and previous administrations have considered
certain proposed tax law changes in the past which, if enacted, could have
adversely affected the ability of First Banks to deduct interest paid on the
subordinated debentures. These proposals were not enacted. Nevertheless, there
can be no assurance that legislation enacted after the date of this prospectus
will not adversely affect the ability of First Banks to deduct the interest
payable on the subordinated debentures or cause First Preferred Capital Trust
III to become subject to tax. Such legislation, as well as changes in law of
similar import that result from future administrative pronouncements or judicial
decisions, may cause a Tax Event. The occurrence of a Tax Event would give us
the right to redeem the subordinated debentures. See "Description of the
Subordinated Debentures -- Redemption" and "Description of Preferred Securities
-- Redemption or Exchange."
See " -- Sales of Preferred Securities" above for the United States
federal income tax consequences of a redemption to a Holder.
Non-United States Holders
The following discussion applies to you if you are not a "Holder" as
described above.
Payments of interest, including OID, to a non-United States Holder on a
trust preferred security will generally not be subject to withholding of income
tax, provided that:
o the non-United States Holder did not, directly or indirectly,
actually or constructively, own 10% or more of the total combined
voting power of all classes of our stock entitled to vote;
o the non-United States Holder is not a controlled foreign
corporation that is related to us through stock ownership;
o the interest does not constitute contingent interest as described
in Section 871 (h) (4) of the Code;
o the non-United States Holder is not a bank receiving interest
described in Section 881 (c) (3) (A) of the Code; and
o either (1) the non-United States Holder certifies to First
Preferred Capital Trust III or its agent, under penalties of
perjury, that the non-U. S. Holder is not a United States person
and provides its name and permanent residential address, (2) a
securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution"), and
holds the trust preferred security in that capacity, certifies to
First Preferred Capital Trust III or its agent, under penalties
of perjury and in accordance with applicable Treasury
regulations, that it requires and has received the required
statement from the non-United States Holder or another Financial
Institution between it and the Holder in the chain of ownership,
and furnishes First Preferred Capital Trust III or its agent with
a copy, (3) a foreign financial institution or foreign clearing
organization (other than a U.S. branch or U.S. office of the
institution or organization), a foreign branch or office of a
U.S. financial institution or a U.S. clearing organization, or
any other person the IRS accepts who enters into a withholding
agreement with the IRS (each a "Foreign Intermediary") certifies
to First Preferred Capital Trust III or its agent, under
penalties of perjury and in accordance with applicable Treasury
regulations, that (i) it is a qualified intermediary that is not
acting for its own account, (ii) it has provided, or will
provide, a withholding statement, as required, and (iii) if
applicable, it has assumed primary withholding responsibility
and/or primary Form 1099 reporting and backup withholding
responsibility, or (4) a Foreign Intermediary that is not a
qualified intermediary certifies to First Preferred Capital
Trust III or its agent, under penalties of perjury and in
accordance with applicable Treasury regulations, that (i) it is
not a qualified intermediary and is not acting for its own
account, (ii) it has provided, or will provide, a withholding
statement, as required, and (iii) it has provided copies of the
required statement from the non-United States Holder or another
Financial Institution between it and the Holder in the chain of
ownership.
Special rules apply to U.S. branches of foreign banks and insurance
companies, foreign partnerships and certain foreign trusts.
As discussed above, it is possible that changes in the law affecting
the income tax consequences of the subordinated debentures could adversely
affect our ability to deduct interest payable on the subordinated debentures.
These changes could also cause the subordinated debentures to be classified as
equity rather than debt for United States federal income tax purposes. This
might cause the income derived from the subordinated debentures to be
characterized as dividends, generally subject to a 30% withholding tax (or lower
rate under an applicable income tax treaty) when paid to you if you are not a
United States Holder, rather than as interest which, as discussed above,
generally is exempt from withholding tax in the hands of a foreign corporation
or nonresident alien who is not a United States Holder.
If a non-United States Holder holds the preferred securities in
connection with the active conduct of a United States trade or business, the
non-United States Holder will be subject to income tax on all income and gains
recognized with respect to its proportionate share of the subordinated
debentures.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to payments
made on, or, if applicable, accrued on, and proceeds from the sale of, the
preferred securities held by a noncorporate Holder within the United States. In
addition, payments made on, and payments of the proceeds from the sale of, the
preferred securities to or through the United States office of a broker are
subject to information reporting unless the Holder certifies as to its
non-United States Holder status or otherwise establish as an exemption from
information reporting and backup withholding. Taxable income on the preferred
securities for a calendar year is required to be reported to United States
Holders on the appropriate forms by the following January 31st.
Payments made on, and proceeds from the sale of, the preferred
securities may be subject to a "backup" withholding tax of (currently 30.5%)
unless a Holder complies with various identification or exemption requirements.
Any amounts so withheld will be allowed as a credit against a Holder's income
tax liability, or refunded, provided the required information is timely provided
to the IRS.
In addition, a non-United States Holder will generally not be subject
to withholding of income tax on any gain realized upon the sale or other
disposition of a trust preferred security.
The preceding discussion is only a summary and does not address the
consequences to particular persons of the purchase, ownership and disposition of
the preferred securities. Potential purchasers of the preferred securities are
urged to contact their own tax advisors to determine their particular tax
consequences.
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement
Income Security Act of 1974, or Section 4975 of the Internal Revenue Code,
generally may purchase preferred securities, subject to the investing
fiduciary's determination that the investment in preferred securities satisfies
ERISA's fiduciary standards and other requirements applicable to investments by
the plan.
In any case, we or any of our affiliates may be considered a "party in
interest" (within the meaning of ERISA) or a "disqualified person" (within the
meaning of Section 4975 of the Internal Revenue Code) with respect to certain
plans. These plans generally include plans maintained or sponsored by, or
contributed to by, any such persons with respect to which we or any of our
affiliates are a fiduciary or plans for which we or any of our affiliates
provide services. The acquisition and ownership of preferred securities by a
plan (or by an individual retirement arrangement or other plans described in
Section 4975(e)(1) of the Internal Revenue Code) with respect to which we or any
of our affiliates are considered a party in interest or a disqualified person
may constitute or result in a prohibited transaction under ERISA or Section 4975
of the Internal Revenue Code, unless the preferred securities are acquired
pursuant to and in accordance with an applicable exemption.
As a result, plans with respect to which we or any of our affiliates or
any affiliate of the plan are a party in interest or a disqualified person
should not acquire preferred securities unless the preferred securities are
acquired pursuant to and in accordance with an applicable exemption. Any other
plans or other entities whose assets include plan assets subject to ERISA or
Section 4975 of the Internal Revenue Code proposing to acquire preferred
securities should consult with their own counsel.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among
First Banks, the trust and the underwriters named below, for whom Stifel,
Nicolaus & Company, Incorporated, Dain Rauscher Incorporated and Fahnestock &
Co. Inc. are acting as representatives (the "Representatives"), the underwriters
have severally agreed to purchase from the trust, and the trust has agreed to
sell to them, an aggregate of 1,600,000 preferred securities in the amounts set
forth below opposite their respective names.
Number of
Preferred
Underwriters Securities
------------ ----------
Stifel, Nicolaus & Company, Incorporated............
Dain Rauscher Incorporated..........................
Fahnestock & Co. Inc................................
---------
Total........................................... 1,600,000
=========
Under the terms and conditions of the underwriting agreement, the
underwriters ar committed to accept and pay for all of the preferred securities,
if any are taken. If an underwriter defaults, the underwriting agreement
provides that the purchase commitments of the non-defaulting underwriters may
be increased or, in certain cases, the underwriting agreement may be terminated.
In the underwriting agreement, the obligations of the underwriters are subject
to approval of certain legal matters by their counsel, including the
authorization and the validity of the preferred securities, and to other
conditions contained in the underwriting agreement, such as receipt by the
underwriters of officers' certificates and legal opinions.
The underwriters propose to offer the preferred securities directly to
the public at the public offering price set forth on the cover page of this
prospectus, and to certain securities dealers (who may include the underwriters)
at this price, less a concession not in excess of $____ per preferred security.
The underwriters may allow, and the selected dealers may reallow, a concession
not in excess of $____ per preferred security to certain brokers and dealers.
After the preferred securities are released for sale to the public, the offering
price and other selling terms may from time to time be changed by the
underwriters.
The trust has granted to the underwriters an option, exercisable within
30 days after the date of this prospectus, to purchase up to 240,000 additional
preferred securities at the same price per preferred security to be paid by the
underwriters for the other preferred securities being offered. If the
underwriters purchase any of the additional preferred securities under this
option, each underwriter will be committed to purchase the additional shares in
approximately the same proportion allocated to them in the table above. The
underwriters may exercise the option only for the purpose of covering
over-allotments, if any, made in connection with the distribution of the
preferred securities being offered.
If the underwriters exercise their option to purchase additional
preferred securities, the trust will issue and sell to us additional common
securities and we will issue and sell subordinated debentures to the trust in an
aggregate principal amount equal to the total aggregate liquidation amount of
the additional preferred securities being purchased under the option and the
additional common securities sold to First Banks.
The table below shows the price and proceeds on a per preferred
security and aggregate basis. The proceeds to be received by the trust as shown
in the table below do not reflect estimated expenses of $275,000 payable by
First Banks.
Per Preferred
Security Total
------------- -----------
Public Offering Price.......................... $25.00 $40,000,000
Proceeds to First Preferred Capital Trust III.. $25.00 $40,000,000
First Banks has agreed to pay the underwriters $ per preferred
security, or a total of $ as compensation for arranging the investment in the
subordinated debentures. Should the underwriters exercise the over-allotment
option, an aggregate of $ will be paid to the underwriters for arranging the
investment in the subordinated debentures.
The offering of the preferred securities is made for delivery when, as
and if accepted by the underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offering without notice. The underwriters
reserve the right to reject any order for the purchase of the preferred
securities.
First Banks and the trust have agreed to indemnify the several
underwriters against several liabilities, including liabilities under the
Securities Act of 1933.
We have applied to have the preferred securities designated for
inclusion in the Nasdaq National Market. The Representatives have advised the
trust that they presently intend to make a market in the preferred securities
after the commencement of trading on Nasdaq, but no assurances can be made as to
the liquidity of the preferred securities or that an active and liquid market
will develop or, if developed, that the market will continue. The offering price
and distribution rate have been determined by negotiations among representatives
of First Banks and the underwriters, and the offering price of the preferred
securities may not be indicative of the market price following the offering. The
Representatives will have no obligation to make a market in the preferred
securities, however, and may cease market-making activities, if commenced, at
any time.
In connection with the offering, the underwriters may engage in
transactions that are intended to stabilize, maintain or otherwise affect the
price of the preferred securities during and after the offering, such as the
following:
o the underwriters may over-allot or otherwise create a short
position in the preferred securities for their own account by
selling more preferred securities than have been sold to them;
o the underwriters may elect to cover any short position by
purchasing preferred securities in the open market or by
exercising the over-allotment option;
o the underwriters may stabilize or maintain the price of the
preferred securities by bidding;
o the underwriters may engage in passive market making
transactions; and
o the underwriters may impose penalty bids, under which selling
concessions allowed to syndicate members or other broker-dealers
participating in this offering are reclaimed if preferred
securities previously distributed in the offering are repurchased
in connection with stabilization transactions or otherwise.
The effect of these transactions may be to stabilize or maintain the
market price at a level above that which might otherwise prevail in the open
market. The imposition of a penalty bid may also affect the price of the
preferred securities to the extent that it discourages resales. No
representation is made as to the magnitude or effect of any such stabilization
or other transactions. Such transactions may be effected in the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.
Because the National Association of Securities Dealers, Inc. may view
the preferred securities as interests in a direct participation program, the
offer and sale of the preferred securities is being made in compliance with the
provisions of Rule 2810 under the NASD Conduct Rules.
Some of the underwriters have previously performed other investment
banking services for First Banks and its subsidiaries. Additionally, Stifel
Nicolaus & Company is providing financial advisory services to the board of
directors of Union Financial Group, Ltd., in connection with First Banks'
acquisition of Union Financial Group, Ltd. and will receive customary fees for
its services.
LEGAL MATTERS
Legal matters, including matters relating to federal income tax
considerations, for First Banks and the trust will be passed upon by Jackson
Walker L.L.P., Dallas, Texas, counsel to First Banks and the trust. Certain
legal matters will be passed upon for the underwriters by Bryan Cave LLP, St.
Louis, Missouri. Jackson Walker L.L.P. and Bryan Cave LLP will rely on the
opinion of Richards, Layton & Finger, Wilmington, Delaware, as to matters of
Delaware law.
WHERE YOU CAN FIND INFORMATION
This prospectus is a part of a Registration Statement on Form S-2 filed
by us and the trust with the SEC under the Securities Act, with respect to the
preferred securities, the subordinated debentures and the guarantee. This
prospectus does not contain all the information set forth in the registration
statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. For further information with respect to us and the
securities offered by this prospectus, reference is made to the registration
statement, including the exhibits to the registration statement and documents
incorporated by reference. Statements contained in this prospectus concerning
the provisions of such documents are necessarily summaries of such documents and
each such statement is qualified in its entirety by reference to the copy of the
applicable document filed with the SEC.
We file periodic reports and other information with the SEC. Our
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also inspect and copy these materials at the public
reference facilities of the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information.
The trust is not currently subject to the information reporting
requirements of the Securities Exchange Act of 1934 and although the trust will
become subject to such requirements upon the effectiveness of the registration
statement, it is not expected that the trust will be required to file separate
reports under the Securities Exchange Act.
Each holder of the trust securities will receive a copy of our annual
report at the same time as we furnish the annual report to the holders of our
common stock.
EXPERTS
The consolidated financial statements of First Banks, Inc. as of
December 31, 2000 and 1999, and for each of the years in the three-year period
ended December 31, 2000, have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
DOCUMENTS INCORPORATED BY REFERENCE
We "incorporate by reference" into this prospectus the information in
documents we file with the SEC, which means that we can disclose important
information to you through those documents. The information incorporated by
reference is an important part of this prospectus. Some information contained in
this prospectus updates the information incorporated by reference and some
information that we file subsequently with the SEC will automatically update
this prospectus. We incorporate by reference the documents listed below:
(a) our Annual Report on Form 10-K for the year ended December 31,
2000, filed with the SEC on March 28, 2001;
(b) our Quarterly Report on Form 10-Q for the quarter ended March 31,
2001, filed with the SEC on May 14, 2001;
(c) our Current Report on Form 8-K filed with the SEC on July 27,
2001; and
(d) our Quarterly Report on Form 10-Q for the quarter ended June 30,
2001, filed with the SEC on August 15, 2001.
We also incorporate by reference any filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the initial filing of the registration statement that contains this prospectus
and before the time that all of the securities offered in this prospectus are
sold.
You may request, and we will provide, a copy of these filings at no
cost by contacting Allen H. Blake, our President, Chief Operating Officer, Chief
Financial Officer and Secretary, at the following address and phone number:
First Banks, Inc.
600 James S. McDonnell Blvd.
Hazelwood, Missouri 63042
(314) 592-5000
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
First Banks, Inc. and Subsidiaries Consolidated Financial Statements
Independent Auditors' Report................................................................ F-1
Consolidated Balance Sheets as of June 30, 2001 (unaudited)
and December 31, 2000 and 1999........................................................... F-2
Consolidated Statements of Income for the six months ended
June 30, 2001 and 2000 (unaudited) and for the years ended
December 31, 2000, 1999 and 1998......................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity
and Comprehensive Income for the six months ended
June 30, 2001 (unaudited) and for the years ended
December 31, 2000, 1999 and 1998......................................................... F-6
Consolidated Statements of Cash Flows for the six months
ended June 30, 2001 and 2000 (unaudited) and for the
years ended December 31, 2000, 1999 and 1998............................................. F-8
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
First Banks, Inc.:
We have audited the accompanying consolidated balance sheets of First Banks,
Inc. and subsidiaries (the Company) as of December 31, 2000 and 1999, and the
related consolidated statements of income, changes in stockholders' equity and
comprehensive income and cash flows for each of the years in the three-year
period ended December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the financial position of First Banks, Inc.
and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.
/S/KPMG LLP
-----------
CONSOLIDATED BALANCE SHEETS
(dollars expressed in thousands, except per share data)
June 30, December 31,
-----------------
2001 2000 1999
---- ---- ----
(unaudited)
ASSETS
------
Cash and cash equivalents:
Cash and due from banks.............................................. $ 130,964 167,474 126,720
Interest-bearing deposits with other financial institutions
with maturities of three months or less............................ 3,196 4,005 1,674
Federal funds sold................................................... 133,100 26,800 42,500
---------- --------- ---------
Total cash and cash equivalents................................. 267,260 198,279 170,894
---------- --------- ---------
Investment securities:
Available for sale, at fair value.................................... 362,515 539,386 430,093
Held to maturity, at amortized cost (fair value of $23,165
at June 30, 2001, $24,507 and $21,476 at December 31, 2000
and 1999, respectively).......................................... 22,495 24,148 21,554
---------- --------- ---------
Total investment securities..................................... 385,010 563,534 451,647
---------- --------- ---------
Loans:
Commercial, financial and agricultural............................... 1,559,990 1,496,284 1,086,919
Real estate construction and development............................. 813,574 809,682 795,081
Real estate mortgage................................................. 2,187,572 2,202,857 1,851,569
Consumer and installment............................................. 119,160 181,602 233,374
Loans held for sale.................................................. 189,788 69,105 37,412
---------- --------- ---------
Total loans..................................................... 4,870,084 4,759,530 4,004,355
Unearned discount.................................................... (8,141) (7,265) (8,031)
Allowance for loan losses............................................ (77,141) (81,592) (68,611)
---------- --------- ---------
Net loans....................................................... 4,784,802 4,670,673 3,927,713
---------- --------- ---------
Derivative instruments.................................................... 27,417 3,759 39
Bank premises and equipment, net of accumulated
depreciation and amortization........................................ 125,820 114,771 75,647
Intangibles associated with the purchase of subsidiaries.................. 83,574 85,021 46,085
Mortgage servicing rights, net of amortization............................ 8,629 7,048 8,665
Accrued interest receivable............................................... 42,277 45,226 33,491
Deferred income taxes..................................................... 71,878 75,699 51,972
Other assets.............................................................. 107,536 112,681 101,594
---------- --------- ---------
Total assets.................................................... $5,904,203 5,876,691 4,867,747
========== ========= =========
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(dollars expressed in thousands, except per share data)
June 30, December 31,
------------------
2001 2000 1999
---- ---- ----
(unaudited)
LIABILITIES
-----------
Deposits:
Demand:
Non-interest-bearing............................................... $ 734,398 808,251 606,064
Interest-bearing................................................... 490,019 448,146 415,113
Savings.............................................................. 1,491,761 1,447,898 1,198,314
Time:
Time deposits of $100 or more...................................... 520,107 499,956 339,214
Other time deposits................................................ 1,757,834 1,808,164 1,693,109
---------- --------- ---------
Total deposits.................................................. 4,994,119 5,012,415 4,251,814
Short-term borrowings..................................................... 201,177 140,569 73,554
Note payable.............................................................. 34,500 83,000 64,000
Accrued interest payable.................................................. 27,170 23,227 11,607
Deferred income taxes..................................................... 26,618 12,774 6,582
Accrued expenses and other liabilities.................................... 26,316 54,944 25,616
Minority interest in subsidiary........................................... 15,018 14,067 12,058
---------- --------- ---------
Total liabilities............................................... 5,324,918 5,340,996 4,445,231
---------- --------- ---------
Guaranteed preferred beneficial interests in:
First Banks, Inc. subordinated debentures............................ 138,570 138,569 83,394
First Banks America, Inc. subordinated debentures.................... 44,311 44,280 44,217
---------- --------- ---------
Total guaranteed preferred beneficial interests in
subordinated debentures..................................... 182,881 182,849 127,611
---------- --------- ---------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock:
$1.00 par value, 5,000,000 shares authorized, no shares issued
and outstanding at June 30, 2001, December 31, 2000 and 1999....... -- -- --
Class A convertible, adjustable rate, $20.00 par value, 750,000
shares authorized, 641,082 shares issued and outstanding........... 12,822 12,822 12,822
Class B adjustable rate, $1.50 par value, 200,000 shares authorized,
160,505 shares issued and outstanding.............................. 241 241 241
Common stock, $250.00 par value, 25,000 shares authorized,
23,661 shares issued and outstanding................................. 5,915 5,915 5,915
Capital surplus........................................................... 2,610 2,267 3,318
Retained earnings......................................................... 345,503 325,580 270,259
Accumulated other comprehensive income.................................... 29,313 6,021 2,350
---------- --------- ---------
Total stockholders' equity...................................... 396,404 352,846 294,905
---------- --------- ---------
Total liabilities and stockholders' equity...................... $5,904,203 5,876,691 4,867,747
========== ========= =========
CONSOLIDATED STATEMENTS OF INCOME
(dollars expressed in thousands, except per share data)
Six Months Ended June 30, Years Ended December 31,
------------------------- ------------------------
2001 2000 2000 1999 1998
---- ---- ---- ---- ----
(unaudited) (unaudited)
Interest income:
Interest and fees on loans........................... $ 212,917 185,826 390,332 323,207 284,177
Investment securities:
Taxable............................................ 14,355 13,537 27,331 26,206 39,898
Nontaxable......................................... 466 482 961 937 985
Federal funds sold and other......................... 1,655 2,033 4,202 2,732 2,800
--------- ------- ------- ------- -------
Total interest income........................... 229,393 201,878 422,826 353,082 327,860
--------- ------- ------- ------- -------
Interest expense:
Deposits:
Interest-bearing demand............................ 3,480 2,885 5,909 5,098 5,135
Savings............................................ 27,525 24,070 51,656 44,10 142,591
Time deposits of $100 or more...................... 15,329 5,855 20,654 11,854 12,024
Other time deposits................................ 53,143 50,222 99,603 84,639 92,305
Interest rate exchange agreements, net............... -- -- -- 5,397 3,810
Short-term borrowings................................ 3,662 2,515 5,881 3,983 2,903
Note payable......................................... 1,773 2,511 3,976 3,629 3,411
--------- ------- ------- ------- -------
Total interest expense.......................... 104,912 88,058 187,679 158,701 162,179
--------- ------- ------- ------- -------
Net interest income............................. 124,481 113,820 235,147 194,381 165,681
Provision for loan losses................................. 7,110 7,202 14,127 13,073 9,000
--------- ------- ------- ------- -------
Net interest income after provision
for loan losses.............................. 117,371 106,618 221,020 181,308 156,681
--------- ------- ------- ------- -------
Noninterest income:
Service charges on deposit accounts and
customer service fees.............................. 10,537 9,464 19,794 17,676 14,876
Gain on mortgage loans sold and held for sale........ 7,332 3,268 7,806 6,909 5,563
Credit card fees..................................... 221 91 236 409 2,999
Gain on sale of credit card portfolio,
net of expenses.................................... 2,275 -- -- -- --
Loan servicing fees, net............................. 153 231 486 657 1,017
Net gain on sales of available-for-sale securities... (113) 379 168 791 1,466
Net (loss) gain on trading securities................ -- - -- (303) 607
Gain on sales of branches, net of expenses........... -- 1,355 1,355 4,406 --
Gain on derivative instruments, net.................. 5,486 -- -- -- --
Other................................................ 10,007 6,247 12,933 11,105 9,969
--------- ------- ------- ------- -------
Total noninterest income........................ 35,898 21,035 42,778 41,650 36,497
--------- ------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits....................... 45,797 35,237 73,391 61,524 55,907
Occupancy, net of rental income...................... 8,216 6,655 14,675 12,518 11,037
Furniture and equipment.............................. 5,617 5,673 11,702 8,520 8,122
Postage, printing and supplies....................... 2,258 2,183 4,431 4,244 5,230
Data processing fees................................. 12,951 10,663 22,359 18,567 13,917
Legal, examination and professional fees............. 3,424 2,003 4,523 9,109 5,326
Amortization of intangibles associated with the
purchase of subsidiaries........................... 3,712 2,373 5,297 4,401 3,184
Communications....................................... 1,513 1,233 2,625 2,488 2,874
Advertising and business development................. 3,182 1,661 4,331 3,734 4,668
Guaranteed preferred debentures...................... 8,978 6,012 13,173 12,050 9,842
Other................................................ 20,368 6,017 14,656 13,652 18,597
--------- ------- ------- ------- -------
Total noninterest expense....................... 116,016 79,710 171,163 150,807 138,704
--------- ------- ------- ------- -------
Income before provision for income taxes,
minority interest in income of subsidiary
and cumulative effect of change in
accounting principle......................... 37,253 47,943 92,635 72,151 54,474
Provision for income taxes................................ 14,581 17,741 34,482 26,313 19,693
--------- ------- ------- ------- -------
Income before minority interest in income of
subsidiary and cumulative effect of change
in accounting principle...................... 22,672 30,202 58,153 45,838 34,781
Minority interest in income of subsidiary................. 1,045 943 2,046 1,660 1,271
--------- ------- ------- ------- -------
Income before cumulative effect of change in
accounting principle......................... 21,627 29,259 56,107 44,178 33,510
Cumulative effect of change in accounting principle,
net of tax........................................... (1,376) -- -- -- --
--------- ------- ------- ------- -------
Net income...................................... 20,251 29,259 56,107 44,178 33,510
Preferred stock dividends................................. 328 328 786 786 786
--------- ------- ------- ------- -------
Net income available to common stockholders..... $ 19,923 28,931 55,321 43,392 32,724
========= ======= ======= ======= =======
Six Months Ended June 30, Years Ended December 31,
------------------------- ------------------------
2001 2000 2000 1999 1998
---- ---- ---- ---- ----
(unaudited) (unaudited)
Earnings per common share:
Basic:
Income before cumulative effect of change in
accounting principle............................ $ 900.21 1,222.71 2,338.04 1,833.91 1,383.04
Cumulative effect of change in accounting
principle, net of tax........................... (58.16) -- -- -- --
---------- -------- -------- -------- --------
Basic.............................................. $ 842.05 1,221.71 2,338.04 1,833.91 1,383.04
========== ======== ======== ======== ========
Diluted:
Income before cumulative effect of change in
accounting principle............................ $ 882.65 1,182.47 2,267.41 1,775.47 1,337.09
Cumulative effect of change in accounting
principle, net of tax........................... (58.16) -- -- -- --
---------- -------- -------- -------- --------
Diluted............................................ $ 824.49 1,182.47 2,267.41 1,775.47 1,337.09
========== ======== ======== ======== ========
Weighted average shares of common stock outstanding....... 23,661 23,661 23,661 23,661 23,661
========== ======== ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Six Months Ended June 30, 2001 and Three Years Ended December 31, 2000
(dollars expressed in thousands, except per share data)
Accu-
Adjustable Rate mulated
Preferred Stock Other Total
------------------
Class A Compre- Compre- Stock-
Conver- Common Capital hensive Retained hensive holders'
tible Class B Stock Surplus Income Earnings Income Equity
----- ------- ----- ------- ---------------- ------- -------
Consolidated balances, January 1, 1998........... $12,822 241 5,915 3,978 199,143 9,438 231,537
Year ended December 31, 1998:
Comprehensive income:
Net income................................. -- -- -- -- 33,510 33,510 -- 33,510
Other comprehensive income, net of tax
Unrealized gains on securities, net of
reclassification adjustment (1).......... -- -- -- -- 2,300 -- 2,300 2,300
------
Comprehensive income....................... 35,810
======
Class A preferred stock dividends,
$1.20 per share.......................... -- -- -- -- (769) -- (769)
Class B preferred stock dividends,
$0.11 per share.......................... -- -- -- -- (17) -- (17)
Effect of capital stock transactions of
majority-owned subsidiary................. -- -- -- (3,198) -- -- (3,198)
------- --- ----- ------ ------- ------ -------
Consolidated balances, December 31, 1998......... 12,822 241 5,915 780 231,867 11,738 263,363
Year ended December 31, 1999:
Comprehensive income:
Net income................................. -- -- -- -- 44,178 44,178 -- 44,178
Other comprehensive income, net of tax
Unrealized losses on securities, net of
reclassification adjustment (1).......... -- -- -- -- (9,388) -- (9,388) (9,388)
------
Comprehensive income....................... 34,790
======
Class A preferred stock dividends,
$1.20 per share.......................... -- -- -- -- (769) -- (769)
Class B preferred stock dividends,
$0.11 per share.......................... -- -- -- -- (17) -- (17)
Effect of capital stock transactions of
majority-owned subsidiary................. -- -- -- (3,273) -- -- (3,273)
Reclassification of retained earnings........ -- -- -- 5,000 (5,000) -- --
Reduction of deferred tax asset
valuation allowance...................... -- -- -- 811 -- -- 811
------- --- ----- ------ ------- ----- -------
Consolidated balances, December 31,1999.......... 12,822 241 5,915 3,318 270,259 2,350 294,905
Year ended December 31, 2000:
Comprehensive income:
Net income................................. -- -- -- -- 56,107 56,107 -- 56,107
Other comprehensive income, net of tax
Unrealized gains on securities, net of
reclassification adjustment (1).......... -- -- -- -- 3,671 -- 3,671 3,671
------
Comprehensive income....................... 59,778
======
Class A preferred stock dividends,
$1.20 per share.......................... -- -- -- -- (769) -- (769)
Class B preferred stock dividends,
$0.11 per share.......................... -- -- -- -- (17) -- (17)
Effect of capital stock transactions of
majority-owned subsidiary................. -- -- -- (1,051) -- -- (1,051)
------- --- ----- ------ ------- ------ -------
Consolidated balances, December 31, 2000......... 12,822 241 5,915 2,267 325,580 6,021 352,846
Six months ended June 30, 2001 (unaudited):
Comprehensive income:
Net income................................. -- -- -- -- 20,251 20,251 -- 20,251
Other comprehensive income, net of tax:
Unrealized gains on securities, net of
reclassification adjustment (1)........ -- -- -- -- 9,529 -- 9,529 9,529
Derivative instruments:
Cumulative effect of change in
accounting principle, net........... -- -- -- -- 9,069 -- 9,069 9,069
Current period transactions............ -- -- -- -- 7,621 -- 7,621 7,621
Reclassification to earnings........... -- -- -- -- (2,927) -- (2,927) (2,927)
------
Comprehensive income....................... 43,543
======
Class A preferred stock dividends,
$0.50 per share.......................... -- -- -- -- (321) -- (321)
Class B preferred stock dividends,
$0.04 per share.......................... -- -- -- -- (7) -- (7)
Effect of capital stock transactions of
majority-owned subsidiary................. -- -- -- 343 -- -- 343
------- --- ----- ------ ------- ------ -------
Consolidated balances, June 30, 2001 (unaudited). $12,822 241 5,915 2,610 345,503 29,313 396,404
======= === ===== ====== ======= ====== =======
_________________________
(1) Disclosure of reclassification adjustment:
Six Months Ended
June 30, Years Ended December 31,
--------------- -------------------------
2001 2000 2000 1999 1998
---- ---- ---- ---- ----
Unrealized gains (losses) on investment securities
arising during the period...................................... $9,456 (1,221) 3,780 (8,874) 3,253
Less reclassification adjustment for gains (losses)
included in net income......................................... (73) 246 109 514 953
------ ------ ----- ------ -----
Unrealized gains (losses) on investment securities................ $9,529 (1,467) 3,671 (9,388) 2,300
====== ====== ===== ====== =====
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars expressed in thousands)
Six Months Ended June 30, Years Ended December 31,
------------------------- ---------------------------
2001 2000 2000 1999 1998
---- ---- ---- ---- ----
(unaudited) (unaudited)
Cash flows from operating activities:
Net income................................................. $ 20,251 29,259 56,107 44,178 33,510
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Cumulative effect of change in accounting principle,
net of tax......................................... 1,376 -- -- -- --
Depreciation and amortization of bank premises
and equipment...................................... 5,734 4,578 9,536 7,609 5,293
Amortization, net of accretion........................ 4,090 3,801 8,370 12,632 10,494
Originations and purchases of loans held for sale..... (757,526) (238,508) (532,178) (452,941) (628,544)
Proceeds from sales of loans held for sale............ 587,612 185,316 413,247 507,077 520,994
Provision for loan losses............................. 7,110 7,202 14,127 13,073 9,000
Provision for income taxes............................ 14,581 17,741 34,482 26,313 19,693
Payments of income taxes.............................. (21,288) (5,382) (10,525) (23,904) (16,091)
Decrease (increase) in accrued interest receivable.... 2,949 (3,295) (7,338) (3,164) 256
Net decrease (increase) in trading securities......... -- -- -- 3,425 (315)
Interest accrued on liabilities....................... 104,912 88,058 187,679 158,701 162,368
Payments of interest on liabilities................... (100,969) (87,088) (177,764) (154,056) (167,090)
Gain on sales of branch facilities.................... - (1,355) (1,355) (4,406) --
Gain on sale of credit card portfolio,
net of expenses.................................... (2,275) -- -- -- --
Net loss (gain) on sales of available-for-sale
investment securities.............................. 113 (379) -- -- --
Other operating activities, net....................... (21,392) (12,080) (11,952) (2,795) (9,122)
Minority interest in income of subsidiary............. 1,045 943 2,046 1,660 1,271
--------- -------- -------- -------- --------
Net cash (used in) provided
by operating activities....................... (153,677) (11,189) (15,518) 133,402 (58,283)
--------- -------- -------- -------- --------
Cash flows from investing activities:
Cash (paid) received for acquired entities, net of
cash and cash equivalents received (paid)................ -- (2,709) (86,106) (15,961) 29,339
Proceeds from sales of investment securities............... 71,023 8,148 46,279 63,938 136,042
Maturities of investment securities available for sale..... 194,642 191,276 347,642 350,940 395,961
Maturities of investment securities held to maturity....... 1,887 679 1,169 2,708 2,314
Purchases of investment securities available for sale...... (57,421) (149,971) (289,875) (288,023) (167,082)
Purchases of investment securities held to maturity........ (240) (489) (3,806) (2,627) (4,910)
Net decrease (increase) in loans........................... 27,258 (254,431) (339,575) (268,238) (443,741)
Recoveries of loans previously charged-off................. 3,775 6,180 9,842 9,281 8,444
Purchases of bank premises and equipment................... (20,403) (10,039) (30,856) (17,099) (14,851)
Other investing activities................................. 6,494 2,183 5,052 (10) (13,919)
--------- -------- -------- -------- --------
Net cash provided by (used in)
investing activities.......................... 227,015 (209,173) (340,234) (165,091) (72,403)
--------- -------- -------- -------- --------
Cash flows from financing activities:
Increase (decrease) in demand and savings deposits......... 11,883 55,340 155,058 (72,895) 258,757
(Decrease) increase in time deposits....................... (27,926) 81,595 129,008 144,499 (171,207)
Increase (decrease) in Federal Home Loan Bank advances..... 50,000 -- -- (50,000) 48,485
Increase (decrease) in federal funds purchased............. -- 36,100 (27,100) -- --
Increase in securities sold under agreements to repurchase. 10,608 41,158 52,015 2,223 18,692
Advances drawn on note payable............................. 5,000 10,000 137,000 32,000 41,000
Repayments of note payable................................. (53,500) (15,500) (118,000) (18,048) (62,097)
Proceeds from issuance of guaranteed
preferred subordinated debentures........................ -- -- 55,050 -- 44,124
Sales of branch deposits................................... -- 892 892 (49,172) --
Payment of preferred stock dividends....................... (328) (328) (786) (786) (786)
Other financing activities, net............................ (94) -- -- -- --
--------- -------- -------- -------- --------
Net cash (used in) provided
by financing activities....................... (4,357) 209,257 383,137 (12,179) 176,968
--------- -------- -------- -------- --------
Net increase (decrease) in cash
and cash equivalents.......................... 68,981 (11,105) 27,385 (43,868) 46,282
Cash and cash equivalents, beginning of period.................. 198,279 170,894 170,894 214,762 168,480
--------- -------- -------- -------- --------
Cash and cash equivalents, end of period........................ $ 267,260 159,789 198,279 170,894 214,762
========= ======== ======== ======== ========
Noncash investing and financing activities:
Reduction of deferred tax asset valuation reserve.......... $ 565 1,267 1,267 -- --
Loans transferred to other real estate..................... 1,312 1,081 1,761 4,039 3,067
Loans exchanged for and transferred to available-for-sale
investment securities.................................... -- -- 37,634 -- 65,361
Loans held for sale exchanged for and transferred
to available-for-sale investment securities.............. 15,139 7,186 19,805 3,985 23,898
Loans held for sale transferred to loans................... 28,351 46,153 72,847 32,982 --
========= ========= ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the more significant accounting policies
followed by First Banks, Inc. and subsidiaries (First Banks or the Company):
Basis of Presentation. The accompanying consolidated financial
statements of First Banks have been prepared in accordance with accounting
principles generally accepted in the United States of America and conform to
predominant practices within the banking industry. Management of First Banks has
made a number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities to
prepare the consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. Actual results
could differ from those estimates.
Principles of Consolidation. The consolidated financial statements
include the accounts of the parent company and its subsidiaries, net of minority
interest, as more fully described below. All significant intercompany accounts
and transactions have been eliminated. Certain reclassifications of 1999 and
1998 amounts have been made to conform with the 2000 presentation.
First Banks operates through its subsidiary bank holding companies and
subsidiary financial institutions (collectively referred to as the Subsidiary
Banks) as follows:
First Bank, headquartered in St. Louis County, Missouri (First Bank);
First Capital Group, Inc., headquartered in Albuquerque, New Mexico
(FCG);
First Banks America, Inc., headquartered in St. Louis County, Missouri
(FBA) and its wholly owned subsidiaries:
First Bank & Trust, headquartered in San Francisco, California
(FB&T); and
The San Francisco Company, headquartered in San Francisco,
California (SFC), and its wholly owned subsidiary:
Bank of San Francisco, headquartered in San Francisco,
California.
The Subsidiary Banks are wholly owned by their respective parent
companies except FBA, which was 83.37% owned by First Banks at December 31,
1999. On October 31, 2000, FBA issued 6,530,769 shares of its common stock to
First Banks in conjunction with FBA's acquisition of First Bank & Trust, a
wholly owned subsidiary of First Banks. This transaction increased First Banks'
ownership interest in FBA to approximately 92.82%. First Banks owned 92.86% of
FBA at December 31, 2000.
Cash and Cash Equivalents. Cash, due from banks, federal funds sold,
and interest-bearing deposits with original maturities of three months or less
are considered to be cash and cash equivalents for purposes of the consolidated
statements of cash flows.
The Subsidiary Banks are required to maintain certain daily reserve
balances on hand in accordance with regulatory requirements. These reserve
balances maintained in accordance with such requirements were $22.3 million and
$10.8 million at December 31, 2000 and 1999, respectively.
Investment Securities. The classification of investment securities
available for sale or held to maturity is determined at the date of purchase.
First Banks no longer engages in the trading of investment securities.
Investment securities designated as available for sale, which include
any security that First Banks has no immediate plan to sell but which may be
sold in the future under different circumstances, are stated at fair value.
Realized gains and losses are included in noninterest income upon commitment to
sell, based on the amortized cost of the individual security sold. Unrealized
gains and losses are recorded, net of related income tax effects, in accumulated
other comprehensive income. All previous fair value adjustments included in the
separate component of accumulated other comprehensive income are reversed upon
sale.
Investment securities designated as held to maturity, which include any
security that First Banks has the positive intent and ability to hold to
maturity, are stated at cost, net of amortization of premiums and accretion of
discounts computed on the level-yield method taking into consideration the level
of current and anticipated prepayments.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Loans Held for Portfolio. Loans held for portfolio are carried at cost,
adjusted for amortization of premiums and accretion of discounts using the
interest method. Interest and fees on loans are recognized as income using the
interest method. Loan origination fees are deferred and accreted over the
estimated life of the loans using the interest method. Loans held for portfolio
are stated at cost as First Banks has the ability and it is management's
intention to hold them to maturity.
The accrual of interest on loans is discontinued when it appears that
interest or principal may not be paid in a timely manner in the normal course of
business. Generally, payments received on nonaccrual and impaired loans are
recorded as principal reductions. Interest income is recognized after all
principal has been repaid or an improvement in the condition of the loan has
occurred which would warrant resumption of interest accruals.
A loan is considered impaired when it is probable that First Banks will
be unable to collect all amounts due, both principal and interest, according to
the contractual terms of the loan agreement. When measuring impairment, the
expected future cash flows of an impaired loan are discounted at the loan's
effective interest rate. Alternatively, impairment is measured by reference to
an observable market price, if one exists, or the fair value of the collateral
for a collateral-dependent loan. Regardless of the historical measurement method
used, First Banks measures impairment based on the fair value of the collateral
when foreclosure is probable. Additionally, impairment of a restructured loan is
measured by discounting the total expected future cash flows at the loan's
effective rate of interest as stated in the original loan agreement. First Banks
uses its existing nonaccrual methods for recognizing interest income on impaired
loans.
Loans Held for Sale. Loans held for sale are carried at the lower of
cost or market value, which is determined on an individual loan basis. Gains or
losses on the sale of loans held for sale are determined on a specific
identification method.
Loan Servicing Income. Loan servicing income represents fees earned for
servicing real estate mortgage loans owned by investors, net of federal agency
guarantee fees, interest shortfall and amortization of mortgage servicing
rights. Such fees are generally calculated on the outstanding principal balance
of the loans serviced and are recorded as income when earned.
Allowance for Loan Losses. The allowance for loan losses is maintained
at a level considered adequate to provide for probable losses. The provision for
loan losses is based on a periodic analysis of the loans held for portfolio and
held for sale, considering, among other factors, current economic conditions,
loan portfolio composition, past loan loss experience, independent appraisals,
loan collateral, payment experience and selected key financial ratios. As
adjustments become necessary, they are reflected in the results of operations in
the periods in which they become known.
Bank Premises and Equipment. Bank premises and equipment are stated at
cost less accumulated depreciation and amortization. Depreciation is computed
primarily using the straight-line method over the estimated useful lives of the
related assets. Amortization of leasehold improvements is calculated using the
straight-line method over the shorter of the useful life of the improvement or
term of the lease. Bank premises and improvements are depreciated over five to
40 years and equipment over three to seven years.
Intangibles Associated With the Purchase of Subsidiaries. Intangibles
associated with the purchase of subsidiaries consist of excess of cost over net
assets acquired. The excess of cost over net assets acquired of purchased
subsidiaries is amortized using the straight-line method over the estimated
periods to be benefited, which range from approximately 10 to 15 years. First
Banks reviews intangible assets for impairment whenever events or changes in
circumstances indicate the carrying value of an underlying asset may not be
recoverable. First Banks measures recoverability based upon the future cash
flows expected to result from the use of the underlying asset and its eventual
disposition. If the sum of the expected future cash flows (undiscounted and
without interest charges) is less than the carrying value of the underlying
asset, First Banks recognizes an impairment loss. The impairment loss recognized
represents the amount by which the carrying value of the underlying asset
exceeds the fair value of the underlying asset. As such adjustments become
necessary, they are reflected in the results of operations in the periods in
which they become known.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Mortgage Servicing Rights. Mortgage servicing rights are amortized in
proportion to the related estimated net servicing income on a disaggregated,
discounted basis over the estimated lives of the related mortgages considering
the level of current and anticipated repayments, which range from five to 12
years.
Other Real Estate. Other real estate, consisting of real estate
acquired through foreclosure or deed in lieu of foreclosure, is stated at the
lower of cost or fair value less applicable selling costs. The excess of cost
over fair value of the property at the date of acquisition is charged to the
allowance for loan losses. Subsequent reductions in carrying value, to reflect
current fair value or costs incurred in maintaining the properties, are charged
to expense as incurred.
Income Taxes. Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled. As
changes in the tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income tax expense.
First Banks, Inc. and its eligible subsidiaries file a consolidated
federal income tax return and unitary or consolidated state income tax returns
in all applicable states.
Financial Instruments. A financial instrument is defined as cash,
evidence of an ownership interest in an entity, or a contract that conveys or
imposes on an entity the contractual right or obligation to either receive or
deliver cash or another financial instrument.
Financial Instruments With Off-Balance-Sheet Risk. First Banks utilizes
financial instruments to reduce the interest rate risk arising from its
financial assets and liabilities. These instruments involve, in varying degrees,
elements of interest rate risk and credit risk in excess of the amount
recognized in the consolidated balance sheets. "Interest rate risk" is defined
as the possibility that interest rates may move unfavorably from the perspective
of First Banks. The risk that a counterparty to an agreement entered into by
First Banks may default is defined as "credit risk."
First Banks is party to commitments to extend credit and commercial and
standby letters of credit in the normal course of business to meet the financing
needs of its customers. These commitments involve, in varying degrees, elements
of interest rate risk and credit risk in excess of the amount recognized in the
consolidated balance sheets.
Interest Rate Swap, Floor and Cap Agreements. Interest rate swap, floor
and cap agreements are accounted for on an accrual basis with the net interest
differential being recognized as an adjustment to interest income or interest
expense of the related asset or liability. Premiums and fees paid upon the
purchase of interest rate swap, floor and cap agreements are amortized over the
life of the agreements using the interest method. In the event of early
termination of these derivative financial instruments, the net proceeds received
or paid are deferred and amortized over the shorter of the remaining contract
life of the derivative financial instrument or the maturity of the related asset
or liability. If, however, the amount of the underlying hedged asset or
liability is repaid, then the gains or losses on the agreements are recognized
immediately in the consolidated statements of income. The unamortized premiums,
fees paid and deferred losses on early terminations are included in other assets
in the accompanying consolidated balance sheets.
Forward Contracts to Sell Mortgage-Backed Securities. Gains and losses
on forward contracts to sell mortgage-backed securities, which qualify as
hedges, are deferred. The net unamortized balance of such deferred gains and
losses is applied to the carrying value of the loans held for sale as part of
the lower of cost or market valuation.
Earnings Per Common Share. Basic earnings per shares (EPS) are computed
by dividing the income available to common stockholders (the numerator) by the
weighted average number of common shares outstanding (the denominator) during
the year. The computation of dilutive EPS is similar except the denominator is
increased to include the number of additional common shares that would have been
outstanding if the dilutive potential shares had been issued. In addition, in
computing the dilutive effect of convertible securities, the numerator is
adjusted to add back: (a) any convertible preferred dividends and (b) the
after-tax amount of interest recognized in the period associated with any
convertible debt.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) ACQUISITIONS AND DIVESTITURES
During the three years ended December 31, 2000, First Banks completed
10 acquisitions as follows:
Total Purchase
Entity Date assets price Intangibles
------ ---- ------ ----- -----------
(dollars expressed in thousands)
2000
----
The San Francisco Company
San Francisco, California December 31, 2000 $ 183,800 62,200 16,300
Millennium Bank
San Francisco, California December 29, 2000 117,000 20,700 8,700
Commercial Bank of San Francisco
San Francisco, California October 31, 2000 155,600 26,400 9,300
Bank of Ventura
Ventura, California August 31, 2000 63,800 14,200 7,200
First Capital Group, Inc.
Albuquerque, New Mexico February 29, 2000 64,600 66,100 1,500
Lippo Bank
San Francisco, California February 29, 2000 85,300 17,200 4,800
---------- -------- --------
$ 670,100 206,800 47,800
========== ======== ========
1999
----
Century Bank
Beverly Hills, California August 31, 1999 $ 156,000 31,500 4,500
Redwood Bancorp
San Francisco, California March 4, 1999 183,900 26,000 9,500
---------- -------- --------
$ 339,900 57,500 14,000
========== ======== ========
1998
----
Republic Bank
Torrance, California September 15, 1998 $ 124,100 19,300 10,200
Pacific Bay Bank
San Pablo, California February 2, 1998 38,300 4,200 1,500
---------- -------- --------
$ 162,400 23,500 11,700
========== ======== ========
In addition to the acquisitions included in the table above, during the
three years ended December 31, 2000, First Banks also completed two branch
office purchases.
On September 17, 1999, FB&T completed its assumption of the deposits
and certain liabilities and the purchase of selected assets of the Malibu,
California branch office of Brentwood Bank of California. The transaction
resulted in the acquisition of approximately $6.3 million in loans, $17.3
million of deposits and one branch office. The excess of the cost over the fair
value of the net assets acquired was $325,000 and is being amortized over 15
years.
On March 19, 1998, First Banks completed its assumption of the deposits
and purchase of selected assets of the Solvang, California banking location of
Bank of America. The transaction resulted in the acquisition of approximately
$15.5 million in deposits and one office. The excess of the cost over the fair
value of the net assets acquired was $1.8 million and is being amortized over 15
years.
In April 2000, First Bank completed its divestiture of one branch
office in central Illinois. In March and April 1999, First Bank completed its
divestiture of seven branches in the northern and central Illinois market areas.
For the years ended December 31, 2000 and 1999, these branch divestitures
resulted in a reduction of the deposit base of approximately $8.8 million and
$54.8 million, resulting in pre-tax gains of $1.4 million and $4.4 million,
respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The aforementioned acquisition transactions were accounted for using
the purchase method of accounting and, accordingly, the consolidated financial
statements include the financial position and results of operations for the
periods subsequent to the respective acquisition dates, and the assets acquired
and liabilities assumed were recorded at fair value at the acquisition dates.
These acquisitions were funded from available cash reserves, proceeds from sales
and maturities of available-for-sale investment securities, borrowings under
First Banks' $120.0 million revolving credit agreement and the proceeds from the
issuance of trust preferred securities. Due to the immaterial effect on
previously reported financial information, pro forma disclosures have not been
prepared for the aforementioned transactions.
(3) INVESTMENTS IN DEBT AND EQUITY SECURITIES
Securities Available for Sale. The amortized cost, contractual
maturity, gross unrealized gains and losses and fair value of investment
securities available for sale at December 31, 2000 and 1999 were as follows:
Maturity Total
--------
After Amor- Gross Weighted
1 Year 1-5 5-10 10 tized Unrealized Fair Average
-------------
or Less Years Years Years Cost Gains Losses Value Yield
------- ----- ----- ----- ---- ----- ------ ----- -----
(dollars expressed in thousands)
December 31, 2000:
Carrying value:
U.S. Treasury.................. $ 89,229 801 -- -- 90,030 30 (37) 90,023 5.85%
U.S. Government agencies
and corporations:
Mortgage-backed......... 1,078 29,625 12,472 159,143 202,318 826 (160) 202,984 7.02
Other................... 22,059 151,242 10,131 20,256 203,688 2,028 (1,521) 204,195 6.70
Corporate debt securities...... 912 1,961 -- 500 3,373 -- (20) 3,353 7.65
Equity investments in other
financial institutions...... 11,299 -- -- -- 11,299 8,121 (369) 19,051 7.98
Federal Home Loan Bank and
Federal Reserve Bank stock
(no stated maturity)........ 19,780 -- -- -- 19,780 -- -- 19,780 6.69
-------- ------- ------ ------- ------- ------ ------ -------
Total.............. $144,357 183,629 22,603 179,899 530,488 11,005 (2,107) 539,386 6.60
======== ======= ====== ======= ======= ====== ====== ======= ====
Fair value:
Debt securities................ $113,277 184,942 22,798 179,538
Equity securities.............. 38,831 -- -- --
-------- ------- ------ -------
Total.............. $152,108 184,942 22,798 179,538
======== ======= ====== =======
Weighted average yield............ 6.19% 6.73% 6.89% 7.09%
======== ======= ====== =======
December 31, 1999:
Carrying value:
U.S. Treasury.................. $ 21,036 29,240 -- -- 50,276 58 (45) 50,289 6.10%
U.S. Government agencies
and corporations:
Mortgage-backed......... 12,489 2,274 20,946 98,935 134,644 20 (1,540) 133,124 6.64
Other................... 144,185 26,073 13,170 24,256 207,684 4 (3,607) 204,081 6.02
Foreign debt securities........ 2,995 -- -- -- 2,995 286 -- 3,281 9.42
Equity investments in other
financial institutions...... 9,605 -- -- -- 9,605 8,492 (434) 17,663 8.53
Federal Home Loan Bank and
Federal Reserve Bank stock
(no stated maturity)........ 21,655 -- -- -- 21,655 -- -- 21,655 6.07
-------- ------- ------ ------- ------- ------ ------ -------
Total.............. $211,965 57,587 34,116 123,191 426,859 8,860 (5,626) 430,093 6.26
======== ======= ====== ======= ======= ====== ====== ======= ====
Fair value:
Debt securities................ $177,426 57,448 32,998 119,621
Equity securities.............. 42,600 -- -- --
-------- ------- ------ -------
Total.............. $220,026 57,448 32,998 119,621
======== ======= ====== =======
Weighted average yield............ 6.00% 6.44% 6.26% 6.79%
======== ======= ====== =======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Securities Held to Maturity. The amortized cost, contractual maturity,
gross unrealized gains and losses and fair value of investment securities held
to maturity at December 31, 2000 and 1999 were as follows:
Maturity
--------
------------------------------------ Total
After Amor- Gross Weighted
1 Year 1-5 5-10 10 tized Unrealized Fair Average
--------------
or Less Years Years Years Cost Gains Losses Value Yield
------- ----- ----- ----- ---- ----- ------ ----- -----
(dollars expressed in thousands)
December 31, 2000:
Carrying value:
U.S. Government agencies
and corporations:
Mortgage-backed......... $ -- -- -- 5,130 5,130 3 (63) 5,070 6.72%
State and political
subdivisions............... 950 11,692 5,896 270 18,808 419 -- 19,227 5.03
Other.......................... 210 -- -- -- 210 -- -- 210 6.90
------ ----- ---- ---- ----- --- ---- -----
Total.............. $1,160 11,692 5,896 5,400 24,148 422 (63) 24,507 5.33
====== ====== ===== ===== ====== === ==== ====== ====
Fair value:
Debt securities................ $1,167 11,854 6,124 5,362
====== ====== ===== =====
Weighted average yield............ 4.64% 4.98% 5.16% 6.74%
====== ====== ===== =====
December 31, 1999:
Carrying value:
U.S. Government agencies
and corporations:
Mortgage-backed......... $ -- -- -- 2,355 2,355 -- (155) 2,200 6.28%
State and political
subdivisions............... 506 11,196 5,322 1,965 18,989 275 (198) 19,066 5.05
Other.......................... -- 210 -- -- 210 -- -- 210 6.92
----- ------ ----- ----- ------ ---- ---- ------
Total.............. $ 506 11,406 5,322 4,320 21,554 275 (353) 21,476 5.22
====== ====== ===== ===== ====== === ==== ====== ====
Fair value:
Debt securities................ $ 512 11,505 5,125 4,334
====== ====== ===== =====
Weighted average yield............ 5.09% 4.97% 4.55% 6.62%
======= ======= ===== =====
Proceeds from sales of available-for-sale investment securities were
$28.0 million, $63.9 million and $136.0 million for the years ended December 31,
2000, 1999 and 1998, respectively. Gross gains of $565,000, $791,000 and $1.5
million were realized on these sales during the years ended December 31, 2000,
1999 and 1998, respectively. Gross losses of $396,000 were realized on these
sales during the year ended December 31, 2000. There were no losses realized on
these sales in 1999 and 1998.
Proceeds from calls of investment securities were $111,000 and $20,000
for the years ended December 31, 2000 and 1999, respectively. Gross gains of
$300 were realized on these called securities during the year ended December 31,
2000. There were no gross gains on called securities in 1999. Gross losses of
$1,800 and $1,200 were realized on these called securities during the years
ended December 31, 2000 and 1999, respectively.
Proceeds from sales of trading investment securities were $2.9 million
and $311 million for the years ended December 31, 1999 and 1998, respectively.
There were no gross gains realized on these sales for the year ended December
31, 1999. Gross gains of $879,000 were realized on these sales for the year
ended December 31, 1998. Gross losses of $303,000 and $234,000 were realized on
these sales for the years ended December 31, 1999 and 1998, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Certain of the Subsidiary Banks maintain investments in the Federal
Home Loan Bank (FHLB) and/or the Federal Reserve Bank (FRB). These investments
are recorded at cost, which represents redemption value. The investment in FHLB
stock is maintained at a minimum amount equal to the greater of 1% of the
aggregate outstanding balance of the applicable Subsidiary Bank's loans secured
by residential real estate, or 5% of advances from the FHLB to each Subsidiary
Bank. First Bank, FB&T, and BSF are members of the FHLB system. The investment
in FRB stock is maintained at a minimum of 6% of the applicable Subsidiary
Bank's capital stock and capital surplus. First Bank and FB&T are members of the
FRB system.
Investment securities with a carrying value of approximately $180.5
million and $222.3 million at December 31, 2000 and 1999, respectively, were
pledged in connection with deposits of public and trust funds, securities sold
under agreements to repurchase and for other purposes as required by law.
(4) LOANS AND ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the years ended December
31 were as follows:
2000 1999 1998
---- ---- ----
(dollars expressed in thousands)
Balance, beginning of year..................................... $ 68,611 60,970 50,509
Acquired allowances for loan losses............................ 6,062 3,008 3,200
-------- -------- ---------
74,673 63,978 53,709
-------- -------- ---------
Loans charged-off.............................................. (17,050) (17,721) (10,183)
Recoveries of loans previously charged-off..................... 9,842 9,281 8,444
-------- -------- ---------
Net loans charged-off.......................................... (7,208) (8,440) (1,739)
-------- -------- ---------
Provision charged to operations................................ 14,127 13,073 9,000
-------- -------- ---------
Balance, end of year........................................... $ 81,592 68,611 60,970
======== ======== =========
At December 31, 2000 and 1999, First Banks had $50.2 million and $36.7
million, respectively, of loans on nonaccrual status. Interest on nonaccrual
loans, which would have been recorded under the original terms of the loans, was
$5.8 million, $5.8 million and $4.5 million for the years ended December 31,
2000, 1999 and 1998, respectively. Of these amounts, $1.9 million, $2.7 million
and $1.9 million were actually recorded as interest income on such loans in
2000, 1999 and 1998, respectively.
At December 31, 2000 and 1999, First Banks had $53.2 million and $39.7
million of impaired loans, including $50.2 million and $36.7 million of loans on
nonaccrual status, respectively. At December 31, 2000 and 1999, impaired loans
also include $3.0 million of restructured loans. The allowance for loan losses
includes an allocation for each impaired loan. The aggregate allocation of the
allowance for loan losses related to impaired loans was approximately $10.3
million and $8.2 million at December 31, 2000 and 1999, respectively. The
average recorded investment in impaired loans was $45.1 million, $46.0 million
and $35.2 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The amount of interest income recognized using a cash basis method
of accounting during the time these loans were impaired was $2.2 million, $2.8
million and $2.3 million in 2000, 1999 and 1998, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
First Banks' primary market areas are the states of Missouri, Illinois,
Texas and California. At December 31, 2000 and 1999, approximately 91% and 90%
of the total loan portfolio and 83% and 88% of the commercial and financial loan
portfolio, respectively, were to borrowers within these regions.
Real estate lending constituted the only significant concentration of
credit risk. Real estate loans comprised approximately 65% and 67% of the loan
portfolio at December 31, 2000 and 1999, of which 26% and 28%, respectively,
were consumer related in the form of residential real estate mortgages and home
equity lines of credit.
First Banks is, in general, a secured lender. At December 31, 2000 and
1999, 96% and 97%, respectively, of the loan portfolio was secured. Collateral
is required in accordance with the normal credit evaluation process based upon
the creditworthiness of the customer and the credit risk associated with the
particular transaction.
(5) MORTGAGE BANKING ACTIVITIES
At December 31, 2000 and 1999, First Banks serviced loans for others
amounting to $957.2 million and $957.1 million, respectively. Borrowers' escrow
balances held by First Banks on such loans were $653,000 and $1.0 million at
December 31, 2000 and 1999, respectively.
Changes in mortgage servicing rights, net of amortization, for the
years ended December 31 were as follows:
2000 1999
---- ----
(dollars expressed in thousands)
Balance, beginning of year........................................... $ 8,665 9,825
Originated mortgage servicing rights................................. 1,455 1,670
Amortization......................................................... (3,072) (2,830)
-------- --------
Balance, end of year................................................. $ 7,048 8,665
======== ========
(6) BANK PREMISES AND EQUIPMENT
Bank premises and equipment were comprised of the following at December
31:
2000 1999
---- ----
(dollars expressed in thousands)
Land................................................................ 18,266 17,582
Buildings and improvements........................................... 66,474 52,491
Furniture, fixtures and equipment.................................... 66,460 55,344
Leasehold improvements............................................... 23,794 11,635
Construction in progress............................................. 15,655 2,896
--------- ---------
Total............................................................ 190,649 139,948
Less accumulated depreciation and amortization....................... 75,878 64,301
--------- ---------
Bank premises and equipment, net................................. $ 114,771 75,647
========= =========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Depreciation and amortization expense for the years ended December 31,
2000, 1999 and 1998 totaled $9.5 million, $7.6 million and $5.3 million,
respectively.
First Banks leases land, office properties and some items of equipment
under operating leases. Certain of the leases contain renewal options and
escalation clauses. Total rent expense was $10.7 million, $7.4 million and $5.3
million for the years ended December 31, 2000, 1999 and 1998, respectively.
Future minimum lease payments under noncancellable operating leases extend
through 2084 as follows:
(dollars expressed in thousands)
Year ending December 31:
2001............................................................... $ 7,420
2002............................................................... 6,101
2003............................................................... 5,321
2004............................................................... 3,941
2005............................................................... 3,198
Thereafter......................................................... 21,578
--------
Total future minimum lease payments........................... $ 47,559
========
First Banks leases to unrelated parties a portion of its banking
facilities. Total rental income was $2.6 million, $2.6 million and $2.5 million
for the years ended December 31, 2000, 1999 and 1998, respectively.
(7) SHORT-TERM BORROWINGS
Short-term borrowings were comprised of the following at December 31:
2000 1999
---- ----
(dollars expressed in thousands)
Securities sold under agreements to repurchase....................... $ 125,025 73,010
FHLB borrowings...................................................... 15,544 544
--------- --------
Short-term borrowings............................................ $ 140,569 73,554
========= ========
The average balance of short-term borrowings was $106.1 million and
$87.4 million, respectively, and the maximum month-end balance of short-term
borrowings was $158.4 million and $176.4 million, respectively, for the years
ended December 31, 2000 and 1999. The average rates paid on short-term
borrowings during the years ended December 31, 2000, 1999 and 1998 were 5.54%,
4.83% and 4.84%, respectively. The assets underlying the short-term borrowings
are under First Banks' control.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) NOTE PAYABLE
First Banks has a $120.0 million revolving line of credit with a group
of unaffiliated banks (Credit Agreement). The Credit Agreement, dated August 24,
2000, replaced a similar revolving credit agreement dated August 25, 1999.
Interest under the Credit Agreement is payable on a monthly basis at the lead
bank's corporate base rate or, at the option of First Banks, is payable at the
Eurodollar Rate plus a margin based upon the outstanding loans and First Banks'
profitability. The interest rate for borrowings under the Credit Agreement was
7.65% at December 31, 2000, and was based on the applicable Eurodollar Rate plus
a margin of 1.00%. Amounts may be borrowed under the Credit Agreement until
August 23, 2001, at which time the principal and accrued interest is due and
payable.
Loans under the Credit Agreement are secured by all of the stock of the
Subsidiary Banks, which is owned by First Banks. Under the Credit Agreement,
there were outstanding borrowings of $83.0 million at December 31, 2000. There
were outstanding borrowings of $64.0 million under the previous credit agreement
at December 31, 1999.
The Credit Agreement requires maintenance of certain minimum capital
ratios for each of the Subsidiary Banks. In addition, it prohibits the payment
of dividends on First Banks' common stock. At December 31, 2000 and 1999, First
Banks and the Subsidiary Banks were in compliance with all restrictions and
requirements of the respective credit agreements.
The average balance and maximum month-end balance outstanding of
advances under the Credit Agreement during the years ended December 31 were as
follows:
2000 1999
---- ----
(dollars expressed in thousands)
Average balance........................................................... $ 51,897 56,376
Maximum month-end balance................................................. 83,000 75,000
======== ======
The average rates paid on the outstanding advances during the years ended
December 31, 2000, 1999 and 1998 were 7.66%, 6.44% and 6.85%, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) GUARANTEED PREFERRED BENEFICIAL INTERESTS IN SUBORDINATED DEBENTURES
In February 1997, First Preferred Capital Trust (First Preferred I), a
newly formed Delaware business trust subsidiary of First Banks, issued 3.45
million shares of 9.25% cumulative trust preferred securities at $25 per share
in an underwritten public offering, and issued 106,702 shares of common
securities to First Banks at $25 per share. First Banks owns all of First
Preferred I's common securities. The gross proceeds of the offering were used by
First Preferred I to purchase $88.9 million of 9.25% subordinated debentures
from First Banks, maturing on March 31, 2027. The maturity date may be shortened
to a date not earlier than March 31, 2002 or extended to a date not later than
March 31, 2046 if certain conditions are met. The subordinated debentures are
the sole asset of First Preferred I. In connection with the issuance of the
preferred securities, First Banks made certain guarantees and commitments that,
in the aggregate, constitute a full and unconditional guarantee by First Banks
of the obligations of First Preferred I under the First Preferred I preferred
securities. First Banks' proceeds from the issuance of the subordinated
debentures to First Preferred I, net of underwriting fees and offering expenses,
were $83.1 million. Distributions on First Preferred I's preferred securities,
which are payable quarterly in arrears, were $8.0 million for the years ended
December 31, 2000, 1999 and 1998, and are included in noninterest expense in the
consolidated financial statements.
In July 1998, First America Capital Trust (FACT), a newly formed
Delaware business trust subsidiary of FBA, issued 1.84 million shares of 8.50%
cumulative trust preferred securities at $25 per share in an underwritten public
offering, and issued 56,908 shares of common securities to FBA at $25 per share.
FBA owns all of FACT's common securities. The gross proceeds of the offering
were used by FACT to purchase $47.4 million of 8.50% subordinated debentures
from FBA, maturing on June 30, 2028. The maturity date may be shortened to a
date not earlier than June 30, 2003 or extended to a date not later than June
30, 2037 if certain conditions are met. The subordinated debentures are the sole
asset of FACT. In connection with the issuance of the FACT preferred securities,
FBA made certain guarantees and commitments that, in the aggregate, constitute a
full and unconditional guarantee by FBA of the obligations of FACT under the
FACT preferred securities. FBA's proceeds from the issuance of the subordinated
debentures to FACT, net of underwriting fees and offering expenses, were $44.0
million. Distributions payable on the FACT preferred securities, which are
payable quarterly in arrears, were $3.9 million, $4.0 million and $1.8 million
for the years ended December 31, 2000, 1999 and 1998, respectively, and are
included in noninterest expense in the consolidated financial statements.
On October 19, 2000, First Preferred Capital Trust II (First Preferred
II), a newly formed Delaware business trust subsidiary of First Banks, issued
2.3 million shares of 10.24% cumulative trust preferred securities at $25 per
share in an underwritten public offering, and issued 71,135 shares of common
securities to First Banks at $25 per share. First Banks owns all of First
Preferred II's common securities. The gross proceeds of the offering were used
by First Preferred II to purchase $59.3 million of 10.24% subordinated
debentures from First Banks, maturing on September 30, 2030. The maturity date
may be shortened to a date not earlier than September 30, 2005, if certain
conditions are met. The subordinated debentures are the sole asset of First
Preferred II. In connection with the issuance of the preferred securities, First
Banks made certain guarantees and commitments that, in the aggregate, constitute
a full and unconditional guarantee by First Banks of the obligations of First
Preferred II under the First Preferred II preferred securities. First Banks'
proceeds from the issuance of the subordinated debentures to First Preferred II,
net of underwriting fees and offering expenses, were $55.1 million.
Distributions on First Preferred II's preferred securities, which are payable
quarterly in arrears, were $1.2 million for the year ended December 31, 2000,
and are included in noninterest expense in the consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) INCOME TAXES
Income tax expense attributable to income from continuing operations
for the years ended December 31 consists of:
Years ended December 31,
------------------------
2000 1999 1998
---- ---- ----
(dollars expressed in thousands)
Current income tax expense:
Federal.................................................... $28,215 19,731 16,801
State...................................................... 2,731 2,247 1,292
------- ------ ------
30,946 21,978 18,093
------- ------ ------
Deferred income tax expense:
Federal.................................................... 4,001 5,056 1,895
State...................................................... (60) 14 273
------- ------ ------
3,941 5,070 2,168
------- ------ ------
Reduction in deferred valuation allowance...................... (405) (735) (568)
------- ------ ------
Total.................................................. $34,482 26,313 19,693
======= ====== ======
The effective rates of federal income taxes for the years ended
December 31 differ from statutory rates of taxation as follows:
Years ended December 31,
----------------------------------------------------------
2000 1999 1998
----------------- -------------- -----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(dollars expressed in thousands)
Income before provision for income taxes and
minority interest in income of subsidiary.... $ 92,635 $72,151 $ 54,474
======== ======= ========
Provision for income taxes calculated
at federal statutory income tax rates........ $ 32,422 35.0% $25,253 35.0% $ 19,066 35.0%
Effects of differences in tax reporting:
Tax-exempt interest income, net of
tax preference adjustment................ (587) (0.6) (439) (0.6) (461) (0.9)
State income taxes........................... 1,736 1.8 1,470 2.0 1,018 1.9
Amortization of intangibles associated
with the purchase of subsidiaries........ 1,567 1.7 1,261 1.8 864 1.6
Reduction in deferred valuation allowance.... (405) (0.4) (735) (1.0) (568) (1.0)
Other, net................................... (251) (0.3) (497) (0.7) (226) (0.4)
-------- ----- ------- ---- -------- ----
Provision for income taxes............. $ 34,482 37.2% $26,313 36.5% $ 19,693 36.2%
======== ===== ======= ==== ======== ====
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows:
December 31,
------------
2000 1999
---- ----
(dollars expressed in thousands)
Deferred tax assets:
Net operating loss carryforwards................................ $ 47,043 30,792
Allowance for loan losses....................................... 29,965 27,071
Alternative minimum tax credits................................. 3,319 2,841
Disallowed losses on investment securities...................... 3,197 2,443
Other real estate............................................... 65 15
Other........................................................... 5,185 3,556
-------- --------
Gross deferred tax assets................................... 88,774 66,718
Valuation allowance............................................. (13,075) (14,746)
-------- --------
Deferred tax assets, net of valuation allowance............. 75,699 51,972
-------- --------
Deferred tax liabilities:
Depreciation on bank premises and equipment..................... 6,151 3,332
Net fair value adjustment for securities available for sale..... 3,258 1,132
Operating leases................................................ 1,313 --
FHLB stock dividends............................................ 890 1,094
State taxes..................................................... 568 591
Other........................................................... 594 433
-------- --------
Deferred tax liabilities.................................... 12,774 6,582
-------- --------
Net deferred tax assets..................................... $ 62,925 45,390
======== ========
The realization of First Banks' net deferred tax assets is based on the
availability of carrybacks to prior taxable periods, the expectation of future
taxable income and the utilization of tax planning strategies. Based on these
factors, management believes it is more likely than not that First Banks will
realize the recognized net deferred tax asset of $62.9 million. The net change
in the valuation allowance, related to deferred tax assets, was a decrease of
$1.7 million for the year ended December 31, 2000. The decrease related to the
recognition of deferred tax assets for certain loans and other real estate, and
the reversal of valuation reserves resulting from the utilization of net
operating loss carryforwards.
Changes to the deferred tax asset valuation allowance for the years
ended December 31 were as follows:
2000 1999 1998
---- ---- ----
(dollars expressed in thousands)
Balance, beginning of year......................................... $ 14,746 17,179 17,747
Current year deferred provision, change in
deferred tax valuation allowance............................... (405) (735) (568)
Reduction attributable to utilization of deferred tax assets:
Adjustment to capital surplus................................... -- (811) --
Adjustment to intangibles associated with the
purchase of subsidiaries..................................... (1,266) (887) --
-------- ------- -------
Balance, end of year............................................... $ 13,075 14,746 17,179
======== ======= =======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The valuation allowance for deferred tax assets at December 31, 1999
included $1.3 million that was recognized in 2000 and credited to intangibles
associated with the purchase of subsidiaries. In addition, the valuation
allowance for deferred tax assets at December 31, 2000 and 1999 includes $5.0
million which when recognized, will be credited to capital surplus under the
terms of the quasi-reorganizations implemented for FBA and First Commercial
Bancorp, Inc. as of December 31, 1994 and 1996, respectively.
At December 31, 2000 and 1999, the accumulation of prior years'
earnings representing tax bad debt deductions were approximately $30.8 million.
If these tax bad debt reserves were charged for losses other than bad debt
losses, First Bank and FB&T would be required to recognize taxable income in the
amount of the charge. It is not contemplated that such tax-restricted retained
earnings will be used in a manner that would create federal income tax
liabilities.
At December 31, 2000 and 1999, for federal income taxes purposes, First
Banks had net operating loss carryforwards of approximately $134.4 million and
$88.0 million, respectively.
The net operating loss carryforwards for First Banks expire as follows:
(dollars expressed in thousands)
Year ending December 31:
2001................................................. $ 561
2002................................................. 4,562
2003................................................. 4,611
2004................................................. 4,148
2005................................................. 21,052
2006 - 2020.......................................... 99,475
---------
Total............................................ $ 134,409
=========
(11) EARNINGS PER COMMON SHARE
The following is a reconciliation of the numerators and denominators of
the basic and diluted EPS computations for the periods indicated:
Income Shares Per share
(numerator) (denominator) amount
----------- ------------- ------
(dollars in thousands, except for per share data)
Year ended December 31, 2000:
Basic EPS - income available to common stockholders............. $ 55,321 23,661 $ 2,338.04
==========
Effect of dilutive securities:
Class A convertible preferred stock........................... 769 1,076
--------- -------
Diluted EPS - income available to common stockholders........... $ 56,090 24,737 $ 2,267.41
========= ======= ==========
Year ended December 31, 1999:
Basic EPS - income available to common stockholders............. $ 43,392 23,661 $ 1,833.91
==========
Effect of dilutive securities:
Class A convertible preferred stock........................... 769 1,212
--------- -------
Diluted EPS - income available to common stockholders........... $ 44,161 24,873 $ 1,775.47
========= ======= ==========
Year ended December 31, 1998:
Basic EPS - income available to common stockholders............. $ 32,724 23,661 $ 1,383.04
==========
Effect of dilutive securities:
Class A convertible preferred stock........................... 769 1,389
--------- -------
Diluted EPS - income available to common stockholders........... $ 33,493 25,050 $ 1,337.09
========= ======= ==========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) INTEREST RATE RISK MANAGEMENT / DERIVATIVE FINANCIAL INSTRUMENTS
First Banks utilizes off-balance-sheet derivative financial instruments
to assist in the management of interest rate sensitivity and to modify the
repricing, maturity and option characteristics of on-balance-sheet assets and
liabilities. The use of such derivative financial instruments is strictly
limited to reducing First Banks' interest rate risk exposure.
Derivative financial instruments held by First Banks for purposes of
managing interest rate risk are summarized as follows:
December 31,
-------------------------------------------------
2000 1999
--------------------- --------------------
Notional Credit Notional Credit
amount exposure amount exposure
(dollars expressed in thousands)
Interest rate swap agreements - pay
adjustable rate, receive fixed rate................. $1,105,000 4,207 455,000 3,349
Interest rate swap agreements - pay
adjustable rate, receive adjustable rate............ -- -- 500,000 --
Interest rate floor agreements........................ 35,000 6 35,000 13
Interest rate cap agreements.......................... 450,000 3,753 10,000 26
Forward commitments to sell
mortgage-backed securities.......................... 32,000 -- 33,000 --
========== ======= ========= ======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The notional amounts of derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
our credit exposure through the use of these instruments. The credit exposure
represents the accounting loss we would incur in the event the counterparties
failed completely to perform according to the terms of the derivative financial
instruments and the collateral held to support the credit exposure was of no
value.
Previously, First Banks utilized interest rate swap agreements to
extend the repricing characteristics of certain interest-bearing liabilities to
more closely correspond with its assets, with the objective of stabilizing cash
flow, and accordingly, net interest income, over time. These swap agreements
were terminated due to a change in the composition of the balance sheet. The
change in the composition of the balance sheet was primarily driven by the
significant decline in interest rates experienced during 1995, which caused an
increase in the principal prepayments of residential mortgage loans. The net
interest expense associated with these agreements, consisting primarily of
amortization of deferred losses, was $5.7 million and $3.7 million for the years
ended December 31, 1999 and 1998, respectively. The deferred losses on
terminated swap agreements were amortized over the remaining lives of the
agreements, unless the underlying liabilities were repaid, in which case the
deferred losses were immediately charged to operations. There were no remaining
unamortized deferred losses on the terminated swap agreements at December 31,
1999.
During 1998, First Banks entered into $280.0 million notional amount of
interest rate swap agreements. The swap agreements effectively lengthen the
repricing characteristics of certain interest-earning assets to correspond more
closely with their funding source with the objective of stabilizing cash flow,
and accordingly, net interest income, over time. The swap agreements initially
provided for First Banks to receive a fixed rate of interest and pay an
adjustable rate equivalent to the 90-day London Interbank Offering Rate. In
March 2000, the terms of the swap agreements were modified such that First Banks
currently pay an adjustable rate of interest equivalent to the daily weighted
average prime lending rate minus 2.705%. The terms of the swap agreements
provide for First Banks to pay quarterly and receive payment semiannually. The
amount receivable by First Banks under the swap agreements was $4.1 million at
December 31, 2000 and 1999, respectively, and the amount payable by First Banks
under the swap agreements was $744,000 and $770,000 at December 31, 2000 and
1999, respectively.
During May 1999, First Banks entered into $500.0 million notional
amount of interest rate swap agreements with the objective of stabilizing the
net interest margin during the six-month period surrounding the Year 2000
century date change. The swap agreements provided for First Banks to receive an
adjustable rate of interest equivalent to the daily weighted average 30-day
London Interbank Offering Rate and pay an adjustable rate of interest equivalent
to the daily weighted average prime lending rate minus 2.665%. The terms of the
swap agreements, which had an effective date of October 1, 1999 and a maturity
date of March 31, 2000, provided for First Banks to pay and receive interest on
a monthly basis. In January 2000, First Banks determined these swap agreements
were no longer necessary based upon the results of the Year 2000 transition and
terminated these agreements resulting in a cost of $150,000.
During September 1999, First Banks entered into $175.0 million notional
amount of interest rate swap agreements to effectively lengthen the repricing
characteristics of certain interest-earning assets to correspond more closely
with their funding source with the objective of stabilizing cash flow, and
accordingly, net interest income, over time. The swap agreements provide for
First Banks to receive a fixed rate of interest and pay an adjustable rate
equivalent to the weighted average prime lending rate minus 2.70%. The terms of
the swap agreements provide for First Banks to pay and receive interest on a
quarterly basis. The amount receivable by First Banks under the swap agreements
was $119,000 at December 31, 2000 and 1999 and the amount payable by First Banks
under the swap agreements was $165,000 and $141,000 at December 31, 2000 and
1999, respectively.
During September 2000, First Banks entered into $600.0 million notional
amount of interest rate swap agreements to effectively lengthen the repricing
characteristics of certain interest-earning assets to correspond more closely
with their funding source with the objective of stabilizing cash flow, and
accordingly, net interest income, over time. The swap agreements provide for
First Banks to receive a fixed rate of interest and pay an adjustable rate
equivalent to the weighted average prime lending rate minus 2.70%. The terms of
the swap agreements provide for First Banks to pay and receive interest on a
quarterly basis. The amount receivable and payable by First Banks under the swap
agreements was $1.2 million at December 31, 2000. In conjunction with these
interest rate swap agreements, First Banks also entered into $450.0 million
notional amount of interest rate cap agreements to limit the net interest
expense associated with the interest rate swap agreements. The interest rate cap
agreements provide for First Banks to receive a quarterly adjustable rate of
interest equivalent to the three-month London Interbank Offering Rate, should
such rate exceed the predetermined interest rate of 7.50%. At December 31, 2000,
the unamortized costs associated with the interest rate cap agreements were $3.8
million, and were included in other assets, and the fair value of the interest
rate cap agreements was $1.6 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During September 2000, First Banks entered into $25.0 million notional
amount of one-year interest rate swap agreements and $25.0 million of five and
one-half year interest rate swap agreements to effectively shorten the repricing
characteristics of certain interest-bearing liabilities with the objective of
stabilizing cash flow, and accordingly, net interest income, over time. The swap
agreements provide for First Banks to receive fixed rates of interest ranging
from 6.6% to 7.25% and pay an adjustable rate equivalent to the three-month
London Interbank Offering Rate minus rates ranging from 0.02% to 0.11%. The
terms of the swap agreements provide for First Banks to pay interest on a
quarterly basis and receive interest on either a semiannual basis or an annual
basis. The amount receivable by First Banks under the swap agreements was $1.0
million at December 31, 2000 and the amount payable by First Banks under the
swap agreements was $119,000 at December 31, 2000.
At December 31, 2000, First Banks had pledged investment securities
available for sale with a carrying value of $8.6 million in connection with the
interest rate swap agreements. In addition, at December 31, 2000, First Banks
had accepted investment securities with a fair value of $19.0 million as
collateral in connection with the interest rate swap agreements. First Banks is
permitted by contract to sell or repledge the collateral accepted from its
counterparties, however, at December 31, 2000, First Banks had not sold or
repledged any of this collateral.
The maturity dates, notional amounts, interest rates paid and received,
and fair values of interest rate swap agreements outstanding as of December 31,
2000 and 1999 were as follows:
Notional Interest rate Interest rate Fair
Maturity date amount paid received Value
------------- ------ ---- -------- -----
(dollars expressed in thousands)
December 31, 2000:
September 27, 2001........................... $ 175,000 6.80% 6.14% $ 65
June 11, 2002................................ 15,000 6.80 6.00 7
September 13, 2001........................... 12,500 6.56 6.80 42
September 21, 2001........................... 12,500 6.47 6.60 43
September 16, 2002........................... 195,000 6.80 5.36 (1,776)
September 18, 2002........................... 70,000 6.80 5.33 (690)
September 20, 2004........................... 600,000 6.80 6.78 16,869
March 13, 2006............................... 12,500 6.47 7.25 5
March 22, 2006............................... 12,500 6.39 7.20 6
---------- --------
$1,105,000 6.70 6.43 $ 14,571
========== ====== ===== ========
December 31, 1999:
March 31, 2000............................... $ 500,000 5.84% 6.45% $ 124
September 27, 2001........................... 175,000 5.80 6.14 (1,598)
June 11, 2002................................ 15,000 6.12 6.00 (291)
September 16, 2002........................... 195,000 6.12 5.36 (7,325)
September 18, 2002........................... 70,000 6.14 5.33 (2,700)
---------- --------
$ 955,000 5.91 6.08 $(11,790)
========== ====== ===== ========
First Banks also utilizes interest rate cap and floor agreements to
limit the interest expense associated with certain interest-bearing liabilities
and the net interest expense of certain interest rate swap agreements,
respectively. At December 31, 2000 and 1999, the unamortized costs of these
agreements were $6,000 and $32,000, respectively, and were included in other
assets.
During 2000 and 1998, the net interest expense realized on the
derivative financial instruments was $4.7 million and $4.0 million,
respectively, in comparison to net interest income of $430,000 realized on the
derivative financial instruments in 1999.
Derivative financial instruments issued by First Banks consist of
commitments to originate fixed-rate loans. Commitments to originate fixed-rate
loans consist primarily of residential real estate loans. These loan
commitments, net of estimated underwriting fallout, and loans held for sale were
$37.6 million and $31.5 million at December 31, 2000 and 1999, respectively.
These net loan commitments and loans held for sale are hedged with forward
contracts to sell mortgage-backed securities of $32.0 million and $33.0 million
at December 31, 2000 and 1999, respectively. Gains and losses from forward
contracts are deferred and included in the cost basis of loans held for sale. At
December 31, 2000, the net unamortized losses were $165,000, in comparison to
net unamortized gains of $838,000 at December 31, 1999. Such gains and losses
were applied to the carrying value of the loans held for sale as part of the
lower of cost or market valuation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(13) CREDIT COMMITMENTS
First Banks is a party to commitments to extend credit and commercial
and standby letters of credit in the normal course of business to meet the
financing needs of its customers. These instruments involve, to varying degrees,
elements of credit risk and interest rate risk in excess of the amount
recognized in the consolidated balance sheets. The interest rate risk associated
with these credit commitments relates primarily to the commitments to originate
fixed-rate loans. As more fully discussed in Note 12 to the accompanying
consolidated financial statements, the interest rate risk of the commitments to
originate fixed-rate loans has been hedged with forward contracts to sell
mortgage-backed securities. The credit risk amounts are equal to the contractual
amounts, assuming the amounts are fully advanced and the collateral or other
security is of no value. First Banks uses the same credit policies in granting
commitments and conditional obligations as it does for on-balance-sheet items.
Commitments to extend credit at December 31 were as follows:
December 31,
------------
2000 1999
---- ----
(dollars expressed in thousands)
Commitments to extend credit.......................................... $ 1,484,278 1,310,249
Commercial and standby letters of credit.............................. 94,802 64,455
----------- ---------
$ 1,579,080 1,374,704
=========== =========
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Each customer's creditworthiness is
evaluated on a case-by-case basis. The amount of collateral obtained, if deemed
necessary upon extension of credit, is based on management's credit evaluation
of the counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant, equipment, income-producing commercial properties or
single family residential properties. Collateral is generally required except
for consumer credit card commitments.
Commercial and standby letters of credit are conditional commitments
issued to guarantee the performance of a customer to a third party. The letters
of credit are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing and similar
transactions. Most letters of credit extend for less than one year. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. Upon issuance of the
commitments, First Banks holds marketable securities, certificates of deposit,
inventory, real property or other assets as collateral supporting those
commitments for which collateral is deemed necessary.
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is management's estimate of the
values at which the instruments could be exchanged in a transaction between
willing parties. These estimates are subjective and may vary significantly from
amounts that would be realized in actual transactions. In addition, other
significant assets are not considered financial assets including the mortgage
banking operation, deferred tax assets, bank premises and equipment and
intangibles associated with the purchase of subsidiaries. Further, the tax
ramifications related to the realization of the unrealized gains and losses can
have a significant effect on the fair value estimates and have not been
considered in any of the estimates.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The estimated fair value of First Banks' financial instruments at
December 31 were as follows:
2000 1999
----------------------- -----------------------
Carrying Estimated Carrying Estimated
value fair value value fair value
Financial assets:
Cash and cash equivalents.................... $ 198,279 198,279 170,894 170,894
Investment securities:
Available for sale......................... 539,386 539,386 430,093 430,093
Held to maturity........................... 24,148 24,509 21,554 21,476
Net loans.................................... 4,670,673 4,694,594 3,927,713 3,908,065
Accrued interest receivable.................. 45,226 45,226 33,491 33,491
========== ========== ========== ==========
Financial liabilities:
Deposits:
Demand:
Non-interest-bearing.................... $ 808,251 808,251 606,064 606,064
Interest-bearing........................ 448,146 448,146 415,113 415,113
Savings and money market................... 1,447,898 1,447,898 1,198,314 1,198,314
Time deposits.............................. 2,308,120 2,351,418 2,032,323 2,032,323
Short-term borrowings........................ 140,569 140,569 73,554 73,554
Note payable................................. 83,000 83,000 64,000 64,000
Accrued interest payable..................... 23,227 23,227 11,607 11,607
Guaranteed preferred beneficial interests
in subordinated debentures................. 182,849 185,608 127,611 127,391
========== ========== ========== ==========
Off-balance-sheet:
Interest rate swap, cap and floor agreements. $ 7,966 16,208 3,388 (11,742)
Forward contracts to sell mortgage-backed
securities................................. -- 32,393 -- 32,207
Credit commitments........................... -- 4,183 -- 4,517
========== ========== ========== ==========
The following methods and assumptions were used in estimating the fair
value of financial instruments:
Financial Assets:
Cash and cash equivalents and accrued interest receivable: The carrying
values reported in the consolidated balance sheets approximate fair value.
Investment securities: The fair value of investment securities
available for sale is the amount reported in the consolidated balance sheets.
The fair value of investment securities held to maturity is based on quoted
market prices where available. If quoted market prices were not available, the
fair value was based upon quoted market prices of comparable instruments.
Net loans: The fair value of most loans held for portfolio was
estimated utilizing discounted cash flow calculations that applied interest
rates currently being offered for similar loans to borrowers with similar risk
profiles. The fair value of loans held for sale, which is the amount reported in
the consolidated balance sheets, is based on quoted market prices where
available. If quoted market prices are not available, the fair value is based
upon quoted market prices of comparable instruments. The carrying value of loans
is net of the allowance for loan losses and unearned discount.
Financial Liabilities:
Deposits: The fair value disclosed for deposits generally payable on
demand (i.e., non-interest-bearing and interest-bearing demand, savings and
money market accounts) is considered equal to their respective carrying amounts
as reported in the consolidated balance sheets. The fair value disclosed for
demand deposits does not include the benefit that results from the low-cost
funding provided by deposit liabilities compared to the cost of borrowing funds
in the market.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair value disclosed for certificates of deposit was estimated utilizing a
discounted cash flow calculation that applied interest rates currently being
offered on similar certificates to a schedule of aggregated monthly maturities
of time deposits.
Guaranteed preferred beneficial interests in subordinated debentures:
The fair value is based on quoted market prices.
Short-term borrowings, note payable and accrued interest payable: The
carrying value reported in the consolidated balance sheets approximates fair
value.
Off-Balance-Sheet:
Interest rate swap, cap and floor agreements: The fair value of the
interest rate swap, cap and floor agreements is estimated by comparison to
market rates quoted on new agreements with similar terms and creditworthiness.
Forward contracts to sell mortgage-backed securities: The fair value of
forward contracts to sell mortgage-backed securities is based upon quoted market
prices. The fair value of these contracts has been reflected in the consolidated
balance sheets in the carrying value of the loans held for sale portfolio as
part of the lower of cost or market valuation.
Credit commitments: The fair value of the commitments to extend credit
associated with loans held for sale in which First Banks has interest rate risk
exposure are based on quoted market prices of comparable mortgage-backed
securities less estimated fallout. The majority of the other commitments to
extend credit and commercial and standby letters of credit contain variable
interest rates and credit deterioration clauses and, therefore, the carrying
value of these credit commitments reported in the consolidated balance sheets
approximates fair value.
(15) EMPLOYEE BENEFITS
First Banks' 401(k) plan is a self-administered savings and incentive
plan covering substantially all employees. Under the plan, employer-matching
contributions are determined annually by First Banks' Board of Directors.
Employee contributions are limited to 15% of the employee's annual compensation,
not to exceed $10,500 for 2000. Total employer contributions under the plan were
$1.1 million, $863,000 and $648,000 for the years ended December 31, 2000, 1999
and 1998, respectively. The plan assets are held and managed under a trust
agreement with First Bank's trust department.
(16) PREFERRED STOCK
First Banks has two classes of preferred stock outstanding. The Class A
preferred stock is convertible into shares of common stock at a rate based on
the ratio of the par value of the preferred stock to the current market value of
the common stock at the date of conversion, to be determined by independent
appraisal at the time of conversion. Shares of Class A preferred stock may be
redeemed by First Banks at any time at 105.0% of par value. The Class B
preferred stock may not be redeemed or converted. The redemption of any issue of
preferred stock requires the prior approval of the Federal Reserve Board.
The holders of the Class A and Class B preferred stock have full voting
rights. Dividends on the Class A and Class B preferred stock are adjustable
quarterly based on the highest of the Treasury Bill Rate or the Ten Year
Constant Maturity Rate for the two-week period immediately preceding the
beginning of the quarter. This rate shall not be less than 6.0% nor more than
12.0% on the Class A preferred stock, or less than 7.0% nor more than 15.0% on
the Class B preferred stock. The annual dividend rates for the Class A and Class
B preferred stock were 6.0% and 7.0%, respectively, for the years ended December
31, 2000, 1999 and 1998.
In addition to the Class A and Class B preferred stock, First Banks has
two issues of trust preferred securities outstanding and FBA has one issue of
trust preferred securities outstanding. The structure of the trust preferred
securities, as further described in Note 9, satisfies the regulatory
requirements for inclusion, subject to certain limitation, in First Banks'
capital base.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(17) TRANSACTIONS WITH RELATED PARTIES
Outside of normal customer relationships, no directors or officers of
First Banks, no stockholders holding over 5% of First Banks' voting securities
and no corporations or firms with which such persons or entities are associated
currently maintain or have maintained, since the beginning of the last full
fiscal year, any significant business or personal relationships with First Banks
or its subsidiaries, other than such as arises by virtue of such position or
ownership interest in First Banks or its subsidiaries, except as described in
the following paragraphs.
During 2000, 1999 and 1998, Tidal Insurance Limited (Tidal), a
corporation owned indirectly by First Banks' Chairman and his adult children,
received approximately $212,000, $316,000 and $280,000, respectively, in
insurance premiums for accident, health and life insurance policies purchased by
loan customers of First Banks. The insurance policies are issued by an
unaffiliated company and subsequently ceded to Tidal. First Banks believes the
premiums paid by the loan customers of First Banks are comparable to those that
such loan customers would have paid if the premiums were subsequently ceded to
an unaffiliated third-party insurer.
During 2000, 1999 and 1998, First Securities America, Inc. (FSA), a
corporation established and administered by and for the benefit of First Banks'
Chairman and members of his immediate family, received approximately $235,000,
$194,000 and $265,000, respectively, in commissions and insurance premiums for
policies purchased by First Banks or customers of the Subsidiary Banks from
unaffiliated, third-party insurors. The insurance premiums on which the
aforementioned commissions were earned were competitively bid, and First Banks
deems the commissions FSA earned from unaffiliated third-party companies to be
comparable to those that would have been earned by an unaffiliated third-party
agent.
First Brokerage America, L.L.C., a limited liability corporation which
is indirectly owned by First Banks' Chairman and members of his immediate
family, received approximately $2.1 million, $2.3 million and $1.8 million for
the years ended December 31, 2000, 1999 and 1998, respectively, in commissions
paid by unaffiliated third-party companies. The commissions received were
primarily in connection with the sales of annuities, securities and other
insurance products to customers of the Subsidiary Banks.
First Services, L.P., a limited partnership indirectly owned by First
Banks' Chairman and his adult children, provides data processing services and
operational support for First Banks, Inc. and its Subsidiary Banks. Fees paid
under agreements with First Services L.P. were $19.3 million, $16.4 million and
$12.2 million for the years ended December 31, 2000, 1999 and 1998,
respectively. During 2000, 1999 and 1998, First Services, L.P. paid First Banks
$1.8 million, $1.2 million and $799,000, respectively, in rental fees for the
use of data processing and other equipment owned by First Banks. The fees paid
by First Banks for data processing services are at least as favorable as could
have been obtained from unaffiliated third parties.
(18) CAPITAL STOCK OF FIRST BANKS AMERICA, INC.
First Banks owned 2,500,000 shares of FBA's Class B common stock and 8,741,350
shares of FBA's common stock at December 31, 2000, representing 92.86% of FBA's
outstanding voting stock. In comparison, First Banks owned 2,500,000 shares of
FBA's Class B common stock and 2,210,581 shares of FBA's common stock at
December 31, 1999, representing 83.37% of FBA's outstanding voting stock. The
increase for 2000 is attributable to FBA's issuance of 6,530,769 shares of its
common stock to First Banks in conjunction with its purchase of First Bank &
Trust, a wholly owned subsidiary of First Banks. This transaction, which
occurred on October 31, 2000, increased First Banks' ownership interest in FBA
from 84.42% to approximately 92.82%. FBA's common stock is publicly traded on
the New York Stock Exchange.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(19) REGULATORY CAPITAL
First Banks and the Subsidiary Banks are subject to various regulatory
capital requirements administered by the federal and state banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on First Banks' financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, First Banks and the Subsidiary Banks must meet specific capital
guidelines that involve quantitative measures of assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices.
Capital amounts and classifications are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require First Banks and the Subsidiary Banks to maintain minimum
amounts and ratios of total and Tier 1 capital (as defined in the regulations)
to risk-weighted assets, and of Tier 1 capital to average assets. Management
believes, as of December 31, 2000, First Banks and the Subsidiary Banks were
each well capitalized.
As of December 31, 2000, the most recent notification from First Banks'
primary regulator categorized First Banks and the Subsidiary Banks as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, First Banks and the Subsidiary Banks must
maintain minimum total risk-based, Tier 1 risk-based and Tier 2 leverage ratios
as set forth in the table below.
At December 31, 2000 and 1999, First Banks' and the Subsidiary Banks'
required and actual capital ratios were as follows:
To be well
capitalized under
Actual For capital prompt corrective
------
2000 1999 adequacy purposes action provisions
---- ---- ----------------- -----------------
Total capital (to risk-weighted assets):
First Banks............................. 10.21% 10.05% 8.0% 10.0%
First Bank.............................. 10.71 10.60 8.0 10.0
FB&T.................................... 10.58 11.17 8.0 10.0
BSF (1)................................. 22.38 -- 8.0 10.0
Tier 1 capital (to risk-weighted assets):
First Banks............................. 7.56 8.00 4.0 6.0%
First Bank.............................. 9.46 9.35 4.0 6.0
FB&T.................................... 9.32 9.94 4.0 6.0
BSF (1)................................. 21.42 -- 4.0 6.0
Tier 1 capital (to average assets):
First Banks............................. 7.45 7.14 3.0 5.0%
First Bank.............................. 8.49 8.10 3.0 5.0
FB&T.................................... 9.27 9.15 3.0 5.0
BSF (1)................................. 22.00 -- 3.0 5.0
-------------------------
(1) BSF was acquired by FBA on December 31, 2000.
(20) DISTRIBUTION OF EARNINGS OF THE SUBSIDIARY BANKS
The Subsidiary Banks are restricted by various state and federal
regulations, as well as by the terms of the Credit Agreement described in Note
8, as to the amount of dividends which are available for payment to First Banks,
Inc. Under the most restrictive of these requirements, the future payment of
dividends from the Subsidiary Banks is limited to approximately $45.2 million at
December 31, 2000, unless prior permission of the regulatory authorities and/or
the lending banks is obtained.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(21) BUSINESS SEGMENT RESULTS
First Banks' business segments are its Subsidiary Banks. The reportable
business segments are consistent with the management structure of First Banks,
the Subsidiary Banks and the internal reporting system that monitors
performance.
Through the respective branch networks, the Subsidiary Banks provide
similar products and services in their defined geographic areas. The products
and services offered include a broad range of commercial and personal deposit
products, including demand, savings, money market and time deposit accounts. In
addition, the Subsidiary Banks market combined basic services for various
customer groups, including packaged accounts for more affluent customers, and
sweep accounts, lock-box deposits and cash management products for commercial
customers. The Subsidiary Banks also offer both consumer and commercial loans.
Consumer lending includes residential real estate, home equity and installment
lending. Commercial lending includes commercial, financial and agricultural
loans, real estate construction and development loans, commercial real estate
loans, asset-based loans, commercial leasing and trade financing.
First Bank FB&T (1)
--------------------------------- ----------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Balance sheet information:
Investment securities................... $ 214,005 241,624 264,364 330,478 192,357 247,566
Loans, net of unearned discount......... 2,694,005 2,527,649 2,490,556 2,058,628 1,469,093 1,089,965
Total assets............................ 3,152,885 3,028,046 3,024,600 2,733,545 1,854,827 1,504,311
Deposits................................ 2,729,489 2,689,671 2,659,030 2,306,469 1,590,490 1,329,253
Stockholders' equity.................... 273,848 263,466 243,673 333,186 204,617 148,239
========== ========== ======== ========= ========= =========
Income statement information:
Interest income......................... $ 247,290 221,195 219,609 176,902 132,407 108,662
Interest expense........................ 115,421 105,231 111,656 71,167 51,544 48,320
---------- ---------- -------- --------- --------- ---------
Net interest income................ 131,869 115,964 107,953 105,735 80,863 60,342
Provision for possible loan losses...... 12,250 8,890 7,250 1,877 4,183 1,750
---------- ---------- -------- --------- --------- ---------
Net interest income after provision
for possible loan losses......... 119,619 107,074 100,703 103,858 76,680 58,592
Noninterest income...................... 32,152 32,260 29,582 12,343 10,774 8,322
Noninterest expense..................... 90,746 77,786 79,748 65,567 54,992 47,105
---------- ---------- -------- --------- --------- ---------
Income (loss) before provision
(benefit) for income taxes and
minority interest in income of
subsidiary....................... 61,025 61,548 50,537 50,634 32,462 19,809
Provision (benefit) for income taxes.... 20,889 20,811 17,238 20,064 12,353 8,163
---------- ---------- -------- --------- --------- ---------
Income (loss) before minority
interest in income of subsidiary. 40,136 40,737 33,299 30,570 20,109 11,646
Minority interest in income
of subsidiary.................... -- -- -- -- -- --
---------- ---------- --------- --------- --------- ---------
Net income......................... $ 40,136 40,737 33,299 30,570 20,109 11,646
========== ========== ======== ========= ========= =========
------------------------
(1) Includes BSF, which was acquired by FBA on December 31, 2000.
(2) Corporate and other includes $8.6 million, $7.9 million and $6.4 million of
guaranteed preferred debentures expense, after applicable income tax
benefit of $4.6 million, $4.2 million and $3.4 million for the years ended
December 31, 2000, 1999 and 1998, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Other financial services include mortgage banking, credit and debit
cards, brokerage services, credit-related insurance, automated teller machines,
telephone banking, safe deposit boxes and trust, private banking and
institutional money management services. The revenues generated by each business
segment consist primarily of interest income, generated from the loan and
investment security portfolios, and service charges and fees, generated from the
deposit products and services. The geographic areas include Missouri, Illinois,
southern and northern California and Houston, Dallas, Irving and McKinney Texas.
The products and services are offered to customers primarily within their
respective geographic areas, with the exception of loan participations executed
between the Subsidiary Banks.
The business segment results are consistent with First Banks' internal
reporting system and, in all material respects, with generally accepted
accounting principles and practices predominant in the banking industry. Such
principles and practices are summarized in Note 1 to the consolidated financial
statements.
Corporate, Other and
Intercompany Reclassifications (2) Consolidated Totals
---------------------------------------- -------------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
19,051 17,666 22,866 563,534 451,647 534,796
(368) (418) (416) 4,752,265 3,996,324 3,580,105
(9,739) (15,126) 25,899 5,876,691 4,867,747 4,554,810
(23,543) (28,347) (48,298) 5,012,415 4,251,814 3,939,985
(254,188) (173,178) (128,549) 352,846 294,905 263,363
========= ========= ========= ========== ========= =========
(1,366) (520) (411) 422,826 353,082 327,860
1,091 1,926 2,203 187,679 158,701 162,179
--------- --------- --------- ---------- --------- ---------
(2,457) (2,446) (2,614) 235,147 194,381 165,681
-- -- -- 14,127 13,073 9,000
--------- --------- --------- ---------- --------- ---------
(2,457) (2,446) (2,614) 221,020 181,308 156,681
(1,717) (1,384) (1,407) 42,778 41,650 36,497
14,850 18,029 11,851 171,163 150,807 138,704
--------- --------- --------- ---------- --------- ---------
(19,024) (21,859) (15,872) 92,635 72,151 54,474
(6,471) (6,851) (5,708) 34,482 26,313 19,693
--------- --------- --------- --------- --------- ---------
(12,553) (15,008) (10,164) 58,153 45,838 34,781
2,046 1,660 1,271 2,046 1,660 1,271
--------- --------- --------- ---------- --------- ---------
(14,599) (16,668) (11,435) 56,107 44,178 33,510
========= ========= ========= ========== ========= =========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(22) PARENT COMPANY ONLY FINANCIAL INFORMATION
Following are condensed balance sheets of First Banks, Inc. as of
December 31, 2000 and 1999, and condensed statements of income and cash flows
for the years ended December 31, 2000, 1999 and 1998:
CONDENSED BALANCE SHEETS
December 31,
-----------------
2000 1999
---- ----
(dollars expressed in thousands)
Assets
------
Cash deposited in subsidiary banks........................................... $ 8,079 4,347
Investment securities........................................................ 14,309 13,848
Investment in subsidiaries................................................... 461,753 429,255
Advances to FBA ............................................................. 98,000 --
Other assets................................................................. 15,333 12,278
---------- ---------
Total assets........................................................... $ 597,474 459,728
========== =========
Liabilities and Stockholders' Equity
------------------------------------
Note payable................................................................ $ 83,000 64,000
Subordinated debentures..................................................... 148,196 88,918
Accrued expenses and other liabilities...................................... 13,432 11,905
---------- ---------
Total liabilities..................................................... 244,628 164,823
Stockholders' equity........................................................ 352,846 294,905
---------- ---------
Total liabilities and stockholders' equity............................ $ 597,474 459,728
========== =========
CONDENSED STATEMENTS OF INCOME
Years ended December 31,
----------------------------
2000 1999 1998
---- ---- ----
(dollars expressed in thousands)
Income:
Dividends from subsidiaries........................................ $ 43,000 25,250 23,000
Management fees from subsidiaries.................................. 17,325 12,977 10,154
Other.............................................................. 1,956 1,313 2,796
--------- ------ -------
Total income................................................... 62,281 39,540 35,950
--------- ------ -------
Expense:
Interest........................................................... 3,964 3,628 3,411
Salaries and employee benefits..................................... 12,180 8,999 7,307
Legal, examination and professional fees........................... 2,031 7,006 1,988
Other.............................................................. 13,969 12,947 12,639
--------- ------ -------
Total expense.................................................. 32,144 32,580 25,345
--------- ------ -------
Income before benefit for income taxes and
equity in undistributed earnings of subsidiaries............ 30,137 6,960 10,605
Benefit for income taxes............................................. (3,922) (5,649) (3,999)
--------- ------ -------
Income before equity in undistributed earnings of subsidiaries. 34,059 12,609 14,604
Equity in undistributed earnings of subsidiaries..................... 22,048 31,569 18,906
--------- ------ -------
Net income..................................................... $ 56,107 44,178 33,510
========= ====== =======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31,
---------------------------------
2000 1999 1998
---- ---- ----
(dollars expressed in thousands)
Cash flows from operating activities:
Net income...................................................... $ 56,107 44,178 33,510
Adjustments to reconcile net income to net cash provided by
operating activities:
Net income of subsidiaries.................................. (64,937) (56,676) (42,107)
Dividends from subsidiaries................................. 43,000 25,250 23,000
Other, net.................................................. 272 1,900 4,963
--------- -------- -------
Net cash provided by operating activities................ 34,442 14,652 19,366
--------- -------- -------
Cash flows from investing activities:
(Increase) decrease in investment securities.................... (860) (100) 3,000
Investment in common securities of First Preferred II........... (1,778) -- --
Acquisitions of subsidiaries.................................... -- (31,500) (31,586)
Capital contributions to subsidiaries........................... (6,100) (3,000) --
Return of subsidiary capital.................................... -- 10,000 --
(Increase) decrease in advances to subsidiaries................. (98,000) -- 14,900
Other, net...................................................... (1,464) (3,646) (3,350)
--------- -------- -------
Net cash used in investing activities.................... (108,202) (28,246) (17,036)
--------- -------- -------
Cash flows from financing activities:
Increase (decrease) in note payable............................. 19,000 13,952 (5,096)
Proceeds from issuance of First Preferred II
subordinated debentures..................................... 59,278 -- --
Payment of preferred stock dividends............................ (786) (786) (786)
--------- -------- -------
Net cash provided by (used in) financing activities...... 77,492 13,166 (5,882)
--------- -------- -------
Net increase (decrease) in cash and cash equivalents..... 3,732 (428) (3,552)
Cash deposited in subsidiary banks, beginning of year............. 4,347 4,775 8,327
--------- -------- -------
Cash deposited in subsidiary banks, end of year................... $ 8,079 4,347 4,775
========= ======== =======
Noncash investing activities:
Cash paid for interest.......................................... $ 4,117 3,420 3,747
Reduction of deferred tax valuation reserve..................... -- 811 --
========= ======== =======
(23) CONTINGENT LIABILITIES
In the ordinary course of business, there are various legal proceedings
pending against First Banks and/or its subsidiaries. Management, in consultation
with legal counsel, is of the opinion the ultimate resolution of these
proceedings will have no material effect on the financial condition or results
of operations of First Banks or its subsidiaries.
(24) Interim Consolidated Financial Statements (Unaudited)
Basis of Presentation. The unaudited interim consolidated financial
statements include the accounts of First Banks and its subsidiaries after
elimination of material intercompany transactions. These unaudited interim
consolidated financial statements, in the opinion of management, include all
adjustments necessary for the fair presentation thereof. All adjustments made
were of a normal and recurring nature. Operating results for the six months
ended June 30, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Implementation of New Accounting Standard. In June 1998, the Financial
Accounting Standards Board, or FASB, issued Statement of Financial Accounting
Standards, or SFAS, No. 133 - Accounting for Derivative Instruments and Hedging
Activities, or SFAS 133. In June 1999 and June 2000, the FASB issued SFAS No.
137 - Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133, an Amendment of FASB Statement No.
133, and SFAS No. 138 - Accounting for Derivative Instruments and Hedging
Activities, an Amendment of FASB Statement No. 133, respectively. SFAS 133, as
amended, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS 133, as amended, requires an entity
to recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge in
one of three categories. The accounting for changes in the fair value of a
derivative (that is, gains and losses) depends on the intended use of the
derivative and the resulting designation. Under SFAS 133, as amended, an entity
that elects to apply hedge accounting is required to establish, at the inception
of the hedge, the method it will use for assessing the effectiveness of the
hedging derivative and the measurement approach for determining the ineffective
aspect of the hedge. Those methods must be consistent with the entity's approach
to managing risk.
We utilize derivative instruments and hedging activities to assist in
the management of interest rate sensitivity and to modify the repricing,
maturity and option characteristics of certain assets and liabilities. We use
such derivative instruments solely to reduce our interest rate exposure. The
following is a summary of our accounting policies for derivative instruments and
hedging activities under SFAS 133, as amended.
Interest Rate Swap Agreements - Cash Flow Hedges. Interest rate swap
agreements designated as cash flow hedges are accounted for at fair value. The
effective portion of the change in the cash flow hedge's gain or loss is
initially reported as a component of other comprehensive income and subsequently
reclassified into noninterest income when the underlying transaction affects
earnings. The ineffective portion of the change in the cash flow hedge's gain or
loss is recorded in earnings on each monthly measurement date. The swap
agreements are accounted for on an accrual basis with the net interest
differential being recognized as an adjustment to interest income or interest
expense of the related asset or liability.
Interest Rate Swap Agreements - Fair Value Hedges. Interest rate swap
agreements designated as fair value hedges are accounted for at fair value.
Changes in the fair value of the swap agreements are recognized currently in
noninterest income. The change in the fair value on the underlying hedged item
attributable to the hedged risk adjusts the carrying amount of the underlying
hedged item and is also recognized currently in noninterest income. All changes
in fair value are measured on a monthly basis. The swap agreements are accounted
for on an accrual basis with the net interest differential being recognized as
an adjustment to interest income or interest expense of the related asset or
liability.
Interest Rate Cap and Floor Agreements. Interest rate cap and floor
agreements are accounted for at fair value. Changes in the fair value of
interest rate cap and floor agreements are recognized in earnings on each
monthly measurement date.
Interest Rate Lock Commitments. Commitments to originate loans, or
interest rate lock commitments, which primarily consist of commitments to
originate fixed rate residential mortgage loans, are recorded at fair value.
Changes in the fair value are recognized in noninterest income on a monthly
basis.
Forward Contracts to Sell Mortgage-Backed Securities. Forward contracts
to sell mortgage-backed securities are recorded at fair value. Changes in the
fair value of forward contracts to sell mortgage-backed securities are
recognized in noninterest income on a monthly basis.
On January 1, 2001, we implemented SFAS 133, as amended. The
implementation of SFAS 133, as amended, resulted in an increase in derivative
instruments of $12.5 million, an increase in deferred tax liabilities of $5.1
million and an increase in other comprehensive income of $9.1 million. In
addition, we recorded a cumulative effect of change in accounting principle of
$1.4 million, net of taxes of $741,000, as a reduction of net income. The effect
of future derivative transactions as well as further guidance from the
Derivative Implementation Group may result in modifications of our current
assessment of SFAS 133, as amended, and its overall impact on our consolidated
financial statements.
INVESTOR INFORMATION
First Banks' Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission, is available without charge to any stockholder upon
request. Requests should be directed, in writing, to Allen H. Blake, First
Banks, Inc., 600 James S. McDonnell Boulevard, Hazelwood, Missouri 63042.
First Banks, Inc. Preferred Securities
The preferred securities of First Banks are traded on the Nasdaq
National Market System with the ticker symbols "FBNKO" and "FBNKN." As of March
20, 2001, there were approximately 484 record holders of First Preferred Capital
Trust. This number does not include any persons or entities that hold their
preferred securities in nominee or "street" name through various brokerage
firms. The preferred securities of First Preferred Capital Trust II are
represented by a global security that has been deposited with and registered in
the name of The Depository Trust Company, New York, New York (DTC). The
beneficial ownership interests of these preferred securities are recorded
through the DTC book-entry system. The high and low preferred securities prices
and the dividends declared for the periods presented are summarized as follows:
First Preferred Capital Trust - FBNKO
2001 2000 1999 Dividend
---------------- -------------- --------------
High Low High Low High Low Declared
---- --- ---- --- ---- --- --------
First quarter..................... $ 26.25 24.38 25.25 23.13 27.25 25.13 $ 0.578125
Second quarter.................... 27.35 25.00 26.00 23.50 27.00 25.25 0.578125
Third quarter..................... 27.25 25.00 25.13 23.50 26.63 24.94 0.578125
Fourth quarter.................... 25.00 23.38 26.00 23.88 0.578125
First Preferred Capital Trust II - FBNKN
2001 2000 Dividend
--------------- ------------
High Low High Low Declared
---- --- ---- --- --------
First quarter..................... $ 27.75 26.38 - - $0.640000
Second quarter.................... 27.40 26.25 - - 0.640000
Third quarter..................... 28.50 26.95 - - 0.640000
Fourth quarter.................... 27.00 25.13 0.504888
First Banks America, Inc. Preferred Securities
The preferred securities of FBA are traded on the New York Stock
Exchange with the ticker symbol "FBAPrt." As of March 20, 2001, there were
approximately 235 record holders of preferred securities. This number does not
include any persons or entities that hold their preferred securities in nominee
or "street" name through various brokerage firms. The high and low preferred
securities prices and the dividends declared for the periods presented are
summarized as follows:
First America Capital Trust - FBAPrt
2001 2000 1999 Dividend
---------------- ------------- -------------
High Low High Low High Low Declared
---- --- ---- --- ---- --- --------
First quarter..................... $25.00 21.63 23.00 19.50 26.25 24.75 $ 0.53125
Second quarter.................... 25.05 23.95 23.88 20.69 26.25 24.31 0.53125
Third quarter..................... 25.80 24.80 23.75 21.13 25.25 22.50 0.53125
Fourth quarter.................... 22.63 20.75 24.50 21.94 0.53125
For information concerning First Banks, please contact:
Allen H. Blake
President and Chief Operating Officer
600 James S. McDonnell Boulevard
Hazelwood, Missouri 63042
Telephone - (314) 592-5000
Transfer Agent:
State Street Bank and Trust Company
Corporate Trust Department
P. O. Box 778
Boston, Massachusetts 02102-0778
Telephone - (800) 531-0368
www.statestreet.com
================================================================================
TABLE OF CONTENTS
Page
----
Summary....................................... 1
Risk Factors.................................. 9
Special Note Regarding Forward-Looking
Statements................................. 17
Use of Proceeds............................... 17
Accounting Treatment.......................... 18
Market For the Trust Preferred Securities..... 18
Capitalization................................ 19
Selected Consolidated and Other Financial
Data ...................................... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 21
Business...................................... 57
Management.................................... 63
Description of the Trust...................... 65
Description of the Preferred Securities....... 66
Description of the Subordinated
Debentures................................. 79
Book-entry Issuance........................... 90
Description of the Guarantee.................. 92
Relationship Among the Preferred
Securities, the Subordinated
Debentures and the Guarantee............... 94
Federal Income Tax Consequences............... 96
ERISA Considerations.......................... 102
Underwriting.................................. 102
Legal Matters................................. 105
Where You Can Find Information................ 105
Experts....................................... 105
Documents Incorporated by Reference........... 106
Index to Consolidated Financial
Statements................................. 107
o You should only rely on the information contained or incorporated by
reference in this prospectus. We have not, and our underwriters have not,
authorized any person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely
on it.
o We are not, and our underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted.
o You should assume that the information appearing in this prospectus is
accurate as of the date on the front cover of this prospectus only.
o This prospectus does not constitute an offer to sell, or the solicitation of
an offer to buy, any securities other than the securities to which it
relates.
================================================================================
================================================================================
================================================================================
================================================================================
1,600,000 Preferred Securities
FIRST PREFERRED
CAPITAL TRUST III
% Cumulative Trust Preferred
Securities
(Liquidation Amount $25 per
Preferred Security)
Fully, irrevocably and unconditionally
guaranteed on a subordinated basis, as
described in this prospectus, by
FIRST BANKS, INC.
---------------
$40,000,000
% Subordinated Debentures
of
FIRST BANKS, INC.
-------------
Prospectus
, 2001
-------------
Stifel, Nicolaus & Company
Incorporated
Dain Rauscher Wessels
Fahnestock & Co. Inc.
================================================================================
================================================================================
FIRST BANKS, INC.
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
SEC Registration Fee................................................... $ 11,500
NASD Filing Fee........................................................ 5,100
Nasdaq Listing Fee..................................................... 1,000
Blue Sky Qualification Fees and Expenses............................... 3,000
Accounting Fees and Expenses........................................... 50,000
Legal Fees and Expenses................................................ 105,000
Printing and Engraving Expenses........................................ 50,000
Trustees' Fees and Expenses............................................ 20,000
Miscellaneous.......................................................... 29,400
--------
Total.................................................................. $275,000
========
Item 15. Indemnification of Directors and Officers
The Registrant is a Missouri corporation. Section 351.355.1 of the
Revised Statutes of Missouri provides that a corporation may indemnify a
director, officer, employee or agent of the corporation in any action, suit or
proceeding other than an action by or in the right of the corporation, against
expenses (including attorneys' fees), judgments, fines and settlement amounts
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Section 351.355.2 provides that the corporation may
indemnify any such person in any action or suit by or in the right of the
corporation against expenses (including attorneys' fees) and settlement amounts
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that he may not be indemnified in respect of any claim,
issue or matter in which he has been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation, unless authorized
by the court. Section 351.355.3 provides that a corporation shall indemnify any
such person against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the action, suit or proceeding if he has been
successful in defense of such action, suit or proceeding and if such action,
suit or proceeding is one for which the corporation may indemnify him under
Section 351.355.1 or 351.355.2. Section 351.355.7 provides that a corporation
shall have the power to give any further indemnity to any such person, in
addition to the indemnity otherwise authorized under Section 351.355, provided
such further indemnity is either (i) authorized, directed or provided for in the
articles of incorporation of the corporation or any duly adopted amendment
thereof or (ii) is authorized, directed or provided for in any bylaw or
agreement of the corporation which has been adopted by a vote of the
stockholders of the corporation, provided that no such indemnity shall indemnify
any person from or on account of such person's conduct which was finally
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct.
Article Nine of the Restated Articles of Incorporation of First Banks
provides that First Banks shall indemnify its officers and directors in all
actions, whether derivative, nonderivative, criminal, administrative or
investigative, if such party's conduct is not finally adjudged to be gross
negligence or willful misconduct. This is a lower standard than that set forth
in the statute described in the preceding paragraph. Pursuant to a policy of
directors' and officers' liability insurance, with total annual limits of $10
million, officers and directors of First Banks are insured, subject to the
limits, retention, exceptions and other terms and conditions of such policy,
against liability for any actual or alleged error, misstatement, misleading
statement, act or omission, or neglect or breach of duty by the directors or
officers of First Banks in the discharge of their duties solely in their
capacity as directors or officers of First Banks, individually or collectively,
or any matter claimed against them solely by reason of their being directors or
officers of First Banks. Under the Trust Agreement, First Banks will agree to
indemnify each of the Trustees of First Preferred Capital Trust III (First
Capital III) or any predecessor Trustee for First Capital III, and to hold each
Trustee harmless against, any loss, damage, claims, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the Trust Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties under the Trust Agreement. First Banks and First Capital III have agreed
to indemnify the Underwriters, and the Underwriters have agreed to indemnify
First Capital III and First Banks against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended. Reference is made to
the Underwriting Agreement filed as Exhibit 1.1 herewith.
Item 16. Exhibits
(a) Exhibits-- See Exhibit Index on Page II-6 hereof.
Item 17. Undertakings
(a) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company'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 herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
the Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer, or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or person in connection with
the securities being registered, each Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(c) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, First Banks
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Louis, State of Missouri on October 15, 2001.
FIRST BANKS, INC.
By: /s/James F. Dierberg
----------------------------------
James F. Dierberg, Chairman of
the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, First
Preferred Capital Trust III certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-2 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of St. Louis, and the State of Missouri
on October 15, 2001.
FIRST PREFERRED CAPITAL TRUST III
By: /s/James F. Dierberg
----------------------------------
James F. Dierberg, Trustee
By: /s/Allen H. Blake
----------------------------------
Allen H. Blake, Trustee
By: /s/Lisa K. Vansickle
----------------------------------
Lisa K. Vansickle, Trustee
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James F. Dierberg, Allen H. Blake and
Lisa K. Vansickle and each of them (with full power to each of them to act
alone), his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof. Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
/s/ James F. Dierberg Chairman of the Board of Directors and October 15, 2001
--------------------------------------------
James F. Dierberg Chief Executive Officer (Principal
Executive Officer)
/s/ Allen H. Blake Director and President, Chief Operating October 15, 2001
--------------------------------------------
Allen H. Blake Officer, Chief Financial Officer and
Secretary
(Principal Financial Officer)
/s/ Michael J. Dierberg Director October 15, 2001
--------------------------------------------
Michael J. Dierberg
/s/ Gordon A. Gundaker Director October 15, 2001
--------------------------------------------
Gordon A. Gundaker
/s/ David L. Steward Director October 15, 2001
--------------------------------------------
David L. Steward
/s/ Hal J. Upbin Director October 15, 2001
--------------------------------------------
Hal J. Upbin
/s/ Douglas H. Yaeger Director October 15, 2001
--------------------------------------------
Douglas H. Yaeger
/s/ Donald W. Williams Director October 15, 2001
--------------------------------------------
Donald W. Williams
/s/ Lisa K. Vansickle Senior Vice President and Controller October 15, 2001
--------------------------------------------
Lisa K. Vansickle (Principal Accounting Officer)
EXHIBIT INDEX
1.1 Form of Underwriting Agreement.
4.1 Form of Indenture.
4.2 Form of Subordinated Debenture (included as Exhibit A to Exhibit 4.1).
4.3 Certificate of Trust of First Preferred Capital Trust III.
4.4 Trust Agreement of First Preferred Capital Trust III.
4.5 Form of Amended and Restated Trust Agreement of First Preferred Capital
Trust III.
4.6 Form of Preferred Security Certificate of First Preferred Capital Trust
III (included as an exhibit to Exhibit 4.5).
4.7 Form of Preferred Securities Guarantee Agreement for First Preferred
Capital Trust III.
4.8 Form of Agreement as to Expenses and Liabilities (included as an
exhibit to Exhibit 4.5).
5.1 Opinion of Jackson Walker L.L.P.
5.2 Opinion of Richards, Layton & Finger, P.A.
8.1 Opinion of Jackson Walker L.L.P. as to certain federal income tax
matters.
10.6 $120,000,000 Secured Credit Agreement, dated as of August 23, 2001,
among First Banks, Inc. and Wells Fargo Bank Minnesota, National
Association, American National Bank and Trust Company of Chicago,
Harris Trust and Savings Bank, The Northern Trust Company, Union Bank
of California N.A., SunTrust Bank, Nashville, LaSalle Bank National
Association and Wells Fargo Bank Minnesota, National Association, as
Agent.
12.1 Statement Regarding Computation of Ratio of Earnings to Combined Fixed
Charges.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Jackson Walker L.L.P. (to be included in their opinions
filed herewith as Exhibits 5.1 and 8.1).
23.3 Consent of Richards, Layton & Finger, P.A. (included in their opinion
filed herewith as Exhibit 5.2).
24.1 Power of Attorney (included on the signature page).
25.1 Form T-1 Statement of Eligibility of State Street Bank and Trust
Company of Connecticut, National Association to act as trustee under
the Indenture.
25.2 Form T-1 Statement of Eligibility of State Street Bank and Trust
Company of Connecticut, National Association to act as trustee under
Amended and Restated Trust Agreement.
25.3 Form T-1 Statement of Eligibility of State Street Bank and Trust
Company of Connecticut, National Association to act as trustee under
the Preferred Securities Guarantee Agreement.
Exhibit 1.1
1,600,000 Preferred Securities
First Preferred Capital Trust III
______% Cumulative Trust Preferred Securities
(Liquidation Amount of $25.00 per Preferred Security)
UNDERWRITING AGREEMENT
----------------------
____________, 2001
STIFEL, NICOLAUS & COMPANY, INCORPORATED
One Financial Plaza
501 North Broadway, 9th Floor
St. Louis, Missouri 63102
DAIN RAUSCHER WESSELS, a division of
DAIN RAUSCHER INCORPORATED
60 South Sixth Street, 18th Floor
Minneapolis, Minnesota 55402
FAHNESTOCK & CO. INC.
125 Broad Street
New York, New York 10004
As Representatives of the Several Underwriters
named in Schedule I hereto
Dear Sirs:
First Banks, Inc., a Missouri corporation (the "Company"), and its
financing subsidiary, First Preferred Capital Trust III, a Delaware business
trust (the "Trust," and hereinafter together with the Company, the "Offerors"),
propose that the Trust issue and sell to the several underwriters listed on
Schedule I hereto (the "Underwriters"), pursuant to the terms of this Agreement,
1,600,000 of the Trust's _____% Cumulative Trust Preferred Securities, with a
liquidation amount of $25.00 per preferred security (the "Preferred
Securities"), to be issued under the Trust Agreement (as hereinafter defined),
the terms of which are more fully described in the Prospectus (as hereinafter
defined). The aforementioned 1,600,000 Preferred Securities to be sold to the
Underwriters are herein called the "Firm Preferred Securities." Solely for the
purpose of covering over-allotments in the sale of the Firm Preferred
Securities, the Offerors further propose that the Trust issue and sell to the
Underwriters, at their option, up to an additional 240,000 Preferred Securities
(the "Option Preferred Securities") upon exercise of the over-allotment option
granted in Section 1 hereof. The Firm Preferred Securities and any Option
Preferred Securities are herein collectively referred to as the "Designated
Preferred Securities." Stifel, Nicolaus & Company, Incorporated, Dain Rauscher
Wessels, a division of Dain Rauscher Incorporated and Fahnestock & Co. Inc. are
acting jointly as representatives of the Underwriters and in such capacity are
sometimes herein referred to as the "Representatives."
The Offerors hereby confirm as follows their agreement with each of the
Underwriters in connection with the proposed purchase of the Designated
Preferred Securities.
1. Sale, Purchase and Delivery of Designated Preferred Securities;
---------------------------------------------------------------
Description of Designated Preferred Securities.
--------------------------------------------------------------------------------
(a) On the basis of the representations, warranties and agreements
herein contained, and subject to the terms and conditions herein set forth, the
Offerors hereby agree that the Trust shall issue and sell to each of the
Underwriters and each of the Underwriters agrees, severally and not jointly, to
purchase from the Trust, at a purchase price of $25.00 per share (the "Purchase
Price"), the respective number of Firm Preferred Securities set forth opposite
the name of such Underwriter in Schedule I hereto. Because the proceeds from the
sale of the Firm Preferred Securities will be used to purchase from the Company
its Debentures (as hereinafter defined and as described in the Prospectus), the
Company shall pay to each Underwriter a commission of $_________ per Firm
Preferred Security purchased (the "Firm Preferred Securities Commission"). The
Representatives may by notice to the Company amend Schedule I to add, eliminate
or substitute names set forth therein (other than to eliminate the name of the
Representatives) and to amend the number of Firm Preferred Securities to be
purchased by any firm or corporation listed thereon, provided that the total
number of Firm Preferred Securities listed on Schedule I shall equal 1,600,000.
In addition, on the basis of the representations, warranties and
agreements herein contained and subject to the terms and conditions herein set
forth, the Trust hereby grants to the Underwriters, severally and not jointly,
an option to purchase all or any portion of the 240,000 Option Preferred
Securities, and upon the exercise of such option in accordance with this Section
1, the Offerors hereby agree that the Trust shall issue and sell to the
Underwriters, severally and not jointly, all or any portion of the Option
Preferred Securities at the same Purchase Price per share paid for the Firm
Preferred Securities. If any Option Preferred Securities are to be purchased,
each Underwriter, severally and not jointly, agrees to purchase from the Trust
that proportion (subject to adjustment as the Representatives may determine to
avoid fractional shares) of the number of Option Preferred Securities to be
purchased that the number of Firm Preferred Securities set forth opposite the
name of such Underwriter in Schedule I hereto (or such number increased as set
forth in Section 9 hereof) bears to 1,600,000. Because the proceeds from the
sale of the Option Preferred Securities will be used to purchase from the
Company its Debentures, the Company shall pay to the Underwriters a commission
of $________ per Option Preferred Security for each Option Preferred Security
purchased (the "Option Preferred Securities Commission"). The option hereby
granted (the "Option") shall expire thirty (30) days after the Effective Date
(as defined herein) and may be exercised only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Preferred Securities. The Option may be exercised in
whole or in part at any time (but not more than once) by you giving notice
(confirmed in writing) to the Company and the Trust setting forth the number of
Option Preferred Securities as to which the Underwriters are exercising the
Option and the time, date and place for payment and delivery of certificates for
such Option Preferred Securities. Such time and date of payment and delivery for
the Option Preferred Securities (the "Option Closing Date") shall be determined
by you, but shall not be earlier than two nor later than five full business days
after the exercise of such Option, nor in any event prior to the Closing Date
(as hereinafter defined). The Option Closing Date may be the same as the Closing
Date.
Payment of the Purchase Price and the Firm Preferred Securities
Commission and delivery of certificates for the Firm Preferred Securities shall
be made at the offices of Stifel, Nicolaus & Company, Incorporated, One
Financial Plaza, 501 North Broadway, Ninth Floor, St. Louis, Missouri 63102, or
such other place as shall be agreed to by you and the Offerors, at 10:00 a.m.,
St. Louis time, on the third (or, if permitted by Rule 15c6-1(c) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), not later than
12:00 p.m. on the fourth) full business day following the date of this Agreement
(the "Closing Date"), or unless postponed in accordance with the provisions of
Section 9. If the Underwriters exercise the Option to purchase any or all of the
Option Preferred Securities, payment of the Purchase Price and Option Preferred
Securities Commission and delivery of certificates for such Option Preferred
Securities shall be made on the Option Closing Date at the offices of Stifel,
Nicolaus & Company, Incorporated, One Financial Plaza, 501 North Broadway, Ninth
Floor, St. Louis, Missouri 63102, or at such other place as the Offerors and you
shall determine. Such payments shall be made to an account designated by the
Trust by wire transfer of same-day funds, in the amount of the Purchase Price
therefor, against delivery by or on behalf of the Trust to you for the
respective accounts of the several Underwriters of certificates for the
Designated Preferred Securities to be purchased by the Underwriters. Delivery of
the Designated Preferred Securities may be made by credit through full FAST
transfer to the accounts at The Depository Trust Company ("DTC") designated by
the Representatives. The Designated Preferred Securities shall be represented in
the form of one or more fully registered global securities in book-entry form
registered in the name of the nominee of DTC.
Time shall be of the essence, and delivery of the certificates for the
Designated Preferred Securities at the time and place specified pursuant to this
Agreement is a further condition of the obligations of each Underwriter
hereunder.
(b) The Offerors propose that the Trust issue the Designated Preferred
Securities pursuant to an Amended and Restated Trust Agreement among State
Street Bank and Trust Company of Connecticut, National Association, as Property
Trustee named therein, (collectively, the "Trustees"), and the Company, in
substantially the form heretofore delivered to the Underwriters, said Agreement
being hereinafter referred to as the "Trust Agreement." In connection with the
issuance of the Designated Preferred Securities, the Company proposes (i) to
issue its ______% Subordinated Debentures due 2031 (the "Debentures") pursuant
to an Indenture, to be dated as of _____________, 2001, between the Company and
State Street Bank and Trust Company of Connecticut, National Association, as
indenture trustee (the "Indenture") and (ii) to guarantee certain payments on
the Designated Preferred Securities pursuant to a Guarantee Agreement, to be
dated as of ___________, 2001, between the Company and State Street Bank and
Trust Company of Connecticut, National Association, as guarantee trustee (the
"Guarantee"), to the extent described therein.
2. Representations and Warranties.
------------------------------
The Offerors jointly and severally represent and warrant to, and agree
with, each of the Underwriters that:
(a) The reports filed with the Securities and Exchange Commission (the
"Commission") by the Company under the 1934 Act, and the rules and regulations
thereunder (the "1934 Act Regulations") at the time the reports were filed with
the Commission, complied as to form in all material respects with the
requirements of the 1934 Act and the 1934 Act Regulations and did not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(b) The Offerors have prepared and filed with the Commission a
registration statement on Form S-2 (File Numbers ______________ and
_______________) for the registration of the Designated Preferred Securities,
the Guarantee and $47,422,700 aggregate principal amount of Debentures under the
Securities Act of 1933, as amended (the "1933 Act"), including the related
prospectus subject to completion, and one or more amendments to such
registration statement may have been so filed, in each case in conformity in all
material respects with the requirements of the 1933 Act, the rules and
regulations promulgated thereunder (the "1933 Act Regulations") and the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and
regulations thereunder. Copies of such registration statement, including any
amendments thereto and any documents incorporated by reference therein, each
Preliminary Prospectus (as defined herein) contained therein and the exhibits,
financial statements and schedules to such registration statement, as finally
amended and revised, have heretofore been delivered by the Offerors to the
Representatives. After the execution of this Agreement, the Offerors will file
with the Commission (A) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the 1933 Act,
a prospectus in the form most recently included in an amendment to such
registration statement (or, if no such amendment shall have been filed, in such
registration statement), with such changes or insertions as are required by Rule
430A of the 1933 Act Regulations ("Rule 430A") or permitted by Rule 424(b) of
the 1933 Act Regulations ("Rule 424(b)") and as have been provided to and not
objected to by the Representatives prior to (or as are agreed to by the
Representatives subsequent to) the execution of this Agreement, or (B) if such
registration statement, as it may have been amended, has not been declared by
the Commission to be effective under the 1933 Act, an amendment to such
registration statement, including a form of final prospectus, necessary to
permit such registration statement to become effective, a copy of which
amendment has been furnished to and not objected to by the Representatives prior
to (or is agreed to by the Representatives subsequent to) the execution of this
Agreement. As used in this Agreement, the term "Registration Statement" means
such registration statement, as amended at the time when it was or is declared
effective under the 1933 Act, including (1) all financial schedules and exhibits
thereto, (2) all documents (or portions thereof) incorporated by reference
therein filed under the 1934 Act, and (3) any information omitted therefrom
pursuant to Rule 430A and included in the Prospectus (as hereinafter defined);
the term "Preliminary Prospectus" means each prospectus subject to completion
filed with such registration statement or any amendment thereto including all
documents (or portions thereof) incorporated by reference therein under the 1934
Act (including the prospectus subject to completion, if any, included in the
Registration Statement and each prospectus filed pursuant to Rule 424(a) under
the 1933 Act); and the term "Prospectus" means the prospectus first filed with
the Commission pursuant to Rule 424(b)(1) or (4) or, if no prospectus is
required to be filed pursuant to Rule 424(b)(1) or (4), the prospectus included
in the Registration Statement, in each case including the financial schedules
and all documents (or portions thereof) incorporated by reference therein under
the 1934 Act. The date on which the Registration Statement becomes effective is
hereinafter referred to as the "Effective Date."
(c) The documents incorporated by reference in the Preliminary
Prospectus or Prospectus or from which information is so incorporated by
reference, when they became effective or were filed with the Commission, as the
case may be, complied in all material respects with the requirements of the 1934
Act and the 1934 Act Regulations, and when read together and with the other
information in the Preliminary Prospectus or Prospectus, as the case may be, at
the time the Registration Statement became or becomes effective and at the
Closing Date and any Option Closing Date, did not or will not, as the case may
be, contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. As of
the date that each Preliminary Prospectus was filed with the Commission or as of
the date that the Prospectus and any amendment or supplement thereto was filed
with the Commission (or, if not filed, on the date provided by the Offerors to
the Underwriters in connection with the offering and sale of the Preferred
Securities), as the case may be, no event has or will have occurred which should
have been set forth in an amendment or supplement to any of the documents
incorporated by reference in the Preliminary Prospectus or Prospectus which has
not then been set forth in such an amendment or supplement.
(d) No order preventing or suspending the use of any Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) has
been issued by the Commission, nor has the Commission, to the knowledge of the
Offerors, threatened to issue such an order or instituted proceedings for that
purpose. Each Preliminary Prospectus, at the time of filing thereof, (A)
complied in all material respects with the requirements of the 1933 Act and the
1933 Act Regulations and (B) did not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements or omissions made in
reliance upon and in conformity with information furnished in writing to the
Offerors by any of the Underwriters expressly for inclusion in the Prospectus
(which includes only the information appearing beneath the heading
"Underwriting" and the paragraph immediately following the price table on the
cover page of the Prospectus (such information referred to herein as the
"Underwriters' Information")). As of the date that each Preliminary Prospectus
was filed with the Commission or as of the date that the Prospectus and any
amendment or supplement thereto was filed with the Commission (or, if not filed,
on the date provided by the Offerors to the Underwriters in connection with the
offering and sale of the Preferred Securities), as the case may be, no event has
or will have occurred which should have been set forth in an amendment or
supplement to the Preliminary Prospectus or Prospectus which has not then been
set forth in the Preliminary Prospectus, Prospectus or such an amendment or
supplement. Each Preliminary Prospectus and the Prospectus will be identical to
the electronically transmitted copies thereof filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system,
except to the extent permitted by Regulation S-T.
(e) The Registration Statement has been declared effective under the
1933 Act, and no post-effective amendment to the Registration Statement has been
filed with the Commission as of the date of this Agreement. No stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding for that purpose has been instituted or, to the Company's
knowledge, threatened by the Commission. At the Effective Date and at all times
subsequent thereto, up to and including the Closing Date and, if applicable, the
Option Closing Date, the Registration Statement and any post-effective amendment
thereto (A) complied and will comply in all material respects with the
requirements of the 1933 Act, the 1933 Act Regulations and the Trust Indenture
Act (and the rules and regulations thereunder) and (B) did not and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, not
misleading. At the Effective Date and at all times when the Prospectus is
required to be delivered in connection with offers and sales of Designated
Preferred Securities, including, without limitation, the Closing Date and, if
applicable, the Option Closing Date, the Prospectus, as amended or supplemented,
(A) complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and the Trust Indenture Act (and the
rules and regulations thereunder) and (B) did not contain and will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty does not apply to Underwriters'
Information. As of the date that the Registration Statement was filed with the
Commission, no event has or will have occurred which should have been set forth
in the Registration Statement or an amendment or supplement to the Registration
Statement which has not then been set forth in such an amendment or supplement.
The Registration Statement will be identical to the electronically transmitted
copy thereof filed with the Commission pursuant to its EDGAR system, except to
the extent permitted by Regulation S-T.
(f) (i) The Company is duly organized, validly existing and in
good standing under the laws of the State of Missouri, with full
corporate and other power and authority to own, lease and operate its
properties and conduct its business as described in and contemplated by
the Registration Statement and the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus) and as
currently being conducted and is duly registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the
"BHC Act").
(ii) The Trust has been duly created and is validly
existing as a statutory business trust in good standing under the
Delaware Business Trust Act with the power and authority (trust and
other) to own its property and conduct its business as described in the
Registration Statement and Prospectus, to issue and sell its common
securities (the "Common Securities") to the Company pursuant to the
Trust Agreement, to issue and sell the Designated Preferred Securities,
to enter into and perform its obligations under this Agreement and to
consummate the transactions herein contemplated; the Trust has no
subsidiaries and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or
the ownership of its property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Trust; the Trust has
conducted and will conduct no business other than the transactions
contemplated by this Agreement, the Trust Agreement and described in
the Prospectus; the Trust is not a party to or bound by any agreement
or instrument other than this Agreement, the Trust Agreement and the
agreements and instruments contemplated by the Trust Agreement and
described in the Prospectus; the Trust has no liabilities or
obligations other than those arising out of the transactions
contemplated by this Agreement and the Trust Agreement and described in
the Prospectus; the Trust is not a party to or subject to any action,
suit or proceeding of any nature; the Trust is, and at the Closing Date
or any Option Closing Date will be, classified as a grantor trust for
United States federal income tax purposes; the Trust is not, and at the
Closing Date or any Option Closing Date will not be, to the knowledge
of the Offerors, classified as an association taxable as a corporation
for United States federal income tax purposes; and the Trust is, and as
of the Closing Date or any Option Closing Date will be, treated as a
consolidated subsidiary of the Company pursuant to accounting
principles generally accepted in the United States of America.
(g) The Company has sixteen (16) direct or indirect subsidiaries that
have material ongoing operations. They are listed on Exhibit A attached hereto
----------
and incorporated herein (the "Subsidiaries"). Except as set forth as Exhibit B,
---------
the Company does not own or control, directly or indirectly, more than 5% of any
class of equity security of any corporation, association or other entity that
conducts material ongoing operations other than the Subsidiaries. First Bank and
First Bank & Trust are collectively referred to as the "Banks." Each Subsidiary
is a bank holding company, state bank, trust company, business trust or
corporation duly organized or incorporated (as applicable), validly existing and
in active status or good standing, as applicable, with all applicable Regulators
(as defined below) and under the laws of its respective jurisdiction of
organization or incorporation. Each such Subsidiary has full corporate and other
power and authority to own, lease and operate its properties and to conduct its
business as described in and contemplated by the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and as currently being conducted. The deposit accounts
of the Banks are insured by the Bank Insurance Fund or Savings Association
Insurance Fund, both administered by the Federal Deposit Insurance Corporation
(the "FDIC") up to the maximum amount provided by law; and no proceedings for
the modification, termination or revocation of any such insurance are pending
or, to the knowledge of the Offerors, threatened.
(h) The Company and each of the Subsidiaries is duly qualified or
authorized to transact business as a foreign corporation and is in active status
or good standing, as applicable, in each other jurisdiction in which it owns or
leases property or conducts its business so as to require such qualification or
authorization and in which the failure to be so qualified or authorized would,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), earnings, affairs, business, prospects or
results of operations of the Company and the Subsidiaries on a consolidated
basis. All of the issued and outstanding shares of capital stock of the
Subsidiaries (A) have been duly authorized and are validly issued, (B) are fully
paid and nonassessable except to the extent such shares may be deemed assessable
under 12 U.S.C. Section 1831o or under applicable state banking law, and (C)
except as disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), are directly or indirectly
owned by the Company free and clear of any security interest, mortgage, pledge,
lien, encumbrance, restriction upon voting or transfer, preemptive rights, claim
or equity.
(i) The capital stock of the Company and the equity securities of the
Trust conform to the description thereof contained in the Registration Statement
and Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). The outstanding shares of capital stock and equity
securities of each Offeror have been duly authorized and validly issued and are
fully paid and nonassessable, and no such shares were issued in violation of the
preemptive or similar rights of any security holder of an Offeror; no person has
any preemptive or similar right to purchase any shares of capital stock or
equity securities of the Offerors. Except as disclosed in the Registration
Statement and Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus), there are no outstanding rights, options or
warrants to acquire any securities of the Offerors or the Subsidiaries, and
there are no outstanding securities convertible into or exchangeable for any
securities of the Offerors or the Subsidiaries and no restrictions upon the
voting or transfer of any capital stock of the Company or equity securities of
the Trust pursuant to the Company's corporate charter or bylaws, the Trust
Agreement or any agreement or other instrument to which an Offeror is a party or
by which an Offeror is bound. The Company has an authorized and outstanding
capitalization as set forth in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(j) (i) The Trust has all requisite power and authority to
issue, sell and deliver the Designated Preferred Securities in
accordance with and upon the terms and conditions set forth in this
Agreement, the Trust Agreement, the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). All corporate and trust action required to be
taken by the Offerors for the authorization, issuance, sale and
delivery of the Designated Preferred Securities in accordance with such
terms and conditions has been validly and sufficiently taken. The
Designated Preferred Securities, when delivered and paid for in
accordance with this Agreement, will be duly and validly issued and
outstanding, will be fully paid and nonassessable undivided beneficial
interests in the assets of the Trust, will be entitled to the benefits
of the Trust Agreement, will not be issued in violation of or subject
to any preemptive or similar rights, and will conform to the
description thereof contained in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and the Trust Agreement. None of the Designated
Preferred Securities, immediately prior to delivery, will be subject to
any security interest, lien, mortgage, pledge, encumbrance, restriction
upon voting or transfer, preemptive rights, claim or equity.
(ii) The Debentures have been duly and validly
authorized, and, when duly and validly executed, authenticated and
issued as provided in the Indenture and delivered against payment
thereof to the Trust pursuant to the Trust Agreement, will constitute
valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity, and
except as any indemnification or contribution provisions thereof may be
limited under applicable securities laws, will be in the form
contemplated by, and entitled to the benefits of, the Indenture, will
conform to the description thereof contained in the Prospectus and will
be owned by the Trust free and clear of any security interest,
mortgage, pledge, lien, encumbrance, restriction upon transfer,
preemptive rights, claim or equity.
(iii) The Guarantee has been duly and validly
authorized, and, when duly and validly executed and delivered to the
guarantee trustee for the benefit of the holders of the Designated
Preferred Securities, will constitute a valid and legally binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity, and will conform to the description
thereof contained in the Prospectus.
(iv) The Agreement as to Expenses and Liabilities
between the Company and the Trust (the "Expense Agreement") has been
duly and validly authorized, and, when duly and validly executed and
delivered by the Company, will constitute a valid and legally binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity, and will conform to the description
thereof contained in the Prospectus.
(k) The Offerors and the Subsidiaries have complied with all foreign,
federal, state and local statutes, regulations, ordinances and rules applicable
to the ownership and operation of their properties or the conduct of their
businesses as described in or contemplated by the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and as currently being conducted, except where the
failure to be in compliance would not have a material adverse effect upon the
condition (financial or otherwise), earnings, affairs, business, prospects or
results of operations of the Offerors and the Subsidiaries on a consolidated
basis.
(l) The Offerors and the Subsidiaries have all permits, easements,
consents, licenses, franchises and other governmental and regulatory
authorizations from all appropriate federal, state, local or other public
authorities ("Permits") as are necessary to own and lease their properties and
conduct their businesses in the manner described in and contemplated by the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), except where the failure to
have such Permits would not have a material adverse effect upon the condition
(financial or otherwise), earnings, affairs, business, prospects or results of
operations of the Offerors and the Subsidiaries on a consolidated basis. All
material Permits are in full force and effect and each of the Offerors and the
Subsidiaries are in all material respects complying therewith, and no event has
occurred that allows, or after notice or lapse of time would allow, revocation
or termination thereof or will result in any other material impairment of the
rights of the holder of any material Permit, subject in each case to such
qualification as may be adequately disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus). No
material Permit contains any restriction that would materially impair the
ability of the Company or the Subsidiaries to conduct their businesses in the
manner consistent with their past practices. Neither the Offerors nor any of the
Subsidiaries has received notice or otherwise has knowledge of any proceeding or
action relating to the revocation or modification of any material Permit.
(m) Neither of the Offerors nor any of the Subsidiaries is in breach or
violation of its corporate charter, by-laws or other governing documents
(including without limitation, the Trust Agreement) in any material respect.
Neither of the Offerors nor any of the Subsidiaries is, and to the knowledge of
the Offerors no other party is, in violation, breach or default (with or without
notice or lapse of time or both) in the performance or observance of any term,
covenant, agreement, obligation, representation, warranty or condition contained
in (A) any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease, franchise, license, material Permit or any other
agreement or instrument to which it is a party or by which it or any of its
properties may be bound, which breach, violation or default could have a
material adverse effect on the condition (financial or otherwise), earnings,
affairs, business, prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis, and to the knowledge of the Offerors, no
other party has asserted that the Offerors or any of the Subsidiaries is in such
violation, breach or default (provided that the foregoing shall not apply to
defaults by borrowers from the Banks or lessees from First Capital Group, Inc.),
or (B) except as disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), any order, decree, judgment,
rule or regulation of any court, arbitrator, government, or governmental agency
or instrumentality, domestic or foreign, having jurisdiction over the Offerors
or the Subsidiaries or any of their respective properties the breach, violation
or default of which could have a material adverse effect on the condition
(financial or otherwise), earnings, affairs, business, prospects, or results of
operations of the Offerors and the Subsidiaries on a consolidated basis.
(n) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement, the Trust
Agreement, the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) do not and will not
conflict with, result in the creation or imposition of any material lien, claim,
charge, encumbrance or restriction upon any property or assets of the Offerors
or the Subsidiaries or the Designated Preferred Securities pursuant to,
constitute a breach or violation of, or constitute a default under, with or
without notice or lapse of time or both, any of the terms, provisions or
conditions of the charter or by-laws of the Company or the Subsidiaries, the
Trust Agreement, the Guarantee, the Indenture, any indenture, mortgage, deed of
trust, loan or credit agreement or note, or any material contract, lease,
franchise, license, Permit or any other agreement or instrument to which the
Offerors or the Subsidiaries is a party or by which any of them or any of their
respective properties may be bound or any order, decree, judgment, rule or
regulation of any court, arbitrator, government, or governmental agency or
instrumentality, domestic or foreign, having jurisdiction over the Offerors or
the Subsidiaries or any of their respective properties which conflict, creation,
imposition, breach, violation or default would have either singly or in the
aggregate a material adverse effect on the condition (financial or otherwise),
earnings, affairs, business, prospects or results of operations of the Offerors
and the Subsidiaries on a consolidated basis. No authorization, approval,
consent or order of or filing, registration or qualification with, any person
(including, without limitation, any court, governmental body or authority) is
required in connection with the transactions contemplated by this Agreement, the
Trust Agreement, the Indenture, the Guarantee, the Registration Statement and
the Prospectus, except such as have been obtained under the 1933 Act, the Trust
Indenture Act and from the Nasdaq National Market relating to the inclusion of
the Designated Preferred Securities, and such as may be required under state
securities laws or Interpretations or Rules of the National Association of
Securities Dealers, Inc. ("NASD") in connection with the purchase and
distribution of the Designated Preferred Securities by the Underwriters.
(o) The Offerors have all requisite power and authority to enter into
this Agreement, and this Agreement has been duly and validly authorized,
executed and delivered by the Offerors and constitutes the legal, valid and
binding agreement of the Offerors, enforceable against the Offerors in
accordance with its terms, except as the enforcement thereof may be limited by
general principles of equity and by bankruptcy or other laws relating to or
affecting creditors' rights generally and except as any indemnification or
contribution provisions thereof may be limited under applicable securities laws.
Each of the Indenture, the Trust Agreement, the Guarantee and the Expense
Agreement has been duly authorized by the Company, and, when executed and
delivered by the Company on the Closing Date, each of said agreements will
constitute a valid and legally binding obligation of the Company and will be
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity and except as any indemnification or
contribution provisions thereof may be limited under applicable securities laws.
Each of the Indenture, the Trust Agreement and the Guarantee has been duly
qualified under the Trust Indenture Act and will conform to the description
thereof contained in the Prospectus.
(p) The Company and the Subsidiaries have good and marketable title in
fee simple to all real property and good title to all personal property owned by
them and material to their business, in each case free and clear of all security
interests, liens, mortgages, pledges, encumbrances, restrictions, claims,
equities and other defects except such as are referred to in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus)
or such as do not materially affect the value of such property in the aggregate
and do not materially interfere with the use made or proposed to be made of such
property; and all of the leases under which the Company or the Subsidiaries hold
real or personal property are valid, existing and enforceable leases and in full
force and effect with such exceptions as are not material and do not materially
interfere with the use made or proposed to be made of such real or personal
property, and neither the Company nor any of the Subsidiaries is in default in
any material respect of any of the terms or provisions of any leases.
(q) KPMG LLP, who have certified the consolidated financial statements
of the Company and its subsidiaries, including the notes thereto, included or
incorporated by reference in the Registration Statement and Prospectus, are
independent public accountants with respect to the Company and its subsidiaries,
as required by the 1933 Act and the 1933 Act Regulations.
(r) The consolidated financial statements including the notes thereto,
included or incorporated by reference in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) with respect to the Company and its subsidiaries comply
in all material respects with the 1933 Act and the 1933 Act Regulations and
present fairly the consolidated financial position of the Company and its
subsidiaries as of the dates indicated and the consolidated statements of
income, cash flows and changes in stockholders' equity and comprehensive income
of the Company and its subsidiaries for the periods specified and have been
prepared in conformity with accounting principles generally accepted in the
United States of America applied on a consistent basis, except that the interim
financial statements are subject to normal year-end adjustments and do not
include all footnotes required by accounting principles generally accepted in
the United States of America for audited financial statements. The selected
consolidated financial data concerning the Offerors and the Company's
subsidiaries included in the Registration Statement and the Prospectus (or such
Preliminary Prospectus) comply in all material respects with the 1933 Act and
the 1933 Act Regulations, have been derived from the financial statements or
operating records of the Company, present fairly the information set forth
therein, and have been compiled on a basis consistent with that of the
consolidated financial statements of the Offerors and the Company's subsidiaries
in the Registration Statement and the Prospectus (or such Preliminary
Prospectus). The other financial, statistical and numerical information included
in the Registration Statement and the Prospectus (or such Preliminary
Prospectus) complies in all material respects with the 1933 Act and the 1933 Act
Regulations, has been derived from the financial statements or operating records
of the Company, presents fairly the information shown therein, and to the extent
applicable has been compiled on a basis consistent with the consolidated
financial statements of the Company and its subsidiaries included in the
Registration Statement and the Prospectus (or such Preliminary Prospectus).
(s) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), except as otherwise stated
therein:
(i) neither of the Offerors nor any of the Subsidiaries has
sustained any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree which is material to the condition (financial
or otherwise), earnings, affairs, business, prospects or results of
operations of the Offerors and the Subsidiaries on a consolidated
basis;
(ii) there has not been any material adverse change in, or
any development which is reasonably likely to have a material adverse
effect on, the condition (financial or otherwise), earnings, affairs,
business, prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis, whether or not arising in the
ordinary course of business;
(iii) neither of the Offerors nor any of the Subsidiaries has
incurred any liabilities or obligations, direct or contingent, or
entered into any material transactions, other than in the ordinary
course of business, which are material to the condition (financial or
otherwise), earnings, affairs, business, prospects or results of
operations of the Offerors and the Subsidiaries on a consolidated
basis;
(iv) neither of the Offerors has declared or paid any
dividend and neither of the Offerors nor any of the Subsidiaries has
become delinquent in the payment of principal or interest on any
outstanding borrowings;
(v) there has not been any change in the capital stock, trust
preferred securities, long-term debt, obligations under capital leases
or, other than in the ordinary course of business, short-term
borrowings of the Offerors or the Subsidiaries; and
(vi) there has not occurred any other event and there has
arisen no set of circumstances required by the 1933 Act or the 1933 Act
Regulations to be disclosed in the Registration Statement or Prospectus
which has not been so set forth in the Registration Statement or such
Prospectus as fairly and accurately summarized therein.
(t) Except as set forth in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), no charge, investigation, action, suit or proceeding is
pending or, to the knowledge of the Offerors, threatened, against or affecting
the Offerors or the Subsidiaries or any of their respective properties before or
by any court or any regulatory, administrative or governmental official,
commission, board, agency or other authority or body, or any arbitrator, wherein
an unfavorable decision, ruling or finding would have a material adverse effect
on the consummation of this Agreement or the transactions contemplated herein or
the condition (financial or otherwise), earnings, affairs, business, prospects
or results of operations of the Offerors and the Subsidiaries on a consolidated
basis or which is required to be disclosed in the Registration Statement or the
Prospectus (or such Preliminary Prospectus) and is not so disclosed.
(u) There are no contracts or other documents required to be filed as
exhibits to the Registration Statement by the 1933 Act or the 1933 Act
Regulations or the Trust Indenture Act (or any rules or regulations thereunder)
which have not been filed as exhibits to or incorporated by reference into the
Registration Statement, or that are required to be summarized in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) that are not so summarized.
(v) Neither of the Offerors has taken, directly or indirectly, any
action causing or resulting in or which has constituted or which might
reasonably be expected to cause or result in stabilization or manipulation of
any security of the Offerors in connection with the sale or resale of the
Designated Preferred Securities in violation of the Commission's rules and
regulations, including, but not limited to, Regulation M, nor is either Offeror
aware of any such action having been taken or to be taken by any affiliate of
the Offerors.
(w) The Offerors and the Subsidiaries own, or possess adequate rights
to use, all patents, copyrights, trademarks, service marks, trade names and
other rights necessary to conduct the businesses now conducted by them in all
material respects or as described in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), and neither the
Offerors nor the Subsidiaries have received any notice of infringement or
conflict with asserted rights of others with respect to any patents, copyrights,
trademarks, service marks, trade names or other rights which, individually or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition (financial or otherwise),
earnings, affairs, business, prospects or results of operations of the Offerors
and the Subsidiaries on a consolidated basis, and the Offerors do not know of
any basis for any such infringement or conflict.
(x) Except as adequately disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), no
labor dispute involving the Company or the Subsidiaries exists or, to the
knowledge of the Offerors, is imminent which might be expected to have a
material adverse effect on the condition (financial or otherwise), earnings,
affairs, business, prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis or which is required to be disclosed in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). Neither the Company nor any of the Subsidiaries has
received notice of any existing or threatened labor dispute by the employees of
any of its principal suppliers, customers or contractors which might be expected
to have a material adverse effect on the condition (financial or otherwise),
earnings, affairs, business, prospects or results of operations of the Company
and the Subsidiaries on a consolidated basis.
(y) The Offerors and the Subsidiaries have timely and properly prepared
and filed, or have timely and properly filed extensions for, all necessary
federal, state, local and foreign tax returns which are required to be filed and
have paid all taxes shown as due thereon and have paid all other taxes and
assessments to the extent that the same shall have become due, except such as
are being contested in good faith or where the failure to so timely and properly
prepare and file would not have a material adverse effect on the condition
(financial or otherwise), earnings, affairs, business, prospects or results of
operations of the Offerors and the Subsidiaries on a consolidated basis. The
Offerors have no knowledge of any tax deficiency which has been or might be
assessed against the Offerors or the Subsidiaries which, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse effect on
the condition (financial or otherwise), earnings, affairs, business, prospects
or results of operations of the Offerors and the Subsidiaries on a consolidated
basis.
(z) Each of the material contracts, agreements and instruments
described or referred to in the Registration Statement or the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) and
each contract, agreement and instrument filed as an exhibit to the Registration
Statement is in full force and effect and is the legal, valid and binding
agreement of the Offerors or the Subsidiaries, enforceable in accordance with
its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity. Except as disclosed in
the Prospectus (or such Preliminary Prospectus), to the knowledge of the
Offerors, no other party to any such agreement is (with or without notice or
lapse of time or both) in breach or default in any material respect thereunder.
(aa) No relationship, direct or indirect, exists between or among the
Offerors or the Subsidiaries, on the one hand, and the directors, officers,
trustees, shareholders, customers or suppliers of the Offerors or the
Subsidiaries, on the other hand, which is required to be described in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) which is not adequately
described therein.
(bb) No person has the right to request or require the Offerors or the
Subsidiaries to register any securities for offering and sale under the 1933 Act
by reason of the filing of the Registration Statement with the Commission or the
issuance and sale of the Designated Preferred Securities except as adequately
disclosed in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(cc) The Designated Preferred Securities have been approved for
inclusion in the Nasdaq National Market, subject to official notice of issuance.
(dd) Except as described in or contemplated by the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
there are no contractual encumbrances or restrictions or material legal
restrictions required to be described therein, on the ability of any of the
Subsidiaries (A) to pay dividends or make any other distributions on its capital
stock or to pay any indebtedness owed to the Offerors, (B) to make any loans or
advances to, or investments in, the Offerors or (C) to transfer any of its
property or assets to the Offerors.
(ee) Except for Star Lane Trust, neither of the Offerors nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended (the "Investment Company Act"). Star Lane Trust has timely and
properly prepared and filed all necessary documents and information which are
required to be filed with the Commission under the Investment Company Act and
has operated in compliance with the Investment Company Act. No order preventing
or suspending Star Lane Trust from acting as an "investment company" has been
issued by the Commission, nor has the Commission, to the knowledge of the
Offerors, threatened to issue such an order or instituted proceedings for that
purpose.
(ff) The Offerors have not distributed and will not distribute prior to
the Closing Date any prospectus in connection with the Offering, other than a
Preliminary Prospectus, the Prospectus, the Registration Statement and the other
materials permitted by the 1933 Act and the 1933 Act Regulations and reviewed by
the Representatives.
(gg) The activities of the Offerors and the Subsidiaries are permitted
under applicable federal and state banking laws and regulations. The Company has
all necessary approvals, including the approval of the FDIC, the State of
Missouri Division of Finance (the "SMDF"), the California Department of
Financial Institutions (the "CDFI") and the Board of Governors of the Federal
Reserve System ("FRB"), as applicable, to own the capital stock of the
Subsidiaries. Neither the Company nor any of the Subsidiaries is a party or
subject to any agreement or memorandum with, or directive or other order issued
by, the FRB, the SMDF, the CDFI, the FDIC or other regulatory authority having
jurisdiction over it (each, a "Regulator," and collectively, the "Regulators"),
which imposes any restrictions or requirements not generally applicable to
entities of the same type as the Company and the Subsidiaries. Neither the
Company nor any Subsidiary is subject to any directive from any Regulator to
make any material change in the method of conducting their respective
businesses, and no such directive is pending or threatened by such Regulators.
(hh) Each Bank has properly administered all accounts for which it acts
as a fiduciary, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law, except where the
failure to be in compliance would not have a material adverse effect upon the
condition (financial or otherwise), earnings, affairs, business, prospects or
results of operations of the Offerors and the Subsidiaries taken as a whole. No
Bank or any directors, officers or employees of any Bank, has committed any
material breach of trust with respect to any such fiduciary account, and the
accountings for each such fiduciary account are true and correct in all material
respects and accurately reflect the assets of such fiduciary account in all
material respects.
(ii) The Offerors are eligible for the use of Form S-2.
(jj) The Offerors and the Subsidiaries are in compliance with all
provisions of Section 517.075, Florida Statutes, relating to doing business with
the Government of Cuba or with any person or affiliate located in Cuba.
(kk) Neither the Company nor any Subsidiary has any liability under any
"pension plan," as defined in the Employee Retirement Income Security Act of
1974, as amended.
(ll) Each of the Company and the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (A)
transactions are executed in accordance with management's general or specific
authorizations, (B) transactions are recorded as necessary to permit preparation
of financial statements in conformity with accounting principles generally
accepted in the United States of America and to maintain asset accountability,
(C) access to assets is permitted only in accordance with management's general
or specific authorization and (D) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. The books, records and accounts and
systems of internal accounting controls of the Company and each of the
Subsidiaries comply in all material respects with the requirements of Section
13(b)(2) of the 1934 Act.
(mm) Other than as contemplated by this Agreement and as disclosed in
the Registration Statement, the Company has not incurred any liability for any
finder's or broker's fee or agent's commission in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(nn) No report or application filed by the Company or any of its
Subsidiaries with the FRB, the FDIC, the SMDF, the CDFI or any other state or
federal regulatory authority, as of the date it was filed or amended, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading when made or failed to comply in all material respects with the
applicable requirements of the FRB, the FDIC, the SMDF, the CDFI or any other
state or federal regulatory authority, as the case may be.
(oo) Based upon current guidelines of the FRB, the Debentures will
constitute "Tier 1" capital (as defined in 12 C.F.R. Part 225), subject to
applicable regulatory restrictions on the amount thereof that can be included in
Tier 1 capital.
(pp) To the best knowledge of the Offerors, no hazardous substances,
hazardous wastes, pollutants or contaminants have been deposited or disposed of
in, on or under the properties of the Company or any of the Subsidiaries
(including properties owned, managed or controlled by a Subsidiary in connection
with its lending activities) during the period in which the Company or the
Subsidiary has owned, occupied, managed, controlled or operated such properties,
in violation of any environmental, safety, health or similar laws or
regulations, orders, decrees or permits relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Regulations"), or any order,
judgment, decree or permit which would require remedial action under any
Environmental Regulation, except for any violations or remedial actions which
would not have, in the aggregate, a material adverse effect upon the condition
(financial or otherwise), earnings, affairs, business, prospects or results of
operations of the Offerors and the Subsidiaries on a consolidated basis. The
Company and each of the Subsidiaries (i) is in material compliance with all
applicable Environmental Regulations and (ii) has received all permits,
licenses, consents or other approvals required under applicable Environmental
Regulations to conduct its business, in each case except where the failure to do
so would not have a material adverse effect upon the condition (financial or
otherwise), earnings, affairs, business, prospects or results of operations of
the Offerors and the Subsidiaries on a consolidated basis.
(qq) None of the Offerors, the Subsidiaries or, to the best knowledge
of the Offerors, any other person associated with or acting on behalf of the
Offerors or any of the Subsidiaries, including, without limitation, any
director, officer, agent, or employee of any of the Subsidiaries or the Company
has, directly or indirectly, while acting on behalf of such Offeror or
Subsidiary (i) used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity; (ii)
made any unlawful contribution to any candidate for foreign or domestic office,
or to any foreign or domestic government officials or employees or other person
charged with similar public or quasi-public duties, other than payments required
or permitted by the laws of the United States or any jurisdiction thereof or to
foreign or domestic political parties or campaigns from corporate funds, or
failed to disclose fully any contribution in violation of law; (iii) violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any other payment of funds of either or both of the Offerors or a
Subsidiary or retained any funds which constitute a violation of any law, rule
or regulation or which was or is required to be disclosed in the Registration
Statement or the Prospectus pursuant to the requirements of the 1933 Act or the
1933 Act Regulations.
(rr) The employee benefit plans, including employee welfare benefit
plans, of the Company and each of the Subsidiaries (the "Employee Plans") have
been operated in material compliance with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the
Internal Revenue Code of 1986, as amended (the "Code"), all regulations, rulings
and announcements promulgated or issued thereunder and all other applicable
governmental laws and regulations (except to the extent such noncompliance would
not, in the aggregate, have a material adverse effect upon the condition
(financial or otherwise) earnings, affairs, business, prospects or results of
operations of the Offerors or the Subsidiaries on a consolidated basis). No
reportable event under Section 4043(c) of ERISA has occurred with respect to any
Employee Plan of the Company or any of the Subsidiaries for which the reporting
requirements have not been waived by the Pension Benefit Guaranty Corporation.
No prohibited transaction under Section 406 of ERISA, for which an exemption
does not apply, has occurred with respect to any Employee Plan of the Company or
any of the Subsidiaries. There are no pending or, to the knowledge of the
Offerors, threatened, claims by or on behalf of any Employee Plan, by any
employee or beneficiary covered under any such Employee Plan or by any
governmental authority or otherwise involving such Employee Plans or any of
their respective fiduciaries (other than for routine claims for benefits). All
Employee Plans that are group health plans have been operated in material
compliance with the group health plan continuation coverage requirements of
Section 4980B of the Code.
(ss) Except for Missouri Valley Partners, Inc., neither of the Offerors
nor any Subsidiary is an "investment adviser" within the meaning of the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), required to
register, become licensed or qualify as a broker-dealer with the Commission or
any state securities authority. Missouri Valley Partners, Inc. is duly
registered and has timely and properly prepared and filed all necessary
documents and information which are required to be filed with the Commission
under the Advisers Act and has operated in compliance with the Advisers Act. All
investment adviser representatives employed or otherwise utilized by Missouri
Valley Partners, Inc. are licensed and/or registered, in each case if required,
with the appropriate federal and/or state authorities. No order preventing or
suspending any investment adviser representative of Missouri Valley Partners,
Inc. from acting as an "investment adviser representative" has been issued by
the Commission or any such state authority, nor has the Commission or any state
authority, to the knowledge of the Offerors, threatened to issue such an order
or instituted proceedings for that purpose.
3. Offering by the Underwriters. After the Registration Statement
------------------------------
becomes effective or, if the Registration Statement is already effective, after
this Agreement becomes effective, the Underwriters propose to offer the Firm
Preferred Securities for sale to the public upon the terms and conditions set
forth in the Prospectus. The Underwriters may from time to time thereafter
reduce the public offering price and change the other selling terms, provided
the proceeds to the Trust shall not be reduced as a result of such reduction or
change. Because the NASD may view the Preferred Securities as interests in a
direct participation program, the offering of the Preferred Securities is being
made in compliance with the applicable provisions of Rule 2810 of the NASD's
Conduct Rules.
The Underwriters may reserve and sell such of the Designated Preferred
Securities purchased by the Underwriters as the Underwriters may elect to
dealers chosen by you (the "Selected Dealers") at the public offering price set
forth in the Prospectus less the applicable Selected Dealers' concessions set
forth therein, for re-offering by Selected Dealers to the public at the public
offering price. The Underwriters may allow, and Selected Dealers may re-allow, a
concession set forth in the Prospectus to certain other brokers and dealers.
4. Certain Covenants of the Offerors. The Offerors jointly and
------------------------------------
severally covenant with the Underwriters as follows:
(a) The Offerors shall use their best efforts to cause the Registration
Statement and any amendments thereto, if not effective at the time of execution
of this Agreement, to become effective as promptly as possible. If the
Registration Statement has become or becomes effective pursuant to Rule 430A and
information has been omitted therefrom in reliance on Rule 430A, then, the
Offerors will prepare and file in accordance with Rule 430A and Rule 424(b), the
Prospectus or, if required by Rule 430A, a post-effective amendment to the
Registration Statement (including the Prospectus) containing all information so
omitted and will provide evidence satisfactory to the Representatives of such
timely filing.
(b) The Offerors shall notify you immediately, and, if requested by
you, shall promptly confirm such notice in writing:
(i) when the Registration Statement, or any post-effective
amendment to the Registration Statement, has become effective, or when
the Prospectus or any supplement to the Prospectus or any amended
Prospectus has been filed;
(ii) of the receipt of any comments or requests from the
Commission relating to the Registration Statement or the Prospectus;
(iii) of any requestof the Commission to amend or supplement the
Registration Statement, any Preliminary Prospectus or the Prospectus
or for additional information; and
(iv) of the issuance by the Commission or any state or other
regulatory body of any stop order or other order suspending the
effectiveness of the Registration Statement, preventing or suspending
the use of any Preliminary Prospectus or the Prospectus, or suspending
the qualification of any of the Designated Preferred Securities for
offering or sale in any jurisdiction or the institution or threat of
institution of any proceedings for any of such purposes. The Offerors
shall use their best efforts to prevent the issuance of any such stop
order or of any other such order and if any such order is issued, to
cause such order to be withdrawn or lifted as soon as possible.
(c) The Offerors shall furnish to the Underwriters, from time to time
without charge, as soon as available, as many copies as the Underwriters may
reasonably request of (i) the registration statement as originally filed and of
all amendments thereto, in executed form, including exhibits, whether filed
before or after the Effective Date, (ii) all exhibits and documents incorporated
therein or filed therewith, (iii) all consents and certificates of experts in
executed form, (iv) each Preliminary Prospectus and all amendments and
supplements thereto, and (v) the Prospectus, and all amendments and supplements
thereto.
(d) During the time when a prospectus is required to be delivered under
the 1933 Act, the Offerors shall comply to the best of their ability with the
1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Designated
Preferred Securities as contemplated herein and in the Trust Agreement and the
Prospectus. The Offerors shall not file any amendment to the registration
statement as originally filed or to the Registration Statement and shall not
file any amendment thereto or make any amendment or supplement to any
Preliminary Prospectus or to the Prospectus unless you shall previously have
been advised in writing and provided a copy a reasonable time prior to the
proposed filings thereof and to which you or counsel for the Underwriters shall
not have objected. If it is necessary, in the Company's reasonable opinion or in
the reasonable opinion of the Company's counsel to amend or supplement the
Registration Statement or the Prospectus in connection with the distribution of
the Designated Preferred Securities, the Offerors shall forthwith amend or
supplement the Registration Statement or the Prospectus, as the case may be, by
preparing and filing with the Commission (provided the Underwriters or counsel
for the Underwriters do not reasonably object), and furnishing to you, such
number of copies as you may reasonably request of an amendment or amendments of,
or a supplement or supplements to, the Registration Statement or the Prospectus,
as the case may be (in form and substance reasonably satisfactory to you and
counsel for the Underwriters). If any event shall occur as a result of which it
is necessary to amend or supplement the Prospectus to correct an untrue
statement of a material fact or to include a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if for any reason it is necessary at any time to amend or
supplement the Prospectus to comply with the 1933 Act and the 1933 Act
Regulations, the Offerors shall, subject to the second sentence of this
subsection (d), forthwith amend or supplement the Prospectus by preparing and
filing with the Commission, and furnishing to you, such number of copies as you
may reasonably request of an amendment or amendments of, or a supplement or
supplements to, the Prospectus (in form and substance satisfactory to you and
counsel for the Underwriters) so that, as so amended or supplemented, the
Prospectus shall not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) The Offerors shall use their best efforts to permit the Designated
Preferred Securities to be eligible for clearance and settlement through the
facilities of DTC.
(f) The Offerors shall make generally available to their security
holders in the manner contemplated by Rule 158 of the 1933 Act Regulations and
furnish to you as soon as practicable, but in any event not later than sixteen
(16) months after the Effective Date, a consolidated earnings statement of the
Offerors in reasonable detail, covering a period of at least twelve (12)
consecutive months beginning after the Effective Date, conforming with the
requirements of Section 11(a) of the 1933 Act and Rule 158.
(g) The Offerors shall use the proceeds from the sale of the Designated
Preferred Securities to be sold by the Trust hereunder in the manner specified
in the Prospectus under the caption "Use of Proceeds."
(h) For five years from the Effective Date, the Offerors shall furnish
to the Representatives copies of all reports and communications (financial or
otherwise) furnished by the Offerors to the holders of the Designated Preferred
Securities as a class, copies of all reports and financial statements filed with
or furnished to the Commission (other than portions for which confidential
treatment has been obtained from the Commission) or with the Nasdaq National
Market, any national securities exchange, or other self-regulatory organization,
and such other documents, reports and information concerning the business and
financial conditions of the Offerors as the Representatives may reasonably
request, other than such documents, reports and information for which the
Offerors have the legal obligation not to reveal to the Representatives.
(i) Until the earlier of the Option Closing Date or the expiration of
the Option, the Offerors shall not, directly or indirectly, offer for sale, sell
or agree to sell or otherwise dispose of any Designated Preferred Securities
other than pursuant to this Agreement, any other beneficial interests in the
assets of the Trust or any securities of the Trust or the Company that are
substantially similar to the Designated Preferred Securities or the Debentures,
including any guarantee of such beneficial interests or substantially similar
securities, or securities convertible into or exchangeable for or that represent
the right to receive any such beneficial interest or substantially similar
securities, without the prior written consent of the Representatives.
(j) The Offerors shall use their best efforts to cause the Designated
Preferred Securities to become included in the Nasdaq National Market or in lieu
thereof to be listed or quoted on a national securities exchange, and to remain
so listed, quoted or included for at least five (5) years from the Effective
Date or for such shorter period as may be specified in a written consent of the
Representatives, provided this shall not prevent the Company from redeeming the
Designated Preferred Securities pursuant to the terms of the Trust Agreement. If
the Designated Preferred Securities are then listed and are exchanged for
Debentures, the Company will use its best efforts to have the Debentures
promptly included in the Nasdaq National Market or a national stock exchange or
to be listed, quoted or included on a national securities exchange or other
organization in or on which the Designated Preferred Securities are then listed,
quoted or included, and to have the Debentures promptly registered under the
Exchange Act.
(k) Subsequent to the date of this Agreement and through the date which
is the later of (i) the day following the date on which the Option to purchase
the Option Preferred Securities shall expire or (ii) the day following the
Option Closing Date with respect to any Option Preferred Securities that the
Underwriters shall elect to purchase, except as described in or contemplated by
the Prospectus, neither the Offerors nor any of the Subsidiaries shall take any
action (or refrain from taking any action) which will result in the Offerors or
the Subsidiaries incurring any material liability or obligation, direct or
contingent, or enter into any material transaction, except in the ordinary
course of business, and there will not be any material change in the financial
position, capital stock, or any material increase in long-term debt, obligations
under capital leases or, other than in the ordinary course of business,
short-term borrowings of the Offerors and the Subsidiaries on a consolidated
basis.
(l) The Offerors shall not, for a period of 180 days after the date
hereof, without the prior written consent of the Representatives, purchase,
redeem or call for redemption, or prepay or give notice of prepayment (or
announce any redemption or call for redemption, or any repayment or notice of
prepayment) any of the Offerors' securities.
(m) The Offerors shall not take, directly or indirectly, any action
designed to result in or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the price of any
security of the Offerors in connection with the sale or resale of the Designated
Preferred Securities in violation of the Commission's rules and regulations,
including, but not limited to, Regulation M, and the Offerors are not aware of
any such action taken or to be taken by any affiliate of the Offerors.
(n) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Offerors will not issue any press release or other communication
directly or indirectly or hold any press conference with respect to the
Offerors, the Subsidiaries or the offering of the Designated Preferred
Securities (the "Offering") without your prior consent.
(o) The Offerors shall inform the Florida Department of Banking and
Finance at any time prior to the consummation of the distribution of the
Securities by the Underwriters if either of the Offerors or any of the
Subsidiaries commences engaging in business with the government of Cuba or with
a person or affiliate located in Cuba, with such information to be provided
within ninety (90) days after the commencement thereof or after a change occurs
with respect to previously reported information.
5. Payment of Expenses. Whether or not this Agreement is terminated or
-------------------
the sale of the Designated Preferred Securities to the Underwriters is
consummated, the Company covenants and agrees that it will pay or cause to be
paid (directly or by reimbursement) all costs and expenses incident to the
performance of the obligations of the Offerors under this Agreement, including:
(a) the preparation, printing, filing, delivery and shipping of the
initial registration statement, the Preliminary Prospectus or Prospectuses, the
Registration Statement and the Prospectus and any amendments or supplements
thereto, and the printing, delivery and shipping of this Agreement and any other
underwriting documents (including, without limitation, selected dealers
agreements), the certificates for the Designated Preferred Securities and the
Preliminary and Final Blue Sky Memoranda and any legal investment surveys and
any supplements thereto;
(b) all fees, expenses and disbursements of the Offerors' counsel and
accountants;
(c) all fees and disbursements of counsel for the Underwriters in
connection with the preparation of the Preliminary and Final Blue Sky Memoranda
and any legal investment surveys and any supplements thereto;
(d) all filing fees and expenses incurred in connection with filings
made with the NASD;
(e) any applicable fees and other expenses incurred in connection with
the inclusion of the Designated Preferred Securities and, if applicable, the
Guarantee and the Debentures in the Nasdaq National Market;
(f) the cost of furnishing to you copies of the initial registration
statements, any Preliminary Prospectus, the Registration Statement and the
Prospectus and all amendments or supplements thereto;
(g) the costs and charges of any transfer agent or registrar and the
fees and disbursements of counsel for any transfer agent or registrar;
(h) all costs and expenses (including stock transfer taxes) incurred in
connection with the printing, issuance and delivery of the Designated Preferred
Securities to the Underwriters;
(i) all expenses incident to the preparation, execution and delivery of
the Trust Agreement, the Indenture and the Guarantee; and
(j) all other costs and expenses incident to the performance of the
obligations of the Company hereunder and under the Trust Agreement that are not
otherwise specifically provided for in this Section 5.
If the sale of Designated Preferred Securities contemplated by this
Agreement is not completed due to the termination pursuant to the terms hereof
(other than pursuant to Section 9 hereof), the Company will pay you your
accountable out-of-pocket expenses in connection herewith or in contemplation of
the performance of your obligations hereunder, including without limitation
travel expenses, reasonable fees, expenses and disbursements of counsel or other
out-of-pocket expenses incurred by you in connection with any discussion of the
Offering or the contents of the Registration Statement, any investigation of the
Offerors and the Subsidiaries, or any preparation for the marketing, purchase,
sale or delivery of the Designated Preferred Securities, in each case following
presentation of reasonably detailed invoices therefor.
If the sale of Designated Preferred Securities contemplated by this
Agreement is completed, the Company shall not be responsible for payment of fees
or disbursements of counsel for the Underwriters other than in accordance with
paragraph (c) above, or for the reimbursement of any expenses of the
Underwriters.
6. Conditions of the Underwriters' Obligations. The obligations of the
-------------------------------------------
Underwriters to purchase and pay for the Firm Preferred Securities and,
following exercise of the Option, the Option Preferred Securities, are subject
to the accuracy of the representations and warranties and to compliance with the
agreements of the Offerors herein as of the date hereof and as of the Closing
Date (or in the case of the Option Preferred Securities, if any, as of the
Option Closing Date), to the accuracy of the written statements of the Offerors
made pursuant to the provisions hereof, to the performance by the Offerors of
their covenants and obligations hereunder and to the following additional
conditions:
(a) If the Registration Statement or any amendment thereto filed prior
to the Closing Date has not been declared effective prior to the time of
execution hereof, the Registration Statement shall become effective not later
than 10:00 a.m., St. Louis time, on the first business day following the time of
execution of this Agreement, or at such later time and date as you may agree to
in writing. If required, the Prospectus and any amendment or supplement thereto
shall have been timely filed in accordance with Rule 424(b) and Rule 430A under
the 1933 Act and Section 4(a) hereof. No stop order suspending the effectiveness
of the Registration Statement or any amendment or supplement thereto shall have
been issued under the 1933 Act or any applicable state securities laws and no
proceedings for that purpose shall have been instituted or shall be pending, or,
to the knowledge of the Offerors or the Representatives, shall be contemplated
by the Commission or any state authority. Any request on the part of the
Commission or any state authority for additional information (to be included in
the Registration Statement or Prospectus or otherwise) shall have been disclosed
to you and complied with to your satisfaction and to the satisfaction of counsel
for the Underwriters.
(b) No Underwriter shall have advised the Company at or before the
Closing Date (and, if applicable, the Option Closing Date) that the Registration
Statement or any post-effective amendment thereto, or the Prospectus or any
amendment or supplement thereto, contains an untrue statement of a fact which,
in your opinion, is material or omits to state a fact which, in your opinion, is
material and is required to be stated therein or is necessary to make statements
therein (in the case of the Prospectus or any amendment or supplement thereto,
in light of the circumstances under which they were made) not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Trust Agreement, and the
Designated Preferred Securities, and the authorization and form of the
Registration Statement and Prospectus, other than financial statements and other
financial data, and all other legal matters relating to this Agreement and the
transactions contemplated hereby or by the Trust Agreement shall be satisfactory
in all material respects to counsel for the Underwriters, and the Offerors and
the Subsidiaries shall have furnished to such counsel all documents and
information relating thereto that they may reasonably request to enable them to
pass upon such matters.
(d) Jackson Walker L.L.P. ("Jackson Walker"), counsel for the Offerors,
shall have furnished to you their signed opinion, dated as of the Closing Date
or the Option Closing Date, as the case may be, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing and in good standing under the laws of the State of Missouri,
and is duly registered as a bank holding company under the BHC Act.
Each of the Subsidiaries is validly existing and in active status or
good standing under the laws of its jurisdiction of incorporation
or organization, as the case may be. Each of the Company and the
Subsidiaries has full corporate or other power and authority to own or
lease its properties and to conduct its business as such business
is described in the Prospectus and is currently conducted in all
material respects. To the best of such counsel's knowledge, all
outstanding shares of capital stock of the Subsidiaries have been duly
authorized and validly issued and are fully paid and nonassessable
except to the extent such shares may be deemed assessable under 12
U.S.C. Section 1831o and, to the best of such counsel's knowledge,
except as disclosed in the Prospectus, there are no outstanding rights,
options or warrants to purchase any such shares or securities
convertible into or exchangeable for any such shares of capital stock
of the Subsidiaries;
(ii) The capital stock, Debentures and Guarantee of the
Company and the equity securities of the Trust conform to the
description thereof contained in the Prospectus in all material
respects. The capital stock of the Company authorized as of June 30,
2001 is as set forth under the caption "Capitalization" in the
Prospectus, and the shares issued and outstanding have been duly
authorized and validly issued, and are fully paid and nonassessable,
except to the extent that such shares may be deemed assessable under 12
U.S.C. Section 1831o. To the best of such counsel's knowledge, and
except as described in the Registration Statement or the Prospectus (or
if the Prospectus is not yet in existence, the most recent Preliminary
Prospectus) there are no outstanding rights, options or warrants to
purchase, no other outstanding securities convertible into or
exchangeable for, and no commitments, plans or arrangements to issue,
any shares of capital stock of the Company or equity securities of the
Trust, except as described in the Prospectus;
(iii) The issuance, sale and delivery of the Designated
Preferred Securities and Debentures in accordance with the terms and
conditions of this Agreement and the Indenture have been duly
authorized by all necessary corporate and trust actions of the
Offerors. All of the Designated Preferred Securities have been duly and
validly authorized and, when delivered in accordance with this
Agreement will be duly and validly issued, fully paid and
nonassessable, and will conform to the description thereof in the
Registration Statement, the Prospectus and the Trust Agreement. The
Designated Preferred Securities have been approved for inclusion in the
Nasdaq National Market subject to official notice of issuance. There
are no preemptive or other rights to subscribe for or to purchase, and
other than as disclosed in the Prospectus, no restrictions upon the
voting or transfer of any shares of capital stock or equity securities
of the Offerors or the Subsidiaries pursuant to the corporate charter,
by-laws or other governing documents (including without limitation, the
Trust Agreement) of the Offerors or any of the Subsidiaries, or, to the
best of such counsel's knowledge, any agreement or other instrument to
which either Offeror or any of the Subsidiaries is a party or by which
either Offeror or any of the Subsidiaries may be bound. The issuance of
the Designated Preferred Securities is not subject to preemptive
rights;
(iv) The Offerors have all requisite corporate and trust power
to enter into and perform their obligations under this Agreement, and
this Agreement has been duly and validly authorized, executed and
delivered by the Offerors and constitutes the legal, valid and binding
obligations of the Offerors enforceable in accordance with its terms,
except as the enforcement hereof or thereof may be limited by general
principles of equity and by bankruptcy or other laws relating to or
affecting creditors' rights generally, and except as the
indemnification and contribution provisions hereof may be limited under
applicable laws and certain remedies may not be available in the case
of a non-material breach;
(v) Each of the Indenture, the Trust Agreement and the
Guarantee has been duly qualified under the Trust Indenture Act, has
been duly authorized, executed and delivered by the Company, and is
a valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, receivership, moratorium and
other laws affecting the rights and remedies of creditors generally and
of general principles of equity;
(vi) The Debentures have been duly authorized, executed,
authenticated and delivered by the Company, are entitled to the
benefits of the Indenture and are legal, valid and binding obligations
of the Company enforceable against the Company in accordance with their
terms, subject to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity;
(vii) The Expense Agreement has been duly authorized, executed
and delivered by the Company, and is a valid and legally binding
obligation of the Company enforceable against the Company in accordance
with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other laws affecting the
rights and remedies of creditors generally and of general principles of
equity;
(viii) To the best of such counsel's knowledge, neither of the
Offerors nor any of the Subsidiaries is in breach or violation of, or
default under, with or without notice or lapse of time or both, its
corporate charter, by-laws or governing document (including without
limitation, the Trust Agreement). The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement, and the Trust Agreement do not and will
not conflict with, result in the creation or imposition of any material
lien, claim, charge, encumbrance or restriction upon any property or
assets of the Offerors or the Subsidiaries or the Designated Preferred
Securities pursuant to, or constitute a material breach or violation
of, or constitute a material default under, with or without notice or
lapse of time or both, any of the terms, provisions or conditions of
the charter, by-laws or governing document (including without
limitation, the Trust Agreement) of the Offerors or the Subsidiaries,
or to the best of such counsel's knowledge, any material contract,
indenture, mortgage, deed of trust, loan or credit agreement, note,
lease, franchise, license or any other agreement or instrument to
which either Offeror or the Subsidiaries is a party or by which any of
them or any of their respective properties may be bound or any order,
decree, judgment, franchise, license, material Permit, or rule or
regulation of any court, arbitrator, government, or governmental agency
or instrumentality, domestic or foreign, known to such counsel having
jurisdiction over the Offerors or the Subsidiaries or any of their
respective properties which, in each case, is material to the Offerors
and the Subsidiaries on a consolidated basis. No authorization,
approval, consent or order of, or filing, registration or qualification
with, any person (including, without limitation, any court,
governmental body or authority) is required under Delaware law in
connection with the transactions contemplated by this Agreement in
connection with the purchase and distribution of the Designated
Preferred Securities by the Underwriters;
(ix) To the best of such counsel's knowledge, holders of
securities of the Offerors either do not have any right that, if
exercised, would require the Offerors to cause such securities to be
included in the Registration Statement or have waived such right. To
the best of such counsel's knowledge, neither the Offerors nor any of
the Subsidiaries is a party to any agreement or other instrument which
grants rights for or relating to the registration of any securities of
the Offerors;
(x) Except as set forth in the Registration Statement and the
Prospectus, to the best of such counsel's knowledge, (i) no action,
suit or proceeding at law or in equity is pending or threatened in
writing to which any of the Offerors or the Subsidiaries is or could
reasonably be expected to become a party, and (ii) no action, suit or
proceeding is pending or threatened in writing against or affecting the
Offerors or the Subsidiaries or any of their properties, before or by
any court or governmental official, commission, board or other
administrative agency, authority or body, or any arbitrator, wherein an
unfavorable decision, ruling or finding could reasonably be expected to
have a material adverse effect on the consummation of this Agreement or
the issuance and sale of the Designated Preferred Securities as
contemplated herein or the condition (financial or otherwise),
earnings, affairs, business, or results of operations of the Offerors
and the Subsidiaries on a consolidated basis or which is required to be
disclosed in the Registration Statement or the Prospectus and is not so
disclosed;
(xi) No authorization, approval, consent or order of or
filing, registration or qualification with, any person (including,
without limitation, any court, governmental body or authority) is
required in connection with the transactions contemplated by this
Agreement, the Trust Agreement, the Registration Statement and the
Prospectus, except such as have been obtained under the 1933 Act, the
1934 Act, and the Trust Indenture Act, and except such as may be
required under state securities laws or Interpretations or Rules of the
NASD in connection with the purchase and distribution of the Designated
Preferred Securities by the Underwriters, as to which such counsel need
express no opinion;
(xii) The Registration Statement and the Prospectus and any
amendments or supplements thereto and any documents incorporated
therein by reference (other than the financial statements or other
financial or statistical data included therein or omitted therefrom and
Underwriters' Information, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations as of their
respective dates of effectiveness;
(xiii) To the best of such counsel's knowledge, there are no
contracts, agreements, leases or other documents of a character
required to be disclosed in the Registration Statement or Prospectus or
to be filed as exhibits to the Registration Statement that are not so
disclosed or filed;
(xiv) The statements under the captions "Business-Supervision
and Regulation," "Description of the Trust," "Description of the
Preferred Securities," "Description of the Subordinated Debentures,"
"Book-Entry Issuance," "Description of the Guarantee," "Relationship
Among the Preferred Securities, the Subordinated Debentures and the
Guarantee," "Federal Income Tax Consequences," and "ERISA
Considerations" in the Prospectus, insofar as such statements
constitute a summary of legal and regulatory matters, documents or
instruments referred to therein, are accurate descriptions of the
matters summarized therein in all material respects and fairly present
the information called for with respect to such legal matters,
documents and instruments, other than financial and statistical data as
to which said counsel shall not be required to express any opinion or
belief;
(xv) Such counsel has been advised by the staff of the
Commission that the Registration Statement has become effective
under the 1933 Act; any required filing of the Prospectus pursuant to
Rule 424(b) has been made within the time period required by Rule
424(b); to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for a stop order are pending or threatened by
the Commission;
(xvi) Except as described in or contemplated by the
Prospectus, to the best of such counsel's knowledge, there are no
contractual encumbrances or restrictions, or material legal
restrictions required to be described therein on the ability of any of
the Subsidiaries (A) to pay dividends or make any other distributions
on its capital stock or to pay indebtedness owed to the Offerors, (B)
to make any loans or advances to, or investments in, the Offerors or
(C) to transfer any of its property or assets to the Offerors; and
(xvii) To the best of such counsel's knowledge, (A)
the business and operations of the Offerors and the Subsidiaries comply
in all material respects with all statutes, ordinances, laws, rules and
regulations applicable thereto and which are material to the Offerors
and the Subsidiaries on a consolidated basis, except in those instances
where non-compliance would not materially impair the ability of the
Offerors and the Subsidiaries to conduct their business; and (B) the
Offerors and the Subsidiaries possess and are operating in all material
respects in compliance with the terms, provisions and conditions of all
Permits that are required to conduct their businesses as described in
the Prospectus and that are material to the Offerors and the
Subsidiaries on a consolidated basis, except in those instances where
the loss thereof or non-compliance therewith would not have a material
adverse effect on the condition (financial or otherwise), earnings,
affairs, business, prospects or results of operations of the Offerors
and the Subsidiaries on a consolidated basis; to the best of such
counsel's knowledge, no action suit or proceeding is pending or
threatened which may lead to the revocation, termination, suspension or
non-renewal of any such Permit, except in those instances where the
loss thereof or non-compliance therewith would not materially impair
the ability of the Offerors or the Subsidiaries to conduct their
businesses.
In giving the above opinion, such counsel may state that, insofar as
such opinion involves factual matters, they have relied upon certificates of
officers of the Offerors including, without limitation, certificates as to the
identity of any and all material contracts, indentures, mortgages, deeds of
trust, loans or credit agreements, notes, leases, franchises, licenses or other
agreements or instruments, and all material Permits, easements, consents,
licenses, franchises and government regulatory authorizations, for purposes of
paragraphs (viii), (xiii) and (xvi) hereof and certificates of public officials.
In giving such opinion, such counsel may rely as to matters of Delaware law upon
the opinion of Richards, Layton & Finger, P.A. described herein.
Such counsel shall also confirm that, in connection with the
preparation of the Registration Statement and Prospectus, such counsel has
participated in conferences with officers and representatives of the Offerors
and with their independent public accountants and with you and your counsel, at
which conferences such counsel made inquiries of such officers, representatives
and accountants and discussed in detail the contents of the Registration
Statement and Prospectus and the documents incorporated therein by reference
(without taking further action to verify independently the statements made in
the Registration Statement and the Prospectus, and without assuming
responsibility for the accuracy or completeness of such statements, except to
the extent expressly provided above) and such counsel has no reason to believe
(A) that the Registration Statement or any amendment thereto (except for the
financial statements and related schedules and statistical data and exhibits
included therein or omitted therefrom or Underwriters' Information, as to which
such counsel need express no opinion), at the time the Registration Statement or
any such amendment became effective, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or (B) that the
Prospectus or any amendment or supplement thereto or the documents incorporated
therein by reference (except for the financial statements and related schedules
and statistical data and exhibits included therein or omitted therefrom or
Underwriters' Information, as to which such counsel need express no opinion), at
the Effective Date (or, if the term "Prospectus" refers to the prospectus first
filed pursuant to Rule 424(b) of the 1933 Act Regulations, at the time the
Prospectus was issued), at the time any such amended or supplemented Prospectus
was issued, at the Closing Date and, if applicable, the Option Closing Date,
contained or contains any untrue statement of a material fact or omitted or
omits to state any material fact in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or (C)
that there is any amendment to the Registration Statement required to be filed
that has not already been filed.
(e) John S. Daniels, Esq. ("JSD"), counsel for the Offerors, shall have
furnished to you his signed opinion, dated as of the Closing Date or the Option
Closing Date, as the case may be, in form and substance satisfactory to counsel
for the Underwriters, to the effect that, in connection with the preparation of
the Registration Statement and Prospectus, such counsel has participated in
conferences with officers and representatives of the Offerors and with you and
your counsel, at which conferences such counsel made inquiries of such officers
and representatives and discussed the contents of the Registration Statement and
Prospectus and the documents incorporated therein by reference (without taking
further action to verify independently the statements made in the Registration
Statement and the Prospectus, and without assuming responsibility for the
accuracy or completeness of such statements, except to the extent expressly
provided above) and such counsel has no reason to believe (A) that the
Registration Statement or any amendment thereto (except for the financial
statements and related schedules and statistical data included therein or
omitted therefrom or Underwriters' Information, as to which such counsel need
express no opinion), at the time the Registration Statement or any such
amendment became effective, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading or (B) that the Prospectus or any amendment or supplement
thereto or the documents incorporated therein by reference (except for the
financial statements and related schedules and statistical data included therein
or omitted therefrom or Underwriters' Information, as to which such counsel need
express no opinion), at the time the Registration Statement became effective
(or, if the term "Prospectus" refers to the prospectus first filed pursuant to
Rule 424(b) of the 1933 Act Regulations, at the time the Prospectus was issued),
at the time any such amended or supplemented Prospectus was issued, at the
Closing Date and, if applicable, the Option Closing Date, contained or contains
any untrue statement of a material fact or omitted or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made,
or (C) that there is any amendment to the Registration Statement required to be
filed that has not already been filed.
(f) Richards, Layton & Finger, P.A., special Delaware counsel to the
Offerors, shall have furnished to you their signed opinion, dated as of Closing
Date or the Option Closing Date, as the case may be, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) The Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware
Business Trust Act.
(ii) The Trust Agreement constitutes a valid and binding
obligation of the Company and the Trustees and is enforceable against
the Company and the Trustees in accordance with its terms.
(iii) Under the Delaware Business Trust Act and the
Trust Agreement, the Trust has the trust powers and authority (a) to
execute and deliver, and to perform its obligations under this
Agreement, (b) to issue and perform its obligations under the Trust
Securities; and (c) to conduct its business as described in the
Prospectus.
(iv) Under the Delaware Business Trust Act and the
Trust Agreement, the execution and delivery by the Trust of this
Agreement, and the performance by the Trust of its obligations under
this Agreement, have been duly authorized by all necessary trust action
on the part of the Trust.
(v) The Preferred Securities have been duly authorized by
the Trust Agreement and are validly issued and subject to
the qualification expressed in paragraph (vi) below, fully paid and
nonassessable beneficial interests in the assets of the Trust and are
entitled to the benefits of the Trust Agreement. The form of
Certificate has been duly authorized by the Trust and complies with all
applicable requirements of the Delaware Business Trust Act.
(vi) Holders of Designated Preferred Securities, as
beneficial owners of the Trust, will be entitled to the same limitation
of personal liability extended to shareholders of private, for-profit
corporations organized under the General Corporation Law of the State
of Delaware. Such opinion may note that the holders of Designated
Preferred Securities may be obligated to make payments as set forth in
the Trust Agreement.
(vii) Under the Delaware Business Trust Act and the Trust
Agreement, the issuance of the Designated Preferred Securities is not
subject to preemptive rights.
(viii) The issuance and sale by the Trust of the
Designated Preferred Securities and the Common Securities, the
execution, delivery and performance by the Trust of this Agreement, and
the consummation by the Trust of the transactions contemplated by this
Agreement, do not violate (a) any provisions of the Trust Agreement, or
(b) any applicable Delaware law, rule or regulation.
(ix) Neither the execution, delivery and performance
by the Trust of this Agreement, nor the offering, issuance, sale or
delivery of the Preferred Securities, requires the consent or approval
of, the withholding of objection on the part of, the giving of notice
to, the filing, registration or qualification with, or the taking of
any action in respect of, any governmental authority or agency of the
State of Delaware, other than the filing of the Certificate of Trust
with the Secretary of State.
Such opinion may state that it is limited to the laws of the State of
Delaware and that the opinions expressed in paragraphs (ii) and (iii) above are
subject to the effect upon the Trust Agreement, the Debentures, the Indenture,
the Guarantee and the Expense Agreement of (i) bankruptcy, insolvency,
moratorium, receivership, reorganization, liquidation, fraudulent conveyance and
other similar laws relating to or affecting the rights and remedies of creditors
generally, (ii) principles of equity, including applicable law relating to
fiduciary duties (regardless of whether considered and applied in a proceeding
in equity or at law), and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification or contribution.
(g) Bryan Cave LLP, counsel for the Underwriters, shall have furnished
you their signed opinion, dated the Closing Date or the Option Closing Date, as
the case may be, with respect to the sufficiency of all corporate procedures and
other legal matters relating to this Agreement, the validity of the Designated
Preferred Securities, the Registration Statement, the Prospectus and such other
related matters as you may reasonably request and there shall have been
furnished to such counsel such documents and other information as they may
request to enable them to pass on such matters. In giving such opinion, Bryan
Cave LLP may rely as to matters of fact upon statements and certifications of
officers of the Offerors and of other appropriate persons and may rely as to
matters of law, other than law of the United States and the State of Missouri,
upon the opinions of JSD, Jackson Walker and Richards, Layton & Finger, P.A.
described herein.
(h) On the date of this Agreement and on the Closing Date (and, if
applicable, any Option Closing Date), the Representatives shall have received
from KPMG LLP a letter, dated the date of this Agreement and the Closing Date
(and, if applicable, the Option Closing Date), respectively, in form and
substance satisfactory to the Representatives, confirming that they are
independent public accountants with respect to Company (which shall be inclusive
of its subsidiaries for purposes of this Section 6(g)), within the meaning of
the 1933 Act and the 1933 Act Regulations, and stating in effect that:
(i) In their opinion, the consolidated financial statements
of the Company audited by them and included in the Registration
Statement comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act, the 1933 Act
Regulations, the 1934 Act and the 1934 Act Regulations.
(ii) On the basis of the procedures specified by the
American Institute of Certified Public Accountants as described in SAS
No. 71, "Interim Financial Information," inquiries of officials of the
Company responsible for financial and accounting matters, and such
other inquiries and procedures as may be specified in such letter,
which procedures do not constitute an audit in accordance with U.S.
generally accepted auditing standards, nothing came to their attention
that caused them to believe that, if applicable, the unaudited interim
consolidated financial statements of the Company included in the
Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act,
1933 Act Regulations, including without limitation, Regulation S-K, or
are not in conformity with U.S. generally accepted accounting
principles applied on a basis substantially consistent, except as noted
in the Registration Statement, with the basis for the audited
consolidated financial statements of the Company included in the
Registration Statement.
(iii) On the basis of limited procedures, not constituting
an audit in accordance with U.S. generally accepted auditing standards,
consisting of a reading of the unaudited interim financial statements
and other information referred to below, a reading of the latest
available unaudited condensed consolidated financial statements of the
Company, inspection of the minute books of the Company since the date
of the latest audited financial statements of the Company included or
incorporated by reference in the Registration Statement, inquiries of
officials of the Company responsible for financial and accounting
matters and such other inquiries and procedures as may be specified in
such letter, nothing came to their attention that caused them to
believe that:
(A) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the consolidated capital stock of the Company, any increase
in the consolidated debt of the Company, any decreases in
consolidated total assets or shareholders' equity of the
Company, or any changes, decreases or increases in other items
specified by the Representatives, in each case as compared
with amounts shown in the latest unaudited interim
consolidated statement of financial condition of the Company
included in the Registration Statement except in each case for
changes, increases or decreases which the Registration
Statement specifically discloses, have occurred or may occur
or which are described in such letter; and
(B) for the period from the date of the latest
unaudited interim consolidated financial statements of
the Company included in the Registration Statement to the
specified date referred to in clause (iii)(A), there were any
decreases in the consolidated interest income, net interest
income, or net income of the Company or in the per share
amount of net income of the Company, or any changes, decreases
or increases in any other items specified by the
Representatives, in each case as compared with the comparable
period of the preceding year and with any other period of
corresponding length specified by the Representatives, except
in each case for increases or decreases which the Registration
Statement discloses have occurred or may occur, or which are
described in such letter.
(iv) In addition to the audit referred to in their report
included in the Registration Statement and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (ii) and (iii) above, they have carried out certain
specified procedures, not constituting an audit in accordance with U.S.
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives
which are derived from the general accounting records and consolidated
financial statements of the Company which appear in the Registration
Statement, and have compared such amounts, percentages and financial
information with the accounting records and the material derived from
such records and consolidated financial statements of the Company have
found them to be in agreement.
In the event that the letters to be delivered referred to above set
forth any such changes, decreases or increases as specified in clauses (iii)(A)
or (iii)(B) above, or any exceptions from such agreement specified in clause
(iv) above, it shall be a further condition to the obligations of the
Underwriters that the Representatives shall have determined, after discussions
with officers of the Company responsible for financial and accounting matters,
that such changes, decreases, increases or exceptions as are set forth in such
letters do not (x) reflect a material adverse change in the items specified in
clause (iii)(A) above as compared with the amounts shown in the latest unaudited
consolidated statement of financial condition of the Company included in the
Registration Statement, (y) reflect a material adverse change in the items
specified in clause (iii)(B) above as compared with the corresponding periods of
the prior year or other period specified by the Representatives, or (z) reflect
a material change in items specified in clause (iv) above from the amounts shown
in the Preliminary Prospectus distributed by the Underwriters in connection with
the offering contemplated hereby or from the amounts shown in the Prospectus.
(i) [Reserved].
(j) At the Closing Date and, if applicable, the Option Closing Date,
you shall have received certificates of the President and Chief Operating
Officer and the Executive Vice President and Chief Financial Officer of the
Company, which certificates shall be deemed to be made on behalf of the Company
dated as of the Closing Date and, if applicable, the Option Closing Date,
evidencing satisfaction of the conditions of Section 6(a) and stating that (i)
the representations and warranties of the Company set forth in Section 2(a)
hereof are accurate as of the Closing Date and, if applicable, the Option
Closing Date, and that the Offerors have complied with all agreements and
satisfied all conditions on their part to be performed or satisfied at or prior
to such Closing Date; (ii) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition (financial or otherwise), earnings,
affairs, business, prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis; (iii) since such dates there has not been
any material transaction entered into by the Offerors or the Subsidiaries other
than transactions in the ordinary course of business; and (iv) they have
carefully examined the Registration Statement and the Prospectus as amended or
supplemented and nothing has come to their attention that would lead them to
believe that either the Registration Statement or the Prospectus, or any
amendment or supplement thereto as of their respective effective or issue dates,
contained, and the Prospectus as amended or supplemented at such Closing Date
(and, if applicable, the Option Closing Date), contains any untrue statement of
a material fact, or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; and (v) covering such
other matters as you may reasonably request. The officers' certificate of the
Company shall further state that no stop order affecting the Registration
Statement is in effect or, to their knowledge, threatened.
(k) At the Closing Date and, if applicable, the Option Closing Date,
you shall have received a certificate of an authorized representative of the
Trust to the effect that to the best of his or her knowledge based upon a
reasonable investigation, the representations and warranties of the Trust in
this Agreement are true and correct as though made on and as of the Closing Date
(and, if applicable, the Option Closing Date); the Trust has complied with all
the agreements and satisfied all the conditions required by this Agreement to be
performed or satisfied by the Trust on or prior to the Closing Date and since
the most recent date as of which information is given in the Prospectus, except
as contemplated by the Prospectus, the Trust has not incurred any material
liabilities or obligations, direct or contingent, or entered into any material
transactions not in the ordinary course of business and there has not been any
material adverse change in the condition (financial or otherwise) of the Trust.
(l) On the Closing Date, you shall have received duly executed
counterparts of the Trust Agreement, the Guarantee, the Indenture and the
Expense Agreement.
(m) The NASD, upon review of the terms of the public offering of the
Designated Preferred Securities, shall not have objected to the Underwriters'
participation in such offering.
(n) Prior to the Closing Date and, if applicable, the Option Closing
Date, the Offerors shall have furnished to you and counsel for the Underwriters
all such other documents, certificates and opinions as they have reasonably
requested.
All opinions, certificates, letters and other documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you. The Offerors shall furnish you with conformed
copies of such opinions, certificates, letters and other documents as you shall
reasonably request.
If any of the conditions referred to in this Section 6 shall not have
been fulfilled when and as required by this Agreement, this Agreement and all of
the Underwriters' obligations hereunder may be terminated by you on notice to
the Company at, or at any time before, the Closing Date or the Option Closing
Date, as applicable. Any such termination shall be without liability of the
Underwriters to the Offerors.
7. Indemnification and Contribution.
--------------------------------
(a) The Offerors jointly and severally agree to indemnify and hold
harmless each Underwriter, each of its directors, officers and agents, and each
person, if any, who controls any Underwriter within the meaning of the 1933 Act,
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation and attorneys' fees and expenses), joint or
several, arising out of or based upon: (i) any untrue statement or alleged
untrue statement of a material fact made by the Company or the Trust contained
in Section 2(a) of this Agreement (or any certificate delivered by the Company
or the Trust pursuant to Sections 6(j), 6(k) or 6(n) hereof) or the registration
statement as originally filed or the Registration Statement, any Preliminary
Prospectus or the Prospectus, or in any amendment or supplement thereto; (ii)
any omission or alleged omission to state a material fact in the registration
statement as originally filed or the Registration Statement, the Preliminary
Prospectus or the Prospectus, or in any amendment or supplement thereto,
required to be stated therein or necessary to make the statements therein not
misleading, and against any and all losses, claims, damages, liabilities and
expenses (including reasonable costs of investigation and attorneys' fees),
joint or several, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus or
the Prospectus, or in any amendment or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; or (iii)
the enforcement of this indemnification provision or the contribution provisions
of Section 7(d); and shall reimburse each such indemnified party for any legal
or other expenses as incurred (but in no event less frequently than 30 days
after each invoice is submitted, incurred) by them in connection with
investigating or defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action,
notwithstanding the possibility that payments for such expenses might later be
held to be improper, in which case such payments shall be promptly refunded;
provided, however, that the Offerors shall not be liable in any such case to the
extent, but only to the extent, that any such losses, claims, damages,
liabilities and expenses arise out of or are based upon any untrue statement or
omission or allegation thereof that has been made therein or omitted therefrom
in reliance upon and in conformity with the Underwriters' Information; provided,
that the indemnification contained in this paragraph with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter (or of
any person controlling any Underwriter) to the extent any such losses, claims,
damages, liabilities or expenses directly results from the fact that such
Underwriter sold Designated Preferred Securities to a person to whom there was
not sent or given, at or prior to the written confirmation of such sale, a copy
of the Prospectus (as amended or supplemented if any amendments or supplements
thereto shall have been furnished to you in sufficient time to distribute same
with or prior to the written confirmation of the sale involved), if required by
law, and if such loss, claim, damage, liability or expense would not have arisen
but for the failure to give or send such person such document. The foregoing
indemnity agreement is in addition to any liability the Company or the Trust may
otherwise have to any such indemnified party.
(b) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless each Offeror, each of its directors, each of its officers who
signed the Registration Statement and each person, if any, who controls an
Offeror within the meaning of the 1933 Act, to the same extent as required by
the foregoing indemnity from the Company to each Underwriter, but only with
respect to the Underwriters' Information. The foregoing indemnity agreement is
in addition to any liability which any Underwriter may otherwise have to any
such indemnified party.
(c) If any action or claim shall be brought or asserted against any
indemnified party or any person controlling an indemnified party in respect of
which indemnity may be sought from the indemnifying party, such indemnified
party or controlling person shall promptly notify the indemnifying party in
writing, and the indemnifying party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all expenses; provided, however, that the failure so to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under such paragraph, and further, shall
only relieve it from liability under such paragraph to the extent prejudiced
thereby. Any indemnified party or any such controlling person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or such controlling person unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) the indemnifying party has failed to assume the defense or to
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
such indemnified party or such controlling person and the indemnifying party and
such indemnified party or such controlling person shall have been advised by
such counsel that there may be one or more legal defenses available to it that
are different from or in addition to those available to the indemnifying party
(in which case, if such indemnified party or controlling person notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party
or such controlling person) it being understood, however, that the indemnifying
party shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys at any time and for all
such indemnified parties and controlling persons, which firm shall be designated
in writing by the indemnified party(ies) (and, if such indemnified parties are
Underwriters, by you, as Representatives). Each indemnified party and each
controlling person, as a condition of such indemnity, shall use reasonable
efforts to cooperate with the indemnifying party in the defense of any such
action or claim. The indemnifying party shall not be liable for any settlement
of any such action effected without its written consent, but if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party and any such controlling
person from and against any loss, claim, damage, liability or expense by reason
of such settlement or judgment.
An indemnifying party shall not, without the prior written consent of
each indemnified party, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnity may be sought hereunder (whether or not such
indemnified party or any person who controls such indemnified party within the
meaning of the 1933 Act is a party to such claim, action, suit or proceeding),
unless such settlement, compromise or consent includes a release of each such
indemnified party reasonably satisfactory to each such indemnified party and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding or unless the indemnifying party shall confirm in a
written agreement with each indemnified party, that notwithstanding any federal,
state or common law, such settlement, compromise or consent shall not alter the
right of any indemnified party or controlling person to indemnification or
contribution as provided in this Agreement.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraphs (a), (b) or (c) hereof in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Offerors on the one hand and the
Underwriters on the other from the offering of the Designated Preferred
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Offerors on the one hand and the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Offerors on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Designated
Preferred Securities (before deducting expenses) received by the Offerors bear
to the total underwriting discounts, commissions and compensation received by
the Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault of the Offerors on the one hand and of the
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Offerors or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Offerors and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this paragraph
(d) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in the first sentence of
this paragraph (d) shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this paragraph (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Designated Preferred Securities underwritten by such
Underwriter and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this paragraph (d), each person who controls an
Underwriter within the meaning of the 1933 Act shall have the same rights to
contribution as such Underwriter, and each person who controls an Offeror within
the meaning of the 1933 Act, each officer and trustee of an Offeror who shall
have signed the Registration Statement and each director of an Offeror shall
have the same rights to contribution as the Offerors subject in each case to the
preceding sentence. The obligations of the Offerors under this paragraph (d)
shall be in addition to any liability which the Offerors may otherwise have and
the obligations of the Underwriters under this paragraph (d) shall be in
addition to any liability that the Underwriters may otherwise have.
(e) The indemnity and contribution agreements contained in this Section
7 and the representations and warranties of the Offerors set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Underwriter or any person
controlling an Underwriter or by or on behalf of the Offerors, or such
directors, trustees or officers (or any person controlling an Offeror, (ii)
acceptance of any Designated Preferred Securities and payment therefor hereunder
and (iii) any termination of this Agreement. A successor of any Underwriter or
of an Offeror, such directors, trustees or officers (or of any person
controlling an Underwriter or an Offeror) shall be entitled to the benefits of
the indemnity, contribution and reimbursement agreements contained in this
Section 7.
(f) The Company agrees to indemnify the Trust against any and all
losses, claims, damages or liabilities that may become due from the Trust under
this Section 7.
8. Termination. You shall have the right to terminate this Agreement at
-----------
any time by written notice at or prior to the Closing Date or, with respect to
the Underwriters' obligation to purchase the Option Preferred Securities, at any
time at or prior to the Option Closing Date, without liability on the part of
the Underwriters to the Offerors, if:
(a) Either Offeror shall have failed, refused, or been unable to
perform any agreement on its part to be performed under this Agreement, or any
of the conditions referred to in Section 6 shall not have been fulfilled, when
and as required by this Agreement;
(b) The Offerors or any of the Subsidiaries shall have sustained any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree which in the judgment of the
Representatives materially impairs the investment quality of the Designated
Preferred Securities;
(c) There has been since the respective dates as of which information
is given in the Registration Statement or the Prospectus, any materially adverse
change in, or any development which is reasonably likely to have a material
adverse effect on, the condition (financial or otherwise), earnings, affairs,
business, prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis, whether or not arising in the ordinary
course of business;
(d) There has occurred any outbreak of hostilities or other calamity or
crisis or material change in general economic, political or financial
conditions, or internal conditions, the effect of which on the financial markets
of the United States is such as to make it, in your reasonable judgment,
impracticable to market the Designated Preferred Securities or enforce contracts
for the sale of the Designated Preferred Securities;
(e) Trading generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required, by any of said exchanges or
market system or by the Commission or any other governmental authority;
(f) A banking moratorium shall have been declared by either federal,
Missouri, Illinois, Texas or California authorities; or
(g) Any action shall have been taken by any government in respect of
its monetary affairs which, in your reasonable judgment, has a material adverse
effect on the United States securities markets.
If this Agreement shall be terminated pursuant to this Section 8, the
Offerors shall not then be under any liability to the Underwriters except as
provided in Sections 5 and 7 hereof.
9. Default of Underwriters. If any Underwriter or Underwriters shall
------------------------
default in its or their obligations to purchase Designated Preferred Securities
hereunder, the other Underwriters shall be obligated severally, in proportion to
their respective commitments hereunder, to purchase the Designated Preferred
Securities which such defaulting Underwriter or Underwriters agreed but failed
to purchase; provided, however, that the non-defaulting Underwriters shall be
-------- -------
under no obligation to purchase that portion of such Designated Preferred
Securities to the extent that the aggregate number of Designated Preferred
Securities to be purchased by such non-defaulting Underwriters shall exceed 110%
of the aggregate underwriting commitments with respect to such non-defaulting
Underwriters as set forth in Schedule I hereto, and provided further, that no
---------- -------- -------
non-defaulting Underwriter shall be obligated to purchase Designated Preferred
Securities to the extent that the number of such Designated Preferred Securities
is more than 110% of such Underwriter's underwriting commitment set forth in
Schedule I hereto.
----------
In the event that the non-defaulting Underwriters are not obligated
under the above paragraph to purchase the Designated Preferred Securities which
the defaulting Underwriter or Underwriters agreed but failed to purchase, the
Representatives may in their discretion arrange for one or more of the
Underwriters or for another party or parties to purchase such Designated
Preferred Securities on the terms contained herein. If within one business day
after such default the Representatives do not arrange for the purchase of such
Designated Preferred Securities, then the Company shall be entitled to a further
period of one business day within which to procure another party or parties
satisfactory to the Representatives to purchase such Designated Preferred
Securities on such terms.
In the event that the Representatives or the Company do not arrange for
the purchase of any Designated Preferred Securities to which a default relates
as provided above, this Agreement shall be terminated.
If the remaining Underwriters or substituted underwriters are required
hereby or agree to take up all or a part of the Designated Preferred Securities
of a defaulting Underwriter or Underwriters as provided in this Section 9, (i)
you shall have the right to postpone the Closing Date for a period of not more
than five full business days, in order to effect any changes that, in the
opinion of counsel for the Underwriters or the Company, may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or agreements, and the Company agrees promptly to file any amendments
to the Registration Statement or supplements to the Prospectus which, in its
opinion, may thereby be made necessary and (ii) the respective numbers of
Designated Preferred Securities to be purchased by the remaining Underwriters or
substituted underwriters shall be taken as the basis of their underwriting
obligation for all purposes of this Agreement. Nothing herein contained shall
relieve any defaulting Underwriter of any liability it may have for damages
occasioned by its default hereunder. Any termination of this Agreement pursuant
to this Section 9 shall be without liability on the part of any non-defaulting
Underwriter or the Company, except for expenses to be paid or reimbursed
pursuant to Section 5 and except for the provisions of Section 7.
10. Effective Date of Agreement. If the Registration Statement is not
---------------------------
effective at the time of execution of this Agreement, this Agreement shall
become effective on the Effective Date at the time the Commission declares the
Registration Statement effective. The Company shall immediately notify the
Underwriters when the Registration Statement becomes effective.
If the Registration Statement is effective at the time of execution of
this Agreement, this Agreement shall become effective at the earlier of 11:00
a.m. St. Louis time, on the first full business day following the day on which
this Agreement is executed, or at such earlier time as the Representatives shall
release the Designated Preferred Securities for initial public offering. The
Representatives shall notify the Offerors immediately after they have taken any
action which causes this Agreement to become effective.
Until such time as this Agreement shall have become effective, it may
be terminated by the Offerors, by notifying you or by you, as Representatives of
the several Underwriters, by notifying either Offeror, except that the
provisions of Sections 5 and 7 shall at all times be effective.
11. Representations, Warranties and Agreements to Survive Delivery. The
--------------------------------------------------------------
representations, warranties, indemnities, agreements and other statements of the
Offerors and their officers and trustees set forth in or made pursuant to this
Agreement and the agreements of the Underwriters contained in Section 7 hereof
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Offerors or controlling persons of
either Offeror, or by or on behalf of the Underwriters or controlling persons of
the Underwriters, and shall survive delivery of and payment for the Designated
Preferred Securities. The obligations of the Company pursuant to Section 5 shall
survive delivery of and payment for the Designated Preferred Securities and
shall survive any termination or cancellation of this Agreement.
12. Notices. Except as otherwise provided in this Agreement, all
-------
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand, mailed by registered or
certified mail, return receipt requested, or transmitted by any standard form of
telecommunication and confirmed. Notices to either Offeror shall be sent to
First Banks, Inc., 600 James S. McDonnell Boulevard, Hazelwood, Misouri 63042
Attention: Allen H. Blake (with a copy to John S. Daniels, Esq., 6440 North
Central Expressway, Suite 503, Dallas, Texas 75206 and to Jackson Walker L.L.P.,
901 Main Street, Suite 6000, Dallas, Texas 75202, Attention: James S. Ryan, III,
Esq.); and notices to the Underwriters shall be sent to Stifel, Nicolaus &
Company, Incorporated, One Financial Plaza, 501 North Broadway, 9th Floor, St.
Louis, Missouri 63102, Attention: Rick E. Maples, to Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, 60 South Sixth Street, 18th Floor,
Minneapolis, Minnesota 55402, Attention: Matt Johnson, and to Fahnestock & Co.
Inc., 125 Broad Street, New York, New York 10004, Attention: Corporate Syndicate
(with a copy to Bryan Cave LLP, 211 North Broadway, Suite 3600, St. Louis,
Missouri 63102, Attention: Harold R. Burroughs, Esq.). In all dealings with the
Company under this Agreement, Stifel, Nicolaus & Company, Incorporated, Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated and Fahnestock & Co.
Inc., shall act jointly as representatives of and on behalf of the several
Underwriters, and the Company shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of the Underwriters, made or
given by Stifel, Nicolaus & Company, Incorporated, Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated and Fahnestock & Co. Inc. on behalf of
the Underwriters, as if the same shall have been made or given in writing by the
Underwriters. No statement, request, notice, agreement or action issued or taken
in connection with the Offering by Stifel, Nicolaus & Company, Incorporated Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated or Fahnestock & Co.
Inc. acting alone, without the express written agreement of the other party,
shall be valid and binding against the other or the several Underwriters.
13. Parties. The Agreement herein set forth is made solely for the
-------
benefit of the Underwriters and the Offerors and, to the extent expressed,
directors, trustees and officers of the Offerors, any person controlling the
Offerors or the Underwriters, and their respective successors and assigns. No
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser, in
his status as such purchaser, from the Underwriters of the Designated Preferred
Securities.
14. Governing Law. This Agreement shall be governed by the laws of
--------------
the State of Missouri, without giving effect to the choice of law or conflicts
of law principles thereof.
15. Counterparts. This Agreement may be executed in one or more
------------
counterparts, and when a counterpart has been executed by each party hereto all
such counterparts taken together shall constitute one and the same Agreement.
[The remainder of this page has been left blank intentionally]
If the foregoing is in accordance with the your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
shall become a binding agreement between the Company, the Trust and you in
accordance with its terms.
Very truly yours,
FIRST BANKS, INC.
By:
--------------------------------------------
Name:
Title:
FIRST PREFERRED CAPITAL TRUST III
By:
--------------------------------------------
Name:
Title: Administrative Trustee
CONFIRMED AND ACCEPTED,
as of ____________ _____, 2001
STIFEL, NICOLAUS & COMPANY, INCORPORATED
By:
--------------------------------------
Name:
Title:
DAIN RAUSCHER WESSELS, a division of
DAIN RAUSCHER INCORPORATED
By:
--------------------------------------
Name:
Title:
FAHNESTOCK & CO. INC.
By:
--------------------------------------
Name:
Title:
For themselves and as Representatives of the several Underwriters named in
Schedule I hereto.
SCHEDULE I
----------
Underwriter Number of Preferred Securities
----------- ------------------------------
Stifel, Nicolaus & Company, Incorporated
Dain Rauscher Incorporated
Fahnestock & Co. Inc.
Total 1,600,000
=========
EXHIBIT A
LIST OF SIGNIFICANT DIRECT AND INDIRECT SUBSIDIARIES
First Bank
First Bank & Trust
First Capital Group, Inc.
First Banks America, Inc.
Eucalyptus Financial Corp.
First America Capital Trust
First Land Trustee Corp.
FB Commercial Finance, Inc.
Star Lane Holdings Trust, S.T.
Star Lane Trust
First Preferred Capital Trust
Missouri Valley Partners, Inc.
First Banc Mortgage, Inc.
First Preferred Capital Trust II
Bank of San Francisco Realty Investors, Inc.
The San Francisco Company
EXHIBIT B
The Company owns approximately 18% of the outstanding common stock of Southside
Bancshares, Corp.
Exhibit 4.1
=================================================================
FIRST BANKS, INC.
AND
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, AS TRUSTEE
INDENTURE
_____% SUBORDINATED DEBENTURES DUE 2031
DATED AS OF ________________, 2001
=================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.............................................................................................1
SECTION 1.1. DEFINITIONS OF TERMS..............................................................................1
ARTICLE II ISSUE, DESCRIPTION, TERMS, CONDITIONS, REGISTRATION AND EXCHANGE OF THE DEBENTURES.....................9
SECTION 2.1. DESIGNATION AND PRINCIPAL AMOUNT..................................................................9
SECTION 2.2. MATURITY.........................................................................................10
SECTION 2.3. FORM AND PAYMENT.................................................................................10
SECTION 2.4. [INTENTIONALLY OMITTED]..........................................................................10
SECTION 2.5. INTEREST.........................................................................................10
SECTION 2.6. EXECUTION AND AUTHENTICATION.....................................................................11
SECTION 2.7. REGISTRATION OF TRANSFER AND EXCHANGE............................................................12
SECTION 2.8. TEMPORARY DEBENTURES.............................................................................13
SECTION 2.9. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES..................................................13
SECTION 2.10. CANCELLATION....................................................................................14
SECTION 2.11. BENEFIT OF INDENTURE............................................................................14
SECTION 2.12. AUTHENTICATING AGENT............................................................................14
ARTICLE III REDEMPTION OF DEBENTURES.............................................................................15
SECTION 3.1. REDEMPTION.......................................................................................15
SECTION 3.2. SPECIAL EVENT REDEMPTION.........................................................................15
SECTION 3.3. OPTIONAL REDEMPTION BY THE COMPANY...............................................................15
SECTION 3.4. NOTICE OF REDEMPTION.............................................................................16
SECTION 3.5. PAYMENT UPON REDEMPTION..........................................................................17
SECTION 3.6. NO SINKING FUND..................................................................................17
ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD..................................................................18
SECTION 4.1. EXTENSION OF INTEREST PAYMENT PERIOD.............................................................18
SECTION 4.2. NOTICE OF EXTENSION..............................................................................18
SECTION 4.3. LIMITATION ON TRANSACTIONS.......................................................................18
ARTICLE V PARTICULAR COVENANTS OF THE COMPANY....................................................................19
SECTION 5.1. PAYMENT OF PRINCIPAL AND INTEREST................................................................19
SECTION 5.2. MAINTENANCE OF AGENCY............................................................................19
SECTION 5.3. PAYING AGENTS....................................................................................20
SECTION 5.4. APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE.................................................20
SECTION 5.5. COMPLIANCE WITH CONSOLIDATION PROVISIONS.........................................................20
SECTION 5.6. LIMITATION ON TRANSACTIONS.......................................................................21
SECTION 5.7. COVENANTS AS TO THE TRUST........................................................................21
SECTION 5.8. COVENANTS AS TO PURCHASES........................................................................22
SECTION 5.9. WAIVER OF USURY; STAY OR EXTENSION LAWS..........................................................22
SECTION 5.10. LIMITATION ON ADDITIONAL JUNIOR INDEBTEDNESS....................................................22
ARTICLE VI DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE....................................23
SECTION 6.1. COMPANY TO FURNISH THE TRUSTEE NAMES AND ADDRESSES OF DEBENTUREHOLDERS...........................23
SECTION 6.2. PRESERVATION OF INFORMATION COMMUNICATIONS WITH THE DEBENTUREHOLDERS.............................24
SECTION 6.3. REPORTS BY THE COMPANY...........................................................................24
SECTION 6.4. REPORTS BY THE TRUSTEE...........................................................................25
ARTICLE VII REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON EVENT OF DEFAULT.....................................26
SECTION 7.1. EVENTS OF DEFAULT................................................................................26
SECTION 7.2. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE..................................27
SECTION 7.3 APPLICATION OF MONEY COLLECTED....................................................................28
SECTION 7.4. LIMITATION ON SUITS..............................................................................29
SECTION 7.5. RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER.....................................29
SECTION 7.6. CONTROL BY DEBENTUREHOLDERS......................................................................29
SECTION 7.7. UNDERTAKING TO PAY COSTS.........................................................................30
SECTION 7.8. DIRECT ACTION; RIGHT OF SET-OFF..................................................................30
ARTICLE VIII FORM OF DEBENTURE AND ORIGINAL ISSUE................................................................31
SECTION 8.1. FORM OF DEBENTURE................................................................................31
SECTION 8.2. ORIGINAL ISSUE OF THE DEBENTURES.................................................................31
ARTICLE IX CONCERNING THE TRUSTEE................................................................................31
SECTION 9.1. CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE...............................................31
SECTION 9.2. NOTICE OF DEFAULTS...............................................................................32
SECTION 9.3. CERTAIN RIGHTS OF TRUSTEE........................................................................32
SECTION 9.4. TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC........................................................33
SECTION 9.5. MAY HOLD THE DEBENTURES..........................................................................34
SECTION 9.6. MONEY HELD IN TRUST..............................................................................34
SECTION 9.7. COMPENSATION AND REIMBURSEMENT...................................................................34
SECTION 9.8. RELIANCE ON OFFICERS' CERTIFICATE................................................................34
SECTION 9.9. DISQUALIFICATION; CONFLICTING INTERESTS..........................................................34
SECTION 9.10. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.........................................................34
SECTION 9.11. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR...............................................35
SECTION 9.12. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR..........................................................36
SECTION 9.13. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.....................................36
SECTION 9.14. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY...........................................37
ARTICLE X CONCERNING THE DEBENTUREHOLDERS........................................................................37
SECTION 10.1. EVIDENCE OF ACTION BY HOLDERS...................................................................37
SECTION 10.2. PROOF OF EXECUTION BY DEBENTUREHOLDERS..........................................................37
SECTION 10.3. WHO MAY BE DEEMED OWNERS........................................................................38
SECTION 10.4. CERTAIN DEBENTURES OWNED BY COMPANY DISREGARDED.................................................38
SECTION 10.5. ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS......................................................38
ARTICLE XI SUPPLEMENTAL INDENTURES...............................................................................38
SECTION 11.1. SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF DEBENTUREHOLDERS.................................38
SECTION 11.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF DEBENTUREHOLDERS........................................39
SECTION 11.3. EFFECT OF SUPPLEMENTAL INDENTURES...............................................................40
SECTION 11.4. THE DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES..............................................40
SECTION 11.5. EXECUTION OF SUPPLEMENTAL INDENTURES............................................................40
ARTICLE XII SUCCESSOR CORPORATION................................................................................40
SECTION 12.1. COMPANY MAY CONSOLIDATE, ETC....................................................................40
SECTION 12.2. SUCCESSOR CORPORATION SUBSTITUTED...............................................................41
SECTION 12.3. EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE......................................................41
ARTICLE XIII SATISFACTION AND DISCHARGE..........................................................................42
SECTION 13.1. SATISFACTION AND DISCHARGE OF INDENTURE.........................................................42
SECTION 13.2. DISCHARGE OF OBLIGATIONS........................................................................42
SECTION 13.3. DEPOSITED MONEY TO BE HELD IN TRUST.............................................................42
SECTION 13.4. PAYMENT OF MONEY HELD BY PAYING AGENTS..........................................................42
SECTION 13.5. REPAYMENT TO THE COMPANY........................................................................43
ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS......................................43
SECTION 14.1. NO RECOURSE.....................................................................................43
ARTICLE XV MISCELLANEOUS PROVISIONS..............................................................................43
SECTION 15.1. EFFECT ON SUCCESSORS AND ASSIGNS................................................................43
SECTION 15.2. ACTIONS BY SUCCESSOR............................................................................43
SECTION 15.3. SURRENDER OF COMPANY POWERS.....................................................................43
SECTION 15.4. NOTICES.........................................................................................44
SECTION 15.5. GOVERNING LAW...................................................................................44
SECTION 15.6. TREATMENT OF DEBENTURES AS DEBT.................................................................44
SECTION 15.7. COMPLIANCE CERTIFICATES AND OPINIONS............................................................44
SECTION 15.8. PAYMENTS ON BUSINESS DAYS.......................................................................44
SECTION 15.9. CONFLICT WITH TRUST INDENTURE ACT...............................................................45
SECTION 15.10. COUNTERPARTS...................................................................................45
SECTION 15.11. SEPARABILITY...................................................................................45
SECTION 15.12. ASSIGNMENT.....................................................................................45
SECTION 15.13. ACKNOWLEDGMENT OF RIGHTS.......................................................................45
ARTICLE XVI SUBORDINATION OF THE DEBENTURES......................................................................45
SECTION 16.1. AGREEMENT TO SUBORDINATE........................................................................45
SECTION 16.2. DEFAULT ON SENIOR DEBT, SUBORDINATED DEBT OR ADDITIONAL SENIOR OBLIGATIONS......................46
SECTION 16.3. LIQUIDATION; DISSOLUTION; BANKRUPTCY............................................................46
SECTION 16.4. SUBROGATION.....................................................................................47
SECTION 16.5. TRUSTEE TO EFFECTUATE SUBORDINATION.............................................................48
SECTION 16.6. NOTICE BY THE COMPANY...........................................................................48
SECTION 16.7. RIGHTS OF THE TRUSTEE; HOLDERS OF THE SENIOR INDEBTEDNESS.......................................48
SECTION 16.8. SUBORDINATION MAY NOT BE IMPAIRED...............................................................49
CROSS-REFERENCE TABLE
Section of
Trust Indenture Act Section of
of 1939, as amended Indenture
------------------- ---------
310(a)...................................................................................................9.10
310(b)..............................................................................................9.9, 9.11
310(c).........................................................................................Not Applicable
311(a)...................................................................................................9.14
311(b)...................................................................................................9.14
311(c).........................................................................................Not Applicable
312(a)........................................................................................... 6.1, 6.2(a)
312(b)................................................................................................ 6.2(c)
312(c)................................................................................................ 6.2(c)
313(a)................................................................................................ 6.4(a)
313(b)................................................................................................ 6.4(b)
313(c).........................................................................................6.4(a), 6.4(b)
313(d).................................................................................................6.4(c)
314(a).................................................................................................6.3(a)
314(b).........................................................................................Not Applicable
314(c)...................................................................................................15.7
314(d).........................................................................................Not Applicable
314(e)...................................................................................................15.7
314(f).........................................................................................Not Applicable
315(a)............................................................................................9.1(a), 9.3
315(b)....................................................................................................9.2
315(c).................................................................................................9.1(a)
315(d).................................................................................................9.1(b)
315(e)....................................................................................................7.7
316(a)...............................................................................................1.1, 7.6
316(b).................................................................................................7.4(b)
316(c)................................................................................................10.1(b)
317(a)....................................................................................................7.2
317(b)....................................................................................................5.3
318(a)...................................................................................................15.9
Note: This Cross-Reference Table does not constitute part of this Indenture and shall not affect the
interpretation of any of its terms or provisions.
INDENTURE
INDENTURE, dated as of _______________, 2001, between FIRST BANKS,
INC., a Missouri corporation (the "Company") and STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association
duly organized and existing under the laws of the United States of America, as
trustee (the "Trustee");
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of securities to be known as its ______% Subordinated Debentures due
2031 (hereinafter referred to as the "Debentures"), the form and substance of
such Debentures and the terms, provisions and conditions thereof to be set forth
as provided in this Indenture;
WHEREAS, First Preferred Capital Trust III, a Delaware statutory
business trust (the "Trust"), has offered to the public $40,000,000 aggregate
liquidation amount of its Preferred Securities (as defined herein) ($46,000,000
if the Underwriters exercise their Option (as defined herein)) and proposes to
invest the proceeds from such offering, together with the proceeds of the
issuance and sale by the Trust to the Company of $1,237,125 aggregate
liquidation amount of its Common Securities (as defined herein) ($1,422,700 if
the Underwriters exercise their Option), in $41,237,125 aggregate principal
amount of the Debentures $47,422,700 if the Underwriters exercise their Option);
and
WHEREAS, the Company has requested that the Trustee execute and deliver
this Indenture; and
WHEREAS, all requirements necessary to make this Indenture a valid
instrument in accordance with its terms, and to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee, the
valid obligations of the Company, have been performed, and the execution and
delivery of this Indenture have been duly authorized in all respects; and
WHEREAS, to provide the terms and conditions upon which the Debentures
are to be authenticated, issued and delivered, the Company has duly authorized
the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and the purchase of
the Debentures by the Trust, it is mutually covenanted and agreed as follows for
the equal and ratable benefit of the holders of the Debentures:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions of Terms. The terms defined in this
Section 1.1 (except as in this Indenture otherwise expressly provided or unless
the context otherwise requires) for all purposes of this Indenture and of any
indenture supplemental hereto shall have the respective meanings specified in
this Section 1.1 and shall include the plural as well as the singular. All other
terms used in this Indenture that are defined in the Trust Indenture Act, or
that are by reference in the Trust Indenture Act defined in the Securities Act
(except as herein otherwise expressly provided or unless the context otherwise
requires), shall have the meanings assigned to such terms in the Trust Indenture
Act and in the Securities Act as in force at the date of the execution of this
instrument. All accounting terms used herein and not expressly defined shall
have the meanings assigned to such terms in accordance with Generally Accepted
Accounting Principles.
"Accelerated Maturity Date" means if the Company elects to accelerate
the Maturity Date in accordance with Section 2.2(b), the date selected by the
Company which is prior to the Scheduled Maturity Date, but is after December 31,
2006.
"Additional Junior Indebtedness" means, without duplication, (A) any
indebtedness, liabilities or obligations of the Company, or any Subsidiary of
the Company, under debt securities (or guarantees in respect of debt securities)
initially issued to any trust, or a trustee of a trust, partnership or other
entity affiliated with the Company that is, directly or indirectly, a finance
subsidiary (as such term is defined in Rule 3a-5) under the Investment Company
Act (or any successor Rule applicable thereto)) or other financing vehicle of
the Company or any Subsidiary of the Company in connection with the issuance by
that entity of preferred securities or other securities that are intended to
qualify for Tier 1 capital treatment (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company, other than the Debentures; provided,
however, that the inability of the Company to treat all or any portion of the
Additional Junior Indebtedness as Tier 1 capital shall not disqualify it as
Additional Junior Indebtedness if such inability results from the Company having
cumulative preferred stock, minority interests in consolidated subsidiaries, or
any other class of security or interest to which the Federal Reserve now accords
or may hereafter accord Tier 1 capital treatment (including the Debentures) in
excess of the amount which may qualify for treatment as Tier 1 capital under
applicable capital adequacy guidelines of the Federal Reserve and (B) any
indebtedness, liabilities or obligations of the Company, or any Subsidiary of
the Company, that is junior or otherwise subordinate in right of payment to
Senior Indebtedness of the Company and that has a maturity or is otherwise due
and payable by the Company on a date twelve (12) months or more after its date
of original issuance, other than the Debentures.
"Additional Payments" shall have the meaning set forth in Section
2.5(c).
"Additional Senior Obligations" means all indebtedness of the Company
whether incurred on or prior to the date of this Indenture or thereafter
incurred, for claims in respect of derivative products such as interest and
foreign exchange rate contracts, commodity contracts and similar arrangements;
provided, however, that Additional Senior Obligations does not include claims in
respect of Senior Debt or Subordinated Debt or obligations which, by their
terms, are expressly stated to be not superior in right of payment to the
Debentures or to rank pari passu in right of payment with the Debentures,
including the Company's 9.25% Subordinated Debentures due 2027 issued to First
Preferred Capital Trust I and the Company's 10.24% Subordinated Debentures due
2030 issued to First Preferred Capital Trust II. For purposes of this
definition, "claim" shall have the meaning assigned thereto in Section 101(4) of
the United States Bankruptcy Code of 1978, as amended.
"Administrative Trustees" shall have the meaning set forth in the Trust
Agreement.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified Person is a
general partner; (e) any officer or director of the specified Person; and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to
the Debentures appointed by the Trustee pursuant to Section 2.12.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any
duly authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification.
"Business Day" means, with respect to the Debentures, any day other
than a Saturday or a Sunday or a day on which federal or state banking
institutions in the Borough of Manhattan, the City of New York, are authorized
or required by law, executive order or regulation to close, or a day on which
the Corporate Trust Office of the Trustee or the Property Trustee is closed for
business.
"Capital Treatment Event" means the receipt by the Company and the
Trust of an Opinion of Counsel, rendered by a law firm having a recognized
banking law practice within a reasonable period of time after the applicable
occurrence, to the effect that, as a result of any amendment to or change
(including any announced prospective change) in the laws (or any regulations
thereunder) of the United States or any political subdivision thereof or
therein, or as a result of any official or administrative pronouncement, action
or judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement, action or judicial
decision is announced on or after the date of issuance of the Preferred
Securities under the Trust Agreement, there is more than an insubstantial risk
of impairment of the Company's ability to treat the aggregate Liquidation Amount
(as defined in the Trust Agreement) of the Preferred Securities (or any
substantial portion thereof) as Tier 1 capital (or the then equivalent thereof)
for purposes of the capital adequacy guidelines of the Federal Reserve, as then
in effect and applicable to the Company; provided, however, that the Trust or
the Company shall have requested and received such an Opinion of Counsel with
regard to such matters within a reasonable period of time after the Trust or the
Company shall have become aware of the occurrence or the possible occurrence of
any of the events described above.
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer, the principal accounting officer, the
treasurer or any vice president of the Company. The Certificate need not comply
with the provisions of Section 15.7.
"Change in 1940 Act Law" shall have the meaning set forth in the
definition of "Investment Company Event."
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Securities" means undivided beneficial interests in the assets
of the Trust which rank pari passu with the Preferred Securities; provided,
however, that upon the occurrence and during the continuation of an Event of
Default, the rights of holders of Common Securities to payment in respect of (i)
distributions, and (ii) payments upon liquidation, redemption and otherwise, are
subordinated to the rights of holders of Preferred Securities.
"Company" means First Banks, Inc., a corporation duly organized and
existing under the laws of the State of Missouri, and, subject to the provisions
of Article XII, shall also include its successors and assigns.
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office" means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at 225 Asylum Street,
Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate Trust
Department.
"Coupon Rate" shall have the meaning set forth in Section 2.5(a).
"Custodian" means any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Debentures" shall have the meaning set forth in the Recitals hereto.
"Debentureholder," "holder of Debentures," "registered holder," or
other similar term, means the Person or Persons in whose name or names a
particular Debenture shall be registered on the books of the Company or the
Trustee kept for that purpose in accordance with the terms of this Indenture.
"Debenture Register" shall have the meaning set forth in Section
2.7(b).
"Debenture Registrar" shall have the meaning set forth in Section
2.7(b).
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) and every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Deferred Payment" shall have the meaning set forth in Section 4.1.
"Direct Action" shall have the meaning set forth in Section 7.8.
"Dissolution Event" means that as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Trust Agreement and the Debentures held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Trust Agreement.
"Distribution" shall have the meaning set forth in the Trust Agreement.
"Event of Default" means, with respect to the Debentures, any event
specified in Section 7.1, which has continued for the period of time, if any,
and after the giving of the notice, if any therein designated.
"Exchange Act," means the Securities Exchange Act of 1934, as amended,
as in effect at the date of execution of this Indenture.
"Extension Period" shall have the meaning set forth in Section 4.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Guarantee" shall have the meaning set forth in the Trust Agreement.
"Generally Accepted Accounting Principles" means such accounting
principles as are generally accepted at the time of any computation required
hereunder.
"Governmental Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged; or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America that, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such Governmental
Obligation or a specific payment of principal of or interest on any such
Governmental Obligation held by such custodian for the account of the holder of
such depository receipt; provided, however, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount received by the
custodian in respect of the Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
"Herein," "hereof," and "hereunder," and other words of similar import,
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into in accordance with the terms hereof.
"Interest Payment Date" shall have the meaning set forth in Section
2.5(a).
"Investment Company Act," means the Investment Company Act of 1940, as
amended, as in effect at the date of execution of this Indenture.
"Investment Company Event" means the receipt by the Company and the
Trust of an Opinion of Counsel, rendered by a law firm having a recognized tax
and securities law practice within a reasonable period of time after the
applicable occurrence, to the effect that, as a result of the occurrence of a
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), the Trust is or shall be considered an
"investment company" that is required to be registered under the Investment
Company Act, which Change in 1940 Act Law becomes effective on or after the date
of original issuance of the Preferred Securities under the Trust Agreement;
provided, however, that the Trust or the Company shall have requested and
received such an Opinion of Counsel with regard to such matters within a
reasonable period of time after the Trust or the Company shall have become aware
of the occurrence or the possible occurrence of any such Change in 1940 Act Law.
"Maturity Date" means the date on which the Debentures mature and on
which the principal shall be due and payable together with all accrued and
unpaid interest thereon including Compounded Interest and Additional Payments,
if any.
"Ministerial Action" shall have the meaning set forth in Section 3.2.
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant Secretary
of the Company that is delivered to the Trustee in accordance with the terms
hereof. Each such certificate shall include the statements provided for in
Section 15.7, if and to the extent required by the provisions thereof.
"Opinion of Counsel" means an opinion in writing of independent,
outside legal counsel that is delivered to the Trustee in accordance with the
terms hereof. Each such opinion shall include the statements provided for in
Section 15.7, if and to the extent required by the provisions thereof.
"Outstanding," when used with respect to the Debentures, means, subject
to the provisions of Section 10.4, as of the date of determination, all of the
Debentures theretofore authenticated and delivered by the Trustee under this
Indenture, except (a) Debentures theretofore canceled by the Trustee or any
Paying Agent, or delivered to the Trustee or any Paying Agent for cancellation;
(b) Debentures or portions thereof for the payment or redemption of which money
or Governmental Obligations in the necessary amount shall have been deposited in
trust with the Trustee or any Paying Agent (other than the Company) or shall
have been set aside and segregated in trust by the Company (if the Company shall
act as its own Paying Agent); provided, however, that if such Debentures or
portions of such Debentures are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as in Article III provided, or
provision satisfactory to the Trustee shall have been made for giving such
notice; and (c) Debentures which have been paid or in lieu of or in substitution
for which other Debentures shall have been authenticated and delivered pursuant
to the terms of Section 2.6; provided, however, that in determining whether the
holders of the requisite percentage of Debentures have given any request,
notice, consent or waiver hereunder, Debentures held by the Company or any
Affiliate of the Company shall not be included; provided, further, that the
Trustee shall be protected in relying upon any request, notice, consent or
waiver unless a Responsible Officer of the Trustee shall have actual knowledge
that the holder of such Debenture is the Company or an Affiliate thereof. The
Debentures so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Debentures, and the pledgee is
not a Person directly or indirectly controlling or controlled by or under direct
or indirect common control with the Company or any such other obligor.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.3.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company, joint-stock company, unincorporated
organization or government or any agency or political subdivision thereof.
"Predecessor Debenture" means every previous Debenture evidencing all
or a portion of the same debt as that evidenced by such particular Debenture;
and, for the purposes of this definition, any Debenture authenticated and
delivered under Section 2.9 in lieu of a lost, destroyed or stolen Debenture
shall be deemed to evidence the same debt as the lost, destroyed or stolen
Debenture.
"Preferred Securities" means the _______% Cumulative Trust Preferred
Securities representing undivided beneficial interests in the assets of the
Trust which rank pari passu with Common Securities issued by the Trust;
provided, however, that upon the occurrence and during the continuation of an
Event of Default, the rights of holders of Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and otherwise
are subordinated to the rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any guarantee that the Company
may enter into with the Trustee or other Persons that operates directly or
indirectly for the benefit of holders of Preferred Securities.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Redemption Price" shall have the meaning set forth in Section 3.2.
"Responsible Officer" when used with respect to the Trustee means any
officer within the Corporate Trust Office of the Trustee with direct
responsibility for the administration of this Indenture, including any vice
president, any assistant vice president, any assistant secretary or any other
officer or assistant officer of the Trustee who customarily performs functions
similar to those performed by the Persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Scheduled Maturity Date" means December 31, 2031.
"Securities Act," means the Securities Act of 1933, as amended, as in
effect at the date of execution of this Indenture.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on all
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is pari
passu with (including without limitation the Company's 9.25% Subordinated
Debentures due 2027 issued to First Preferred Capital Trust I and the Company's
10.24% Subordinated Debentures due 2030 issued to First Preferred Capital Trust
II), or subordinated to, the Debentures; provided, however, that Senior Debt
shall not be deemed to include any (a) Debt of the Company which when incurred
and without respect to any election under section 1111(b) of the United States
Bankruptcy Code of 1978, as amended, was without recourse to the Company; (b)
the Guarantee Agreement; (c) Debt to any employee of the Company; (d) Debt which
by its terms is subordinated to trade accounts payable or accrued liabilities
arising in the ordinary course of business to the extent that payments made to
the holders of such Debt by the holders of the Debentures as a result of the
subordination provisions of this Indenture would be greater than they otherwise
would have been as a result of any obligation of such holders to pay amounts
over to the obligees on such trade accounts payable or accrued liabilities
arising in the ordinary course of business as a result of subordination
provisions to which such Debt is subject; and (e) Debt which constitutes
Subordinated Debt.
"Senior Indebtedness" shall have the meaning set forth in Section 16.1.
"Special Event" means a Tax Event, a Capital Treatment Event or an
Investment Company Event.
"Subordinated Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt (other than the Debentures), whether incurred on or prior to the date of
this Indenture or thereafter incurred, which is by its terms expressly provided
to be junior and subordinate to other Debt of the Company (other than the
Debentures); provided, however, that Subordinated Debt will not be deemed to
include (i) any Debt of the Company which when incurred and without respect to
any election under section 1111(b) of the United States Bankruptcy Code of 1978,
as amended, was without recourse to the Company, (ii) any Debt of the Company
owed to any of its subsidiaries, (iii) any Debt owed to any employee of the
Company, (iv) any Debt which by its terms is subordinated to trade accounts
payable or accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of such Debt by the holders of the
Subordinated Debentures as a result of the subordination provisions of this
Indenture would be greater than they otherwise would have been as a result of
any obligation of such holders to pay amounts over to the obligees on such trade
accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which such Debt is subject,
(v) Debt which constitutes Senior Debt, (vi) any Debt of the Company under debt
securities (and guarantees in respect of these debt securities) initially issued
to any trust, or a trustee of a trust, partnership or other entity affiliated
with the Company that is, directly or indirectly, a financing vehicle of the
Company in connection with the issuance by that entity of preferred securities
or other securities which are intended to qualify for Tier 1 capital treatment,
or (vii) any Debt of its Subsidiaries (including any Debt of First Banks
America, Inc. under debt securities and guarantees in respect of such securities
initially issued to any trust, or a trustee of a trust, partnership or other
entity affiliated with First Banks America, Inc. that is, directly or
indirectly, a financing vehicle of First Banks America, Inc. in connection with
the issuance by that entity of preferred securities or other securities which
are intended to qualify for Tier 1 capital treatment) unless, by its terms, such
Debt is subordinated to the Debentures.
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries; (ii) any general
partnership, limited liability company, joint venture, trust or similar entity,
at least a majority of whose outstanding partnership or similar interests shall
at the time be owned by such Person, or by one or more of its Subsidiaries, or
by such Person and one or more of its Subsidiaries; and (iii) any limited
partnership of which such Person or any of its Subsidiaries is a general
partner.
"Tax Event" means the receipt by the Company and the Trust of an
Opinion of Counsel, rendered by a law firm having a recognized tax and
securities law practice within a reasonable period of time after the applicable
occurrence, to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which pronouncement or
decision is announced on or after the date of issuance of the Preferred
Securities under the Trust Agreement, there is more than an insubstantial risk
that (i) the Trust is, or shall be within ninety (90) days after the date of
such Opinion of Counsel, subject to United States federal income tax with
respect to income received or accrued on the Debentures; (ii) interest payable
by the Company on the Debentures is not, or within ninety (90) days after the
date of such Opinion of Counsel, shall not be, deductible by the Company, in
whole or in part, for United States federal income tax purposes; or (iii) the
Trust is, or shall be within 90 days after the date of such Opinion of Counsel,
subject to more than a de minimis amount of other taxes, duties, assessments or
other governmental charges; provided, however, that the Trust or the Company
shall have requested and received such an Opinion of Counsel with regard to such
matters within a reasonable period of time after the Trust or the Company shall
have become aware of the occurrence or the possible occurrence of any of the
events described in clauses (i) through (iii) above.
"Trust" means First Preferred Capital Trust III, a Delaware statutory
business trust.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
__________, 2001, of the Trust.
"Trustee" means State Street Bank and Trust Company of Connecticut,
National Association and, subject to the provisions of Article IX, shall also
include its successors and assigns, and, if at any time there is more than one
Person acting in such capacity hereunder, "Trustee" shall mean each such Person.
"Trust Indenture Act," means the Trust Indenture Act of 1939, as
amended, subject to the provisions of Sections 11.1, 11.2, and 12.1, as in
effect at the date of execution of this Indenture.
"Trust Securities" means the Common Securities and Preferred
Securities, collectively.
"Voting Stock," as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.
ARTICLE II
ISSUE, DESCRIPTION, TERMS, CONDITIONS,
REGISTRATION AND EXCHANGE OF THE DEBENTURES
Section 2.1. Designation and Principal Amount. There is hereby
authorized Debentures designated the "______% Subordinated Debentures due 2031,"
limited in aggregate principal amount up to $47,422,700 which amount shall be as
set forth in any written order of the Company for the authentication and
delivery of Debentures pursuant to Section 2.6.
Section 2.2. Maturity.
(a) The Maturity Date shall be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to accelerate the Maturity Date
to be a date prior to the Scheduled Maturity Date in accordance with Section
2.2(c), the Accelerated Maturity Date.
(b) The Company may at any time before the day which is ninety (90)
days before the Scheduled Maturity Date and after December 31, 2006 elect to
shorten the Maturity Date only once to the Accelerated Maturity Date, provided
that the Company has received the prior approval of the Federal Reserve if then
required under applicable capital guidelines, policies or regulations of the
Federal Reserve.
(c) If the Company elects to accelerate the Maturity Date in accordance
with Section 2.2(b), the Company shall give notice to the Trustee and the Trust
(unless the Trust is not the holder of the Debentures, in which case the Trustee
will give notice to the holders of the Debentures) of the acceleration of the
Maturity Date and the Accelerated Maturity Date at least thirty (30) days and no
more than 180 days before the Accelerated Maturity Date; provided, however, that
nothing provided in this Section 2.2 shall limit the Company's rights, as
provided in Article III hereof, to redeem all or a portion of the Debentures at
such time or times on or after December 31, 2006, as the Company may so
determine, or at any time upon the occurrence of a Special Event.
Section 2.3. Form and Payment. The Debentures shall be issued in fully
registered certificated form without interest coupons. Principal and interest on
the Debentures issued in certificated form shall be payable, the transfer of
such Debentures shall be registrable and such Debentures shall be exchangeable
for Debentures bearing identical terms and provisions at the office or agency of
the Trustee; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the holder at such address as shall
appear in the Debenture Register or by wire transfer to an account maintained by
the holder as specified in the Debenture Register, provided that the holder
provides proper transfer instructions by the regular record date.
Notwithstanding the foregoing, so long as the holder of any Debentures is the
Property Trustee, the payment of principal of and interest (including Compounded
Interest and Additional Payments, if any) on such Debentures held by the
Property Trustee shall be made at such place and to such account as may be
designated by the Property Trustee.
Section 2.4. [Intentionally Omitted].
Section 2.5. Interest.
(a) Each Debenture shall bear interest at a rate of _____% per annum
(the "Coupon Rate") from the original date of issuance until the principal
thereof becomes due and payable, and on any overdue principal and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the Coupon Rate, compounded quarterly,
payable (subject to the provisions of Article IV) quarterly in arrears on March
31, June 30, September 30, and December 31 of each year (each, an "Interest
Payment Date"), commencing on December 31, 2001, to the Person in whose name
such Debenture or any Predecessor Debenture is registered, at the close of
business on the regular record date for such interest installment, which shall
be the fifteenth day of the last month of the calendar quarter.
(b) The amount of interest payable for any period shall be computed on
the basis of a 360-day year of twelve 30-day months. The amount of interest
payable for any period shorter than a full quarterly period for which interest
is computed shall be computed on the basis of the number of days elapsed in a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Debentures is not a Business Day, then payment of
interest payable on such date shall be made on the next succeeding day which is
a Business Day (and without any interest or other payment in respect of any such
delay) with the same force and effect as if made on the date such payment was
originally payable.
(c) If, at any time while the Property Trustee is the holder of any
Debentures, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any case, the Company shall pay as additional payments ("Additional
Payments") on the Debentures held by the Property Trustee, such additional
amounts as shall be required so that the net amounts received and retained by
the Trust and the Property Trustee after paying such taxes, duties, assessments
or other governmental charges shall be equal to the amounts the Trust and the
Property Trustee would have received had no such taxes, duties, assessments or
other government charges been imposed.
Section 2.6. Execution and Authentication.
(a) The Debentures shall be signed on behalf of the Company by its
Chairman, Chief Executive Officer, President or one of its Vice Presidents,
under its corporate seal attested by its Secretary or one of its Assistant
Secretaries. Signatures may be in the form of a manual or facsimile signature.
The Company may use the facsimile signature of any Person who shall have been a
Chairman, Chief Executive Officer, President or Vice President thereof, or of
any Person who shall have been a Secretary or Assistant Secretary thereof,
notwithstanding the fact that at the time the Debentures shall be authenticated
and delivered or disposed of such Person shall have ceased to be the Chairman,
Chief Executive Officer, President or a Vice President, or the Secretary or an
Assistant Secretary, of the Company (and any such signature shall be binding on
the Company). The seal of the Company may be in the form of a facsimile of such
seal and may be impressed, affixed, imprinted or otherwise reproduced on the
Debentures. The Debentures may contain such notations, legends or endorsements
required by law, stock exchange rule or usage. Each Debenture shall be dated the
date of its authentication by the Trustee.
(b) A Debenture shall not be valid until manually authenticated by an
authorized signatory of the Trustee, or by an Authenticating Agent. Such
signature shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture.
(c) At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Debentures executed by the Company to
the Trustee for authentication, together with a written order of the Company for
the authentication and delivery of such Debentures signed by its Chairman, Chief
Executive Officer, President or any Vice President and its Treasurer or any
Assistant Treasurer, and the Trustee in accordance with such written order shall
authenticate and deliver such Debentures.
(d) In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 9.1) shall be
fully protected in relying upon, an Opinion of Counsel stating that the form and
terms thereof have been established in conformity with the provisions of this
Indenture.
(e) The Trustee shall not be required to authenticate such Debentures
if the issue of such Debentures pursuant to this Indenture shall affect the
Trustee's own rights, duties or immunities under the Debentures and this
Indenture or otherwise in a manner that is not reasonably acceptable to the
Trustee.
Section 2.7. Registration of Transfer and Exchange.
(a) Debentures may be exchanged upon presentation thereof at the office
or agency of the Company designated for such purpose or at the office of the
Debenture Registrar, for other Debentures and for a like aggregate principal
amount in denominations of integral multiples of $25, upon payment of a sum
sufficient to cover any tax or other governmental charge in relation thereto,
all as provided in this Section 2.7. In respect of any Debentures so surrendered
for exchange, the Company shall execute, the Trustee shall authenticate and such
office or agency shall deliver in exchange therefor the Debenture or Debentures
that the Debentureholder making the exchange shall be entitled to receive,
bearing numbers not contemporaneously outstanding.
(b) The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose or at the office of the Debenture Registrar,
or such other location designated by the Company a register or registers (herein
referred to as the "Debenture Register") in which, subject to such reasonable
regulations as the Debenture Registrar (as defined below) may prescribe, the
Company shall register the Debentures and the transfers of Debentures as in this
Article II provided and which at all reasonable times shall be open for
inspection by the Trustee. The registrar for the purpose of registering
Debentures and transfer of Debentures as herein provided shall initially be the
Trustee and thereafter as may be appointed by the Company as authorized by Board
Resolution (the "Debenture Registrar"). Upon surrender for transfer of any
Debenture at the office or agency of the Company designated for such purpose,
the Company shall execute, the Trustee shall authenticate and such office or
agency shall deliver in the name of the transferee or transferees a new
Debenture or Debentures for a like aggregate principal amount. All Debentures
presented or surrendered for exchange or registration of transfer, as provided
in this Section 2.7, shall be accompanied (if so required by the Company or the
Debenture Registrar) by a written instrument or instruments of transfer, in form
satisfactory to the Company or the Debenture Registrar, duly executed by the
registered holder or by such holder's duly authorized attorney in writing.
(c) No service charge shall be made for any exchange or registration of
transfer of Debentures, or issue of new Debentures in case of partial
redemption, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge in relation thereto, other than exchanges
pursuant to Section 2.8, Section 3.5(b) and Section 11.4 not involving any
transfer.
(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period beginning at the opening
of business fifteen (15) days before the day of the mailing of a notice of
redemption of less than all the Outstanding Debentures and ending at the close
of business on the day of such mailing; nor (ii) to register the transfer of or
exchange any Debentures or portions thereof called for redemption.
(e) Debentures may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Indenture. Any
transfer or purported transfer of any Debenture not made in accordance with this
Indenture shall be null and void.
Section 2.8. Temporary Debentures. Pending the preparation of
definitive Debentures, the Company may execute, and the Trustee shall
authenticate and deliver, temporary Debentures (printed, lithographed, or
typewritten). Such temporary Debentures shall be substantially in the form of
the definitive Debentures in lieu of which they are issued, but with such
omissions, insertions and variations as may be appropriate for temporary
Debentures, all as may be determined by the Company. Every temporary Debenture
shall be executed by the Company and be authenticated by the Trustee upon the
same conditions and in substantially the same manner, and with like effect, as
the definitive Debentures. Without unnecessary delay the Company shall execute
and shall furnish definitive Debentures and thereupon any or all temporary
Debentures may be surrendered in exchange therefor (without charge to the
holders), at the office or agency of the Company designated for the purpose and
the Trustee shall authenticate and such office or agency shall deliver in
exchange for such temporary Debentures an equal aggregate principal amount of
definitive Debentures, unless the Company advises the Trustee to the effect that
definitive Debentures need not be authenticated and furnished until further
notice from the Company. Until so exchanged, the temporary Debentures shall be
entitled to the same benefits under this Indenture as definitive Debentures
authenticated and delivered hereunder.
Section 2.9. Mutilated, Destroyed, Lost or Stolen Debentures.
(a) In case any temporary or definitive Debenture shall become
mutilated or be destroyed, lost or stolen, the Company (subject to the next
succeeding sentence) shall execute, and upon the Company's request the Trustee
(subject as aforesaid) shall authenticate and deliver, a new Debenture bearing a
number not contemporaneously outstanding, in exchange and substitution for the
mutilated Debenture, or in lieu of and in substitution for the Debenture so
destroyed, lost, stolen or mutilated. In every case the applicant for a
substituted Debenture shall furnish to the Company and the Trustee such security
or indemnity as may be required by them to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company and the Trustee evidence to their satisfaction of the destruction,
loss or theft of the applicant's Debenture and of the ownership thereof. The
Trustee shall authenticate any such substituted Debenture and deliver the same
upon the written request or authorization of the Chairman, Chief Executive
Officer, President or any Vice President and the Treasurer or any Assistant
Treasurer of the Company. Upon the issuance of any substituted Debenture, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
In case any Debenture that has matured or is about to mature shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Debenture, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated Debenture) if the applicant
for such payment shall furnish to the Company and the Trustee such security or
indemnity as they may require to save them harmless, and, in case of
destruction, loss or theft, evidence to the satisfaction of the Company and the
Trustee of the destruction, loss or theft of such Debenture and of the ownership
thereof.
(b) Every replacement Debenture issued pursuant to the provisions of
this Section 2.9 shall constitute an additional contractual obligation of the
Company whether or not the mutilated, destroyed, lost or stolen Debenture shall
be found at any time, or be enforceable by anyone, and shall be entitled to all
the benefits of this Indenture equally and proportionately with any and all
other Debentures duly issued hereunder. All Debentures shall be held and owned
upon the express condition that the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Debentures, and shall preclude (to the extent lawful) any and all other rights
or remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
Section 2.10. Cancellation. All Debentures surrendered for the purpose
of payment, redemption, exchange or registration of transfer shall, if
surrendered to the Company or any Paying Agent, be delivered to the Trustee for
cancellation, or, if surrendered to the Trustee, shall be canceled by it, and no
Debentures shall be issued in lieu thereof except as expressly required or
permitted by any of the provisions of this Indenture. On request of the Company
at the time of such surrender, the Trustee shall deliver to the Company canceled
Debentures held by the Trustee. In the absence of such request the Trustee may
dispose of canceled Debentures in accordance with its standard procedures and
deliver a certificate of disposition to the Company. If the Company shall
otherwise acquire any of the Debentures, however, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Debentures unless and until the same are delivered to the Trustee for
cancellation.
Section 2.11. Benefit of Indenture. Nothing in this Indenture or in the
Debentures, express or implied, shall give or be construed to give to any
Person, other than the parties hereto and the holders of the Debentures (and,
with respect to the provisions of Article XVI, the holders of the Senior
Indebtedness) any legal or equitable right, remedy or claim under or in respect
of this Indenture, or under any covenant, condition or provision herein
contained; all such covenants, conditions and provisions being for the sole
benefit of the parties hereto and of the holders of the Debentures (and, with
respect to the provisions of Article XVI, the holders of the Senior
Indebtedness).
Section 2.12. Authenticating Agent.
(a) So long as any of the Debentures remain Outstanding there may be an
Authenticating Agent for any or all such Debentures, which Authenticating Agent
the Trustee shall have the right to appoint. Said Authenticating Agent shall be
authorized to act on behalf of the Trustee to authenticate Debentures issued
upon exchange, transfer or partial redemption thereof, and Debentures so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. All references in this Indenture to the authentication of Debentures
by the Trustee shall be deemed to include authentication by an Authenticating
Agent. Each Authenticating Agent shall be acceptable to the Company and shall be
a corporation that has a combined capital and surplus, as most recently reported
or determined by it, sufficient under the laws of any jurisdiction under which
it is organized or in which it is doing business to conduct a trust business,
and that is otherwise authorized under such laws to conduct such business and is
subject to supervision or examination by federal or state authorities. If at any
time any Authenticating Agent shall cease to be eligible in accordance with
these provisions, it shall resign immediately.
(b) Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time (and upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint a
successor Authenticating Agent eligible under the provisions of Section 2.12(a)
of this Indenture. Any successor Authenticating Agent, upon acceptance of its
appointment hereunder, shall become vested with all the rights, powers and
duties of its predecessor hereunder as if originally named as an Authenticating
Agent pursuant hereto.
ARTICLE III
REDEMPTION OF DEBENTURES
Section 3.1. Redemption. Subject to the Company having received
prior approval of the Federal Reserve, if then required under the applicable
capital guidelines, policies or regulations of the Federal Reserve, the Company
may redeem the Debentures issued hereunder on and after the dates set forth in
and in accordance with the terms of this Article III.
Section 3.2. Special Event Redemption. Subject to the Company
having received the prior approval of the Federal Reserve, if then required
under the applicable capital guidelines, policies or regulations of the Federal
Reserve, if a Special Event has occurred and is continuing, then,
notwithstanding Section 3.3(a) but subject to Section 3.3(b), the Company shall
have the right upon not less than thirty (30) days' nor more than sixty (60)
days' notice to the holders of the Debentures to redeem the Debentures, in whole
but not in part, for cash within 180 days following the occurrence of such
Special Event (the "180-Day Period") at a redemption price equal to 100% of the
principal amount to be redeemed plus any accrued and unpaid interest thereon to
the date of such redemption (the "Redemption Price"), provided, that if at the
time there is available to the Company the opportunity to eliminate, within the
180-Day Period, a Tax Event by taking some ministerial action (a "Ministerial
Action"), such as filing a form or making an election, or pursuing some other
similar reasonable measure which has no adverse effect on the Company, the Trust
or the holders of the Trust Securities issued by the Trust, the Company shall
pursue such Ministerial Action in lieu of redemption, and, provided, further,
that the Company shall have no right to redeem the Debentures pursuant to this
Section 3.2 while it is pursuing any Ministerial Action pursuant to its
obligations hereunder, and, provided, further, that, if it is determined that
the taking of a Ministerial Action would not eliminate the Tax Event within the
180 Day Period, the Company's right to redeem the Debentures pursuant to this
Section 3.2 shall be restored and it shall have no further obligations to pursue
the Ministerial Action. The Redemption Price shall be paid prior to 12:00 noon,
New York time, on the date of such redemption or such earlier time as the
Company determines, provided that the Company shall deposit with the Trustee an
amount sufficient to pay the Redemption Price by 10:00 a.m., New York time, on
the date such Redemption Price is to be paid.
Section 3.3. Optional Redemption by the Company.
(a) Subject to the provisions of Section 3.3(c), except as otherwise
may be specified in this Indenture, the Company shall have the right to redeem
the Debentures, in whole or in part, from time to time, on or after December 31,
2006, at a Redemption Price equal to 100% of the principal amount to be redeemed
plus any accrued and unpaid interest thereon to the date of such redemption. Any
redemption pursuant to this Section 3.3(a) shall be made upon not less than
thirty (30) days' nor more than sixty (60) days' notice to the holder of the
Debentures, at the Redemption Price. If the Debentures are only partially
redeemed pursuant to this Section 3.3(a), the Debentures shall be redeemed by
lot. The Redemption Price shall be paid prior to 12:00 noon, New York time, on
the date of such redemption or at such earlier time as the Company determines,
provided that the Company shall deposit with the Trustee an amount sufficient to
pay the Redemption Price by 10:00 a.m., New York time, on the date such
Redemption Price is to be paid.
(b) Subject to the provisions of Section 3.3(c), the Company shall have
the right to redeem Debentures at any time and from time to time in a principal
amount equal to the Liquidation Amount (as defined in the Trust Agreement) of
any Preferred Securities purchased and beneficially owned by the Company, plus
an additional principal amount of Debentures equal to the Liquidation Amount (as
defined in the Trust Agreement) of that number of Common Securities that bears
the same proportion to the total number of Common Securities then outstanding as
the number of Preferred Securities to be redeemed bears to the total number of
Preferred Securities then outstanding. Such Debentures shall be redeemed
pursuant to this Section 3.3(b) only in exchange for and upon surrender by the
Company to the Property Trustee of the Preferred Securities and a proportionate
amount of Common Securities, whereupon the Property Trustee shall cancel the
Preferred Securities and Common Securities so surrendered and a Like Amount (as
defined in the Trust Agreement) of Debentures shall be extinguished by the
Trustee and shall no longer be deemed Outstanding.
(c) If a partial redemption of the Debentures would result in the
termination of inclusion of the Preferred Securities in the Nasdaq National
Market or the delisting of the Preferred Securities from any national securities
exchange or other self-regulatory organization on or in which the Preferred
Securities are then included, listed, quoted or included, the Company shall not
be permitted to effect such partial redemption and may only redeem the
Debentures in whole.
Section 3.4. Notice of Redemption.
(a) Except in the case of a redemption pursuant to Section 3.3(b), in
case the Company shall desire to exercise such right to redeem all or, as the
case may be, a portion of the Debentures in accordance with the right reserved
so to do, the Company shall, or shall cause the Trustee to, upon receipt of
forty-five (45) days' written notice from the Company (which notice shall, in
the event of a partial redemption, include a representation to the effect that
such partial redemption will not result in the delisting of the Preferred
Securities as described in Section 3.3(c) above), give notice of such redemption
to holders of the Debentures to be redeemed by mailing, first class postage
prepaid, a notice of such redemption not less than thirty (30) days and not more
than sixty (60) days before the date fixed for redemption to such holders at
their last addresses as they shall appear upon the Debenture Register unless a
shorter period is specified in the Debentures to be redeemed. Any notice that is
mailed in the manner herein provided shall be conclusively presumed to have been
duly given, whether or not the registered holder receives the notice. In any
case, failure duly to give such notice to the holder of any Debenture designated
for redemption in whole or in part, or any defect in the notice, shall not
affect the validity of the proceedings for the redemption of any other
Debentures. In the case of any redemption of Debentures prior to the expiration
of any restriction on such redemption provided in the terms of such Debentures
or elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with any such restriction. Each such
notice of redemption shall specify the date fixed for redemption and the
Redemption Price and shall state that payment of the Redemption Price shall be
made at the Corporate Trust Office, upon presentation and surrender of such
Debentures, that interest accrued to the date fixed for redemption shall be paid
as specified in said notice and that from and after said date interest shall
cease to accrue. If less than all the Debentures are to be redeemed, the notice
to the holders of the Debentures shall specify the particular Debentures to be
redeemed. If the Debentures are to be redeemed in part only, the notice shall
state the portion of the principal amount thereof to be redeemed and shall state
that on and after the redemption date, upon surrender of such Debenture, a new
Debenture or Debentures in principal amount equal to the unredeemed portion
thereof shall be issued.
(b) Except in the case of a redemption pursuant to Section 3.3(b), if
less than all the Debentures are to be redeemed, the Company shall give the
Trustee at least forty-five (45) days' written notice in advance of the date
fixed for redemption as to the aggregate principal amount of Debentures to be
redeemed, and thereupon the Trustee shall select, by lot the portion or portions
(equal to $25 or any integral multiple thereof) of the Debentures to be redeemed
and shall thereafter promptly notify the Company in writing of the numbers of
the Debentures to be redeemed, in whole or in part. The Company may, if and
whenever it shall so elect pursuant to the terms hereof, by delivery of
instructions signed on its behalf by its Chairman, Chief Executive Officer,
President or any Vice President, instruct the Trustee or any Paying Agent to
call all or any part of the Debentures for redemption and to give notice of
redemption in the manner set forth in this Section 3.4, such notice to be in the
name of the Company or its own name as the Trustee or such Paying Agent may deem
advisable. In any case in which notice of redemption is to be given by the
Trustee or any such Paying Agent, the Company shall deliver or cause to be
delivered to, or permit to remain with, the Trustee or such Paying Agent, as the
case may be, such Debenture Register, transfer books or other records, or
suitable copies or extracts therefrom, sufficient to enable the Trustee or such
Paying Agent to give any notice by mail that may be required under the
provisions of this Section 3.4.
Section 3.5. Payment Upon Redemption.
(a) If the giving of notice of redemption shall have been completed as
above provided, the Debentures or portions of Debentures to be redeemed
specified in such notice shall become due and payable on the date and at the
place stated in such notice at the applicable Redemption Price, and interest on
such Debentures or portions of Debentures shall cease to accrue on and after the
date fixed for redemption, unless the Company shall default in the payment of
such Redemption Price with respect to any such Debenture or portion thereof. On
presentation and surrender of such Debentures on or after the date fixed for
redemption at the place of payment specified in the notice, said Debentures
shall be paid and redeemed at the Redemption Price (but if the date fixed for
redemption is an Interest Payment Date, the interest installment payable on such
date shall be payable to the registered holder at the close of business on the
applicable record date pursuant to Section 2.5).
(b) Upon presentation of any Debenture that is to be redeemed in part
only, the Company shall execute and the Trustee shall authenticate and the
office or agency where the Debenture is presented shall deliver to the holder
thereof, at the expense of the Company, a new Debenture of authorized
denomination in principal amount equal to the unredeemed portion of the
Debenture so presented.
Section 3.6. No Sinking Fund. The Debentures are not entitled to
the benefit of any sinking fund.
ARTICLE IV
EXTENSION OF INTEREST PAYMENT PERIOD
Section 4.1. Extension of Interest Payment Period. The Company shall
have the right, at any time and from time to time during the term of the
Debentures so long as no Event of Default has occurred and is continuing, to
defer payments of interest by extending the interest payment period of such
Debentures for a period not exceeding twenty (20) consecutive quarters (the
"Extension Period"), during which Extension Period no interest shall be due and
payable; provided that no Extension Period may extend beyond the Maturity Date
or end on a date other than an Interest Payment Date. To the extent permitted by
applicable law, interest, the payment of which has been deferred because of the
extension of the interest payment period pursuant to this Section 4.1, shall
bear interest thereon at the Coupon Rate compounded quarterly for each quarter
of the Extension Period ("Compounded Interest"). At the end of the Extension
Period, the Company shall calculate (and deliver such calculation to the
Trustee) and pay all interest accrued and unpaid on the Debentures, including
any Additional Payments and Compounded Interest (together, "Deferred Payments")
that shall be payable to the holders of the Debentures in whose names the
Debentures are registered in the Debenture Register on the first record date
after the end of the Extension Period. Before the termination of any Extension
Period, the Company may further extend such period so long as no Event of
Default has occurred and is continuing, provided that such period together with
all such further extensions thereof shall not exceed twenty (20) consecutive
quarters, or extend beyond the Maturity Date of the Debentures or end on a date
other than an Interest Payment Date. Upon the termination of any Extension
Period and upon the payment of all Deferred Payments then due, the Company may
commence a new Extension Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extension Period, except at the end
thereof, but the Company may prepay at any time all or any portion of the
interest accrued during an Extension Period.
Section 4.2. Notice of Extension.
(a) If the Property Trustee is the only registered holder of the
Debentures at the time the Company selects an Extension Period, the Company
shall give written notice to the Administrative Trustees, the Property Trustee
and the Trustee of its selection of such Extension Period at least two (2)
Business Days before the earlier of (i) the next succeeding date on which
Distributions on the Trust Securities issued by the Trust are payable; or (ii)
the date the Trust is required to give notice of the record date, or the date
such Distributions are payable, to the Nasdaq National Market or other
applicable exchange or self-regulatory organization or to holders of the
Preferred Securities issued by the Trust, but in any event at least one Business
Day before such record date.
(b) If the Property Trustee is not the only holder of the Debentures at
the time the Company selects an Extension Period, the Company shall give the
holders of the Debentures and the Trustee written notice of its selection of
such Extension Period at least two Business Days before the earlier of (i) the
next succeeding Interest Payment Date; or (ii) the date the Company is required
to give notice of the record or payment date of such interest payment to The
Nasdaq National Market or other applicable self-regulatory organization or to
holders of the Debentures, but in any event at least one Business Day before
such record date.
(c) The quarter in which any notice is given pursuant to paragraphs (a)
or (b) of this Section 4.2 shall be counted as one of the twenty (20) quarters
permitted in the maximum Extension Period permitted under Section 4.1.
Section 4.3. Limitation on Transactions. If (i) the Company shall
exercise its right to defer payment of interest as provided in Section 4.1; or
(ii) there shall have occurred and be continuing any Event of Default, then (a)
neither the Company nor any of its Subsidiaries shall declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
(other than (A) dividends or distributions in common stock of the Company or
such Subsidiary, as the case may be, or any declaration of a non-cash dividend
in connection with the implementation of a shareholder rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (B) purchases of common stock of
the Company related to the rights under any of the Company's benefit plans for
its directors, officers or employees), (C) as a result of a reclassification of
its capital stock for another class of its capital stock, or (D) dividends or
distributions made by a Subsidiary to the Company , or (E) dividends or
distributions made by a Subsidiary to a Subsidiary); (b) neither the Company nor
any Subsidiary shall make any payment of interest, principal or premium, if any,
or repay, repurchase or redeem any debt securities issued by the Company or any
Subsidiary which rank pari passu with (including without limitation the
Company's 9.25% Subordinated Debentures due 2027 issued to First Preferred
Capital Trust I and the Company's 10.24% Subordinated Debentures due 2030 issued
to First Preferred Capital Trust II) or junior to the Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Debentures; provided, however, that
notwithstanding the foregoing the Company may make payments pursuant to its
obligations under the Preferred Securities Guarantee; and (c) the Company shall
not redeem, purchase or acquire less than all of the Outstanding Debentures or
any of the Preferred Securities. The term "capital stock" as used in this
Indenture shall not include the 8.50% Subordinated Debentures due 2028 issued by
First Banks America, Inc. to First America Capital Trust or the 8.50% Cumulative
Trust Preferred Securities issued by First America Capital Trust.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1. Payment of Principal and Interest. The Company shall
duly and punctually pay or cause to be paid the principal of and interest on the
Debentures at the time and place and in the manner provided herein. Each such
payment of the principal of and interest on the Debentures shall relate only to
the Debentures, shall not be combined with any other payment of the principal of
or interest on any other obligation of the Company, and shall be clearly and
unmistakably identified as pertaining to the Debentures.
Section 5.2. Maintenance of Agency. So long as any of the
Debentures remain Outstanding, the Company shall maintain an office or agency at
such other location or locations as may be designated as provided in this
Section 5.2, where (i) Debentures may be presented for payment; (ii) Debentures
may be presented as hereinabove authorized for registration of transfer and
exchange; and (iii) notices and demands to or upon the Company in respect of the
Debentures and this Indenture may be given or served, such designation to
continue with respect to such office or agency until the Company shall, by
written notice signed by its President or a Vice President and delivered to the
Trustee, designate some other office or agency for such purposes or any of them.
If at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, notices and demands. The Company shall give
the Trustee prompt written notice of any such designation or rescission thereof.
Section 5.3. Paying Agents.
(a) The Trustee shall initially act as the Paying Agent. If the Company
shall appoint one or more Paying Agents for the Debentures, other than the
Trustee, the Company shall cause each such Paying Agent to execute and deliver
to the Trustee an instrument in which such agent shall agree with the Trustee,
subject to the provisions of this Section 5.3:
(i) that it shall hold all sums held by it as such agent for
the payment of the principal of or interest on the Debentures (whether
such sums have been paid to it by the Company or by any other obligor
of such Debentures) in trust for the benefit of the Persons entitled
thereto;
(ii) that it shall give the Trustee notice of any failure by
the Company (or by any other obligor of such Debentures) to make any
payment of the principal of or interest on the Debentures when the same
shall be due and payable;
(iii) that it shall, at any time during the continuance of any
failure referred to in the preceding paragraph (a)(ii) above, upon the
written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent; and
(iv) that it shall perform all other duties of Paying Agent
as set forth in this Indenture.
(b) If the Company shall act as its own Paying Agent with respect to
the Debentures, it shall on or before each due date of the principal of or
interest on such Debentures, set aside, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay such principal
or interest so becoming due on Debentures until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and shall promptly notify
the Trustee of such action, or any failure (by it or any other obligor on such
Debentures) to take such action. Whenever the Company shall have one or more
Paying Agents for the Debentures, it shall, prior to each due date of the
principal of or interest on any Debentures, deposit with the Paying Agent a sum
sufficient to pay the principal or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal or interest,
and (unless such Paying Agent is the Trustee) the Company shall promptly notify
the Trustee of this action or failure so to act.
(c) Notwithstanding anything in this Section 5.3 to the contrary, (i)
the agreement to hold sums in trust as provided in this Section 5.3 is subject
to the provisions of Section 13.3 and 13.4; and (ii) the Company may at any
time, for the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, pay, or direct any Paying Agent to pay, to
the Trustee all sums held in trust by the Company or such Paying Agent, such
sums to be held by the Trustee upon the same terms and conditions as those upon
which such sums were held by the Company or such Paying Agent; and, upon such
payment by any Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
Section 5.4. Appointment to Fill Vacancy in Office of Trustee. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
shall appoint, in the manner provided in Section 9.11, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.5. Compliance with Consolidation Provisions. The Company
shall not, while any of the Debentures remain Outstanding, consolidate with, or
merge into, or merge into itself, or sell or convey all or substantially all of
its property to any other company unless the provisions of Article XII hereof
are complied with.
Section 5.6. Limitation on Transactions. If Debentures are issued
to the Trust or a trustee of the Trust in connection with the issuance of Trust
Securities by the Trust and (i) there shall have occurred and be continuing any
event that would constitute an Event of Default; (ii) the Company shall be in
default with respect to its payment of any obligations under the Preferred
Securities Guarantee relating to the Trust; or (iii) the Company shall have
given notice of its election to defer payments of interest on such Debentures by
extending the interest payment period as provided in this Indenture and such
Extension Period, or any extension thereof, shall be continuing, then (a)
neither the Company nor any of its Subsidiaries shall declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
(other than (A) dividends or distributions in common stock of the Company or
such Subsidiary, as the case may be, or any declaration of a non-cash dividend
in connection with the implementation of a shareholder rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (B) purchases of common stock of
the Company related to the rights under any of the Company's benefit plans for
its directors, officers or employees), (C) as a result of a reclassification of
its capital stock, or (D) dividends or distributions made by a Subsidiary to the
Company, or (E) dividends or distributions made by a Subsidiary to a
Subsidiary); (ii) neither the Company nor any Subsidiary shall make any payment
of principal, interest or premium, if any, or repay, repurchase or redeem any
debt securities issued by the Company or any Subsidiary which rank pari passu
with (including without limitation the Company's 9.25% Subordinated Debentures
due 2027 issued to First Preferred Capital Trust I) or junior in interest to the
Debentures; provided, however, that the Company may make payments pursuant to
its obligations under the Preferred Securities Guarantee; and (c) the Company
shall not redeem, purchase or acquire less than all of the Outstanding
Debentures or any of the Preferred Securities.
Section 5.7. Covenants as to the Trust. For so long as the Trust
Securities of the Trust remain outstanding, the Company shall (i) maintain 100%
direct or indirect ownership of the Common Securities of the Trust; provided,
however, that any permitted successor of the Company under this Indenture may
succeed to the Company's ownership of the Common Securities; (ii) not
voluntarily terminate, wind up or liquidate the Trust, except upon prior
approval of the Federal Reserve if then so required under applicable capital
guidelines, regulations or policies of the Federal Reserve and use its
reasonable efforts to cause the Trust (a) to remain a business trust (and to
avoid involuntary termination, winding up or liquidation), except in connection
with a distribution of Debentures, the redemption of all of the Trust Securities
of the Trust or certain mergers, consolidations or amalgamations, each as
permitted by the Trust Agreement; and (b) to otherwise continue not to be
treated as an association taxable as a corporation or partnership for United
States federal income tax purposes; (iii) use its reasonable efforts to cause
each holder of Trust Securities to be treated as owning an undivided beneficial
interest in the Debentures; and (iv) including any successor to the Company,
shall use best efforts to maintain the eligibility of the Preferred Securities
for listing, quotation or inclusion on or in any national securities exchange or
other self-regulatory organization on or in which the Preferred Securities are
then listed, quoted or included (including, if applicable, the Nasdaq National
Market) and shall use best efforts to keep the Preferred Securities so listed,
quoted or included for so long as the Preferred Securities remain outstanding.
In connection with the distribution of the Debentures to the holders of the
Preferred Securities issued by the Trust upon a Dissolution Event, the Company
shall use its best efforts to include such Debentures in the Nasdaq National
Market or on such other exchange or to include such Debentures in such
self-regulatory organization as the Preferred Securities are then listed, quoted
or included.
Section 5.8. Covenants as to Purchases. Except upon the exercise
by the Company of its right to redeem the Debentures pursuant to Section 3.2
upon the occurrence and continuation of a Special Event or pursuant to Section
3.3(b), the Company shall not purchase any Debentures, in whole or in part, from
the Trust prior to December 31, 2006.
Section 5.9. Waiver of Usury; Stay or Extension Laws. The Company
shall not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performances of this Indenture, and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
Section 5.10. Limitation on Additional Junior Indebtedness. The
Company shall not, and it shall not cause or permit any Subsidiary of the
Company to, incur, issue or be obligated on any Additional Junior Indebtedness,
either directly or indirectly, by way of guarantee, suretyship or otherwise,
other than:
(a) Additional Junior Indebtedness that, by its terms, is
expressly stated to be junior and subordinate in all respects to the Debentures;
or
(b) Additional Junior Indebtedness that, by its terms, is expressly
stated to be pari passu and rank equally in all respects with the Debentures;
provided, however, that neither the Company nor any of its Subsidiaries shall
incur, issue or otherwise become obligated on any Additional Junior Indebtedness
pursuant to this Section 5.10(b) unless the quotient of "X" divided by "Y" is
less than 65% upon incurring, issuing or otherwise obligated on any Additional
Junior Indebtedness, where "X" and "Y" are calculated as described in Section
5.10(c) and 5.10(d), respectively.
(c) As used in Section 5.10(b), "X" means the sum of the following:
(i) the aggregate liquidation amount or principal amount, as
the case may be, of the Debentures Outstanding at the time of the
proposed issuance of such Additional Junior Indebtedness pursuant to
Section 5.10(b), plus
(ii) the aggregate liquidation amount or principal amount, as
the case may be, of any Additional Junior Indebtedness previously
issued and outstanding at the time of the proposed issuance of such
Additional Junior Indebtedness pursuant to Section 5.10(b), excluding
any such Additional Junior Indebtedness that, by its terms, is
expressly stated to be junior and subordinate in all respects to the
Debentures, plus
(iii) the aggregate liquidation amount or principal amount, as
the case may be, of the Additional Junior Indebtedness proposed to be
issued or otherwise incurred pursuant to Section 5.10(b), plus
(iv) the principal amount of any Senior Indebtedness of the
Company outstanding at the time of the proposed issuance of such
Additional Junior Indebtedness pursuant to Section 5.10(b) for amounts
borrowed;
less, any indebtedness described in clauses (i) to (iv) above
to be paid with the proceeds of the Additional Junior Indebtedness then
proposed to be incurred, issued or upon which the Company is then to
become obligated.
(d) As used in Section 5.10(b), "Y" means the sum of the following:
(i) the stockholder's equity (excluding any amount of
accumulated other comprehensive income or loss) of the Company, each
calculated on a consolidated basis and in accordance with accounting
principles generally accepted in the United States of America,
determined as of the last day of the month immediately preceding the
month during which the proposed issuance of the Additional Junior
Indebtedness pursuant to Section 5.10(b) is scheduled to occur,
(provided, however, that in no event shall any portion of the
Debentures, the Additional Junior Indebtedness or the Senior
Indebtedness described in Section 5.10(c) also be included in "Y" under
this Section 5.10(d)), plus
(ii) the aggregate liquidation amount or principal amount, as
the case may be, of any Additional Junior Indebtedness, which by its
terms is expressly stated to be junior and subordinate in all respects
to the Debentures and which was previously issued and outstanding at
the time of the proposed issuance of such Additional Junior
Indebtedness pursuant to Section 5.10(b).
(e) Notwithstanding the foregoing, the limitations of this Section 5.10
shall not in any way preclude the Company from merging with or into, or from
acquiring or being acquired by, another Person (including by way of merger,
stock purchase or acquisition of assets) that is not directly or indirectly
controlling, controlled by or under common control with the Company in an arm's
length transaction entered into in good faith, even though the pro forma
consolidated balance sheet of the surviving Person immediately following the
consummation of such merger, or of the acquiror immediately following the
completion of such acquisition transaction, may include Additional Junior
Indebtedness in amounts in excess of amounts that would otherwise be permitted
by this Section 5.10; provided, however, that thereafter the limitations on
future incurrences of Additional Junior Indebtedness in this Section 5.10 shall
continue to apply to the Company (in the event that it is the surviving
corporation in such merger transaction or the acquiror in such acquisition
transaction) and shall apply to the other Person (in the event that it is the
surviving corporation in such merger transaction or the acquiror in such
acquisition transaction) whether or not such other Person is expressly made a
party hereto.
(f) The Company will not pay dividends or make any payments on account
of the purchase, redemption or other retirement of any of its common stock, or
make any distribution in respect thereof, directly or indirectly, if such
payment or distribution, would cause the quotient referred to in Section 5.10(b)
to exceed 60%.
ARTICLE VI
DEBENTUREHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
Section 6.1. Company to Furnish the Trustee Names and Addresses of
Debentureholders. The Company shall furnish or cause to be furnished to the
Trustee (a) on a quarterly basis on each regular record date (as described in
Section 2.5) a list, in such form as the Trustee may reasonably require, of the
names and addresses of the holders of the Debentures as of such regular record
date, provided that the Company shall not be obligated to furnish or cause to be
furnished such list at any time that the list shall not differ in any respect
from the most recent list furnished to the Trustee by the Company (in the event
the Company fails to provide such list on a quarterly basis, the Trustee shall
be entitled to rely on the most recent list provided by the Company); and (b) at
such other times as the Trustee may request in writing within thirty (30) days
after the receipt by the Company of any such request, a list of similar form and
content as of a date not more than fifteen (15) days prior to the time such list
is furnished; provided, however, that, in either case, no such list need be
furnished if the Trustee shall be the Debenture Registrar.
Section 6.2. Preservation of Information Communications with the
Debentureholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debentures contained in the most recent list furnished to it as provided in
Section 6.1 and as to the names and addresses of holders of Debentures received
by the Trustee in its capacity as Debenture Registrar for the Debentures (if
acting in such capacity).
(b) The Trustee may destroy any list furnished to it as provided
in Section 6.1 upon receipt of a new list so furnished.
(c) Debentureholders may communicate as provided in Section 312(b) of
the Trust Indenture Act with other Debentureholders with respect to their rights
under this Indenture or under the Debentures.
Section 6.3. Reports by the Company.
(a) The Company covenants and agrees to file with the Trustee, within
fifteen (15) days after the Company is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) that the
Company may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Company is not required to file
information, documents or reports pursuant to either of such sections, then to
file with the Trustee and the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports that may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations.
(b) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed from time to
time by the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.
(c) The Company covenants and agrees to transmit by mail, first class
postage prepaid, or reputable overnight delivery service that provides for
evidence of receipt, to the Debentureholders, as their names and addresses
appear upon the Debenture Register, within thirty (30) days after the filing
thereof with the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to subsections (a) and (b)
of this Section 6.3 as may be required by rules and regulations prescribed from
time to time by the Commission.
Section 6.4. Reports by the Trustee.
(a) On or before July 15 in each year in which any of the Debentures
are Outstanding, the Trustee shall transmit by mail, first class postage
prepaid, to the Debentureholders, as their names and addresses appear upon the
Debenture Register, a brief report dated as of the preceding May 15, if and to
the extent required under Section 313(a) of the Trust Indenture Act.
(b) The Trustee shall comply with Section 313(b) and 313(c) of the
Trust Indenture Act.
(c) A copy of each such report shall, at the time of such transmission
to Debentureholders, be filed by the Trustee with the Company, with the Nasdaq
National Market, or any stock exchange on which any Debentures are listed and/or
any other self-regulatory organization on or in which any Debentures are quoted
or included (if so listed, quoted or included) and also with the Commission. The
Company agrees to notify the Trustee when any Debentures become designated for
inclusion in the Nasdaq National Market or listed on any other stock exchange or
other self-regulatory organization.
ARTICLE VII
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
Section 7.1. Events of Default.
(a) Whenever used herein with respect to the Debentures, "Event of
Default" means any one or more of the following events that has occurred and is
continuing:
(i) the Company defaults in the payment of any installment of
interest upon any of the Debentures, as and when the same shall become
due and payable, and continuance of such default for a period of thirty
(30) days; provided, however, that a valid extension of an interest
payment period by the Company in accordance with the terms of this
Indenture shall not constitute a default in the payment of interest for
this purpose;
(ii) the Company defaults in the payment of the principal on
the Debentures as and when the same shall become due and payable
whether at maturity, upon redemption, by declaration or otherwise;
(iii) the Company fails to observe or perform any other of its
covenants or agreements with respect to the Debentures for a period of
ninety (90) days after the date on which written notice of such
failure, requiring the same to be remedied and stating that such notice
is a "Notice of Default" hereunder, shall have been given to the
Company by the Trustee, by registered or certified mail, or to the
Company and the Trustee by the holders of at least twenty-five percent
(25%) in principal amount of the Debentures at the time Outstanding;
(iv) the Company pursuant to or within the meaning of any
Bankruptcy Law (A) commences a voluntary case; (B) consents to the
entry of an order for relief against it in an involuntary case; (C)
consents to the appointment of a Custodian of it or for all or
substantially all of its property; or (D) makes a general assignment
for the benefit of its creditors;
(v) a court of competent jurisdiction enters an order under
any Bankruptcy Law that (A) is for relief against the Company in an
involuntary case; (B) appoints a Custodian of the Company for all or
substantially all of its property; or (C) orders the liquidation of the
Company, and in any of such events the order or decree remains unstayed
and in effect for 60 consecutive days; or
(vi) the Trust shall have voluntarily or involuntarily
dissolved, wound-up its business or otherwise terminated its existence
except in connection with (A) the distribution of Debentures to holders
of Trust Securities in liquidation of their interests in the Trust; (B)
the redemption of all of the outstanding Trust Securities of the Trust;
or (C) certain mergers, consolidations or amalgamations, each as
permitted by the Trust Agreement.
(b) In each and every such case referred to in paragraphs (i) through
(vi) of Section 7.1(a), unless the principal of all the Debentures shall have
already become due and payable, either the Trustee or the holders of not less
than twenty-five percent (25%) in aggregate principal amount of the Debentures
then Outstanding hereunder, by notice in writing to the Company (and to the
Trustee if given by such Debentureholders) may declare the principal of all the
Debentures to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due and payable, notwithstanding
anything contained in this Indenture or in the Debentures.
(c) At any time after the principal of the Debentures shall have been
so declared due and payable, and before any judgment or decree for the payment
of the money due shall have been obtained or entered as hereinafter provided,
the holders of a majority in aggregate principal amount of the Debentures then
Outstanding hereunder, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if: (i) the Company has
paid or deposited with the Trustee a sum sufficient to pay all matured
installments of interest upon all the Debentures and the principal of any and
all Debentures that shall have become due otherwise than by acceleration (with
interest upon such principal, and, to the extent that such payment is
enforceable under applicable law, upon overdue installments of interest, at the
rate per annum expressed in the Debentures to the date of such payment or
deposit) and the amount payable to the Trustee under Section 9.7; and (ii) any
and all Events of Default under this Indenture, other than the nonpayment of
principal on Debentures that shall not have become due by their terms, shall
have been remedied or waived as provided in Section 7.6. No such rescission and
annulment shall extend to or shall affect any subsequent default or impair any
right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any right with
respect to Debentures under this Indenture and such proceedings shall have been
discontinued or abandoned because of such rescission or annulment or for any
other reason or shall have been determined adversely to the Trustee, then and in
every such case the Company and the Trustee shall be restored respectively to
their former positions and rights hereunder, and all rights, remedies and powers
of the Company and the Trustee shall continue as though no such proceedings had
been taken.
Section 7.2. Collection of Indebtedness and Suits for Enforcement
by Trustee.
(a) The Company covenants that (i) in case it shall default in the
payment of any installment of interest on any of the Debentures, and such
default shall have continued for a period of thirty (30) days (other than by
reason of a valid extension of an interest payment period by the Company in
accordance with the terms of this Indenture); or (ii) in case it shall default
in the payment of the principal of any of the Debentures when the same shall
have become due and payable, whether upon maturity of the Debentures or upon
redemption or upon declaration or otherwise, then, upon demand of the Trustee,
the Company shall pay to the Trustee, for the benefit of the holders of the
Debentures, the whole amount that then shall have become due and payable on all
such Debentures for principal or interest, or both, as the case may be, with
interest upon the overdue principal and (to the extent that payment of such
interest is enforceable under applicable law and, if the Debentures are held by
the Trust or a trustee of the Trust, without duplication of any other amounts
paid by the Trust or trustee in respect thereof) upon overdue installments of
interest at the rate per annum expressed in the Debentures; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, and the amount payable to the Trustee under Section 9.7.
(b) If the Company shall fail to pay such amounts set forth in Section
7.2(a) forthwith upon such demand, the Trustee, in its own name and as trustee
of an express trust, shall be entitled and empowered to institute any action or
proceedings at law or in equity for the collection of the sums so due and
unpaid, and may prosecute any such action or proceeding to judgment or final
decree, and may enforce any such judgment or final decree against the Company or
other obligor upon the Debentures and collect the money adjudged or decreed to
be payable in the manner provided by law out of the property of the Company or
other obligor upon the Debentures, wherever situated.
(c) In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, readjustment, arrangement, composition or judicial proceedings
affecting the Company, the Trust or the creditors or property of either, the
Trustee shall have power to intervene in such proceedings and take any action
therein that may be permitted by the court and shall (except as may be otherwise
provided by law) be entitled to file such proofs of claim and other papers and
documents as may be necessary or advisable in order to have the claims of the
Trustee and of the holders of the Debentures allowed for the entire amount due
and payable by the Company under this Indenture at the date of institution of
such proceedings and for any additional amount that may become due and payable
by the Company after such date, and to collect and receive any money or other
property payable or deliverable on any such claim, and to distribute the same
after the deduction of the amount payable to the Trustee under Section 9.7; and
any receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the holders of the Debentures to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such
payments directly to such Debentureholders, to pay to the Trustee any amount due
it under Section 9.7.
(d) All rights of action and of asserting claims under this Indenture,
or under any of the terms established with respect to the Debentures, may be
enforced by the Trustee without the possession of any of such Debentures, or the
production thereof at any trial or other proceeding relative thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for payment to the Trustee of any amounts due under Section 9.7, be
for the ratable benefit of the holders of the Debentures. In case of an Event of
Default hereunder which is continuing, the Trustee may in its discretion proceed
to protect and enforce the rights vested in it by this Indenture by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any of such rights, either at law or in equity or in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law. Nothing contained herein
shall be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Debentureholder any plan of reorganization, arrangement,
adjustment or composition affecting the Debentures or the rights of any holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Debentureholder in any such proceeding.
Section 7.3 Application of Money Collected. Any money or other assets
collected by the Trustee pursuant to this Article VII with respect to the
Debentures shall be applied in the following order, at the date or dates fixed
by the Trustee and, in case of the distribution of such money or other assets on
account of principal or interest, upon presentation of the Debentures, and
notation thereon of the payment, if only partially paid, and upon surrender
thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and of
all amounts payable to the Trustee under Section 9.7;
SECOND: To the payment of all Senior Indebtedness of the Company
if and to the extent required by Article XVI; and
THIRD: To the payment of the amounts then due and unpaid upon the
Debentures for principal and interest, in respect of which or for the benefit of
which such money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Debentures for
principal and interest, respectively.
Section 7.4. Limitation on Suits.
(a) Except as set forth in this Indenture, no holder of any Debenture
shall have any right by virtue or by availing of any provision of this Indenture
to institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless (i) such holder previously shall have
given to the Trustee written notice of an Event of Default and of the
continuance thereof with respect to the Debentures specifying such Event of
Default, as hereinbefore provided; (ii) the holders of not less than twenty-five
percent (25%) in aggregate principal amount of the Debentures then Outstanding
shall have made written request upon the Trustee to institute such action, suit
or proceeding in its own name as trustee hereunder; (iii) such holder or holders
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby;
and (iv) the Trustee for sixty (60) days after its receipt of such notice,
request and offer of indemnity shall have failed to institute any such action,
suit or proceeding and during such sixty (60) day period, the holders of a
majority in principal amount of the Debentures do not give the Trustee a
direction inconsistent with the request.
(b) Notwithstanding anything contained herein to the contrary or any
other provisions of this Indenture, the right of any holder of the Debentures to
receive payment of the principal of and interest on the Debentures, as therein
provided, on or after the respective due dates expressed in such Debenture (or
in the case of redemption, on the redemption date), or to institute suit for the
enforcement of any such payment on or after such respective dates or redemption
date, shall not be impaired or affected without the consent of such holder and
by accepting a Debenture hereunder it is expressly understood, intended and
covenanted by the taker and holder of every Debenture with every other such
taker and holder and the Trustee that no one or more holders of the Debentures
shall have any right in any manner whatsoever by virtue or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of the
holders of any other of such Debentures, or to obtain or seek to obtain priority
over or preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of the Debentures. For the protection and
enforcement of the provisions of this Section 7.4, each and every
Debentureholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Section 7.5. Rights and Remedies Cumulative; Delay or Omission Not
Waiver.
(a) Except as otherwise provided in Section 2.9(b), all powers and
remedies given by this Article VII to the Trustee or to the Debentureholders
shall, to the extent permitted by law, be deemed cumulative and not exclusive of
any other powers and remedies available to the Trustee or the holders of the
Debentures, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to such Debentures.
(b) No delay or omission of the Trustee or of any holder of any of the
Debentures to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or an acquiescence
therein; and, subject to the provisions of Section 7.4, every power and remedy
given by this Article VII or by law to the Trustee or the Debentureholders may
be exercised from time to time, and as often as shall be deemed expedient, by
the Trustee or by the Debentureholders.
Section 7.6. Control by Debentureholders. The holders of a
majority in aggregate principal amount of the Debentures at the time
Outstanding, determined in accordance with Section 10.4, shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; provided, however, that such direction shall not be in conflict with
any rule of law or with this Indenture. Subject to the provisions of
Section 9.1, the Trustee shall have the right to decline to follow any such
direction if the Trustee in good faith shall, by a Responsible Officer or
Officers of the Trustee, determine that the proceeding so directed would involve
the Trustee in personal liability. The holders of a majority in aggregate
principal amount of the Debentures at the time Outstanding affected thereby,
determined in accordance with Section 10.4, may on behalf of the holders of all
of the Debentures waive any past default in the performance of any of the
covenants contained herein and its consequences, except (i) a default in the
payment of the principal of or interest on any of the Debentures as and when the
same shall become due by the terms of such Debentures otherwise than by
acceleration (unless such default has been cured and a sum sufficient to pay all
matured installments of principal and interest has been deposited with the
Trustee (in accordance with Section 7.1(c)); (ii) a default in the covenants
contained in Section 5.7; or (iii) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the holder of each
Outstanding Debenture affected; provided, however, that if the Debentures are
held by the Trust or a trustee of the Trust, such waiver or modification to such
waiver shall not be effective until the holders of a majority in liquidation
preference of Trust Securities of the Trust shall have consented to such waiver
or modification to such waiver; provided, further, that if the Debentures are
held by the Trust or a trustee of the Trust, and if the consent of the holder of
each Outstanding Debenture is required, such waiver shall not be effective until
each holder of the Trust Securities of the Trust shall have consented to such
waiver. Upon any such waiver, the default covered thereby shall be deemed to be
cured for all purposes of this Indenture and the Company, the Trustee and the
holders of the Debentures shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 7.7. Undertaking to Pay Costs. All parties to this
Indenture agree, and each holder of any Debentures by such holder's acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken or omitted by
it as the Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 7.7 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Debentureholder, or group of the
Debentureholders holding more than ten percent (10%) in aggregate principal
amount of the Outstanding Debentures, or to any suit instituted by any
Debentureholder for the enforcement of the payment of the principal of or
interest on the Debentures, on or after the respective due dates expressed in
such Debenture or established pursuant to this Indenture.
Section 7.8. Direct Action; Right of Set-Off. In the event that an
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Company to pay interest on or principal of the Debentures
on an Interest Payment Date or Maturity Date, as applicable, then a holder of
Preferred Securities may institute and prosecute a legal proceeding directly
against the Company for enforcement of payment to such holder of the principal
of or interest on such Debentures having a principal amount equal to the
aggregate Liquidation Amount of the Preferred Securities of such holders (a
"Direct Action"). In connection with such Direct Action, the Company will have a
right of set-off under this Indenture to the extent of any payment actually made
by the Company to such holder of the Preferred Securities with respect to such
Direct Action.
ARTICLE VIII
FORM OF DEBENTURE AND ORIGINAL ISSUE
Section 8.1. Form of Debenture. The Debenture and the Trustee's
Certificate of Authentication to be endorsed thereon are to be substantially in
the forms contained as Exhibit A to this Indenture attached hereto and
incorporated herein by reference.
Section 8.2. Original Issue of the Debentures. Debentures in the
aggregate principal amount of $41,237,125 may, upon execution of this Indenture,
be executed by the Company and delivered to the Trustee for authentication. If
the Underwriters exercise their Option and there is an Option Closing Date (as
such terms are defined in the Underwriting Agreement dated ____________, 2001,
by and among the Company, the Trust and Stifel, Nicolaus & Company, Incorporated
as representative of the several Underwriters named therein), then on such
Option Closing Date, Debentures in the additional aggregate principal amount of
up to $6,185,575 may be executed by the Company and delivered to the Trustee for
authentication. In either such event, the Trustee shall thereupon authenticate
and deliver said Debentures to or upon the written order of the Company, signed
by its Chairman, its Chief Executive Officer, its President, or any Vice
President and its Treasurer or an Assistant Treasurer, without any further
action by the Company.
ARTICLE IX
CONCERNING THE TRUSTEE
Section 9.1. Certain Duties and Responsibilities of the Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform with respect to the Debentures such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
shall be read into this Indenture against the Trustee. In case an Event of
Default has occurred and is continuing and has not been cured or waived, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent Person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Trustee shall
with respect to the Debentures be determined solely by the
express provisions of this Indenture, and the Trustee shall
not be liable with respect to the Debentures except for the
performance of such duties and obligations as are specifically
set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee; and
(B) in the absence of bad faith on the part of the
Trustee, the Trustee may with respect to the Debentures
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the
case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this Indenture;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the holders of not less than a majority in
principal amount of the Debentures at the time Outstanding relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee under this Indenture with respect to the Debentures;
and
(iv) none of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if there is reasonable
ground for believing that the repayment of such funds or liability is
not reasonably assured to it under the terms of this Indenture or
adequate indemnity against such risk is not reasonably assured to it.
Section 9.2. Notice of Defaults. Within ninety (90) days after actual
knowledge by a Responsible Officer of the Trustee of the occurrence of any
Default hereunder with respect to the Debentures, the Trustee shall transmit by
mail to all holders of the Debentures, as their names and addresses appear in
the Debenture Register, notice of such default, unless such Default shall have
been cured or waived; provided, however, that, except in the case of a Default
in the payment of the principal or interest (including any Additional Payments)
on any Debenture, the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of the directors and/or Responsible Officers of the Trustee determines
in good faith that the withholding of such notice is in the interests of the
holders of such Debentures; and provided, further, that in the case of any
Default of the character specified in section 7.1(a)(iii), no such notice to
holders of Debentures need be sent until at least thirty (30) days after the
occurrence thereof.
Section 9.3. Certain Rights of Trustee. Except as otherwise
provided in Section 9.1:
(a) The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond, security or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by a Board Resolution or an instrument
signed in the name of the Company by the President or any Vice President and by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer thereof (unless other evidence in respect thereof is specifically
prescribed herein);
(c) The Trustee shall not be deemed to have knowledge of a Default or
an Event of Default, other than an Event of Default specified in Section
7.1(a)(i) or (ii), unless and until it receives written notification of such
Event of Default from the Company or by holders of at least twenty-five percent
(25%) of the aggregate principal amount of the Debentures at the time
Outstanding;
(d) The Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted hereunder in
good faith and in reliance thereon;
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Debentureholders, pursuant to the provisions of this
Indenture, unless such Debentureholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an Event
of Default (that is continuing and has not been cured or waived) to exercise
with respect to the Debentures such of the rights and powers vested in it by
this Indenture, and to use the same degree of care and skill in its exercise, as
a prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs;
(f) The Trustee shall not be liable for any action taken or omitted to
be taken by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture;
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, security, or
other papers or documents, unless requested in writing so to do by the holders
of not less than a majority in principal amount of the Outstanding Debentures
(determined as provided in Section 10.4); provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such costs, expenses or liabilities as a condition
to so proceeding, and the reasonable expense of every such examination shall be
paid by the Company or, if paid by the Trustee, shall be repaid by the Company
upon demand; and
(h) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
Section 9.4. Trustee Not Responsible for Recitals, etc.
(a) The Recitals contained herein and in the Debentures shall be taken
as the statements of the Company, and the Trustee assumes no responsibility for
the correctness of the same.
(b) The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Debentures.
(c) The Trustee shall not be accountable for the use or application by
the Company of any of the Debentures or of the proceeds of such Debentures, or
for the use or application of any money paid over by the Trustee in accordance
with any provision of this Indenture, or for the use or application of any money
received by any Paying Agent other than the Trustee.
Section 9.5. May Hold the Debentures. The Trustee or any Paying
Agent or Debenture Registrar for the Debentures, in its individual or any other
capacity, may become the owner or pledgee of the Debentures with the same rights
it would have if it were not Trustee, Paying Agent or Debenture Registrar.
Section 9.6. Money Held in Trust. Subject to the provisions of
Section 13.5, all money received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
law. The Trustee shall be under no liability for interest on any money received
by it hereunder except such as it may agree with the Company to pay thereon.
Section 9.7. Compensation and Reimbursement.
(a) The Company covenants and agrees to pay to the Trustee, and the
Trustee shall be entitled to, such reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust), as the Company and the Trustee may from time to time agree in
writing, for all services rendered by it in the execution of the trusts hereby
created and in the exercise and performance of any of the powers and duties
hereunder of the Trustee, and, except as otherwise expressly provided herein,
the Company shall pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith. The Company also
covenants to indemnify the Trustee (and its officers, agents, directors and
employees) for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Trustee and arising
out of or in connection with the acceptance or administration of this Indenture,
including the costs and expenses of defending itself against any claim of
liability in the premises.
(b) The obligations of the Company under this Section 9.7 to compensate
and indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Debentures upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the holders of particular
Debentures.
Section 9.8. Reliance on Officers' Certificate. Except as
otherwise provided in Section 9.1, whenever in the administration of the
provisions of this Indenture the Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or suffering or omitting
to take any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered or
omitted to be taken by it under the provisions of this Indenture upon the faith
thereof.
Section 9.9. Disqualification; Conflicting Interests. If the
Trustee has or shall acquire any "conflicting interest" within the meaning of
Section 310(b) of the Trust Indenture Act, the Trustee and the Company shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
Section 9.10. Corporate Trustee Required; Eligibility. There shall
at all times be a Trustee with respect to the Debentures issued hereunder which
shall at all times be a corporation organized and doing business under the laws
of the United States or any state or territory thereof or of the District of
Columbia, or a corporation or other Person permitted to act as trustee by the
Commission, authorized under such laws to exercise corporate trust powers,
having (or the obligations of which are guaranteed by an entity having) a
combined capital and surplus of at least $50,000,000, and subject to supervision
or examination by federal, state, territorial, or District of Columbia
authority. If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 9.10, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. The Company may
not, nor may any Person directly or indirectly controlling, controlled by, or
under common control with the Company, serve as Trustee. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 9.10, the Trustee shall resign immediately in the manner and with the
effect specified in Section 9.11.
Section 9.11. Resignation and Removal; Appointment of Successor.
(a) The Trustee or any successor hereafter appointed, may at any time
resign by giving written notice thereof to the Company and by transmitting
notice of resignation by mail, first class postage prepaid, to the
Debentureholders, as their names and addresses appear upon the Debenture
Register. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor trustee with respect to Debentures by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within thirty (30) days after the mailing of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee with respect to
Debentures, or any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six (6) months may, subject to the
provisions of Sections 9.9 and 9.10, on behalf of himself or herself and all
others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon after such notice, if any, as it may
deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any one of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of
Section 9.9 after written request therefor by the Company or by any
Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.10 and shall fail to resign after written
request therefor by the Company or by any such Debentureholder; or
(iii) the Trustee shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy
proceeding, or a receiver of the Trustee or of its property shall be
appointed or consented to, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, the Company may remove the Trustee with respect to all
Debentures and appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the Trustee so removed and one copy to the successor trustee,
or, subject to the provisions of Sections 9.9 and 9.10, unless the Trustee's
duty to resign is stayed as provided herein, any Debentureholder who has been a
bona fide holder of a Debenture or Debentures for at least six months may, on
behalf of that holder and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon after such notice, if any, as it may
deem proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in principal amount of the Debentures at
the time Outstanding may at any time remove the Trustee by so notifying the
Trustee and the Company and may appoint a successor Trustee with the consent of
the Company.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee with respect to the Debentures pursuant to any of the
provisions of this Section 9.11 shall become effective upon acceptance of
appointment by the successor trustee as provided in Section 9.12.
(e) Any successor trustee appointed pursuant to this Section 9.11 may
be appointed with respect to the Debentures, and at any time there shall be only
one Trustee with respect to the Debentures.
Section 9.12. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor trustee with
respect to the Debentures, every successor trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the request of the
Company or the successor trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
trustee all the rights, powers, and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor trustee all property and
money held by such retiring Trustee hereunder.
(b) Upon request of any successor trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor trustee all such rights, powers and trusts referred to in
paragraph (a) of this Section 9.12.
(c) No successor trustee shall accept its appointment unless at the
time of such acceptance such successor trustee shall be qualified and eligible
under this Article IX.
(d) Upon acceptance of appointment by a successor trustee as provided
in this Section 9.12, the Company shall transmit notice of the succession of
such trustee hereunder by mail, first class postage prepaid, to the
Debentureholders, as their names and addresses appear upon the Debenture
Register. If the Company fails to transmit such notice within ten days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be transmitted at the expense of the Company.
Section 9.13. Merger, Conversion, Consolidation or Succession to
Business. Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided, that such Person shall be
qualified under the provisions of Section 9.9 and eligible under the provisions
of Section 9.10, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. In case any Debentures shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Debentures so authenticated with the same effect as if such
successor Trustee had itself authenticated such Debentures.
Section 9.14. Preferential Collection of Claims Against the
Company. The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship described in Section 311(b) of the
Trust Indenture Act. A Trustee who has resigned or been removed shall be subject
to Section 311(a) of the Trust Indenture Act to the extent included therein.
ARTICLE X
CONCERNING THE DEBENTUREHOLDERS
Section 10.1. Evidence of Action by Holders.
(a) Whenever in this Indenture it is provided that the holders of a
majority or specified percentage in principal amount of the Debentures may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action), the fact that at
the time of taking any such action the holders of such majority or specified
percentage have joined therein may be evidenced by any instrument or any number
of instruments of similar tenor executed by such holders of Debentures in Person
or by agent or proxy appointed in writing.
(b) If the Company shall solicit from the Debentureholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of Debentureholders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or other
action, but the Company shall have no obligation to do so. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action may be given before or after the record date, but only
the Debentureholders of record at the close of business on the record date shall
be deemed to be Debentureholders for the purposes of determining whether
Debentureholders of the requisite proportion of Outstanding Debentures have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other action, and for that purpose the
Outstanding Debentures shall be computed as of the record date; provided,
however, that no such authorization, agreement or consent by such
Debentureholders on the record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than six
(6) months after the record date.
Section 10.2. Proof of Execution by Debentureholders. Subject to
the provisions of Section 9.1, proof of the execution of any instrument by a
Debentureholder (such proof shall not require notarization) or such
Debentureholder's agent or proxy and proof of the holding by any Person of any
of the Debentures shall be sufficient if made in the following manner:
(a) The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable to the Trustee.
(b) The ownership of Debentures shall be proved by the Debenture
Register of such Debentures or by a certificate of the Debenture Registrar
thereof.
(c) The Trustee may require such additional proof of any matter
referred to in this Section 10.2 as it shall deem necessary.
Section 10.3. Who May be Deemed Owners. Prior to the due
presentment for registration of transfer of any Debenture, the Company, the
Trustee, any Paying Agent, any Authenticating Agent and any Debenture Registrar
may deem and treat the Person in whose name such Debenture shall be registered
upon the books of the Company as the absolute owner of such Debenture (whether
or not such Debenture shall be overdue and notwithstanding any notice of
ownership or writing thereon made by anyone other than the Debenture Registrar)
for the purpose of receiving payment of or on account of the principal of and
interest on such Debenture (subject to Section 2.3) and for all other purposes;
and neither the Company nor the Trustee nor any Paying Agent nor any
Authenticating Agent nor any Debenture Registrar shall be affected by any notice
to the contrary.
Section 10.4. Certain Debentures Owned by Company Disregarded. In
determining whether the holders of the requisite principal amount of the
Debentures have concurred in any direction, consent or waiver under this
Indenture, the Debentures that are owned by the Company or any other obligor on
the Debentures or by any Person directly or indirectly controlling or controlled
by or under common control with the Company or any other obligor on the
Debentures shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination, except that (i) for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, consent
or waiver, only Debentures that the Trustee actually knows are so owned shall be
so disregarded; and (ii) for purposes of this Section 10.4, the Trust shall be
deemed not to be controlled by the Company. The Debentures so owned that have
been pledged in good faith may be regarded as Outstanding for the purposes of
this Section 10.4, if the pledgee shall establish to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Debentures and that
the pledgee is not a Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any such other
obligor. In case of a dispute as to such right, any decision by the Trustee
taken upon the advice of counsel shall be full protection to the Trustee.
Section 10.5. Actions Binding on Future Debentureholders. At any
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 10.1, of the taking of any action by the holders of the majority or
percentage in principal amount of the Debentures specified in this Indenture in
connection with such action, any holder of a Debenture that is shown by the
evidence to be included in the Debentures the holders of which have consented to
such action may, by filing written notice with the Trustee, and upon proof of
holding as provided in Section 10.2, revoke such action so far as concerns such
Debenture. Except as aforesaid any such action taken by the holder of any
Debenture shall be conclusive and binding upon such holder and upon all future
holders and owners of such Debenture, and of any Debenture issued in exchange
therefor, on registration of transfer thereof or in place thereof, irrespective
of whether or not any notation in regard thereto is made upon such Debenture.
Any action taken by the holders of the majority or percentage in principal
amount of the Debentures specified in this Indenture in connection with such
action shall be conclusively binding upon the Company, the Trustee and the
holders of all the Debentures.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1. Supplemental Indentures Without the Consent of
Debentureholders. In addition to any supplemental indenture otherwise authorized
by this Indenture, the Company and the Trustee may from time to time and at any
time enter into an indenture or indentures supplemental hereto (which shall
conform to the provisions of the Trust Indenture Act as then in effect), without
the consent of the Debentureholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein, or in the
Debentures;
(b) to provide for uncertificated Debentures in addition to or in place
of certificated Debentures;
(c) to add to the covenants of the Company for the benefit of the
holders of all or any of the Debentures or to surrender any right or power
herein conferred upon the Company;
(d) to make any change that does not adversely affect the rights
of any Debentureholder in any material respect;
(e) to qualify or maintain the qualification of this Indenture under
the Trust Indenture Act;
(f) to evidence a consolidation or merger involving the Company as
permitted under Section 12.1;
(g) to add to, delete from, or revise the conditions, limitations, and
restrictions on the authorized amount, terms, or purposes of issue,
authentication, and delivery of Debentures, only as herein set forth; or
(h) to provide for the issuance of and establish the form and terms and
conditions of the Debentures, to establish the form of any certifications
required to be furnished pursuant to the terms of this Indenture or of the
Debentures, or to add to the rights of the holders of the Debentures.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise. Any supplemental indenture authorized by the provisions of this
Section 11.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Debentures at the time Outstanding, notwithstanding
any of the provisions of Section 11.2.
Section 11.2. Supplemental Indentures with Consent of
Debentureholders. With the consent (evidenced as provided in Section 10.1) of
the holders of not less than a majority in principal amount of the Debentures at
the time Outstanding, the Company, when authorized by Board Resolutions, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as then in effect) for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture or of any supplemental indenture or of modifying in any manner not
covered by Section 11.1 the rights of the holders of the Debentures under this
Indenture; provided, however, that no such supplemental indenture shall without
the consent of the holders of each Debenture then Outstanding and affected
thereby, (i) extend the fixed maturity of any Debentures, reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon; or (ii) reduce the aforesaid percentage of Debentures, the holders of
which are required to consent to any such supplemental indenture; provided,
further, that if the Debentures are held by the Trust or a trustee of the Trust,
such supplemental indenture shall not be effective until the holders of a
majority in liquidation preference of Trust Securities of the Trust shall have
consented to such supplemental indenture; provided, further, that if the consent
of the holder of each Outstanding Debenture is required, such supplemental
indenture shall not be effective until each holder of the Trust Securities of
the Trust shall have consented to such supplemental indenture. It shall not be
necessary for the consent of the Debentureholders affected thereby under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3. Effect of Supplemental Indentures. Upon the execution
of any supplemental indenture pursuant to the provisions of this Article XI,
this Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Debentures shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 11.4. The Debentures Affected by Supplemental Indentures.
The Debentures affected by a supplemental indenture, authenticated and delivered
after the execution of such supplemental indenture pursuant to the provisions of
this Article XI, may bear a notation in form approved by the Company, provided,
such form meets the requirements of any exchange or automated quotation system
upon which the Debentures may be listed or quoted, as to any matter provided for
in such supplemental indenture. If the Company shall so determine, new
Debentures so modified as to conform, in the opinion of the Board of Directors
of the Company, to any modification of this Indenture contained in any such
supplemental indenture may be prepared by the Company, authenticated by the
Trustee and delivered in exchange for the Debentures then Outstanding.
Section 11.5. Execution of Supplemental Indentures.
(a) Upon the request of the Company, accompanied by its Board
Resolutions authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of the
Debentureholders required to consent thereto as aforesaid, the Trustee shall
join with the Company in the execution of such supplemental indenture unless
such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion but shall not be obligated to enter into such supplemental
indenture. The Trustee, subject to the provisions of Sections 9.1, may receive
an Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article XI is authorized or permitted by, and conforms
to, the terms of this Article XI and that it is proper for the Trustee under the
provisions of this Article XI to join in the execution thereof.
(b) Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 11.5, the
Trustee shall transmit by mail, first class postage prepaid, a notice, setting
forth in general terms the substance of such supplemental indenture, to the
Debentureholders as their names and addresses appear upon the Debenture
Register. Any failure of the Trustee to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
ARTICLE XII
SUCCESSOR CORPORATION
Section 12.1. Company May Consolidate, etc. Nothing contained in
this Indenture or in any of the Debentures shall prevent any consolidation or
merger of the Company with or into any other corporation or corporations
(whether or not affiliated with the Company, as the case may be), or successive
consolidations or mergers in which the Company, as the case may be, or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance, transfer or other disposition of the property of the Company, as the
case may be, or its successor or successors as an entirety, or substantially as
an entirety, to any other corporation (whether or not affiliated with the
Company, as the case may be, or its successor or successors) authorized to
acquire and operate the same; provided, however, that the Company hereby
covenants and agrees that (a) upon any such consolidation, merger, sale,
conveyance, transfer or other disposition, the due and punctual payment, in the
case of the Company, of the principal of and interest on all of the Debentures,
according to their tenor and the due and punctual performance and observance of
all of the covenants and conditions of this Indenture to be kept or performed by
the Company, as the case may be, shall be expressly assumed, by supplemental
indenture (which shall conform to the provisions of the Trust Indenture Act, as
then in effect) satisfactory in form to the Trustee executed and delivered to
the Trustee by the entity formed by such consolidation, or into which the
Company, as the case may be, shall have been merged, or by the entity which
shall have acquired such property; (b) in case the Company consolidates with or
merges into another Person or conveys or transfers its properties and assets
substantially as an entirety to any Person, the successor Person is organized
under the laws of the United States or any state or the District of Columbia;
and (c) immediately after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing.
Section 12.2. Successor Corporation Substituted.
(a) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of, in the case of the Company, the due
and punctual payment of the principal of and interest on all of the Debentures
Outstanding and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, as the case may be,
such successor corporation shall succeed to, and be substituted for, the Company
with the same effect as if it had been named as the Company herein and thereupon
the predecessor corporation shall be relieved of all obligations and covenants
under this Indenture and the Debentures.
(b) In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not in
substance) may be made in the Debentures thereafter to be issued as may be
appropriate.
(c) Nothing contained in this Indenture or in any of the Debentures
shall prevent the Company from merging into itself or acquiring by purchase or
otherwise, all or any part of, the property of any other Person (whether or not
affiliated with the Company).
Section 12.3. Evidence of Consolidation, etc. to Trustee. The Trustee,
subject to the provisions of Section 9.1, may receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale, conveyance,
transfer or other disposition, and any such assumption, comply with the
provisions of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE
Section 13.1. Satisfaction and Discharge of Indenture. If at any
time: (a) the Company shall have delivered to the Trustee for cancellation all
Debentures theretofore authenticated (other than any Debentures that shall have
been destroyed, lost or stolen and that shall have been replaced or paid as
provided in Section 2.9) and all Debentures for whose payment money or
Governmental Obligations have theretofore been deposited in trust or segregated
and held in trust by the Company (and thereupon repaid to the Company or
discharged from such trust, as provided in Section 13.5); or (b) all such
Debentures not theretofore delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit or cause to be deposited with the Trustee as trust funds
the entire amount in money or Governmental Obligations sufficient, or a
combination thereof sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay at maturity or upon redemption all Debentures
not theretofore delivered to the Trustee for cancellation, including principal
and interest due or to become due on such date of maturity or date fixed for
redemption, as the case may be, and if the Company shall also pay or cause to be
paid all other sums payable hereunder by the Company; then this Indenture shall
thereupon cease to be of further effect except for the provisions of Sections
2.3, 2.7, 2.9, 5.1, 5.2, 5.3, 9.7 and 9.10, that shall survive until the date of
maturity or redemption date, as the case may be, and Sections 9.7 and 13.5, that
shall survive to such date and thereafter, and the Trustee, on demand of the
Company and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture.
Section 13.2. Discharge of Obligations. If at any time all
Debentures not heretofore delivered to the Trustee for cancellation or that have
not become due and payable as described in Section 13.1 shall have been paid by
the Company by depositing irrevocably with the Trustee as trust funds money or
an amount of Governmental Obligations sufficient in the opinion of a nationally
recognized certified public accounting firm to pay at maturity or upon
redemption all Debentures not theretofore delivered to the Trustee for
cancellation, including principal and interest due or to become due to such date
of maturity or date fixed for redemption, as the case may be, and if the Company
shall also pay or cause to be paid all other sums payable hereunder by the
Company, then after the date such money or Governmental Obligations, as the case
may be, are deposited with the Trustee, the obligations of the Company under
this Indenture shall cease to be of further effect except for the provisions of
Sections 2.3, 2.7, 2.9, 5.1, 5.2, 5.3, 9.6, 9.7, 9.10 and 13.5 hereof that shall
survive until such Debentures shall mature and be paid. Thereafter, Sections 9.7
and 13.5 shall survive.
Section 13.3. Deposited Money to be Held in Trust. All money or
Governmental Obligations deposited with the Trustee pursuant to Sections 13.1 or
13.2 shall be held in trust and shall be available for payment as due, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent), to the holders of the Debentures for the payment or redemption of
which such money or Governmental Obligations have been deposited with the
Trustee.
Section 13.4. Payment of Money Held by Paying Agents. In connection
with the satisfaction and discharge of this Indenture, all money or Governmental
Obligations then held by any Paying Agent under the provisions of this Indenture
shall, upon demand of the Company, be paid to the Trustee and thereupon such
Paying Agent shall be released from all further liability with respect to such
money or Governmental Obligations.
Section 13.5. Repayment to the Company. Any money or Governmental
Obligations deposited with any Paying Agent or the Trustee, or then held by the
Company in trust, for payment of principal of or interest on the Debentures that
are not applied but remain unclaimed by the holders of such Debentures for at
least two years after the date upon which the principal of or interest on such
Debentures shall have respectively become due and payable, shall be repaid to
the Company, as the case may be, on December 31 of each year or (if then held by
the Company) shall be discharged from such trust; and thereupon the Paying Agent
and the Trustee shall be released from all further liability with respect to
such money or Governmental Obligations, and the holder of any of the Debentures
entitled to receive such payment shall thereafter, as an unsecured general
creditor, look only to the Company for the payment thereof.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1. No Recourse. No recourse under or upon any
obligation, covenant or agreement of this Indenture, or of the Debentures, or
for any claim based thereon or otherwise in respect thereof, shall be had
against any incorporator, stockholder, officer or director, past, present or
future, as such, of the Company or of any predecessor or successor corporation,
either directly or through the Company or any such predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever, shall
attach to, or is or shall be incurred by, the incorporators, stockholders,
officers or directors as such, of the Company or of any predecessor or successor
corporation, or any of them, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Debentures or implied therefrom;
and that any and all such personal liability of every name and nature, either at
common law or in equity or by constitution or statute, and any and all such
rights and claims against, every such incorporator, stockholder, officer or
director as such, because of the creation of the indebtedness hereby authorized,
or under or by reason of the obligations, covenants or agreements contained in
this Indenture or in any of the Debentures or implied therefrom, are hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issuance of such Debentures.
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1. Effect on Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Indenture contained by or on
behalf of the Company shall bind its respective successors and assigns, whether
so expressed or not.
Section 15.2. Actions by Successor. Any act or proceeding by any
provision of this Indenture authorized or required to be done or performed by
any board, committee or officer of the Company shall and may be done and
performed with like force and effect by the corresponding board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 15.3. Surrender of Company Powers. The Company by
instrument in writing executed by appropriate authority of its Board of
Directors and delivered to the Trustee may surrender any of the powers reserved
to the Company, and thereupon such power so surrendered shall terminate both as
to the Company, as the case may be, and as to any successor corporation.
Section 15.4. Notices. Except as otherwise expressly provided
herein any notice or demand that by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders
of Debentures to or on the Company may be given or served by being deposited
first class postage prepaid in a post-office letterbox addressed (until
another address is filed in writing by the Company with the Trustee), as
follows: First Banks, Inc., 600 James S. McDonnell Boulevard, Mail Code 014,
Hazelwood, Missouri 63042, Attention: Chief Financial Officer. Any notice,
election, request or demand by the Company or any Debentureholder to or upon
the Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made in writing at the Corporate Trust Office of the
Trustee.
Section 15.5. Governing Law. This Indenture and each Debenture
shall be deemed to be a contract made under the internal laws of the State of
Missouri and for all purposes shall be construed in accordance with the laws of
said State.
Section 15.6. Treatment of Debentures as Debt. It is intended that
the Debentures shall be treated as indebtedness and not as equity for federal
income tax purposes. The provisions of this Indenture shall be interpreted to
further this intention. The Company (with respect to its separate books and
records), the Trustee, and, by acceptance of a Debenture, each holder of a
Debenture, agree to treat the Debentures as indebtedness of the Company and not
as equity for all tax (including without limitation federal income tax) and
financial accounting purposes.
Section 15.7. Compliance Certificates and Opinions.
(a) Upon any application or demand by the Company to the Trustee to
take any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent provided for in this Indenture relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent have been complied with, except that in
the case of any such application or demand as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or demand, no additional certificate or opinion
need be furnished.
(b) Each certificate or opinion of the Company provided for in this
Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant in this Indenture shall include (i) a statement that the
Person making such certificate or opinion has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based; (iii) a statement that, in the opinion of such
Person, he or she has made such examination or investigation as, in the opinion
of such Person, is necessary to enable him or her to express an informed opinion
as to whether or not such covenant or condition has been complied with; and (iv)
a statement as to whether or not, in the opinion of such Person, such condition
or covenant has been complied with; provided, however, that each such
certificate shall comply with the provisions of Section 34 of the Trust
Indenture Act.
Section 15.8. Payments on Business Days. In any case where the date
of maturity of interest or principal of any Debenture or the date of redemption
of any Debenture shall not be a Business Day, then payment of interest or
principal may be made on the next succeeding Business Day with the same force
and effect as if made on the nominal date of maturity or redemption, and no
interest shall accrue for the period after such nominal date.
Section 15.9. Conflict with Trust Indenture Act. If and to the
extent that any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture
Act, such imposed duties shall control.
Section 15.10. Counterparts. This Indenture may be executed in
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 15.11. Separability. In case any one or more of the
provisions contained in this Indenture or in the Debentures shall for any reason
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Indenture or of the Debentures, but this Indenture and the Debentures shall be
construed as if such invalid or illegal or unenforceable provision had never
been contained herein or therein.
Section 15.12. Assignment. The Company shall have the right at all
times to assign any of its respective rights or obligations under this Indenture
to a direct or indirect wholly owned Subsidiary of the Company, provided, that
in the event of any such assignment, the Company shall remain liable for all
such obligations. Subject to the foregoing, this Indenture is binding upon and
inures to the benefit of the parties thereto and their respective successors and
assigns. This Indenture may not otherwise be assigned by the parties thereto.
Section 15.13. Acknowledgment of Rights. The Company acknowledges
that, with respect to any Debentures held by the Trust or a trustee of the
Trust, if the Property Trustee fails to enforce its rights under this Indenture
as the holder of the Debentures held as the assets of the Trust, any holder of
Preferred Securities may institute legal proceedings directly against the
Company to enforce such Property Trustee's rights under this Indenture without
first instituting any legal proceedings against such Property Trustee or any
other person or entity. Notwithstanding the foregoing, if an Event of Default
has occurred and is continuing and such event is attributable to the failure of
the Company to pay principal or interest on the Debentures on the date such
principal or interest is otherwise payable (or in the case of redemption, on the
redemption date), the Company acknowledges that a holder of Preferred Securities
may directly institute a proceeding for enforcement of payment to such holder of
the principal of or interest on the Debentures having a principal amount equal
to the aggregate liquidation amount of the Preferred Securities of such holder
on or after the respective due date specified in the Debentures.
ARTICLE XVI
SUBORDINATION OF THE DEBENTURES
Section 16.1. Agreement to Subordinate. The Company covenants and
agrees, and each holder of the Debentures issued hereunder by such holder's
acceptance thereof likewise covenants and agrees, that all the Debentures shall
be issued subject to the provisions of this Article XVI; and each holder of a
Debenture, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions. The payment by the Company of
the principal of and interest on all the Debentures issued hereunder shall, to
the extent and in the manner hereinafter set forth, be subordinated and junior
in right of payment to the prior payment in full of all Senior Debt,
Subordinated Debt and Additional Senior Obligations of the Company
(collectively, "Senior Indebtedness") to the extent provided herein, whether
outstanding at the date of this Indenture or thereafter incurred. No provision
of this Article XVI shall prevent the occurrence of any Default or Event of
Default hereunder.
Section 16.2. Default on Senior Debt, Subordinated Debt or
Additional Senior Obligations. In the event and during the continuation of any
default by the Company in the payment of principal, premium, interest or any
other payment due on any Senior Indebtedness, or in the event that the maturity
of any Senior Indebtedness has been accelerated because of a default, then, in
either case, no payment shall be made by the Company with respect to the
principal (including redemption payments) of or interest on the Debentures. In
the event that, notwithstanding the foregoing, any payment shall be received by
the Trustee when such payment is prohibited by the preceding sentence of this
Section 16.2, such payment shall be held in trust for the benefit of, and shall
be paid over or delivered to, the holders of Senior Indebtedness or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, but only to the extent that the holders of the
Senior Indebtedness (or their representative or representatives or a trustee)
notify the Trustee in writing within 90 days of such payment of the amounts then
due and owing on the Senior Indebtedness and only the amounts specified in such
notice to the Trustee shall be paid to the holders of the Senior Indebtedness.
Section 16.3. Liquidation; Dissolution; Bankruptcy.
(a) Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
shall first be paid in full, or payment thereof provided for in money in
accordance with its terms, before any payment is made by the Company on account
of the principal or interest on the Debentures; and upon any such dissolution or
winding-up or liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the holders of the Debentures or the Trustee
would be entitled to receive from the Company, except for the provisions of this
Article XVI, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the holders of the Debentures or by the Trustee under this
Indenture if received by them or it, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay such Senior Indebtedness in full, in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the holders of the Debentures or to the Trustee.
(b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness, as the case may be,
remaining unpaid to the extent necessary to pay such Senior Indebtedness in full
in money in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the benefit of the holders of such Senior
Indebtedness.
(c) For purposes of this Article XVI, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XVI with respect
to the Debentures to the payment of all Senior Indebtedness, as the case may be,
that may at the time be outstanding, provided, that (i) such Senior Indebtedness
is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment; and (ii) the rights of the holders of such
Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of the Company with, or
the merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article XII shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 16.3 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
XII. Nothing in Section 16.2 or in this Section 16.3 shall apply to claims of,
or payments to, the Trustee under or pursuant to Section 9.7.
Section 16.4. Subrogation.
(a) Subject to the payment in full of all Senior Indebtedness, the
rights of the holders of the Debentures shall be subrogated to the rights of the
holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company, as the case may be, applicable to
such Senior Indebtedness until the principal of and interest on the Debentures
shall be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of such Senior Indebtedness of any cash, property
or securities to which the holders of the Debentures or the Trustee would be
entitled except for the provisions of this Article XVI, and no payment over
pursuant to the provisions of this Article XVI to or for the benefit of the
holders of such Senior Indebtedness by holders of the Debentures or the Trustee,
shall, as between the Company, its creditors other than holders of Senior
Indebtedness of the Company, and the holders of the Debentures, be deemed to be
a payment by the Company to or on account of such Senior Indebtedness. It is
understood that the provisions of this Article XVI are and are intended solely
for the purposes of defining the relative rights of the holders of the
Debentures, on the one hand, and the holders of such Senior Indebtedness on the
other hand.
(b) Nothing contained in this Article XVI or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as between the
Company, its creditors (other than the holders of Senior Indebtedness), and the
holders of the Debentures, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Debentures the principal of and
interest on the Debentures as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the holders of the Debentures and creditors of the Company, as the
case may be, other than the holders of Senior Indebtedness, as the case may be,
nor shall anything herein or therein prevent the Trustee or the holder of any
Debenture from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XVI of the holders of such Senior Indebtedness in respect of cash,
property or securities of the Company, as the case may be, received upon the
exercise of any such remedy.
(c) Upon any payment or distribution of assets of the Company referred
to in this Article XVI, the Trustee, subject to the provisions of Article IX,
and the holders of the Debentures shall be entitled to conclusively rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the holders of the Debentures, for the purposes of ascertaining
the Persons entitled to participate in such distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XVI.
Section 16.5. Trustee to Effectuate Subordination. Each holder of
Debentures by such holder's acceptance thereof authorizes and directs the
Trustee on such holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XVI and
appoints the Trustee such holder's attorney-in-fact for any and all such
purposes.
Section 16.6. Notice by the Company.
(a) The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company that would prohibit the
making of any payment of money to or by the Trustee in respect of the Debentures
pursuant to the provisions of this Article XVI. Notwithstanding the provisions
of this Article XVI or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts that would prohibit
the making of any payment of money to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article XVI, unless and until a
Responsible Officer of the Trustee shall have received written notice thereof
from the Company or a holder or holders of Senior Indebtedness or from any
trustee therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 9.1, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 16.6 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of or interest on any Debenture), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purposes for which
they were received, and shall not be affected by any notice to the contrary that
may be received by it within two Business Days prior to such date.
(b) The Trustee, subject to the provisions of Section 9.1, shall be
entitled to conclusively rely on the delivery to it of a written notice by a
Person representing himself or herself to be a holder of Senior Indebtedness (or
a trustee on behalf of such holder) to establish that such notice has been given
by a holder of such Senior Indebtedness or a trustee on behalf of any such
holder or holders. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of such Senior Indebtedness to participate in any payment or distribution
pursuant to this Article XVI, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article XVI, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 16.7. Rights of the Trustee; Holders of the Senior
Indebtedness.
(a) The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XVI in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. The Trustee's right to compensation and reimbursement
of expenses as set forth in Section 9.7 shall not be subject to the
subordination provisions of the Article XVI.
(b) With respect to the holders of the Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article XVI, and no implied covenants or
obligations with respect to the holders of such Senior Indebtedness shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of such Senior Indebtedness and, subject
to the provisions of Section 9.1, the Trustee shall not be liable to any holder
of such Senior Indebtedness if it shall pay over or deliver to holders of
Debentures, the Company or any other Person money or assets to which any holder
of such Senior Indebtedness shall be entitled by virtue of this Article XVI or
otherwise.
Section 16.8. Subordination May Not be Impaired.
(a) No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with.
(b) Without in any way limiting the generality of Section 16.8(a), the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the holders of the Debentures,
without incurring responsibility to the holders of the Debentures and without
impairing or releasing the subordination provided in this Article XVI or the
obligations hereunder of the holders of the Debentures to the holders of such
Senior Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
such Senior Indebtedness, or otherwise amend or supplement in any manner such
Senior Indebtedness or any instrument evidencing the same or any agreement under
which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
[The remainder of this page has been left blank intentionally]
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
FIRST BANKS, INC.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION,
as Trustee
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
STATE OF MISSOURI )
) ss
COUNTY OF ST. LOUIS )
On this ______ day of _____________, 2001, before me appeared
_____________, to me personally known, who, being by me duly sworn, did say that
he is the _________________ of First Banks, Inc., and that the seal affixed to
said instrument is the corporate seal of said corporation, and that said
instrument was signed and sealed in behalf of said corporation by authority of
its Board of Directors and said _______________ acknowledged said instrument to
be the free act and deed of said corporation.
In testimony whereof I have hereunto set my hand and affixed my
official seal at my office in said county and state the day and year last above
written.
Notary Public _________________________
My term expires: _________________________
[seal]
COMMONWEALTH OF MASSACHUSETTS )
) ss
COUNTY OF SUFFOLK )
On this ______ day of ______________, 2001, before me appeared
___________________, to me personally known, who, being by me duly sworn, did
say that he is the _____________________ of State Street Bank and Trust Company
of Connecticut, National Association, and that the seal affixed to said
instrument is the corporate seal of said corporation, and that said instrument
was signed and sealed in behalf of said corporation by authority of its Board of
Directors and said _____________________________ acknowledged said instrument to
be the free act and deed of said corporation.
In testimony whereof I have hereunto set my hand and affixed my
official seal at my office in said county and commonwealth the day and year last
above written.
Notary Public _________________________
My term expires: _________________________
[seal]
EXHIBIT A
(Form of Face of Debenture)
FIRST BANKS, INC.
_______% SUBORDINATED DEBENTURE
DUE DECEMBER 31, 2031
No. ___ $__________
CUSIP No. _______________
First Banks, Inc., a Missouri corporation (the "Company," which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to _______________ or registered
assigns, the principal sum of _________________________ ($___________) on
December 31, 2031 (the "Stated Maturity"), and to pay interest on said principal
sum from _____________, 2001, or from the most recent interest payment date
(each such date, an "Interest Payment Date") to which interest has been paid or
duly provided for, quarterly (subject to deferral as set forth herein) in
arrears on the last day of March, June, September and December of each year
commencing December 31, 2001, at the rate of _____% per annum until the
principal hereof shall have become due and payable, and on any overdue principal
and (without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
same rate per annum compounded quarterly. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of a 360-day year of twelve
30-day months. The amount of interest for any partial period shall be computed
on the basis of the number of days elapsed in a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on this
Debenture is not a Business Day, then payment of interest payable on such date
shall be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) with the same force and
effect as if made on such date. The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date shall, as
provided in the Indenture, be paid to the person in whose name this Debenture
(or one or more Predecessor Debentures, as defined in said Indenture) is
registered at the close of business on the regular record date for such interest
installment. Any such interest installment not punctually paid or duly provided
for shall forthwith cease to be payable to the registered holders on such
regular record date and may be paid to the Person in whose name this Debenture
(or one or more Predecessor Debentures) is registered at the close of business
on a special record date to be fixed by the Trustee for the payment of such
defaulted interest, notice thereof shall be fixed by the Trustee for the payment
of such defaulted interest, notice thereof shall be given to the registered
holders of the Debentures not less than 10 days prior to such special record
date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange or quotation system on or in
which the Debentures may be listed or quoted, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. The
principal of and the interest on this Debenture shall be payable at the office
or agency of the Trustee maintained for that purpose in any coin or currency of
the United States of America that at the time of payment is legal tender for
payment of public and private debts; provided, however, that payment of interest
may be made at the option of the Company by check mailed to the registered
holder at such address as shall appear in the Debenture Register.
Notwithstanding the foregoing, so long as the holder of this Debenture is the
Property Trustee, the payment of the principal of and interest on this Debenture
shall be made at such place and to such account as may be designated by the
Trustee.
The Stated Maturity may be shortened at any time by the Company to any
date not earlier than December 31, 2006, subject to the Company having received
prior approval of the Federal Reserve if then required under applicable capital
guidelines, policies or regulations of the Federal Reserve.
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness (as defined in the Indenture). This
Debenture is issued subject to the provisions of the Indenture with respect
thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and
shall be bound by such provisions; (b) authorizes and directs the Trustee on his
or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination so provided; and (c) appoints the
Trustee his or her attorney-in-fact for any and all such purposes. Each holder
hereof, by his or her acceptance hereof, hereby waives all notice of the
acceptance of the subordination provisions contained herein and in the Indenture
by each holder of Senior Indebtedness, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated ___________________, 2001
FIRST BANKS, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
-------------------------------
Attest:
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
FORM OF CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-mentioned
Indenture.
Dated: , 2001
-----------------------------
State Street Bank and Trust Company of Connecticut, ________________________
National Association or Authenticating Agent
as Trustee
By: _______________________________ By: _______________________
Authorized Signatory
FORM OF REVERSE OF DEBENTURE
______% SUBORDINATED DEBENTURE DUE 2031
(CONTINUED)
This Debenture is one of the subordinated debentures of the Company
(herein sometimes referred to as the "Debentures"), all issued or to be issued
under and pursuant to an Indenture dated as of ___________, 2001 (the
"Indenture") duly executed and delivered between the Company and State Street
Bank and Trust Company of Connecticut, National Association, as Trustee (the
"Trustee"), to which Indenture reference is hereby made for a description of the
rights, limitations of rights, obligations, duties and immunities thereunder of
the Trustee, the Company and the holders of the Debentures. The Debentures are
limited in aggregate principal amount as specified in the Indenture.
Because of the occurrence and continuation of a Special Event (as
defined in the Indenture), in certain circumstances, this Debenture may become
due and payable at the principal amount together with any interest accrued
thereon (the "Redemption Price"). The Redemption Price shall be paid prior to
12:00 noon, Eastern Standard Time, on the date of such redemption or at such
earlier time as the Company determines. The Company shall have the right as set
forth in the Indenture to redeem this Debenture at the option of the Company,
without premium or penalty, in whole or in part at any time on or after December
31, 2006 (an "Optional Redemption"), or at any time in certain circumstances
upon the occurrence of a Special Event, at a Redemption Price equal to 100% of
the principal amount hereof plus any accrued but unpaid interest hereon, to the
date of such redemption. Any redemption pursuant to this paragraph shall be made
upon not less than thirty (30) days nor more than thirty (60) days notice, at
the Redemption Price. The Redemption Price shall be paid at the time and in the
manner provided therefor in the Indenture. If the Debentures are only partially
redeemed by the Company pursuant to an Optional Redemption, the Debentures shall
be redeemed by lot as described in the Indenture.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures for the unredeemed portion hereof shall be issued in the
name of the holder hereof upon the cancellation hereof.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time Outstanding (as defined
in the Indenture) to execute supplemental indentures for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the Indenture or of any supplemental indenture or of modifying in any manner
the rights of the holders of the Debentures; provided, however, that no such
supplemental indenture shall, except as provided in the Indenture, (i) extend
the fixed maturity of the Debentures or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, without the
consent of the holder of each Debenture so affected thereby; or (ii) reduce the
aforesaid percentage of Debentures, the holders of which are required to consent
to any such supplemental indenture, without the consent of the holders of each
Debenture then Outstanding and affected thereby. The Indenture also contains
provisions permitting the holders of a majority in aggregate principal amount of
the Debentures at the time Outstanding, on behalf of all of the holders of the
Debentures, to waive any past default in the performance of any of the covenants
contained in the Indenture, and its consequences, except (i) a default in the
payment of the principal of or interest on any of the Debentures (except as
otherwise provided in the Indenture) and (ii) default in the performance of
certain covenants as specified in the Indenture. Any such consent or waiver by
the registered holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Debenture and of any Debenture issued in exchange
herefor or in place hereof (whether by registration of transfer or otherwise),
irrespective of whether or not any notation of such consent or waiver is made
upon this Debenture.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal and interest on this
Debenture at the time and place and at the rate and in the money herein
prescribed.
Provided certain conditions are met, the Company shall have the right
at any time during the term of the Debentures and from time to time to extend
the interest payment period of such Debentures for up to twenty (20) consecutive
quarters (each, an "Extension Period"), at the end of which period the Company
shall pay all interest then accrued and unpaid (together with interest thereon
at the rate specified for the Debentures to the extent that payment of such
interest is enforceable under applicable law). Before the termination of any
such Extension Period, so long as no Event of Default shall have occurred and be
continuing, the Company may further extend such Extension Period, provided that
such Extension Period together with all such further extensions thereof shall
not exceed twenty (20) consecutive quarters, extend beyond December 31, 2031, or
end on a date other than an Interest Payment Date. At the termination of any
such Extension Period and upon the payment of all accrued and unpaid interest
and any additional amounts then due and subject to the foregoing conditions, the
Company may commence a new Extension Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Debenture is transferable by the registered holder hereof on the
Debenture Register (as defined in the Indenture) of the Company, upon surrender
of this Debenture for registration of transfer at the office or agency of the
Trustee accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
holder hereof or his or her attorney duly authorized in writing, and thereupon
one or more new Debentures of authorized denominations and for the same
aggregate principal amount shall be issued to the designated transferee or
transferees. No service charge shall be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any Paying Agent (as defined in the
Indenture) and the Debenture Registrar may deem and treat the registered holder
hereof as the absolute owner hereof (whether or not this Debenture shall be
overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the Debenture Registrar) for the purpose of receiving payment
of or on account of the principal hereof and interest due hereon and for all
other purposes, and neither the Company nor the Trustee nor any Paying Agent nor
any Debenture Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Debentures are issuable only in registered form without coupons in
denominations of $25 and any integral multiple thereof (or such other
denominations and any integral multiple thereof as may be deemed necessary by
the Company for the purpose of maintaining the eligibility of the Debentures for
inclusion in the Nasdaq National Market or any successor thereto).
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
Exhibit 4.3
CERTIFICATE OF TRUST
OF
FIRST PREFERRED CAPITAL TRUST III
THIS CERTIFICATE OF TRUST OF FIRST PREFERRED CAPITAL TRUST III (the
"Trust"), dated as of October 5, 2001, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, and James F. Dierberg,
Allen H. Blake and Lisa K. Vansickle, each an individual, as trustees, to form a
business trust under the Delaware Business Trust Act (12 Del. C. Section 3801 et
seq.).
1. NAME. The name of the business trust formed hereby is First
Preferred Capital Trust III.
2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.
IN WITNESS WHEREOF, each of the undersigned, being a trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY, as Trustee
By: /s/ Donald G. MacKelcan
--------------------------------------------
Name: Donald G. MacKelcan
--------------------------------------------
Title: Vice President
--------------------------------------------
/s/ James F. Dierberg
-----------------------------------------------------
JAMES F. DIERBERG, as Trustee
/s/ Allen H. Blake
-----------------------------------------------------
ALLEN H. BLAKE, as Trustee
/s/ Lisa K. Vansickle
-----------------------------------------------------
LISA K. VANSICKLE, as Trustee
Exhibit 4.4
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of October 5, 2001 (this "Trust
Agreement"), among (i) FIRST BANKS, INC., a Missouri corporation (the
"Depositor"), (ii) WILMINGTON TRUST COMPANY, a Delaware banking corporation, as
trustee, and (iii) JAMES F. DIERBERG, ALLEN H. BLAKE and LISA K. VANSICKLE, each
an individual, as trustees (each of such trustees in (ii) and (iii) a "Trustee"
and collectively, the "Trustees"). The Depositor and the Trustees hereby agree
as follows:
1. The trust created hereby (the "Trust") shall be known as "First
Preferred Capital Trust III" in which name the Trustees, or the Depositor to the
extent provided herein, may engage in the transactions contemplated hereby, make
and execute contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to
the Trustees the sum of $25. The Trustees hereby acknowledge receipt of such
amount in trust from the Depositor, which amount shall constitute the initial
trust estate. The Trustees hereby declare that they will hold the trust estate
in trust for the Depositor. It is the intention of the parties hereto that the
Trust created hereby constitutes a business trust under Chapter 38 of Title 12
of the Delaware Code, 12 Del. C. Section 3801, et seq. (the "Business Trust
Act"), and that this document constitutes the governing instrument of the Trust.
The Trustees are hereby authorized and directed to execute and file a
certificate of trust with the Delaware Secretary of State in accordance with the
provisions of the Business Trust Act.
3. The Depositor and the Trustees will enter into an amended and
restated Trust Agreement, satisfactory to each such party and substantially in
the form included as an exhibit to the 1933 Act Registration Statement (as
defined below), to provide for the contemplated operation of the Trust created
hereby and the issuance of the Preferred Securities and Common Securities
referred to therein. Prior to the execution and delivery of such amended and
restated Trust Agreement, the Trustees shall not have any duty or obligation
hereunder or with respect to the trust estate, except as otherwise required by
applicable law or as may be necessary to obtain prior to such execution and
delivery any licenses, consents or approvals required by applicable law or
otherwise.
4. The Depositor and the Trustees hereby authorize and direct the
Depositor, as the agent of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
the Trust, (a) the Registration Statement on Form S-2 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to the 1933 Act Registration Statement, relating to the registration
under the Securities Act of 1933, as amended, of the Preferred Securities of the
Trust and possibly certain other securities and (b) a Registration Statement on
Form 8-A (the "1934 Act Registration Statement") (including all pre-effective
and post-effective amendments thereto) relating to the registration of the
Preferred Securities of the Trust under the Securities Exchange Act of 1934, as
amended; (ii) to file with the Nasdaq National Market or a national stock
exchange (each, an "Exchange") and execute on behalf of the Trust one or more
listing applications and all other applications, statements, certificates,
agreements and other instruments as shall be necessary or desirable to cause the
Preferred Securities to be included in or listed on any of the Exchanges; (iii)
to file and execute on behalf of the Trust such applications, reports, surety
bonds, irrevocable consents, appointments of attorney for service of process and
other papers and documents as shall be necessary or desirable to register the
Preferred Securities under the securities or blue sky laws of such jurisdictions
as the Depositor, on behalf of the Trust, may deem necessary or desirable; and
(iv) to execute on behalf of the Trust that certain Underwriting Agreement
relating to the Preferred Securities, among the Trust, the Depositor and the
several Underwriters named therein, substantially in the form included as an
exhibit to the 1933 Act Registration Statement. In the event that any filing
referred to in clauses (i), (ii) and (iii) above is required by the rules and
regulations of the Commission, an Exchange or state securities or blue sky laws,
to be executed on behalf of the Trust by one or more of the Trustees, each of
the Trustees, in its, his or her capacity as a Trustee of the Trust, is hereby
authorized and, to the extent so required, directed to join in any such filing
and to execute on behalf of the Trust any and all of the foregoing, it being
understood that Wilmington Trust Company in its capacity as a Trustee of the
Trust shall not be required to join in any such filing or execute on behalf of
the Trust any such document unless required by the rules and regulations of the
Commission, the Exchange or state securities or blue sky laws. In connection
with the filings referred to above, the Depositor and James F. Dierberg, Allen
H. Blake and Lisa K. Vansickle, each as Trustees and not in their individual
capacities, hereby constitutes and appoints James F. Dierberg, Allen H. Blake
and Lisa K. Vansickle, and each of them, as its true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the Depositor or such Trustee or in the Depositor's or such
Trustees' name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the 1933 Act Registration
Statement and the 1934 Act Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission, the Exchange and administrators of the state securities or blue sky
laws, granting unto said attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as the
Depositor or such Trustee might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
respective substitute or substitutes, shall do or cause to be done by virtue
hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. The number of Trustees initially shall be four (4) and thereafter
the number of Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by the Depositor which may increase or decrease
the number of Trustees; provided, however, that to the extent required by the
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware and otherwise meets
the requirements of applicable Delaware law. Subject to the foregoing, the
Depositor is entitled to appoint or remove without cause any Trustee at any
time. The Trustees may resign upon thirty (30) days' prior notice to the
Depositor.
7. (a) The Trustee and its officers, directors, agents and servants
(collectively, the "Fiduciary Indemnified Persons") shall not be liable,
responsible or accountable in damages or otherwise to the Trust, the Depositor,
the Trustees or any holder of the Trust Securities (the Trust, the Depositor and
any holder of the Trust Securities being a "Covered Person") for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by the Fiduciary Indemnified Persons in good faith on behalf of the Trust and in
a manner the Fiduciary Indemnified Persons reasonably believed to be within the
scope of authority conferred on the Fiduciary Indemnified Persons by this Trust
Agreement or by law, except that the Fiduciary Indemnified Persons shall be
liable for any such loss, damage or claim incurred by reason of the Fiduciary
Indemnified Person's negligence or willful misconduct with respect to such acts
or omissions.
(b) The Fiduciary Indemnified Persons shall be fully protected in
relying in good faith upon the records of the Trust and upon such information,
opinions, reports or statements presented to the Trust by any person as to
matters the Fiduciary Indemnified Persons reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Trust, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which distributions to holders of Trust Securities might properly be
paid.
(c) The Depositor agrees, to the fullest extent permitted by applicable
law, (i) to indemnify and hold harmless each Fiduciary Indemnified Person, or
any of its officers, directors, shareholders, employees, representatives or
agents, from and against any loss, damage, liability, tax, penalty, expense or
claim of any kind or nature whatsoever incurred by the Fiduciary Indemnified
Persons by reason of the creation, operation or termination of the Trust in a
manner the Fiduciary Indemnified Persons reasonably believed to be within the
scope of authority conferred on the Fiduciary Indemnified Persons by this Trust
Agreement of Trust, except that no Fiduciary Indemnified Persons shall be
entitled to be indemnified in respect of any loss, damage or claim incurred by
the Fiduciary Indemnified Persons by reason of negligence or willful misconduct
with respect to such acts or omissions, and (ii) to advance expenses (including
legal fees) incurred by a Fiduciary Indemnified Person in defending any claim,
demand, action, suit or proceeding shall, from time to time, prior to the final
disposition of such claim, demand, action, suit or proceeding, upon receipt by
the Trust of an undertaking by or on behalf of such Fiduciary Indemnified
Persons to repay such amount if it shall be determined that such Fiduciary
Indemnified Person is not entitled to be indemnified as authorized in the
preceding subsection.
(d) The provisions of Section 7 shall survive the termination of this
Trust Agreement or the earlier resignation or removal of the Fiduciary
Indemnified Persons.
8. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws of principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed as of the day and year first above written.
FIRST BANKS, INC.,
as Depositor
By: /s/ Allen H. Blake
-------------------------------------
Name: Allen H. Blake
-------------------------------------
Title: President and Chief Operating Officer
-------------------------------------
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/ Donald G. MacKelcan
-------------------------------------
Name: Donald G. MacKelcan
-------------------------------------
Title: Vice President
-------------------------------------
/s/ James F. Dierberg
--------------------------------------------
JAMES F. DIERBERG, as Trustee
/s/ Allen H. Blake
--------------------------------------------
ALLEN H. BLAKE, as Trustee
/s/ Lisa K. Vansickle
--------------------------------------------
LISA K. VANSICKLE, as Trustee
Exhibit 4.5
FIRST PREFERRED CAPITAL TRUST III
AMENDED AND RESTATED
TRUST AGREEMENT
among
FIRST BANKS, INC., as Depositor
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, as Property Trustee
WILMINGTON TRUST COMPANY, as Delaware Trustee,
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF ______________, 2001
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINED TERMS.....................................................................................1
SECTION 101. DEFINITIONS................................................................................1
ARTICLE II ESTABLISHMENT OF THE TRUST.......................................................................9
SECTION 201. NAME.......................................................................................9
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS...............................10
SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL EXPENSES...........................10
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES......................................................10
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE OF DEBENTURES................10
SECTION 206. DECLARATION OF TRUST......................................................................11
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS..........................................11
SECTION 208. ASSETS OF TRUST...........................................................................14
SECTION 209. TITLE TO TRUST PROPERTY...................................................................15
ARTICLE III PAYMENT ACCOUNT................................................................................15
SECTION 301. PAYMENT ACCOUNT...........................................................................15
ARTICLE IV DISTRIBUTIONS; REDEMPTION.......................................................................15
SECTION 401. DISTRIBUTIONS.............................................................................15
SECTION 402. REDEMPTION................................................................................16
SECTION 403. SUBORDINATION OF COMMON SECURITIES........................................................18
SECTION 404. PAYMENT PROCEDURES........................................................................18
SECTION 405. TAX RETURNS AND REPORTS...................................................................18
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST...............................................19
SECTION 407. PAYMENTS UNDER INDENTURE..................................................................19
ARTICLE V TRUST SECURITIES CERTIFICATES....................................................................19
SECTION 501. INITIAL OWNERSHIP.........................................................................19
SECTION 502. THE TRUST SECURITIES CERTIFICATES.........................................................19
SECTION 503. EXECUTION, AUTHENTICATION AND DELIVERY OF TRUST SECURITIES CERTIFICATES...................20
SECTION 503A. GLOBAL PREFERRED SECURITY.................................................................20
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES CERTIFICATES................................................................21
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES CERTIFICATES........................22
SECTION 506. PERSONS DEEMED SECURITYHOLDERS............................................................23
SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND ADDRESSES....................................23
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY...........................................................23
SECTION 509. APPOINTMENT OF PAYING AGENT...............................................................24
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR...............................................24
SECTION 511. PREFERRED SECURITIES CERTIFICATES.........................................................25
SECTION 512. NOTICES TO CLEARING AGENCIES..............................................................25
SECTION 513. RIGHTS OF SECURITYHOLDERS.................................................................25
ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING.......................................................26
SECTION 601. LIMITATIONS ON VOTING RIGHTS..............................................................26
SECTION 602. NOTICE OF MEETINGS........................................................................27
SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS.....................................................27
SECTION 604. VOTING RIGHTS.............................................................................27
SECTION 605. PROXIES, ETC..............................................................................27
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT..................................................28
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES.................................................28
SECTION 608. ACTS OF SECURITYHOLDERS...................................................................28
SECTION 609. INSPECTION OF RECORDS.....................................................................29
ARTICLE VII REPRESENTATIONS AND WARRANTIES.................................................................29
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND THE PROPERTY TRUSTEE.......................29
SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE BANK AND THE DELAWARE TRUSTEE.............30
SECTION 703. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR...........................................31
ARTICLE VIII TRUSTEES......................................................................................32
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.......................................................32
SECTION 802. CERTAIN NOTICES...........................................................................33
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE........................................................33
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES....................................35
SECTION 805. MAY HOLD SECURITIES.......................................................................35
SECTION 806. COMPENSATION; INDEMNITY; FEES.............................................................36
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES..............................36
SECTION 808. CONFLICTING INTERESTS.....................................................................37
SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE..........................................................37
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.........................................38
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR....................................................39
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS...............................40
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST..............................40
SECTION 814. REPORTS BY PROPERTY TRUSTEE...............................................................40
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE...........................................................41
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT..........................................41
SECTION 817. NUMBER OF TRUSTEES........................................................................41
SECTION 818. DELEGATION OF POWER.......................................................................41
SECTION 819. VOTING....................................................................................41
ARTICLE IX TERMINATION, LIQUIDATION AND MERGER.............................................................42
SECTION 901. TERMINATION UPON EXPIRATION DATE..........................................................42
SECTION 902. EARLY TERMINATION.........................................................................42
SECTION 903. TERMINATION...............................................................................42
SECTION 904. LIQUIDATION...............................................................................42
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST.......................44
ARTICLE X MISCELLANEOUS PROVISIONS.........................................................................45
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS..................................................45
SECTION 1002. AMENDMENT................................................................................45
SECTION 1003. SEPARABILITY.............................................................................46
SECTION 1004. GOVERNING LAW............................................................................46
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY.........................................................47
SECTION 1006. SUCCESSORS...............................................................................47
SECTION 1007. HEADINGS.................................................................................47
SECTION 1008. REPORTS, NOTICES AND DEMANDS.............................................................47
SECTION 1009. AGREEMENT NOT TO PETITION................................................................48
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT...................................48
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE..........................49
CROSS-REFERENCE TABLE
Section of Section of
Trust Indenture Act Amended and Restated
of 1939, as amended Trust Agreement
------------------- --------------------
310(a)(1) 807
310(a)(2) 807
310(a)(3) 807
310(a)(4) 207(a)(ii)
310(b) 808
311(a) 813
311(b) 813
312(a) 507
312(b) 507
312(c) 507
313(a) 814(a)
313(a)(4) 814(b)
313(b) 814(b)
313(c) 1008
313(d) 814(c)
314(a) 815
314(b) Not Applicable
314(c)(1) 816
314(c)(2) 816
314(c)(3) Not Applicable
314(d) Not Applicable
314(e) 101, 816
315(a) 801(a), 803(a)
315(b) 802, 1008
315(c) 801(a)
315(d) 801, 803
316(a)(2) Not Applicable
316(b) Not Applicable
316(c) 607
317(a)(1) Not Applicable
317(a)(2) Not Applicable
317(b) 509
318(a) 1010
Note: This Cross-Reference Table does not constitute part of this Agreement and shall not affect the
interpretation of any of its terms or provisions.
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, dated as of ____________, 2001,
among (i) FIRST BANKS, INC., a Missouri corporation (including any successors or
assigns, the "Depositor"), (ii) STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association duly organized
and existing under the laws of the United States of America, as property trustee
(the "Property Trustee" and, in its separate corporate capacity and not in its
capacity as Property Trustee, the "Bank"), (iii) WILMINGTON TRUST COMPANY, a
Delaware banking corporation duly organized and existing under the laws of the
State of Delaware, as Delaware trustee (the "Delaware Trustee," and, in its
separate corporate capacity and not in its capacity as Delaware Trustee, the
"Delaware Bank"), (iv) JAMES F. DIERBERG, an individual, ALLEN H. BLAKE, an
individual and LISA K. VANSICKLE, an individual, each of whose address is c/o
First Banks, Inc., 600 James S. McDonnell Boulevard, Mail Code 014, Hazelwood,
Missouri 63042 (each an "Administrative Trustee" and collectively the
"Administrative Trustees") (the Property Trustee, the Delaware Trustee and the
Administrative Trustees referred to collectively as the "Trustees"), and (v) the
several Holders (as hereinafter defined).
RECITALS
WHEREAS, the Depositor, the Delaware Trustee, James F. Dierberg, Allen
H. Blake and Lisa K. Vansickle, each as an Administrative Trustee, have
heretofore duly declared and established a business trust pursuant to the
Delaware Business Trust Act by entering into that certain Trust Agreement, dated
as of October ___, 2001 (the "Original Trust Agreement"), and by the execution
and filing by the Delaware Trustee, the Depositor and the Administrative
Trustees with the Secretary of State of the State of Delaware of the Certificate
of Trust, filed on October __, 2001, the form of which is attached as Exhibit A;
and
WHEREAS, the Depositor, the Delaware Trustee, the Property Trustee and
the Administrative Trustees desire to amend and restate the Original Trust
Agreement in its entirety as set forth herein to provide for, among other
things, (a) the issuance of the Common Securities (as defined herein) by the
Trust (as defined herein) to the Depositor; (b) the issuance and sale of the
Preferred Securities (as defined herein) by the Trust pursuant to the
Underwriting Agreement (as defined herein); (c) the acquisition by the Trust
from the Depositor of all of the right, title and interest in the Debentures (as
defined herein); and (d) the appointment of the Trustees;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each party, for the benefit of the
other parties and for the benefit of the Securityholders (as defined herein),
hereby amends and restates the Original Trust Agreement in its entirety and
agrees as follows:
ARTICLE I
DEFINED TERMS
Section 101. Definitions.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings assigned
to them in this Article I and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Payments" has the meaning specified in Section 1.1 of the
Indenture.
"Administrative Trustee" means each of James F. Dierberg, Allen H.
Blake and Lisa K. Vansickle, solely in his or her capacity as Administrative
Trustee of the Trust formed and continued hereunder and not in his or her
individual capacity, or such Administrative Trustee's successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified Person is a
general partner; (e) any officer or director of the specified Person; and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to
the Preferred Securities appointed by the Property Trustee pursuant to Section
503.
"Bank" has the meaning specified in the Preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction
in the premises adjudging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking liquidation or reorganization of or in respect
of such Person under the United States Bankruptcy Code of 1978, as amended, or
any other similar applicable federal or state law, and the continuance of any
such decree or order unvacated and unstayed for a period of ninety (90) days; or
the commencement of an involuntary case under the United States Bankruptcy Code
of 1978, as amended, in respect of such Person, which shall continue undismissed
for a period of ninety (90) days or entry of an order for relief in such case;
or the entry of a decree or order of a court having jurisdiction in the premises
for the appointment on the ground of insolvency or bankruptcy of a receiver,
custodian, liquidator, trustee or assignee in bankruptcy or insolvency of such
Person or of its property, or for the winding up or liquidation of its affairs,
and such decree or order shall have remained in force unvacated and unstayed for
a period of ninety (90) days; or
(b) the institution by such Person of proceedings to be
adjudicated a voluntary bankrupt, or the consent by such Person to the filing of
a bankruptcy proceeding against it, or the filing by such Person of a petition
or answer or consent seeking liquidation or reorganization under the United
States Bankruptcy Code of 1978, as amended, or other similar applicable Federal
or State law, or the consent by such Person to the filing of any such petition
or to the appointment on the ground of insolvency or bankruptcy of a receiver or
custodian or liquidator or trustee or assignee in bankruptcy or insolvency of
such Person or of its property, or a general assignment by such Person for the
benefit of creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors, or such committee of the Board of
Directors or officers of the Depositor to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full force and effect on
the date of such certification, and delivered to the appropriate Trustee.
"Business Day" means any day other than a Saturday or Sunday, a day on
which banking institutions in The City of New York are authorized or required by
law, executive order or regulation to remain closed, or a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Certificate Depositary Agreement" means the agreement among Depositor,
Trust and DTC, as the initial Clearing Agency, dated as of the Closing Date,
substantially in the form attached as Exhibit E as the same may be amended and
supplemented from time to time.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust, as
amended or restated from time to time.
"Change in 1940 Act Law" shall have the meaning set forth in the
definition of "Investment Company Event."
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. DTC shall be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank or other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Security" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit B.
"Common Securityholder" means First Banks, Inc.
"Company" means First Banks, Inc.
"Corporate Trust Office" means the office at which, at any particular
time, the corporate trust business of the Property Trustee or the Debenture
Trustee, as the case may be, shall be principally administered, which office at
the date hereof, in each such case, is located at 225 Asylum Street, Goodwin
Square, Hartford, Connecticut, Attention: Corporate Trust Department.
"Debenture Event of Default" means an "Event of Default" as defined in
Section 7.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as specified in Section 1.1
of the Indenture.
"Debenture Trustee" means State Street Bank and Trust Company of
Connecticut, National Association, a national banking association organized
under the laws of the United States of America, and any successor thereto, as
trustee under the Indenture.
"Debentures" means the $41,237,125 (or $47,422,700 if the Underwriters
exercise their Option (as such terms are defined in the Underwriting Agreement))
aggregate principal amount of the Depositor's % Subordinated Debentures due
2031, issued pursuant to the Indenture.
"Definitive Preferred Securities Certificates" means the Preferred
Securities Certificates issued in certificated, fully registered form as
provided in Section 511.
"Delaware Bank" has the meaning specified in the Preamble to this Trust
Agreement.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Delaware Code Sections 3801 et seq., as it may be amended from
time to time.
"Delaware Trustee" means the commercial bank or trust company
identified as the "Delaware Trustee" in the Preamble to this Trust Agreement,
solely in its capacity as Delaware Trustee of the Trust formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"Depositary" means DTC or any successor thereto.
"Depositor" has the meaning specified in the Preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 401(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 401.
"DTC" means The Depository Trust Company.
"Early Termination Event" has the meaning specified in Section 902.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust or the Property Trustee in the
payment of any Distribution when it becomes due and payable, and continuation
of such default for a period of thirty (30) days; or
(c) default by the Trust or the Property Trustee in the
payment of any Redemption Price of any Trust Security when it becomes due and
payable; or
(d) default in the performance, or breach, in any
material respect, of any covenant or warranty of the Trustees in this Trust
Agreement (other than a covenant or warranty a default in the performance of
which or the breach of which is dealt with in clause (b) or (c), above) and
continuation of such default or breach for a period of sixty (60) days after
there has been given, by registered or certified mail, to the defaulting Trustee
or Trustees by the Holders of at least 25% in aggregate Liquidation Amount of
the Outstanding Preferred Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect
to the Property Trustee and the failure by the Depositor to appoint a successor
Property Trustee within (sixty) 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit C, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extension Period" has the meaning specified in Section 4.1 of the
Indenture.
"Global Preferred Securities Certificate" means a Preferred Securities
Certificate evidencing ownership of Global Preferred Securities.
"Global Preferred Security" means a Preferred Security, the ownership
and transfer of which shall be made through book entries by a Clearing Agency as
described herein.
"Guarantee" means the Preferred Securities Guarantee Agreement executed
and delivered by the Depositor and State Street Bank and Trust Company of
Connecticut, National Association, as trustee, contemporaneously with the
execution and delivery of this Trust Agreement, for the benefit of the Preferred
Securityholders, as amended from time to time.
"Indenture" means the Indenture, dated as of _____________, 2001,
between the Depositor and the Debenture Trustee, as trustee, as amended or
supplemented from time to time pertaining to the Debentures of the Depositor.
"Investment Company Act," means the Investment Company Act of 1940, as
amended, as in effect at the date of execution of this instrument.
"Investment Company Event" means the receipt by the Trust and the
Depositor of an Opinion of Counsel, rendered by a law firm having a recognized
national tax and securities law practice within a reasonable period of time
after the applicable occurrence, to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or
shall be considered an "investment company" that is required to be registered
under the Investment Company Act, which Change in 1940 Act Law becomes effective
on or after the date of original issuance of the Preferred Securities under this
Trust Agreement.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having an aggregate Liquidation Amount equal to the
aggregate principal amount of Debentures to be contemporaneously redeemed in
accordance with the Indenture and the proceeds of which shall be used to pay the
Redemption Price of such Trust Securities; and (b) with respect to a
distribution of Debentures to Holders of Trust Securities in connection with a
termination or liquidation of the Trust, Debentures having a principal amount
equal to the Liquidation Amount of the Trust Securities of the Holder to whom
such Debentures are distributed. Each Debenture distributed pursuant to clause
(b) above shall carry with it accrued interest in an amount equal to the accrued
and unpaid interest then due on such Debentures.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a termination and
liquidation of the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section 904(d).
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the appropriate Trustee. One of
the officers signing an Officers' Certificate given pursuant to Section 816
shall be the principal executive, financial or accounting officer of the
Depositor. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of
the examination or investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied with.
"Opinion of Counsel" means an opinion in writing of independent,
outside legal counsel, who may be counsel for the Trust, the Property Trustee,
the Delaware Trustee or the Depositor and who shall be reasonably acceptable to
the Property Trustee.
"Original Trust Agreement" has the meaning specified in the Recitals to
this Trust Agreement.
"Outstanding", when used with respect to Preferred Securities, means,
as of the date of determination, all Preferred Securities theretofore executed
and delivered under this Trust Agreement, except:
(a) Preferred Securities theretofore canceled by the
Property Trustee or delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Property
Trustee or any Paying Agent for the Holders of such Preferred Securities;
provided that, if such Preferred Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in
exchange for or in lieu of which other Preferred Securities have been executed
and delivered pursuant to Sections 504, 505, 511 and 513; provided, however,
that in determining whether the Holders of the requisite Liquidation Amount of
the Outstanding Preferred Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Preferred
Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor
or any Trustee shall be disregarded and deemed not to be Outstanding, except
that (i) in determining whether any Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Preferred Securities that such Trustee knows to be so owned shall be so
disregarded; and (ii) the foregoing shall not apply at any time when all of the
Outstanding Preferred Securities are owned by the Depositor, one or more of the
Trustees and/or any such Affiliate. Preferred Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Administrative Trustees the pledgee's
right so to act with respect to such Preferred Securities and the pledgee is not
the Depositor or any other Obligor upon the Preferred Securities or a Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Depositor or any Affiliate of the Depositor.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Debentures shall be held and from which the Property Trustee
shall make payments to the Securityholders in accordance with Sections 401 and
402.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Securities Certificate", means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as Exhibit
D.
"Preferred Security" means an undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount of $25 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Preferred Securityholder" means a Holder of a Preferred Security.
"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee," in the Preamble to this Trust Agreement
solely in its capacity as Property Trustee of the Trust heretofore formed and
continued hereunder and not in its individual capacity, or its successor in
interest in such capacity, or any successor property trustee appointed as herein
provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, allocated on a pro rata basis (based on
Liquidation Amounts) among the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 504.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Securities is registered in the Securities Register; any such Person
is a beneficial owner within the meaning of the Delaware Business Trust Act.
"Trust" means the Delaware business trust created and continued hereby
and identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act of 1939, as
amended, is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures; (b) the rights of the
Property Trustee under the Guarantee; (c) any cash on deposit in, or owing to,
the Payment Account; and (d) all proceeds and rights in respect of the foregoing
and any other property and assets for the time being held or deemed to be held
by the Property Trustee pursuant to this Trust Agreement.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement, dated as
of ______________, 2001, among the Trust, the Depositor, Stifel Nicolaus &
Company, Incorporated, Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated, Fahnestock & Co. Inc. and the Underwriters named therein.
ARTICLE II
ESTABLISHMENT OF THE TRUST
Section 201. Name.
The Trust continued hereby shall be known as "FIRST PREFERRED CAPITAL
TRUST III," as such name may be modified from time to time by the Administrative
Trustees following written notice to the Holders of Trust Securities and the
other Trustees, in which name the Trustees may engage in the transactions
contemplated hereby, make and execute contracts and other instruments on behalf
of the Trust and sue and be sued.
Section 202. Office of the Delaware Trustee; Principal Place of
Business.
The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or
such other address in the State of Delaware as the Delaware Trustee may
designate by written notice to the Securityholders and the Depositor. The
principal executive office of the Trust is c/o First Banks, Inc., 600 James S.
McDonnell Boulevard, Mail Code 014, Hazelwood, Missouri 63042.
Section 203. Initial Contribution of Trust Property; Organizational
Expenses.
The Trustees acknowledge receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $25, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
Section 204. Issuance of the Preferred Securities.
On _______________, 2001, the Depositor and an Administrative Trustee,
on behalf of the Trust and pursuant to the Original Trust Agreement, executed
and delivered the Underwriting Agreement. Contemporaneously with the execution
and delivery of this Trust Agreement, an Administrative Trustee, on behalf of
the Trust, shall execute in accordance with Section 502 and deliver in
accordance with the Underwriting Agreement, Preferred Securities Certificates,
registered in the name of the Persons entitled thereto, in an aggregate amount
of 1,600,000 Preferred Securities having an aggregate Liquidation Amount of
$40,000,000 against receipt of the aggregate purchase price of such Preferred
Securities of $40,000,000, which amount such Administrative Trustee shall
promptly deliver to the Property Trustee. If the Underwriters exercise their
Option and there is an Option Closing Date (as defined in the Underwriting
Agreement), then an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502, and deliver in accordance with the
Underwriting Agreement, additional Preferred Securities Certificates, registered
in the name of the Persons entitled thereto in an aggregate amount of up to
240,000 Preferred Securities having an aggregate Liquidation Amount of up to
$6,000,000 against receipt of the aggregate purchase price of such Preferred
Securities of up to $6,000,000, which amount such Administrative Trustee shall
promptly deliver to the Property Trustee.
Section 205. Issuance of the Common Securities; Subscription and
Purchase of Debentures.
(a) Contemporaneously with the execution and delivery of this
Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502 and deliver to the Depositor Common
Securities Certificates registered in the name of the Depositor, in an aggregate
amount of 49,485 Common Securities having an aggregate Liquidation Amount of
$1,237,125 against payment by the Depositor of such amount. Contemporaneously
therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to
and purchase from the Depositor Debentures, registered in the name of the
Property Trustee on behalf of the Trust and having an aggregate principal amount
equal to $41,237,125 and, in satisfaction of the purchase price for such
Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the
Depositor the sum of $41,237,125.
(b) If the Underwriters exercise the Option and there is an Option
Closing Date, then an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502, and deliver to the Depositor, Common
Securities Certificates, registered in the name of the Depositor, in an
additional aggregate amount of up to 7,423 Common Securities having an aggregate
Liquidation Amount of up to $185,575 against payment by the Depositor of such
amount. Contemporaneously therewith, an Administrative Trustee, on behalf of the
Trust, shall subscribe to and purchase from the Depositor, additional
Debentures, registered in the name of the Property Trustee on behalf of the
Trust and having an aggregate principal amount of up to $6,185,575, and, in
satisfaction of the purchase price of such Debentures, the Property Trustee, on
behalf of the Trust, shall deliver to the Depositor up to $6,185,575, such
aggregate amount equal to the sum of the amounts received from the Depositor
pursuant to the first sentence of this Section 205(b) and from one of the
Administrative Trustees pursuant to the last sentence of Section 204.
Section 206. Declaration of Trust.
The exclusive purposes and functions of the Trust are (a) to issue and
sell Trust Securities and use the proceeds from such sale to acquire the
Debentures; and (b) to engage in those activities necessary, advisable or
incidental thereto. The Depositor hereby appoints the Trustees as trustees of
the Trust, to have all the rights, powers and duties to the extent set forth
herein, and the Trustees hereby accept such appointment. The Property Trustee
hereby declares that it shall hold the Trust Property in trust upon and subject
to the conditions set forth herein for the benefit of the Securityholders. The
Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. The Delaware Trustee shall not be entitled to exercise
any powers, nor shall the Delaware Trustee have any of the duties and
responsibilities, of the Property Trustee or the Administrative Trustees set
forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for
the sole and limited purpose of fulfilling the requirements of Section 3807 of
the Delaware Business Trust Act.
Section 207. Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Trust Agreement. Subject to the limitations
set forth in paragraph (b) of this Section 207 and Article VIII, and in
accordance with the following provisions (i) and (ii), the Administrative
Trustees shall have the authority to enter into all transactions and agreements
determined by the Administrative Trustees to be appropriate in exercising the
authority, express or implied, otherwise granted to the Administrative Trustees
under this Trust Agreement, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee,
acting singly or jointly, shall have the power and authority to act on behalf
of the Trust with respect to the following matters:
(A) the issuance and sale of the Trust
Securities and compliance with the
Underwriting Agreement in connection
therewith;
(B) to cause the Trust to enter into, and to
execute, deliver and perform on behalf of
the Trust, the Expense Agreement and such
other agreements or documents as may be
necessary or desirable in connection with
the purposes and function of the Trust;
(C) assisting in the registration of the
Preferred Securities under the Securities
Act of 1933, as amended, and under state
securities or blue sky laws, and the
qualification of this Trust Agreement as a
trust indenture under the Trust Indenture
Act;
(D) assisting in the inclusion of the Preferred
Securities in the Nasdaq National Market or
in the listing of the Preferred Securities
on such securities exchange or exchanges as
shall be determined by the Depositor and the
registration of the Preferred Securities
under the Exchange Act, the compliance with
the listing requirements of The Nasdaq
National Market or the applicable securities
exchanges and the preparation and filing of
all periodic and other reports and other
documents pursuant to the foregoing;
(E) the sending of notices (other than notices
of default) and other information regarding
the Trust Securities and the Debentures to
the Securityholders in accordance with this
Trust Agreement;
(F) the appointment of a Paying Agent,
Authenticating Agent and Securities
Registrar in accordance with this Trust
Agreement;
(G) to the extent provided in this Trust
Agreement, the winding up of the affairs of
and liquidation of the Trust and the
preparation, execution and filing of the
certificate of cancellation with the
Secretary of State of the State of Delaware;
(H) the taking of all action that may be
necessary or appropriate for the
preservation and the continuation of the
Trust's valid existence, rights, franchises
and privileges as a statutory business trust
under the laws of the State of Delaware and
of each other jurisdiction in which such
existence is necessary to protect the
limited liability of the Preferred
Securityholders or to enable the Trust to
effect the purposes for which the Trust was
created; and
(I) the taking of any action incidental to the
foregoing as the Administrative Trustees may
from time to time determine is necessary or
advisable to give effect to the terms of
this Trust Agreement for the benefit of the
Securityholders (without consideration of
the effect of any such action on any
particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust with respect to the
following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and
any other payments made in respect
of the Debentures in the Payment Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the
Trust Securities in accordance with the
terms of this Trust Agreement;
(E) the exercise of all of the rights, powers
and privileges of a holder of the
Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities
and the Debentures to the Securityholders in
accordance with this Trust Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this
Trust Agreement;
(H) to the extent provided in this Trust
Agreement, the winding up of the affairs
of and liquidation of the Trust;
(I) after an Event of Default, the taking of any
action incidental to the foregoing as the
Property Trustee may from time to time
determine is necessary or advisable to give
effect to the terms of this Trust Agreement
and protect and conserve the Trust Property
for the benefit of the Securityholders
(without consideration of the effect of any
such action on any particular
Securityholder);
(J) registering transfers of the Trust
Securities in accordance with this Trust
Agreement; and
(K) except as otherwise provided in this Section
207(a)(ii), the Property Trustee shall have
none of the duties, liabilities, powers or
the authority of the Administrative Trustees
set forth in Section 207(a)(i).
(b) So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement; (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Securityholders,
except as expressly provided herein; (iii) take any action that would cause the
Trust to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes; (iv) incur any indebtedness for borrowed money or issue any
other debt; or (v) take or consent to any action that would result in the
placement of a Lien on any of the Trust Property. The Administrative Trustees
shall defend all claims and demands of all Persons at any time claiming any Lien
on any of the Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred Securities,
the Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Depositor in furtherance of the following prior to the date of this
Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration statement
on the appropriate form in relation to the Preferred Securities, the Debentures
and the Guarantee, including any amendments thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or, register for sale all or part of the Preferred
Securities and to do any and all such acts, other than actions which must be
taken by or on behalf of the Trust, and advise the Trustees of actions they must
take on behalf of the Trust, and prepare for execution and filing any documents
to be executed and filed by the Trust or on behalf of the Trust, as the
Depositor deems necessary or advisable in order to comply with the applicable
laws of any such states;
(iii) the preparation for filing by the Trust and execution on
behalf of the Trust of an application to The Nasdaq National Market or a
national stock exchange or other organization for inclusion, listing or
quotation upon notice of issuance of any Preferred Securities and to file or
cause an Administrative Trustee to file thereafter with such exchange or
organization such notifications and documents as may be necessary from time to
time;
(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration statement
on Form 8-A relating to the registration of the Preferred Securities under
Section 12(b) or 12(g) of the Exchange Act, including any amendments thereto;
(v) the negotiation of the terms of, and the execution
and delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrative
Trustees are authorized and directed to conduct the affairs of the Trust and to
operate the Trust so that the Trust shall not be deemed to be an "investment
company" required to be registered under the Investment Company Act, shall be
classified as a "grantor trust" and not as an association taxable as a
corporation for United States federal income tax purposes and so that the
Debentures shall be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, subject to Section 1002, the
Depositor and the Administrative Trustees are authorized to take any action, and
the Administrative Trustees are authorized to direct the Property Trustee in
writing to take any action not inconsistent with applicable law or this Trust
Agreement, that each of the Depositor and the Trustees determines in their
discretion to be necessary or desirable for such purposes. The Property Trustee
shall take any action so directed by one or more of the Administrative Trustees.
Section 208. Assets of Trust.
The assets of the Trust shall consist of the Trust Property.
Section 209. Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Securityholders in accordance with
this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
Section 301. Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the Payment
Account shall be held by the Property Trustee in the Payment Account for the
exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
Section 401. Distributions.
(a) Distributions on the Trust Securities shall be cumulative, and
shall accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall accumulate from the date of
issuance of the Trust Securities and, except during any Extension Period with
respect to the Debentures, shall be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, commencing on December 31,
2001. If any date on which a Distribution is otherwise payable on the Trust
Securities is not a Business Day, then the payment of such Distribution shall be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay) with the same force and effect as
if made on such date (each date on which Distributions are payable in accordance
with this Section 401(a), a "Distribution Date").
(b) The Trust Securities represent undivided beneficial interests in
the Trust Property. The Distributions on the Trust Securities shall be payable
at a rate of ______% per annum of the Liquidation Amount of the Trust
Securities. The amount of Distributions payable for any full period shall be
computed on the basis of a 360-day year of twelve 30-day months. The amount of
Distributions for any partial period shall be computed on the basis of the
number of days elapsed in a 360-day year of twelve 30 day months. During any
Extension Period with respect to the Debentures, Distributions on the Preferred
Securities shall be deferred for a period equal to the Extension Period.
(c) Distributions on the Trust Securities shall be made by the Property
Trustee solely from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand and
immediately available by 12:30 p.m. on each Distribution Date in the Payment
Account for the payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which
shall be the 15th day of March, June, September or December for Distributions
payable on the last calendar day of the respective month; provided, however,
that for any Trust Securities held in global form, Distributions shall be
payable to the Holder thereof as of one Business Day immediately preceding the
Distribution Date.
Section 402. Redemption.
(a) On each Debenture Redemption Date and on the maturity of the
Debentures, the Trust shall be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than thirty (30) nor more
than sixty (60) days prior to the Redemption Date to each Holder of Trust
Securities to be redeemed, at such Holder's address appearing in the Securities
Register. The Property Trustee shall have no responsibility for the accuracy of
any CUSIP number contained in such notice. All notices of redemption shall
state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities
are to be redeemed, the identification and the aggregate Liquidation Amount
of the particular Trust Securities to be redeemed;
(v) that, on the Redemption Date, the Redemption Price shall
become due and payable upon each such Trust Security to be redeemed and that
Distributions thereon shall cease to accumulate on and after said date, except
as provided in Section 402(d); and
(vi) the place or places at which Trust Securities are to
be surrendered for the payment of the Redemption Price.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of the Debentures. Redemptions of the Trust Securities shall be made
and the Redemption Price shall be payable on each Redemption Date only to the
extent that the Trust has immediately available funds then on hand and available
in the Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of
any Preferred Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, subject to Section 402(c), the Property Trustee, subject to
Section 402(c), shall, with respect to Preferred Securities held in global form,
deposit with the Clearing Agency for such Preferred Securities, to the extent
available therefor, funds sufficient to pay the applicable Redemption Price and
will give such Clearing Agency irrevocable instructions and authority to pay the
Redemption Price to the Holders of the Preferred Securities. With respect to
Trust Securities that are not held in global form, the Property Trustee, subject
to Section 402(c), shall deposit with the Paying Agent funds sufficient to pay
the applicable Redemption Price and shall give the Paying Agent irrevocable
instructions and authority to pay the Redemption Price to the Holders thereof
upon surrender of their Preferred Securities Certificates. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date for any
Trust Securities called for redemption shall be payable to the Holders of such
Trust Securities as they appear on the Securities Register for the Trust
Securities on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as required, then
upon the date of such deposit, (i) all rights of Securityholders holding Trust
Securities so called for redemption shall cease, except the right of such
Securityholders to receive the Redemption Price, but without interest and (ii)
such Securities shall cease to be Outstanding. In the event that any date on
which any Redemption Price is payable is not a Business Day, then payment of the
Redemption Price payable on such date shall be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) with the same force and effect as if made on such date. In the
event that payment of the Redemption Price in respect of any Trust Securities
called for redemption is improperly withheld or refused and not paid either by
the Trust or by the Depositor pursuant to the Guarantee, Distributions on such
Trust Securities shall continue to accumulate, at the then applicable rate, from
the Redemption Date originally established by the Trust for such Trust
Securities to the date such Redemption Price is actually paid, in which case the
actual payment date shall be the date fixed for redemption for purposes of
calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be
made to the record holders thereof as they appear on the Securities Register for
the Trust Securities on the relevant record date, which shall be the date
fifteen (15) days prior to the relevant Redemption Date; provided, however, that
for any Trust Securities held in global form, Distributions shall be payable to
the Holder thereof as of one Business Day immediately preceding the Distribution
Date.
(f) Subject to Section 403(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. The particular Preferred Securities to be redeemed
shall be selected not more than sixty (60) days prior to the Redemption Date by
the Property Trustee from the Outstanding Preferred Securities not previously
called for redemption, by such method (including, without limitation, by lot) as
the Property Trustee shall deem fair and appropriate and which may provide for
the selection for redemption of portions (equal to such Liquidation Amount or an
integral multiple of such Liquidation Amount in excess thereof) of the
Liquidation Amount of Preferred Securities of a denomination larger than the
Liquidation Amount; provided, however, that in the event the redemption relates
only to Preferred Securities purchased and held by the Depositor being redeemed
in exchange for a Like Amount of Debentures, the Property Trustee shall select
those particular Preferred Securities for redemption. The Property Trustee shall
promptly notify the Securities Registrar in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the Liquidation Amount thereof to be redeemed, it being
understood that, in the case of Preferred Securities registered in the name of
and held of record by the Clearing Agency or its nominee, the distribution of
the proceeds of such redemption will be made in accordance with the procedures
of the Clearing Agency or its nominee. For all purposes of this Trust Agreement,
unless the context otherwise requires, all provisions relating to the redemption
of Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the Liquidation
Amount of Preferred Securities which has been or is to be redeemed, it being
understood that, in the case of Preferred Securities registered in the name of
and held of record by the Clearing Agency or its nominee, the distribution of
the proceeds of such redemption will be made in accordance with the procedures
of the Clearing Agency or its nominee.
Section 403. Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 402(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities; provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution (including
Additional Amounts, if applicable) on, or Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions (including Additional Amounts,
if applicable) on all Outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all Outstanding
Preferred Securities then called for redemption, shall have been made or
provided for, and all funds immediately available to the Property Trustee shall
first be applied to the payment in full in cash of all Distributions (including
Additional Amounts, if applicable) on, or the Redemption Price of, Preferred
Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from a Debenture Event of Default, the Common Securityholders shall be deemed to
have waived any right to act with respect to any such Event of Default under
this Trust Agreement until the effect of all such Events of Default with respect
to the Preferred Securities shall have been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust Agreement with
respect to the Preferred Securities shall have been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
Preferred Securityholders and not the Common Securityholder, and only the
Preferred Securityholders shall have the right to direct the Property Trustee to
act on their behalf.
Section 404. Payment Procedures.
Payments of Distributions (including Additional Amounts, if applicable)
in respect of the Preferred Securities shall be made by check mailed to the
address of the Person entitled thereto as such address shall appear on the
Securities Register or, if the Preferred Securities are held by a Clearing
Agency, such Distributions shall be made to the Clearing Agency in immediately
available funds, which will credit the relevant accounts on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be made
in such manner as shall be mutually agreed between the Property Trustee and the
Common Securityholder.
Section 405. Tax Returns and Reports.
The Administrative Trustees shall prepare (or cause to be prepared), at
the Depositor's expense, and file all United States federal, state and local tax
and information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
forms required to be filed in respect of the Trust in each taxable year of the
Trust; and (b) prepare and furnish (or cause to be prepared and furnished) to
each Securityholder the appropriate Internal Revenue Service forms required to
be furnished to such Securityholder or the information required to be provided
on such forms. The Administrative Trustees shall provide the Depositor with a
copy of all such returns and reports promptly after such filing or furnishing.
The Property Trustee shall comply with United States federal withholding and
backup withholding tax laws and information reporting requirements with respect
to any payments to Securityholders under the Trust Securities.
Section 406. Payment of Taxes, Duties, etc. of the Trust.
Upon receipt under the Debentures of Additional Payments, the Property
Trustee, at the direction of an Administrative Trustee or the Depositor, shall
promptly pay any taxes, duties or governmental charges of whatsoever nature
(other than withholding taxes) imposed on the Trust by the United States or any
other taxing authority.
Section 407. Payments Under Indenture. Any amount payable hereunder to
any Preferred Securityholder shall be reduced by the amount of any corresponding
payment such Holder has directly received under the Indenture pursuant to
Section 513(b) or (c) hereof.
ARTICLE V
TRUST SECURITIES CERTIFICATES
Section 501. Initial Ownership.
Upon the creation of the Trust and the contribution by the Depositor
pursuant to Section 203 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are Outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
Section 502. The Trust Securities Certificates.
The Preferred Securities Certificates shall be issued in minimum
denominations of the Liquidation Amount and integral multiples of the
Liquidation Amount in excess thereof, and the Common Securities Certificates
shall be issued in denominations of the Liquidation Amount and multiples thereof
(which may, in the case of the Common Securities, include fractional amounts).
The Trust Securities Certificates shall be executed on behalf of the Trust by
manual or facsimile signature of at least one Administrative Trustee. Trust
Securities Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be validly issued and entitled
to the benefits of this Trust Agreement, notwithstanding that such individuals
or any of them shall have ceased to be so authorized prior to the delivery of
such Trust Securities Certificates or did not hold such offices at the date of
delivery of such Trust Securities Certificates. A transferee of a Trust
Securities Certificate shall become a Securityholder, and shall be entitled to
the rights and subject to the obligations of a Securityholder hereunder, upon
due registration of such Trust Securities Certificate in such transferee's name
pursuant to Sections 504, 511 and 513.
Section 503. Execution, Authentication and Delivery of Trust
Securities Certificates.
(a) On the Closing Date and, if applicable, the Option Closing Date,
the Administrative Trustees shall cause Trust Securities Certificates, in an
aggregate Liquidation Amount as provided in Sections 204 and 205, to be executed
on behalf of the Trust by at least one of the Administrative Trustees and
delivered to or upon the written order of the Depositor, signed by its Chief
Executive Officer, President, any Vice President, the Treasurer or any Assistant
Treasurer without further corporate action by the Depositor, in authorized
denominations.
(b) A Preferred Securities Certificate shall not be valid until
authenticated by the manual signature of an authorized signatory of the Property
Trustee. The signature shall be conclusive evidence that the Preferred
Securities Certificate has been authenticated under this Trust Agreement. Each
Preferred Security Certificate shall be dated the date of its authentication.
Upon the written order of the Trust signed by one of the Administrative
Trustees, the Property Trustee shall authenticate and make available for
delivery the Preferred Securities Certificates.
The Property Trustee may appoint an Authenticating Agent acceptable to
the Trust to authenticate the Preferred Securities. An Authenticating Agent may
authenticate the Preferred Securities whenever the Property Trustee may do so.
Each reference in this Trust Agreement to authentication by the Property Trustee
includes authentication by such agent. An Authenticating Agent has the same
rights as the Property Trustee to deal with the Company or the Trust.
Section 503A. Global Preferred Security.
(a) Any Global Preferred Security issued under this Trust Agreement
shall be registered in the name of the nominee of the Clearing Agency and
delivered to such custodian therefor, and such Global Preferred Security shall
constitute a single Preferred Security for all purposes of this Trust Agreement.
(b) Notwithstanding any other provision in this Trust Agreement, no
Global Preferred Security may be exchanged for Preferred Securities registered
in the names of persons other than the Depositary or its nominee unless (i) the
Depositary notifies the Property Trustee that it is unwilling or unable to
continue as a depositary for such Global Preferred Securities and the Depositor
is unable to locate a qualified successor depositary, (ii) the Depositor
executes and delivers to the Property Trustee a written order stating that it
elects to terminate the book-entry system through the Depositary or (iii) there
shall have occurred and be continuing a Debenture Event of Default.
(c) If a Preferred Security is to be exchanged in whole or in part for
a beneficial interest in a Global Preferred Security, then either (i) such
Global Preferred Security shall be so surrendered for exchange or cancellation
as provided in this Article V or (ii) the Liquidation Amount thereof shall be
reduced or increased by an amount equal to the portion thereof to be so
exchanged or canceled, or equal to the Liquidation Amount of such other
Preferred Securities to be so exchanged for a beneficial interest therein, as
the case may be, by means of an appropriate adjustment made on the records of
the Securities Registrar, whereupon the Property Trustee, in accordance with the
rules and procedures of the Depositary for such Global Preferred Security (the
"Applicable Procedures"), shall instruct the Clearing Agency or its authorized
representative to make a corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Preferred Security by the Clearing Agency,
accompanied by registration instructions, the Administrative Trustees shall
execute and the Property Trustee shall, subject to Section 504(b) and as
otherwise provided in this Article V, authenticate and deliver any Preferred
Securities issuable in exchange for such Global Preferred Security (or any
portion thereof) in accordance with the instructions of the Clearing Agency. The
Property Trustee shall not be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be fully protected in
relying on, such instructions.
(d) Every Preferred Security executed, authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Preferred Security or any portion thereof, whether pursuant to this Article V or
otherwise, shall be executed, authenticated and delivered in the form of, and
shall be, a Global Preferred Security, unless such Global Preferred Security is
registered in the name of a Person other than the Clearing Agency for such
Global Preferred Security or a nominee thereof.
(e) The Clearing Agency or its nominee, as the registered owner of a
Global Preferred Security, shall be considered the Holder of the Preferred
Securities represented by such Global Preferred Security for all purposes under
this Trust Agreement and the Preferred Securities, and owners of beneficial
interests in such Global Preferred Security shall hold such interests pursuant
to the Applicable Procedures and, except as otherwise provided herein, shall not
be entitled to receive physical delivery of any such Preferred Securities in
definitive form and shall not be considered the Holders thereof under this Trust
Agreement. Accordingly, any such owner's beneficial interest in the Global
Preferred Securities shall be shown only on, and the transfer of such interest
shall be effected only through, records maintained by the Clearing Agency or its
nominee. Neither the Property Trustee, the Securities Registrar nor the
Depositor shall have any liability in respect of any transfers effected by the
Clearing Agency.
(f) The rights of owners of beneficial interests in a Global Preferred
Security shall be exercised only through the Clearing Agency and shall be
limited to those established by law and agreements between such owners and the
Clearing Agency.
Section 504. Registration of Transfer and Exchange of Preferred
Securities Certificates.
(a) The Depositor shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 508, a register or registers for the
purpose of registering Trust Securities Certificates and, subject to the
provisions of Section 503A, transfers and exchanges of Preferred Securities
Certificates (herein referred to as the "Securities Register") in which the
registrar designated by the Depositor (the "Securities Registrar"), subject to
such reasonable regulations as it may prescribe, shall provide for the
registration of Preferred Securities Certificates and Common Securities
Certificates (subject to Section 510 in the case of the Common Securities
Certificates) and registration of transfers and exchanges of Preferred
Securities Certificates as herein provided. The Property Trustee shall be the
initial Securities Registrar.
(b) Subject to the provisions of Section 503A, upon surrender for
registration of transfer of any Preferred Securities Certificate at the office
or agency maintained pursuant to Section 508, the Administrative Trustees or any
one of them shall execute and deliver, in the name of the designated transferee
or transferees, one or more new Preferred Securities Certificates in authorized
denominations of a like aggregate Liquidation Amount dated the date of execution
by such Administrative Trustee or Trustees. The Securities Registrar shall not
be required to register the transfer of any Preferred Securities that have been
called for redemption. At the option of a Holder, Preferred Securities
Certificates may be exchanged for other Preferred Securities Certificates in
authorized denominations of the same class and of a like aggregate Liquidation
Amount upon surrender of the Preferred Securities Certificates to be exchanged
at the office or agency maintained pursuant to Section 508.
(c) Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange, subject to the provisions of Section 503A,
shall be accompanied by a written instrument of transfer in form satisfactory to
the Property Trustee and the Securities Registrar duly executed by the Holder or
his attorney duly authorized in writing. Each Preferred Securities Certificate
surrendered for registration of transfer or exchange shall be canceled and
subsequently disposed of by the Property Trustee in accordance with its
customary practice. The Trust shall not be required to (i) issue, register the
transfer of, or exchange any Preferred Securities during a period beginning at
the opening of business 15 calendar days before the date of mailing of a notice
of redemption of any Preferred Securities called for redemption and ending at
the close of business on the day of such mailing; or (ii) register the transfer
of or exchange any Preferred Securities so selected for redemption, in whole or
in part, except the unredeemed portion of any such Preferred Securities being
redeemed in part.
(d) No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, subject to the provisions of
Section 503A, but the Securities Registrar may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Preferred Securities Certificates.
(e) Preferred Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Trust Agreement.
Any transfer or purported transfer of any Preferred Security not made in
accordance with this Trust Agreement shall be null and void. A Preferred
Security that is not a Global Preferred Security may be transferred, in whole or
in part, to a Person who takes delivery in the form of another Preferred
Security that is not a Global Preferred Security as provided in Section 504(a).
A beneficial interest in a Global Preferred Security may be exchanged for a
Preferred Security that is not a Global Preferred Security only as provided in
Section 503A.
Section 505. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates.
If (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate, and (b) there shall be delivered to the Securities
Registrar, the Property Trustee and the Administrative Trustees such security or
indemnity as may be required by them to save each of them harmless, then in the
absence of notice that such Trust Securities Certificate shall have been
acquired by a bona fide purchaser, the Administrative Trustees, or any one of
them, on behalf of the Trust shall execute and make available for delivery, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust
Securities Certificate, a new Trust Securities Certificate of like class, tenor
and denomination. In connection with the issuance of any new Trust Securities
Certificate under this Section 505, the Administrative Trustees or the
Securities Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Trust Securities Certificate issued pursuant to this Section 505
shall constitute conclusive evidence of an undivided beneficial interest in the
assets of the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Trust Securities Certificate shall be found at any time.
Section 506. Persons Deemed Securityholders.
The Trustees, the Paying Agent and the Securities Registrar shall treat
the Person in whose name any Trust Securities Certificate shall be registered in
the Securities Register as the owner of such Trust Securities Certificate for
the purpose of receiving Distributions and for all other purposes whatsoever,
and neither the Trustees nor the Securities Registrar shall be bound by any
notice to the contrary.
Section 507. Access to List of Securityholders' Names and Addresses.
At any time when the Property Trustee is not also acting as the
Securities Registrar, the Administrative Trustees or the Depositor shall furnish
or cause to be furnished to the Property Trustee (a) within five Business Days
after March 15, June 15, September 15 and December 15 in each year, a list, in
such form as the Property Trustee may reasonably require, of the names and
addresses of the Securityholders as of the most recent record date; and (b)
promptly after receipt by any Administrative Trustee or the Depositor of a
request therefor from the Property Trustee in order to enable the Property
Trustee to discharge its obligations under this Trust Agreement, in each case to
the extent such information is in the possession or control of the
Administrative Trustees or the Depositor and is not identical to a previously
supplied list or has not otherwise been received by the Property Trustee in its
capacity as Securities Registrar. The rights of Securityholders to communicate
with other Securityholders with respect to their rights under this Trust
Agreement or under the Trust Securities and the corresponding rights of the
Trustee shall be as provided in the Trust Indenture Act. Each Holder, by
receiving and holding a Trust Securities Certificate, and each owner shall be
deemed to have agreed not to hold the Depositor, the Property Trustee or the
Administrative Trustees accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
Section 508. Maintenance of Office or Agency.
The Administrative Trustees shall maintain or cause to be maintained in
The City of New York or other location designated by the Administrative
Trustees, an office or offices or agency or agencies where Preferred Securities
Certificates may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Trustees in respect of the Trust
Securities Certificates may be served. The Administrative Trustees initially
designate the Corporate Trust Office of the Property Trustee, 225 Asylum Street,
Goodwin Square, Hartford, Connecticut 06103, as the principal corporate trust
office for such purposes. The Administrative Trustees shall give prompt written
notice to the Depositor and to the Securityholders of any change in the location
of the Securities Register or any such office or agency.
Section 509. Appointment of Paying Agent.
The Property Trustee shall be the initial Paying Agent, and any
co-paying agent chosen by the Property Trustee must be acceptable to the
Administrative Trustees and the Depositor. The Paying Agent shall make
Distributions to Securityholders from the Payment Account and shall report the
amounts of such Distributions to the Property Trustee and the Administrative
Trustees. Any Paying Agent shall have the revocable power to withdraw funds from
the Payment Account for the purpose of making the Distributions referred to
above. The Administrative Trustees may revoke such power and remove the Paying
Agent if such Trustees determine in their sole discretion that the Paying Agent
shall have failed to perform its obligations under this Trust Agreement in any
material respect. The Paying Agent shall initially be the Property Trustee, and
any co-paying agent chosen by the Property Trustee must be acceptable to the
Administrative Trustees and the Depositor. Any Person acting as Paying Agent
shall be permitted to resign as Paying Agent upon thirty (30) days' written
notice to the Administrative Trustees, the Property Trustee and the Depositor.
In the event that the Property Trustee shall no longer be the Paying Agent or a
successor Paying Agent shall resign or its authority to act be revoked, the
Administrative Trustees shall appoint a successor (which shall be a bank or
trust company) that is acceptable to the Property Trustee and the Depositor to
act as Paying Agent. The Administrative Trustees shall cause such successor
Paying Agent or any additional Paying Agent appointed by the Administrative
Trustees to execute and deliver to the Trustees an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the Trustees
that as Paying Agent, such successor Paying Agent or additional Paying Agent
shall hold all sums, if any, held by it for payment to the Securityholders in
trust for the benefit of the Securityholders entitled thereto until such sums
shall be paid to such Securityholders. The Paying Agent shall return all
unclaimed funds to the Property Trustee and, upon removal of a Paying Agent,
such Paying Agent shall also return all funds in its possession to the Property
Trustee. The provisions of Sections 801, 803 and 806 shall apply to the Property
Trustee also in its role as Paying Agent, for so long as the Property Trustee
shall act as Paying Agent and, to the extent applicable, to any other Paying
Agent appointed hereunder. Any reference in this Agreement to the Paying Agent
shall include any co-paying agent unless the context requires otherwise.
Section 510. Ownership of Common Securities by Depositor.
On the Closing Date, the Depositor shall acquire and retain beneficial
and record ownership of the Common Securities. To the fullest extent permitted
by law, any attempted transfer of the Common Securities (other than a transfer
in connection with a merger or consolidation of the Depositor into another
corporation pursuant to Section 12.1 of the Indenture) shall be void. The
Administrative Trustees shall cause each Common Securities Certificate issued to
the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE
EXCEPT IN COMPLIANCE WITH SECTION 510 OF THE TRUST AGREEMENT."
Section 511. Preferred Securities Certificates.
(a) Upon their original issuance, Preferred Securities Certificates
shall be issued in the form of one or more fully registered Global Preferred
Securities Certificates which will be deposited with or on behalf of the
Clearing Agency and registered in the name of the Clearing Agency's nominee.
Unless and until it is exchangeable in whole or in part for the Preferred
Securities in definitive form, a global security may not be transferred except
as a whole by the Clearing Agency to a nominee of the Clearing Agency or by a
nominee of the Clearing Agency to the Clearing Agency or another nominee of the
Clearing Agency or by the Clearing Agency or any such nominee to a successor of
such Clearing Agency or a nominee of such successor.
(b) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
Section 512. Notices to Clearing Agencies.
To the extent that a notice or other communication to the Holders is
required under this Trust Agreement, for so long as Preferred Securities are
represented by a Global Preferred Securities Certificate, the Trustees shall
give all such notices and communications specified herein to be given to the
Clearing Agency, and shall have no obligation to provide notice to the owners of
the beneficial interest in the Global Preferred Securities.
Section 513. Rights of Securityholders.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 209, and
the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities, and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights. When issued and delivered to
Preferred Securityholders against payment of the purchase price therefor, the
Preferred Securities shall be fully paid and nonassessable interests in the
Trust. The Preferred Securityholders, in their capacities as such, shall be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the holders of
not less than twenty-five percent (25%) in principal amount of the outstanding
Debentures fail to declare the principal of all of the Debentures to be
immediately due and payable, the Holders of at least twenty-five (25%) in
Liquidation Amount of the Preferred Securities then Outstanding shall have such
right by a notice in writing to the Depositor and the Debenture Trustee; and
upon any such declaration such principal amount of and the accrued interest on
all of the Debentures shall become immediately due and payable, provided that
the payment of principal and interest on such Debentures shall remain
subordinated to the extent provided in the Indenture.
(c) For so long as any Preferred Securities remain Outstanding, upon a
Debenture Event of Default arising from the failure to pay interest or principal
on the Debentures, the Holders of any Preferred Securities then Outstanding
shall, to the fullest extent permitted by law, have the right to directly
institute proceedings for enforcement of payment to such Holders of principal of
or interest on the Debentures having a principal amount equal to the Liquidation
Amount of the Preferred Securities of such Holders.
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
Section 601. Limitations on Voting Rights.
(a) Except as provided in this Section 601, in Sections 513 810 and
1002 and in the Indenture and as otherwise required by law, no Preferred
Securityholder shall have any right to vote or in any manner otherwise control
the administration, operation and management of the Trust or the obligations of
the parties hereto, nor shall anything herein set forth, or contained in the
terms of the Trust Securities Certificates, be construed so as to constitute the
Securityholders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures; (ii) waive any past default which is waivable under Article VII of
the Indenture; (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable; or (iv) consent to
any amendment, modification or termination of the Indenture or the Debentures,
where such consent shall be required, without, in each case, obtaining the prior
approval of the Holders of at least a majority in Liquidation Amount of all
Outstanding Preferred Securities; provided, however, that where a consent under
the Indenture would require the consent of each holder of outstanding Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior written consent of each Preferred Securityholder. The Trustees shall
not revoke any action previously authorized or approved by a vote of the
Preferred Securityholders, except by a subsequent vote of the Preferred
Securityholders. The Property Trustee shall notify each Preferred Securityholder
of any notice of default received from the Debenture Trustee with respect to the
Debentures. In addition to obtaining the foregoing approvals of the Preferred
Securityholders, prior to taking any of the foregoing actions, the Trustees
shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced
in such matters to the effect that the Trust shall continue to be classified as
a grantor trust and not as an association taxable as a corporation for United
States federal income tax purposes on account of such action.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Trustees otherwise propose to effect, (i) any action that would adversely
affect in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise; or (ii) the dissolution, winding-up or termination of the Trust,
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Preferred Securities as a class shall be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of, with respect to matters described in
(i) above, at least 66 2/3% in Liquidation Amount of the Outstanding Preferred
Securities and with respect to matters described in (ii) above, at least a
majority in Liquidation Amount of the Outstanding Preferred Securities. No
amendment to this Trust Agreement may be made if, as a result of such amendment,
the Trust would cease to be classified as a grantor trust or would be classified
as an association taxable as a corporation for United States federal income tax
purposes.
Section 602. Notice of Meetings.
Notice of all meetings of the Preferred Securityholders, stating the
time, place and purpose of the meeting, shall be given by the Property Trustee
pursuant to Section 1008 to each Preferred Securityholder of record, at his or
her registered address, at least fifteen (15) days and not more than ninety (90)
days before the meeting. At any such meeting, any business properly before the
meeting may be so considered whether or not stated in the notice of the meeting.
Any adjourned meeting may be held as adjourned without further notice.
Section 603. Meetings of Preferred Securityholders.
(a) No annual meeting of Securityholders is required to be held. The
Administrative Trustees, however, shall call a meeting of Securityholders to
vote on any matter in respect of which Preferred Securityholders are entitled to
vote upon the written request of the Preferred Securityholders of twenty-five
percent (25%) of the Outstanding Preferred Securities (based upon their
aggregate Liquidation Amount) and the Administrative Trustees or the Property
Trustee may, at any time in their discretion, call a meeting of Preferred
Securityholders to vote on any matters as to which the Preferred Securityholders
are entitled to vote.
(b) Preferred Securityholders of record of fifty percent (50%) of the
Outstanding Preferred Securities (based upon their aggregate Liquidation
Amount), present in person or by proxy, shall constitute a quorum at any meeting
of Securityholders.
(c) If a quorum is present at a meeting, an affirmative vote by the
Preferred Securityholders of record present, in person or by proxy, holding more
than a majority of the Preferred Securities (based upon their aggregate
Liquidation Amount) held by the Preferred Securityholders of record present,
either in person or by proxy, at such meeting shall constitute the action of the
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
Section 604. Voting Rights.
Securityholders shall be entitled to one vote for each dollar value of
Liquidation Amount represented by their Trust Securities (with any fractional
multiple thereof rounded up or down as the case may be to the closest integral
multiple) in respect of any matter as to which such Securityholders are entitled
to vote (and such dollar value shall be $25 per Preferred Security until such
time, if any, as the Liquidation Amount is changed as provided herein).
Section 605. Proxies, etc.
At any meeting of Securityholders, any Securityholder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Administrative Trustees, or
with such other officer or agent of the Trust as the Administrative Trustees may
direct, for verification prior to the time at which such vote shall be taken.
Only Holders shall be entitled to vote. When Trust Securities are held jointly
by several persons, any one of them may vote at any meeting in person or by
proxy in respect of such Trust Securities, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Trust Securities. A proxy purporting to be executed
by or on behalf of a Securityholder shall be deemed valid unless challenged at
or prior to its exercise, and, the burden of proving invalidity shall rest on
the challenger. No proxy shall be valid more than three years after its date of
execution.
Section 606. Securityholder Action by Written Consent.
Any action which may be taken by Securityholders at a meeting may be
taken without a meeting if Securityholders holding more than a majority of all
Outstanding Trust Securities (based upon their aggregate Liquidation Amount)
entitled to vote in respect of such action (or such larger proportion thereof as
shall be required by any express provision of this Trust Agreement) shall
consent to the action in writing (based upon their aggregate Liquidation
Amount).
Section 607. Record Date for Voting and Other Purposes.
For the purposes of determining the Securityholders who are entitled to
notice of and to vote at any meeting or by written consent, or to participate in
any Distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees or the Property Trustee may from time
to time fix a date, not more than 90 days prior to the date of any meeting of
Securityholders or the payment of Distribution or other action, as the case may
be, as a record date for the determination of the identity of the
Securityholders of record for such purposes.
Section 608. Acts of Securityholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Trust Agreement to be
given, made or taken by Securityholders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such
Securityholders in person or by an agent duly appointed in writing; and, except
as otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 801) conclusive in favor
of the Trustees, if made in the manner provided in this Section 608.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee receiving the same deems sufficient.
(c) The ownership of Preferred Securities shall be proved by the
Securities Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Securityholder of any Trust Security shall bind every
future Securityholder of the same Trust Security and the Securityholder of every
Trust Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
(e) Without limiting the foregoing, a Securityholder entitled hereunder
to take any action hereunder with regard to any particular Trust Security may do
so with regard to all or any part of the Liquidation Amount of such Trust
Security or by one or more duly appointed agents, each of which may do so
pursuant to such appointment with regard to all or any part of such Liquidation
Amount.
(f) A Securityholder may institute a legal proceeding directly against
the Depositor under the Guarantee to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Guarantee Trustee (as
defined in the Guarantee), the Trust or any Person.
Section 609. Inspection of Records.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection at the principal
executive office of the Trust (as indicated in Section 202) by Holders of the
Trust Securities during normal business hours for any purpose reasonably related
to such Securityholder's interest as a Securityholder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 701. Representations and Warranties of the Bank and the
Property Trustee.
The Bank and the Property Trustee, each severally on behalf of and as
to itself, as of the date hereof, and each successor Property Trustee at the
time of the successor Property Trustee's acceptance of its appointment as
Property Trustee hereunder (the term "Bank" being used to refer to such
successor Property Trustee in its separate corporate capacity) hereby represents
and warrants (as applicable) for the benefit of the Depositor and the
Securityholders that:
(a) the Bank is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States of America;
(b) the Bank has full corporate power, authority and legal right
to execute, deliver and perform its obligations under this Trust Agreement and
has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and constitutes the valid and legally binding
agreement of the Property Trustee enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(d) the execution, delivery and performance by the Property
Trustee of this Trust Agreement has been duly authorized by all necessary
corporate or other action on the part of the Property Trustee and does not
require any approval of stockholders of the Bank, and such execution, delivery
and performance shall not (i) violate the Bank's charter or by-laws; (ii)
violate any provision of, or constitute, with or without notice or lapse of
time, a default under, or result in the creation or imposition of, any Lien on
any properties included in the Trust Property pursuant to the provisions of, any
indenture, mortgage, credit agreement, license or other agreement or instrument
to which the Property Trustee or the Bank is a party or by which it is bound; or
(iii) violate any law, governmental rule or regulation of the United States or
the State of Connecticut, as the case may be, governing the banking or trust
powers of the Bank or the Property Trustee (as appropriate in context) or any
order, judgment or decree applicable to the Property Trustee or the Bank;
(e) neither the authorization, execution or delivery by the
Property Trustee of this Trust Agreement nor the consummation of any of the
transactions by the Property Trustee contemplated herein or therein requires the
consent or approval of, the giving of notice to, the registration with or the
taking of any other action with respect to any governmental authority or agency
under any existing federal law governing the banking or trust powers of the Bank
or the Property Trustee, as the case may be, under the laws of the United States
or the State of Connecticut;
(f) there are no proceedings pending or, to the best of the
Property Trustee's knowledge, threatened against or affecting the Bank or the
Property Trustee in any court or before any governmental authority, agency or
arbitration board or tribunal which, individually or in the aggregate, would
materially and adversely affect the Trust or would question the right, power and
authority of the Property Trustee to enter into or perform its obligations as
one of the Trustees under this Trust Agreement; and
(g) the Property Trustee is a Person eligible pursuant to the
Trust Indenture Act to act as such and has (or the obligations of which are
guaranteed by an entity having) a combined capital and surplus of at least
$50,000,000.
Section 702. Representations and Warranties of the Delaware Bank
and the Delaware Trustee.
The Delaware Bank and the Delaware Trustee, each severally on behalf of
and as to itself, as of the date hereof, and each successor Delaware Trustee at
the time of the successor Delaware Trustee's acceptance of appointment as
Delaware Trustee hereunder (the term "Delaware Bank" being used to refer to such
successor Delaware Trustee in its separate corporate capacity), hereby
represents and warrants (as applicable) for the benefit of the Depositor and the
Securityholders that:
(a) the Delaware Bank is a Delaware banking corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware;
(b) the Delaware Bank has full corporate power, authority and
legal right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed and
delivered by the Delaware Trustee and constitutes the valid and legally binding
agreement of the Delaware Trustee enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors, rights and to general equity principles;
(d) the execution, delivery and performance by the Delaware
Trustee of this Trust Agreement has been duly authorized by all necessary
corporate or other action on the part of the Delaware Trustee and does not
require any approval of stockholders of the Delaware Bank, and such execution,
delivery and performance shall not (i) violate the Delaware Bank's charter or
by-laws; (ii) violate any provision of, or constitute, with or without notice or
lapse of time, a default under, or result in the creation or imposition of, any
Lien on any properties included in the Trust Property pursuant to the provisions
of, any indenture, mortgage, credit agreement, license or other agreement or
instrument to which the Delaware Bank or the Delaware Trustee is a party or by
which it is bound; or (iii) violate any law, governmental rule or regulation of
the United States or the State of Delaware, as the case may be, governing the
banking or trust powers of the Delaware Bank or the Delaware Trustee (as
appropriate in context) or any order, judgment or decree applicable to the
Delaware Bank or the Delaware Trustee;
(e) neither the authorization, execution or delivery by the
Delaware Trustee of this Trust Agreement nor the consummation of any of the
transactions by the Delaware Trustee contemplated herein or therein requires the
consent or approval of, the giving of notice to, the registration with or the
taking of any other action with respect to any governmental authority or agency
under any existing federal law governing the banking or trust powers of the
Delaware Bank or the Delaware Trustee, as the case may be, under the laws of the
United States or the State of Delaware; and
(f) there are no proceedings pending or, to the best of the
Delaware Trustee's knowledge, threatened against or affecting the Delaware Bank
or the Delaware Trustee in any court or before any governmental authority,
agency or arbitration board or tribunal which, individually or in the aggregate,
would materially and adversely affect the Trust or would question the right,
power and authority of the Delaware Trustee to enter into or perform its
obligations as one of the Trustees under this Trust Agreement.
Section 703. Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants for the benefit of the
Securityholders that:
(a) the Trust Securities Certificates issued on the Closing Date
or the Option Closing Date, if applicable, on behalf of the Trust have been duly
authorized and shall have been duly and validly executed, issued and delivered
by the Administrative Trustees pursuant to the terms and provisions of, and in
accordance with the requirements of, this Trust Agreement, and the
Securityholders shall be, as of such date, entitled to the benefits of this
Trust Agreement; and
(b) there are no taxes, fees or other governmental charges payable
by the Trust (or the Trustees on behalf of the Trust) under the laws of the
State of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Bank, the Property Trustee or the
Delaware Trustee, as the case may be, of this Trust Agreement.
ARTICLE VIII
TRUSTEES
Section 801. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be as
provided by this Trust Agreement and, in the case of the Property Trustee, by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. No Administrative Trustee nor the Delaware Trustee shall be liable for its
act or omissions hereunder except as a result of its own gross negligence or
willful misconduct. The Property Trustee's liability shall be determined under
the Trust Indenture Act. Whether or not therein expressly so provided, every
provision of this Trust Agreement relating to the conduct or affecting the
liability of or affording protection to the Trustees shall be subject to the
provisions of this Section 801. To the extent that, at law or in equity, the
Delaware Trustee or an Administrative Trustee has duties (including fiduciary
duties) and liabilities relating thereto to the Trust or to the Securityholders,
the Delaware Trustee or such Administrative Trustee shall not be liable to the
Trust or to any Securityholder for such Trustee's good faith reliance on the
provisions of this Trust Agreement. The provisions of this Trust Agreement, to
the extent that they restrict the duties and liabilities of the Delaware Trustee
or the Administrative Trustees otherwise existing at law or in equity, are
agreed by the Depositor and the Securityholders to replace such other duties and
liabilities of the Delaware Trustee or the Administrative Trustees, as the case
may be.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. With respect
to the relationship of each Securityholder and the Trustees, each
Securityholder, by its acceptance of a Trust Security, agrees that it shall look
solely to the revenue and proceeds from the Trust Property to the extent legally
available for distribution to it as herein provided and that the Trustees are
not personally liable to it for any amount distributable in respect of any Trust
Security or for any other liability in respect of any Trust Security. This
Section 801(b) does not limit the liability of the Trustees expressly set forth
elsewhere in this Trust Agreement or, in the case of the Property Trustee, in
the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property Trustee,
unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a majority in Liquidation Amount
of the Trust Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee, or exercising any
trust or power conferred upon the Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Payment Account shall be to deal with such property in a similar manner as the
Property Trustee deals with similar property for its own account, subject to the
protections and limitations on liability afforded to the Property Trustee under
this Trust Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree with the Depositor
and money held by the Property Trustee need not be segregated from other funds
held by it except in relation to the Payment Account maintained by the Property
Trustee pursuant to Section 301 and except to the extent otherwise required by
law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the Depositor with
their respective duties under this Trust Agreement, nor shall the Property
Trustee be liable for the negligence, default or misconduct of the
Administrative Trustees or the Depositor.
Section 802. Certain Notices.
(a) Within five (5) Business Days after the occurrence of any
Event of Default actually known to the Property Trustee, the Property Trustee
shall transmit, in the manner and to the extent provided in Section 1008, notice
of such Event of Default to the Securityholders, the Administrative Trustees and
the Depositor, unless such Event of Default shall have been cured or waived. For
purposes of this Section 802 the term "Event of Default" means any event that
is, or after notice or lapse of time or both would become, an Event of Default.
(b) The Administrative Trustees shall transmit to the Securityholders,
in the manner and to the extent provided in Section 1008, notice of the
Depositor's election to begin or further extend an Extension Period on the
Debentures (unless such election shall have been revoked) and of any election by
the Depositor to accelerate the Maturity Date of the Debentures within the time
specified for transmitting such notice to the holders of the Debentures pursuant
to the Indenture as originally executed.
Section 803. Certain Rights of Property Trustee.
Subject to the provisions of Section 801:
(a) the Property Trustee may rely and shall be protected in acting
or refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action; or
(ii) in construing any of the provisions of this Trust Agreement the Property
Trustee finds the same ambiguous or inconsistent with other provisions contained
herein; or (iii) the Property Trustee is unsure of the application of any
provision of this Trust Agreement, then, except as to any matter as to which the
Preferred Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken, and the Property Trustee shall take such action, or refrain from
taking such action, as the Property Trustee shall be instructed in writing to
take, or to refrain from taking, by the Depositor; provided, however, that if
the Property Trustee does not receive such instructions of the Depositor within
ten (10) Business Days after it has delivered such notice, or such reasonably
shorter period of time set forth in such notice (which to the extent practicable
shall not be less than two (2) Business Days), it may, but shall be under no
duty to, take or refrain from taking such action not inconsistent with this
Trust Agreement as it shall deem advisable and in the best interests of the
Securityholders, in which event the Property Trustee shall have no liability
except for its own bad faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced
by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officer's
Certificate which, upon receipt of such request, shall be promptly delivered by
the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement or, except as provided in Section 405, any filing under
tax or securities laws) or any rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel of its choice
(which counsel may be counsel to the Depositor or any of its Affiliates), and
the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon and, in accordance with such advice, such
counsel may be counsel to the Depositor or any of its Affiliates, and may
include any of its employees; the Property Trustee shall have the right at any
time to seek instructions concerning the administration of this Trust Agreement
from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the request
or direction of any of the Securityholders pursuant to this Trust Agreement,
unless such Securityholders shall have offered to the Property Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction;
nothing contained herein shall, however, relieve the Property Trustee of the
obligation, upon the occurrence of any Event of Default (that has not been
waived) to exercise such of the rights and powers vested in it by the Trust
Agreement, and to use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by the Holders of not less
than a majority in Liquidation Amount of the Outstanding Preferred Securities,
but the Property Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the Property Trustee shall be responsible for
its own negligence or recklessness with respect to selection of any agent or
attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the Property
Trustee (i) may request instructions from the Holders of the Trust Securities
which instructions may only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled to direct the
Property Trustee under the terms of the Trust Securities in respect of such
remedy, right or action; (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received; and (iii) shall
be protected in acting in accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Trust Agreement. No
provision of this Trust Agreement shall be deemed to impose any duty or
obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
Section 804. Not Responsible for Recitals or Issuance of Securities.
The Recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
Section 805. May Hold Securities.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 808 and 813 and except as provided in the
definition of the term "Outstanding" in Article I, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
Section 806. Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable
compensation for all services rendered by them hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision of
this Trust Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to such Trustee's negligence, bad faith or
willful misconduct (or, in the case of the Administrative Trustees or the
Delaware Trustee, any such expense, disbursement or advance as may be
attributable to its, his or her gross negligence, bad faith or willful
misconduct); and
(c) to indemnify each of the Trustees or any predecessor Trustee
for, and to hold the Trustees harmless against, any loss, damage, claims,
liability, penalty or expense of any kind or nature whatsoever, arising out of
or in connection with the acceptance or administration of this Trust Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, except any such expense, disbursement or advance as may be
attributable to such Trustee's negligence, bad faith or willful misconduct (or,
in the case of the Administrative Trustees or the Delaware Trustee, any such
expense, disbursement or advance as may be attributable to its, his or her gross
negligence, bad faith or willful misconduct).
No Trustee may claim any Lien or charge on Trust Property as a result
of any amount due pursuant to this Section 806.
Section 807. Corporate Property Trustee Required; Eligibility
of Trustees.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has (or the
obligations of which are guaranteed by an entity having) a combined capital and
surplus of at least $50,000,000. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section 807,
the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section 807, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VIII.
(b) There shall at all times be one or more Administrative
Trustees hereunder with respect to the Trust Securities. Each Administrative
Trustee shall be either a natural person who is at least 21 years of age or a
legal entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to
the Trust Securities. The Delaware Trustee shall either be (i) a natural person
who is at least 21 years of age and a resident of the State of Delaware; or (ii)
a legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
Section 808. Conflicting Interests.
If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
Section 809. Co-Trustees and Separate Trustee.
(a) Unless a Debenture Event of Default shall have occurred and be
continuing, at any time or times, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the Trust Property may at the time be located, the Depositor shall have power
to appoint, and upon the written request of the Property Trustee, the Depositor
shall for such purpose join with the Property Trustee in the execution, delivery
and performance of all instruments and agreements necessary or proper to
appoint, one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate trustee of any
such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section 809. If the Depositor does not
join in such appointment within 15 days after the receipt by it of a request so
to do, or in case a Debenture Event of Default has occurred and is continuing,
the Property Trustee alone shall have power to make such appointment. Any
co-trustee or separate trustee appointed pursuant to this Section 809 shall
either be (i) a natural person who is at least 21 years of age and a resident of
the United States; or (ii) a legal entity with its principal place of business
in the United States that shall act through one or more persons authorized to
bind such entity.
(b) Should any written instrument from the Depositor be required
by any co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right, or power, any
and all such instruments shall, on request, be executed, acknowledged, and
delivered by the Depositor.
(c) Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms, namely:
(i) The Trust Securities shall be executed and delivered and
all rights, powers, duties and obligations hereunder in respect of the custody
of securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder, shall be exercised,
solely by such Trustees and not by such co-trustee or separate trustee.
(ii) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and exercised or
performed by the Property Trustee or by the Property Trustee and such co-trustee
or separate trustee jointly, as shall be provided in the instrument appointing
such co-trustee or separate trustee, except to the extent that under any law of
any jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(iii) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the Depositor, may
accept the resignation of or remove any co-trustee or separate trustee appointed
under this Section 809, and, in case a Debenture Event of Default has occurred
and is continuing, the Property Trustee shall have the power to accept the
resignation of, or remove, any such co-trustee or separate trustee without the
concurrence of the Depositor. Upon the written request of the Property Trustee,
the Depositor shall join with the Property Trustee in the execution, delivery
and performance of all instruments and agreements necessary or proper to
effectuate such resignation or removal. A successor to any co-trustee or
separate trustee so resigned or removed may be appointed in the manner provided
in this Section 809.
(iv) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property Trustee or
any other trustee hereunder.
(v) The Property Trustee shall not be liable by
reason of any act of a co-trustee or separate trustee.
(vi) Any Act of Holders delivered to the Property Trustee
shall be deemed to have been delivered to each such co-trustee and separate
trustee.
Section 810. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of any Trustee (the "Relevant
Trustee") and no appointment of a successor Trustee pursuant to this Article
VIII shall become effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of Section 811.
(b) Subject to the immediately preceding paragraph, the Relevant
Trustee may resign at any time with respect to the Trust Securities by giving
written notice thereof to the Securityholders. If the instrument of acceptance
by the successor Trustee required by Section 811 shall not have been delivered
to the Relevant Trustee within thirty (30) days after the giving of such notice
of resignation, the Relevant Trustee may petition, at the expense of the
Depositor, any court of competent jurisdiction for the appointment of a
successor Relevant Trustee with respect to the Trust Securities.
(c) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Common Securityholder at any time.
(d) If any Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of any Trustee for
any cause, at a time when no Debenture Event of Default shall have occurred and
be continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees with respect to the Trust Securities and the Trust, and the successor
Trustee shall comply with the applicable requirements of Section 811. If the
Property Trustee or the Delaware Trustee shall resign, be removed or become
incapable of continuing to act as the Property Trustee or the Delaware Trustee,
as the case may be, at a time when a Debenture Event of Default shall have
occurred and is continuing, the Preferred Securityholders, by Act of the
Securityholders of a majority in Liquidation Amount of the Preferred Securities
then Outstanding delivered to the retiring Relevant Trustee, shall promptly
appoint a successor Relevant Trustee or Trustees with respect to the Trust
Securities and the Trust, and such successor Trustee shall comply with the
applicable requirements of Section 811. If an Administrative Trustee shall
resign, be removed or become incapable of acting as Administrative Trustee, at a
time when a Debenture Event of Default shall have occurred and be continuing,
the Common Securityholder, by Act of the Common Securityholder delivered to an
Administrative Trustee, shall promptly appoint a successor Administrative
Trustee or Administrative Trustees with respect to the Trust Securities and the
Trust, and such successor Administrative Trustee or Administrative Trustees
shall comply with the applicable requirements of Section 811. If no successor
Relevant Trustee with respect to the Trust Securities shall have been so
appointed by the Common Securityholder or the Preferred Securityholders and
accepted appointment in the manner required by Section 811, any Securityholder
who has been a Securityholder of Trust Securities on behalf of himself and all
others similarly situated may petition a court of competent jurisdiction for the
appointment Trustee with respect to the Trust Securities.
(e) The Property Trustee shall give notice of each resignation and
each removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 1008 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
(f) Notwithstanding the foregoing or any other provision of this
Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee
who is a natural person dies or becomes, in the opinion of the Depositor,
incompetent or incapacitated, the vacancy created by such death, incompetence or
incapacity may be filled by (a) the unanimous act of remaining Administrative
Trustees if there are at least two of them; or (b) otherwise by the Depositor
(with the successor in each case being a Person who satisfies the eligibility
requirement for Administrative Trustees set forth in Section 807).
Section 811. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Relevant
Trustee with respect to the Trust Securities and the Trust, the retiring
Relevant Trustee and each successor Relevant Trustee with respect to the Trust
Securities shall execute and deliver an instrument hereto wherein each successor
Relevant Trustee shall accept such appointment and which shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Relevant Trustee all the rights, powers, trusts and
duties of the retiring Relevant Trustee with respect to the Trust Securities and
the Trust and upon the execution and delivery of such instrument the resignation
or removal of the retiring Relevant Trustee shall become effective to the extent
provided therein and each such successor Relevant Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Relevant Trustee with respect to the Trust Securities
and the Trust; but, on request of the Trust or any successor Relevant Trustee
such retiring Relevant Trustee shall duly assign, transfer and deliver to such
successor Relevant Trustee all Trust Property, all proceeds thereof and money
held by such retiring Relevant Trustee hereunder with respect to the Trust
Securities and the Trust.
(b) Upon request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the immediately preceding paragraph, as the case may be.
(c) No successor Relevant Trustee shall accept its appointment
unless at the time of such acceptance such successor Relevant Trustee shall be
qualified and eligible under this Article VIII.
Section 812. Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which such Relevant Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of such Relevant Trustee, shall be the successor of such Relevant Trustee
hereunder, provided such Person shall be otherwise qualified and eligible under
this Article VIII, without the execution or filing of any paper or any further
act on the part of any of the parties hereto.
Section 813. Preferential Collection of Claims Against Depositor or
Trust.
If and when the Property Trustee or the Delaware Trustee shall be or
become a creditor of the Depositor or the Trust (or any other obligor upon the
Debentures or the Trust Securities), the Property Trustee or the Delaware
Trustee, as the case may be, shall be subject to and shall take all actions
necessary in order to comply with the provisions of the Trust Indenture Act
regarding the collection of claims against the Depositor or Trust (or any such
other obligor).
Section 814. Reports by Property Trustee.
(a) The Property Trustee shall transmit to the Securityholders
such reports concerning the Property Trustee, its actions under this Trust
Agreement and the property and funds in its possession in its capacity as the
Property Trustee as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with the Nasdaq
National Market and each national securities exchange or other organization upon
which the Trust Securities are listed, and also with the Commission and the
Depositor.
Section 815. Reports to the Property Trustee.
The Depositor and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act.
Section 816. Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
Section 817. Number of Trustees.
(a) The number of Trustees shall be five, provided that the Common
Securityholder by written instrument may increase or decrease the number of
Administrative Trustees. The Property Trustee and the Delaware Trustee may be
the same Person.
(b) If an Administrative Trustee ceases to hold office for any
reason and the number of Administrative Trustees is not reduced pursuant to
Section 817(a), or if the number of Trustees is increased pursuant to Section
817(a), a vacancy shall occur. The vacancy shall be filled with a Trustee
appointed in accordance with Section 810.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Administrative Trustees
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 810, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
Section 818. Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purpose of executing any documents
contemplated in Section 207(a); and
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to the Depositor the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.
Section 819. Voting.
Except as otherwise provided in this Trust Agreement, the consent or
approval of the Administrative Trustees shall require consent or approval by not
less than a majority of the Administrative Trustees, unless there are only two,
in which case both must consent.
ARTICLE IX
TERMINATION, LIQUIDATION AND MERGER
Section 901. Termination Upon Expiration Date.
Unless earlier dissolved, the Trust shall automatically dissolve on
December 31, 2031 (the "Expiration Date"), subject to distribution of the Trust
Property in accordance with Section 904.
Section 902. Early Termination.
The first to occur of any of the following events is an "Early
Termination Event:"
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b) delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor, subject to Depositor having received prior approval
of the Board of Governors of the Federal Reserve System if so required under
applicable guidelines, policies or regulations thereof) to dissolve the Trust
and distribute the Debentures to Securityholders in exchange for the Preferred
Securities in accordance with Section 904;
(c) the redemption of all of the Preferred Securities in
connection with the redemption of all of the Debentures (whether upon a
Debenture Redemption Date or the maturity of the Debentures); and
(d) an order for dissolution of the Trust shall have been
entered by a court of competent jurisdiction.
Section 903. Termination.
The respective obligations and responsibilities of the Trustees and the
Trust created and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to Securityholders
upon the liquidation of the Trust pursuant to Section 904, or upon the
redemption of all of the Trust Securities pursuant to Section 402, of all
amounts required to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust; (c) the discharge
of all administrative duties of the Administrative Trustees, including the
performance of any tax reporting obligations with respect to the Trust or the
Securityholders; and (d) the filing of a Certificate of Cancellation by an
Administrative Trustee under the Delaware Business Trust Act.
Section 904. Liquidation.
(a) If an Early Termination Event specified in clause (a), (b), or
(d) of Section 902 occurs or upon the Expiration Date, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
practicable by distributing, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, to each Securityholder a Like Amount of
Debentures, subject to Section 904(d). Notice of liquidation shall be given by
the Property Trustee by first-class mail, postage prepaid, mailed not later than
thirty (30) nor more than sixty (60) days prior to the Liquidation Date to each
Holder of Trust Securities at such Holder's address appearing in the Securities
Register. All notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the
Trust Securities shall no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange shall be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities Certificates for
Debentures, or, if Section 904(d) applies, receive a Liquidation Distribution,
as the Administrative Trustees or the Property Trustee shall deem appropriate.
(b) Except where Section 902(c) or 904(d) applies, in order to
effect the liquidation of the Trust and distribution of the Debentures to
Securityholders, the Property Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities shall no longer be deemed to be
Outstanding; (ii) certificates representing a Like Amount of Debentures shall be
issued to holders of Trust Securities Certificates upon surrender of such
certificates to the Administrative Trustees or their agent for exchange; (iii)
the Depositor shall use its reasonable efforts to have the Debentures included
in the Nasdaq National Market or on such other securities exchange or other
organization as the Preferred Securities are then listed or traded; (iv) any
Trust Securities Certificates not so surrendered for exchange shall be deemed to
represent a Like Amount of Debentures, accruing interest at the rate provided
for in the Debentures from the last Distribution Date on which a Distribution
was made on such Trust Securities Certificates until such certificates are so
surrendered (and until such certificates are so surrendered, no payments of
interest or principal shall be made to holders of Trust Securities Certificates
with respect to such Debentures); and (v) all rights of Securityholders holding
Trust Securities shall cease, except the right of such Securityholders to
receive Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of
this Section 904, whether because of an order for dissolution entered by a court
of competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved, wound-up or terminated, by the Property Trustee in such manner as the
Property Trustee determines. In such event, on the date of the dissolution,
winding-up or other termination of the Trust, Securityholders shall be entitled
to receive out of the assets of the Trust available for distribution to
Securityholders, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, an amount equal to the Liquidation Amount per Trust
Security plus accumulated and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If, upon any such
dissolution, winding-up or termination, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then, subject to the next succeeding
sentence, the amounts payable by the Trust on the Trust Securities shall be paid
on a pro rata basis (based upon Liquidation Amounts, subject to Section 407).
The Common Securityholder shall be entitled to receive Liquidation Distributions
upon any such dissolution, winding-up or termination pro rata (determined as
aforesaid) with Preferred Securityholders, except that, if a Debenture Event of
Default has occurred and is continuing, the Preferred Securities shall have a
priority over the Common Securities.
Section 905. Mergers, Consolidations, Amalgamations or Replacements
of the Trust.
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except pursuant
to this Section 905. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Preferred
Securityholders, the Property Trustee or the Delaware Trustee, the Trust may
merge with or into, consolidate, amalgamate, be replaced by or convey, transfer
or lease its properties and assets substantially as an entirety to a trust
organized as such under the laws of any state; provided, that (i) such successor
entity either (a) expressly assumes all of the obligations of the Trust with
respect to the Preferred Securities, or (b) substitutes for the Preferred
Securities other securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Preferred Securities rank in priority with respect to
distributions and payments upon liquidation, redemption and otherwise; (ii) the
Depositor expressly appoints a trustee of such successor entity possessing
substantially the same powers and duties as the Property Trustee as the holder
of the Debentures; (iii) the Successor Securities are listed or traded, or any
Successor Securities shall be listed or traded upon notification of issuance, on
any national securities exchange or other organization on which the Preferred
Securities are then listed, if any; (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Preferred Securityholders
(including any Successor Securities) in any material respect; (v) such successor
entity has a purpose substantially identical to that of the Trust; (vi) prior to
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Depositor has received an Opinion of Counsel to the effect that (a)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
Preferred Securityholders (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such successor
entity shall be required to register as an "investment company" under the
Investment Company Act; and (vii) the Depositor owns all of the Common
Securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee, the Debentures, this Trust Agreement and the Expense
Agreement. For purposes of this Section 905, any such consolidation, merger,
sale, conveyance, transfer or other disposition as a result of which (a) the
Company is not the surviving Person, and (b) the same Person is not both (i) the
primary obligor in respect of the Debentures and (ii) the Guarantor under that
certain Preferred Securities Guarantee Agreement of even date herewith (the
"Guarantee") between the Company and State Street Bank and Trust Company of
Connecticut, National Association, shall be deemed to constitute a replacement
of the Trust by a successor entity; provided further, that, notwithstanding the
foregoing, in the event that upon the consummation of such a consolidation,
merger, sale, conveyance, transfer or other disposition, the parent company (if
any) of the Company, or its successor, is a bank holding company or financial
holding company or comparably regulated financial institution, such parent
company shall guarantee the obligations of the Trust (and any successor thereto)
under the Preferred Securities (including any Successor Securities) at least to
the extent provided by the Guarantee, the Debentures, the Trust Agreement and
the Expense Agreement. Notwithstanding the foregoing, the Trust shall not,
except with the consent of the Holders of 100% in Liquidation Amount of the
Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 1001. Limitation of Rights of Securityholders.
The death or incapacity of any Person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives or heirs of such Person or any
Securityholder for such Person, to claim an accounting, take any action or bring
any proceeding in any court for a partition or winding-up of the arrangements
contemplated hereby, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
Section 1002. Amendment.
(a) This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Securityholders, (i) as
provided in Section 811 with respect to acceptance of appointment by a successor
Trustee; (ii) to cure any ambiguity, correct or supplement any provision herein
or therein which may be inconsistent with any other provision herein or therein,
or to make any other provisions with respect to matters or questions arising
under this Trust Agreement, that shall not be inconsistent with the other
provisions of this Trust Agreement; (iii) to modify, eliminate or add to any
provisions of this Trust Agreement to such extent as shall be necessary to
ensure that the Trust shall be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities are
Outstanding or to ensure that the Trust shall not be required to register as an
"investment company" under the Investment Company Act; or (iv) to reduce or
increase the Liquidation Amount per Trust Security and simultaneously to
increase or decrease correspondingly the number of Trust Securities issued and
Outstanding solely for the purpose of maintaining the eligibility of the
Preferred Securities for quotation or listing on any national securities
exchange or other organization on which the Preferred Securities are then
included, quoted or listed (including, if applicable, the Nasdaq National
Market); provided, however, that in the case of clause (ii), such action shall
not adversely affect in any material respect the interests of any
Securityholder; and provided further, that in the case of clause (iv), the
aggregate Liquidation Amount of the Trust Securities Outstanding upon completion
of any such reduction must be the same as the aggregate Liquidation Amount of
the Trust Securities Outstanding immediately prior to such reduction or
increase. Any amendments of this Trust Agreement shall become effective when
notice thereof is given to the Securityholders or, in the case of an amendment
pursuant to clause (iv), as of the date specified in the notice.
(b) Except as provided in Section 601(c) or Section 1002(c)
hereof, any provision of this Trust Agreement may be amended by the Trustees and
the Depositor (i) with the consent of the Securityholders representing not less
than a majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding; and (ii) upon receipt by the Trustees of an Opinion of Counsel to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment shall not affect the Trust's status
as a grantor trust for United States federal income tax purposes or the Trust's
exemption from status of an "investment company" under the Investment Company
Act.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 603 or 606 hereof), this Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date; or (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 603 or 606 hereof), this
paragraph (c) of this Section 1002 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement,
no Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an "investment company" under the Investment Company Act or to fail or
cease to be classified as a grantor trust for United States federal income tax
purposes.
(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor, this Trust Agreement may not be
amended in a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is
made, the Administrative Trustees shall promptly provide to the Depositor a copy
of such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement which affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
with this Trust Agreement.
Section 1003. Separability.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 1004. Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT
AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO ITS CONFLICT OF LAWS
PRINCIPLES).
Section 1005. Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day which is a Business Day with the same
force and effect as though made on the date fixed for such payment, and no
distribution shall accumulate thereon for the period after such date.
Section 1006. Successors.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Trust or the Relevant Trustee(s),
including any successor by operation of law. Except in connection with a
consolidation, merger or sale involving the Depositor that is permitted under
Article XII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Depositor's obligations hereunder, the Depositor shall
not assign its obligations hereunder.
Section 1007. Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
Section 1008. Reports, Notices and Demands.
Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon any Securityholder or the Depositor may be given or served in writing
by deposit thereof, first-class postage prepaid, in the United States mail, hand
delivery or facsimile transmission, in each case, addressed, (a) in the case of
a Preferred Securityholder, to such Preferred Securityholder as such
Securityholder's name and address may appear on the Securities Register; and (b)
in the case of the Common Securityholder or the Depositor, to First Banks, Inc.,
600 James S. McDonnell Boulevard, Hazelwood, Missouri 63042, Attention: Chief
Financial Officer, facsimile no.: (314) 592-6621. Any notice to Preferred
Securityholders shall also be given to such owners as have, within two years
preceding the giving of such notice, filed their names and addresses with the
Property Trustee for that purpose. Such notice, demand or other communication to
or upon a Securityholder shall be deemed to have been sufficiently given or
made, for all purposes, upon hand delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee or the Administrative Trustees shall be given in
writing addressed (until another address is published by the Trust) as follows:
(a) with respect to the Property Trustee to State Street Bank and Trust Company
of Connecticut, National Association, 225 Asylum Street, Goodwin Square,
Hartford, Connecticut 06103, Attention: Corporate Trust Department, with a copy
to: State Street Bank and Trust Company, 2 Avenue de Lafayette, Boston,
Massachusetts 02110, Attention: Corporate Trust Department; (b) with respect to
the Delaware Trustee, to Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; and (c) with respect to the Administrative Trustees, to them at
the address above for notices to the Depositor, marked "Attention:
Administrative Trustees of First Preferred Capital Trust III." Such notice,
demand or other communication to or upon the Trust or the Property Trustee shall
be deemed to have been sufficiently given or made only upon actual receipt of
the writing by the Trust or the Property Trustee.
Section 1009. Agreement Not to Petition.
Each of the Trustees and the Depositor agrees for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Trust under any bankruptcy, insolvency,
reorganization or other similar law (including, without limitation, the United
States Bankruptcy Code of 1978, as amended) (collectively, "Bankruptcy Laws") or
otherwise join in the commencement of any proceeding against the Trust under any
Bankruptcy Law. In the event the Depositor or any of the Trustees takes action
in violation of this Section 1009, the Property Trustee agrees, for the benefit
of Securityholders, that at the expense of the Depositor (which expense shall be
paid prior to the filing), it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such petition by the Depositor or such
Trustee against the Trust or the commencement of such action and raise the
defense that the Depositor or such Trustee has agreed in writing not to take
such action and should be stopped and precluded therefrom. The provisions of
this Section 1009 shall survive the termination of this Trust Agreement.
Section 1010. Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Trust
Agreement by any of the provisions of the Trust Indenture Act, such required
provision shall control. If any provision of this Trust Agreement modifies or
excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Trust Agreement
as so modified or to be excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
Section 1011. Acceptance of Terms of Trust Agreement, Guarantee
and Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND
THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH
SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST
AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND
SUCH SECURITYHOLDER AND SUCH OTHERS. WITHOUT LIMITING THE FOREGOING, BY
ACCEPTANCE OF A PREFERRED SECURITY, EACH INITIAL AND SUBSEQUENT HOLDER THEREOF
SHALL BE DEEMED TO HAVE AGREED TO TREAT, FOR ALL FINANCIAL ACCOUNTING AND UNITED
STATES FEDERAL INCOME TAX PURPOSES, THE DEBENTURES AS INDEBTEDNESS OF THE
COMPANY AND THE PREFERRED SECURITIES AS EVIDENCING AN UNDIVIDED BENEFICIAL
OWNERSHIP INTEREST IN THE DEBENTURES.
[The remainder of this page has been left blank intentionally]
FIRST BANKS, INC.
By:
------------------------------------------------
Its:
-----------------------------------------------
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, as Property Trustee
By:
------------------------------------------------
Its:
-----------------------------------------------
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:
------------------------------------------------
Its:
-----------------------------------------------
-----------------------------------------------------
James F. Dierberg, as Administrative Trustee
-----------------------------------------------------
Allen H. Blake, as Administrative Trustee
-----------------------------------------------------
Lisa K. Vansickle, as Administrative Trustee
EXHIBIT A
CERTIFICATE OF TRUST
OF
FIRST PREFERRED CAPITAL TRUST III
THIS CERTIFICATE OF TRUST of FIRST PREFERRED CAPITAL TRUST III (the
"Trust"), dated as of _________, 2000, is being duly executed and filed by
WILMINGTON TRUST COMPANY, a Delaware banking corporation, JAMES F. DIERBERG,
ALLEN H. BLAKE and LISA K. VANSICKLE, each an individual, as trustees, to form a
business trust under the Delaware Business Trust Act (12 Delaware Code Section
3801 et seq.).
1. NAME. The name of the business trust formed hereby is FIRST PREFERRED
CAPITAL TRUST III.
2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective on
October ____, 2001.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Trust as of the date first above written, in accordance with Section 3811(a) of
the Delaware Business Trust Act.
WILMINGTON TRUST COMPANY,
as Trustee
By:
-------------------------------------
Its:
------------------------------------
------------------------------------------
JAMES F. DIERBERG
as Trustee
------------------------------------------
ALLEN H. BLAKE
as Trustee
------------------------------------------
LISA K. VANSICKLE
as Trustee
EXHIBIT B
THIS CERTIFICATE IS NOT TRANSFERABLE
EXCEPT IN COMPLIANCE WITH
SECTION 510 OF THE TRUST AGREEMENT
CERTIFICATE NUMBER _________ NUMBER OF COMMON SECURITIES __________
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
FIRST PREFERRED CAPITAL TRUST III
COMMON SECURITIES
LIQUIDATION AMOUNT $25 PER COMMON SECURITY
FIRST PREFERRED CAPITAL TRUST III, a statutory business trust created
under the laws of the State of Delaware (the "Trust"), hereby certifies that
FIRST BANKS, INC. (the "Holder") is the registered owner of ( ) common
securities of the Trust representing undivided beneficial interests in the
assets of the Trust and designated the % Common Securities (liquidation amount
$25 per Common Security) (the "Common Securities"). In accordance with Section
510 of the Trust Agreement (as defined below), the Common Securities are not
transferable, and any attempted transfer hereof (other than a transfer in
compliance with Section 510 of the Trust Agreement) shall be void. The
designations, rights, privileges, restrictions, preferences, and other terms and
provisions of the Common Securities are set forth in, and this certificate and
the Common Securities represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated Trust Agreement
of the Trust dated as of ____________, 2001, as the same may be amended from
time to time (the "Trust Agreement"), including the designation of the terms of
the Common Securities as set forth therein. The Trust shall furnish a copy of
the Trust Agreement to the Holder without charge upon written request to the
Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ____ day of ____________, 2001.
FIRST PREFERRED CAPITAL TRUST III
By:
---------------------------------
Its:
--------------------------------
EXHIBIT C
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement") dated as of
_______________, 2001, between FIRST BANKS, INC., a Missouri corporation ("First
Banks"), and FIRST PREFERRED CAPITAL TRUST III, a Delaware business trust (the
"Trust").
RECITALS
WHEREAS, the Trust intends to issue its common securities (the "Common
Securities") to, and receive ___% Subordinated Debentures (the "Debentures")
from, First Banks and to issue and sell up to 1,840,000 ______% Cumulative Trust
Preferred Securities (the "Preferred Securities") with such powers, preferences
and special rights and restrictions as are set forth in the Amended and Restated
Trust Agreement of the Trust dated as of ______________, 2001, as the same may
be amended from time to time (the "Trust Agreement"); and
WHEREAS, First Banks shall directly or indirectly own all of the Common
Securities of the Trust and shall issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase First Banks hereby agrees shall benefit
First Banks and which purchase First Banks acknowledges shall be made in
reliance upon the execution and delivery of this Agreement, First Banks,
including in its capacity as holder of the Common Securities, and the Trust
hereby agree as follows:
ARTICLE I
Section 1.1. Guarantee by First Banks.
Subject to the terms and conditions hereof, First Banks, including in
its capacity as holder of the Common Securities, hereby irrevocably and
unconditionally guarantees to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment when
and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
liabilities of the Trust other than obligations of the Trust to pay to holders
of any Preferred Securities or other similar interests in the Trust the amounts
due such holders pursuant to the terms of the Preferred Securities or such other
similar interests, as the case may be. This Agreement is intended to be for the
benefit of, and to be enforceable by, all such Beneficiaries, whether or not
such Beneficiaries have received notice hereof.
Section 1.2. Term of Agreement.
This Agreement shall terminate and be of no further force and effect
upon the later of (a) the date on which full payment has been made of all
amounts payable to all holders of all the Preferred Securities (whether upon
redemption, liquidation, exchange or otherwise); and (b) the date on which there
are no Beneficiaries remaining; provided, however, that this Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any holder of Preferred Securities or any Beneficiary must restore payment
of any sums paid under the Preferred Securities, under any obligation, under the
Preferred Securities Guarantee Agreement dated the date hereof by First Banks
and State Street Bank and Trust Company of Connecticut, National Association, as
guarantee trustee, or under this Agreement for any reason whatsoever. This
Agreement is continuing, irrevocable, unconditional and absolute.
Section 1.3. Waiver of Notice.
First Banks hereby waives notice of acceptance of this Agreement and of
any obligation to which it applies or may apply, and First Banks hereby waives
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
Section 1.4. No Impairment.
The obligations, covenants, agreements and duties of First Banks under
this Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of all or
any portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part
of the Beneficiaries to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the benefit
of creditors, reorganization, arrangement composition or readjustment of debt
of, or other similar proceedings affecting, the Trust or any of the assets of
the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, First Banks with respect to the happening of any of the
foregoing.
Section 1.5. Enforcement.
A Beneficiary may enforce this Agreement directly against First Banks,
and First Banks waives any right or remedy to require that any action be brought
against the Trust or any other person or entity before proceeding against First
Banks.
ARTICLE II
Section 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind
the successors, assigns, receivers, trustees and representatives of First Banks
and shall inure to the benefit of the Beneficiaries.
Section 2.2. Amendment.
So long as there remains any Beneficiary or any Preferred Securities of
any series are outstanding, this Agreement shall not be modified or amended in
any manner adverse to such Beneficiary or to the holders of the Preferred
Securities.
Section 2.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same by facsimile
transmission (confirmed by mail), telex, or by registered or certified mail,
addressed as follows (and if so given, shall be deemed given when mailed or upon
receipt of an answer back, if sent by telex):
First Preferred Capital Trust III
c/o First Banks, Inc.
600 James S. McDonnell Boulevard
Mail Code 014
Hazelwood, Missouri 63042
Facsimile No.: (314) 592-6621
Attention: Chief Financial Officer
First Banks, Inc.
600 James S. McDonnell Boulevard
Mail Code 014
Hazelwood, Missouri 63042
Facsimile No.: (314) 592-6621
Attention: Chief Financial Officer
Section 2.4. This agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Missouri (without regard
to conflict of laws principles).
THIS AGREEMENT is executed as of the day and year first above written.
FIRST BANKS, INC.
By:
-------------------------------------
Its:
------------------------------------
FIRST PREFERRED CAPITAL TRUST III
By:
-------------------------------------
Its:
------------------------------------
EXHIBIT D
Certificate Number Number of Preferred Securities ________
P-
Certificate Evidencing Preferred Securities
of
First Preferred Capital Trust III
% Cumulative Trust Preferred Securities
(liquidation amount $25 per Preferred Security)
CUSIP NO. ___________________
First Preferred Capital Trust III, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that
________________ (the "Holder") is the registered owner of _____ preferred
securities of the Trust representing undivided beneficial interests in the
assets of the Trust and designated the % Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Preferred Security) (the "Preferred Securities").
The Preferred Securities are transferable on the books and records of the Trust,
in person or by a duly authorized attorney, upon surrender of this Certificate
duly endorsed and in proper form for transfer as provided in Section 504 of the
Trust Agreement (as defined herein). The designations, rights, privileges,
restrictions, preferences, and other terms and provisions of the Preferred
Securities are set forth in, and this Certificate and the Preferred Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the Trust dated
as of _______________, 2001, as the same may be amended from time to time (the
"Trust Agreement"), including the designation of the terms of Preferred
Securities as set forth therein. The Holder is entitled to the benefits of the
Preferred Securities Guarantee Agreement entered into by First Banks, Inc., a
Missouri corporation, and State Street Bank and Trust Company of Connecticut,
National Association, as guarantee trustee, dated as of ___________________,
2001, (the "Guarantee"), to the extent provided therein. The Trust shall furnish
a copy of the Trust Agreement and the Guarantee to the Holder without charge
upon written request to the Trust at its principal place of business or
registered office.
Upon receipt of this Certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
Unless the Certificate of Authentication has been manually executed by
the Authentication Agent, this Certificate is not valid or effective.
IN WITNESS WHEREOF, the Administrative Trustees of the Trust have
executed this certificate this ______ day of _____________, 2001.
Dated: _________________, 2001 FIRST PREFERRED CAPITAL TRUST III
CERTIFICATE OF AUTHENTICATION
This is one of the ____ %
Cumulative Trust By
----------------------------
Preferred Securities referred to Trustee
in the within-mentioned Trustee Trust
Agreement.
STATE STREET BANK & TRUST COMPANY
OF CONNECTICUT, By
NATIONAL ASSOCIATION, ----------------------------
as Authentication Agent and Registrar Trustee
By
-----------------------------
Trustee
By
--------------------------------------
Authorized Signature
LEGEND
FOR CERTIFICATES EVIDENCING
GLOBAL PREFERRED SECURITIES ONLY:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to Issuer or its agent for registration
of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and
any payment is made to Cede & Co. or to such other entity as
is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
[FORM OF REVERSE OF CERTIFICATE]
The Trust will furnish without charge to any registered owner of Preferred
Securities who so requests, a copy of the Trust Agreement and the Guarantee. Any
such request should be in writing and addressed to First Preferred Capital Trust
III, c/o First Banks, Inc., 600 James S. McDonnell Boulevard, Mail Code 014,
Hazelwood, Missouri 63042, Facsimile No.: (314) 592-6621or to the Registrar
named on the face of this Certificate.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT
-.......Custodian............................
TEN ENT - as tenants by the entireties
(Cust) (Minor)
under Uniform
Gifts to
Minors Act..................................
(State)
JT TEN as joint tenants with right of UNIF TRF MIN ACT -..........Custodian
survivorship and not as tenants (until age)..................................
in common
......................under Uniform
(Minor)
Transfers to
Minors
Act..........................................
(State)
TOD - transfer on death direction in
event owner's death, to person
named on face and subject to TOD
rules referenced
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sell, assign and transfer
unto: ______________________________________________________________________
(Please insert Social Security or other identifying number of assignee)
______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Preferred Securities represented by the within Certificate, and do(es) hereby
irrevocably constitute and appoint _________________________________ attorney
to transfer the said Preferred Securities on the books of the within-named Trust
with full power of substitution in the premises.
Dated:
-------------------------------------
Signature:
---------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERNATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
________________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
Exhibit 4.7
PREFERRED SECURITIES GUARANTEE AGREEMENT
by and between
FIRST BANKS, INC.
and
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION
Dated as of _____________, 2001
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION..........................................................................1
Section 1.1. Definitions and Interpretation....................................................................1
ARTICLE II TRUST INDENTURE ACT....................................................................................4
Section 2.1. Trust Indenture Act; Application..................................................................4
Section 2.2 List of Holders of Securities......................................................................4
Section 2.3. Reports by the Guarantee Trustee..................................................................5
Section 2.4. Periodic Reports to the Guarantee Trustee.........................................................5
Section 2.5. Evidence of Compliance with Conditions Precedent..................................................5
Section 2.6. Events of Default; Waiver.........................................................................5
Section 2.7. Event of Default; Notice..........................................................................5
Section 2.8. Conflicting Interests.............................................................................5
ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE....................................................5
Section 3.1. Powers and Duties of the Guarantee Trustee........................................................5
Section 3.2. Certain Rights of the Guarantee Trustee...........................................................7
Section 3.3. Not Responsible for Recitals or Issuance of Guarantee.............................................8
ARTICLE IV GUARANTEE TRUSTEE......................................................................................8
Section 4.1. Guarantee Trustee; Eligibility....................................................................8
Section 4.2. Appointment, Removal and Resignation of Guarantee Trustee.........................................9
ARTICLE V GUARANTEE..............................................................................................10
Section 5.1. Guarantee........................................................................................10
Section 5.2. Waiver of Notice and Demand......................................................................10
Section 5.3. Obligations not Affected.........................................................................10
Section 5.4. Rights of Holders................................................................................11
Section 5.5. Guarantee of Payment.............................................................................11
Section 5.6. Subrogation......................................................................................11
Section 5.7. Independent Obligations..........................................................................11
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION.............................................................11
Section 6.1. Limitation on Transactions.......................................................................11
Section 6.2. Ranking..........................................................................................12
ARTICLE VII TERMINATION..........................................................................................12
Section 7.1. Termination......................................................................................12
ARTICLE VIII INDEMNIFICATION.....................................................................................12
Section 8.1. Exculpation......................................................................................12
Section 8.2. Indemnification..................................................................................12
ARTICLE IX MISCELLANEOUS.........................................................................................13
Section 9.1. Successors and Assigns...........................................................................13
Section 9.2. Amendments.......................................................................................13
Section 9.3. Notices..........................................................................................13
Section 9.4. Benefit..........................................................................................14
Section 9.5. Governing Law....................................................................................14
CROSS REFERENCE TABLE
Section of Trust Section of
Indenture Act of Guarantee
1939, as amended Agreement
---------------- ---------
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Not Applicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Not Applicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Not Applicable
314(c) 2.5
314(d) Not Applicable
314(e) 1.1, 2.5, 3.2
314(f) 2.1, 3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1, 2.6, 5.4
316(b) 5.3
317(a) 3.1
317(b) Not Applicable
318(a) 2.1(a)
318(b) 2.1
318(c) 2.1(b)
Note: This Cross-Reference Table does not constitute part of this Agreement and
shall not affect the interpretation of any of its terms or provisions.
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Preferred
Securities Guarantee"), dated as of __________________, 2001, is executed and
delivered by FIRST BANKS, INC., a Missouri corporation (the "Guarantor"), and
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a
national banking association organized and existing under the laws of the United
States of America, as trustee (the "Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the Preferred Securities (as
defined herein) of First Preferred Capital Trust III, a Delaware statutory
business trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of _____________, 2001, among the trustees of the
Trust named therein, the Guarantor, as depositor, and the holders from time to
time of undivided beneficial interests in the assets of the Trust, the Trust is
issuing on the date hereof up to 1,840,000 preferred securities, having an
aggregate liquidation amount of $46,000,000, designated the _____% Cumulative
Trust Preferred Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions and Interpretation. In this Preferred
Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to them
in this Section 1.1;
(b) terms defined in the Trust Agreement as at the date of execution of
this Preferred Securities Guarantee have the same meaning when used in this
Preferred Securities Guarantee, unless otherwise defined in this Preferred
Securities Guarantee;
(c) a term defined anywhere in this Preferred Securities Guarantee has
the same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a Saturday or a Sunday or a day
on which federal or state banking institutions in the Borough of Manhattan, the
City of New York are authorized or required by law, executive order or
regulation to close or a day on which the Corporate Trust Office of the
Guarantee Trustee is closed for business.
"Code" means the Internal Revenue Code of 1986, as amended.
"Corporate Trust Office" means the office of the Guarantee Trustee at
which the corporate trust business of the Guarantee Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Preferred Securities Guarantee is located at 225 Asylum
Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate Trust
Department.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the _______% Subordinated Debentures due December
31, 2031, of the Debenture Issuer held by the Property Trustee of the Trust.
"Debenture Issuer" means the Guarantor.
"Event of Default" means a default by the Guarantor on any of its
payments or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Trust: (i) any accrued and unpaid Distributions that are
required to be paid on such Preferred Securities, to the extent the Trust shall
have funds available therefor, (ii) the redemption price, including all accrued
and unpaid Distributions to the date of redemption (the "Redemption Price"), to
the extent the Trust has funds available therefor, with respect to any Preferred
Securities called for redemption by the Trust, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of the Debentures to the Holders in exchange
for the Preferred Securities as provided in the Trust Agreement), the lesser of
(A) the aggregate of the Liquidation Amount and all accrued and unpaid
Distributions on the Preferred Securities to the date of payment, to the extent
the Trust shall have funds available therefor (the "Liquidation Distribution"),
and (B) the amount of assets of the Trust remaining available for distribution
to Holders in liquidation of the Trust.
"Guarantee Trustee" means State Street Bank and Trust Company, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Preferred Securities Guarantee and thereafter
means each such Successor Guarantee Trustee.
"Guarantor" means First Banks, Inc., a Missouri corporation.
"Holder" means a Person in whose name a Preferred Security is or
Preferred Securities are registered in the Securities Register; provided,
however, that, in determining whether the holders of the requisite percentage of
the Preferred Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include the Guarantor, the Guarantee Trustee or
any of their respective Affiliates.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Guarantee
Trustee.
"Indenture" means the Indenture dated as of ______________, 2001, among
the Debenture Issuer and State Street Bank and Trust Company, as trustee, and
any indenture supplemental thereto pursuant to which the Debentures are to be
issued to the Property Trustee of the Trust.
"Liquidation Amount" means the stated value of $25 per Preferred
Security.
"Liquidation Distribution" has the meaning provided therefor in the
definition of Guarantee Payments.
"List of Holders" has the meaning set forth in Section 2.2 of this
Preferred Securities Guarantee.
"Majority in Liquidation Amount of the Preferred Securities" means the
Holders of more than 50% of the Liquidation Amount (plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all of the Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two authorized officers of such Person, at least one of
whom shall be the principal executive officer, principal financial officer,
principal accounting officer, treasurer or any vice president of such Person.
Any Officers' Certificate delivered with respect to compliance with a condition
or covenant provided for in this Preferred Securities Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Securities" means the _____% Cumulative Trust Preferred
Securities representing undivided beneficial interests in the assets of the
Trust which rank pari passu with Common Securities issued by the Trust;
provided, however, that upon the occurrence and during the continuance of an
Event of Default, the rights of holders of Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and otherwise
are subordinated to the rights of holders of Preferred Securities.
"Redemption Price" has the meaning provided therefor in the definition
of Guarantee Payments.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
officer within the Corporate Trust Office of the Guarantee Trustee with direct
responsibility for the administration of this Preferred Securities Guarantee,
including any vice-president, any assistant vice-president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer or other officer of
the Corporate Trust Office of the Guarantee Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Securities Register" and "Securities Registrar" have the meanings
assigned to such terms as in the Trust Agreement (as defined in the Indenture).
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act of 1939, as
amended, is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939, as so amended.
ARTICLE II
TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
Section 2.2 List of Holders of Securities.
(a) In the event the Guarantee Trustee is not also the Securities
Registrar, the Guarantor shall provide the Guarantee Trustee with a list, in
such form as the Guarantee Trustee may reasonably require, of the names and
addresses of the Holders of the Preferred Securities (the "List of Holders") as
of such date, (i) within one Business Day after January 1 and June 30 of each
year, and (ii) at any other time within 30 days of receipt by the Guarantor of a
written request for a List of Holders as of a date no more than fifteen (15)
days before such List of Holders is given to the Guarantee Trustee; provided,
that the Guarantor shall not be obligated to provide such List of Holders at any
time the List of Holders does not differ from the most recent List of Holders
given to the Guarantee Trustee by the Guarantor. The Guarantee Trustee may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
Section 2.3. Reports by the Guarantee Trustee. On or before July 15 of
each year, the Guarantee Trustee shall provide to the Holders of the Preferred
Securities such reports as are required by Section 313 of the Trust Indenture
Act, if any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Guarantee Trustee shall also comply with the requirements of
Section 313(d) of the Trust Indenture Act.
Section 2.4. Periodic Reports to the Guarantee Trustee. The Guarantor
shall provide to the Guarantee Trustee such documents, reports and information
as required by Section 314 (if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
Section 2.5. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Preferred Securities
Guarantee that relate to any of the matters set forth in Section 314(c) of the
Trust Indenture Act. Any certificate or opinion required to be given by an
officer pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
Section 2.6. Events of Default; Waiver. The Holders of a Majority in
Liquidation Amount of the Preferred Securities may, by vote, on behalf of the
Holders of all of the Preferred Securities, waive any past Event of Default and
its consequences. Upon such waiver, any such Event of Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Preferred Securities Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
Section 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within ninety (90) days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Guarantee Trustee, unless
such defaults have been cured before the giving of such notice; provided, that,
except in the case of a default by Guarantor on any of its payment obligations,
the Guarantee Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Guarantee Trustee in good faith determines
that the withholding of such notice is in the interests of the Holders of the
Preferred Securities.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or of which a Responsible Officer of the Guarantee Trustee charged with
the administration of the Trust Agreement shall have obtained actual knowledge
of such Event of Default.
Section 2.8. Conflicting Interests. The Trust Agreement shall be deemed
to be specifically described in this Preferred Securities Guarantee for the
purposes of clause (i) of the first proviso contained in Section 310(b) of the
Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
Section 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Preferred Securities Guarantee shall be held by the Guarantee
Trustee for the benefit of the Holders of the Preferred Securities, and the
Guarantee Trustee shall not transfer this Preferred Securities Guarantee to any
Person except a Holder of Preferred Securities exercising his or her rights
pursuant to Section 5.4(b) or to a Successor Guarantee Trustee on acceptance by
such Successor Guarantee Trustee of its appointment to act as Successor
Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee
shall enforce this Preferred Securities Guarantee for the benefit of the Holders
of the Preferred Securities.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Guarantee Trustee. In case an
Event of Default has occurred (that has not been cured or waived pursuant to
Section 2.6) and is actually known to a Responsible Officer of the Guarantee
Trustee, the Guarantee Trustee shall exercise such of the rights and powers
vested in it by this Preferred Securities Guarantee, and use the same degree of
care and skill in its exercise thereof, as a prudent Person would exercise or
use under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions of this
Preferred Securities Guarantee, and the Guarantee Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Preferred Securities Guarantee, and no
implied covenants or obligations shall be read into this Preferred
Securities Guarantee against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Guarantee Trustee and conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Guarantee Trustee, the Guarantee Trustee shall be
under a duty to examine the same to determine whether or not they
conform to the requirements of this Preferred Securities Guarantee;
(ii) the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that the Guarantee Trustee
was negligent in ascertaining the pertinent facts upon which such
judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in Liquidation Amount of the Preferred Securities relating to
the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee, or exercising any trust or power
conferred upon the Guarantee Trustee under this Preferred Securities
Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any
of its duties or in the exercise of any of its rights or powers, if the
Guarantee Trustee shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured to it
under the terms of this Preferred Securities Guarantee or indemnity,
reasonably satisfactory to the Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
Section 3.2. Certain Rights of the Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) the Guarantee Trustee may conclusively rely, and shall be
fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Guarantor contemplated
by this Preferred Securities Guarantee shall be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever, in the administration of this Preferred
Securities Guarantee, the Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or
omitting any action hereunder, the Guarantee Trustee (unless other
evidence is herein specifically prescribed) may, in the absence of bad
faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly
delivered by the Guarantor;
(iv) the Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof);
(v) the Guarantee Trustee may consult with counsel, and the
written advice or opinion of such counsel with respect to legal matters
shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and
in accordance with such advice or opinion. Such counsel may be counsel
to the Guarantor or any of its Affiliates and may include any of its
employees. The Guarantee Trustee shall have the right at any time to
seek instructions concerning the administration of this Preferred
Securities Guarantee from any court of competent jurisdiction;
(vi) the Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Preferred
Securities Guarantee at the request or direction of any Holder, unless
such Holder shall have provided to the Guarantee Trustee such security
and indemnity, reasonably satisfactory to the Guarantee Trustee,
against the costs, expenses (including attorneys' fees and expenses and
the expenses of the Guarantee Trustee's agents, nominees or custodians)
and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Guarantee Trustee; provided that, nothing contained in
this Section 3.2(a)(vi) shall be taken to relieve the Guarantee
Trustee, upon the occurrence and during the continuance of an Event of
Default, of its obligation to exercise the rights and powers vested in
it by this Preferred Securities Guarantee;
(vii) the Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(viii) the Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents, nominees, custodians or attorneys, and the Guarantee
Trustee shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
(ix) no third party shall be required to inquire as to the
authority of the Guarantee Trustee to so act or as to its compliance
with any of the terms and provisions of this Preferred Securities
Guarantee, both of which shall be conclusively evidenced by the
Guarantee Trustee's or its agent's taking such action;
(x) whenever in the administration of this Preferred
Securities Guarantee the Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Guarantee Trustee (A) may
request instructions from the Holders of a Majority in Liquidation
Amount of the Preferred Securities, (B) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received, and (C) shall be protected in conclusively relying on or
acting in accordance with such instructions.
(b) No provision of this Preferred Securities Guarantee shall be deemed
to impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty.
Section 3.3. Not Responsible for Recitals or Issuance of Guarantee. The
Recitals contained in this Guarantee shall be taken as the statements of the
Guarantor, and the Guarantee Trustee does not assume any responsibility for
their correctness. The Guarantee Trustee makes no representation as to the
validity or sufficiency of this Preferred Securities Guarantee.
ARTICLE IV
GUARANTEE TRUSTEE
Section 4.1. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under
the laws of the United States or any state or territory thereof or of
the District of Columbia, or a corporation or Person permitted by the
Securities and Exchange Commission to act as an institutional trustee
under the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having (or the obligations of which are
guaranteed by an entity having) a combined capital and surplus of at
least $50,000,000, and subject to supervision or examination by
federal, state, territorial or District of Columbia authority. If such
corporation, trust company or national banking association publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to
above, then, for the purposes of this Section 4.1(a)(ii), the combined
capital and surplus of such corporation, trust company or national
banking association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to
so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in
the manner and with the effect set out in Section 4.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and the Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
Section 4.2. Appointment, Removal and Resignation of Guarantee Trustee.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 4.2(a) until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within sixty (60) days
after delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or removal
or resignation of the Guarantee Trustee pursuant to this Section 4.2, the
Guarantor shall pay to the Guarantee Trustee all fees and expenses accrued to
the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
Section 5.1. Guarantee. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by the Trust), as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Trust to pay such amounts to the Holders.
Section 5.2. Waiver of Notice and Demand. The Guarantor hereby waives
notice of acceptance of this Preferred Securities Guarantee and of any liability
to which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the Trust or any other Person before
proceeding against the Guarantor, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
Section 5.3. Obligations not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Preferred Securities Guarantee
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures or any extension of the maturity date of the Debentures permitted
by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Trust granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) any failure or omission to receive any regulatory approval or
consent required in connection with the Preferred Securities (or the common
equity securities issued by the Trust), including the failure to receive any
approval of the Board of Governors of the Federal Reserve System required for
the redemption of the Preferred Securities;
(g) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(h) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
Section 5.4. Rights of Holders.
(a) The Holders of a Majority in Liquidation Amount of the Preferred
Securities have the right to direct the time, method and place of conducting of
any proceeding for any remedy available to the Guarantee Trustee in respect of
this Preferred Securities Guarantee or exercising any trust or power conferred
upon the Guarantee Trustee under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute and prosecute a
legal proceeding directly against the Guarantor to enforce its rights under this
Preferred Securities Guarantee, without first instituting and prosecuting a
legal proceeding against the Trust, the Guarantee Trustee or any other Person.
Section 5.5. Guarantee of Payment. This Preferred Securities
Guarantee creates a guarantee of payment and not of collection.
Section 5.6. Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders of the Preferred Securities against the Trust in
respect of any amounts paid to such Holders by the Guarantor under this
Preferred Securities Guarantee; provided, however, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any right that it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of payment
under this Preferred Securities Guarantee, if, at the time of any such payment,
any amounts are due and unpaid under this Preferred Securities Guarantee. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
Section 5.7. Independent Obligations. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Trust with
respect to the Preferred Securities, and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Preferred Securities Guarantee notwithstanding the occurrence of
any event referred to in subsections (a) through (h), inclusive, of Section 5.3
hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 6.1. Limitation on Transactions. So long as any Preferred
Securities remain outstanding, if there shall have occurred and be continuing an
Event of Default under this Preferred Securities Guarantee, an event of default
under the Trust Agreement or during an Extension Period (as defined in the
Indenture), then (a) neither the Guarantor nor any of its Subsidiaries (as
defined in the Indenture) shall declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (as such term is
defined in the Indenture), except as permitted in such circumstances by the
Indenture; (b) the Guarantor shall not make any payment of interest, principal
or premium, if any, or repay, repurchase or redeem any debt securities issued by
the Guarantor which rank pari passu with (including without limitation the
Guarantor's 9.25% Subordinated Debentures due 2027 issued to First Preferred
Capital Trust I and the Guarantor's 10.24% Subordinated Debentures due 2030
issued to First Preferred Capital Trust II) or junior to the Debentures or make
any guarantee payments with respect to any guarantee of the Guarantor of the
debt securities of any Subsidiary of the Guarantor if such guarantee ranks pari
passu with or junior to the Debentures, other than payments under this Preferred
Securities Guarantee; and (c) the Guarantor shall not redeem, purchase or
acquire less than all of the Outstanding Debentures or any of the Preferred
Securities.
Section 6.2. Ranking. This Preferred Securities Guarantee will
constitute an unsecured obligation of the Guarantor and will rank subordinate
and junior in right of payment to all Senior Debt, Subordinated Debt and
Additional Senior Obligations (as defined in the Indenture) of the Guarantor, to
the extent and in the manner set forth in the Indenture, and the applicable
provisions of the Indenture will apply in all relevant respects to the
obligations of the Guarantor hereunder.
ARTICLE VII
TERMINATION
Section 7.1. Termination. This Preferred Securities Guarantee shall
terminate upon (a) full payment of the Redemption Price of all the Preferred
Securities, (b) full payment of the amounts payable in accordance with the Trust
Agreement upon liquidation of the Trust, or (c) distribution of the Debentures
to the Holders of the Preferred Securities. Notwithstanding the foregoing, this
Preferred Securities Guarantee shall continue to be effective or shall be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Preferred
Securities Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Preferred Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to the Holders of the Preferred Securities might properly be
paid.
Section 8.2. Indemnification. The Guarantor agrees to indemnify each
Indemnified Person for, and to hold each Indemnified Person harmless against,
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 8.2 shall survive the termination of this
Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Successors and Assigns. All guarantees and agreements
contained in this Preferred Securities Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the Holders of the Preferred Securities then
outstanding.
Section 9.2. Amendments. Except with respect to any changes that do not
materially and adversely affect the rights of the Holders (in which case no
consent of the Holders will be required), this Preferred Securities Guarantee
may only be amended with the prior approval of the Holders of at least a
Majority in Liquidation Amount of the Preferred Securities. The provisions of
Article VI of the Trust Agreement with respect to meetings of the Holders of the
Preferred Securities apply to the giving of such approval.
Section 9.3. Notices. All notices provided for in this Preferred
Securities Guarantee shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by registered or certified
mail, as follows:
(a) If given to the Guarantee Trustee, at the Guarantee Trustee's
mailing address set forth below (or such other address as the Guarantee Trustee
may give notice of to the Holders of the Preferred Securities):
State Street Bank and Trust Company of Connecticut,
National Association
225 Asylum Street, Goodwin Square
Hartford, Connecticut 06103
Attention: Corporate Trust Department
with a copy to: State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, Massachusetts 02110
Attention: Corporate Trust Department
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Preferred Securities):
First Banks, Inc.
600 James S. McDonnell Boulevard
Mail Code 014
Hazelwood, Missouri 63042
Attention: Chief Financial Officer
(c) If given to any Holder of Preferred Securities, at the address
set forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
Section 9.4. Benefit. This Preferred Securities Guarantee is solely
for the benefit of the Holders of the Preferred Securities and, subject to
Section 3.1(a), is not separately transferable from the Preferred
Securities.
Section 9.5. Governing Law. THIS PREFERRED SECURITIES GUARANTEE
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF MISSOURI.
[The remainder of this page has been left blank intentionally]
This Preferred Securities Guarantee is executed as of the day
and year first above written.
FIRST BANKS, INC.
By:
-------------------------------------------------
Its:
------------------------------------------------
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, as Property Trustee
By:
-------------------------------------------------
Its:
------------------------------------------------
Exhibit 5.1
[Jackson Walker LLP Letterhead]
October 15, 2001
First Banks, Inc.
135 North Meramec
St. Louis, Missouri 63105
First Preferred Capital Trust III
135 North Meramec
St. Louis, Missouri 63105
Re: First Preferred Capital Trust III % Cumulative Trust Preferred
Securities
Ladies and Gentlemen:
We have acted as counsel to First Banks, Inc., a Missouri corporation
(the "Company"), and First Preferred Capital Trust III, a statutory business
trust created under the laws of Delaware (the "Trust"), in connection with the
proposed issuance of: (i) % Cumulative Trust Preferred Securities (the
"Preferred Securities") of the Trust pursuant to the terms of the Amended and
Restated Trust Agreement between the Company and State Street Bank and Trust
Company, as Property Trustee (the "Trust Agreement"), to be offered in an
underwritten public offering; and (ii) Subordinated Debentures (the
"Subordinated Debentures") of the Company pursuant to the terms of an indenture
between the Company and State Street Bank and Trust Company of Connecticut,
National Association, as Trustee (the "Indenture"), to be sold by the Company to
the Trust; and the proposed execution and delivery by the Company of the
Preferred Securities Guarantee Agreement with respect to the Preferred
Securities (the "Guarantee") between the Company and State Street Bank and Trust
Company, as Guarantee Trustee.
The Preferred Securities and the Subordinated Debentures are to be
issued as contemplated by the registration statement on Form S-2 dated October
15, 2001 (the "Registration Statement") to be filed by the Company and the Trust
with the Securities and Exchange Commission to register the issuances of the
Preferred Securities, the Subordinated Debentures and the Guarantee under the
Securities Act of 1933, as amended (the "Act"). Except as otherwise indicated,
the terms utilized herein have the meaning ascribed to them in the Registration
Statement.
First Banks, Inc.
First Preferred Capital Trust III
October 15, 2001
Page 2
In rendering this opinion we have examined originals or copies,
certified or otherwise identified to our satisfaction, of documents, corporate
records and other instruments as we have deemed necessary or appropriate for
purposes of this opinion including: (i) the Registration Statement; (ii) the
Form of Indenture included as an exhibit to the Registration Statement; (iii)
the Form of the Subordinated Debenture included as an exhibit to the
Registration Statement; (iv) the Form of original Trust Agreement, included as
an exhibit to the Registration Statement; (v) the form of Amended and Restated
Trust Agreement included as an exhibit to the Registration Statement; (vi) the
Form of Guarantee included as an exhibit to the Registration Statement; and
(vii) the Form of Preferred Security Certificate included as an exhibit to the
Registration Statement (collectively the "Documents"). Our opinion is premised
and conditioned on the accuracy of the facts contained in the Documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, the authenticity
of the originals of such latter documents, the genuineness of all signatures and
the correctness of all representations made therein and on the assumption that
the transactions contemplated therein will be consummated in the manner
described therein. In particular, and without limiting the scope of the
preceding sentence, we have assumed for purposes of our opinion that the
trustees of the Trust will conduct the affairs of the Trust in accordance with
the Trust Agreement. We have further assumed that there are no agreements or
understandings contemplated therein other than those contained in the Documents.
In our examination related to delivery of this opinion, we have assumed
the legal capacity of all natural persons, the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as copies and the
authenticity of the originals of such copies. In examining documents executed by
parties other than the Company or the Trust, we have assumed that such parties
had the power, corporate or otherwise, to enter into and perform all obligations
thereunder and have also assumed the due authorization by all requisite action,
corporate or otherwise, and execution and delivery by such parties of such
documents and that, except as set forth in paragraphs (1) and (2) below, such
documents constitute valid and binding obligations of such parties. In addition,
we have assumed that the Amended and Restated Trust Agreement of the Trust, the
Preferred Securities of the Trust, the Guarantee, the Subordinated Debentures
and the Indenture, when executed, will be executed in substantially the form
reviewed by us. As to any facts material to the opinions expressed herein which
were not independently established or verified, we have relied upon oral or
written statements and representations of officers, trustees, and other
representatives of the Company, the Trust, and others.
We are members of the bar of the state of Texas, and we express no
opinion as to the laws of any other jurisdiction.
First Banks, Inc.
First Preferred Capital Trust III
October 15, 2001
Page 3
Based upon and subject to the foregoing and to other qualifications and
limitations set forth herein, we are of the opinion that:
1. After the Indenture has been duly executed and delivered,
the Subordinated Debentures, when duly executed, delivered,
authenticated and issued in accordance with the Indenture and
delivered and paid for as contemplated by the Registration
Statement, will be valid and binding obligations of the
Company, entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their
terms, except to the extent that enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization,
moratorium, or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general
principles of equity regardless of whether enforceability is
considered in a proceeding at law or in equity.
2. The Guarantee, when duly executed and delivered by the parties
hereto, will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium, or
other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of
equity regardless of whether enforceability is considered in a
proceeding at law or in equity.
We hereby consent to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement and to
the inclusion of this legal opinion as an Exhibit to the Registration Statement.
Very truly yours,
/s/ JACKSON WALKER L.L.P.
-------------------------
Exhibit 5.2
[Richards, Layton & Finger P.A. Letterhead]
October 15, 2001
First Banks, Inc.
135 North Meramec
Clayton, Missouri 63105
Re: First Preferred Capital Trust III
---------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for First Banks,
Inc., a Missouri corporation (the "Company") and First Preferred Capital Trust
III, a Delaware business trust (the "Trust") in connection with the matters set
forth herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, as filed with
the office of the Secretary of State of the State of Delaware (the "Secretary of
State") on October 11, 2001;
(b) The Trust Agreement of the Trust, dated as of October
11, 2001, among the Company and the trustees named therein;
(c) The Registration Statement (the "Registration
Statement") on Form S-2, including a preliminary prospectus with respect to the
Trust (the "Prospectus"), relating to the Cumulative Trust Preferred Securities
of the Trust representing preferred undivided beneficial interests in the Trust
(each, a "Preferred Security" and collectively, the "Preferred Securities"), as
filed by the Company and the Trust with the Securities and Exchange Commission
on or about October 15, 2001.
(d) A form of Amended and Restated Trust Agreement for the
Trust, to be entered into between the Company, the trustees of the Trust named
therein, and the holders, from time to time, of the undivided beneficial
interests in the assets of such Trust (including the Exhibits thereto) (the
"Trust Agreement"), attached as an exhibit to the Registration Statement; and
First Banks, Inc.
October 15, 2001
Page 2
(e) A Certificate of Good Standing for the Trust,
dated October 15, 2001, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise
defined are used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (e) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (e) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the
Trust Agreement will constitute the entire agreement among the parties thereto
with respect to the subject matter thereof, including with respect to the
creation, operation and termination of the applicable Trust, and that the Trust
Agreement and the Certificate of Trust will be in full force and effect and will
not be amended, (ii) except to the extent provided in paragraph 1 below, the due
organization or due formation, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its organization or formation, (iii) the legal capacity
of natural persons who are parties to the documents examined by us, (iv) that
each of the parties to the documents examined by us has the power and authority
to execute and deliver, and to perform its obligations under, such documents,
(v) the due authorization, execution and delivery by all parties thereto of all
documents examined by us, (vi) the receipt by each Person to whom a Preferred
Security is to be issued by the Trust (collectively, the "Preferred Security
Holders") of a Preferred Security Certificate for such Preferred Security and
the payment for such Preferred Security, in accordance with the Trust Agreement
and the Registration Statement, and (vii) that the Preferred Securities are
authenticated, issued and sold to the Preferred Security Holders in accordance
with the Trust Agreement and the Registration Statement. We have not
participated in the preparation of the Registration Statement or the Prospectus
and assume no responsibility for their contents.
First Banks, Inc.
October 15, 2001
Page 3
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder which are currently in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly
existing in good standing as a business trust under the Business Trust Act.
2. The Preferred Securities of the Trust will represent
valid and, subject to the qualifications set forth in paragraph 3 below, fully
paid and nonassessable beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners
of the Trust, will be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware. We note that the Preferred
Security Holders may be obligated to make payments as set forth in the Trust
Agreement.
We consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement. We hereby
consent to the use of our name under the heading "Legal Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/Richards, Layton, & Finger P.A.
----------------------------------
EAM
Exhibit 8.1
October 15, 2001
First Banks, Inc.
135 North Meramec
Clayton, Missouri 63105
First Preferred Capital Trust III
135 North Meramec
Clayton, Missouri 63105
Re: First Preferred Capital Trust III, ___% Cumulative Trust Preferred
Securities
Ladies and Gentlemen:
We have acted as federal income tax counsel for First Banks, Inc., a
Missouri corporation (the "Company"), and First Preferred Capital Trust III, a
statutory business trust created under the laws of Delaware (the "Trust"), in
connection with the proposed issuance of: (i) __% Cumulative Trust Preferred
Securities of the Trust (the "Preferred Securities") pursuant to the terms of
the Amended and Restated Trust Agreement between the Company and the trustees
named therein (the "Trust Agreement"); (ii) subordinated debentures of the
Company (the "Subordinated Debentures") pursuant to the terms of an indenture
from the Company to State Street Bank and Trust Company of Connecticut, National
Association, as Trustee (the "Indenture"); and (iii) the Preferred Securities
Guarantee Agreement of the Company with respect to the Preferred Securities (the
"Guarantee") between the Company and State Street Bank and Trust Company of
Connecticut, National Association, as Guarantee Trustee. The Preferred
Securities and the Subordinated Debentures are to be issued as contemplated by
the registration statement on Form S-2 dated October 15, 2001 (the "Registration
Statement") to be filed by the Company and the Trust to register the issuances
of the Preferred Securities, the Subordinated Debentures and the Guarantee under
the Securities Act of 1933, as amended. In connection with our engagement, we
have participated in the preparation of the discussion set forth under the
caption "Federal Income Tax Consequences" in the Registration Statement. Except
as otherwise indicated, defined terms used herein have the meanings given to
them in the Registration Statement.
In rendering this opinion, we have examined such documents, records and
other instruments as we have deemed necessary or appropriate, including, without
limitation: (i) the Registration Statement; (ii) the form of Indenture attached
as an exhibit to the Registration Statement; (iii) the form of the Subordinated
Debenture attached as an exhibit to the Registration Statement; (iv) the form of
Trust Agreement, attached as an exhibit to the Registration Statement; (v) the
form of Amended and Restated Trust Agreement, attached as an exhibit to the
Registration Statement; (vi) the form of Guarantee attached as an exhibit to the
Registration Statement; and (vii) the form of Preferred Security Certificate
attached as an exhibit to the Registration Statement (collectively the
"Documents"). Our opinion is premised and conditioned on the accuracy of the
facts contained in the Documents, the correctness of all representations made in
the Documents, the assumption that the final Documents will be substantially
identical to the forms of the Documents attached as exhibits to the Registration
Statement, the assumption that the transactions contemplated by the Documents
will be consummated in the manner described in the Documents, and the assumption
that there will be full compliance with all of the terms of the final Documents.
In particular, and without limiting the scope of the preceding sentence, we have
assumed for purposes of our opinion that the trustees will conduct the affairs
of the Trust in accordance with the Trust Agreement.
In rendering this opinion, we have also relied, without independent
investigation or verification, upon the initial and continuing accuracy of the
following certifications on behalf of the Company or the Trust, the initial and
continuing accuracy of which constitute an integral basis for the opinions
expressed herein:
1. The Company and the Trust intend to create a debtor-creditor
relationship between the Company, as debtor, and the Trust, as
creditor, upon the issuance of the Subordinated Debentures to
the Trust by the Company, and the Company and the Trust will:
(i) record and at all times continue to reflect the
Subordinated Debentures as indebtedness of the Company on
their respective separate books and records for financial
accounting purposes; and (ii) treat the Subordinated
Debentures as indebtedness of the Company for all United
States federal income tax purposes.
2. The sole assets of the Trust will be the Subordinated
Debentures.
3. The Company has no present intent to exercise its right to
defer payments of interest by extending the interest
payment period on the Subordinated Debentures.
4. The Company believes that the likelihood that it would
exercise its right to defer payments of interest by extending
the interest payment period on the Subordinated Debentures is
remote because of the resulting (i) restrictions that would be
imposed on the Company's ability to pay dividends on its
outstanding equity and its ability to make payments on its
outstanding debt securities that rank pari passu or junior to
the Subordinated Debentures, and (ii) adverse effect on the
Company's cost of, and ability to raise, capital in the
future.
5. The Company expects that it will be able to cause its
subsidiaries to (i) pay dividends, and, as necessary, (ii)
make payments of principal and interest pursuant to the terms
of any outstanding intercompany note between the Company and
any of its subsidiaries in amounts and at times sufficient to
enable the Company to make timely payments of interest and
principal on the Subordinated Debentures.
6. The Company has and expects to continue to have material
amounts of trade accounts payable.
7. There has been no material payment default by the Company
with respect to any of its currently or previously
outstanding debt.
Accordingly, subject to the assumptions, qualifications, and conditions
set forth therein and in this opinion:
the legal conclusions within the discussion set forth under
the caption "Federal Income Tax Consequences" in the
Registration Statement constitute the opinion of this firm
with respect to the United States federal income tax matters
specifically addressed therein.
This opinion is based on the Internal Revenue Code of 1986, as amended,
United States Treasury regulations promulgated thereunder, and administrative
and judicial interpretations thereof, all as in existence and in effect on the
date hereof and all of which are subject to change, possibly on a retroactive
basis. Any such changes could have a material impact upon the conclusions
reached herein. Our opinion is not binding on the Internal Revenue Service
("IRS") or the courts. The authorities on which this opinion is based are
subject to various interpretations and there is no clear legal precedent dealing
with the federal income tax characterization of securities similar to the
Subordinated Debentures and the Preferred Securities. The IRS has issued a
Notice (Notice 94-47, 1994-1 C.B. 357) indicating that it intends to closely
scrutinize securities similar to those contemplated to be issued in the
transactions here in question. Accordingly, there can be no assurance that the
IRS will not challenge the opinions expressed herein or that a court would not
sustain such a challenge.
We specifically note that we are rendering no opinion as to the state,
local or foreign tax consequences associated with the Trust, the Subordinated
Debentures or the Preferred Securities nor do we render any opinion as to any
United States federal income tax consequences related thereto except as
expressly addressed herein. Additionally, we undertake no obligation to update
this opinion in the event there is (i) a change in the legal authorities, the
facts (including the taking of any action by any party to any of the
transactions described in the Documents relating to such transactions) or the
Documents on which this opinion is based, or (ii) any inaccuracy in any of the
representations or warranties upon which we have relied in rendering this
opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the use of our name under the headings "Federal
Income Tax Consequences" and "Legal Matters" in the Registration Statement.
Sincerely,
/s/ Jackson Walker L.L.P.
--------------------------
Jackson Walker L.L.P.
Exhibit 10.6
SECURED CREDIT AGREEMENT
($120,000,000 Revolving Loan)
dated as of August 23, 2001
among
FIRST BANKS, INC.
and
THE LENDERS SIGNATORY HERETO
and
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
as Agent
WELLS FARGO BANK, NATIONAL ASSOCIATION
as Sole Lead Arranger and Sole Book Runner
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS......................................................................1
Section 1.01 Defined Terms...............................................................................1
Section 1.02 Accounting Terms............................................................................8
ARTICLE II. AMOUNT AND TERMS OF REVOLVING LOAN...................................................................8
Section 2.01 Advances....................................................................................8
Section 2.02 Interest....................................................................................9
Section 2.03 Margins....................................................................................11
Section 2.04 Payments...................................................................................12
Section 2.05 Commitment Fee.............................................................................12
Section 2.06 Termination or Reduction of the Commitments................................................13
Section 2.07 Voluntary Prepayments......................................................................13
Section 2.08 Computation of Interest and Fees...........................................................13
Section 2.09 Making of Payments.........................................................................13
Section 2.10 Payment on Nonbusiness Days................................................................13
Section 2.11 Use of Proceeds............................................................................14
Section 2.12 Fees on Advances and Indemnity.............................................................14
Section 2.13 Capital Adequacy...........................................................................15
Section 2.14 Failure of Any Lender to Make Advances.....................................................16
ARTICLE III. CONDITIONS PRECEDENT...............................................................................16
Section 3.01 Initial Conditions Precedent...............................................................16
Section 3.02 Conditions Precedent to All Advances.......................................................17
ARTICLE IV. REPRESENTATIONS AND WARRANTIES.......................................................................18
Section 4.01 Corporate Existence and Power..............................................................18
Section 4.02 Authorization of Borrowing; No Conflict as to Law or Agreements............................18
Section 4.03 Legal Agreements...........................................................................18
Section 4.04 Subsidiaries...............................................................................18
Section 4.05 Financial Condition........................................................................19
Section 4.06 Adverse Change.............................................................................19
Section 4.07 Litigation.................................................................................19
Section 4.08 Regulation U...............................................................................19
Section 4.09 Taxes......................................................................................19
Section 4.10 Titles.....................................................................................19
Section 4.11 ERISA......................................................................................19
ARTICLE V. AFFIRMATIVE COVENANTS.................................................................................20
Section 5.01 Reporting Requirements.....................................................................20
Section 5.02 Books and Records; Inspection and Examination..............................................21
Section 5.03 Compliance with Laws.......................................................................21
Section 5.04 Payment of Taxes and Other Claims..........................................................22
Section 5.05 Operations.................................................................................22
Section 5.06 Insurance..................................................................................22
Section 5.07 Preservation of Corporate Existence........................................................22
Section 5.08 Additional Collateral......................................................................22
ARTICLE VI. NEGATIVE COVENANTS...................................................................................22
Section 6.01 Liens......................................................................................22
Section 6.02 Indebtedness...............................................................................23
Section 6.03 Guaranties.................................................................................23
Section 6.04 Dividends..................................................................................23
Section 6.05 Consolidation and Merger...................................................................24
Section 6.06 Subordinated Debt..........................................................................24
Section 6.07 Restrictions on Nature of Business.........................................................24
Section 6.08 Negative Pledges; Subsidiary Restrictions..................................................24
Section 6.09 Issuance of Additional Stock...............................................................24
ARTICLE VII. FINANCIAL COVENANTS.................................................................................25
Section 7.01 Total Risk Based Capital Ratio.............................................................25
Section 7.02 Tier I Risk Based Capital Ratio............................................................25
Section 7.03 Leverage...................................................................................25
Section 7.04 Minimum Return on Assets...................................................................25
Section 7.05 Maximum Non-Performing Assets..............................................................25
Section 7.06 Allowance for Loan and Lease Losses........................................................25
ARTICLE VIII. EVENTS OF DEFAULT, RIGHTS AND REMEDIES.............................................................25
Section 8.01 Events of Default..........................................................................25
Section 8.02 Rights and Remedies........................................................................28
Section 8.03 Offset.....................................................................................28
ARTICLE IX. THE AGENT............................................................................................29
Section 9.01 Authorization..............................................................................29
Section 9.02 Distribution of Payments and Proceeds......................................................29
Section 9.03 Expenses...................................................................................30
Section 9.04 Payments Received Directly by Lenders......................................................30
Section 9.05 Indemnification............................................................................30
Section 9.06 Limitations on Agent's Power...............................................................30
Section 9.07 Exculpation................................................................................31
Section 9.08 Agent and Affiliates.......................................................................31
Section 9.09 Credit Investigation.......................................................................31
Section 9.10 Resignation................................................................................31
Section 9.11 Assignments................................................................................32
Section 9.12 Participations.............................................................................32
Section 9.13 Disclosure of Information..................................................................33
ARTICLE X. MISCELLANEOUS.........................................................................................34
Section 10.01 No Waiver; Cumulative Remedies............................................................34
Section 10.02 Amendments, Etc...........................................................................34
Section 10.03 Notice....................................................................................34
Section 10.04 Costs and Expenses........................................................................34
Section 10.05 Indemnification by Borrower...............................................................35
Section 10.06 Execution in Counterparts.................................................................35
Section 10.07 Binding Effect, Assignment................................................................35
Section 10.08 Governing Law.............................................................................35
Section 10.09 Consent to Jurisdiction...................................................................35
Section 10.10 Severability of Provisions................................................................35
Section 10.11 Prior Agreements..........................................................................36
Section 10.12 Headings..................................................................................36
Exhibit A -- Revolving Loan Commitment Amounts
Exhibit B -- Compliance Certificate
Exhibit C -- Note
Exhibit D -- FBA Security Agreement
Exhibit E -- Pledge Agreement
Exhibit F -- Third Party Pledge Agreement
Exhibit G -- Intercompany Note
Schedule 4.04 -- Bank Subsidiaries
Schedule 4.07 -- Litigation
Schedule 6.01 -- Existing Liens
Schedule 6.02 -- Indebtedness
Schedule 6.03 -- Liabilities
SECURED CREDIT AGREEMENT
THIS SECURED CREDIT AGREEMENT dated as of August 23, 2001, is
entered into by and among FIRST BANKS, INC., a Missouri corporation
("Borrower"), the financial institutions that have executed this Agreement as
lenders (each individually a "Lender" and collectively the "Lenders"), and WELLS
FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as
Agent.
WITNESSETH THAT:
WHEREAS Borrower and certain banks were party to a Second
Amended and Restated Secured Credit Agreement dated as of August 24, 2000 (the
OExisting Credit AgreementO) pursuant to which such banks had severally made
available to Borrower a revolving credit facility in the aggregate amount of One
Hundred Twenty Million Dollars ($120,000,000);
WHEREAS Borrower has requested that the Lenders make available
a new revolving credit facility in the amount of One Hundred Twenty Million
Dollars ($120,000,000);
WHEREAS Borrower, the Lenders and Agent desire to enter into
this Secured Credit Agreement in replacement of the Existing Credit Agreement,
thereby making available to Borrower the requested revolving credit facility;
and
WHEREAS the Lenders are willing severally to provide such
revolving credit facility to Borrower, subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Defined Terms. As used in this Agreement, the
-------------
following terms have the following meanings (terms defined in the singular to
have the same meaning when used in the plural and vice versa):
"Advance" means an advance by the Lenders to the Borrower
pursuant to Article II.
"Additional Lender" means a financial institution that becomes
a Lender pursuant to the procedures set forth in Section 9.11.
------------
"Affiliate" means any Person (1) which directly or indirectly
controls, or is controlled by, or is under common control with, the
Borrower or any Subsidiary; (2) which directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of
voting stock of Borrower or any Subsidiary; or (3) five percent (5%) or
more of the voting stock of which is directly or indirectly
beneficially owned or held by Borrower or any Subsidiary. The term
"Control" for the purposes of this Agreement means the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise. For the
purposes of the foregoing definition, a shareholder of Borrower shall
not be deemed to be directly or indirectly controlling or controlled by
the Borrower or a subsidiary, provided the person in question will not
receive any proceeds from the Loans.
"Agent" means Wells Fargo Bank Minnesota, National
Association, acting in its capacity as Agent pursuant to Article IX
hereof, or any duly appointed successor.
"Agreement" means this Secured Credit Agreement, as amended,
supplemented or modified from time to time.
"Bank Business Day" means a day other than a Saturday, Sunday,
United States national holiday or other day on which banks in Minnesota
are permitted or required by law to close.
"Bank Subsidiary" means any direct or indirect Subsidiary of
the Borrower which is a bank or thrift institution, including, without
limitation the financial institutions listed in Schedule 4.04 hereof
-------------
and, beginning one year following the acquisition thereof, any bank or
thrift institution subsequently becoming a direct or indirect
Subsidiary of the Borrower.
"Base Rate" means the rate of interest publicly announced from
time to time by the Agent as its "prime" or "base" rate or, if the
Agent ceases to announce a rate so designated, any similar successor
rate designated by the Agent.
"Borrower" has the meaning assigned to such term in the
preamble of this Agreement.
"Borrowing" means a borrowing under Article II consisting of
Advances made to the Borrower by each of the Lenders severally.
"Capitalized Lease" of a Person means any lease of property by
such Person as lessee which would be capitalized on a balance sheet of
such Person prepared in accordance with GAAP.
"Collateral" means all property which is subject or is to be
subject to the Liens granted by the Pledge Agreement and the FBA
Security Agreement.
"Commitments" means the several commitments of the Lenders in
the aggregate original principal amount of $120,000,000, as such amount
may be reduced from time to time pursuant to Section 2.06 hereof. When
------------
used with reference to a particular Lender, "Commitment" means that
Lender's obligation to make Advances in an aggregate amount equal to
its Commitment Amount.
"Commitment Amount" means, with respect to each Lender, the
amount set forth opposite that Lender's name on Exhibit A, as that
---------
amount may be adjusted from time to time pursuant to Section 2.06 or
-------------
any assignment made pursuant to Section 9.11.
------------
"Compliance Certificate" means a certificate in substantially
the form of Exhibit B, or such other form as the Borrower and the
----------
Required Lenders may from time to time agree upon in writing, executed
by the chief financial officer of the Borrower, stating (i) that any
financial statements delivered therewith have been prepared in
accordance with GAAP, subject to year-end audit adjustments, (ii)
whether or not such officer has knowledge of the occurrence of any
Default or Event of Default hereunder not theretofore reported and
remedied and, if so, stating in reasonable detail the facts with
respect thereto, (iii) all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrower is in
compliance with the Financial Covenants, and (iv) all relevant facts in
reasonable detail to evidence, and the computations as to, whether or
not the Borrower is in compliance with the other Financial Covenants.
"Default" means any of the events specified in Section 8.01,
------------
whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with the Borrower would be treated as a
single employer under Section 4001 of ERISA.
"Equity Capital" of a Bank Subsidiary means the aggregate of
its perpetual preferred stock (and related surplus), common stock,
surplus (excluding all surplus related to perpetual preferred stock),
undivided profits and capital reserves, plus its net unrealized holding
gains (or minus its net realized holding losses) on available-for-sale
securities.
"Eurodollar Business Day" means a Bank Business Day on which
dealings in U.S. dollar deposits are carried on in the London interbank
market.
"Eurodollar Rate" means the annual rate equal to the sum of
(i) the rate obtained by dividing (a) the rate (rounded up to the
nearest 1/16 of 1%) determined by the Agent as of 11:00 a.m. London,
England time on the second Eurodollar Business Day prior to the date
such rate is to become effective to be the average rate at which U.S.
dollar deposits are offered or available to banks in the London
interbank market for funds to be made available on the first day of any
Interest Period in an amount approximately equal to the amount for
which a Eurodollar Rate quotation has been requested and maturing at
the end of such Interest Period, by (b) a percentage equal to 100%
minus the Federal Reserve System reserve requirement (expressed as a
percentage) applicable to such deposits, and (ii) the applicable
Margin. In making such determination, the Agent shall utilize Telerate
page 3750 under the heading OBritish Bankers Association LIBOR ratesO
in the column designated OUSD,O as published by Bridge Information
Systems, Inc., or such other comparable source as may be available to
the Agent in the event such Telerate page is no longer published or
readily available.
"Eurodollar Rate Funding" means a Borrowing or any portion
thereof, or any other portion of the principal balance of the Notes,
that bears interest at a Eurodollar Rate.
"Event of Default" means any of the events specified in
Section 8.01, provided that any requirement for the giving of notice,
------------
the lapse of time, or both, or any other applicable condition, has been
satisfied.
"Existing Credit Agreement" has the meaning assigned to such
term in the recitals to this Agreement.
"FBA" means First Banks America, Inc., a Delaware corporation.
"FBA Security Agreement" means the security agreement in the
form of Exhibit D, whereby FBA grants a security interest to the
Borrower in all its stock of San Francisco Company to secure the
Intercompany Note.
"Federal Funds Rate" means at any time an interest rate per
annum equal to the weighted average of the rates for overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any
day which is a Bank Business Day, the average, determined by the Agent,
of the quotations for such day for such transactions received by the
Agent from three federal funds brokers of recognized standing selected
by it, it being understood that the Federal Funds Rate for any day
which is not a Bank Business Day shall be the Federal Funds Rate for
the next preceding Bank Business Day.
"Financial Covenants" means any covenant contained in Article
VII.
"First Bank (California)" means First Bank and Trust, a
California state bank.
"First Bank (Missouri)" means First Bank, a Missouri state
bank.
"Floating Rate" means, at any time, an annual rate equal to
the greater of:
(i) the Base Rate; or
(ii) the Federal Funds Rate, plus 50 basis points (0.50%);
The Floating Rate shall change when and as the Base Rate or Federal
Funds Rate changes.
"Funded Debt" of the Borrower means (without duplication) (i)
all indebtedness of the Borrower for borrowed money; (ii) indebtedness
evidenced by bonds, notes or similar written debt instruments; and
(iii) the face amount of all letters of credit and bankers' acceptances
issued for the account of the Borrower, and without duplication, all
drafts drawn thereunder; provided, however, that in no event shall any
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calculation of Funded Debt include Subordinated Debt or debt of the
type referred to in Section 6.02(b) or 6.02(c).
"Funded Debt Ratio" means the ratio of Funded Debt to Net
Income of the Borrower for the most recent period of four fiscal
quarters.
"GAAP" means generally accepted accounting principles applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 4.05.
------------
"Interest Period" means, with respect to any Eurodollar Rate
Funding (except as provided below on the Closing Date of this
Agreement), a period of one, two, three or six months beginning on a
Eurodollar Business Day, as elected by the Borrower. Each Interest
Period shall end on the day in the final month of such Interest Period
that immediately precedes the date which numerically corresponds to the
first day of such Interest Period, except that (i) if such final month
has no numerically corresponding day, then the Interest Period shall
end on the last Eurodollar Business Day of such month, and (ii) if an
Interest Period would otherwise end on a day which is not a Eurodollar
Business Day, such Interest Period shall end on the next following
Eurodollar Business Day, unless such next following Eurodollar Business
Day is the first Eurodollar Business Day of a month, in which case such
Interest Period shall end on the next preceding Eurodollar Business
Day.
"Intercompany Note" means the revolving promissory note in the
form of Exhibit G, whereby FBA promises to repay certain obligations
---------
incurred to the Borrower.
"Lender" or "Lenders" has the meaning assigned to such term in
the preamble to this Agreement.
"Leverage" shall be defined and calculated in accordance with
Federal Reserve Board Regulation Y in the case of the Borrower and in
accordance with Section 38 of the Federal Deposit Insurance Act in the
case of a Bank Subsidiary.
"Lien" means any mortgage, deed of trust, lien, pledge,
security interest or other charge or encumbrance, of any kind
whatsoever, including but not limited to the interest of the lessor or
titleholder under any Capitalized Lease, title retention contract or
similar agreement.
"Loan Document(s)" means this Agreement, the Notes, the Pledge
Agreement, the Intercompany Note, the FBA Security Agreement and the
Third Party Pledge Agreement, as each may be renewed, extended,
amended, rearranged, restructured, restated, replaced or otherwise
modified from time to time.
"Loan Loss Reserve" for any Person, for any period, means the
amount set forth on the most recent report on form FRY-9C filed by
Borrower with the Board of Governors of the Federal Reserve System (or
any successor report) applicable to such period as "Allowance for loan
and lease losses."
"Margin" means an amount determined pursuant to Section 2.03
------------
that is added to other amounts to determine a Eurodollar Rate.
"Multiemployer Plan" means a Plan described in Section
4001(a)(3) of ERISA which covers employees of a Borrower or any ERISA
Affiliate.
"Net Income" has the meaning assigned to such term by GAAP,
without reference to extraordinary items or adjustments caused solely
by changes in applicable accounting principles.
"Non-Performing Assets" of a Bank Subsidiary means the sum of:
(i) all loans classified as past due 90 days or more and still accruing
interest; (ii) all loans classified as "non-accrual" and no longer
accruing interest; (iii) all loans classified as "restructured loans
and leases"; and (iv) all other "Non-Performing Assets," as reported in
the then most recent call report of such Bank Subsidiary.
"Note" has the meaning set forth in Section 2.01.
------------
"Obligations" means all debts, liabilities, obligations,
covenants and duties of the Borrower arising under any of the Loan
Documents, whether direct or indirect, absolute or contingent, due or
to become due, and whether now existing or hereafter arising.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Percentage" means, with respect to each Lender, the
percentage so designated by such Lender's name in Exhibit A, as such
---------
percentage may be adjusted from time to time pursuant to Section 9.11.
------------
"Permitted Acquisition" means the acquisition by the Borrower
or any of its Subsidiaries of stock or other equity interests in any
other Person, the consolidation or merger of any other Person into the
Borrower or any of its Subsidiaries, or the transfer of any assets of
any other Person to the Borrower or any of its Subsidiaries outside the
ordinary course of business, in each case so long as:
(i) no Default or Event of Default is continuing at the
time of such acquisition, consolidation, merger or
transfer, or would be caused by such acquisition,
consolidation, merger or transfer;
(ii) all authorizations of governmental agencies, bodies
or authorities which are necessary to approve the
acquisition have been obtained and are in full force
and effect, or will be obtained contemporaneously
with the making of any Advance for such purpose, and
no further approval, consent, order or authorization
of or designation, registration, declaration or
filing with any governmental authority is required in
connection therewith;
(iii) in the case of any consolidation or merger, the
continuing or surviving corporation shall be
controlled by the Borrower immediately following the
transaction; provided, however, that (A) a Subsidiary
-------- -------
may merge with and into the Borrower or another
Subsidiary, but (B) under no circumstances may the
Borrower merge into or consolidate with any
Subsidiary; and
(iv) the total assets of such Person (other than the
Borrower or any o its Subsidiaries) are not more
than $500,000,000.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority, or other juridical entity of
whatever nature.
"Plan" means any employee benefit or other plan established,
maintained, or to which contributions have been made by the Borrower or
any ERISA Affiliate.
"Pledge Agreement" means the collateral pledge agreement in
the form of Exhibit E pledging to the Agent for the ratable benefit of
---------
the Lenders all of the stock of FBA and First Bank (Missouri) that is
owned by the Borrower, certain stock acquired after the date of this
Agreement, and the Intercompany Note.
"Primary Equity Capital" means the aggregate of the allowance
for loan and lease losses, as reported in the Bank Subsidiary's then
most recent call report, plus its Equity Capital.
"Prohibited Transaction" means any transaction prohibited by
Section 406 of ERISA or Section 4975 of the Internal Revenue Code, as
amended from time to time.
"Reportable Event" means any of the events set forth in
Section 4043 of ERISA.
"Required Lenders" means Lenders (including, where relevant,
Additional Lenders) having an aggregate Percentage of 66 2/3% or more.
"Return on Assets" of a Person means the percentage determined
by dividing the Net Income of such Person for the four calendar
quarters immediately preceding the date of determination by its total
average assets as of the end of such period. The total average assets
of a Person shall be as reported in its most recent quarterly financial
statements or, in the case of a Bank Subsidiary, in its most recent
quarterly call report.
"Revolving Credit Termination Date" means August 22, 2002.
"San Francisco Company" means The San Francisco Company, a
Delaware corporation.
"Subordinated Debt" means indebtedness of the Borrower or any
of its Subsidiaries which is subordinated in right of payment to all
indebtedness of the Borrower to any Lender, on terms that have been
approved in writing by the Required Lenders and that have been noted by
appropriate legend on all instruments evidencing the Subordinated Debt.
"Subsidiary" means, as to Borrower, any corporation with total
assets exceeding $1,000,000 of which shares of stock having ordinary
voting power (other than stock having such power only by reason of the
happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation are at the time owned,
or the management of which corporation is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
the Borrower or a Subsidiary of Borrower.
"Third Party Pledge Agreement" means the security agreement in
the form of Exhibit F, whereby San Francisco Company pledges all its
stock of First Bank (California) to the Borrower to secure the
Intercompany Note.
"Tier I Risk Based Capital Ratio" shall be defined and
calculated in accordance with Federal Reserve Board Regulation Y in the
case of the Borrower and in accordance with Section 38 of the Federal
Deposit Insurance Act in the case of a Bank Subsidiary.
"Total Risk Based Capital Ratio" shall be defined and
calculated in accordance with Federal Reserve Board Regulation Y in the
case of the Borrower and in accordance with Section 38 of the Federal
Deposit Insurance Act in the case of a Bank Subsidiary.
Section 1.02. Accounting Terms. All accounting terms not
-----------------
specifically defined herein shall be construed in accordance with GAAP
consistent with those applied in the preparation of the financial statements and
reports referred to in Section 4.05, and all financial data submitted pursuant
------------
to this Agreement shall be prepared in accordance with such principles.
ARTICLE II.
AMOUNT AND TERMS OF REVOLVING LOAN
Section 2.01 Advances.
--------
(a)Each Lender agrees, severally but not jointly, on the terms
and subject to the conditions hereinafter set forth, to make Advances
to the Borrower from time to time during the period from the date
hereof to and including the Revolving Credit Termination Date in an
aggregate amount not to exceed at any time outstanding that Lender's
Commitment Amount. The total amount of the Advances outstanding at any
time hereunder shall not exceed the Commitments. Within the limits of
the Commitments, the Borrower may borrow, prepay pursuant to Section
-------
2.07 and reborrow under this Section 2.01. The Advances made by each
---- -------------
Lender shall be evidenced by and repayable in accordance with a single
promissory note of the Borrower (a "Note") payable to the order of that
Lender, substantially in the form of Exhibit C hereto, dated the date
---------
hereof. The Notes shall bear interest on the unpaid principal amount
thereof from the date thereof until paid as set forth in Section 2.02.
------------
(b)Each Borrowing under this Section 2.01 shall occur
-------------
following written or telephonic request to the Agent from the Borrower,
any telephonic request to be confirmed by fax in such form as the
Borrower and the Agent may agree. Each such notice or request shall
specify (i) the date of the requested Borrowing, (ii) the amount
thereof, and (iii) if any portion of such Borrowing will bear interest
at a Eurodollar Rate, the Interest Period selected by the Borrower with
respect thereto. Such notice or request must be received by the Agent
not later than [1:00 p.m.] (Minneapolis time) on the Bank Business Day
prior to the day on which such Borrowing is to occur or, if all or any
portion of the Borrowing will bear interest at a Eurodollar Rate, not
later than three Eurodollar Business Days prior to the date on which
such Borrowing is to occur. Upon receiving a request for a Borrowing
under this Section 2.01, and in any event not later than 2:00 p.m.
-------------
(Minneapolis time) on the day that the request is received, the Agent
will notify the Lenders of the amount of the requested Borrowing, the
amount of each Lender's Advance with respect thereto, and, if
applicable, the fact that the Borrower has elected a Eurodollar Rate
and the Interest Period selected by the Borrower. Upon fulfillment of
the applicable conditions set forth in Article III, each Lender shall
remit its Percentage of the requested Borrowing to the Agent in
immediately available funds. So long as a Lender receives notice of the
requested Borrowing prior to 2:00 p.m. (Minneapolis time) on the date
the request is received, that Lender will make its Advance with respect
to that Borrowing available to the Agent by wire transfer of
immediately available funds to the Agent not later than 11:00 a.m.
(Minneapolis time) on the date called for in such notice. Prior to
12:00 noon (Minneapolis time) on the day of the requested Borrowing,
the Agent shall disburse such funds by wire transferring the same to
the Borrower's account number 1800000225 at First Bank (Missouri), by
crediting the same to the Borrower's demand deposit account maintained
with the Agent or in such other manner as the Agent and the Borrower
may from time to time agree in writing. The Agent shall have no
obligation to disburse the requested Borrowing if any condition set
forth in Article III has not been satisfied on the day of the requested
Borrowing. Each Borrowing shall be in the amount of $1,000,000 or an
integral multiple of $100,000 greater than $1,000,000. The Borrower
shall promptly confirm each telephonic request for an Advance by
executing and delivering an appropriate confirmation certificate to the
Agent. The Borrower shall be obligated to repay all Advances made to it
notwithstanding the fact that the person requesting the same was not in
fact authorized so to do. Any request for an Advance shall be deemed to
be a representation that the statements set forth in Article IV are
correct except to the extent that the same relate specifically to an
earlier date.
(c)In the event that any one or more Lenders' obligations to
make Advances at the Eurodollar Rate are suspended pursuant to Section
-------
2.02(d) following a request for a Borrowing that specifies that a
-------
Eurodollar Rate is to apply, such Lenders shall nevertheless be obliged
to fund their respective Advances, and such Advances shall bear
interest at the Floating Rate until they are repaid or until such
Lenders may again make, maintain or fund Advances at the Eurodollar
Rate and the Borrower requests pursuant to Section 2.02(b) that a
----------------
Eurodollar Rate be applicable to such Advances.
Section 2.02 Interest
--------
(a)Floating Rate. Unless the Borrower elects a Eurodollar Rate
pursuant to Section 2.01(b) or Subsection (b) of this Section, the
---------------- ---------------
principal balance of the Notes shall bear interest at the Floating
Rate.
(b)Conversion of Principal to Eurodollar Rates. At the
election of the Borrower, which may be exercised from time to time, the
Borrower may request in writing or by telephone that a Eurodollar Rate
be applicable for the portion of the outstanding principal balance of
the Notes (including any Advance requested or to be requested) and for
the Interest Period indicated by the Borrower in its request. The
portion of the outstanding balance of the Notes for which a Eurodollar
Rate is requested must, on the first day of the applicable Interest
Period, either (A) bear interest at the Floating Rate, or (B) bear
interest at a Eurodollar Rate with respect to which the Interest Period
expires on such first day. A request for a Eurodollar Rate must be
received by the Agent before 1:00 p.m. (Minneapolis time) on the day
three Eurodollar Business Days before the first day of the proposed
Interest Period. Upon receiving a request for a Eurodollar Rate, and in
any event not later than the close of business on the day that the
request is received, the Agent will notify the Lenders of the principal
amount to be subject to such Eurodollar Rate and the Interest Period
applicable thereto. Not later than 4:00 p.m. (Minneapolis time) on the
second Eurodollar Business Day prior to the date on which such
Eurodollar Rate is to become effective, the Agent will notify the
Lenders and the Borrower of the interest rate to be applicable thereto.
Following a request for a Eurodollar Rate under this Section or Section
2.01, the Eurodollar Rate as determined hereunder shall be the interest
rate applicable for the proposed Interest Period to the portion of the
outstanding principal balance of the Notes to which the quotation
related, subject to fluctuations in the applicable Margin (and the
remaining part of the principal balance of the Notes, if any, shall
continue to bear interest at the rate or rates previously applicable to
such amounts). At the termination of such Interest Period, the interest
rate applicable to the portion of the principal balance of the Notes to
which the Eurodollar Rate quotation was applicable shall revert to the
Floating Rate unless a new Eurodollar Rate quotation is requested by
the Borrower in accordance with this paragraph.
(c)Setting and Notice of Rates. The Eurodollar Rate applicable
to each Eurodollar Rate Funding shall be determined by the Agent
between the opening of business and 11:00 a.m. (Minneapolis time) on
the second Eurodollar Business Day prior to the beginning of the
applicable Interest Period. Promptly following such determination, the
Agent shall give notice thereof (which may be by telephone if promptly
confirmed by fax) to the Borrower and each Lender. Each such
determination of the applicable Eurodollar Rate shall be conclusive and
binding upon the parties hereto, in the absence of demonstrable error.
The Agent, upon written request of the Borrower or any Lender, shall
deliver to the Borrower or such requesting Lender a statement showing
the computations used by the Agent in determining the applicable
Eurodollar Rate hereunder.
(d)Limitations on Eurodollar Rate Fundings. In no event shall
more than six Eurodollar Rate Fundings be outstanding at any one time.
In no event may the Borrower request a Eurodollar Rate Funding if,
after giving effect to such Eurodollar Rate Funding, the Borrower would
be required to prepay the Eurodollar Rate Funding in order to pay the
principal amount of the Advances on the Maturity Date. In no event may
the Borrower rescind any request for a Eurodollar Rate Funding once
made. Notwithstanding anything to the contrary in this Agreement, the
Agent and the Lenders shall have no obligation to honor any request for
a Eurodollar Rate Funding if a Default or Event of Default has occurred
and is continuing when such request is made or on the first day of the
Interest Period applicable thereto. If on or prior to the first day of
any Interest Period the Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, or the Required Lenders
determine (which determination shall be conclusive) and notify the
Agent that the Eurodollar Rate will not adequately and fairly reflect
the cost to the Lenders of funding the requested Eurodollar Rate
Funding for such Interest Period, then the Agent shall give the
Borrower prompt notice thereof specifying the amounts or periods, and
so long as such condition remains in effect, the Lenders shall be under
no obligation to fund any Eurodollar Rate Fundings and the Borrower
shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Eurodollar Rate Fundings, either prepay such Eurodollar
Rate Fundings or convert such Eurodollar Rate Fundings into Floating
Rate Borrowings in accordance with the terms of this Agreement.
Notwithstanding any other provision of this Agreement, in the event
that it becomes unlawful for any Lender to make, maintain, or fund
Advances at the Eurodollar Rate hereunder, then such Lender shall
promptly notify the Borrower thereof and such Lender's obligation to
make, maintain or fund Advances at the Eurodollar Rate shall be
suspended until such time as such Lender may again make, maintain, and
fund Advances at the Eurodollar Rate. If the obligation of any Lender
to make, maintain or fund Advances at the Eurodollar Rate shall be
suspended pursuant to this Subsection 2.02(d), such Lender's affected
-------------------
Advances shall be automatically converted into Floating Rate Advances
on the last day(s) of the then current Interest Period(s) for the
affected Advances.
(e)Records. Absent error, the records of the Agent shall be
conclusive evidence as to the amount of each Eurodollar Rate Funding
and the interest rate and Interest Period applicable thereto.
(f)Default Interest. Upon the occurrence of any Default or
Event of Default, and so long as such Default or Event of Default
continues without written waiver thereof by the Required Lenders, each
Note shall bear interest at an annual rate that shall be four percent
(4.00%) plus the annual rate at which interest would otherwise accrue
on that Note. Accrual of interest at such increased rate shall not be
deemed a waiver or excuse of any such Default or Event of Default.
Section 2.03 Margins.
-------
(a)Generally. The Margin through and including the first
adjustment occurring as specified below shall be 1.00%. Beginning with
the receipt by the Lenders of the financial statements and Compliance
Certificates for the period ending September 30, 2001, the Margin shall
be adjusted each quarter on the basis of the Funded Debt Ratio as at
the end of the previous fiscal quarter, in accordance with the
following table:
Funded Debt Ratio Margin in Basis Points
----------------- ----------------------
1.75 to 1.00 or more 125.0
1.00 to 1.00 or more,
but less than 112.5
1.75 to 1.00
Less than 1.00 to 1.00 100.0
Reductions and increases in the Margin will be made quarterly on the
first day of the month following the date the Borrower's financial
statements and Compliance Certificates required under Section 5.01 are
------------
due. Notwithstanding the foregoing, (i) if the Borrower fails to
deliver any financial statements or Compliance Certificates when
required under Section 5.01, the Agent may (and, upon request of the
------------
Required Lenders, shall), by notice to the Borrower, increase the
Margin to the highest rates set forth above until such time as the
Agent has received all such financial statements and Compliance
Certificates, and (ii) no reduction in the Margin will be made if a
Default or an Event of Default has occurred and is continuing at the
time that such reduction would otherwise be made.
(b)Adjustments. If, upon receipt of the Borrower's audited
financial statements with respect to any fiscal year of the Borrower,
the Margin is determined to be higher than that based on the Borrower's
interim financial statements as of the end of such fiscal year, and the
Borrower is thus determined to have underpaid interest since the
adjustment date following the end of such fiscal year, the Borrower
shall pay such amount on demand. If, upon such receipt, the Margin is
determined to be lower than that based on the Borrower's interim
financial statements as of the end of such fiscal year, and the
Borrower is thus determined to have overpaid interest since the
adjustment date following the end of such fiscal year, the Lenders
shall credit such overpayment, first, as a prepayment of accrued but
unpaid interest on the Notes, and, second, as a prepayment of interest
thereafter accruing on the Notes.
Section 2.04 Payments.
--------
(a)Interest. Interest accruing on the principal balance of the
Notes shall be due and payable as follows:
(i) Interest accruing on the principal balance of the
Notes at the Floating Rate each calendar quarter
shall be due and payable on the last day of that
calendar quarter, with the first quarterly payment of
interest due on the last day of September, 2001.
(ii) Interest on each Eurodollar Rate Funding shall be due
and payable on the last day of the applicable
Interest Period or, if such Interest Period is six
months, on the last day of the third month during
such Interest Period, and on the last day of such
Interest Period.
(b)Principal. The principal balance of the Notes shall be due
and payable in full on the Revolving Credit Termination Date.
Section 2.05 Commitment Fee. The Borrower shall pay to the
---------------
Agent, for the benefit of the Lenders, a commitment fee at an annual rate equal
to 17.5 basis points (.00175%) applied to the aggregate daily average unused
amount of the Commitment Amounts hereunder. The commitment fee shall be due and
payable quarterly in arrears with the first quarterly payment due September 30,
2001. Any commitment fee remaining unpaid on the Revolving Credit Termination
Date shall be due and payable on that date.
Section 2.06 Termination or Reduction of the Commitments.
-------------------------------------------
The Borrower may at any time and from time to time upon 10 calendar days' prior
notice to the Agent permanently terminate the Commitments in whole or
permanently reduce the Commitments in part, without penalty or premium, provided
that (i) the Commitments may not be terminated while any Advances remain
outstanding, (ii) each partial reduction shall be in the amount of $1,000,000 or
a multiple thereof, (iii) any partial reduction of the Commitments shall be pro
rata as to each Lender in accordance with that Lender's Percentage, and (iv) no
reduction shall reduce the Commitments to an amount less than the aggregate
amount of the Advances outstanding at the time.
Section 2.07 Voluntary Prepayments. The Borrower may prepay
----------------------
the portion of the principal balance of the Notes bearing interest at a Floating
Rate (the "Floating Rate Portion") in whole or in part, at any time and from
time to time; provided that (i) prepayment of any Lender's Note must be
accompanied by pro rata prepayment of each other Lender's Note, (ii) any
prepayment of the full amount of any Note shall include accrued interest
thereon, and (iii) each partial prepayment of the Floating Rate Portion of the
Notes shall be in the principal amount of $1,000,000 or an integral multiple of
$100,000 greater than $1,000,000.
The Borrower may prepay the portion of the principal balance
of the Notes bearing interest at a Eurodollar Rate (the "Eurodollar Rate
Portion") in whole or in part, at any time from time to time; provided that (i)
prepayment of any Lender's Note must be accompanied by pro rata prepayment of
each other Lender's Note, (ii) any prepayment of the full amount of any Note
shall include accrued interest thereon, (iii) each partial prepayment of the
Eurodollar Rate Portion of the Notes shall be in the principal amount of
$1,000,000 or an integral multiple of $100,000 greater than $1,000,000, (iv) any
prepayment of the Eurodollar Rate Portion of the Notes shall be made only upon
three Bank Business Days' notice to the Agent, and (v) if the prepayment is made
on a date other than the last day of the applicable Interest Period, such
prepayment must be accompanied by a written agreement from Borrower to reimburse
the Lenders for any amounts due to the Lenders pursuant to Section 2.12(b).
---------------
Section 2.08 Computation of Interest and Fees. Interest
--------------------------------
under the Notes and the fees hereunder shall be computed on the basis of actual
number of days elapsed in a year of 360 days.
Section 2.09 Making of Payments. All payments of principal
------------------
and interest under the Notes and of the fees hereunder shall be made to the
Agent in immediately available funds. Payments received after 2:00 p.m.
(Minneapolis time) on any day shall be deemed received on the next succeeding
Bank Business Day. The Borrower and the Lenders agree that the amount shown on
the books and records of the Agent as being the principal balance of each
Lender's Note shall be prima facie evidence of such principal amount. The
Borrower hereby authorizes the Agent to charge against any account the Borrower
may maintain with Wells Fargo Bank Minnesota, National Association, an amount
equal to the accrued interest and fees from time to time due and payable to the
Agent under the Notes or hereunder, or (at the option of the Required Lenders)
to make an Advance in such amount, all without receipt of any request for such
charge or Advance.
Section 2.10 Payment on Nonbusiness Days. Payments of
---------------------------
interest on Eurodollar Fundings shall be governed by Section 2.04(a)(ii). With
-------------------
respect to all other payments to be made hereunder or under the Notes, whenever
such payments shall be stated to be due on a day other than a Bank Business Day,
such payment may be made on the next succeeding Bank Business Day, and such
extension of time shall in each case be included in the computation of payment
of interest on such Note or the fees hereunder, as the case may be.
Section 2.11 Use of Proceeds. The proceeds of the Advances
----------------
shall be used by the Borrower (i) for its general corporate purposes, (ii) to
refinancing existing indebtedness under the Existing Credit Agreement, and (iii)
for Permitted Acquisitions.
Section 2.12 Fees on Advances and Indemnity. In addition to
-------------------------------
any interest payable on Advances made hereunder and any fees or other amounts
payable hereunder, the Borrower agrees:
(a) If at any time any generally applicable law, rule or
regulation or the generally applicable interpretation or administration
thereof by any governmental authority (including, without limitation,
Regulation D of the Federal Reserve Board):
(iv) shall subject any Lender to any tax, duty or other
charges (including but not limited to any tax
designed to discourage the purchase or acquisition of
foreign securities or debt instruments by United
States nationals) with respect to this Agreement, or
shall materially change the basis of taxation of
payments to any Lender of the principal of or
interest on any portion of the principal balance of
the Notes bearing interest at a Eurodollar Rate
(except for the imposition of or changes in respect
of the rate of tax on the overall net income of that
Lender); or
(v) shall impose or deem applicable or increase any
reserve, special deposit or similar requirement
against assets of, deposits with or for the account
of, or credit extended by any Lender because of any
portion of the principal balance of any Note bearing
interest at a Eurodollar Rate;
and the result of any of the foregoing would be to increase the cost to
that Lender of making or maintaining any such portion or to reduce any
sum received or receivable by that Lender with respect to such portion,
then, within 30 days after demand by any Lender specifying the basis of
the Lender's assertion in reasonable detail, the Borrower shall pay
that Lender such additional amount or amounts as will compensate that
Lender for such increased cost or reduction.
(b)The Borrower shall also compensate any Lender, upon written
request by that Lender (which request shall set forth the basis for
requesting such amounts), for all losses and expenses in respect of any
interest or other consideration paid by that Lender to lenders of funds
borrowed by it or deposited with it to maintain any portion of the
principal balance of any Note at a Eurodollar Rate which that Lender
may sustain to the extent not otherwise compensated for hereunder and
not mitigated by the reemployment of such funds to the extent such loss
or expense arises (i) as a consequence of any failure by the Borrower
to make any payment when due of any amount due hereunder in connection
with any Eurodollar Rate Fundings, (ii) due to any failure of the
Borrower to borrow or convert any Eurodollar Rate Fundings on a date
specified therefor in a notice thereof, or (iii) due to any payment or
prepayment of any Eurodollar Rate Funding on a date other than the last
day of the applicable Interest Period for such Eurodollar Rate Funding.
A certificate as to any such loss or expense (including calculations,
in reasonable detail, showing how that Lender computed such loss or
expense) shall be promptly submitted by that Lender to the Borrower.
Such loss or expense may be computed as though that Lender acquired
deposits in the London interbank market to fund that portion of the
principal balance whether or not that Lender actually did so.
(c) A notice from any Lender under this Section claiming
compensation and setting forth the additional amount or amounts to be
paid to it hereunder shall be conclusive in the absence of error. In
determining any such amount, a Lender may use any reasonable averaging
and attribution methods.
Section 2.13 Capital Adequacy. If any Lender determines at
----------------
any time that its Return has been reduced as a result of any Capital Adequacy
Rule Change, that Lender may require the Borrower to pay it the amount necessary
to restore its Return to what it would have been had there been no Capital
Adequacy Rule Change. For purposes of this Section:
(a)"Return", for any period, means the percentage determined
by dividing (i) the sum of interest and ongoing fees earned by a Lender
under this Agreement during such period, by (ii) the average capital
that Lender is required to maintain during such period as a result of
its being a party to this Agreement, as reasonably determined in good
faith by that Lender based upon its total capital requirements and a
reasonable attribution formula that takes account of the Capital
Adequacy Rules then in effect. Return may be calculated for each
calendar quarter and for the shorter period between the end of a
calendar quarter and the date of termination in whole of this
Agreement.
(b)"Capital Adequacy Rule" means any law, rule, regulation or
guideline regarding capital adequacy that applies to any Lender, or the
interpretation thereof by any governmental or regulatory authority with
supervisory authority over such Lender. Capital Adequacy Rules include
rules requiring financial institutions to maintain total capital in
amounts based upon percentages of outstanding loans, binding loan
commitments and letters of credit.
(c)"Capital Adequacy Rule Change" means any change applicable
to banks generally in any Capital Adequacy Rule occurring after the
date of this Agreement, but the term does not include any changes in
applicable requirements that at the date hereof are scheduled to take
place under the existing Capital Adequacy Rules or any increases in the
capital that any Lender is required to maintain to the extent that the
increases are required due to a regulatory authority's action affecting
only that Lender.
(d)For purposes of this Section, "Lender" includes (but is not
limited to) the Agent, the Lenders, as defined elsewhere in this
Agreement, and any assignee of any interest of any Lender hereunder and
any participant in the loans made hereunder.
The initial notice sent by a Lender shall be sent as promptly
as practicable after that Lender learns that its Return has been reduced, shall
include a demand for payment of the amount necessary to restore that Lender's
Return for the quarter in which the notice is sent, and shall state in
reasonable detail the cause for the reduction in its Return and its calculation
of the amount of such reduction. Thereafter, that Lender may send a new notice
during each calendar quarter setting forth the calculation of the reduced Return
for that quarter and including a demand for payment of the amount necessary to
restore its Return for that quarter.
Section 2.14. Failure of Any Lender to Make Advances. Should
--------------------------------------
any Lender default in making an Advance, the other Lenders shall not be released
from their several obligations to make Advances as agreed hereunder, and, in the
event such defaulting Lender is the Agent, the other Lenders shall forthwith
appoint one of themselves to act as Agent. However, such default shall not
obligate any of the Lenders to increase their Commitment Amounts. Without
limiting any other remedies to which the Borrower may be entitled, Borrower
shall be released from all liability to pay such defaulting Lender any accrued
or future fees under Section 2.05 and the other obligations of the Borrower to
such defaulting Lender under the Loan Documents, except the obligation to repay
the outstanding Revolving Loans theretofore made by such Lender and interest
accrued thereon as provided in the Loan Documents, shall terminate; provided,
however, once such default is cured, then such defaulting Lender shall,
subsequent thereto, have all rights under the Loan Documents.
ARTICLE III.
CONDITIONS PRECEDENT
Section 3.01 Initial Conditions Precedent. The obligation of
----------------------------
the Lenders to make any Advance is subject to the condition precedent that each
Lender shall have received on or before the day of the first Advance all of the
following, each dated (unless otherwise indicated) as of the date hereof, in
form and substance satisfactory to each Lender:
(a) The Notes, properly executed on behalf of the Borrower.
(b) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower or FBA, (ii) no financing statements have
been filed and remain in effect against the Borrower or FBA except
financing statements perfecting only Liens permitted under Section
-------
6.01, and (iii) no judgment liens are in effect against the Borrower or
----
FBA.
(c) Separate certificates of the secretaries of the Borrower,
FBA and San Francisco Company certifying, in the case of each such
corporation, (i) that the execution, delivery and performance of the
Loan Documents and other documents contemplated hereunder to which such
corporation is a party have been duly approved by all necessary action
of the Board of Directors of such corporation, and attaching true and
correct copies of the applicable resolutions granting such approval,
(ii) that attached to such certificate are true and correct copies of
the articles of incorporation and bylaws of such corporation, together
with such copies, and (iii) the names of the officers of such
corporation who are authorized to sign the Loan Documents and other
documents contemplated hereunder to which such corporation is a party,
including, with respect to the Borrower, requests for Advances,
together with the true signatures of such officers. The Agent and the
Lenders may conclusively rely on each such certificate until they shall
receive a further certificate of the Secretary or Assistant Secretary
of the applicable corporation canceling or amending the prior
certificate and submitting the signatures of the officers named in such
further certificate.
(d) A certificate of good standing of the Borrower and of each
of its Subsidiaries, dated not more than twenty (20) days before the
date of the first Advance.
(e) A signed copy of an opinion of counsel for the Borrower
and its Subsidiaries, addressed to the Lenders as to matters referred
to in Sections 4.01, 4.02, 4.03 and 4.07, and as to such other matters
------------- ---- ---- ----
as the Lenders may reasonably request, with that opinion being subject
to customary assumptions and limitations and reasonably acceptable to
each Lender's counsel. In the case of Section 4.07, the opinion may be
------------
to the best knowledge of such counsel, and, in the case of Section
-------
4.03, insofar as it relates to enforcement of remedies, it may be
----
subject to applicable bankruptcy, insolvency, reorganization or similar
laws affecting the rights of creditors generally from time to time, and
to usual equity principles.
(f) The Pledge Agreement, duly executed by the Borrower.
(g) One or more certificates, representing in the aggregate
all of the issued and outstanding capital stock of FBA and First Bank
(Missouri) that is owned by the Borrower, and one blank stock power
executed by the Borrower for each such certificate.
(h) The Intercompany Note, duly executed by FBA.
(i) The FBA Security Agreement, duly executed by FBA.
(j) Certificates representing, in the aggregate, all of the
issued and outstanding capital stock of San Francisco Company owned by
FBA, and one blank stock power executed by FBA for each such
certificate.
(k) The Third Party Pledge Agreement, duly executed by San
Francisco Company.
(l) Certificates representing, in the aggregate, all the
issued and outstanding capital stock of First Bank (California) owned
by San Francisco Company, and one blank stock power executed by San
Francisco Company for each such certificate.
(m) Evidence that all of the Borrower's obligations under the
Existing Credit Agreement have been paid and discharged in full, or
will be so paid and discharged from proceeds of the first Borrowing.
Section 3.02 Conditions Precedent to All Advances. The
-----------------------------------------
obligation of each Lender to make any Advance (including the initial Advance)
shall be subject to the further conditions precedent that on the date of such
Advance:
(a) The representations and warranties contained in Article IV
are correct on and as of the date of such Advance as though made on and
as of such date, except to the extent that such representations and
warranties relate solely to an earlier date.
(b) No event has occurred and is continuing, or would result
from such Advance, which constitutes a Default or an Event of Default.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders as follows:
Section 4.01 Corporate Existence and Power. The Borrower and
------------------------------
each of its Subsidiaries (i) is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation,
and is duly licensed or qualified to transact business in all jurisdictions
where the character of the property owned or leased or the nature of the
business transacted by it makes such licensing or qualification necessary and
where failure to be so licensed or qualified would have a materially adverse
impact on its business or properties; (ii) is in compliance with the
requirements of applicable laws and regulations, the noncompliance with which
would materially and adversely affect its business or financial condition; and
(iii) has all requisite power and authority to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents.
Section 4.02 Authorization of Borrowing; No Conflict as
-----------------------------------------------
to Law or Agreements. The execution, delivery and performance by the Borrower
--------------------
and each of its Subsidiaries of the Loan Documents to which it is a party and
the Borrowings from time to time hereunder have been duly authorized by all
necessary corporate action and do not and will not (i) require any consent or
approval of the stockholders of the Borrower or any of its Subsidiaries, or any
authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, except such as
have already been obtained, (ii) violate any provision of any law, rule or
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to the Borrower or any of its
Subsidiaries or of the Articles of Incorporation or Bylaws of the Borrower or
any of its Subsidiaries, (iii) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other material agreement,
lease or instrument to which the Borrower or any of its Subsidiaries is a party
or by which it or its properties may be bound or affected, or (iv) result in, or
require, the creation or imposition of any Lien or other charge or encumbrance
of any nature upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower or any of its Subsidiaries.
Section 4.03 Legal Agreements. This Agreement and the other
-----------------
Loan Documents to which it is a party constitute, the legal, valid and binding
obligations of the Borrower and each of its Subsidiaries, as applicable,
enforceable against each such party in accordance with their respective terms.
Section 4.04 Subsidiaries. Except as listed in Schedule 4.04,
------------ -------------
as of the date of this Agreement the Borrower has no direct or indirect
Subsidiaries. The percentage of the capital stock of each Subsidiary owned by
the Borrower or by one or more other Subsidiaries is as set forth in Schedule
--------
4.04.
----
Section 4.05 Financial Condition. The Borrower has
-------------------
heretofore furnished to the Lenders its audited financial statement as of
December 31, 2000, and call reports of the Bank Subsidiaries dated as of June
30, 2001. Those financial statements fairly present the financial condition of
the Borrower and its Subsidiaries on the dates thereof and the results of their
operations and cash flows for the periods then ended, and were prepared in
accordance with GAAP, subject, in the case of the interim financial statements,
to year-end audit adjustments.
Section 4.06 Adverse Change. There has been no material
---------------
adverse change in the business, properties or condition (financial or otherwise)
of the Borrower or its Subsidiaries since the date of the latest financial
statement referred to in Section 4.05.
------------
Section 4.07 Litigation. Except as disclosed in Schedule
--------
4.07, as of the date of this Agreement, there are no actions, suits or
----
proceedings pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or any of its Subsidiaries or the properties of the
Borrower or any of its Subsidiaries before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Borrower or any of its Subsidiaries, would
have a material adverse effect on the financial condition, properties, or
operations of the Borrower or any of its Subsidiaries.
Section 4.08 Regulation U. No part of the proceeds of any
-------------
Advance will be used by the Borrower or any Bank Subsidiary directly or
indirectly, (i) to purchase or carry any margin stock (as defined in Regulation
U of the Board of Governors of the Federal Reserve System; herein, the "Board")
or to extend credit to others for the purpose of purchasing or carrying any
margin stock or (ii) for any purpose which entails a violation of, or which is
inconsistent with, the provisions of Regulation U issued by the Board.
Section 4.9 Taxes. The Borrower and each of its
-----
Subsidiaries has paid or caused to be paid to the proper authorities when due
all federal, state and local taxes required to be withheld by it. The Borrower
and each of its Subsidiaries has filed all federal, state and local tax returns
which to the knowledge of the officers of the Borrower are required to be filed,
and the Borrower and each of its Subsidiaries has paid or caused to be paid to
the respective taxing authorities all taxes as shown on said returns or on any
assessment received by it to the extent such taxes have become due, other than
taxes whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which the Borrower or its Subsidiary, as
applicable, has provided adequate reserves in accordance with GAAP.
Section 4.10 Titles. The Borrower or its Subsidiaries, as
------
applicable, have good title to each of the material properties and assets
reflected in the latest balance sheet referred to in Section 4.05.
------------
Section 4.11 ERISA. As of the date of this Agreement, no
-----
Plan established or maintained by the Borrower or any ERISA Affiliate that is
subject to Part 3 of Subtitle B of Title I of ERISA had an accumulated funding
deficiency (as such term is defined in Section 302 of ERISA) in excess of
$1,000,000 as of the last day of the most recent fiscal year of such Plan ended
prior to the date hereof, and no liability to the Pension Benefit Guaranty
Corporation or the Internal Revenue Service in excess of such amount has been,
or is expected by the Borrower or any ERISA Affiliate to be, incurred with
respect to any Plan of the Borrower or any ERISA Affiliate. Neither the Borrower
nor any of its Subsidiaries has any contingent liability with respect to any
post-retirement benefit under a Welfare Plan as described in Section 3(1) of
ERISA, other than liability for continuation coverage described in Part 6 of
Subtitle B of Title I of ERISA.
ARTICLE V.
AFFIRMATIVE COVENANTS
So long as any Note or any other Obligation hereunder shall
remain unpaid or any Commitments shall be outstanding, the Borrower will comply,
and will cause each of its Subsidiaries to comply, with the following
requirements, unless the Required Lenders shall otherwise consent in writing:
Section 5.01 Reporting Requirements. The Borrower will
----------------------
deliver to each Lender:
(a) As soon as available, and in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the annual
audit report of the Borrower with the unqualified opinion of
independent certified public accountants selected by the Borrower and
acceptable to the Agent and the Required Lenders.
(b) As soon as available, and in any event within 45 days
after the end of each fiscal quarter of the Borrower, a copy of the
Borrower's Form 10Q filed with the SEC with respect to such fiscal
quarter.
(c) As soon as available, and in any event within 90 days
after the end of each fiscal year of FBA, a copy of the annual audit
report of FBA with the unqualified opinion of independent certified
public accountants selected by FBA and acceptable to the Agent and the
Required Lenders.
(d) As soon as available, and in any event within 45 days
after the end of each fiscal quarter of FBA, a copy of FBA's Form 10Q
filed with the SEC with respect to such fiscal quarter.
(e) As soon as available, and in any event within 90 days
after the end of each fiscal year of the Borrower, FBA, and San
Francisco Company, their Annual Report of Domestic Holding Companies
(FRY-6) required by the Federal Reserve Banks of the districts where
they are located.
(f) As soon as available, and in any event no later than 45
days after the end of each calendar quarter, the complete FRY-9LP and
FRY-9C reports required to be filed by the Borrower and its
Subsidiaries quarterly with the Federal Reserve Banks of the districts
where they are located.
(g) As soon as available, and in any event within 45 days
after the end of each calendar quarter, the complete call report
prepared by each Bank Subsidiary at the end of such calendar quarter in
compliance with the requirements of any federal or state regulatory
agency which has authority to examine such Bank Subsidiary, prepared in
accordance with the requirements imposed by the applicable regulatory
authorities and applied on a basis consistent with the accounting
practices reflected in any previous call reports and similar statements
delivered to the Agent prior to the date of this Agreement.
(h) As soon as available, and in any event within 45 days
after the end of each calendar quarter, commencing November 15, 2001, a
Compliance Certificate, duly executed by the chief financial officer of
the Borrower.
(i) Unless covered by insurance, promptly after the
commencement thereof, notice in writing of all litigation and of all
proceedings before any governmental or regulatory agency which, if
determined adversely to the Borrower or any of its Subsidiaries, would
have a material adverse effect on the financial condition, properties
or operations of the Borrower or any of its Subsidiaries.
(j) As promptly as practicable (but in any event not later
than five business days) after the Borrower or an executive officer of
any of its Subsidiaries obtains knowledge of the occurrence of any
Default or Event of Default, notice of such occurrence, together with a
detailed statement by a responsible officer of the Borrower of the
steps being taken by the Borrower to cure the effect of such event.
(k) Promptly upon the filing thereof, copies of all
registration statements and all annual and quarterly reports which the
Borrower or any Subsidiary of the Borrower shall have filed with the
Securities and Exchange Commission.
(l) Such other information respecting the financial condition
and results of operations of the Borrower or any of its Subsidiaries as
any Lender may from time to time reasonably request.
Section 5.02 Books and Records; Inspection and Examination.
-----------------------------------------------
The Borrower and each of its Subsidiaries will keep accurate books of record and
account for itself in which true and complete entries will be made in accordance
with GAAP and, upon request of any Lender, will give any representative of that
Lender reasonable access to, and permit such representative to examine, copy or
make extracts from, any and all books, records and documents in its possession,
to inspect any of its properties and to discuss its affairs, finances and
accounts with any of its principal officers, all at such times during normal
business hours and as often as any Lender may reasonably request; provided,
--------
however, that with respect to the loans made by any Bank Subsidiary or First
-------
Capital Group, Inc., a Lender may only review and make copies of summaries of
the watch lists prepared on a quarterly basis and loan credit reports; review of
specific loan accounts and loan review reports may be requested by any Lender,
whereupon the Borrower and such Lender shall within 10 days agree to the number
of such accounts and reports that are reasonable and appropriate to review;
provided further, however, that during the continuance of any Default or Event
---------------- -------
of Default, there shall be no restrictions upon the scope of the review,
inspection and reproduction rights of the Lenders concerning the loans of any
Subsidiary.
Section 5.03 Compliance with Laws. The Borrower and each of
---------------------
its Subsidiaries will comply with the requirements of applicable laws and
regulations, the noncompliance with which would materially and adversely affect
its business or the financial condition of the Borrower or any of its
Subsidiaries.
Section 5.04 Payment of Taxes and Other Claims. The Borrower
----------------------------------
and each of its Subsidiaries will pay or discharge, when due, (a) all taxes,
assessments and governmental charges levied or imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, (b) all federal, state and local taxes required
to be withheld by it, and (c) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a Lien or charge upon any
properties of the Borrower or any of its Subsidiaries; provided, that neither
the Borrower nor any of its Subsidiaries shall be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which the Borrower or
its Subsidiary, as applicable, has provided adequate reserves in accordance with
GAAP.
Section 5.05 Operations. The Borrower will, and will cause
----------
each of its Subsidiaries to, operate and maintain its business and property in
the ordinary course in a prudent manner consistent with sound banking practices
and in such a manner that the performance by the Borrower of its Obligations
hereunder is not jeopardized or impaired.
Section 5.06 Insurance. The Borrower and each of its
---------
Subsidiaries will obtain and maintain insurance with insurers believed by it to
be responsible and reputable, in such amounts and against such risks as the
Borrower considers prudent and economical. Without limiting the foregoing, the
Borrower will cause the Bank Subsidiaries to maintain blanket bond coverage,
property and casualty coverage, and errors and omissions coverage as customary
for banks.
Section 5.07 Preservation of Corporate Existence. The
-----------------------------------
Borrower and each of its Subsidiaries will preserve and maintain its corporate
existence and all of its material rights, privileges and franchises; provided,
--------
however, that neither the Borrower nor its Subsidiaries shall be required to
-------
preserve any of its rights, privileges and franchises if its Board of Directors
shall determine that the preservation thereof is no longer desirable in the
conduct of its business and that the loss thereof is not disadvantageous in any
material respect to any Lender as a holder of a Note.
Section 5.08 Additional Collateral. The Borrower will
---------------------
deliver, and cause FBA and San Francisco Company to deliver, to the Agent any
shares of capital stock of any FDIC-insured financial institution or its holding
company that are acquired in whole or in part with proceeds of Advances. Any
shares of capital stock so delivered shall constitute additional collateral
under the Pledge Agreement (if delivered by the Borrower), the FBA Security
Agreement (if delivered by FBA) or the Third Party Pledge Agreement (if
delivered by San Francisco Company).
ARTICLE VI.
NEGATIVE COVENANTS
So long as any Note or any other Obligation shall remain
unpaid or any Commitments shall be outstanding, the Borrower will comply, and
will cause each of its Subsidiaries to comply, with the following covenants
unless the Required Lenders shall otherwise consent in writing:
Section 6.01 Liens. The Borrower will not create, incur,
-----
assume or suffer to exist, or permit FBA or San Francisco Company to create,
incur, assume or suffer to exist, any Lien or other charge or encumbrance of any
nature on any of the Collateral, now owned or hereafter acquired, or assign or
otherwise convey any right to receive income with respect to the Collateral or
give its consent to the subordination of any right or claim of the Borrower to
any right or claim of any other Person.
Section 6.02 Indebtedness. Neither the Borrower nor any of
------------
its Subsidiaries that are not Bank Subsidiaries will incur, create, assume or
permit to exist any indebtedness or liability on account of deposits or advances
or any indebtedness for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, except:
(a) Indebtedness to the Lenders under the Notes.
(b) Indebtedness of the Borrower or its Subsidiaries listed in
Schedule 6.02 hereto, and any extensions or renewals thereof.
-------------
(c) Indebtedness of the Borrower or any of its Subsidiaries
that may be treated as regulatory capital, or that is issued to provide
a source of repayment of securities that may be treated as regulatory
capital, of the Borrower or such Subsidiary.
(d) Subordinated Debt, or renewals or extensions thereof.
(e) Indebtedness not otherwise permitted under this Section
-------
6.02, so long as such indebtedness does not exceed $5,000,000 in the
----
aggregate outstanding at any one time.
Section 6.03 Guaranties. Neither the Borrower nor any of its
----------
Subsidiaries will assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligations of
any other Person, except:
(a) The endorsement of negotiable instruments by the Borrower
or any of its Subsidiaries for deposit or collection or similar
transactions in the ordinary course of business.
(b) Guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons in
existence on the date hereof and listed in Schedule 6.03 hereto.
-------------
(c) Letters of credit and other obligations in the nature of
guaranties incurred by the Bank Subsidiaries in the ordinary course of
their banking businesses.
(d) Other assumptions, guarantees, endorsements and similar
liabilities in connection with obligations of other Persons, not in
excess of $5,000,000 in the aggregate outstanding at any one time.
Section 6.04 Dividends. The Borrower will not pay dividends,
---------
or make any payments on account of the purchase, redemption or other retirement
of any of its common stock, or make any distribution in respect thereof,
directly or indirectly (any such payment or distribution being a "shareholder
distribution"). The Borrower will not make any shareholder distribution with
respect to any of its preferred stock in excess of $1,000,000 in the aggregate
during any period of 12 consecutive months.
Section 6.05 Consolidation and Merger. Neither the Borrower
-------------------------
nor any of its Subsidiaries will consolidate with or merge into any Person, or
permit any other Person to merge into it, or acquire (in a transaction analogous
in purpose or effect to a consolidation or merger) all or substantially all of
the assets of any other Person, except that the foregoing shall not prohibit any
Permitted Acquisition.
Section 6.06 Subordinated Debt. Neither the Borrower nor
------------------
any of its Subsidiaries will (i) make any payment of, or acquire, any
Subordinated Debt except as expressly permitted by the subordination provision
thereof; (ii) give security for all or any part of such Subordinated Debt; (iii)
amend or cancel the subordination provisions of such Subordinated Debt; (iv)
take or omit to take any action as a result of which the subordination of such
Subordinated Debt or any part thereof to the Notes might be terminated, impaired
or adversely affected; or (v) omit to give the Lenders prompt written notice of
any default under any agreement or instrument relating to such Subordinated Debt
by reason whereof such Subordinated Debt might become or be declared to be
immediately due and payable.
Section 6.07 Restrictions on Nature of Business. The
----------------------------------
Borrower will not, and will not permit any of its Subsidiaries to, change the
nature of its business substantially, and will not engage, or permit any of its
Subsidiaries to engage, in any line of business if, as a result thereof, the
business of the Borrower and its Subsidiaries, taken as a whole, would not be
predominantly the banking and thrift business (including activities deemed
closely related to banking and/or thrift business by applicable regulatory
authorities) as currently constituted.
Section 6.8 Negative Pledges; Subsidiary Restrictions. The
--------------------------------------------
Borrower will not, and will not permit any Subsidiary (including Bank
Subsidiaries) to, enter into any agreement, bond, note or other instrument with
or for the benefit of any Person other than the Lenders which would (i) prohibit
the Borrower or such Subsidiary from granting, or otherwise limit the ability of
the Borrower or such Subsidiary to grant, to the Lenders any Lien on any assets
or properties of the Borrower or such Subsidiary (it being agreed, however, that
nothing herein shall preclude the Bank Subsidiaries from granting security
interests to secure deposits), or (ii) require the Borrower or such Subsidiary
to grant a Lien to any other Person if the Borrower or such Subsidiary grants
any Lien to the Lenders. Except pursuant to any applicable law or regulation,
the Borrower will not permit any Subsidiary to place or allow any restriction,
directly or indirectly, on the ability of such Subsidiary to (a) pay dividends
or any distributions on or with respect to such Subsidiary's capital stock or
(b) make loans or other cash payments to the Borrower.
Section 6.9 Issuance of Additional Stock. The Borrower
------------------------------
will not, and will not permit FBA or San Francisco Company to, permit any
Subsidiary whose shares are pledged pursuant to the Pledge Agreement, the FBA
Security Agreement or the Third Party Pledge Agreement to issue any additional
shares of capital stock unless such additional shares are immediately pledged
pursuant to the Pledge Agreement, the FBA Security Agreement or the Third Party
Pledge Agreement, as applicable; provided, however, that FBA may issue
additional shares of its voting stock free and clear of this prohibition so long
as the shares of its voting stock that are subject to the Pledge Agreement
constitute more than 80% of all of the voting stock of FBA.
ARTICLE VII.
FINANCIAL COVENANTS
Section 7.01 Total Risk Based Capital Ratio. The Borrower
--------------------------------
shall cause each Bank Subsidiary to maintain its Total Risk Based Capital Ratio
at not less than 10%.
Section 7.02 Tier I Risk Based Capital Ratio. The Borrower
---------------------------------
shall cause each Bank Subsidiary to maintain its Tier I Risk Based Capital Ratio
at not less than 6%.
Section 7.03 Leverage. The Borrower shall maintain on a
--------
consolidated basis, and shall cause each Bank Subsidiary to maintain, a minimum
Leverage of not less than 5%.
Section 7.04 Minimum Return on Assets.
------------------------
(a) The Borrower will maintain (on a consolidated basis) its
Return on Assets, determined as of each calendar quarter end, at not
less than .70%.
(b) The Borrower will cause First Bank (Missouri) and First
Bank (California) to maintain (on a combined basis) their Return on
Assets, determined as of each quarter-end, at not less than .70%.
Section 7.05 Maximum Non-Performing Assets.
-----------------------------
(a) The Borrower will maintain on a consolidated basis, its
Non-Performing Assets at an amount not greater than 25% of its Primary
Equity Capital, determined as of each calendar quarter end.
(b) The Borrower will cause First Bank (Missouri) and First
Bank (California) to maintain their Non-Performing Assets at amounts
not greater than 20% and 10%, respectively, of their Primary Equity
Capital, determined as of each calendar quarter-end.
Section 7.06 Allowance for Loan and Lease Losses. The
-----------------------------------
Borrower will cause the Bank Subsidiaries to maintain their combine allowance
for loan and lease losses at not less than 100% of their combined Non-Performing
Assets.
ARTICLE VIII.
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 8.01 Events of Default. "Event of Default", wherever
-----------------
used herein, means any one of the following events:
(a) Default in the payment of principal of any Note when the
same becomes due and payable.
(b) Default in the payment of interest on any Note or of any
fees or other amounts required to be paid under this Agreement, and the
continuance of such default for a period of ten days or more.
(c) Default in the performance, or breach, of any covenant or
agreement on the part of the Borrower contained in any Financial
Covenant or in Article VI hereof.
(d) Default in a material respect in the performance, or
breach, of any covenant or agreement of the Borrower in this Agreement
(other than a covenant or agreement a default in whose performance or
whose breach is elsewhere in this Section specifically dealt with), and
the continuance of such default or breach for a period of 30 days after
the date on which an executive officer of the Borrower or any of its
Subsidiaries first obtains knowledge of such default or breach.
(e) Any representation or warranty made by the Borrower in
this Agreement or by the Borrower (or any of its officers) or any of
its Subsidiaries (or any of its officers) in any other Loan Document,
certificate, instrument, or statement contemplated by or made or
delivered pursuant to or in connection with this Agreement, shall prove
to have been incorrect or misleading in any material respect when made.
(f) A default under any bond, debenture, note or other
evidence of indebtedness of the Borrower or any of its Subsidiaries in
excess of $2,000,000 (other than to the Lenders) or under any indenture
or other instrument under which any such evidence of indebtedness has
been issued or by which it is governed where a party thereto has the
right to accelerate any indebtedness owing to such party from the
Borrower or any of its Subsidiaries thereunder as a result of such
default, or any default by the Borrower or any of its Subsidiaries in
the payment of required principal or interest under any of the
foregoing agreements or instruments.
(g) An event of default shall occur under any security
agreement, mortgage, deed of trust, assignment or other instrument or
agreement directly or indirectly securing any obligations of the
Borrower hereunder or under any Note or under any guaranty of such
obligations.
(h) Default in the payment of any amount in excess of
$2,000,000 owed by the Borrower or any of its Subsidiaries to any
Lender other than hereunder or under the Notes and the expiration of
the applicable period of grace, if any, with respect thereto; provided,
--------
however, that if such default shall be cured by the Borrower or its
-------
Subsidiary, as applicable, as may be permitted by the terms of such
indebtedness, or waived by the Lender holding such indebtedness, in
each case prior to the commencement of any action under Section 8.02,
------------
then the Event of Default hereunder by reason of such default shall be
deemed likewise to have been thereupon cured or waived.
(i) The Borrower or any of its Subsidiaries shall be
adjudicated a bankrupt or insolvent, or admit in writing its inability
to pay its debts as they mature, or make an assignment for the benefit
of creditors; or the Borrower or any of its Subsidiaries shall apply
for or consent to the appointment of any receiver, trustee, or similar
officer for it or for all or any substantial part of its property; or
such receiver, trustee or similar officer shall be appointed without
the application or consent of the Borrower or its Subsidiary, as
applicable and such appointment shall continue undischarged for a
period of 30 days; or the Borrower or any of its Subsidiaries shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it
under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against the Borrower
or any of its Subsidiaries and shall continue without dismissal for a
period of 30 days; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower or any of its
Subsidiaries and such judgment, writ, or similar process shall not be
released, vacated or fully bonded within 30 days after its issue or
levy.
(j) A petition shall be filed by the Borrower or any of its
Subsidiaries under the United States Bankruptcy Code naming the
Borrower or any of its Subsidiaries as debtor; or an involuntary
petition shall be filed against the Borrower or any of its Subsidiaries
under the United States Bankruptcy Code, and such petition shall not
have been dismissed within 45 days after the Borrower of the applicable
Subsidiary has received notice of such filing; or an order for relief
shall be entered in any case under the United States Bankruptcy Code
naming the Borrower or any of its Subsidiaries as debtor.
(k) The rendering against the Borrower or any of its
Subsidiaries of a final judgment, decree or order for the payment of
money in excess of $5,000,000 and the continuance of such judgment,
decree or order unsatisfied and in effect for any period of 30
consecutive days without a stay of execution or other similar relief.
(l) A writ of attachment, garnishment, levy or similar process
shall be issued against or served upon the Agent or any Lender with
respect to (i) any property of the Borrower or any of its Subsidiaries
in the possession of the Agent or such Lender, or (ii) any indebtedness
of the Agent or such Lender to the Borrower or any of its Subsidiaries,
and the same shall not be lifted within 30 days.
(m) A trustee shall have been appointed by an appropriate
United States District Court to administer any Plan, or the Pension
Benefit Guaranty Corporation shall have instituted proceedings to
terminate any Plan or to appoint a trustee to administer any Plan, or
withdrawal liability shall have been asserted against the Borrower or
any ERISA Affiliate by a Multiemployer Plan; or the Borrower or any
ERISA Affiliate shall have incurred liability to the Pension Benefit
Guaranty Corporation, the Internal Revenue Service, the Department of
Labor or Plan participants in excess of $2,000,000 with respect to any
Plan; or any Reportable Event that the Required Lenders may determine
in good faith might constitute grounds for the termination of any Plan,
for the appointment by the appropriate United States District Court of
a trustee to administer any Plan or for the imposition of withdrawal
liability with respect to a Multiemployer Plan, shall have occurred and
be continuing 30 days after written notice to such effect shall have
been given to the Borrower by the Lenders.
(n) The issuance against the Borrower, or any Subsidiary of
the Borrower (including without limitation, any Bank Subsidiary) of any
informal or formal administrative action, temporary or permanent, by
any federal or state regulatory agency having jurisdiction or control
over the Borrower or such Subsidiary, such action taking the form of,
but not limited to: (i) any directive citing conditions or activities
deemed to be unsafe or unsound or breaches of fiduciary duty or law or
regulation; (ii) a memorandum of understanding; (iii) a cease and
desist order; (iv) the termination of insurance coverage of customer
deposits by the Federal Deposit Insurance Corporation; (v) the
suspension or removal of an executive officer or director, or the
prohibition of participation by any others in the business affairs of
Borrower or such Subsidiary; (vi) a capital maintenance agreement; or
(vii) any other regulatory action, agreement or understanding involving
safety or soundness issues with respect to Borrower or such Subsidiary.
(o) James F. Dierberg, Mary W. Dierberg, members of their
immediate family, and trusts, partnerships and other organizations of
which they have effective voting control shall cease to own in the
aggregate at least 51% of the voting shares of the Borrower.
Section 8.02 Rights and Remedies. Upon the occurrence of an
--------------------
Event of Default or at any time thereafter until such Event of Default is cured
to the written satisfaction of the Required Lenders, the Agent may, with the
consent of the Required Lenders, and shall, upon written request of the Required
Lenders:
(a) By notice to the Borrower, declare the Commitments to be
terminated, whereupon the same shall forthwith terminate.
(b) By notice to the Borrower, declare the entire unpaid
principal amount of the Notes then outstanding, all interest accrued
and unpaid thereon, and all other amounts payable under this Agreement
to be forthwith due and payable, whereupon the Notes, all such accrued
interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower.
(c) Without notice to the Borrower and without further action,
apply (and direct each Lender to apply) any and all money owing by any
Lender to the Borrower to the payment of the Notes then outstanding,
including interest accrued thereon, and of all other sums then owing by
the Borrower hereunder.
(d) Exercise any other rights and remedies available to the
Agent and the Lenders by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 8.01(i) or (j) hereof, the entire unpaid principal amount
--------------- ---
of the Notes then outstanding, all interest accrued and unpaid thereon, and all
other amounts payable under this Agreement shall be immediately due and payable
without presentment, demand, protest or notice of any kind.
Section 8.03 Offset. In addition to the remedies set forth
------
in Section 8.02, upon the occurrence of any Event of Default and thereafter
-------------
while the same be continuing, the Borrower hereby irrevocably authorizes each
Lender to set off any Obligations owed to such Lender against all deposits and
credits of the Borrower with, and any and all claims of the Borrower against,
such Lender. Such right shall exist whether or not such Lender shall have made
any demand hereunder or under any other Loan Document, whether or not the
Obligations, or any part thereof, or deposits and credits held for the account
of the Borrower is or are matured or unmatured, and regardless of the existence
or adequacy of any collateral, guaranty or any other security, right or remedy
available to such Lender or Lenders. Each Lender agrees that, as promptly as is
reasonably possible after the exercise of any such setoff right, it shall notify
the Borrower of its exercise of such setoff right; provided, however, that the
-------- -------
failure of such Lender to provide such notice shall not affect the validity of
the exercise of such setoff rights.
ARTICLE IX.
THE AGENT
Section 9.01 Authorization. Each Lender and the holder of
-------------
each Note irrevocably appoints and authorizes the Agent to act on behalf of such
Lender or holder to the extent provided herein or in any document or instrument
delivered hereunder or in connection herewith, and to take such other action as
may be reasonably incidental thereto.
Section 9.02 Distribution of Payments and Proceeds.
-------------------------------------
(a) After deduction of any costs of collection as hereinafter
provided, the Agent shall remit to each Lender that Lender's Percentage
of all payments of principal, interest, fees and other amounts for the
account of the Lenders that are received by the Agent under the Loan
Documents. Each Lender's interest in the Loan Documents shall be
payable solely from payments, collections and proceeds actually
received by the Agent under the Loan Documents; and the Agent's only
liability to the Lenders hereunder shall be to account for each
Lender's Percentage of such payments, collections and proceeds in
accordance with this Agreement. If the Agent is ever required for any
reason to refund any such payments, collections or proceeds, each
Lender will refund to the Agent, upon demand, its Percentage of such
payments, collections or proceeds, together with its Percentage of
interest or penalties, if any, payable by the Agent in connection with
such refund. The Agent may, in its sole discretion, make payment to the
Lenders in anticipation of receipt of payment from the Borrower. If the
Agent fails to receive any such anticipated payment from the Borrower,
each Lender shall promptly refund to the Agent, upon demand, any such
payment made to it in anticipation of payment from the Borrower,
together with interest for each day on such amount until so refunded at
a rate equal to the Fed Funds Rate for each such date.
(b) Notwithstanding the foregoing, if any Lender has
wrongfully refused to fund its Percentage of any Borrowing or other
Advance as required hereunder, or if the principal balance of any
Lender's Note is for any other reason less than its Percentage of the
aggregate principal balances of the Notes then outstanding, the Agent
may remit all payments received by it to the other Lenders until such
payments have reduced the aggregate amounts owed by the Borrower to the
extent that the aggregate amount owing to such Lender hereunder is
equal to its Percentage of the aggregate amount owing to all of the
Lenders hereunder. The provisions of this paragraph are intended only
to set forth certain rules for the application of payments, proceeds
and collections in the event that a Lender has breached its obligations
hereunder and shall not be deemed to excuse any Lender from such
obligations.
Section 9.03 Expenses. All payments, collections and
--------
proceeds received or effected by the Agent may be applied, first, to pay or
reimburse the Agent for all costs, expenses, damages and liabilities at any time
incurred by or imposed upon the Agent in connection with this Agreement or any
other Loan Document (including but not limited to all reasonable attorney's
fees, foreclosure expenses and advances made to protect the security of any
collateral). If the Agent does not receive payments, collections or proceeds
sufficient to cover any such costs, expenses, damages or liabilities within 30
days after their incurrence or imposition, each Lender shall, upon demand, remit
to the Agent its Percentage of the difference between (i) such costs, expenses,
damages and liabilities, and (ii) such payments, collections and proceeds.
Section 9.04 Payments Received Directly by Lenders. If any
---------------------------------------
Lender or other holder of a Note shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of offset or otherwise) on
account of principal of or interest on any Note other than through distributions
made in accordance with Section 9.02, such Lender or holder shall promptly give
------------
notice of such fact to the Agent and shall purchase from the other Lenders or
holders such participations in the Notes held by them as shall be necessary to
cause the purchasing Lender or holder to share the excess payment or other
recovery ratably with each of them; provided, however, that if all or any
-------- -------
portion of the excess payment or other recovery is thereafter recovered from
such purchasing Lender or holder, the purchase shall be rescinded and the
purchasing Lender restored to the extent of such recovery (but without interest
thereon).
Section 9.05 Indemnification. The Agent shall not be
---------------
required to do any act hereunder or under any other document or instrument
delivered hereunder or in connection herewith or take any action toward the
execution or enforcement of the agency hereby created, or to prosecute or defend
any suit in respect of this Agreement or the Notes or any documents or
instrument delivered hereunder or in connection herewith unless indemnified to
its satisfaction by the holders of the Notes against loss, cost, liability and
expense; provided, however, that no Lender shall be obligated to indemnify the
-------- -------
Agent for any portion of any such loss, cost, liability or expense resulting
from the gross negligence or willful misconduct of the Agent. If any indemnity
furnished to the Agent for any purpose shall, in the opinion of the Agent, be
insufficient or become impaired, the Agent may call for additional indemnity and
not commence or cease to do the acts indemnified against until such additional
indemnity is furnished.
Section 9.06 Limitations on Agent's Power. Notwithstanding
----------------------------
any other provision of this Agreement, the Agent shall not have the power,
without the consent of all of the Lenders, to (i) forgive any indebtedness of
the Borrower arising under this Agreement or the Notes, (ii) agree to reduce the
rate of interest charged under this Agreement or the commitment fee payable
under Section 2.05, (iii) agree to extend the maturity or decrease the amount of
------------
any payment due under this Agreement or the Notes, (iv) release any Collateral
from the lien created by the Pledge Agreement, the FBA Security Agreement or the
Third Party Pledge Agreement, or (v) amend the definition of "Required Lenders"
in Section 1.01. In addition, in no event may the Agent increase the total
-------------
Commitment Amount (being the aggregate sum of all Commitment Amounts of all
Lenders) hereunder without the consent of all Lenders or increase or decrease
the Commitment Amount of any given Lender without the consent of that Lender.
Section 9.07 Exculpation. The Agent shall be entitled to
-----------
rely upon advice of counsel concerning legal matters, and upon this Agreement,
any Loan Document and any schedule, certificate, statement, report, notice or
other writing which it believes to be genuine or to have been presented by a
proper person. Neither the Agent nor any of its directors, officers, employees
or agents shall (a) be responsible for any recitals, representations or
warranties contained in, or for the execution, validity, genuineness,
effectiveness or enforceability of this Agreement, any Loan Document, or any
other instrument or document delivered hereunder or in connection herewith, (b)
be responsible for the validity, genuineness, perfection, effectiveness,
enforceability, existence, value or enforcement of any collateral security, (c)
be under any duty to inquire into or pass upon any of the foregoing matters, or
to make any inquiry concerning the performance by the Borrower or any other
obligor of its obligations, or (d) in any event, be liable as such for any
action taken or omitted by it or them, except for its or their own gross
negligence or willful misconduct. The agency hereby created shall in no way
impair or affect any of the rights and powers of, or impose any duties or
obligations upon, the Agent in its individual capacity.
Section 9.08 Agent and Affiliates. The Agent shall have the
---------------------
same rights and powers hereunder in its individual capacity as any other Lender,
and may exercise or refrain from exercising the same as though it were not the
Agent, and the Agent and its affiliates may accept deposits from and generally
engage in any kind of business with the Borrower as fully as if the Agent were
not the Agent hereunder.
Section 9.09 Credit Investigation. Each Lender acknowledges
--------------------
that it has made such inquiries and taken such care on its own behalf as would
have been the case had its Commitment been granted and the Advances made
directly by such Lender to the Borrower without the intervention of the Agent or
any other Lender. Each Lender agrees and acknowledges that the Agent makes no
representations or warranties about the creditworthiness of the Borrower, any
Subsidiary or any other party to this Agreement or with respect to the legality,
validity, sufficiency or enforceability of this Agreement, any Loan Document, or
any other instrument or document delivered hereunder or in connection herewith.
Section 9.10 Resignation. The Agent may resign as such at
-----------
any time upon at least 30 days' prior notice to the Borrower and the Lenders. In
the event of any resignation of the Agent, the Required Lenders shall as
promptly as practicable appoint a successor Agent. If no such successor Agent
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the resigning Agent's giving of notice of
resignation, then the resigning Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States of America or of any State thereof. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon be entitled to receive from the prior Agent such documents of transfer
and assignment as such successor Agent may reasonably request and the resigning
Agent shall be discharged from its duties and obligations under this Agreement.
After any resignation pursuant to this Section, the provisions of this Section
shall inure to the benefit of the retiring Agent as to any actions taken or
omitted to be taken by it while it was an Agent hereunder.
Section 9.11 Assignments.
-----------
(a) No Lender may assign any of its rights or obligations
under any Loan Document without the prior written consent of the
Borrower and the Agent, which consent may not be unreasonably withheld;
provided, however, that the consent of the Borrower shall not be
-------- -------
required in connection with any such assignment made at any time when a
Default or an Event of Default has occurred and is continuing. The
aggregate principal amount of the Notes and the portion of the
Commitment Amounts so assigned in any assignment shall be not less than
$5,000,000, and the assigning Lender shall retain at least $5,000,000
of such Notes and Commitment Amounts for its own account; provided,
--------
however, that the foregoing restriction shall not apply to a Lender
-------
assigning its entire Note and Commitment Amount to a single
institution. If the Agent and (if applicable) the Borrower so consent,
then, from and after the effective date of any such assignment, the
assignee thereunder (an "Additional Lender") shall, to the extent that
rights and obligations hereunder have been assigned to it pursuant to
such assignment, have the rights and obligations so assigned to it, and
the assigning Lender shall, to the extent that rights and obligations
have been assigned by it pursuant to such assignment, relinquish its
rights and be released from its obligations under this Agreement.
Within five business days after any request of the Agent following such
assignment, the Borrower will execute and deliver to the Agent new
Notes to the order of such assignee in amounts corresponding to the
interest in the assigning Lender's rights and obligations under this
Agreement acquired by such assignee pursuant to such assignment and, if
the assigning Lender has retained an interest in such rights and
obligations, new Notes to the order of the assigning Lender in amounts
corresponding to such interests retained by it hereunder. Such new
Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of the Notes to be replaced by such new Notes, shall
be dated the effective date of such assignment and shall otherwise be
in the form of the Notes to be replaced thereby. Such new Notes shall
be issued in substitution for, but not in satisfaction or payment of,
the Notes being replaced thereby. The Agent shall bear the cost of
preparation of such new Notes. Upon the issuance of such new Notes, the
term, "Note", as used herein, shall include all such new Notes issued
pursuant to this Section 9.11.
------------
(b) Any Lender making an assignment under this Section shall
pay the Agent a transfer fee in the amount of $3,000 simultaneous with
such assignment.
(c) Notwithstanding any other provision of this Agreement, any
Lender may at any time create a security interest in all or any portion
of its rights under this Agreement and that Lender's Notes in favor of
any Federal Reserve Bank in accordance with Regulation A of the Board
of Governors of the Federal Reserve System.
(d) Except as set forth in this Section 9.11 and the following
------------
Section 9.12, no Lender may assign any of its rights or obligations
-------------
under any Loan Document.
Section 9.12 Participations. In addition to the rights
--------------
granted in Section 9.11, each Lender may grant participations in a portion of
------------
its Notes and Commitments to any institutional investor, without the consent of
Borrower or the Agent, but only so long as (except in the case of a
the participation granted to an affiliate of a Lender, in which case the
limitation and qualification set forth in clause (a) and (b) below shall not
apply):
(a) Within five Bank Business Days after granting any
participation, such Lender gives the Agent and the Borrower notice of
such participation, including the name, address and telecopier number
of the participant and the amount of the Notes and Commitments covered
by the participation; and
(b) The principal amount of the participations so granted is
no less than $5,000,000.
No holder of any such participation, other than an affiliate
of such Lender, shall be entitled to require such Lender to take or omit to take
any action hereunder, except that such Lender may agree with such participant
that such Lender will not, without such participant's consent, (i) forgive any
indebtedness of the Borrower under this Agreement or the Notes, (ii) agree to
reduce the rate of interest charged under this Agreement, or (iii) agree to
extend the final maturity of any indebtedness evidenced by the Notes, except as
expressly provided by the terms of the Loan Documents. No Lender shall, as
between the Borrower and such Lender, be relieved of any of its obligations
hereunder as a result of any such granting of a participation. The Borrower
hereby acknowledges and agrees that any participant described in this Section
will, for purposes of Section 9.04, be considered to be a Lender hereunder
-------------
(provided that such participant shall not be entitled to receive any more than
the Lender selling such participation would have received had such sale not
taken place) and may rely on, and possess all rights under, any opinions,
certificates, or other instruments or documents delivered under or in connection
with any Loan Document. Except as set forth in this Section 9.12, no Lender may
------------
grant any participation in any Loan Document or Commitment.
Section 9.13 Disclosure of Information. The Borrower
-----------------------------
authorizes each Lender and the Agent to disclose to any participant, assignee or
Additional Lender (each, a "Transferee") and any prospective Transferee any and
all financial and other information in the possession of the Agent or any Lender
concerning the Borrower which has been delivered to the Agent or such Lender by
the Borrower pursuant to this Agreement or which has been delivered to the Agent
or such Lender by the Borrower in connection with the credit evaluation of the
Borrower by the Agent or such Lender prior to entering into this Agreement;
provided, however, that prior to disclosing such information to a Transferee or
-------- -------
prospective Transferee, the applicable Lender shall obtain from such Transferee
or prospective Transferee a confidentiality agreement agreeing that such
information shall be used only in connection with such Person's evaluation and,
if applicable, administration of its interest in this Agreement and the loans
hereunder, and shall not be disclosed to any other person, subject to exceptions
permitting disclosure to regulators and auditors, disclosure as required by law
or judicial process, and disclosure under such other limited circumstances as
that Lender and such Transferee or prospective Transferee may reasonably agree.
ARTICLE X.
MISCELLANEOUS
Section 10.01 No Waiver; Cumulative Remedies. No failure or
--------------------------------
delay on the part of the Lenders in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any Lender's
acceptance of payments while any Default or Event of Default is outstanding
operate as a waiver of such Default or Event of Default, or any right, power or
remedy under the Loan Documents; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy under the Loan Documents. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
Section 10.02 Amendments, Etc. No amendment, modification,
----------------
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom shall be effective unless the same shall be
in writing and signed by the Required Lenders (or, in the case of any action
described in Section 9.06, the number of Lenders specified for the applicable
------------
action in such Section) and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. No notice
to or demand on the Borrower in any case shall entitle the Borrower to any other
or further notice or demand in similar or other circumstances.
Section 10.03 Notice. Except as otherwise expressly provided
------
herein, all notices and other communications hereunder shall be in writing and
shall be (i) personally delivered, (ii) transmitted by registered mail, postage
prepaid, (iii) sent by Federal Express or similar expedited delivery service, or
(iv) transmitted by telecopy (followed, in the case of any notice from the Agent
or a Lender to the Borrower, pursuant to any of Sections 8.02(a), 8.02(b) or
----------------- -------
8.03, by a notice transmitted by registered mail, postage prepaid), in each case
----
addressed to the party to whom notice is being given at its address as set forth
by its signature below, or, if telecopied, transmitted to that party at its
telecopier number set forth by its signature below; or, as to each party, at
such other address or telecopier number as may hereafter be designated in a
notice by that party to the other party complying with the terms of this
Section. All such notices or other communications shall be deemed to have been
given on (i) the date received if delivered personally, by mail, or by Federal
Express or similar expedited delivery service, or (ii) the date of transmission
if delivered by telecopy, except that notices or requests to the Agent or any
Lender pursuant to any of the provisions of Article II shall not be effective
until received.
Section 10.04 Costs and Expenses. The Borrower agrees to pay
------------------
on demand (i) all costs and expenses incurred by the Agent in connection with
the negotiation, preparation, execution, administration or amendment of the Loan
Documents and the other instruments and documents to be delivered hereunder and
thereunder, including the reasonable fees and out-of-pocket expenses of counsel
for the Agent with respect thereto, whether paid to outside counsel or allocated
by in-house counsel, and (ii) all costs and expenses incurred by the Agent or
any Lender in connection with the enforcement of the Loan Documents, including
the reasonable fees and out-of-pocket expenses of counsel for the Agent or any
Lender with respect thereto, whether paid to outside counsel or allocated by
in-house counsel.
Section 10.05 Indemnification by Borrower.The Borrower hereby
---------------------------
agrees to indemnify the Agent and the Lenders and each officer, director,
employee and agent thereof (herein individually each called an "Indemnitee" and
collectively called the "Indemnitees") from and against any and all losses,
claims, damages, reasonable expenses (including, without limitation, reasonable
attorneys' fees) and liabilities (all of the foregoing being herein called the
"Indemnified Liabilities") incurred by an Indemnitee in connection with or
arising out of the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the use of the proceeds of any Advance
(including but not limited to any such loss, claim, damage, expense or liability
arising out of any claim in which it is alleged that any Environmental Law has
been breached with respect to any activity or property of the Borrower), except
for any portion of such losses, claims, damages, expenses or liabilities
incurred solely as a result of the gross negligence or willful misconduct of the
applicable Indemnitee or the breach of this Agreement or any other Loan Document
by that Indemnitee. If and to the extent that the foregoing indemnity may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. All obligations provided
for in this Section shall survive any termination of this Agreement.
Section 10.06 Execution in Counterparts. This Agreement and
--------------------------
the other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts of this Agreement or such other Loan Document, as the case
may be, taken together, shall constitute but one and the same instrument.
Section 10.07 Binding Effect, Assignment. The Loan Documents
---------------------------
shall be binding upon and inure to the benefit of the Borrower and the Lenders
and their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights thereunder or any interest therein without
the prior written consent of each of the Lenders.
Section 10.08 Governing Law. The Loan Documents shall be
-------------
governed by, and construed in accordance with, the laws of the State of
Minnesota.
Section 10.09 Consent to Jurisdiction. The Borrower and the
------------------------
Lenders each irrevocably (i) agree that any suit, action or other legal
proceeding arising out of or relating to this Agreement or any other Loan
Document may be brought in a court of record in Hennepin County in the State of
Minnesota or in the Courts of the United States located in such State, (ii)
consent to the jurisdiction of each such court in any suit, action or
proceeding, (iii) waive any objection which they may have to the laying of venue
of any such suit, action or proceeding in any such courts and any claim that any
such suit, action or proceeding has been brought in an inconvenient forum, and
(iv) agree that a final judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
Section 10.10 Severability of Provisions. Any provision of
----------------------------
this Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 10.11 Prior Agreements. This Agreement and the other
----------------
Loan Documents and related documents described herein restate and supersede in
their entirety any and all prior agreements and understandings, oral or written,
between any of the Lenders and the Borrower.
Section 10.12 Headings. Article and Section headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
Address: FIRST BANKS, INC.
135 North Meramec
Clayton, Missouri 63105
Attention: Allen H. Blake By /s/ Allen H. Blake
---------------------------------
Telecopier: (314) 592-6621 Its President/Chief Operating Officer
---------------------------------
Address: WELLS FARGO BANK MINNESOTA,
MAC: N9305-071 NATIONAL ASSOCIATION, as Agent
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Doug Gallun
Telecopier: 612-667-3510 By /s/ Doug Gallun
---------------------------------
Its Vice President
---------------------------------
(Signature Page to Secured Credit Agreement Page 1 of 3)
Address: WELLS FARGO BANK MINNESOTA
NATIONAL ASSOCIATION, as a Lender
MAC: N9305-071
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Doug Gallun By /s/Doug Gallun
---------------------------------
Telecopier: 612-667-3510 Its Vice President
---------------------------------
Commitment Amount: $30,000,000
Percentage: 25.00000%
Address: AMERICAN NATIONAL BANK &
TRUST COMPANY OF CHICAGO
120 South LaSalle Street
Chicago, Illinois 60603-3400
Attention: Sunil Mehta By /s/Saunil Mehta
---------------------------------
Telecopier: (312) 661-9511 Its Commercial Banking Officer
---------------------------------
Commitment Amount: $25,000,000
Percentage: 20.83333%
Address: LASALLE BANK NATIONAL ASSOCIATION
One Metropolitan Square
211 North Broadway, Suite 4050
St. Louis, Missouri 63102
Attention: Robert J. Mathias By /s/Jay C. Goldner
---------------------------------
Telecopier: (314) 621-3947 Its Senior Vice President
---------------------------------
Commitment Amount: $20,000,000
Percentage: 16.66667%
Address: HARRIS TRUST AND SAVINGS BANK
111 West Monroe Street
Chicago, Illinois 60690-0755
Attention: David J. Konrad By /s/David J. Konrad
---------------------------------
Telecopier: (312) 765-8353 Its Vice President
---------------------------------
Commitment Amount: $15,000,000
Percentage: 12.50000%
(Signature Page to Secured Credit Agreement Page 2 of 3)
Address: THE NORTHERN TRUST COMPANY
50 South LaSalle Street
Chicago, Illinois 60675
Attention: Thomas E. Bernhardt By /s/Thomas E. Bernhardt
---------------------------------
Telecopier: 312-557-8337 Its Vice President
---------------------------------
Commitment Amount: $10,000,000
Percentage: 8.33333%
Address: UNION BANK OF CALIFORNIA
445 South Figureroa Street
Los Angeles, California 90071
Attention: Dennis A. Cattell By /s/Dennis A. Cattell
---------------------------------
Telecopier: (213) 236-5548 Its Vice President
---------------------------------
Commitment Amount: $10,000,000
Percentage: 8.33333%
Address: SUNTRUST BANK, NASHVILLE
201 Fourth Avenue North
Nashville, Tennessee 37219
Attention: Richard B. Boring By /s/Robert E. McNeilly
---------------------------------
Telecopier: (615) 748-5161 Its Vice President
---------------------------------
Commitment Amount: $10,000,000
Percentage: 8.33333%
(Signature Page to Secured Credit Agreement Page 3 of 3)
EXHIBIT 12.1
FIRST BANKS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
As of or for the
Six Months Ended
June 30, As of or for the Year Ended December 31,
--------------------- -------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
--------- -------- ------- -------- ------- ------ ------
(dollars expressed in thousands)
Income before provision for income taxes
and minority interest in income of
subsidiary............................... $ 37,253 47,943 92,635 72,151 54,474 50,380 27,837
Add back:
Interest:
With deposits.................... 104,912 88,058 187,679 158,701 162,179 148,831 141,670
Without deposits................. 5,435 5,026 9,857 13,009 10,124 10,170 16,933
Rent expense......................... 5,900 4,900 10,700 7,400 5,300 5,000 4,200
Earnings base:
With deposits........................ 148,065 140,901 291,014 238,252 221,953 204,211 173,707
Without deposits..................... 48,588 57,869 113,192 92,560 69,898 65,550 48,970
Fixed charges:
Including interest on deposits....... 110,812 92,958 198,379 166,101 167,479 153,831 145,870
Excluding interest on deposits....... 11,335 9,926 20,557 20,409 15,424 15,170 21,133
Ratio of earnings to fixed charges:
Including interest on deposits....... 1.34x 1.52x 1.47x 1.43x 1.33x 1.33x 1.19x
Excluding interest on deposits....... 4.29 5.83 5.51 4.54 4.53 4.32 2.32
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
To Board of Directors
First Banks, Inc.:
We consent to the use of our report, included herein and incorporated by
reference, and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG LLP
--------------
St. Louis, Missouri
October 12, 2001
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
Connecticut 06-1304336
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
FIRST BANKS, INC.
(Exact name of obligor as specified in its charter)
MISSOURI 43-1175538
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 NORTH MERAMEC
ST. LOUIS, MISSOURI 63105
(Address of principal executive offices) (Zip Code)
% SUBORDINATED DEBENTURES
(Title of indenture securities)
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
Comptroller of the Currency
Treasury Department of the United States
Washington, D.C.
Board of Governors of the Federal Reserve System
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its
parent, State Street Boston Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee as now in
effect incorporated herein by reference to Exhibit T-1.1 filed
with Form T-1 Statement, Registration No. 33-40617.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of the Certificate of the Comptroller of the Currency.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
A copy of the Certification of Fiduciary Powers (included in
Exhibit 2).
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the existing by-laws of the trustee incorporated
herein by reference to Exhibit T-1.1 filed with Form T-1
Statement, Registration No. 33-40617.
5. A copy of each indenture referred to in Item 4. if the obligor is
in default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company of Connecticut,
National Association, a national banking association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Boston and The Commonwealth of Massachusetts, on
the 1st of October, 2001.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION
By: /s/ Paul D. Allen
------------------------------
Paul D. Allen, Vice President
EXHIBIT 1 AND 2
(COMPTROLLER OF THE CURRENCY ADMINISTRATOR OF NATIONAL BANKS--LETTERHEAD)
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq.,
as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering, regulation and supervision
of all National Banking Associations.
2. "State Street Bank and Trust Company of Connecticut, National Association",
Hartford, Connecticut, (Charter No. 22272), is a National Banking Association
formed under the laws of the United States and is authorized thereunder to
transact the business of banking and exercise Fiduciary Powers on the date of
this Certificate.
IN TESTIMONY WHEREOF, I have
hereunto subscribed my name and
caused my seal of office to be
affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia,
this 1st day of April, 1998.
/s/ Eugene A. Ludwig
------------------------------------
Comptroller of the Currency
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by First
Banks, Inc. of its % Subordinated Debentures, we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION
By: /s/ Paul D. Allen
------------------------------
Paul D. Allen, Vice President
Dated: October 1, 2001
EXHIBIT 7
Legal Title of Bank: State Street Bank and Trust Company of CT, N.A. Call Date: June 30, 2001
Address: Goodwin Square, 225 Asylum Street, Floor 29
City, State Zip Hartford, CT 06103
FDIC Certifcate No.: 33132
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 2000
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ...................... 17,689
Interest-bearing balances.............................................. 0
Securities:
Held-to-maturity balances.............................................. 0
Available-for-sale securities........................................ 0
Federal funds sold and securities purchased under agreements to resell. 0
Loans and lease financing receivables:
Loans and leases, net of unearned income ............ 0
LESS: Allowance for loan and lease losses ........... 0
LESS: Allocated transfer risk reserve................ 0
Loans and leases, net of unearned income, allowance, and reserve .................. 0
Trading assets..................................................................... 0
Premises and fixed assets (including capitalized leases) .......................... 182
Other real estate owned ........................................................... 0
Investments in unconsolidated subsidiaries and associated companies ............... 0
Customers' liability to this bank on acceptances outstanding ...................... 0
Intangible assets ................................................................. 778
Other assets....................................................................... 3,339
Losses deferred pursuant to 12 U.S.C 1823(j)....................................... 0
Total assets and losses deferred pursuant to 12 U.S.C. 1823(j)..................... 21,988
Legal Title of Bank: State Street Bank and Trust Company of CT, N.A. Call Date: June 30, 2001
Address: Goodwin Square, 225 Asylum Street, Floor 29
City, State Zip Hartford, CT 06103
FDIC Certifcate No.: 33132
Schedule RC - Continued
LIABILITIES
Deposits:
In domestic offices ...................................................... 0
Noninterest-bearing ............................................. 0
Interest-bearing ................................................ 0
In foreign offices, Edge and Agreement subsidiaries, and IBFs............. 0
Noninterest-bearing ............................................. 0
Interest-bearing ................................................ 0
Federal funds purchased and securities sold under agreements to repurchase ........ 0
Demand notes issued to the U.S. Treasury........................................... 0
Trading Liabilities................................................................ 0
Other borrowed money .............................................................. 0
with a remaining maturity of one year or less............................. 0
with a remaining maturity of more than one year through three years....... 0
with a remaining maturity of more than three years........................ 0
Bank's liability on acceptances executed and outstanding .......................... 0
Other liabilities.................................................................. 13,607
Total liabilities.................................................................. 13,607
EQUITY CAPITAL
Perpetual preferred stock and related surplus...................................... 0
Common stock....................................................................... 500
Surplus............................................................................ 2,500
Undivided profits and capital reserves ............................................ 5,381
Net unrealized holding gains (losses) on available-for-sale securities............. 0
Accumulated net gains (losses) on cash flow hedges................................. 0
Cumulative foreign currency translation adjustments................................ 0
Total equity capital .............................................................. 8,381
Total liabilities, equity capital.................................................. 21,988
======
We, the undersigned directors, attest to the correctness of this statement of
resources and liabilities. We declare that it has been examined by us, and to
the best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.
Bryan Calder
Geraldine Walsh
Chris A. Hayes
I, Chris A. Hayes, Senior Vice President, Director and Chairperson of the Board,
of the above named bank do hereby declare that the Report of Condition is true
and correct to the best of my knowledge and belief.
Chris A. Hayes
Exhibit 25.2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
Connecticut 06-1304336
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
FIRST PREFERRED CAPITAL TRUST III
(Exact name of obligor as specified in its charter)
DELAWARE APPLIED FOR
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 NORTH MERAMEC
ST. LOUIS, MISSOURI 63105
(Address of principal executive offices) (Zip Code)
% PREFERRED SECURITIES
(Title of indenture securities)
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
Comptroller of the Currency
Treasury Department of the United States
Washington, D.C.
Board of Governors of the Federal Reserve System
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its
parent, State Street Boston Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee as now in
effect incorporated herein by reference to Exhibit T-1.1 filed
with Form T-1 Statement, Registration No. 33-40617.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of the Certificate of the Comptroller of the Currency.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
A copy of the Certification of Fiduciary Powers (included in
Exhibit 2).
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the existing by-laws of the trustee incorporated
herein by reference to Exhibit T-1.1 filed with Form T-1
Statement, Registration No. 33-40617.
5. A copy of each indenture referred to in Item 4. if the obligor is
in default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company of Connecticut,
National Association, a national banking association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Boston and The Commonwealth of Massachusetts, on
the 1st of October, 2001.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION
By: /s/ Paul D. Allen
---------------------------------
Paul D. Allen, Vice President
EXHIBIT 1 AND 2
(COMPTROLLER OF THE CURRENCY ADMINISTRATOR OF NATIONAL BANKS--LETTERHEAD)
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq.,
as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering, regulation and supervision
of all National Banking Associations.
2. "State Street Bank and Trust Company of Connecticut, National Association",
Hartford, Connecticut, (Charter No. 22272), is a National Banking Association
formed under the laws of the United States and is authorized thereunder to
transact the business of banking and exercise Fiduciary Powers on the date of
this Certificate.
IN TESTIMONY WHEREOF, I have
hereunto subscribed my name and
caused my seal of office to be
affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia,
this 1st day of April, 1998.
/s/ Eugene A. Ludwig
------------------------------------
Comptroller of the Currency
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by First
Preferred Capital Trust III of its % Preferred Securities, we hereby consent
that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION
By: /s/ Paul D. Allen
-----------------------------------
Paul D. Allen, Vice President
Dated: October 1, 2001
EXHIBIT 7
Legal Title of Bank: State Street Bank and Trust Company of CT, N.A. Call Date: June 30, 2001
Address: Goodwin Square, 225 Asylum Street, Floor 29
City, State Zip Hartford, CT 06103
FDIC Certifcate No.: 33132
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 2000
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ........................ 17,689
Interest-bearing balances................................................ 0
Securities:
Held-to-maturity balances................................................ 0
Available-for-sale securities........................................... 0
Federal funds sold and securities purchased under agreements to resell .. 0
Loans and lease financing receivables:
Loans and leases, net of unearned income ............. 0
LESS: Allowance for loan and lease losses ............ 0
LESS: Allocated transfer risk reserve................. 0
Loans and leases, net of unearned income, allowance, and reserve .................... 0
Trading assets....................................................................... 0
Premises and fixed assets (including capitalized leases) ............................ 182
Other real estate owned ............................................................. 0
Investments in unconsolidated subsidiaries and associated companies ................. 0
Customers' liability to this bank on acceptances outstanding ........................ 0
Intangible assets ................................................................... 778
Other assets......................................................................... 3,339
Losses deferred pursuant to 12 U.S.C 1823(j)......................................... 0
Total assets and losses deferred pursuant to 12 U.S.C. 1823(j)....................... 21,988
Legal Title of Bank: State Street Bank and Trust Company of CT, N.A. Call Date: June 30, 2001
Address: Goodwin Square, 225 Asylum Street, Floor 29
City, State Zip Hartford, CT 06103
FDIC Certifcate No.: 33132
Schedule RC - Continued
LIABILITIES
Deposits:
In domestic offices ........................................................ 0
Noninterest-bearing ................................. 0
Interest-bearing .................................... 0
In foreign offices, Edge and Agreement subsidiaries, and IBFs............... 0
Noninterest-bearing ................................. 0
Interest-bearing .................................... 0
Federal funds purchased and securities sold under agreements to repurchase .......... 0
Demand notes issued to the U.S. Treasury............................................. 0
Trading Liabilities.................................................................. 0
Other borrowed money ................................................................ 0
with a remaining maturity of one year or less............................... 0
with a remaining maturity of more than one year through three years......... 0
with a remaining maturity of more than three years.......................... 0
Bank's liability on acceptances executed and outstanding ............................ 0
Other liabilities.................................................................... 13,607
Total liabilities..................................................................... 13,607
EQUITY CAPITAL
Perpetual preferred stock and related surplus........................................ 0
Common stock......................................................................... 500
Surplus.............................................................................. 2,500
Undivided profits and capital reserves .............................................. 5,381
Net unrealized holding gains (losses) on available-for-sale securities............... 0
Accumulated net gains (losses) on cash flow hedges................................... 0
Cumulative foreign currency translation adjustments.................................. 0
Total equity capital ................................................................ 8,381
Total liabilities, equity capital.................................................... 21,988
======
We, the undersigned directors, attest to the correctness of this statement of
resources and liabilities. We declare that it has been examined by us, and to
the best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.
Bryan Calder
Geraldine Walsh
Chris A. Hayes
I, Chris A. Hayes, Senior Vice President, Director and Chairperson of the Board,
of the above named bank do hereby declare that the Report of Condition is true
and correct to the best of my knowledge and belief.
Chris A. Hayes
Exhibit 25.3
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
Connecticut 06-1304336
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
FIRST BANKS, INC.
(Exact name of obligor as specified in its charter)
MISSOURI 43-1175538
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 NORTH MERAMEC
ST. LOUIS, MISSOURI 63105
(Address of principal executive offices) (Zip Code)
GUARANTEE
(Title of indenture securities)
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
Comptroller of the Currency
Treasury Department of the United States
Washington, D.C.
Board of Governors of the Federal Reserve System
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its
parent, State Street Boston Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee as now in
effect incorporated herein by reference to Exhibit T-1.1 filed
with Form T-1 Statement, Registration No. 33-40617.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of the Certificate of the Comptroller of the Currency.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
A copy of the Certification of Fiduciary Powers (included in
Exhibit 2).
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the existing by-laws of the trustee incorporated
herein by reference to Exhibit T-1.1 filed with Form T-1
Statement, Registration No. 33-40617.
5. A copy of each indenture referred to in Item 4. if the obligor is
in default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company of Connecticut,
National Association, a national banking association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Boston and The Commonwealth of Massachusetts, on
the 1st of October, 2001.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION
By: /s/ Paul D. Allen
---------------------------------
Paul D. Allen, Vice President
EXHIBIT 1 AND 2
(COMPTROLLER OF THE CURRENCY ADMINISTRATOR OF NATIONAL BANKS--LETTERHEAD)
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq.,
as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering, regulation and supervision
of all National Banking Associations.
2. "State Street Bank and Trust Company of Connecticut, National Association",
Hartford, Connecticut, (Charter No. 22272), is a National Banking Association
formed under the laws of the United States and is authorized thereunder to
transact the business of banking and exercise Fiduciary Powers on the date of
this Certificate.
IN TESTIMONY WHEREOF, I have
hereunto subscribed my name and
caused my seal of office to be
affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia,
this 1st day of April, 1998.
/s/ Eugene A. Ludwig
-----------------------------------
Comptroller of the Currency
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by First
Banks, Inc. of its Guarantee, we hereby consent that reports of examination by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION
By: /s/ Paul D. Allen
------------------------------
Paul D. Allen, Vice President
Dated: October 1, 2001
EXHIBIT 7
Legal Title of Bank: State Street Bank and Trust Company of CT, N.A. Call Date: June 30, 2001
Address: Goodwin Square, 225 Asylum Street, Floor 29
City, State Zip Hartford, CT 06103
FDIC Certifcate No.: 33132
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 2000
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ............................ 17,689
Interest-bearing balances.................................................... 0
Securities:
Held-to-maturity balances.................................................... 0
Available-for-sale securities............................................... 0
Federal funds sold and securities purchased under agreements to resell ...... 0
Loans and lease financing receivables:
Loans and leases, net of unearned income ............... 0
LESS: Allowance for loan and lease losses .............. 0
LESS: Allocated transfer risk reserve................... 0
Loans and leases, net of unearned income, allowance, and reserve ........................ 0
Trading assets........................................................................... 0
Premises and fixed assets (including capitalized leases) ................................ 182
Other real estate owned ................................................................. 0
Investments in unconsolidated subsidiaries and associated companies ..................... 0
Customers' liability to this bank on acceptances outstanding ............................ 0
Intangible assets ....................................................................... 778
Other assets............................................................................. 3,339
Losses deferred pursuant to 12 U.S.C 1823(j)............................................. 0
Total assets and losses deferred pursuant to 12 U.S.C. 1823(j)........................... 21,988
Legal Title of Bank: State Street Bank and Trust Company of CT, N.A. Call Date: June 30, 2001
Address: Goodwin Square, 225 Asylum Street, Floor 29
City, State Zip Hartford, CT 06103
FDIC Certifcate No.: 33132
Schedule RC - Continued
LIABILITIES
Deposits:
In domestic offices ............................................................ 0
Noninterest-bearing ..................................... 0
Interest-bearing ........................................ 0
In foreign offices, Edge and Agreement subsidiaries, and IBFs................... 0
Noninterest-bearing ..................................... 0
Interest-bearing ........................................ 0
Federal funds purchased and securities sold under agreements to repurchase .............. 0
Demand notes issued to the U.S. Treasury................................................. 0
Trading Liabilities...................................................................... 0
Other borrowed money .................................................................... 0
with a remaining maturity of one year or less................................... 0
with a remaining maturity of more than one year through three years............. 0
with a remaining maturity of more than three years.............................. 0
Bank's liability on acceptances executed and outstanding ................................ 0
Other liabilities........................................................................ 13,607
Total liabilities........................................................................ 13,607
EQUITY CAPITAL
Perpetual preferred stock and related surplus............................................. 0
Common stock.............................................................................. 500
Surplus................................................................................... 2,500
Undivided profits and capital reserves ................................................... 5,381
Net unrealized holding gains (losses) on available-for-sale securities.................... 0
Accumulated net gains (losses) on cash flow hedges........................................ 0
Cumulative foreign currency translation adjustments....................................... 0
Total equity capital ..................................................................... 8,381
Total liabilities, equity capital......................................................... 21,988
======
We, the undersigned directors, attest to the correctness of this statement of
resources and liabilities. We declare that it has been examined by us, and to
the best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.
Bryan Calder
Geraldine Walsh
Chris A. Hayes
I, Chris A. Hayes, Senior Vice President, Director and Chairperson of the Board,
of the above named bank do hereby declare that the Report of Condition is true
and correct to the best of my knowledge and belief.
Chris A. Hayes