James S. Ryan, III
(214) 953-5801
jryan@jw.com
January 16, 2003
VIA ELECTRONIC FILING
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: First Banks, Inc. / First Preferred Capital Trust IV
Gentlemen:
Attached for electronic filing, please find a Registration Statement on
Form S-2 related to Trust Preferred Securities of First Preferred Capital Trust
IV, Subordinated Debentures of First Banks, Inc. and Guarantee of First Banks,
Inc.
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
Harold R. Burroughs
E. Steve Bolden II
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 2003
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 IV
(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 organization) incorporation or organization)
43-1175538 APPLIED FOR
(I.R.S. Employer Identification No.) (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 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. HAROLD R. BURROUGHS, 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
============================================================ ================= ================= ============== =================
Title of Each Class of Amount to be Proposed Maximum Proposed Amount of
Maximum
Aggregate
Offering Price Offering Registration
Securities To Be Registered Registered(1) Per Unit Price(1) Fee(1) (2)
- ------------------------------------------------------------ ----------------- ----------------- -------------- -----------------
Preferred Securities of First Preferred Capital Trust IV 2,760,000 $25.00 $69,000,000 $ 6,348
- ------------------------------------------------------------ ----------------- ----------------- -------------- -----------------
Subordinated Debentures of First Banks, Inc.(3)......... (3)(4) - - -
- ------------------------------------------------------------ ----------------- ----------------- -------------- -----------------
Guarantee of First Banks, Inc., with respect to Preferred
Securities(4)....................................... (4) - - -
============================================================ ================= ================= ============== =================
(1) Includes 360,000 Preferred Securities which may be sold by First Preferred Capital Trust IV 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 IV 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 IV 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 for 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.
====================================================================================================================================
********************************************************************************
* The information in this prospectus is not complete and may be changed. We *
* may not sell these securities until the registration statement filed with *
* the Securities and Exchange Commission is effective. This prospectus is not *
* an offer to sell these securities, and it is not soliciting an offer to buy *
* these securities in any state where the offer or sale is not permitted. *
********************************************************************************
SUBJECT TO COMPLETION, DATED JANUARY 16, 2003
PROSPECTUS
2,400,000 Preferred Securities
FIRST PREFERRED CAPITAL TRUST IV
% 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 IV. The trust will invest all of the
proceeds of this offering of preferred securities to purchase % subordinated
debentures due 2033 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 March 31, 2003 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 March 31, 2033. 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 March 31, 2008, or
earlier under circumstances specified in this prospectus.
We will apply to have the preferred securities approved for listing on
the New York Stock Exchange under the symbol "_____." Trading is expected to
commence on or around the delivery of the preferred securities.
--------------------
Investing in the preferred securities involves risks. See "Risk Factors"
beginning on page 10.
--------------------
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 $60,000,000
Proceeds to the trust............................ $25.00 $60,000,000
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 360,000 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 Fahnestock & Co. Inc.
Incorporated
, 2003
FIRST BANKS, INC. AND SUBSIDIARIES
MAP OF LOCATIONS
As of September 30, 2002
-------------------------------------------------------------------------------
First Bank
-------------------------------------------------------------------------------
Central and
Metro Regional Southern Northern
Missouri Missouri Illinois Illinois
-------- -------- -------- --------
[GRAPHIC OMITTED]
Arnold Beaufort Belleville (2) Bartonville
Ballwin Bismarck Breese Canton
Brentwood Dutzow Brighton Chicago
Chesterfield (2) Fulton Carbondale Des Plaines (3)
Clayton Gerald Chester (2) Elk Grove
Creve Coeur (3) Hermann Columbia Village
Ellisville Middletown East St. Louis Galesburg (2)
Florissant (3) Montgomery City Edwardsville Havana
Kirkwood Owensville Granite City Hillside
Lake St. Louis Park Hills (2) Greenville Jacksonville
Manchester Warrenton Jerseyville (2) Knoxville
O'Fallon Washington Johnston City Peoria (3)
Shrewsbury Wentzville Lawrenceville Pittsfield
St. Charles (3) Marine Quincy (2)
St. Louis City (2) O'Fallon (2) Roodhouse
St. Louis County (3) Red Bud Springfield
St. Peters Salem (2) Sterling
Warson Woods Shiloh Winchester
Webster Groves Swansea
Valmeyer
Vandalia
Waterloo
West Frankfort
First Bank & Trust
-------------------------------------------------------------------------------
Southern Northern
California California Texas
---------- ---------- -----
Beverly Hills Campbell Dallas
Costa Mesa Concord Denton
Encino Fairfield Garland
[GRAPHIC OMITTED] Fountain Valley Napa Houston (3)
Fullerton Oakland Irving
Gardena Rancho Cordova McKinney
Huntington Beach (3) Roseville (2)
Irvine Sacramento
Laguna Niguel San Francisco (2)
Lakewood San Jose
Long Beach (3) San Mateo
Los Angeles (2) San Pablo
Malibu San Rafael
Marina del Rey Vallejo
Mira Loma Walnut Creek
Newport Beach
Orange
Riverside
Santa Barbara
Santa Maria
Solvang
Torrance
Ventura
Westlake Village
Westminster
Woodland Hills
Yorba Linda
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. Since 1994, 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. At September 30, 2002, we had total assets of $7.17 billion, loans,
net of unearned discount, of $5.46 billion, total deposits of $6.03 billion and
total stockholders' equity of $506.2 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, internet banking, 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
Name at September 30, 2002 at September 30, 2002
- -------------------------------------------- ---------------------------------------- --------------------------
(dollars expressed
in thousands)
First Bank Missouri (43) and Illinois (51) $4,063,159
First Bank and Trust California (49) and Texas (8) 3,139,170
We anticipate merging our bank subsidiaries, First Bank and First Bank
& Trust, during the first quarter of 2003 to allow certain administrative and
operational economies not available while the two banks maintain separate
charters.
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. In the early 1990's, however, the pricing of acquisitions in these
areas escalated beyond the levels we believed to be desirable, causing us to
explore acquisitions in other markets. This effort led to the acquisition of
BancTEXAS Group, Inc. in 1994, which had offices in Dallas and Houston, Texas,
and subsequent acquisitions of financial institutions that had offices located
in the San Francisco - Sacramento corridor in Northern California and Orange
County in Southern California during the six years ended December 31, 2000. Our
emphasis in recent acquisitions has been to enhance our presence in markets we
currently serve. In 2001, we completed two acquisitions in Southern California
that increased our market share in Los Angeles and Orange Counties, and extended
our market into neighboring Riverside County. In addition, in 2001 we completed
an acquisition in Swansea, Illinois of a bank holding company that increased our
presence in the Illinois areas immediately east and north of St. Louis. In 2002,
we completed an acquisition in Des Plaines, Illinois, in the Chicago
metropolitan area, and two branch offices in Denton and Garland, Texas, in the
Dallas metropolitan area. In addition, we currently have one pending acquisition
in Ste. Genevieve, Missouri that will further expand our Midwest franchise south
of St. Louis.
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 members of his immediate family, own all of our voting
stock. Mr. Dierberg and his family, therefore, control our management and
policies.
Growth Strategy
Our primary strategic objective remains to achieve progressive and
profitable growth through the continued development of our banking franchise, as
supplemented by periodic acquisitions of other financial institutions. 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. Our acquisitions may serve to enhance our presence in a given market,
to expand the extent of our market areas or to enable us to enter new markets.
Primary responsibility for managing our subsidiary banking units rests
with the officers and directors of each unit, but we centralize overall
corporate policies, procedures and administrative functions and provide
centralized 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 earnings performance, as
well as retaining and investing those earnings. Consequently, we have never
paid, and have no present intention to pay, dividends on our common stock.
Furthermore, the dividends paid on our Class A and B preferred stock currently
represent less than 2.0% of our current net income before dividends. As a
result, between December 31, 1997 and December 31, 2001, our common
stockholders' equity grew at a compound annual growth rate of approximately
18.8%.
Compound
Growth or
Average for the
As of or for the Five Years
Nine Months Ended Ended
September 30, December 31, As of or for the Year Ended December 31,
-------------------- ------------------------ ------------------------------------------
2002 2001 2001(1) 2001 2000 1999 1998 1997
--------- ---------- -------------- --------- --------- ----------- ---------- ---------
(dollars in thousands)
Net income................. $ 30,362 34,632 18.2% $ 64,514 56,107 44,178 33,510 33,027
Loans, net of unearned
discount.............. 5,464,020 4,774,300 15.9 5,408,869 4,752,265 3,996,324 3,580,105 3,002,200
Total assets............... 7,171,534 5,976,773 12.9 6,778,451 5,876,691 4,867,747 4,554,810 4,165,014
Common stockholders'
equity................ 493,131 425,766 18.8 435,594 339,783 281,842 250,300 218,474
Total stockholders'
equity................ 506,194 438,829 18.0 448,657 352,846 294,905 263,363 231,537
Return on average total
stockholders'
equity (2)............ 8.67% 11.88% 15.15% 15.96% 17.43% 15.79% 13.64% 12.91%
Number of locations........ 151 142 -- 150 140 135 135 131
- ---------------------
(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 and total stockholders' equity and average return on average total stockholders'
equity.
(2) Ratios for the nine-month periods are annualized.
Our address is 135 North Meramec, Clayton, Missouri 63105, and our
telephone number is (314) 854-4600.
First Preferred Capital Trust IV
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 March 31, 2033, 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 IV
Securities being offered......................... 2,400,000 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 March 31, 2003. 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 March 31, 2033. We have the
option, however, to shorten the maturity date to a date not
earlier than March 31, 2008. 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 March 31, 2033
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 March 31, 2008. 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
March 31, 2033. 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 $183.7 million of trust preferred
securities that four of our other financing
subsidiaries will have outstanding (after giving
effect to the redemption of $86.3 million of
subordinated debentures associated with trust
preferred securities that we anticipate will be
effected in part with the proceeds of this offering);
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.
Voting rights of the preferred Except in limited circumstances, holders of the preferred
securities................................ securities will have no voting rights.
New York Stock Exchange
symbol.................................... We will apply to have the preferred securities approved for
listing on the New York Stock Exchange under the symbol "_____."
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 entire net proceeds to us from the sale of the
subordinated debentures to the trust, after deducting
underwriting expenses and commissions, will be approximately
$57.8 million. We expect to use the net proceeds from the
sale of the subordinated debentures to redeem the subordinated
debentures associated with the 9.25% trust preferred
securities issued by one of our financing subsidiaries in
1997. Currently, there is approximately $88.9 million in
principal amount of such subordinated debentures outstanding.
Remaining funds necessary to complete this redemption will be
provided from available cash and borrowings under our
revolving credit line with a group of unaffiliated financial
institutions.
Before purchasing the preferred securities being offered, you should carefully consider the "Risk Factors" beginning
on page 10.
SUMMARY CONSOLIDATED AND OTHER FINANCIAL DATA
The summary consolidated financial and other data set forth below, insofar as they relate to the five years ended
December 31, 2001, are derived from our consolidated financial statements, which have been audited by KPMG LLP. The summary
consolidated financial and other data set forth below for the nine-month periods ended September 30, 2002 and 2001, 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 nine-month periods indicated, have been included. This information is
qualified by reference to our consolidated financial statements included herein, and 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 nine-month period ended September 30, 2002 are not necessarily indicative of results that may be expected for
the entire year ending December 31, 2002.
As of and for the
Nine Months Ended
September 30, (1) As of or for the Year Ended December 31, (1)
-------------------- ------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
--------- ---------- -------- --------- --------- --------- ---------
(dollars expressed in thousands, except per share data)
Income Statement Data:
Interest income.................................... $ 319,726 340,117 444,743 422,826 353,082 327,860 295,101
Interest expense................................... 121,735 164,840 209,604 200,852 170,751 172,021 156,153
---------- --------- --------- --------- --------- --------- ---------
Net interest income................................ 197,991 175,277 235,139 221,974 182,331 155,839 138,948
Provision for loan losses.......................... 38,700 13,910 23,510 14,127 13,073 9,000 11,300
---------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for loan losses 159,291 161,367 211,629 207,847 169,258 146,839 127,648
Noninterest income................................. 64,840 57,744 98,609 42,778 41,650 36,497 25,697
Noninterest expense................................ 175,232 157,361 211,671 157,990 138,757 128,862 102,965
---------- --------- --------- --------- --------- --------- ---------
Income before provision for income taxes,
minority interest in income of subsidiary
and cumulative effect of change
in accounting principle.......................... 48,899 61,750 98,567 92,635 72,151 54,474 50,380
Provision for income taxes......................... 17,471 24,120 30,048 34,482 26,313 19,693 16,083
---------- --------- --------- --------- --------- --------- ---------
Income before minority interest in income
of subsidiary and cumulative effect of
change in accounting principle................... 31,428 37,630 68,519 58,153 45,838 34,781 34,297
Minority interest in income of subsidiary.......... 1,066 1,622 2,629 2,046 1,660 1,271 1,270
---------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of change in
accounting principle............................. 30,362 36,008 65,890 56,107 44,178 33,510 33,027
Cumulative effect of change in accounting
principle, net of tax............................ -- (1,376) (1,376) -- -- -- --
---------- --------- --------- --------- --------- --------- ---------
Net income......................................... $ 30,362 34,632 64,514 56,107 44,178 33,510 33,027
========== ========= ========= ========= ========= ========= =========
Dividends:
Preferred stock.................................... $ 524 524 786 786 786 786 5,067
Common stock....................................... -- -- -- -- -- -- --
Ratio of total dividends declared to net income.... 1.73% 1.51% 1.22% 1.40% 1.78% 2.35% 15.34%
Balance Sheet Data:
Investment securities.............................. $ 914,875 533,149 631,068 563,534 451,647 534,796 795,530
Loans, net of unearned discount.................... 5,464,020 4,774,300 5,408,869 4,752,265 3,996,324 3,580,105 3,002,200
Total assets....................................... 7,171,534 5,976,773 6,778,451 5,876,691 4,867,747 4,554,810 4,165,014
Total deposits..................................... 6,025,703 5,072,090 5,683,904 5,012,415 4,251,814 3,939,985 3,684,595
Notes payable...................................... -- 29,500 27,500 83,000 64,000 50,048 55,144
Guaranteed preferred beneficial interests in
First Banks, Inc. and First Banks America,
Inc. subordinated debentures..................... 267,632 182,945 235,881 182,849 127,611 127,443 83,183
Common stockholders' equity........................ 493,131 425,766 435,594 339,783 281,842 250,300 218,474
Total stockholders' equity......................... 506,194 438,829 448,657 352,846 294,905 263,363 231,537
Earnings Ratios:
Return on average total assets (2)................. 0.58% 0.79% 1.08% 1.09% 0.95% 0.78% 0.87%
Return on average total stockholders' equity (2)... 8.67 11.88 15.96 17.43 15.79 13.64 12.91
Efficiency ratio (3)............................... 66.67 67.53 63.42 59.67 61.95 67.00 62.54
Net interest margin (2) (4)........................ 4.23 4.40 4.34 4.65 4.24 3.94 3.88
Asset Quality Ratios:
Allowance for loan losses to loans................. 2.01 1.69 1.80 1.72 1.72 1.70 1.68
Nonperforming loans to loans (5)................... 1.82 0.94 1.24 1.12 0.99 1.22 0.80
Allowance for loan losses to
nonperforming loans (5).......................... 110.72 179.05 144.36 153.47 172.66 140.04 209.88
Nonperforming assets to loans and
other real estate (6)............................ 1.87 1.02 1.32 1.17 1.05 1.32 1.04
Net loan charge-offs to average loans (2).......... 0.68 0.41 0.45 0.17 0.22 0.05 0.27
Capital Ratios:
Average total stockholders' equity to
average total assets............................. 6.71 6.63 6.74 6.25 6.01 5.74 6.71
Total risk-based capital ratio..................... 10.97 10.98 10.53 10.21 10.05 10.27 10.26
Leverage ratio..................................... 6.86 7.67 7.25 7.46 7.15 6.78 6.80
Ratio of Earnings to Fixed Charges: (7)
Including interest on deposits..................... 1.37x 1.36x 1.44x 1.44x 1.40x 1.31x 1.31x
Excluding interest on deposits..................... 2.46 3.07 3.47 3.75 3.22 3.16 3.25
------------------------------
(1) The comparability of the selected data presented is affected by the acquisitions of 13 banks and five purchases of branch
offices during the five-year period ended December 31, 2001, and the acquisition of one bank and two purchases of branch
offices during the nine-month period ended September 30, 2002. 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 nine-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, which may involve varying degrees of inherent risk, 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 acquirers 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, higher than anticipated
expenses, operational problems or unknown or contingent
liabilities of the banks or businesses we acquire. If these
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. Our use of cash can be a
disadvantage in acquisitions relative to other prospective
acquirers in those instances in which selling stockholders
desire a tax-free exchange. Cash acquisitions at prices in
excess of the selling entity's stockholders' equity inherently
reduce our regulatory capital ratios. Additionally, we may
borrow funds to finance an acquisition, thereby increasing our
leverage; 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 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 information technology and item processing
functions at remote locations including the transportation of
documents and communications line charges from various service
providers;
o Control of correspondent accounts, reserve balances and wire
transfers in different time zones;
o Familiarizing personnel with our business environment, banking
practices and customer requirements at geographically dispersed
areas;
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 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 commercial or
residential real estate. Commercial, real estate construction and residential
real estate loans were $1.81 billion, $983.3 million and $709.9 million at
September 30, 2002, representing 34.9%, 18.9% and 13.5% of our loan portfolio,
respectively. Adverse developments affecting real estate in one or more of our
markets could increase the credit risk associated with our loan portfolio.
We maintain an allowance for loan losses to absorb loan losses as they
are incurred, as well as probable loan losses inherent within 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 incurred which diminish the allowance to an
extent that it is no longer adequate to support the remaining loan portfolio
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 changing interest
rates on our interest-earning assets and interest-bearing liabilities, there can
be no assurance that such measures will be effective in avoiding undue interest
rate risk. Furthermore, these measures do not address the effect of interest
rates on the financial capacity of our customers or our ability to increase or
maintain our loan or deposit portfolios. 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 fair value. The effect of
certain of our hedging strategies may result in volatility in our quarterly
earnings as interest rates change or as the volatility in the underlying
derivatives markets increases or decreases. 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
may have more flexibility than we do 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 sudden or unexpected changes in economic
conditions in the areas in which we operate, including changes that might result
from terrorist acts and further acts of war.
We conduct business in four states, with a concentration of business in
eastern Missouri, southeastern Illinois, Texas and northern and southern
California. Because of the concentration of our interests in those areas, we may
experience higher rates of loss and delinquency in our loan portfolio than if
the underlying loans were more geographically diversified. Additionally, the
loans in our portfolio may be subject to greater risk of default than other
comparable loans in the event of adverse economic, political, or business
developments or natural hazards that may affect those states and the ability of
property owners or commercial borrowers in those states to make payments of
principal and interest on the underlying loans.
Additionally, terrorist attacks and further acts of violence could
cause deterioration of the domestic economy which can cause an increase in
delinquencies in our loan portfolio and loan losses, and may lead to reduced
levels of travel, which could adversely affect our hotel loan and commercial
airline equipment leasing portfolios. At September 30, 2002, we had $124.3
million in hotel loans and $47.3 million in commercial airline equipment leases.
Any terrorist attack, any response to such an attack by the United States or any
similar condition disproportionately affecting one or more of the states in
which we conduct substantial business could affect the value of the collateral
underlying our loans and leases and materially adversely affect our results of
operations. We are unable to predict whether the threat of terrorist attacks or
responses to such events will result in long-term commercial disruptions or will
have long-term adverse effects 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.
As a company that files reports with the Securities and Exchange
Commission, or SEC, we are subject to the corporate governance standards set
forth in the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and other
recent changes to the federal securities laws, as well as any rules or
regulations that may be promulgated by the SEC or the New York Stock Exchange.
The new regulations associated with the Sarbanes-Oxley Act require that certain
of our officers personally certify certain SEC filings and financial statements
and may require additional measures to be taken by our officers and directors
and our outside auditors. At this time we cannot assess the full impact of any
such legislation or regulations on our financial condition or results of
operations.
In October 2001, the USA Patriot Act of 2001, or the Patriot Act, was
enacted in response to terrorist attacks in New York, Pennsylvania and
Washington, D.C., which occurred on September 11, 2001. The Patriot Act contains
sweeping anti-money laundering and financial transparency laws and imposes
various regulations, including standards for verifying client identification at
account opening, and rules to promote cooperation among financial institutions,
regulators and law enforcement entities in identifying parties that may be
involved in terrorism or money laundering. The Patriot Act is expected to
increase the administrative costs and burden of doing business for financial
institutions; however, we cannot predict the significance of any increase at
this time.
We continually encounter technological change, and we 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 members of his immediate family, 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. 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 $26.0 million in
dividends as of September 30, 2002 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.
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.
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 $7.0 million at
December 31, 2002, and will rank equally with the subordinated debentures
associated with the $183.7 million of trust preferred securities four of our
other financing subsidiaries will have outstanding after giving effect to the
complete redemption of our $86.3 million of 9.25% trust preferred securities
issued in 1997. 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, 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 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 nor 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 March 31, 2033.
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 March 31, 2008.
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 March 31, 2033. 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 relative to securities issued such as the preferred securities.
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 "Material United States 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
will apply to have the preferred securities approved for listing on the New York
Stock Exchange, 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 on the New York Stock
Exchange. 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 SEC that are not
statements of historical fact are 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" beginning on
page 10 of 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: fluctuations in interest rates and the economy, including the negative
impact on the economy resulting from the events of September 11, 2001 in New
York City and Washington D.C. and the national response to those events as well
as the threat of future terrorist activities, potential wars and/or military
actions related thereto, and domestic responses to terrorism or threats of
terrorism; the impact of laws and regulations applicable to us and changes
therein; the impact of accounting pronouncements applicable to us and changes
therein; competitive conditions in the markets in which we conduct our
operations, including competition from banking and non-banking companies with
substantially greater resources than us, some of which may offer and develop
products and services not offered by us; our ability to control the composition
of our loan portfolio without adversely affecting interest income; 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; 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. We
do not have a duty to and will not update these forward-looking statements.
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
$57.8 million after deduction of offering expenses estimated to be $275,000 and
underwriting commissions.
We expect to use the entire net proceeds to redeem the subordinated
debentures associated with the 9.25% trust preferred securities issued by our
financing subsidiary, First Preferred Capital Trust, in 1997. Currently, there
is approximately $88.9 million in principal amount of such subordinated
debentures. Remaining funds necessary to complete this redemption will be
provided from available cash and borrowings under our revolving credit line with
a group of unaffiliated financial institutions.
The revolving credit line initially provided a $90 million revolving
credit line and a $20 million letter of credit. On December 31, 2002, the
revolving credit line was amended, at the request of First Banks, to provide a
$45 million revolving credit line and a $20 million letter of credit.
Additionally, the revolving credit line was amended to reduce from 0.70% to
0.60% the minimum return on average assets ratio that First Banks is required to
meet for the quarter ended December 31, 2002 and to add a covenant providing
that for the quarter ending December 31, 2002 and each following quarter, First
Banks is required to maintain a minimum return on average assets ratio, computed
with respect to the current quarter annualized, of at least 0.80%. The revolving
credit line defines return on average assets as the percentage determined by
dividing First Banks' net income for the immediately preceding four calendar
quarters by total average assets as reflected on First Banks' balance sheet at
the end of the most recently completed calendar quarter. First Banks requested
this amendment because it anticipated that its minimum return on average assets
determined for the quarter ended December 31, 2002 would be less than 0.70%.
Interest is payable on outstanding principal loan balances at a floating rate
equal to, either the lender's prime rate or, at our option, the Eurodollar rate
plus a margin determined by the outstanding loan balances and our net income for
the preceding four calendar quarters. If the loan balances outstanding under the
revolving credit line are accruing at the prime rate, interest is to be paid
monthly. If the loan balances outstanding under the revolving credit line are
accruing at the London InterBank Offering Rate, or LIBOR, interest is payable
based on the one, two, three or six-month LIBOR rates as selected by us. The
revolving credit line matures on August 21, 2003 and is secured by a pledge of
the stock of our banking subsidiaries.
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 interest 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 will apply to have the preferred securities approved for listing on
the New York Stock Exchange under the symbol "_____." Trading is expected to
commence on or around 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 at September 30, 2002 and (ii) our consolidated
capitalization giving effect to the issuance of the preferred securities hereby offered by the trust and our receipt and utilization
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 September 30, 2002 to redeem the subordinated debentures associated with the 9.25% trust
preferred securities issued by one of our financing subsidiaries 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.
September 30, 2002
---------------------------------------
Actual As Adjusted
--------------- ---------------
(dollars expressed in thousands)
Long-Term Debt:
Notes payable (1)..................................................... $ -- $ 16,000
--------- ---------
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 (2)(3).................................... 227,789 201,759
Guaranteed preferred beneficial interests in First Banks America, Inc.
subordinated debentures (2)....................................... 46,336 46,336
-------- --------
Total guaranteed preferred beneficial interests in subordinated
debentures................................................... 274,125 248,095
Less unamortized expenses relating to the issuance of the preferred
securities........................................................ (6,493) (8,718)
-------- --------
Total guaranteed preferred beneficial interests in subordinated
debentures, net of expenses.................................. 267,632 239,377
-------- --------
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....................................................... 5,950 5,950
Retained earnings..................................................... 419,146 419,146
Accumulated other comprehensive income................................ 62,120 62,120
-------- --------
Total stockholders' equity........................................ 506,194 506,194
-------- ---------
Total capitalization.............................................. $773,826 $761,571
======== ========
Capital Ratios: (4)(5)
Leverage ratio (6).................................................... 6.86% 6.86%
Tier I capital ratio.................................................. 7.79 7.78
Total risk based capital ratio........................................ 10.97 10.54
- -----------------------------
(1) The proceeds of this offering will be used in their entirety to redeem the subordinated debentures associated with the $86.3
million issue of trust preferred securities by our financing subsidiary in 1997. The remaining funds necessary to complete this
redemption will be provided from available cash and borrowings under First Banks' revolving credit line. See "Use of Proceeds"
beginning on page 18 of this prospectus for a description of the revolving credit line and the amounts outstanding thereunder
as of certain dates.
(2) Includes the effects of interest rate swap agreements. At September 30, 2002, the stated value of the guaranteed preferred
beneficial interests in the First Banks, Inc. subordinated debentures and the First Banks America, Inc. subordinated debentures
is $224.0 million and $46.0 million, respectively.
(3) Amounts include $25.0 million of variable rate subordinated debentures issued on April 10, 2002 by First Bank Capital Trust
that rank equal in priority to $143.8 million of our subordinated debentures and, effective December 31, 2002, $46.0 million of
FBA's subordinated debentures, and rank junior in priority to $55.2 million of our subordinated debentures that were issued in
November 2001.
(4) 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.
(5) 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 because of
the 25% limitation. The preferred securities will, however, be included in total risk-based capital.
(6) 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 and other data set forth below, insofar as they relate to the five years ended
December 31, 2001, are derived from our consolidated financial statements, which have been audited by KPMG LLP. The selected
consolidated financial and other data set forth below for the nine-month periods ended September 30, 2002 and 2001, 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 nine-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 nine-month period ended September 30, 2002 are not necessarily indicative of
results that may be expected for the entire year ending December 31, 2002.
As of or for the
Nine Months Ended
September 30, (1) As of or for the Year Ended December 31, (1)
------------------- ---------------------------------------------
2002 2001 2001 2000 1999 1998 1997
-------- ---------- ------- --------- --------- -------- --------
(dollars expressed in thousands, except per share data)
Income Statement Data:
Interest income.................................... $319,726 340,117 444,743 422,826 353,082 327,860 295,101
Interest expense................................... 121,735 164,840 209,604 200,852 170,751 172,021 156,153
-------- ------- -------- -------- --------- --------- ---------
Net interest income................................ 197,991 175,277 235,139 221,974 182,331 155,839 138,948
Provision for loan losses.......................... 38,700 13,910 23,510 14,127 13,073 9,000 11,300
-------- ------- -------- -------- --------- --------- ---------
Net interest income after provision for
loan losses...................................... 159,291 161,367 211,629 207,847 169,258 146,839 127,648
Noninterest income................................. 64,840 57,744 98,609 42,778 41,650 36,497 25,697
Noninterest expense................................ 175,232 157,361 211,671 157,990 138,757 128,862 102,965
-------- ------- -------- -------- --------- --------- ---------
Income before provision for income taxes,
minority interest in income of subsidiary
and cumulative effect of change
in accounting principle.......................... 48,899 61,750 98,567 92,635 72,151 54,474 50,380
Provision for income taxes......................... 17,471 24,120 30,048 34,482 26,313 19,693 16,083
-------- ------- -------- -------- --------- --------- ---------
Income before minority interest in income of
subsidiary and cumulative effect of change
in accounting principle.......................... 31,428 37,630 68,519 58,153 45,838 34,781 34,297
Minority interest in income of subsidiary.......... 1,066 1,622 2,629 2,046 1,660 1,271 1,270
-------- ------- -------- -------- --------- --------- ---------
Income before cumulative effect of change in
accounting principle............................. 30,362 36,008 65,890 56,107 44,178 33,510 33,027
Cumulative effect of change in accounting
principle, net of tax............................ -- (1,376) (1,376) -- -- -- --
-------- ------- -------- -------- --------- --------- ---------
Net income......................................... $ 30,362 34,632 64,514 56,107 44,178 33,510 33,027
======== ======= ======== ======== ========= ========= =========
Dividends:
Preferred stock.................................... $ 524 524 786 786 786 786 5,067
Common stock....................................... -- -- -- -- -- -- --
Ratio of total dividends declared to net income.... 1.73% 1.51% 1.22% 1.40% 1.78% 2.35% 15.34%
Per Share Data:
Earnings per common share:
Basic:
Income before cumulative effect of
change in accounting principle............... $1,261.05 1,499.67 2,751.54 2,338.04 1,833.91 1,383.04 1,181.69
Cumulative effect of change in
accounting principle......................... -- (58.16) (58.16) -- -- -- --
--------- -------- -------- -------- --------- --------- ---------
Basic.......................................... $1,261.05 1,441.51 2,693.38 2,338.04 1,833.91 1,383.04 1,181.69
========= ======== ======== ======== ========= ========= =========
Diluted:
Income before cumulative effect of
change in accounting principle............... $1,246.05 1,468.14 2,684.93 2,267.41 1,775.47 1,337.09 1,134.28
Cumulative effect of change in
accounting principle......................... -- (58.16) (58.16) -- -- -- --
Diluted.................................. $1,246.05 1,409.98 2,626.77 2,267.41 1,775.47 1,337.09 1,134.28
========= ======== ======== ======== ========= ========= =========
Weighted average common stock outstanding.......... 23,661 23,661 23,661 23,661 23,661 23,661 23,661
Balance Sheet Data:
Investment securities.............................. $ 914,875 533,149 631,068 563,534 451,647 534,796 795,530
Loans, net of unearned discount.................... 5,464,020 4,774,300 5,408,869 4,752,265 3,996,324 3,580,105 3,002,200
Total assets....................................... 7,171,534 5,976,773 6,778,451 5,876,691 4,867,747 4,554,810 4,165,014
Total deposits..................................... 6,025,703 5,072,090 5,683,904 5,012,415 4,251,814 3,939,985 3,684,595
Notes payable...................................... -- 29,500 27,500 83,000 64,000 50,048 55,144
Guaranteed preferred beneficial interests
in First Banks, Inc. and First Banks
America, Inc. subordinated debentures............ 267,632 182,945 235,881 182,849 127,611 127,443 83,183
Common stockholders' equity........................ 493,131 425,766 435,594 339,783 281,842 250,300 218,474
Total stockholders' equity......................... 506,194 438,829 448,657 352,846 294,905 263,363 231,537
Earnings Ratios:
Return on average total assets (2)................. 0.58% 0.79% 1.08% 1.09% 0.95% 0.78% 0.87%
Return on average total stockholders' equity (2)... 8.67 11.88 15.96 17.43 15.79 13.64 12.91
Efficiency ratio (3)............................... 66.67 67.53 63.42 59.67 61.95 67.00 62.54
Net interest margin (2) (4)........................ 4.23 4.40 4.34 4.65 4.24 3.94 3.88
Asset Quality Ratios:
Allowance for loan losses to loans................. 2.01 1.69 1.80 1.72 1.72 1.70 1.68
Nonperforming loans to loans (5)................... 1.82 0.94 1.24 1.12 0.99 1.22 0.80
Allowance for loan losses to
nonperforming loans (5).......................... 110.72 179.05 144.36 153.47 172.66 140.04 209.88
Nonperforming assets to loans and
other real estate (6)............................ 1.87 1.02 1.32 1.17 1.05 1.32 1.04
Net loan charge-offs to average loans (2).......... 0.68 0.41 0.45 0.17 0.22 0.05 0.27
Capital Ratios:
Average total stockholders' equity
to average total assets.......................... 6.71 6.63 6.74 6.25 6.01 5.74 6.71
Total risk-based capital ratio..................... 10.97 10.98 10.53 10.21 10.05 10.27 10.26
Leverage ratio..................................... 6.86 7.67 7.25 7.46 7.15 6.78 6.80
Ratio of Earnings to Fixed Charges: (7)
Including interest on deposits..................... 1.37x 1.36x 1.44x 1.44x 1.40x 1.31x 1.31x
Excluding interest on deposits..................... 2.46 3.07 3.47 3.75 3.22 3.16 3.25
------------------------------
(1) The comparability of the selected data presented is affected by the acquisitions of 13 banks and five purchases of branch
offices during the five-year period ended December 31, 2001, and the acquisition of one bank and two purchases of branch
offices during the nine-month period ended September 30, 2002. 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 nine-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. Since 1994, our organization has grown significantly,
primarily as a result of our acquisition strategy, as well as through internal
growth. We currently operate banking subsidiaries with branches in California,
Illinois, Missouri and Texas. At September 30, 2002, we had total assets of
$7.17 billion, loans, net of unearned discount, of $5.46 billion, total deposits
of $6.03 billion and total stockholders' equity of $506.2 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, internet banking, 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:
Name Geographic (Number of) Locations Total Assets
at September 30, 2002 at September 30, 2002
------------------------------------------ ------------------------------------- -----------------------
(dollars expressed
in thousands)
First Bank Missouri (43) and Illinois (51) $4,063,159
First Banks America, Inc., and its
subsidiary:
First Bank & Trust California (49) and Texas (8) 3,139,170
Our subsidiary banks are wholly owned by their respective parent
companies and we owned 93.76% of First Banks America, Inc., or FBA, at September
30, 2002. On December 31, 2002, we completed our acquisition of all of FBA's
outstanding capital stock that we did not already own for a price of $40.54 per
share, or approximately $32.4 million. In conjunction with this transaction, FBA
became a wholly owned subsidiary of ours, and was merged with and into First
Banks. We anticipate merging our bank subsidiaries, First Bank and First Bank &
Trust, during the first quarter of 2003 to allow certain administrative and
operational economies not available while the two banks maintain separate
charters.
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 members of his immediate family, 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, but we centralize overall
corporate policies, procedures and administrative functions and provide
centralized 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.
Due to the nature of our ownership, we have elected to only engage in those
acquisitions that can be accomplished for cash. 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 advantages of tax-free exchanges to the selling
shareholders. Our acquisition activities are generally somewhat sporadic because
we may consummate multiple transactions in a particular period, followed by a
substantially less active acquisition period. 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,
ownership, regulatory or other problems. We seek to address the risks of these
issues by adjusting the acquisition pricing, accompanied by appropriate remedial
attention after consummation of the transaction. In these institutions, these
issues may diminish their attractiveness to other potential acquirers, and
therefore may reduce 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 may not be economically
viable in extremely competitive acquisition markets.
During the five years ended December 31, 2001, we primarily
concentrated our acquisitions in California, completing 13 acquisitions of banks
and five purchases of branch offices, which provided us with an aggregate of
$2.05 billion in total assets and 47 banking locations as of the dates of
acquisition. More recent acquisitions have occurred in our other geographic
markets. On January 15, 2002, we completed our acquisition of a bank in Des
Plaines, Illinois, which provided us with $256.3 million in total assets and
four banking locations and on June 22, 2002, we completed our assumption of the
deposits and certain liabilities and the purchase of certain assets of two
branch offices in Denton and Garland, Texas, which provided us with deposits of
$64.9 million. We are also planning on further expanding our Midwest banking
franchise with an acquisition in the Ste. Genevieve, Missouri market, which is
expected to be completed in the first quarter of 2003. These acquisitions have
allowed us to significantly expand our presence throughout our geographic areas,
improve operational efficiencies, convey a more consistent image and quality of
service and more cohesively market and deliver our products and services.
Management continues to meld the acquired entities into our operations, systems
and culture.
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 various areas including, but not limited to:
o improving asset quality;
o reducing unnecessary, duplicative and/or excessive expenses
including personnel, information technology and certain other
operational and administrative expenses;
o maintaining, repairing and, in some cases, refurbishing bank
premises necessitated by the deferral of such projects by some
of 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 includes the combining of separate
and distinct entities together to form a cohesive organization with common
objectives and focus. We invest 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, 2001 and, to a lesser extent, the nine months
ended September 30, 2002, 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 prospects for improving future profitability.
In conjunction with our acquisition strategy, we have also focused on
building and reorganizing the infrastructure necessary to accomplish our
objectives for internal growth. This process has required significant increases
in the resources dedicated to commercial and consumer 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. We continue to focus on modifying and
effectively repositioning our internal and external resources to better serve
the markets in which we operate. Although these efforts have primarily led to
increased capital expenditures and noninterest expenses, 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 November 2001,
our third financing subsidiary, First Preferred Capital Trust III, issued $55.2
million of 9.00% trust preferred securities, and, on April 10, 2002, First Bank
Capital Trust, our fourth financing subsidiary, issued $25.0 million of variable
rate cumulative 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. Each of these financing subsidiaries operates as a
Delaware statutory trust. The trust preferred securities issued by First
Preferred Capital Trust, First Preferred Capital Trust II and First Preferred
Capital Trust III are publicly held and traded on the Nasdaq National Market.
The trust preferred securities issued by First Bank Capital Trust were issued in
a private placement and rank equal to the trust preferred securities issued by
our other three financing subsidiaries and junior to the trust preferred
securities issued by First Preferred Capital Trust III. 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. With the exception of the First
Bank Capital Trust preferred securities, we pay distributions on these trust
preferred securities quarterly in arrears on March 31st, June 30th, September
30th, and December 31st of each year. Distributions on the First Bank Capital
Trust preferred securities are payable semi-annually in arrears on April 22nd
and October 22nd of each year. The distributions payable on all issues of trust
preferred securities are included in interest expense in the consolidated
statements of income.
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 the 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 certain instances, sales of loans. As a
result, our portfolio of one-to-four family residential real estate loans, after
reaching a high of $1.20 billion at December 31, 1995, has decreased to $798.1
million at December 31, 2001, and $703.9 million at September 30, 2002.
Similarly, our portfolio of consumer and installment loans, net of unearned
discount, decreased significantly from $279.3 million at December 31, 1997 to
$122.1 million at December 31, 2001, and $91.0 million at September 30, 2002.
The decrease in 2002 reflects 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 expanding
commercial lending and reducing the amount of less profitable loan types. For
the year ended December 31, 2001, the overall decline in our consumer and
installment portfolio, exclusive of loans held for sale, also reflects the sale
of our student loan and credit card portfolios.
As these components of our loan portfolio decreased, we replaced them
with 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 $3.00
billion at December 31, 1997 to $5.41 billion at December 31, 2001 and $5.46
billion at September 30, 2002.
Our expanded level of commercial lending carries with it greater credit
risk, which we manage through uniform loan policies, procedures, underwriting
and credit administration. As a consequence of such greater risk, the growth of
the loan portfolio must also be accompanied by adequate allowances for loan
losses. We associate the increased level of commercial lending activities and
our acquisitions with the increase of $14.1 million in nonperforming loans for
the year ended December 31, 2001 as compared to December 31, 2000. In addition,
the loan portfolios of some of our acquisitions completed in 2000 and 2001,
particularly Millennium Bank and Union Financial Group, Ltd., or Union,
exhibited significant distress, which further contributed to the overall
increase in nonperforming loans. For the nine months ended September 30, 2002,
our nonperforming loans increased $31.9 million to $99.2 million as of September
30, 2002, compared to $67.3 million at December 31, 2001. The increase is
primarily attributable to general economic conditions, additional problems
identified in the acquired loan portfolios, continuing deterioration in the
portfolio of leases to the airline industry and the addition of a $16.1 million
borrowing relationship to nonaccrual real estate construction and development
loans during the second quarter of 2002. This relationship relates to a
residential and recreational development project that had significant financial
difficulties and experienced inadequate project financing, project delays and
weak project management. This relationship had previously been on nonaccrual
status and was removed from nonaccrual status during the third quarter of 2001
due to financing being recast with a new borrower, who appeared able to meet
ongoing developmental expectations. Subsequent to that time, the new borrower
encountered internal management problems, which negatively impacted and further
delayed development of the project. We believe these increases, while partially
attributable to the overall risk in our loan portfolio, are reflective of
cyclical trends experienced within the banking industry as a result of the
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. This
growth is accomplished by cross-selling various products and services, packaging
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, 1997, total
time deposits were $1.90 billion, or 51.68% of total deposits. Although time
deposits have increased to $2.30 billion at December 31, 2001 and decreased
slightly to $2.28 billion at September 30, 2002, they represented only 40.5% and
37.8% of total deposits at December 31, 2001 and September 30, 2002,
respectively, reflecting our continued focus on transactional accounts and full
service deposit relationships with our customers.
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, 2001 and 2000, net income was $64.5
million and $56.1 million, respectively, compared with $44.2 million, $33.5
million and $33.0 million in 1999, 1998 and 1997, respectively. For the nine
months ended September 30, 2002, net income was $30.4 million, compared to $34.6
million for the comparable period in 2001. The factors that led to the decline
in earnings for 2002 include the current interest rate environment, asset
quality issues requiring additional provisions for loan losses, and increased
operating expenses. The increased provisions for loan losses reflect the current
economic environment and significantly increased loan charge-off, delinquency
and nonperforming trends as further discussed under "--Comparison of Results of
Operations for the Nine Months Ended September 30, 2002 and 2001." 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
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 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 and the issuance of trust preferred securities to meet
our growth objectives under our acquisition program.
During the three years ended December 31, 2001, we completed ten
acquisitions of banks, one branch office purchase and the acquisition of certain
assets and assumption of certain liabilities of a leasing company. As
demonstrated below, our acquisitions during the three years ended December 31,
2001 have primarily served to increase our presence in the California markets
that we originally entered during 1995 and to further augment our existing
markets and our Midwest banking franchise. In 2002, we also completed an
acquisition in the Chicago metropolitan area and the purchase of two branch
offices in the Dallas metropolitan area. Additionally, we currently have one
pending acquisition that will further expand our Midwest banking franchise.
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 (1)
------ ------------ ---------- ------------- -------------- ------------ -------------
(dollars expressed in thousands)
Pending Acquisition
- -------------------
Bank of Ste. Genevieve
Ste. Genevieve, Missouri -- $ 111,100 60,900 38,700 91,100
========== ======== ======== ======== ===
2002
- ----
Union Planters Bank, N.A.
Denton and Garland, Texas
branch offices June 22, 2002 $ 63,700 600 -- 64,900 2
Plains Financial Corporation
Des Plaines, Illinois January 15, 2002 256,300 150,400 81,000 213,400 4
---------- -------- -------- --------- ----
$ 320,000 151,000 81,000 278,300 6
========== ======== ======== ========= ====
2001
- ----
Union Financial Group, Ltd.
Swansea, Illinois December 31, 2001 $ 360,000 263,500 1,150 283,300 9
BYL Bancorp
Orange, California October 31, 2001 281,500 175,000 12,600 251,800 7
Charter Pacific Bank
Agoura Hills, California October 16, 2001 101,500 70,200 7,500 89,000 2
---------- -------- -------- -------- ----
$ 743,000 508,700 21,250 624,100 18
========== ======== ======== ======== ====
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
========== ======== ======== ======== ====
- -------------------------
(1) For our pending acquisition that is expected to close on March 31, 2003, amounts are as of September 30, 2002. For closed
acquisitions, amounts are as of the respective closing dates.
We funded the completed acquisitions from available cash reserves,
proceeds from the sales and maturities of available-for-sale investment
securities, borrowings under our revolving credit line with a group of
unaffiliated banks and the proceeds of the issuance of trust preferred
securities.
Pending Acquisition
On September 17, 2002, First Banks and Allegiant Bancorp, Inc., or
Allegiant, signed an agreement and plan of exchange that provides for First
Banks to acquire Allegiant's wholly owned banking subsidiary, Bank of Ste.
Genevieve. Bank of Ste. Genevieve operates two locations in Ste. Genevieve,
Missouri, and reported total assets of $111.1 million and total deposits of
$91.1 million at September 30, 2002. Under the terms of the agreement, First
Banks will acquire Bank of Ste. Genevieve in exchange for approximately 974,150
shares of Allegiant common stock that are currently held by First Banks. The
transaction, which is subject to regulatory approvals, is expected to be
completed during the first quarter of 2003. First Banks will continue to own
approximately 232,000 shares of Allegiant common stock subsequent to completion
of the transaction.
Closed Acquisitions and Other Corporate Transactions
On January 15, 2002, we completed our acquisition of Plains Financial
Corporation, or Plains, and its wholly owned banking subsidiary, PlainsBank of
Illinois, National Association, Des Plaines, Illinois, in exchange for $36.5
million in cash. Plains operated a total of three banking facilities in Des
Plaines, Illinois, and one banking facility in Elk Grove Village, Illinois. At
the time of the transaction, Plains had $256.3 million in total assets, $150.4
million in loans, net of unearned discount, $81.0 million in investment
securities and $213.4 million in deposits. This transaction was accounted for
using the purchase method of accounting. The excess of the cost over the fair
value of the net assets acquired was approximately $12.6 million and will not be
amortized, but instead will be periodically tested for impairment in accordance
with Statement of Financial Accounting Standards, or SFAS, No. 142, Goodwill and
Other Intangible Assets. The core deposit intangibles were approximately $2.9
million and are being amortized over seven years utilizing the straight-line
method. Plains was merged with and into Union and PlainsBank of Illinois was
merged with and into First Bank.
On June 22, 2002, First Bank & Trust completed its assumption of the
deposits and certain liabilities and the purchase of certain assets of the
Garland and Denton, Texas branch offices of Union Planters Bank, National
Association, or UP branches. The transaction resulted in the acquisition of
$15.3 million in deposits and one branch office in Garland and $49.6 million in
deposits and one branch office, and a detached drive-thru facility, in Denton.
The core deposit intangibles associated with the branch purchases were $1.4
million and are being amortized over seven years utilizing the straight-line
method.
On December 31, 2002, we completed our acquisition of all of FBA's
outstanding capital stock that we did not already own for a price of $40.54 per
share, or approximately $32.4 million. At December 31, 2002, there were 798,753
shares, or approximately 6.22% of FBA's outstanding stock, held publicly. We
owned the other 93.78%. In conjunction with this transaction, FBA became a
wholly owned subsidiary of ours, and was merged with and into First Banks. This
transaction was accounted for using the purchase method of accounting. The
excess of the cost over the fair value of the net assets acquired was
approximately $12.4 million and will not be amortized, but instead will be
periodically tested for impairment in accordance with SFAS No. 142.
Critical Accounting Policies
Our financial condition and results of operations presented in the
consolidated financial statements, accompanying notes to the consolidated
financial statements, selected consolidated and other financial data appearing
elsewhere within this prospectus, and management's discussion and analysis of
financial condition and results of operations are, to large degree, dependent
upon our accounting policies. The selection and application of our accounting
policies involve judgments, estimates and uncertainties that are susceptible to
change.
We have identified the following accounting policies that we believe
are the most critical to the understanding of our financial condition and
results of operations. These critical accounting policies require management's
most difficult, subjective and complex judgments about matters that are
inherently uncertain. In the event that different assumptions or conditions were
to prevail, and depending upon the severity of such changes, the possibility of
a materially different financial condition and/or results of operations could be
a reasonable likelihood. The impact and any associated risks related to our
critical accounting policies on our business operations is discussed throughout
"--Management's Discussion and Analysis of Financial Condition and Results of
Operations," where such policies affect our reported and expected financial
results.
Loans and Allowance for Loan Losses. We maintain an allowance for loan
losses at a level we consider adequate to provide for probable losses in our
loan portfolio. The determination of our allowance for loan losses requires
management to make significant judgments and estimates based upon a periodic
analysis of our loans held for portfolio and held for sale considering, among
other factors, current economic conditions, loan portfolio composition, past
loan loss experience, independent appraisals, the fair value of underlying loan
collateral, our customers' ability to pay and selected key financial ratios. If
actual events prove the estimates and assumptions we used in determining our
allowance for loan losses were incorrect, we may need to make additional
provisions for loan losses.
Derivative Financial Instruments. 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 judgments and assumptions that are most critical to the
application of this critical accounting policy are those affecting the
estimation of fair value and hedge effectiveness. Fair value is based on quoted
market prices where available. If quoted market prices are unavailable, fair
value is based upon quoted market prices of comparable derivative instruments.
Factors that affect hedge effectiveness include the initial selection of the
derivative that will be used as a hedge and how well changes in its cash flow or
fair value have correlated and are expected to correlate with changes in the
cash flow or fair value of the underlying hedged asset or liability. Past
correlation is easy to demonstrate, but expected correlation depends upon
projections and trends that may not always hold true within acceptable limits.
Changes in assumptions and conditions could result in greater than expected
inefficiencies that, if large enough, could reduce or eliminate the economic
benefits anticipated when the hedges were established and/or invalidate
continuation of hedge accounting. Greater inefficiency and/or discontinuation of
hedge accounting is likely to result in increased volatility to reported
earnings. For cash flow hedges, this would result as more or all of the change
in the fair value of the affected derivative would be reported in noninterest
income. For fair value hedges, this would result as less or none of the change
in the fair value of the derivative would be offset by changes in the fair value
of the underlying hedged asset or liability.
Deferred Tax Assets. We recognize deferred tax assets and liabilities
for the estimated future tax effects of temporary differences, net operating
loss carryforwards and tax credits. We recognize deferred tax assets subject to
management's judgment based upon available evidence that realization is more
likely than not. Our deferred tax assets are reduced, if necessary, by a
deferred tax asset valuation allowance. In the event that we determine we would
not be able to realize all or part of our net deferred tax assets in the future,
we would need to adjust the recorded value of our deferred tax assets, which
would result in a direct charge to our provision for income taxes in the period
in such determination is made.
Business Combinations. We emphasize acquiring other financial
institutions as an important means of achieving our growth objectives. The
determination of the fair value of the assets and liabilities acquired in these
transactions as well as the returns on investment that may be achieved requires
management to make significant judgments and estimates based upon detailed
analyses of the existing and future economic value of such assets and
liabilities and/or the related income steams, including the resulting intangible
assets. If actual events prove the estimates and assumptions we used in
determining the fair values of the acquired assets and liabilities or the
projected income were incorrect, we may need to make additional adjustments to
the recorded values of such assets and liabilities, which could result in
increased volatility to reported earnings. In addition, we may need to make
additional adjustments to the recorded value of our intangible assets, which
directly impact our regulatory capital levels.
Financial Condition and Average Balances
Our average total assets were $6.97 billion for the nine months ended
September 30, 2002, compared to $5.87 billion for the nine months ended
September 30, 2001. Our total assets were $7.17 billion and $6.78 billion at
September 30, 2002 and December 31, 2001, respectively. The increase in total
assets is primarily attributable to our 2002 acquisitions of Plains and UP
branches, which provided total assets of $256.3 million and $63.7 million,
respectively. The increase in total assets was partially offset by lower loan
demand and an anticipated level of attrition associated with our acquisitions of
Charter Pacific Bank, BYL Bancorp and Union completed during the fourth quarter
of 2001, and of Plains. Federal funds sold increased by $23.6 million due to the
investment of excess funds resulting from reduced loan demand primarily due to
economic conditions. Investment securities increased $283.8 million to $914.9
million at September 30, 2002 from $631.1 million at December 31, 2001. We
attribute the increase in investment securities primarily to the purchase of
available-for-sale investment securities of $1.11 billion as well as the $81.0
million of investment securities acquired in conjunction with our acquisition of
Plains, offset by maturities of available-for-sale investment securities of
$855.1 million. Derivative instruments increased $47.0 million due to the
purchase of three interest rate swap agreements in May and June 2002 and
mark-to-market adjustments required under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which was implemented in January
2001, as amended. See further discussion under "--Interest Rate Risk
Management." In addition, intangibles associated with the purchase of
subsidiaries increased $14.8 million, which reflects core deposit intangibles
and goodwill associated with our acquisition of Plains as well as core deposit
intangibles associated with our branch purchases. The overall increase in assets
was also due to the increase in loans, net of unearned discount, of $55.2
million. This increase primarily reflects the acquisitions that we completed in
2002 offset by an anticipated amount of attrition associated with those
acquisitions as well as an overall decline in loan demand, which are further
discussed under "--Loans and Allowance for Loan Losses." Total deposits
increased by $341.8 million to $6.03 billion at September 30, 2002 from $5.68
billion at December 31, 2001. The increase primarily reflects deposits of $213.4
million acquired in our Plains acquisition and $64.9 million acquired in our
branch purchases in addition to an increase in savings accounts due primarily to
general economic conditions. The increase was offset by an anticipated level of
attrition associated with our acquisitions and continued aggressive competition
within our market areas. In addition, certain large commercial accounts,
particularly related to real estate title and escrow business, sharply reduced
their deposit levels in 2002, reflecting their reduced business activity as a
result of general economic conditions. Short-term borrowings decreased $29.1
million to $214.1 million at September 30, 2002 from $243.1 million at December
31, 2001, primarily due to a reduction in federal funds purchased. Our note
payable decreased by $27.5 million due to repayments primarily funded through
dividends from our subsidiaries and the issuance of $25.0 million of additional
trust preferred securities by First Bank Capital Trust offset, by a $36.5
million advance utilized to fund our acquisition of Plains in January 2002.
Guaranteed preferred beneficial interests in subordinated debentures also
increased $31.8 million due to the issuance of additional trust preferred
securities and increased amortization of deferred issuance costs.
Our average total assets were $5.99 billion for the year ended December
31, 2001, compared to $5.15 billion and $4.66 billion for the years ended
December 31, 2000 and 1999, respectively. We attribute the increase of $842.6
million in total average assets for 2001 primarily to our acquisitions completed
during the fourth quarter of 2000 and in 2001; internal loan growth generated
through the efforts of our business development staff; increased bank premises
and equipment associated with the expansion and renovation of various corporate
and branch offices; and, increased derivative instruments resulting from a
change in accounting principle in accordance with SFAS No. 133. The acquisition
of Union, which provided total assets of $360.0 million, was completed on
December 31, 2001, and therefore did not have a significant impact on our
average total assets for the year ended December 31, 2001.
Similarly, we attribute the $490.0 million increase 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, however, 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 44.9%, of the total assets we acquired in 2000.
The increase in assets for 2001 was primarily funded by an increase in
average deposits of $612.9 million to $5.09 billion for the year ended December
31, 2001, and an increase of $51.9 million in average short-term borrowings to
$158.0 million for the year ended December 31, 2001. 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 either temporarily invested in federal
funds sold or invested in available-for-sale investment securities, resulting in
increases in average federal funds sold and average investment securities of
$26.1 million and $19.4 million, respectively, to $93.6 million and $451.4
million, respectively, for the year ended December 31, 2001. Similarly, we
funded the increase in assets for 2000 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.
Loans, net of unearned discount, averaged $5.42 billion and $4.84
billion for the nine months ended September 30, 2002 and 2001, respectively. The
increase in loans is primarily attributable to our 2001 and 2002 acquisitions as
well as an increase of $57.1 million in our loans held for sale portfolio due to
increased volumes of residential mortgage loans resulting from the current
interest rate environment. This increase was partially offset by a decline in
our consumer and installment portfolio, net of unearned discount, to $91.0
million at September 30, 2002 from $122.1 million at December 31, 2001. This
decrease reflects continued 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 declines in our commercial, financial and agricultural portfolio due
to an anticipated amount of attrition associated with our acquisitions completed
during the fourth quarter of 2001 and the first quarter of 2002, as well as
current economic conditions prevalent within our markets.
Loans, net of unearned discount, averaged $4.88 billion, $4.29 billion
and $3.81 billion for the years ended December 31, 2001, 2000 and 1999,
respectively. The acquisitions we completed during 2000 and 2001 provided loans,
net of unearned discount, of $440.0 million and $508.7 million, respectively. In
addition to the growth provided by these acquisitions, for 2001, $174.6 million
of net loan growth was provided by corporate banking business development,
consisting of increases of $20.4 million of commercial, financial and
agricultural loans, $145.8 million of commercial real estate loans and $8.4
million of real estate construction and development loans. Furthermore, the
increase in loans is also attributable to an increase in residential real estate
lending, including loans held for sale, of $48.6 million for the year ended
December 31, 2001. We primarily attribute this increase to be the result of a
significantly higher volume of residential mortgage loans originated, including
both new fundings and refinancings, as a result of declining interest rates
experienced throughout 2001 as well as an expansion of our mortgage banking
activities. These overall increases were partially offset by continuing
reductions in consumer and installment loans, net of unearned discount, which
decreased $75.3 million to $122.1 million at December 31, 2001. This decrease
reflects the sale of our student loan and credit card loan 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. These changes result from the focus we
have placed on our business development efforts and the portfolio repositioning
which we originally began in the mid-1990s. 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 $766.1 million and $424.2 million for
the nine months ended September 30, 2002 and 2001, respectively. The significant
increase in 2002 is primarily attributable to an increase in the purchases of
available-for-sale investment securities due to reduced loan demand and our
acquisition of Plains, which provided us with $81.0 million in investment
securities. Investment securities averaged $451.4 million, $431.9 million and
$454.4 million for the years ended December 31, 2001, 2000 and 1999,
respectively, reflecting an increase of $19.5 million for the year ended
December 31, 2001 and a decrease of $22.5 million for the year ended December
31, 2000. The increase for 2001 is primarily associated with the investment
securities that we acquired in conjunction with our 2000 and 2001 acquisitions
and the investment of excess funds available due to reduced loan demand. This
increase was partially offset by the liquidation of certain acquired investment
securities, a higher than normal level of calls of investment securities prior
to their normal maturity dates experienced throughout 2001 resulting from the
general decline in interest rates, and sales of certain available-for-sale
investment securities.
Nonearning assets averaged $676.7 million and $529.3 million for the
nine months ended September 30, 2002 and 2001, respectively. Our average
nonearning assets were $562.9 million for the year ended December 31, 2001,
compared to $359.2 million and $340.2 million for the years ended December 31,
2000 and 1999, respectively. The increases in average nonearning assets for the
nine months ended September 30, 2002 and the year ended December 31, 2001 are
primarily due to derivative instruments resulting from three new swap agreements
entered into in 2002 and the implementation of SFAS No. 133 in January 2001. In
addition, bank premises and equipment, net of depreciation and amortization,
increased $34.8 million to $149.6 million at December 31, 2001 from $114.8
million at December 31, 2000. We primarily attribute the increase in bank
premises and equipment to our acquisitions, the purchase and remodeling of a new
operations center and corporate administrative building, and the construction
and/or renovation of various branch offices. In addition, the increase in
intangibles associated with the purchase of subsidiaries is due to the cost in
excess of the fair value of the net assets acquired of our 2002 and 2001
acquisitions.
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 $5.90 billion and $4.99 billion for the nine months ended
September 30, 2002 and 2001, respectively, and $5.09 billion, $4.48 billion and
$4.06 billion for the years ended December 31, 2001, 2000 and 1999,
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 increase for 2002 also
reflects an increase in savings accounts offset by a decline in certain large
commercial accounts due primarily to general economic conditions. The overall
increase for 2001 was partially offset by an anticipated level of account
attrition associated with our acquisitions during the fourth quarter of 2000 and
$50.0 million of time deposits of $100,000 or more that either matured or were
called in September 2001. The overall increase for 2000 was partially offset by
the divestiture of one of our central Illinois branches, which resulted in a
reduction in First Bank's deposit base of approximately $8.8 million.
Short-term borrowings averaged $187.6 million and $161.8 million for
the nine months ended September 30, 2002 and 2001, respectively, and $158.0
million, $106.1 million and $87.4 million for the years ended December 31, 2001,
2000 and 1999, respectively. The increase in the average balance for 2002
reflects an increase in securities sold under agreement to repurchase
principally in connection with the cash management activities of our commercial
deposit customers, offset by a decline in federal funds purchased. Short-term
borrowings increased by $102.5 million to $243.1 million at December 31, 2001
from $140.6 million at December 31, 2000. This increase reflects a $17.5 million
increase in securities sold under agreements to repurchase, a $15.1 million
increase in Federal Home Loan Bank advances acquired in conjunction with our
Union acquisition, and a $70.0 million increase in federal funds purchased.
Notes payable averaged $23.9 million and $45.5 million for the nine
months ended September 30, 2002 and 2001, respectively, and $41.6 million, $51.9
million and $56.4 million for the years ended December 31, 2001, 2000 and 1999,
respectively. Our note payable decreased by $55.5 million to $27.5 million at
December 31, 2001 from $83.0 million at December 31, 2000 due to dividends from
our subsidiaries and the issuance of additional trust preferred securities. In
addition, the merger of our former subsidiary, First Bank & Trust, with and into
Bank of San Francisco, effective March 29, 2001, allowed us to further reduce
our note payable through a capital reduction of the combined bank of $23.0
million. In conjunction with this merger, Bank of San Francisco was renamed
First Bank & Trust. The balance of our note payable at December 31, 2001 results
from a $27.5 million advance drawn on December 31, 2001 to fund our purchase of
Union. The balance was paid off during the nine months ended September 30, 2002.
The repayments were funded primarily through dividends from our subsidiaries and
the issuance of additional trust preferred securities, offset by a $36.5 million
advance utilized to fund our acquisition of Plains in January 2002.
During October 2000, First Preferred Capital Trust II 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 Millennium
Bank in December 2000. Distributions payable on these trust preferred securities
were $4.6 million for the nine months ended September 30, 2002, and $6.0 million
and $1.2 million for the years ended December 31, 2001 and 2000, respectively.
During November 2001, First Preferred Capital Trust III issued $55.2 million of
9.00% trust preferred securities. Proceeds from this offering, net of
underwriting fees and offering expenses, were approximately $52.9 million and
were used to reduce borrowings. Distributions payable on these trust preferred
securities were $3.8 million for the nine months ended September 30, 2002, and
$634,000 for the year ended December 31, 2001. On April 10, 2002, First Bank
Capital Trust issued $25.0 million of variable rate cumulative trust preferred
securities. Proceeds from this offering, net of underwriting fees and offering
expenses, were approximately $24.2 million and were used to reduce borrowings.
Distributions payable on these trust preferred securities were $828,000 for the
nine months ended September 30, 2002. The distributions on all issues of our
trust preferred securities are recorded as interest expense in our consolidated
financial statements.
Stockholders' equity averaged $468.2 million and $389.7 million for the
nine months ended September 30, 2002 and 2001, respectively, and $404.1 million,
$321.9 million and $279.8 million for the years ended December 31, 2001, 2000
and 1999, respectively. The increase in stockholders' equity for the nine months
ended September 30, 2002 is primarily attributable to net income of $30.4
million and a $27.8 million increase in accumulated other comprehensive income,
offset by dividends paid on our Class A and Class B preferred stock. The
increase in accumulated other comprehensive income reflects increases of $20.7
million associated with our derivative financial instruments as accounted for
under SFAS No. 133 and $7.1 million associated with the change in unrealized
gains and losses on available-for-sale investment securities as accounted for
under SFAS No. 115. We primarily attribute the increase for 2001 to net income
of $64.5 million and an increase in accumulated other comprehensive income of
$28.3 million. The increase in accumulated other comprehensive income reflects
an increase of $30.1 million associated with our derivative financial
instruments as accounted for under SFAS No. 133, offset by a $1.9 million
reduction in other comprehensive income resulting from the change in unrealized
gains and losses on available-for-sale investment securities. The overall
increase in stockholders' equity for 2001 also reflects an increase of $3.8
million associated with capital stock and certain other equity transactions of
FBA, partially offset by dividends paid on our Class A and Class B preferred
stock. 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.
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 nine months ended
September 30, 2002 and 2001:
Nine Months Ended September 30,
------------------------------------------------------------------------
2002 2001
---------------------------------- -----------------------------------
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............................... $5,400,519 293,217 7.26% $4,828,321 314,714 8.71%
Tax-exempt (4)........................ 15,427 1,057 9.16 7,889 591 10.01
Investment securities:
Taxable............................... 718,278 22,965 4.27 405,976 20,233 6.66
Tax-exempt (4)........................ 47,868 2,158 6.03 18,224 1,055 7.74
Federal funds sold and other............. 115,477 1,454 1.68 84,093 4,100 6.52
---------- -------- ---------- --------
Total interest-earning assets....... 6,297,569 320,851 6.81 5,344,503 340,693 8.52
-------- --------
Nonearning assets........................... 676,661 529,260
---------- ----------
Total assets........................ $6,974,230 $5,873,763
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand
deposits............................. $ 721,982 5,739 1.06% $ 482,891 5,372 1.49%
Savings deposits....................... 1,947,271 27,253 1.87 1,485,391 39,927 3.59
Time deposits (3)...................... 2,312,586 66,640 3.85 2,301,246 98,746 5.74
---------- -------- ---------- --------
Total interest-bearing deposits..... 4,981,839 99,632 2.67 4,269,528 144,045 4.51
Short-term borrowings.................... 187,634 2,635 1.88 161,755 5,000 4.13
Notes payable............................ 23,904 839 4.69 45,521 2,328 6.84
Guaranteed preferred debentures (3)...... 254,044 18,629 9.80 182,860 13,467 9.85
---------- -------- ---------- --------
Total interest-bearing liabilities.. 5,447,421 121,735 2.99 4,659,664 164,840 4.73
-------- --------
Noninterest-bearing liabilities:
Demand deposits.......................... 916,822 718,468
Other liabilities........................ 141,769 105,929
---------- ----------
Total liabilities................... 6,506,012 5,484,061
Stockholders' equity........................ 468,218 389,702
---------- ----------
Total liabilities and
stockholders' equity.............. $6,974,230 $5,873,763
========== ==========
Net interest income......................... 199,116 175,853
======== ========
Interest rate spread........................ 3.82 3.79
Net interest margin (5)..................... 4.23% 4.40%
==== ====
- --------------------
(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 and interest expense includes the effects of interest rate swap agreements.
(4) Information is presented on a tax-equivalent basis assuming a tax rate of 35%. The tax-equivalent adjustments were
approximately $1.1 million and $576,000 for the nine months ended September 30, 2002 and 2001, respectively.
(5) Net interest margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average interest-earning
assets.
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,
-------------------------------------------------------------------------------------
2001 2000 1999
----------------------------- ------------------------ ------------------------
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........................ $4,876,615 411,663 8.44% $4,281,290 389,687 9.10% $3,805,351 322,703 8.48%
Tax-exempt (4)................. 7,684 754 9.81 9,668 992 10.26 7,157 775 10.83
Investment securities:
Taxable........................ 433,454 26,244 6.05 412,932 27,331 6.62 435,189 26,206 6.02
Tax-exempt (4)................. 17,910 1,366 7.63 18,996 1,478 7.78 19,247 1,442 7.49
Federal funds sold and other...... 93,561 5,458 5.83 67,498 4,202 6.23 51,342 2,732 5.32
---------- ------- ---------- ------- ---------- -------
Total interest-earning
assets..................... 5,429,224 445,485 8.21 4,790,384 423,690 8.84 4,318,286 353,858 8.19
Nonearning assets..................... 562,918 ------- 359,196 ------- 340,226 -------
--------- ---------- ----------
Total assets................. $5,992,142 $5,149,580 $4,658,512
========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing
demand deposits.............. $ 507,011 7,019 1.38% $ 421,986 5,909 1.40% $ 391,892 5,098 1.30%
Savings deposits............... 1,548,441 50,388 3.25 1,279,378 51,656 4.04 1,220,425 44,101 3.61
Time deposits (3).............. 2,278,263 125,131 5.49 2,139,305 120,257 5.62 1,899,218 101,653 5.35
---------- ------- ---------- ------- ---------- -------
Total interest-bearing
deposits.................... 4,333,715 182,538 4.21 3,840,669 177,822 4.63 3,511,535 150,852 4.30
Short-term borrowings............. 158,047 5,847 3.70 106,123 5,881 5.54 87,374 4,220 4.83
Notes payable..................... 41,590 2,629 6.32 51,897 3,976 7.66 56,376 3,629 6.44
Guaranteed preferred debentures... 189,440 18,590 9.81 138,605 13,173 9.50 127,534 12,050 9.45
--------- ------- ---------- ------- ---------- -------
Total interest-bearing
liabilities................. 4,722,792 209,604 4.44 4,137,294 200,852 4.85 3,782,819 170,751 4.51
------- ------- -------
Noninterest-bearing liabilities:
Demand deposits................... 754,763 634,886 552,029
Other liabilities................. 110,480 55,473 43,852
--------- ---------- ----------
Total liabilities............ 5,588,035 4,827,653 4,378,700
Stockholders' equity.................. 404,107 321,927 279,812
--------- ---------- ----------
Total liabilities and
stockholders' equity........ $5,992,142 $5,149,580 $4,658,512
========== ========== ==========
Net interest income................... 235,881 222,838 183,107
======= ======= =======
Interest rate spread.................. 3.77 3.99 3.68
Net interest margin (5)............... 4.34% 4.65% 4.24%
===== ===== =====
- ------------------------
(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 and interest expense includes the effects of interest rate swap agreements.
(4) Information is presented on a tax-equivalent basis assuming a tax rate of 35%. The tax-equivalent adjustments were
approximately $742,000, $864,000 and $776,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
(5) Net interest margin is the ratio of net interest income (expressed on a tax-equivalent basis) to average interest-earning
assets.
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 period. 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:
---------------------------------------------------------------------------
Nine Months Ended Year Ended Year Ended
September 30, 2002 December 31, 2001 December 31, 2000
Compared to Compared to Compared to
Nine Months Ended Year Ended Year Ended
September 30, 2001 December 31, 2000 December 31, 1999
-------------------------- ---------------------- -----------------------
Net Net
Volume Rate Change Volume Rate Change Volume Rate Change
------ ---- ------ ------ ---- ------ ------ ---- ------
(dollars expressed in thousands)
Interest earned on:
Loans: (1) (2) (3)
Taxable........................... $49,288 (70,785) (21,497) 51,584 (29,608) 21,976 42,273 24,711 66,984
Tax-exempt (4).................... 551 (85) 466 (196) (42) (238) 260 (43) 217
Investment securities:
Taxable........................... 15,096 (12,364) 2,732 1,325 (2,412) (1,087) (1,389) 2,514 1,125
Tax-exempt (4).................... 1,520 (417) 1,103 (84) (28) (112) (19) 55 36
Federal funds sold and other......... 1,838 (4,484) (2,646) 1,540 (284) 1,256 952 518 1,470
------- ------- ------- ------ ------- ------ ------ ------ -------
Total interest income......... 68,293 (88,135) (19,842) 54,169 (32,374) 21,795 42,077 27,755 69,832
------- ------- ------- ------ ------- ------ ------ ------ ------
Interest paid on:
Interest-bearing demand deposits..... 2,855 (2,488) 367 1,194 (84) 1,110 405 406 811
Savings deposits..................... 15,123 (27,797) (12,674) 9,818 (11,086) (1,268) 2,180 5,375 7,555
Time deposits (3) ................... 809 (32,915) (32,106) 7,696 (2,822) 4,874 13,296 5,308 18,604
Short-term borrowings................ 1,115 (3,480) (2,365) 2,306 (2,340) (34) 986 675 1,661
Notes payable and other.............. (896) (593) (1,489) (716) (631) (1,347) (304) 651 347
Guaranteed preferred debentures (3).. (31,502) (594) (32,096) 4,974 443 5,417 1,058 65 1,123
------- ------- ------- ------ ------ ------ ------ ------ -------
Total interest expense........ (12,496) (67,867) (80,363) 25,272 (16,520) 8,752 17,621 12,480 30,101
------- ------- ------- ------ ------- ------ ------ ------ -------
Net interest income........... $80,789 (20,268) 60,521 28,897 (15,854) 13,043 24,456 15,275 39,731
======= ======= ======= ====== ======= ====== ====== ====== =======
- ------------------------
(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 and interest expense includes the effect of interest rate swap 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 $199.1 million, or 4.23% of
average interest-earning assets, for the nine months ended September 30, 2002,
from $175.9 million, or 4.40% of average interest-earning assets, for the
comparable period in 2001. We credit the increased net interest income primarily
to the net interest-earning assets provided by our acquisitions completed during
the fourth quarter of 2001 and in January 2002 as well as earnings on our
interest rate swap agreements that we entered into in conjunction with our
interest rate risk management program. These agreements provided net interest
income of $38.0 million and $12.8 million for the nine months ended September
30, 2002 and 2001, respectively. The increase in net interest income, however,
was partially offset by reductions in prevailing interest rates, generally
weaker loan demand and overall economic conditions, resulting in the decline in
our net interest margin. Guaranteed preferred debentures expense was $18.6
million for the nine months ended September 30, 2002, compared to $13.5 million
for the comparable period in 2001. The increase for 2002 is primarily
attributable to the issuance of trust preferred securities by our financing
subsidiaries. In November 2001, First Preferred Capital Trust III issued $55.2
million of trust preferred securities and in April 2002, First Bank Capital
Trust issued $25.0 million of trust preferred securities. The overall increase
also reflects a change in estimate reducing the period over which the deferred
issuance costs are being amortized. The increase was partially offset by the
earnings associated with our interest rate swap agreements entered into in May
and June 2002.
Net interest income (expressed on a tax-equivalent basis) increased to
$235.9 million, or 4.34% of average interest-earning assets, for the year ended
December 31, 2001, from $222.8 million, or 4.65% of average interest-earning
assets, and $183.1 million, or 4.24% of average interest-earning assets, for the
years ended December 31, 2000 and 1999, respectively. We credit the increased
net interest income for 2001 primarily to the net interest-earning assets
provided by our acquisitions completed during 2000 and 2001, internal loan
growth and earnings on our interest rate swap agreements that we entered into in
conjunction with our interest rate risk management program. The overall increase
in net interest income was significantly offset by reductions in prevailing
interest rates throughout 2001, resulting in the overall decline in our net
interest rate margin. We credit the increased net interest income for 2000
primarily to the net interest-earning assets provided by our acquisitions
completed during 1999 and 2000, internal loan growth and increases in prevailing
interest rates which resulted in increased yields on interest-earning assets.
However, the overall increase in net interest income for 2000 was partially
offset by the expense associated with our interest rate swap agreements. In
addition, guaranteed preferred debentures expense was $18.6 million and $13.2
million for the years ended December 31, 2001 and 2000, respectively. The
increase for 2001 is solely attributable to the issuance of $57.5 million of
trust preferred securities by First Preferred Capital Trust II in October 2000
and the issuance of $55.2 million of trust preferred securities in November 2001
by First Preferred Capital Trust III.
Average loans, net of unearned discount, were $5.42 billion for the
nine months ended September 30, 2002, in comparison to $4.84 billion for the
comparable period in 2001. The yield on our loan portfolio, however, decreased
to 7.26% for the nine months ended September 30, 2002, in comparison to 8.72%
for the comparable period in 2001. This was a major contributor to the decline
in our net interest margin of 17 basis points for the nine months ended
September 30, 2002, from the comparable period in 2001. We attribute the decline
in yields and our net interest margin primarily to the decreases in prevailing
interest rates throughout 2001. During the period from January 1, 2001 through
December 31, 2001, the Board of Governors of the Federal Reserve System
decreased the targeted federal funds rate 11 times, resulting in 11 decreases in
the prime rate of interest from 9.50% to 4.75%. 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. As discussed above, the
reduced level of interest income earned on our loan portfolio as a result of
declining interest rates and increased competition within our market areas was
partially mitigated by the earnings associated with our interest rate swap
agreements.
Average total loans, net of unearned discount, increased by $593.3
million to $4.88 billion for the year ended December 31, 2001, from $4.29
billion and $3.81 billion for the years ended December 31, 2000 and 1999,
respectively. The yield on our loan portfolio, however, declined to 8.44% for
the year ended December 31, 2001, in comparison to 9.10% for 2000. This was a
major contributor to the 31 basis point decline in our net interest rate margin
for 2001. We attribute the decline in yields and our net interest rate margin
primarily to decreases in prevailing interest rates as discussed above. As
further discussed under "--Interest Rate Risk Management," 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. For the year ended December 31, 2001, these agreements provided
net interest income of $23.4 million. In addition, increased competition within
our market areas led to reduced lending rates. Conversely, the yield on our loan
portfolio for the year ended December 31, 2000 increased to 9.10% from 8.48% for
the year ended December 31, 1999, principally as a result of increases in
prevailing interest rates. During the period from June 30, 1999 to December 31,
2000, the Board of Governors of the Federal Reserve System increased the
targeted federal funds rate six times, resulting in six increases in the prime
rate of interest from 7.75% to 9.50%, respectively. However the improved yield
on our loan portfolio was partially offset by the expense associated with our
interest rate swap agreements, which was $4.7 million for the year ended
December 31, 2000.
The aggregate weighted average rate paid on our deposit portfolio was
2.67% and 4.51% for the nine months ended September 30, 2002 and 2001,
respectively. We attribute the decline primarily to rates paid on savings and
time deposits, which have continued to decline in conjunction with the interest
rate reductions previously discussed. The decrease in rates paid for the nine
months ended September 30, 2002 is a result of generally decreasing interest
rates during 2001. However, the competitive pressures on deposits within our
market areas precluded us from fully reflecting the general interest rate
decreases in our deposit pricing while still providing an adequate funding
source for loans.
For the years ended December 31, 2001, 2000 and 1999, the aggregate
weighted average rate paid on our interest-bearing deposit portfolio was 4.21%,
4.63% and 4.30%, respectively. We attribute the decline in 2001 primarily to
rates paid on savings deposits, which have continued to decline with the
interest rate reductions previously discussed. The overall decrease in rates
paid is a result of generally decreasing interest rates in 2001 as compared to
generally increasing rates in 2000.
The aggregate weighted average rate paid on our note payable was 4.69%
and 6.84% for the nine months ended September 30, 2002 and 2001, respectively,
and 6.32%, 7.66% and 6.44% for the years ended December 31, 2001, 2000 and 1999,
respectively. The overall changes in the weighted average rates paid reflect
changing market interest rates during these periods. Amounts outstanding under
our $90.0 million revolving line of credit with a group of unaffiliated
financial institutions 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, our revolving credit line
represents a relatively high-cost funding source as increased advances have the
effect of increasing the weighted average rate of non-deposit liabilities. The
overall cost of this funding source, however, has been significantly mitigated
by the reductions in the prime lending rate during 2001 and in the outstanding
balance of the note payable in 2002. During 2000, we utilized the note payable
to fund our acquisitions of Commercial Bank of San Francisco, Millenium Bank and
Bank of San Francisco, thus resulting in a higher level of borrowings occurring
during the fourth quarter of 2000. During 2001, our note payable was fully
repaid from the proceeds of the trust preferred securities issued by First
Preferred Capital Trust III. However, on December 31, 2001, we obtained a $27.5
million advance to fund our acquisition of Union and in January 2002, we
utilized the note payable to fund our acquisition of Plains. The balance was
fully repaid in September 2002. The aggregate weighted average rate paid on our
short-term borrowings also declined to 1.88% for the nine months ended September
30, 2002, as compared to 4.13% for the comparable period in 2001, reflecting
reductions in the current interest rate environment.
The aggregate weighted average rate paid on our guaranteed preferred
debentures was 9.80% and 9.85% for the nine months ended September 30, 2002 and
2001, respectively, and 9.81%, 9.50% and 9.45% for the years ended December 31,
2001, 2000 and 1999, respectively. The decreased rates for 2002 primarily
reflect the earnings impact of our interest rate swap agreements entered into in
May and June 2002. The decline was partially offset by the additional expense of
our trust preferred securities issued in November 2001 and April 2002 as well as
a change in estimate regarding the period over which the deferred issuance costs
associated with these obligations are being amortized. The increase for the
years ended December 31, 2001 and 2000 primarily reflects the additional expense
of our trust preferred securities issued in November 2001 and October 2000,
respectively.
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 may differ significantly from those within its deposit
structure. 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 strive to 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 that 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. 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," indicating that our assets would generally reprice with
changes in rates more rapidly than our liabilities, 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, an instantaneous parallel decline in the
interest yield curve of 100 basis points indicates a pre-tax projected loss of
approximately 7.0% of net interest income, based on assets and liabilities at
September 30, 2002. Although we do not anticipate that instantaneous shifts in
the yield curve as projected in our simulation model are likely, these are
indications of the effects that changes in interest rates would have over time.
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:
September 30, 2002 December 31, 2001 December 31, 2000
------------------ ----------------- -----------------
Notional Credit Notional Credit Notional Credit
Amount Exposure Amount Exposure Amount Exposure
------ -------- ------ -------- ------ --------
(dollars expressed in thousands)
Cash flow hedges................. $1,050,000 1,883 900,000 1,764 1,055,000 3,449
Fair value hedges................ 387,450 7,866 200,000 6,962 50,000 758
Interest rate floor agreements... -- -- -- -- 35,000 6
Interest rate cap agreements..... 450,000 426 450,000 2,063 450,000 3,753
Interest rate lock commitments... 106,000 -- 88,000 -- 4,100 --
Forward commitments to sell
Mortgage-backed securities..... 243,000 -- 209,000 -- 32,000 --
========== ===== ======= ===== ========= =====
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 nine months ended September 30, 2002 and 2001, the net
interest income realized on our derivative financial instruments was $38.0
million and $12.8 million, respectively. The increase is primarily due to
interest income associated with the additional swap agreements entered into
during May and June 2002 as well as the decline in prevailing interest rates. In
addition, we recorded a net gain on derivative instruments, which is included in
noninterest income in the consolidated statements of income, of $1.7 million and
$14.4 million for the nine months ended September 30, 2002 and 2001,
respectively. The net decrease in income from 2001 reflects $3.8 million of
gains resulting from the termination of certain interest rate swap agreements
during the second quarter of 2001, the sale of our interest rate floor
agreements in November 2001 and changes in the fair value of our interest rate
cap agreements and fair value hedges. During 2001 and 1999, we recorded net
interest income on derivative financial instruments of $23.4 million and
$430,000, respectively, in comparison to net interest expense of $4.7 million in
2000. In addition, we realized a net gain on derivative instruments, which is
included in noninterest income in the consolidated statements of income, of
$18.6 million for the year ended December 31, 2001.
Cash Flow Hedges
During September 2000, March 2001, April 2001 and March 2002, we
entered into $600.0 million, $200.0 million, $175.0 million and $150.0 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
underlying hedged assets are certain loans within our commercial loan portfolio.
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 2.70%, 2.82%, 2.82%
and 2.80%, respectively. The terms of the swap agreements provide for us to pay
and receive interest on a quarterly basis. In November 2001, we terminated $75.0
million notional amount of the swap agreements originally entered into in April
2001, which would have expired in April 2006, in order to appropriately modify
our overall hedge position in accordance with our interest rate risk management
program. We recorded a pre-tax gain of $2.6 million in conjunction with the
termination of these swap agreements. The amount receivable by us under the swap
agreements was $3.0 million and $2.9 million at September 30, 2002 and December
31, 2001, respectively, and the amount payable by us was $1.1 million at
September 30, 2002 and December 31, 2001.
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 September 30, 2002 and December 31, 2001 were as follows:
Notional Interest rate Interest rate Fair
Maturity date amount paid received value
------------- ------ ---- -------- -----
(dollars expressed in thousands)
September 30, 2002:
March 14, 2004.................................. $ 150,000 1.95% 3.93% $ 4,357
September 20, 2004.............................. 600,000 2.05 6.78 53,927
March 21, 2005.................................. 200,000 1.93 5.24 14,043
April 2, 2006................................... 100,000 1.93 5.45 9,054
---------- ---------
$1,050,000 2.00 5.95 $ 81,381
========== ===== ===== =========
December 31, 2001:
September 20, 2004.............................. $ 600,000 2.05% 6.78% 40,980
March 21, 2005.................................. 200,000 1.93 5.24 4,951
April 2, 2006................................... 100,000 1.93 5.45 2,305
---------- ---------
$ 900,000 2.01 6.29 $ 48,236
========== ===== ===== =========
Fair Value Hedges
We entered into the following interest rate swap agreements, designated
as fair value hedges, to effectively shorten the repricing characteristics of
certain interest-bearing liabilities to correspond more closely with their
funding source with the objective of stabilizing net interest income over time:
o 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 that 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 underlying hedged
liabilities are a portion of our other time deposits. The terms
of the swap agreements provide for us to pay interest on a
quarterly basis and receive interest on a semiannual basis. The
amount receivable by us under the swap agreements was $2.5
million and $5.2 million at September 30, 2002 and December 31,
2001, respectively, and the amount payable by us under the swap
agreements was $868,000 and $1.2 million at September 30, 2002
and December 31, 2001, respectively.
o During May 2002 and June 2002, we entered into $55.2 million and
$86.3 million notional amount, respectively, of interest rate
swap agreements that 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 plus 2.30% and 2.75%,
respectively. In addition, during June 2002, FBA entered into
$46.0 million notional amount of interest rate swap agreements
that 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 plus 1.97%. The underlying hedged
liabilities are our guaranteed preferred beneficial interests in
First Banks, Inc. subordinated debentures and First Banks
America, Inc. subordinated debentures. The terms of the swap
agreements provide for us to pay and receive interest on a
quarterly basis. There were no amounts receivable or payable by
us at September 30, 2002. The $86.3 million notional amount
interest rate swap agreement was called by its counterparty on
November 8, 2002 resulting in final settlement of this interest
rate swap agreement on December 18, 2002.
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 September 30, 2002 and December 31, 2001 were as follows:
Notional Interest rate Interest rate Fair
Maturity date amount paid received value
------------- ------ ---- -------- -----
(dollars expressed in thousands)
September 30, 2002:
January 9, 2004................................. $ 50,000 1.86% 5.37% $ 2,221
January 9, 2006................................. 150,000 1.86 5.50 13,406
March 31, 2027.................................. 86,250 4.61 9.25 (220)
June 30, 2028................................... 46,000 3.83 8.50 336
December 31, 2031............................... 55,200 4.16 9.00 4,060
---------- ---------
$ 387,450 3.03 7.17 $ 19,803
========== ===== ===== =========
December 31, 2001:
January 9, 2002................................. $ 50,000 2.48% 5.37% $ 1,761
January 9, 2006................................. 150,000 2.48 5.50 3,876
---------- ---------
$ 200,000 2.48 5.47 $ 5,637
========== ===== ===== =========
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 provided 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. In November 2001, we terminated these
interest rate floor agreements in order to appropriately modify our overall
hedge position in accordance with our interest rate risk management program. In
conjunction with the termination, we recorded a pre-tax adjustment of $4.0
million representing the decline in fair value from our previous month-end
measurement date. These agreements provided net interest income of $2.1 million
for the year ended December 31, 2001.
Interest Rate Cap Agreements
In conjunction with the interest rate swap agreements maturing
September 20, 2004, 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
September 30, 2002 and December 31, 2001, the carrying value of these interest
rate cap agreements, which is included in derivative instruments in the
consolidated balance sheets, was $426,000 and $2.1 million, respectively.
Pledged Collateral
At September 30, 2002 and December 31, 2001, we had pledged investment
securities available for sale with a carrying value of $5.9 million and $1.1
million, respectively, in connection with our interest rate swap agreements. In
addition, at September 30, 2002, and December 31, 2001, we had accepted, as
collateral in connection with our interest rate swap agreements, cash of $97.5
million and $4.9 million, respectively. At December 31, 2001, we had also
accepted investment securities with a fair value of $53.9 million 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 September 30, 2002 and December 31, 2001, we had not done so.
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 nine months ended September 30, 2002 and 2001, we originated
and purchased loans for resale totaling $1.30 billion and $1.09 billion, and
sold loans totaling $848.3 million and $728.5 million, respectively. For the
three years ended December 31, 2001, 2000 and 1999, we originated and purchased
loans for resale totaling $1.52 billion, $532.2 million and $452.9 million and
sold loans totaling $992.0 million, $413.2 million and $507.1 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 $1.26 billion at September 30, 2002, and $1.07 billion, $957.2
million and $957.1 million at December 31, 2001, 2000 and 1999, respectively.
The gain on mortgage loans originated for resale, including loans sold
and held for sale, was $20.3 million and $9.7 million for the nine months ended
September 30, 2002 and 2001, respectively, and $15.0 million, $7.8 million and
$6.9 million for the years ended December 31, 2001, 2000 and 1999, 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 nine months ended September 30, 2002 and for 2001
is primarily attributable to a significant increase in the volume of loans
originated and sold commensurate with the prevailing interest rate environment
experienced throughout 2001, including continued reductions in mortgage loan
rates and our growth in mortgage banking activities. The increases for 2000 and
1999 reflect the expansion of our mortgage banking activities into our
California and Texas markets.
The interest income on loans held for sale was $10.1 million for the
nine months ended September 30, 2002, compared to $7.8 million for the
comparable period in 2001. The interest income on loans held for sale was $11.1
million for the year ended December 31, 2001, in comparison to $3.5 million and
$4.9 million for the years ended December 31, 2000 and 1999, 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 $177.0 million and $144.8 million for the nine months
ended September 30, 2002 and 2001, respectively, and $150.8 million, $47.0
million and $79.1 million for the years ended December 31, 2001, 2000 and 1999,
respectively. On an annualized basis, our yield on the portfolio of loans held
for sale was 7.66% and 7.23% for the nine months ended September 30, 2002 and
2001, respectively, and 7.38%, 7.49% and 6.23% for the years ended December 31,
2001, 2000 and 1999, respectively. This compares with our cost of funds, as a
percentage of average interest-bearing liabilities, of 2.99% and 4.73% for the
nine months ended September 30, 2002 and 2001, respectively, and 4.44%, 4.85%
and 4.51% for the years ended December 31, 2001, 2000 and 1999, 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 $553,000 and $302,000 for the nine months ended September 30,
2002 and 2001, respectively, and $222,000, $486,000 and $657,000 for the years
ended December 31, 2001, 2000 and 1999, respectively.
The increase in loan servicing fees in 2002 primarily reflects the significant
increase in the volume of loans originated and sold commensurate with the
reductions in mortgage loan rates experienced in 2001. We attribute the decrease
in loan servicing fees for 2001, 2000 and 1999 primarily 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. Amortization of
mortgage servicing rights was $2.7 million for the nine months ended September
30, 2002 and 2001, and $3.7 million, $3.1 million and $2.8 million for the years
ended December 31, 2001, 2000 and 1999, respectively.
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 September 30,
2002 and December 31, 2001, 2000 and 1999, we had $235.5 million, $197.5
million, $37.6 million and $31.5 million, respectively, of loans held for sale
and related commitments, net of committed loan sales and estimated underwriting
fallout, of which $243.1 million, $209.9 million, $32.0 million and $33.0
million, respectively, were hedged through the use of such forward commitments.
Comparison of Results of Operations for the Nine Months Ended September 30, 2002
and 2001
Net Income. Net income was $30.4 million for the nine months ended
September 30, 2002, compared to $34.6 million for the comparable period in 2001.
Results for 2002 reflect increased net interest income and noninterest income,
offset by higher operating expenses and increased provisions for loan losses,
reflecting the current economic environment and increased loan charge-off,
delinquency and nonperforming trends. See further discussion under "-- Provision
for Loan Losses." The implementation of SFAS No. 142 on January 1, 2002,
resulted in the discontinuation of amortization of certain intangibles
associated with the purchase of subsidiaries. If we had implemented SFAS No. 142
at the beginning of 2001, net income for the nine months ended September 30,
2001 would have increased $5.4 million. In addition, the implementation of SFAS
No. 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 in 2001. Excluding this item, net income would have
been $36.0 million for the nine months ended September 30, 2001. The accounting
for derivatives under the requirements of SFAS No. 133 will continue to have an
impact on future financial results as further discussed under "--Noninterest
Income."
The overall increase in operating expenses for 2002, as further
discussed under "--Noninterest Expense," was partially offset by the
discontinuation of amortization of certain intangibles associated with the
purchase of subsidiaries in accordance with the implementation of SFAS No. 142.
Amortization of intangibles for the nine months ended September 30, 2002 was
$1.5 million, respectively, compared to $5.6 million for the comparable period
in 2001. The higher operating expenses and increased provisions for loan losses
were partially offset by increased net interest income and noninterest income as
further discussed under "--Net Interest Income" and "--Noninterest Income."
Provision for Loan Losses. The provision for loan losses was $38.7 for
the nine months ended September 30, 2002, compared to $13.9 million for the
comparable period in 2001. The increase in the provision for loan losses
reflects a higher level of problem loans and related loan charge-offs and past
due loans resulting from the economic conditions within our markets, additional
problems identified in acquired loan portfolios and continuing deterioration in
the portfolio of leases to the airline industry. Net loan charge-offs were $27.4
million for the nine months ended September 30, 2002, in comparison to $14.8
million for the comparable period in 2001. The increase in net loan charge-offs
reflects the general slowdown in economic conditions prevalent within our
markets as well as an aggregate of $15.0 million of loan charge-offs on five
large credit relationships, representing nearly 40% of loan charge-offs in 2002.
Loan recoveries were $11.7 for the nine months ended September 30, 2002, in
comparison to $7.2 million for the comparable period in 2001. In addition,
nonperforming assets and loans past due 90 days or more and still accruing have
increased to $110.1 million at September 30, 2002 from $86.8 million at December
31, 2001, and are expected to remain at these higher-than-normal levels in the
near future. Management considered these trends in its overall assessment of the
adequacy of the allowance for loan losses. In addition, our acquisition of
Plains in January 2002 provided $1.4 million in additional 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 nine months ended September
30, 2002 and 2001:
September 30, Increase (Decrease)
----------------- -------------------
2002 2001 Amount %
---- ---- -------- ---------
(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts and customer service fees.... $ 21,985 16,268 5,717 35.14%
Gain on mortgage loans sold and held for sale.................... 20,316 9,718 10,598 109.06
Gain on sale of credit card portfolio, net of expenses........... -- 1,853 (1,853) (100.00)
Net gain (loss) on sales of available-for-sale securities........ 90 (145) 235 162.07
Bank-owned life insurance investment income...................... 4,318 3,069 1,249 40.70
Net gain on derivative instruments............................... 1,714 14,401 (12,687) (88.10)
Other............................................................ 16,417 12,580 3,837 30.50
--------- -------- -------
Total noninterest income................................... $ 64,840 57,744 7,096 12.29
========= ======== ======= =========
Noninterest expense:
Salaries and employee benefits................................... $ 84,506 68,889 15,617 22.67%
Occupancy, net of rental income.................................. 15,938 12,379 3,559 28.75
Furniture and equipment.......................................... 12,730 8,845 3,885 43.92
Postage, printing and supplies................................... 4,205 3,528 677 19.19
Information technology fees...................................... 24,411 19,891 4,520 22.72
Legal, examination and professional fees......................... 6,463 5,415 1,048 19.35
Amortization of intangibles associated with the
purchase of subsidiaries...................................... 1,480 5,573 (4,093) (73.44)
Communications................................................... 2,375 2,223 152 6.84
Advertising and business development............................. 4,132 4,405 (273) (6.20)
Other............................................................ 18,992 26,213 (7,221) (27.55)
--------- -------- -------
Total noninterest expense.................................. $ 175,232 157,361 17,871 11.36
========= ======== ======= =========
Noninterest Income
Noninterest income was $64.8 million for the nine months ended
September 30, 2002, in comparison to $57.7 million for the comparable period in
2001. Noninterest income consists primarily of service charges on deposit
accounts and customer service fees, mortgage-banking revenues, bank-owned life
insurance investment income, net gains on derivative instruments and other
income.
Service charges on deposit accounts and customer service fees were
$22.0 million for the nine months ended September 30, 2002, in comparison to
$16.3 million for the comparable period in 2001. We attribute the increase in
service charges and customer service fees to:
o our acquisitions completed during 2001 and 2002;
o additional products and services available and utilized by our
expanding base of consumer and commercial customers;
o increased fee income resulting from revisions of customer service
charge rates, effective July 1, 2002, 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 $20.3 million for
the nine months ended September 30, 2002, in comparison to $9.7 million for the
comparable period in 2001. The overall increase is primarily attributable to a
significant increase in the volume of loans originated and sold commensurate
with the reductions in mortgage loan rates experienced in 2001 as well as the
continued expansion of our mortgage banking activities.
During the nine months ended September 30, 2001, we recorded a $1.9
million pre-tax gain on the sale of our credit card portfolio, net of expenses.
The sale of this portfolio was consistent with our strategic decision to exit
this product line and enter into an agent relationship with a larger credit card
service provider.
Bank-owned life insurance investment income was $4.3 million for the
nine months ended September 30, 2002, in comparison to $3.1 million for the
comparable period in 2001. The increase for 2002 reflects changes in the
portfolio mix of the underlying investments, which improved our return on this
product, as well as the reinvestment of earnings.
The net gain on derivative instruments was $1.7 million for the nine
months ended September 30, 2002, in comparison to $14.4 million for the
comparable periods in 2001. The decrease in income from derivative instruments
reflects $3.8 million of gains resulting from the termination of certain
interest rate swap agreements during the second quarter of 2001, the sale of our
interest rate floor agreements in November 2001 and changes in the fair value of
our interest rate cap agreements and fair value hedges.
Other income was $16.4 million for the nine months ended September 30,
2002, in comparison to $12.6 million for the comparable period in 2001. We
attribute the primary components of the increase to:
o our acquisitions completed during 2001 and 2002;
o increased portfolio management fee income associated our
Institutional Money Management division;
o increased earnings associated with our international banking
products;
o increased rental income associated with our commercial leasing
activities;
o increased rental fees from First Services, L.P. for the use of
data processing and other equipment owned by First Banks; and
o a gain of approximately $448,000 in March 2002 on the sale of
certain operating lease equipment associated with equipment
leasing activities that we acquired in conjunction with our
acquisition of Bank of San Francisco in December 2000; offset by
o the write-down of approximately $943,000 on certain equipment
associated with our commercial leasing operation in June 2002.
Noninterest Expense
Noninterest expense was $175.2 million for the nine months ended
September 30, 2002, in comparison to $157.4 million for the comparable period in
2001. The increase for 2002 reflects the noninterest expense of our acquisitions
completed during 2001 and 2002, including certain nonrecurring expenses
associated with those acquisitions as well as increased salaries and employee
benefit expenses, occupancy and furniture and equipment expenses and information
technology fees, offset by a decline in amortization of intangibles associated
with the purchase of subsidiaries and other expense.
Salaries and employee benefits were $84.5 million for the nine months
ended September 30, 2002, in comparison to $68.9 million for the comparable
period in 2001. We primarily associate the increase with our 2001 and 2002
acquisitions and higher commissions paid to mortgage loan originators due to
increased loan volume. However, the increase also reflects higher salary and
employee benefit costs associated with employing and retaining qualified
personnel. In addition, the increase includes various additions to staff
throughout 2001 to enhance senior management expertise and expand our product
lines.
Occupancy, net of rental income, and furniture and equipment expense
totaled $28.7 million for the nine months ended September 30, 2002, in
comparison to $21.2 million for the comparable period in 2001. We primarily
attribute the increase to our aforementioned acquisitions, including certain
nonrecurring expenses associated with lease termination obligations, the
relocation of certain branches and operational areas, increased depreciation
expense associated with numerous capital expenditures and the continued
expansion and renovation of various corporate and branch offices, including our
facility that houses our centralized operations and certain corporate
administrative functions.
Information technology fees were $24.4 million for the nine months
ended September 30, 2002, in comparison to $19.9 million for the comparable
period in 2001. First Services, L.P. , a limited partnership indirectly owned by
our Chairman and members of his immediate family, provides information
technology and various operational support services to our subsidiaries and us
under the terms of information technology agreements. We attribute the increased
fees to growth and technological advancements consistent with our product and
service offerings, continued expansion and upgrades to technological equipment,
networks and communication channels and certain nonrecurring expenses associated
with the data processing conversions of Union and Plains, completed in the first
quarter of 2002, and of the Denton and Garland, Texas branch purchases,
completed in the second quarter of 2002.
Legal, examination and professional fees were $6.5 million for the nine
months ended September 30, 2002, in comparison to $5.4 million for the
comparable period in 2001. We primarily attribute the increase in these fees to
the continued expansion of overall corporate activities, the ongoing
professional services utilized by certain of our acquired entities and increased
legal fees associated with commercial loan documentation, collection efforts,
expanded corporate activities and certain defense litigation particularly
related to acquired entities.
Amortization of intangibles associated with the purchase of
subsidiaries was $1.5 million for the nine months ended September 30, 2002, in
comparison to $5.6 million for the comparable period in 2001. The significant
decrease for 2002 is attributable to the implementation of SFAS No. 142 in
January 2002.
Other expense was $19.0 million for the nine months ended September 30,
2002, in comparison to $26.2 million for the comparable period in 2001. Other
expense encompasses numerous general and administrative expenses including
travel, meals and entertainment, insurance, freight and courier services,
correspondent bank charges, miscellaneous losses and recoveries, memberships and
subscriptions, transfer agent fees and sales taxes. We attribute the majority of
the decrease in other expense for 2002 to a $11.5 million nonrecurring
litigation settlement charge in June 2001 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. In addition, the
decrease is also attributable to the establishment of a specific reserve for an
unfunded letter of credit in the amount of $1.8 million during the nine months
ended September 30, 2001. The overall decrease in other expenses for the nine
months ended September 30, 2002 was offset by expenses associated with our
acquisitions completed during 2001 and 2002 as well as the continued growth and
expansion of our banking franchise.
Provision for Income Taxes
The provision for income taxes was $17.5 million for the nine months
ended September 30, 2002, representing an effective income tax rate of 35.7%, in
comparison to $24.1 million, representing an effective income tax rate of 39.1%
for the comparable period in 2001. The decrease in the effective income tax rate
for 2002 reflects the significant decline in amortization of intangibles
associated with the purchase of subsidiaries, in accordance with the
requirements of SFAS No. 142, which is not deductible for tax purposes.
Comparison of Results of Operations for 2001 and 2000
Net Income. Net income was $64.5 million for the year ended December
31, 2001, compared to $56.1 million for 2000. The implementation of SFAS No.
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 $65.9 million for the
year ended December 31, 2001. The improved earnings primarily result from
increased net interest income and noninterest income, including a gain on the
exchange of an equity investment in an unaffiliated financial institution in
October 2001, as well as a reduced provision for income taxes. The reduced
provision for income taxes includes the effect of an $8.1 million reduction in
our deferred tax asset valuation allowance that was no longer deemed necessary
as our overall net deferred tax assets are expected to be recoverable through
future earnings. The overall improvement in earnings was partially offset by an
increased provision for loan losses and higher operating expenses, including
nonrecurring charges associated with the establishment of a specific reserve
related to a contingent liability and the settlement of certain litigation.
Net interest income (expressed on a tax-equivalent basis) improved to
$235.9 million for the year ended December 31, 2001, compared to $222.8 million
for 2000. However, our net interest rate margin declined to 4.34% for the year
ended December 31, 2001 from 4.65% for 2000. Net interest income increased
primarily as a result of increased earning assets generated through internal
loan growth along with our acquisitions completed throughout 2000 and 2001.
However, the improvement in net interest income was significantly mitigated by
continued reductions in prevailing interest rates throughout 2001. We funded the
overall loan growth primarily through deposits added through acquisitions and
internal deposit growth. During the year ended December 31, 2001, noninterest
income improved significantly to $98.6 million from $42.8 million for the years
ended December 31, 2001 and 2000, respectively as further discussed under
"--Noninterest Income."
The improvement in net interest income and noninterest income was
partially offset by a $53.7 million increase in operating expenses to $211.7
million for the year ended December 31, 2001, compared to $158.0 million for
2000. The increased operating expenses are primarily attributable to:
o the operating expenses of our 2000 and 2001 acquisitions
subsequent to their respective acquisition dates;
o increased salaries and employee benefit expenses;
o increased information technology fees;
o increased legal, examination and professional fees;
o increased amortization of intangibles associated with the
purchase of subsidiaries;
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.
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 $23.5
million and $14.1 million for the years ended December 31, 2001 and 2000,
respectively. We attribute the increase in the provision for loan losses
primarily to the overall growth in our loan portfolio, both internal and through
acquisitions, a general increase in risk associated with the continued changing
composition of our loan portfolio and a significant increase in nonperforming
assets and past due loans, which is further discussed under "--Loans and
Allowance for Loan Losses." Loan charge-offs were $31.5 million for the year
ended December 31, 2001, in comparison to $17.1 million for the year ended
December 31, 2000. The increase in loan charge-offs is due to $5.9 million in
charge-offs related to our commercial leasing business, a single loan in the
amount of $4.5 million that was charged-off due to suspected fraud on the part
of the borrower, $3.6 million in charge-offs on a shared national credit
relationship as well as the effects of the general slowdown in economic
conditions prevalent within our markets. Loan recoveries were $9.5 million for
the year ended December 31, 2001, in comparison to $9.8 million for 2000.
Nonperforming assets and past-due loans have increased significantly during
2001, and we anticipate these trends will continue in the near future.
Management considered these trends in its overall assessment of the adequacy of
the allowance for loan losses. Our acquisitions during 2000 and 2001 provided
$6.1 million and $14.0 million, respectively, in additional allowance for loan
losses at their respective acquisition dates.
Noninterest Income and Expense. The following table summarizes
noninterest income and noninterest expense for the years ended December 31, 2001
and 2000:
December 31, Increase (Decrease)
------------------- -------------------
2001 2000 Amount %
---- ---- ------ -------
(dollars expressed in thousands)
Noninterest income:
Service charges on deposit accounts and customer service fees.... $ 22,865 19,794 3,071 15.51%
Gain on mortgage loans sold and held for sale.................... 14,983 7,806 7,177 91.94
Gain on sale of credit card portfolio, net of expenses........... 1,853 -- 1,853 100.00
Net gain on sales of available-for-sale securities............... 18,722 168 18,554 110.44
Gain on sales of branches, net of expenses....................... -- 1,355 (1,355) (100.00)
Bank-owned life insurance investment income...................... 4,415 4,314 101 2.34
Gain on derivative instruments, net.............................. 18,583 -- 18,583 100.00
Other............................................................ 17,188 9,341 7,847 84.01
--------- -------- -------
Total noninterest income................................... $ 98,609 42,778 55,831 130.51
========= ======== ======= =========
Noninterest expense:
Salaries and employee benefits................................... $ 93,452 73,391 20,061 27.33%
Occupancy, net of rental income.................................. 17,432 14,675 2,757 18.79
Furniture and equipment.......................................... 12,612 11,702 910 7.78
Postage, printing and supplies................................... 4,869 4,431 438 9.88
Information technology fees...................................... 26,981 22,359 4,622 20.67
Legal, examination and professional fees......................... 6,988 4,523 2,465 54.50
Amortization of intangibles associated with the
purchase of subsidiaries...................................... 8,248 5,297 2,951 55.71
Communications................................................... 3,247 2,625 622 23.70
Advertising and business development............................. 5,237 4,331 906 20.92
Other............................................................ 32,605 14,656 17,949 122.47
--------- -------- -------
Total noninterest expense.................................. $ 211,671 157,990 53,681 33.98
========= ======== ======= ========
Noninterest Income
Noninterest income was $98.6 million for the year ended December 31,
2001, compared to $42.8 million for 2000. Noninterest income consists primarily
of service charges on deposit accounts and customer service fees, mortgage
banking revenues, net gains on sales of available-for-sale securities, net gains
on derivative instruments and other income.
Service charges on deposit accounts and customer service fees increased
to $22.9 million for 2001, from $19.8 million for 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 and, to a lesser degree,
2001;
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 September 30, 2000, and July 1, 2001, 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 increased to $15.0
million from $7.8 million for the years ended December 31, 2001 and 2000,
respectively. We attribute the increase to a significant increase in the volume
of loans originated and sold commensurate with the continued reductions in
mortgage loan rates experienced during 2001 as well as the continued expansion
of our mortgage banking activities into new and existing markets.
During 2001, we recorded a $1.9 million pre-tax gain on the sale of our
credit card portfolio, which results from 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 years ended December 31, 2001 and 2000
included net gains on the sale of available-for-sale investment securities of
$18.7 million and $168,000, respectively. The significant increase in 2001
results from a $19.1 million pre-tax gain recognized in conjunction with the
exchange of an equity investment in the common stock of an unaffiliated
publicly-traded financial institution for $10.0 million in cash and a $14.4
million equity investment in the acquiring unaffiliated financial institution.
We owned 7.93% of the outstanding shares of common stock of the unaffiliated
financial institution at December 31, 2001. This gain was partially offset by a
net loss that resulted from the liquidation of certain equity investment
securities. The net gain for 2000 resulted primarily from the sales of certain
investment securities held by acquired institutions that did not meet our
overall investment objectives.
The gain on sales of branches, net of expenses, was $1.4 million for
the year ended December 31, 2000, and results from the divestiture of one of our
branch locations in central Illinois. In 2001, we did not sell any existing
branches.
The net gain on derivative instruments of $18.6 million for the year
ended December 31, 2001 includes $4.1 million of gains resulting from the
terminations of certain interest rate floor and 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 No. 133, as amended.
Other income was $17.2 million and $9.3 million for the years ended
December 31, 2001 and 2000, respectively. We attribute the primary components of
this increase to:
o our acquisitions completed during 2000 and, to a lesser extent,
2001;
o increased portfolio management fee income of $3.4 million
associated with our Institutional Money Management Division,
which was formed in August 2000;
o increased brokerage revenue of $1.1 million, which is primarily
associated with the stock option services acquired in conjunction
with our acquisition of Bank of San Francisco in December 2000;
o increased rental income of $2.1 million associated with our
commercial leasing activities that were acquired in conjunction
with our acquisition of a leasing company in February 2000; and
o income of approximately $1.1 million associated with equipment
leasing activities that were acquired in conjunction with our
acquisition of Bank of San Francisco.
Noninterest Expense
Noninterest expense was $211.7 million for the year ended December 31,
2001, in comparison to $158.0 million for 2000. The increase reflects:
o the noninterest expense associated with our acquisitions
completed during 2000 and 2001, including certain nonrecurring
expenses associated with those acquisitions;
o increased salaries and employee benefit expenses;
o increased information technology fees;
o increased legal, examination and professional fees;
o increased amortization of intangibles associated with the
purchase of subsidiaries; and
o increased other expense.
Salaries and employee benefits increased by $20.1 million to $93.5
million from $73.4 million for the years ended December 31, 2001 and 2000,
respectively. We primarily associate the increase with our 2000 and 2001
acquisitions and our Institutional Money Management Division, which was formed
in August 2000. 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 $30.0 million and $26.4 million for the years ended December 31, 2001
and 2000, respectively. The increase is attributable to our 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 and
administrative functions.
Information technology fees were $27.0 million and $22.4 million for
the years ended December 31, 2001 and 2000, respectively. We attribute the
increased information technology fees to growth and technological advancements
consistent with our product and service offerings, continued expansion and
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, Bank of San Francisco,
Millennium Bank, Charter Pacific Bank and BYL completed in 2001.
Legal, examination and professional fees were $7.0 million and $4.5
million for the years ended December 31, 2001 and 2000, respectively. 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 and increased
legal fees associated with commercial loan documentation, collection efforts,
expanded corporate activities and certain defense litigation.
Amortization of intangibles associated with the purchase of
subsidiaries was $8.2 million and $5.3 million for the years ended December 31,
2001 and 2000, respectively. 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 nine acquisitions that we completed during 2000.
Other expense was $32.6 million and $14.7 million for the years ended
December 31, 2001 and 2000, respectively. 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 and 2001;
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 $1.8 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 $30.0 million for the year ended
December 31, 2001, representing an effective income tax rate of 30.5%, in
comparison to $34.5 million, representing an effective income tax rate of 37.2%,
for the year ended December 31, 2000. The decrease in the effective income tax
rate is primarily attributable to:
o a reduction of our deferred tax asset valuation allowance of
$13.1 million recorded in December 2001. This reduction, of which
$8.1 million represented a reduction in our provision for income
taxes and $5.0 million represented an increase in capital
surplus, reflects the recognition of deferred tax assets for net
operating loss carryforwards and the expectation of future
taxable income sufficient to realize the net deferred tax assets;
partially offset by
o the increase in amortization of intangibles associated with the
purchase of subsidiaries, which is not deductible for tax
purposes.
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 information technology fees
and increased amortization of intangibles associated with the purchase of
subsidiaries. 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.
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
Net gain on sales of available-for-sale securities............... 168 791 (623) (78.76)
Gain on sales of branches, net of expenses....................... 1,355 4,406 (3,051) (69.25)
Bank-owned life insurance investment income...................... 4,314 3,919 395 10.08
Other............................................................ 9,341 7,949 1,392 17.51
--------- -------- -------
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
Information technology 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
Other............................................................ 14,656 13,652 1,004 7.35
--------- -------- -------
Total noninterest expense.................................. $ 157,990 138,757 19,233 13.86
========= ======== ======= ========
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 September 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 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.
Bank-owned life insurance income was $4.3 million and $3.9 million for
the years ended December 31, 2000 and 1999, respectively. The increase for 2000
reflects an increased rate of return on this product primarily associated with
the current interest rate environment as well as the reinvestment of product
earnings.
Other income was $9.3 million and $7.9 million for the years ended
December 31, 2000 and 1999, respectively. The increase in other income is
primarily attributable to rental income associated with 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 $158.0 million for the year ended December 31,
2000, in comparison to $138.8 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 information technology fees;
o increased amortization of intangibles associated with the
purchase of subsidiaries; 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.
Information technology fees were $22.4 million and $18.6 million for
the years ended December 31, 2000 and 1999, respectively. We attribute the
increased information technology 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 nine acquisitions that we completed during 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.
Provision for Income Taxes
The provision for income taxes was $34.5 million for the year ended
December 31, 2000, representing an effective income tax rate of 37.2%, in
comparison to $26.3 million, representing an effective income tax rate of 36.5%,
for the year ended December 31, 1999. 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.
Balance Sheet
Investment Securities
We classify the securities within our investment portfolio as held to
maturity or available for sale. We do not 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 $914.9
million and $631.1 million at September 30, 2002 and December 31, 2001,
respectively, compared to $563.5 million and $451.6 million at December 31, 2000
and 1999, respectively. We attribute the increases in investment securities to
securities acquired through acquisitions and the overall level of loan demand
within our market areas, which affects the amount of funds available for
investment. In addition, the increase for 2001 was partially offset by the
liquidation of certain investment securities and a significant increase in calls
of investment securities prior to their normal maturity dates resulting from the
general decline in interest rates during 2001.
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 91.9% and
92.6% of total interest income for the nine months ended September 30, 2002 and
2001, respectively, and 92.7%, 92.3% and 91.5% of total interest income for the
years ended December 31, 2001, 2000 and 1999, respectively. Loans, net of
unearned discount, increased $55.2 million to $5.46 billion, or 76.2% of total
assets, at September 30, 2002, compared to $5.41 billion, or 79.8% of total
assets as of December 31, 2001. Exclusive of our acquisition of Plains, which
provided loans, net of unearned discount, of $150.4 million, loans decreased
$95.2 million at September 30, 2002 compared to December 31, 2001. The decrease
primarily results from declines in our commercial, financial and agricultural
portfolio due to an anticipated amount of attrition associated with our
acquisitions completed during the fourth quarter of 2001 and the first quarter
of 2002 and weaker loan demand from our commercial customers, which is
indicative of the current economic conditions prevalent within our markets. In
addition, our consumer and installment portfolio, net of unearned discount,
decreased to $91.0 million at September 30, 2002 from $122.1 million at December
31, 2001. This decrease reflects continued 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. The decrease in loans was offset by a $57.1 million increase in loans
held for sale, which is primarily attributable to increased volumes of
residential mortgage loans resulting from the current interest rate environment
and the continuing expansion of our mortgage banking business.
During the five years ended December 31, 2001, total loans, net of
unearned discount, increased significantly from $2.77 billion at December 31,
1996 to $5.41 billion at December 31, 2001. 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
and management of both loan and deposit relationships with commercial customers.
While this process was occurring, in an attempt 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 conforming residential mortgage
loan production has been sold in the secondary mortgage market. We have also
substantially reduced our consumer lending by discontinuing the origination of
indirect automobile loans and the sale of our student loan and credit card loan
portfolios. This allowed us to fund part of the growth in corporate lending
through reductions in residential real estate, indirect automobile and other
consumer-related loans.
In addition, our acquisitions added substantial portfolios of new
loans. Some of these portfolios contained significant loan problems, which we
had anticipated and considered in our acquisition pricing. As we resolved the
asset quality issues, the portfolios of the acquired entities tended to decline
due to the elimination of problem loans and because many of the resources that
would otherwise be directed toward generating new loans were concentrated on
improving or eliminating existing relationships. We continue to experience this
trend as a result of our acquisitions of Millennium Bank and Union completed in
December 2000 and 2001, respectively.
This table summarizes the effects of these factors on our loan
portfolio for the nine months ended September 30, 2002 and five years ended
December 31, 2001:
(Decrease) Increase Increase (Decrease)
For the Nine Months For the Year Ended December 31,
-------------------------------------------------
Ended September 30, 2002 2001 2000 1999 1998 1997
------------------------ ---- ---- ---- ---- ----
(dollars expressed in thousands)
Internal loan volume (decrease) increase:
Commercial lending..................... $ (20,337) 174,568 360,410 363,486 633,660 378,882
Residential real estate lending (1).... (43,335) 48,616 20,137 (126,418) (152,849) (144,707)
Consumer lending, net of
unearned discount.................... (32,177) (75,280) (64,606) (56,349) (30,506) (54,305)
Loans provided by acquisitions............. 151,000 508,700 440,000 235,500 127,600 54,361
--------- ------- ------- -------- -------- --------
Total increase in loans, net of
unearned discount.............. $ 55,151 656,604 755,941 416,219 577,905 234,231
========= ======= ======= ======== ======== ========
-------------------------
(1) Includes loans held for sale, which increased $57.1 million for the nine months ended September 30, 2002.
Our lending strategy emphasizes 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 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:
September 30, 2002
------------------
Amount %
------ -
Commercial, financial
and agricultural.............................. $1,610,062 30.9%
Real estate construction and development......... 983,346 18.9
Real estate mortgage:
One-to-four-family
residential loans........................... 703,902 13.5
Other real estate loans....................... 1,814,472 34.9
Consumer and installment,
net of unearned discount...................... 90,980 1.8
---------- -----
Total loans, excluding
loans held for sale...................... 5,202,762 100.0%
=====
Loans held for sale.............................. 261,258
----------
Total loans................................ $5,464,020
==========
December 31,
----------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
--------------- ---------------- --------------- -------------- ----------------
Amount % Amount % Amount % Amount % Amount %
------ - ------ - ------ - ------ - ------ -
(dollars expressed in thousands)
Commercial, financial
and agricultural........... $1,681,846 32.3% $1,496,284 32.0% $1,086,919 27.4% $ 920,007 26.7% $ 621,618 21.1%
Real estate construction
and development............ 954,913 18.4 809,682 17.3 795,081 20.1 720,910 20.9 413,107 14.0
Real estate mortgage:
One-to-four-family
residential loans........ 798,089 15.3 726,474 15.5 720,630 18.2 739,442 21.5 915,205 31.1
Other real estate loans.... 1,647,758 31.7 1,476,383 31.5 1,130,939 28.6 789,735 22.9 713,910 24.3
Consumer and installment,
net of unearned discount... 122,057 2.3 174,337 3.7 225,343 5.7 274,392 8.0 279,279 9.5
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Total loans, excluding
loans held for sale... 5,204,663 100.0% 4,683,160 100.0% 3,958,912 100.0% 3,444,486 100.0% 2,943,119 100.0%
===== ===== ===== ===== =====
Loans held for sale........... 204,206 69,105 37,412 135,619 59,081
---------- ---------- ---------- ---------- ----------
Total loans............. $5,408,869 $4,752,265 $3,996,324 $3,580,105 $3,002,200
========== ========== =========== ========== ==========
Loans at December 31, 2001 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.................... $ 1,432,117 207,884 22,956 17,382 1,507 1,681,846
Real estate construction and development.................. 907,907 43,162 2,345 1.499 -- 954,913
Real estate mortgage...................................... 1,410,772 623,413 243,841 162,081 5,740 2,445,847
Consumer and installment, net of unearned discount........ 32,198 66,099 771 22,989 -- 122,057
Loans held for sale....................................... 204,206 -- -- -- -- 204,206
----------- -------- -------- ------- ------- ---------
Total loans......................................... $ 3,987,200 940,558 269,913 203,951 7,247 5,408,869
=========== ======== ======== ======= ======= =========
The following table is a summary of loan loss experience for the nine months ended September 30, 2002 and 2001, and
for the five years ended December 31, 2001:
As of or For the Nine
Months Ended September 30, As of or For the Years Ended December 31,
-------------------------- -------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---- ---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Allowance for loan losses,
beginning of period..................... $ 97,164 81,592 81,592 68,611 60,970 50,509 46,781
Acquired allowances for loan losses......... 1,366 -- 14,046 6,062 3,008 3,200 30
---------- --------- --------- --------- --------- --------- ---------
98,530 81,592 95,638 74,673 63,978 53,709 46,811
---------- --------- --------- --------- --------- --------- ---------
Loans charged-off:
Commercial, financial
and agricultural...................... (32,710) (19,722) (27,834) (9,768) (10,855) (3,908) (2,308)
Real estate construction
and development....................... (1,302) (65) (108) (2,229) (577) (185) (2,242)
Real estate mortgage.................... (3,734) (995) (1,818) (2,213) (2,561) (2,389) (6,250)
Consumer and installment................ (1,301) (1,174) (1,693) (2,840) (3,728) (3,701) (6,032)
---------- --------- --------- --------- --------- --------- ---------
Total............................. (39,047) (21,956) (31,453) (17,050) (17,721) (10,183) (16,832)
---------- --------- --------- --------- --------- --------- ---------
Recoveries of loans previously
charged-off:
Commercial, financial and agricultural.. 5,741 3,456 4,450 5,621 3,602 3,417 2,146
Real estate construction
and development....................... 628 1,219 1,171 319 849 342 269
Real estate mortgage.................... 4,059 1,236 2,102 1,937 2,357 2,029 3,666
Consumer and installment................ 1,264 1,291 1,746 1,965 2,473 2,656 3,149
---------- --------- --------- --------- --------- --------- ---------
Total............................. 11,692 7,202 9,469 9,842 9,281 8,444 9,230
---------- --------- -------- --------- --------- --------- ---------
Net loans charged-off............. (27,355) (14,754) (21,984) (7,208) (8,440) (1,739) (7,602)
---------- --------- --------- ---------- --------- --------- --------
Provision for loan losses................... 38,700 13,910 23,510 14,127 13,073 9,000 11,300
---------- --------- --------- --------- --------- --------- ---------
Allowance for loan losses, end of period.... $ 109,875 80,748 97,164 81,592 68,611 60,970 50,509
========== ========= ========= ========= ========= ========= =========
Loans outstanding, net of
unearned discount:
Average................................. $5,415,946 4,836,210 4,884,299 4,290,958 3,812,508 3,250,719 2,846,157
End of period........................... 5,464,020 4,774,300 5,408,869 4,752,265 3,996,324 3,580,105 3,002,200
End of period, excluding
loans held for sale................... 5,202,762 4,640,063 5,204,663 4,683,160 3,958,912 3,444,486 2,943,119
========== ========= ========= ========= ========= ========= =========
Ratio of allowance for loan losses
to loans outstanding:
Average................................. 2.03% 1.67% 1.99% 1.90% 1.80% 1.88% 1.77%
End of period........................... 2.01 1.69 1.80 1.72 1.72 1.70 1.68
End of period, excluding loans
held for sale.......................... 2.11 1.74 1.87 1.74 1.73 1.77 1.72
Ratio of net charge-offs to average loans
outstanding (1)......................... 0.68 0.41 0.45 0.17 0.22 0.05 0.27
Ratio of current period recoveries to
preceding period's total charge-offs (1) 49.70 56.48 55.54 55.54 91.14 50.17 31.81
========== ========= ========= ========== ======== ========= =========
- --------------------
(1) Ratios for the nine-month periods are annualized.
The following table is a summary of the allocation of the allowance for loan losses for the five years ended December 31, 2001:
As of or For the Years Ended December 31,
-------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- --- ----
(dollars expressed in thousands)
Commercial, financial and agricultural............................. $ 40,161 32,352 24,898 19,239 14,879
Real estate construction and development........................... 21,598 14,667 13,264 15,073 7,148
Real estate mortgage............................................... 31,406 24,691 20,750 18,774 18,317
Consumer and installment........................................... 3,999 3,142 4,390 5,180 5,089
Unallocated (1).................................................... -- 6,740 5,309 2,704 5,076
-------- ------- ------- ------- --------
Total........................................................ $ 97,164 81,592 68,611 60,970 50,509
======== ======= ======= ======= ========
- ----------------------
(1) During 2001, we reviewed our practice of maintaining unallocated reserves in light of continuing refinement in our loss
estimation processes. We concluded the use of unallocated reserves would be discontinued. Consequently, reserves were
aligned with their respective portfolios.
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:
September 30, December 31,
---------------------- -------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---- ---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Commercial, financial and agricultural:
Nonaccrual............................ $ 37,413 25,402 19,326 22,437 18,397 15,385 4,017
Restructured terms.................... -- -- -- 22 29 -- --
Real estate construction and development:
Nonaccrual............................ 25,645 465 3,270 11,068 1,886 3,858 4,097
Real estate mortgage:
Nonaccrual............................ 32,943 15,909 41,898 16,524 16,414 18,858 10,402
Restructured terms.................... 1,956 2,918 2,013 2,952 2,979 5,221 5,456
Consumer and installment:
Nonaccrual............................ 1,276 396 794 155 32 216 94
Restructured terms.................... -- 7 7 8 -- -- --
---------- --------- --------- --------- --------- --------- ---------
Total nonperforming loans...... 99,233 45,097 67,308 53,166 39,737 43,538 24,066
Other real estate........................ 3,125 3,707 4,316 2,487 2,129 3,709 7,324
---------- --------- --------- --------- --------- --------- ---------
Total nonperforming assets.... $ 102,358 48,804 71,624 55,653 41,866 47,247 31,390
========== ========= ========= ========= ========= ========= =========
Loans, net of unearned discount.......... $5,464,020 4,774,300 5,408,869 4,752,265 3,996,324 3,580,105 3,002,200
========== ========= ========= ========= ========= ========= =========
Loans past due 90 days or more
and still accruing.................... $ 7,778 8,514 15,156 3,009 5,844 4,674 2,725
========== ========= ========= ========= ========= ========= =========
Ratio of:
Allowance for loan losses to loans.... 2.01% 1.69% 1.80% 1.72% 1.72% 1.70% 1.68%
Nonperforming loans to loans.......... 1.82 0.94 1.24 1.12 0.99 1.22 0.80
Allowance for loan losses to
nonperforming loans................ 110.72 179.05 144.36 153.47 172.66 140.04 209.88
Nonperforming assets to loans and
other real estate.................. 1.87 1.02 1.32 1.17 1.05 1.32 1.04
========== ========= ========= ========= ========= ========= =========
Nonperforming loans, consisting of loans on nonaccrual status and
certain restructured loans, were $99.2 million at September 30, 2002 and $67.3
million at December 31, 2001, in comparison to $53.2 million and $39.7 million
at December 31, 2000 and 1999, respectively. The increase in nonperforming loans
in 2002 is primarily attributable to general economic conditions, additional
problems identified in acquired loan portfolios, continuing deterioration in the
portfolio of leases to the airline industry and the addition of a $16.1 million
borrowing relationship to nonaccrual real estate construction and development
loans during the second quarter of 2002. The relationship relates to a
residential and recreational development project that had significant financial
difficulties and experienced inadequate project financing, project delays and
weak project management. This relationship had previously been on nonaccrual
status and was removed from nonaccrual status during the third quarter of 2001
due to financing being recast with a new borrower, who appeared able to meet
ongoing developmental expectations. Subsequent to that time, the new borrower
encountered internal management problems, which negatively impacted and further
delayed development of the project. Loan charge-offs also increased
significantly to $39.0 million for the nine months ended September 30, 2002,
from $22.0 million for the comparable period in 2001. Included in this were
charge-offs aggregating $15.0 million on five large credit relationships,
representing nearly 40% of loan charge-offs in 2002. We anticipate this trend of
higher nonperforming and delinquent loans will continue in the near future. The
increase in nonperforming loans for 2001 reflects cyclical trends experienced
within the banking industry as a result of economic slowdown, as well as the
asset quality of acquired institutions. Our Union acquisition, completed in
December 2001, resulted in the addition of approximately $8.9 million of
nonperforming loans and $3.6 million of loans past due 90 days or more. The
increase in nonperforming loans in 2000 reflected a small number of credit
relationships that were placed on nonaccrual during the year and the overall
growth of the loan portfolio.
As of September 30, 2002, December 31, 2001 and 2000, $96.4 million,
$123.2 million and $50.2 million, respectively, of loans not included in the
table above were identified by management as having potential credit problems
(problem loans). The significant increase in problem loans for the year ended
December 31, 2001 is primarily due to problem loans included in the acquisitions
of Millenium Bank and Union, completed in December 2000 and 2001, respectively,
continuing deterioration of leases to the airline industry, portfolio growth
(both internal and external) and the gradual slow down and uncertainties that
have recently occurred in the economy surrounding the markets in which we
operate. As previously discussed, certain acquired loan portfolios 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 of December 31,
1999, 1998 and 1997, problem loans totaled $36.3 million, $21.3 million and
$27.9 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 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, 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.
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:
Nine Months Ended Year Ended December 31,
------------------------------------------------------------------------
September 30, 2002 2001 2000 1999
----------------------- --------------------- -------------------- ------------------------
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.. $ 916,822 15.54% --% $ 754,763 14.83% --% $ 634,886 14.18% --% $ 552,029 13.59% --%
Interest-bearing demand..... 721,982 12.24 1.06 507,011 9.97 1.38 421,986 9.43 1.40 391,892 9.65 1.30
Savings..................... 1,947,271 33.01 1.87 1,548,441 30.43 3.25 1,279,378 28.59 4.04 1,220,425 30.03 3.61
Time deposits .............. 2,312,586 39.21 3.85 2,278,263 44.77 5.49 2,139,305 47.80 5.62 1,899,218 46.73 5.35
--------- ------ ===== ---------- ------ ===== ---------- ------ ==== ---------- ------ ====
Total average deposits.. $5,898,661 100.00% $5,088,478 100.00% $4,475,555 100.00% $4,063,564 100.00%
========== ====== ========== ====== ========== ====== ========== ======
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 $524,000 for the nine months ended September 30,
2002, and $786,000 for the years ended December 31, 2001, 2000 and 1999. We have
never paid, and have no present intention to pay, dividends on our common stock.
Management believes as of September 30, 2002, December 31, 2001 and
2000, 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, First
Preferred Capital Trust, for the purpose of issuing $86.25 million of trust
preferred securities, and in October 2000, we formed our second financing
subsidiary, First Preferred Capital Trust II, for the purpose of issuing $57.5
million of trust preferred securities. In October 2001, we formed our third
financing subsidiary, First Preferred Capital Trust III, for the purpose of
issuing $55.2 million of trust preferred securities, and on April 10, 2002, we
formed First Bank Capital Trust and issued $25.0 million of trust preferred
securities in a private placement offering. In June 1998, FBA formed its
financing subsidiary, First America Capital Trust, 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
September 30, 2002, $115.3 million of these preferred securities were not
includable in Tier 1 capital, although this entire 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 that 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 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
$710.2 million, $754.8 million and $723.5 million at September 30, 2002,
December 31, 2001 and 2000, 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 September 30, 2002:
September 30, 2002
(dollars expressed in thousands)
Three months or less......................................................... $ 345,099
Over three months through nine months........................................ 100,119
Over nine months through twelve months....................................... 131,532
Over twelve months........................................................... 133,422
---------
Total.............................................................. $ 710,172
=========
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 September 30, 2002 and December 31, 2001, the
borrowing capacity of our subsidiary banks under these agreements was
approximately $1.19 billion and $1.21 billion, respectively. In addition, our
subsidiary banks' borrowing capacity through their relationships with the
Federal Home Loan Banks was approximately $387.3 million and $234.6 million at
September 30, 2002 and December 31, 2001, respectively. Exclusive of the Federal
Home Loan Bank advances outstanding at First Bank of $10.0 million and $20.1
million at September 30, 2002 and December 31, 2001, respectively, our
subsidiaries had no amounts outstanding under either of these agreements at
September 30, 2002 and December 31, 2001. Under a separate Federal Home Loan
Bank agreement, First Bank & Trust had advances outstanding of $10.0 million and
$10.5 million at September 30, 2002 and December 31, 2001, 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, First Preferred Capital Trust I, First Preferred Capital Trust II,
First Preferred Capital Trust III and First Bank Capital Trust, and First
America Capital Trust.
Effects of New Accounting Standards
In July 2001, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 142 -- Goodwill and Other Intangible Assets. 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. 144 -- Accounting for the Impairment or Disposal of
Long-Lived Assets, as discussed below. The amortization of goodwill ceased upon
adoption of SFAS No. 142, which for calendar year-end companies was January 1,
2002.
On January 1, 2002, First Banks adopted SFAS No. 142. At the date of
adoption, First Banks had unamortized goodwill of $115.9 million and core
deposit intangibles of $9.6 million, which were subject to the transition
provisions of SFAS No. 142. Under SFAS No. 142, First Banks continues to
amortize, on a straight-line basis, its core deposit intangibles and goodwill
associated with purchases of branch offices. Goodwill associated with the
purchase of subsidiaries will no longer be amortized, but instead, will be
tested annually for impairment following First Banks' existing methods of
measuring and recording impairment losses.
First Banks completed the transitional goodwill impairment test
required under SFAS No. 142, to determine the potential impact, if any, on the
consolidated financial statements. The results of the transitional goodwill
impairment testing did not identify any goodwill impairment losses.
Intangible assets associated with the purchase of subsidiaries, net of
amortization, were comprised of the following at September 30, 2002 and December
31, 2001:
September 30, 2002 December 31, 2001
---------------------------- ---------------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
------ ------------ ------ ------------
(dollars expressed in thousands)
Amortized intangible assets:
Core deposit intangibles.............. $ 13,871 (1,372) 9,580 --
Goodwill associated with
purchases of branch offices......... 2,210 (684) 2,210 (576)
--------- ------- ------- -------
Total............................ $ 16,081 (2,056) 11,790 (576)
========= ======= ======= =======
Unamortized intangible assets:
Goodwill associated with the
purchase of subsidiaries............ $ 126,234 114,226
========= =======
Amortization of intangibles associated with the purchase of
subsidiaries and branch offices was $1.5 million for the nine months ended
September 30, 2002 and $5.6 million for the comparable period in 2001.
Amortization of intangibles associated with the purchase of subsidiaries,
including amortization of core deposit intangibles and branch purchases, has
been estimated through 2007 in the following table, and does not take into
consideration any potential future acquisitions or branch purchases.
(dollars expressed
in thousands)
Year ending December 31:
2002 (1)..................................... $ 2,012
2003......................................... 2,129
2004......................................... 2,129
2005......................................... 2,129
2006......................................... 2,129
2007......................................... 2,129
---------
Total..................................... $ 12,657
=========
--------------
(1) Includes $1.5 million of amortization for the nine months ended
September 30, 2002.
Changes in the carrying amount of goodwill for the nine months ended
September 30, 2002 were as follows:
Nine Months Ended September 30, 2002
---------------------------------------
First Bank First Bank & Trust Total
---------- ------------------ -----
(dollars expressed in thousands)
Balance, beginning of period.................... $ 19,165 96,695 115,860
Goodwill acquired during period................. 12,577 -- 12,577
Acquisition-related adjustments................. (569) -- (569)
Amortization - purchases of branch offices...... -- (108) (108)
-------- ------ --------
Balance, end of period.......................... $ 31,173 96,587 127,760
======== ====== ========
The following is a reconciliation of reported net income to net income
adjusted to reflect the adoption of SFAS No. 142, as if it had been implemented
on January 1, 2001:
Nine Months Ended
September 30,
------------------------------
2002 2001
---- ----
(dollars expressed in thousands)
Net income:
Reported net income...................................... $ 30,362 34,632
Add back - goodwill amortization......................... -- 5,438
-------- --------
Adjusted net income.................................... $ 30,362 40,070
========= ========
Basic earnings per share:
Reported net income...................................... $1,261.05 1,441.51
Add back - goodwill amortization......................... -- 229.86
--------- --------
Adjusted net income.................................... $1,261.05 1,671.37
========= ========
Diluted earnings per share:
Reported net income...................................... $1,246.05 1,409.98
Add back - goodwill amortization......................... -- 221.50
--------- --------
Adjusted net income.................................... $1,246.05 1,631.48
========= ========
In August 2001, the FASB issued SFAS No. 144 -- Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121 -- Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and requires that
one accounting model be used for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. SFAS No. 144 broadens the
presentation of discontinued operations to include more disposal transactions.
Therefore, the accounting for similar events and circumstances will be the same.
The provisions of SFAS No. 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years, with early application encouraged. The provisions of SFAS No. 144
generally are to be applied prospectively. On January 1, 2002, First Banks
implemented SFAS No. 144, which did not have a material effect on the
consolidated financial statements.
On October 1, 2002, the FASB issued SFAS No. 147 -- Acquisitions of
Certain Financial Institutions, an amendment of SFAS No. 72 -- Accounting for
Certain Acquisitions of Banking or Thrift Institutions and SFAS No. 144 --
Accounting for the Impairment or Disposal of Long-Lived Assets and FASB
Interpretation No. 9 -- Applying APB Opinions No. 16 and 17 When a Savings and
Loan Association or a Similar Institution Is Acquired in a Business Combination
Accounted for by the Purchase Method. SFAS No. 147 addresses the financial
accounting and reporting for the acquisition of all or part of a financial
institution, except for transactions between two or more mutual enterprises.
SFAS No. 147 removes acquisitions of financial institutions, other than
transactions between two or more mutual enterprises, from the scope of SFAS No.
72. SFAS No. 147 also provides guidance on the accounting for impairment or
disposal of acquired long-term customer-relationship intangible assets,
including those acquired in transactions between two or more mutual enterprises.
The provisions of SFAS No. 147 are effective for acquisitions on or after
October 1, 2002. On October 1, 2002, First Banks implemented SFAS No. 147, which
did not have a material effect on the 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. Since 1994, our organization has grown significantly,
primarily as a result of our acquisition strategy, as well as through internal
growth. We currently operate banking subsidiaries with branches in California,
Illinois, Missouri and Texas. At September 30, 2002, we had total assets of
$7.17 billion, loans, net of unearned discount, of $5.46 billion, total deposits
of $6.03 billion and total stockholders' equity of $506.2 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, internet banking, 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
Name at September 30, 2002 at September 30, 2002
----------------------------------------- ------------------------------------- ---------------------
(dollars expressed
in thousands)
First Bank Missouri (43) and Illinois (51) $4,063,159
First Banks America, Inc., and its
subsidiary:
First Bank & Trust California (49) and Texas (8) 3,139,170
Our subsidiary banks are wholly owned by their respective parent
companies and we owned 93.76% of First Banks America, Inc., or FBA, at September
30, 2002. On December 31, 2002, we completed our acquisition of all of FBA's
outstanding capital stock that we did not already own for a price of $40.54 per
share, or approximately $32.4 million. In conjunction with this transaction, FBA
became a wholly owned subsidiary of ours, and was merged with and into First
Banks. We anticipate merging our bank subsidiaries, First Bank and First Bank &
Trust, during the first quarter of 2003 to allow certain administrative and
operational economies not available while the two banks maintain separate
charters.
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 members of his immediate family, own all of our voting
stock. Mr. Dierberg and his family, therefore, control our management, policies
and the election of our directors.
Acquisitions
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, however, the pricing of acquisitions
in these areas escalated beyond the levels we believed were desirable, causing
us to explore acquisitions in other markets. This effort led to the acquisition
of BancTEXAS Group, Inc. in 1994, which had offices in Dallas and Houston,
Texas, and subsequent acquisitions of financial institutions that had offices
located in the San Francisco - Sacramento corridor in Northern California and
Orange County in Southern California during the six years ended December 31,
2000. Our emphasis in recent acquisitions has been to enhance our presence in
markets we currently serve. In 2001, we completed two acquisitions in Southern
California that increased our market share in Los Angeles and Orange Counties,
and extended our market into neighboring Riverside County. In addition, in 2001
we completed an acquisition in Swansea, Illinois of a bank holding company that
increased our presence in the Illinois areas immediately east and north of St.
Louis. In 2002, we completed an acquisition in Des Plaines, Illinois, in the
Chicago metropolitan area, and two branch offices in Denton and Garland, Texas,
in the Dallas metropolitan area. In addition, we currently have one pending
acquisition in Ste. Genevieve, Missouri that will further expand our Midwest
franchise south of St. Louis.
Pending Acquisition
On September 17, 2002, First Banks and Allegiant Bancorp, Inc., or
Allegiant, signed an agreement and plan of exchange that provides for First
Banks to acquire Allegiant's wholly owned banking subsidiary, Bank of Ste.
Genevieve. Bank of Ste. Genevieve operates two locations in Ste. Genevieve,
Missouri, and reported total assets of $111.1 million and total deposits of
$91.1 million at September 30, 2002. Under the terms of the agreement, First
Banks will acquire Bank of Ste. Genevieve in exchange for approximately 974,150
shares of Allegiant common stock that are currently held by First Banks. The
transaction, which is subject to regulatory approvals, is expected to be
completed during the first quarter of 2003. First Banks will continue to own
approximately 232,000 shares of Allegiant common stock subsequent to completion
of the transaction.
Closed Acquisitions and Other Corporate Transactions
On January 15, 2002, we completed our acquisition of Plains Financial
Corporation, or Plains, and its wholly owned banking subsidiary, PlainsBank of
Illinois, National Association, Des Plaines, Illinois, in exchange for $36.5
million in cash. Plains operated a total of three banking facilities in Des
Plaines, Illinois, and one banking facility in Elk Grove Village, Illinois. At
the time of the transaction, Plains had $256.3 million in total assets, $150.4
million in loans, net of unearned discount, $81.0 million in investment
securities and $213.4 million in deposits. This transaction was accounted for
using the purchase method of accounting. The excess of the cost over the fair
value of the net assets acquired was approximately $12.6 million and will not be
amortized, but instead will be periodically tested for impairment in accordance
with SFAS No. 142. The core deposit intangibles were approximately $2.9 million
and are being amortized over seven years utilizing the straight-line method.
Plains was merged with and into Union, and PlainsBank of Illinois was merged
with and into First Bank.
On June 22, 2002, First Bank & Trust completed its assumption of the
deposits and certain liabilities and the purchase of certain assets of the
Garland and Denton, Texas branch offices of Union Planters Bank, National
Association, or UP branches. The transaction resulted in the acquisition of
$15.3 million in deposits and one branch office in Garland and $49.6 million in
deposits and one branch office, and a detached drive-thru facility, in Denton.
The core deposit intangibles associated with the branch purchases were $1.4
million and are being amortized over seven years utilizing the straight-line
method.
On December 31, 2002, we completed our acquisition of all of FBA's
outstanding capital stock that we did not already own for a price of $40.54 per
share, or approximately $32.4 million. At December 31, 2002, there were 798,753
shares, or approximately 6.22% of FBA's outstanding stock, held publicly. We
owned the other 93.78%. In conjunction with this transaction, FBA became a
wholly owned subsidiary of ours, and was merged with and into First Banks. This
transaction was accounted for using the purchase method of accounting. The
excess of the cost over the fair value of the net assets acquired was
approximately $12.4 million and will not be amortized, but instead will be
periodically tested for impairment in accordance with SFAS No. 142.
Market Area
As of September 30, 2002, our subsidiary banks' 151 banking facilities
were located in California, eastern Missouri, Illinois and Texas. Our primary
market area is the St. Louis, Missouri metropolitan area. Our second and third
largest market areas are southern and northern California and central and
southern Illinois, respectively. We also have locations in the Houston, Dallas,
Irving, McKinney and Denton, 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 operating 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, 2002, we employed approximately 2,300 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 existing 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 our subsidiary
banks and us 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 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. Consequently, the Board of Governors of the Federal Reserve System,
or Federal Reserve, 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
and a member of the Federal Reserve, both the State of Missouri Division of
Finance and the Federal Reserve supervise, regulate and examine 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, or FDIC, which provides deposit insurance of up
to $100,000 for each insured depositor.
Bank Holding Company Regulation. Our 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, or GLB Act, which was enacted in November 1999 and is
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 their 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. We are 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 us 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 obligations and 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-half 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 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,
together with Tier I capital, is referred to as "Total Risk-Based 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 highest supervisory rating, while all other bank
holding companies must maintain a minimum Leverage Ratio of at least 4% to 5%.
The Office of the Comptroller of the Currency, or 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 September 30, 2002 and December 31,
2001:
Actual
----------------------------- To be Well
For Capital Capitalized Under
September 30, December 31, Adequacy Prompt Corrective
2002 2001 Purposes Action Provisions
---- ---- -------- -----------------
Total capital (to risk-weighted assets):
First Banks............................ 10.97% 10.53% 8.0% 10.0%
First Bank............................. 10.49 10.14 8.0 10.0
First Bank & Trust..................... 10.43 11.27 8.0 10.0
Tier I capital (to risk-weighted assets):
First Banks............................ 7.79 7.57 4.0 6.0
First Bank............................. 9.23 8.89 4.0 6.0
First Bank & Trust..................... 9.17 10.02 4.0 6.0
Tier I capital (to average assets):
First Banks............................ 6.86 7.25 3.0 5.0
First Bank............................. 7.82 8.67 3.0 5.0
First Bank & Trust..................... 8.59 9.47 3.0 5.0
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 become progressively more severe as the capital levels decrease.
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. Our 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.
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 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 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. However,
it may lead to additional competition in the markets in which we operate by
allowing new entrants into various segments of those markets that are not the
traditional competitors in those segments. Furthermore, the authority granted by
the GLB Act may encourage 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.
The Sarbanes-Oxley Act. On July 30, 2002, President Bush signed into
law the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act imposes a myriad of
corporate governance and accounting measures designed to ensure that the
shareholders of corporate America are treated fairly and have full and accurate
information about the public companies in which they invest. All public
companies, including companies that file periodic reports with the SEC such as
First Banks, are affected by the Sarbanes-Oxley Act.
Certain provisions of the Sarbanes-Oxley Act became effective
immediately, while other provisions will become effective as the SEC adopts
rules to implement those provisions. Some of the principal provisions of the
Sarbanes-Oxley Act which may affect us include:
o the creation of an independent accounting oversight board to
oversee the audit of public companies and auditors who perform
such audits;
o auditor independence provisions which restrict non-audit services
that independent accountants may provide to their audit clients;
o additional corporate governance and responsibility measures which
(i) require the chief executive officer and chief financial
officer to certify financial statements and to forfeit salary and
bonuses in certain situations, and (ii) protect whistleblowers and
informants;
o expansion of the audit committee's authority and responsibility by
requiring that the audit committee (i) have direct control of the
outside auditor, (ii) be able to hire and fire the auditor, and
(iii) approve all non-audit services;
o mandatory disclosure by analysts of potential conflicts of
interest; and
o enhanced penalties for fraud and other violations.
The Sarbanes-Oxley Act is expected to increase the administrative costs
and burden of doing business for public companies; however, we cannot predict
the significance of any increase at this time.
The USA Patriot Act. In October 2001, the Patriot Act was enacted in
response to the terrorist attacks in New York, Pennsylvania and Washington, D.C.
which occurred on September 11, 2001. The Patriot Act is intended to strengthen
the ability of U.S. law enforcement agencies and the intelligence communities to
work cohesively to combat terrorism on a variety of fronts. The potential impact
of the Patriot Act on financial institutions of all kinds is significant and
wide ranging. The Patriot Act contains sweeping anti-money laundering and
financial transparency laws and imposes various regulations, including standards
for verifying client identification at account opening, and rules to promote
cooperation among financial institutions, regulators and law enforcement
entities in identifying parties that may be involved in terrorism or money
laundering. The Patriot Act is expected to increase the administrative costs and
burden of doing business for financial institutions; however, we cannot predict
the significance of any increase at this time.
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.
First Bank is a member of the Federal Reserve System. Both First Bank
and First Bank & Trust are members of the Federal Home Loan Bank System. As
members, they are required to hold investments in regional banks within those
systems. Our subsidiary banks were in compliance with these requirements at
September 30, 2002, with investments of $9.7 million in stock of the Federal
Home Loan Bank of Des Moines held by First Bank, $500,000 in stock of the
Federal Home Loan Bank of Chicago held by First Bank (associated with the
acquisition of Union completed on December 31, 2001), $2.4 million in stock of
the Federal Home Loan Bank of San Francisco held by First Bank & Trust, and $7.5
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 instruments of
monetary policy available to the Federal Reserve include the following:
o changes in the discount rate on member bank borrowings and the
targeted federal funds rate;
o the availability of credit at the "discount window;"
o open market operations;
o the imposition of changes in reserve requirements against
deposits of domestic banks;
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 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 65 Chairman of the Board of Directors and Chief Executive Officer
Allen H. Blake 59 Director and President, Chief Financial Officer and Secretary
Michael J. Dierberg (1) 31 Director and General Counsel
Gordon A. Gundaker (2) 68 Director
David L. Steward (2) 51 Director
Hal J. Upbin (2) 63 Director
Douglas H. Yaeger (2) 53 Director
Donald W. Williams 55 Director and Senior Executive Vice President and Chief Credit Officer
Executive Officers Not
Serving as Directors:
Terrance M. McCarthy 48 Senior Executive Vice President and Chief Operating Officer
Mark T. Turkcan 46 Executive Vice President -- Mortgage Banking
- -----------------------------
(1) Michael J. Dierberg is the son of James F. Dierberg.
(2) 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 served as the Chairman of the
Board of Directors, President and Chief Executive Officer of FBA from 1994 until
its merger with First Banks on December 31, 2001 and has been a trustee of our
other financing subsidiaries since 1997, 1998, 2000 and 2001, respectively.
Allen H. Blake has served as our President since October 1999. He
served as our Chief Financial Officer from 1984 to 1999 and again since May 2001
and our Secretary since 1988. Mr. Blake has held various executive positions
with us since 1984. Mr. Blake served as Executive Vice President of FBA from
1998 until its merger with First Banks, its Chief Operating Officer from 1999 to
July 2002, its Chief Financial Officer from 1994 to September 1999 and from June
2001 until its merger with First Banks, and its Secretary from 1994 until its
merger with First Banks. Mr. Blake has served as a trustee of our other
financing subsidiaries since 1997, 1998, 2000 and 2001, respectively.
Michael J. Dierberg serves as Director and General Counsel. Mr.
Dierberg previously served as Senior Vice President (Northern California Region)
of First Bank & Trust since July 2001. Prior to joining First Banks, 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 The Laclede Group,
Inc. 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 also served as Executive Vice President and Chief Credit
Officer of FBA until its merger with First Banks and serves as Chairman of the
Board of Directors of First Bank.
Terrance M. McCarthy has served as our Senior Executive Vice President
and Chief Operating Officer since June 2002, and has been employed in various
executive capacities with us since 1995. Mr. McCarthy is also President and
Chief Executive Officer of First Bank and Chairman of the Board of Directors,
President and Chief Executive Officer of First Bank & Trust.
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
and Chairman of the Board of Directors, President and Chief Executive Officer of
First Banc Mortgage, Inc.
DESCRIPTION OF THE TRUST
The trust is a statutory trust formed pursuant to the Delaware
Statutory 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 Statutory Trust Act and the Trust Indenture
Act. The trust agreement does not permit the trust to borrow money or make any
investment 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 Allen H. Blake, Terrance M. McCarthy and Lisa
K. Vansickle. The fourth trustee must 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 Fifth Third Bank. 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, Fifth Third Bank 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 Fifth Third Bank 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 76 of this prospectus. Fifth Third Bank 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 March 31, 2003.
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 March 31, 2033 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);
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
March 31, 2008; 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 March 31, 2033 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 New York Stock Exchange 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 79 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 79 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. 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 on the New York Stock
Exchange 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 Fifth Third Bank, 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 $61,855,675 or $71,134,025 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 March 31, 2003, 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 March 31, 2033, the stated
maturity date. We may shorten this date once at any time to any date not earlier
than March 31, 2008, 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 March
31, 2008, except if (a) a Tax Event, an Investment Company Event or a Capital
Treatment Event, which terms are defined on page 79, 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 include as taxable income each year amounts approximately equal to the
accrued but unpaid interest. See "Material United States 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);
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 three 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 New York Stock
Exchange, 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
March 31, 2008; 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 list the subordinated debentures on the New York Stock
Exchange 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);
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 four
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 (which will be redeemed in their
entirety following consummation of this offering), our 10.24%
subordinated debentures due 2030, our 9.0% subordinated
debentures due 2031 and our variable rate subordinated debentures
due 2032 issued to our 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 owed 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 owed to any of our subsidiaries;
o any debt owed 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, the approximately $56.9 million of 9.00% subordinated
debentures due 2031 that we issued to one of our other financing
subsidiaries in 2001, the approximately $25.8 million of variable
rate subordinated debentures due 2032 issued to one of our other
financing subsidiaries in 2002 and the approximately $47.4
million of 8.5% 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 no consolidated senior and senior subordinated
debt outstanding at November 30, 2002.
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 Cincinnati,
Ohio. 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
statutory 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 on the
New York Stock Exchange 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;
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. Fifth Third
Bank, 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.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General
This discussion outlines the material United States federal income tax
consequences of the purchase, ownership and disposition of the preferred
securities. It is only a general discussion and may not apply to your particular
circumstances for any of the following, or other, reasons:
o It is based on authorities in effect as of the date of this
prospectus, including the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), applicable Treasury
regulations and related administrative and judicial
pronouncements. Changes in these authorities after the date of
this prospectus could alter the consequences described in this
discussion, possibly on a retroactive basis.
o It addresses only preferred securities acquired upon the closing
of this offering at their original issue price and held as
capital assets, within the meaning of the Internal Revenue Code.
o It does not discuss all of the United States federal income tax
consequences that may be relevant to a holder of preferred
securities. Nor does it discuss United States federal income tax
consequences to holders subject to special rules, such as banks,
thrift institutions, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities
or currencies, certain securities traders, tax-exempt investors,
persons holding a preferred security as a position in a straddle,
hedge, conversion or constructive sale transaction, and (except
for the discussion under the caption "-Non-United States
Persons") persons who are not United States Persons as defined
below.
o It does not discuss the United States federal income tax
consequences to stockholders in, or partners or beneficiaries of,
a purchaser of preferred securities; the United States
alternative minimum tax consequences or other collateral tax
consequences of purchasing, owning and disposing of preferred
securities; or 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 either the Internal Revenue Service (the "IRS") or
the courts could take a contrary position. No rulings have been or will be
sought from the IRS with respect to the matters described in this discussion. No
assurance can be given that the IRS will not challenge the conclusions expressed
herein or that a court would not sustain such a challenge.
Accordingly, you are urged to consult your own tax advisors regarding
the tax consequences of purchasing, owning and disposing of the preferred
securities based on your particular circumstances.
For purposes of this discussion, a United States Person generally
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 IV
It is the opinion of Jackson Walker L.L.P., First Banks' counsel, that
First Preferred Capital Trust IV will be characterized for United States federal
income tax purposes as a grantor trust, based on and subject to the facts and
assumptions set forth in its opinion, including the assumption that there will
be full compliance with the terms of the trust agreement and other relevant
documents. Accordingly, you will be considered the beneficial owner of an
undivided interest in the subordinated debentures owned by First Preferred
Capital Trust IV, and you will be required to include in your gross income all
income or gain recognized for United States federal income tax purposes with
respect to your share of the subordinated debentures. We cannot assure you that
the IRS will not challenge this position.
Characterization of the Subordinated Debentures
It is the opinion of Jackson Walker L.L.P., First Banks' counsel, that
the subordinated debentures will be classified as debt of First Banks for United
States federal income tax purposes, based on and subject to the facts and
assumptions set forth in its opinion. By acceptance of a beneficial interest in
a preferred security, you agree to treat the subordinated debentures as debt of
First Banks and the preferred securities as evidence of a beneficial ownership
interest in the subordinated debentures. We cannot assure you that the IRS will
not challenge this position. The remainder of this discussion assumes that the
subordinated debentures will be classified as debt of First Banks for United
States federal income tax purposes.
Interest Income and Original Issue Discount
We anticipate that the subordinated debentures will not be issued with
an issue price that is less than their stated redemption price at maturity.
Under certain circumstances, we have the ability to defer payments of interest
on the subordinated debentures. Treasury regulations provide that a debt
instrument that is subject to a contingency that interest may not be paid will
not be considered to have been issued with original issue discount ("OID") if
the likelihood of the occurrence of the contingency is remote. It is the opinion
of Jackson Walker L.L.P., First Banks' counsel, that because exercise of our
deferral option would, among other matters, prevent us from declaring dividends
on our common stock and from making any payments with respect to our debt
securities that rank equally with or junior to the subordinated debentures, the
likelihood of our exercise of the deferral option is remote. Accordingly,
although the IRS could challenge our position, we will take the position that
the deferral option does not cause the subordinated debentures to be issued with
OID and, therefore, you will be taxed on stated interest on the subordinated
debentures when it is paid or accrued in accordance with your regular method of
accounting.
If we do exercise our right to defer payments of interest on the
subordinated debentures, the subordinated debentures would be treated as issued
with OID at the time of such exercise. If our deferral option was determined not
to be remote, the subordinated debentures would be treated as having been
originally issued with OID. In either case, you would be subject to the special
OID accrual rules. Under those rules, regardless of your method of accounting,
you would accrue an amount of interest income each year that approximates the
stated interest payments called for under the terms of your preferred securities
using the constant-yield-to-maturity method of accrual. Cash payments to you in
respect of the accrued OID would not be reported separately as taxable income.
OID included in your gross income would increase your adjusted tax basis in the
preferred securities and payments to you in respect of the accrued OID would
reduce your adjusted tax basis in the preferred securities. Under the OID rules,
you may be required to include OID in income before receipt of cash interest
payments. Also, if you sell or otherwise dispose of a preferred security you
will be subject to income tax on OID accrued through the date of the sale.
Dividends-Received Deduction
Assuming that the subordinated debentures are properly classified as
debt of First Banks for United States federal income tax purposes, 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.
Liquidating Distributions and Redemptions
Under certain circumstances, First Preferred Capital Trust IV may
distribute a pro-rata share of the subordinated debentures to you in liquidation
of the trust. Because the trust is to be classified as a grantor trust, such a
distribution would not be a taxable event and, consequently, your holding period
and adjusted tax basis for the preferred securities would become your holding
period and adjusted tax basis for the subordinated debentures received. After a
distribution of subordinated debentures, a holder of subordinated debentures
would recognize interest income or OID in respect of the subordinated debentures
received in the manner described above under "Interest Income and Original Issue
Discount."
Under certain circumstances, we may redeem subordinated debentures for
cash, the proceeds of which would be distributed to you in redemption of your
preferred securities. In such case, you would recognize gain or loss for United
States federal income tax purposes as if you had sold the preferred securities
for cash. See "Sales of Preferred Securities" below.
Sales of Preferred Securities
Upon a sale or other taxable disposition (including a redemption for
cash) of preferred securities, you will recognize gain or loss equal to the
difference between your adjusted tax basis in the preferred securities and the
amount realized on the sale or other disposition. Unless a subordinated
debenture is treated as having OID, any portion of the amount you receive that
is attributable to accrued interest will be treated as interest income and will
not be treated as part of the amount realized for purposes of determining your
gain or loss on the disposition. If, however, the subordinated debentures are
treated as having OID, the adjusted tax basis of the preferred securities would
be increased by OID included in your gross income to the date of disposition,
and decreased by payments received on the preferred securities in respect of the
OID. Any gain or loss generally will be capital gain or loss, and generally will
be a long-term capital gain or loss if you have held the preferred securities as
a capital asset for more than one year. In the case of individuals, trusts and
estates, long-term capital gains generally are taxed at a lower rate than
short-term capital gains. Subject to certain limited exceptions, capital losses
generally cannot be applied to offset ordinary income.
Non-United States Persons
The following discussion applies only to beneficial owners of preferred
securities who are not United States Persons as defined above under "General."
Under present United States federal income tax law, if you are not engaged in a
trade or business in the United States, no withholding of United States federal
income tax will be required with respect to payments of principal or interest,
including any OID, on the preferred securities or the subordinated debentures,
provided that:
o you do not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled
to vote;
o you are not a controlled foreign corporation as defined in the
Internal Revenue Code that is related to us through stock
ownership;
o you are not a foreign private foundation;
o you are not a bank whose receipt of interest is described in
Section 881(c)(3)(A) of the Internal Revenue Code; and
o either (a) you provide your name and address on IRS Form W-8BEN
or other appropriate form and certify, under penalties of
perjury, that you are not a United States Person, or (b)
generally, a financial institution holding the preferred
securities (or subordinated debentures) on your behalf certifies,
under penalties of perjury, that it has received an IRS Form
W-8BEN or other appropriate form from you and provides us a copy.
If you do not satisfy the requirements described above, or if it were
determined that the subordinated debentures should be classified as equity and
not debt, payments made to you will be subject to a 30% United States federal
withholding tax, unless you provide us or our paying agent with a properly
executed (a) IRS Form W-8BEN or other appropriate form claiming an exemption
from, or a reduction of, withholding tax under the benefit of an applicable tax
treaty; or (b) IRS Form W-8ECI or other appropriate form stating that interest
received on the preferred securities or subordinated debentures is not subject
to withholding tax because it is effectively connected with your conduct of a
trade or business in the United States.
No withholding of United States federal income tax will be required
with respect to any gain realized by you upon the sale or other disposition of
preferred securities or subordinated debentures if you provide appropriate
documentation that you are not a United States Person.
If you are engaged in a trade or business in the United States and
income on the preferred securities or the subordinated debentures is effectively
connected with the conduct of that trade or business, you will be subject to
United States federal income tax on that income on a net income basis in the
same manner as if you were a United States Person. In addition, if you are a
foreign corporation, you may be subject to a 30% branch profits tax. Any gain
realized upon the sale or disposition of preferred securities or subordinated
debentures generally will not be subject to United States federal income tax
unless (a) the gain is effectively connected with a United States trade or
business conducted by you; or (b) if you are a non-United States Person who is
an individual, you are present in the United States for 183 days or more in the
taxable year of the sale or other disposition.
The consequences of acquiring, owning and disposing of the preferred
securities or subordinated debentures by non-United States Persons may be
modified by an applicable tax treaty. Non-United States Persons should consult
their tax advisors about the rules concerning the tax consequences to them of
acquiring, owning and disposing of the preferred securities or debentures,
including withholding on payments to non-United States Persons and the potential
application of tax treaties.
Information Reporting and Backup Withholding
The amount of interest paid and any OID accrued on the subordinated
debentures held directly or through the preferred securities by United States
Persons, other than corporations and other exempt recipients, will be reported
annually to the IRS. The amount of such income will be reported to holders by
January 31st following each calendar year.
Backup withholding will apply to payments of interest, dividends and
payments of redemption or other disposition proceeds to you if you are a
non-exempt United States Person unless you furnish your taxpayer identification
number in the manner prescribed in applicable Treasury regulations (generally,
on an IRS Form W-9), certify, under penalties of perjury, that this number is
correct and meet certain other conditions. The backup withholding rate is 30% in
2003, 29% in 2004 and 2005, and 28% in 2006. Any amounts withheld under the
backup withholding rules will be allowable as a refund or a credit against your
United States federal income tax liability, provided that the required
information is furnished to the IRS.
Proposed Legislation and Other Possible Changes in Tax Laws
On January 24, 2002, Representative Charles B. Rangel introduced in the
United States House of Representatives proposed legislation known as the
Emergency Worker and Investor Protection Act of 2002. The proposed legislation
would, among other things, disallow an interest deduction for United States
federal income tax purposes for certain indebtedness, including in the case of a
United States Securities and Exchange Commission registrant: (a) any
indebtedness of such registrant if such indebtedness is not shown in the
certified annual report as part of the total liabilities of such registrant, and
(b) any indebtedness of an off-balance-sheet entity if the proceeds from the
issuance of such indebtedness are used directly or indirectly to acquire stock
(or other ownership interests) in such registrant. This legislation is proposed
to be effective for instruments issued on or after the date of enactment. As
drafted, this legislation would not affect the subordinated debentures or
preferred securities or otherwise result in a Tax Event. However, there can be
no assurance that the proposed legislation, final legislation or any other
future legislative proposals, or future administrative or judicial
pronouncements, will not adversely affect our ability to deduct interest on the
subordinated debentures or otherwise affect the tax treatment of the
transactions described in this Prospectus. Such a change could, if applicable to
the preferred securities or subordinated debentures, give rise to a Tax Event,
which would permit us to cause a redemption of the debentures as described
above.
This discussion is included for general information only and may not be
applicable depending upon your particular situation. You should consult your own
tax advisors with respect to the tax consequences of the purchase, ownership and
disposition of preferred securities, including the tax consequences under state,
local foreign and other tax laws, and the possible effects of changes in federal
or other tax laws.
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 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 2,400,000 preferred securities in the amounts set forth below
opposite their respective names.
Number of
Preferred
Underwriters Securities
------------ ----------
Stifel, Nicolaus & Company, Incorporated.....................................
Fahnestock & Co. Inc.........................................................
----------------
Total................................................................... 2,400,000
================
Under the terms and conditions of the underwriting agreement, the
underwriters are 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 360,000 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 $60,000,000
Proceeds to First Preferred Capital Trust IV............... $25.00 $60,000,000
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 will apply to have the preferred securities approved for listing on
the New York Stock Exchange. The Representatives have advised the trust that
they presently intend to make a market in the preferred securities after the
commencement of trading on the New York Stock Exchange 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 on the New York Stock
Exchange 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. An affiliate of James F.
Dierberg, our Chairman and Chief Executive Officer, is the owner of 300,000
shares of common stock (or approximately 4.23% of the outstanding common stock)
of Stifel Financial Corp., the parent company of Stifel, Nicolaus & Company,
Incorporated.
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, 2001 and 2000, and for each of the years in the three-year period
ended December 31, 2001, 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,
2001, filed with the SEC on March 25, 2002;
(b) our Quarterly Report on Form 10-Q for the quarter ended March
31, 2002, filed with the SEC on May 13, 2002;
(c) our Quarterly Report on Form 10-Q for the quarter ended June
30, 2002, filed with the SEC on August 12, 2002;
(d) our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2002, filed with the SEC on November 12, 2002;
and
(e) our Current Reports on Form 8-K, filed with the SEC on
January 29, 2002 and January 3, 2003.
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 Lisa K. Vansickle, our Senior Vice President and Controller,
at the following address and phone number:
First Banks, Inc.
600 James S. McDonnell Blvd.
Mail Stop M1-199-014
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 September 30, 2002 (unaudited)
and December 31, 2001 and 2000........................................................... F-2
Consolidated Statements of Income for the nine months ended September 30,
2002 and 2001 (unaudited) and for the years
ended December 31, 2001, 2000 and 1999................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity and
Comprehensive Income for the nine months ended September 30, 2002
(unaudited) and for the years ended
December 31, 2001, 2000 and 1999......................................................... F-5
Consolidated Statements of Cash Flows for the nine months ended September
30, 2002 and 2001 (unaudited) and for
the years ended December 31, 2001, 2000 and 1999......................................... F-6
INDEPENDENT AUDITORS' REPORT
[KPMG LOGO]
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, 2001 and 2000, 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, 2001. 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, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.
As discussed in note 1 to the consolidated financial statements, the Company
changed its method of accounting for derivative instruments and hedging
activities in 2001.
/s/ KPMG LLP
------------
St. Louis, Missouri
March 15, 2002
FIRST BANKS, INC.
CONSOLIDATED BALANCE SHEETS
(dollars expressed in thousands, except share and per share data)
December 31,
September 30, -----------------
2002 2001 2000
---- ---- ----
(unaudited)
ASSETS
------
Cash and cash equivalents:
Cash and due from banks.............................................. $ 165,251 181,522 167,474
Interest-bearing deposits with other financial institutions
with maturities of three months or less............................ 2,093 4,664 4,005
Federal funds sold................................................... 79,300 55,688 26,800
---------- --------- ---------
Total cash and cash equivalents................................. 246,644 241,874 198,279
---------- --------- ---------
Investment securities:
Available for sale, at fair value.................................... 895,491 610,466 539,386
Held to maturity, at amortized cost (fair value of $20,037
at September 30, 2002, $20,812 and $24,507 at
December 31, and 2000, respectively)............................... 19,384 20,602 24,148
---------- --------- ---------
Total investment securities..................................... 914,875 631,068 563,534
---------- --------- --------
Loans:
Commercial, financial and agricultural............................... 1,610,062 1,681,846 1,496,284
Real estate construction and development............................. 983,346 954,913 809,682
Real estate mortgage................................................. 2,518,374 2,445,847 2,202,857
Consumer and installment............................................. 98,376 124,542 181,602
Loans held for sale.................................................. 261,258 204,206 69,105
---------- --------- ---------
Total loans..................................................... 5,471,416 5,411,354 4,759,530
Unearned discount.................................................... (7,396) (2,485) (7,265)
Allowance for loan losses............................................ (109,875) (97,164) (81,592)
---------- --------- ---------
Net loans....................................................... 5,354,145 5,311,705 4,670,673
---------- --------- ---------
Derivative instruments.................................................... 101,872 54,889 3,759
Bank premises and equipment, net of accumulated
depreciation and amortization........................................ 155,419 149,604 114,771
Intangibles associated with the purchase of subsidiaries
net of amortization.................................................. 140,259 125,440 85,021
Bank owned life insurance................................................. 91,216 87,200 83,292
Accrued interest receivable............................................... 33,953 37,349 45,226
Deferred income taxes..................................................... 97,182 94,546 77,956
Other assets.............................................................. 35,969 44,776 34,180
---------- --------- ---------
Total assets.................................................... $7,171,534 6,778,451 5,876,691
========== ========= =========
The accompanying notes are an integral part of the consolidated financial statements.
FIRST BANKS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(dollars expressed in thousands, except share and per share data)
December 31,
September 30, -----------------------
2002 2001 2000
---- ---- ----
(unaudited)
LIABILITIES
-----------
Deposits:
Demand:
Non-interest-bearing............................................... $ 954,017 921,455 808,251
Interest-bearing................................................... 765,390 629,015 448,146
Savings.............................................................. 2,026,734 1,832,939 1,447,898
Time:
Time deposits of $100 or more...................................... 496,118 484,201 499,956
Other time deposits................................................ 1,783,444 1,816,294 1,808,164
---------- ---------- ---------
Total deposits.................................................. 6,025,703 5,683,904 5,012,415
Short-term borrowings..................................................... 214,054 243,134 140,569
Note payable.............................................................. -- 27,500 83,000
Guaranteed preferred beneficial interests in:
First Banks, Inc. subordinated debentures............................ 222,259 191,539 138,569
First Banks America, Inc. subordinated debentures.................... 45,373 44,342 44,280
Accrued interest payable.................................................. 13,466 16,006 23,227
Deferred income taxes..................................................... 63,016 43,856 15,031
Accrued expenses and other liabilities.................................... 61,685 61,515 52,687
Minority interest in subsidiary........................................... 19,784 17,998 14,067
---------- ---------- ---------
Total liabilities............................................... 6,665,340 6,329,794 5,523,845
---------- ---------- ---------
STOCKHOLDERS' EQUITY
--------------------
Preferred stock:
$1.00 par value, 5,000,000 shares authorized, no shares
issued and outstanding at September 30, 2002, December 31, 2001
and 2000........................................................... -- -- --
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........................................................... 5,950 6,074 2,267
Retained earnings......................................................... 419,146 389,308 325,580
Accumulated other comprehensive income.................................... 62,120 34,297 6,021
---------- ---------- ---------
Total stockholders' equity...................................... 506,194 448,657 352,846
---------- ---------- ---------
Total liabilities and stockholders' equity...................... $7,171,534 6,778,451 5,876,691
========== ========== =========
FIRST BANKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars expressed in thousands, except per share data)
Nine Months Ended
September 30, Years Ended December 31,
------------------------ ----------------------------
2002 2001 2001 2000 1999
---- ---- ---- ---- ----
(unaudited) (unaudited)
Interest income:
Interest and fees on loans........................... $ 293,904 315,098 412,153 390,332 323,207
Investment securities:
Taxable............................................ 22,965 20,233 26,244 27,331 26,206
Nontaxable......................................... 1,403 686 888 961 937
Federal funds sold and other......................... 1,454 4,100 5,458 4,202 2,732
--------- -------- ------- ------- -------
Total interest income........................... 319,726 340,117 444,743 422,826 353,082
--------- -------- ------- ------- -------
Interest expense:
Deposits:
Interest-bearing demand............................ 5,739 5,372 7,019 5,909 5,098
Savings............................................ 27,253 39,927 50,388 51,656 44,101
Time deposits of $100 or more...................... 14,803 22,117 28,026 20,654 11,854
Other time deposits................................ 51,837 76,629 97,105 99,603 84,639
Interest rate exchange agreements, net............... -- -- -- -- 5,397
Short-term borrowings................................ 2,635 5,000 5,847 5,881 3,983
Note payable......................................... 839 2,328 2,629 3,976 3,629
Guaranteed preferred debentures...................... 18,629 13,467 18,590 13,173 12,050
--------- -------- ------- ------- -------
Total interest expense.......................... 121,735 164,840 209,604 200,852 170,751
--------- -------- ------- ------- -------
Net interest income............................. 197,991 175,277 235,139 221,974 182,331
Provision for loan losses................................. 38,700 13,910 23,510 14,127 13,073
--------- -------- ------- ------- -------
Net interest income after provision
for loan losses............................. 159,291 161,367 211,629 207,847 169,258
--------- -------- ------- ------- -------
Noninterest income:
Service charges on deposit accounts and
customer service fees.............................. 21,985 16,268 22,865 19,794 17,676
Gain on mortgage loans sold and held for sale........ 20,316 9,718 14,983 7,806 6,909
Gain on sale of credit card portfolio,
net of expenses.................................... -- 1,853 1,853 -- --
Net gain (loss) on sales of
available-for-sale securities...................... 90 (145) 18,722 168 791
Gain on sales of branches, net of expenses........... -- -- -- 1,355 4,406
Bank-owned life insurance investment income.......... 4,318 3,069 4,415 4,314 3,919
Net gain on derivative instruments................... 1,714 14,401 18,583 -- --
Other................................................ 16,417 12,580 17,188 9,341 7,949
--------- -------- ------- ------- -------
Total noninterest income........................ 64,840 57,744 98,609 42,778 41,650
--------- -------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits....................... 84,506 68,889 93,452 73,391 61,524
Occupancy, net of rental income...................... 15,938 12,379 17,432 14,675 12,518
Furniture and equipment.............................. 12,730 8,845 12,612 11,702 8,520
Postage, printing and supplies....................... 4,205 3,528 4,869 4,431 4,244
Information technology fees.......................... 24,411 19,891 26,981 22,359 18,567
Legal, examination and professional fees............. 6,463 5,415 6,988 4,523 9,109
Amortization of intangibles associated with the
purchase of subsidiaries........................... 1,480 5,573 8,248 5,297 4,401
Communications....................................... 2,375 2,223 3,247 2,625 2,488
Advertising and business development................. 4,132 4,405 5,237 4,331 3,734
Other................................................ 18,992 26,213 32,605 14,656 13,652
--------- -------- ------- ------- -------
Total noninterest expense....................... 175,232 157,361 211,671 157,990 138,757
--------- -------- ------- ------- -------
Income before provision for income
taxes, minority interest in income
of subsidiary and cumulative effect
of change in accounting principle............ 48,899 61,750 98,567 92,635 72,151
Provision for income taxes................................ 17,471 24,120 30,048 34,482 26,313
--------- -------- ------- ------- -------
Income before minority interest in income
of subsidiary and cumulative effect of
change in accounting principle............... 31,428 37,630 68,519 58,153 45,838
Minority interest in income of subsidiary................. 1,066 1,622 2,629 2,046 1,660
--------- -------- ------- ------- -------
Income before cumulative effect of change in
accounting principle......................... 30,362 36,008 65,890 56,107 44,178
Cumulative effect of change in accounting principle,
net of tax........................................... -- (1,376) (1,376) -- --
--------- -------- ------- ------- -------
Net income...................................... 30,362 34,632 64,514 56,107 44,178
Preferred stock dividends................................. 524 524 786 786 786
--------- -------- ------- ------- -------
Net income available to common stockholders..... $ 29,838 34,108 63,728 55,321 43,392
========= ======== ======= ======= =======
FIRST BANKS, INC.
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(dollars expressed in thousands, except per share data)
Nine Months Ended
September 30, Years Ended December 31,
------------------------ ----------------------------
2002 2001 2001 2000 1999
---- ---- ---- ---- ----
(unaudited) (unaudited)
Earnings per common share:
Basic:
Income before cumulative effect of change in
accounting principle............................ $1,261.05 1,499.67 2,751.54 2,338.04 1,833.91
Cumulative effect of change in accounting
principle, net of tax.......................... -- (58.16) (58.16) -- --
--------- --------- -------- -------- --------
Basic.............................................. $1,261.05 1,441.51 2,693.38 2,338.04 1,833.91
========= ========= ======== ======== ========
Diluted:
Income before cumulative effect of change in
accounting principle............................ $1,246.05 1,468.14 2,684.93 2,267.41 1,775.47
Cumulative effect of change in accounting
principle, net of tax........................... -- (58.16) (58.16) -- --
--------- --------- -------- -------- --------
Diluted............................................ $1,246.05 1,409.98 2,626.77 2,267.41 1,775.47
========= ========= ======== ======== ========
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.
FIRST BANKS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Nine Months Ended September 30, 2002 and Three Years Ended December 31, 2001
(dollars expressed in thousands, except per share data)
Adjustable Rate Accu-
Preferred Stock mulated
--------------- 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, 1999........... $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
Year ended December 31, 2001:
Comprehensive income:
Net income................................. -- -- -- -- 64,514 64,514 -- 64,514
Other comprehensive income, net of tax:
Unrealized gains on securities, net of
reclassification adjustment (1)........ -- -- -- -- (1,871) -- (1,871) (1,871)
Derivative instruments:
Cumulative effect of change in
accounting principle, net............. -- -- -- -- 9,069 9,069 9,069
Current period transactions............ -- -- -- -- 27,021 27,021 27,021
Reclassification to earnings........... -- -- -- -- (5,943) (5,943) (5,943)
-------
Comprehensive income....................... 92,790
=======
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................. -- -- -- 3,807 -- -- 3,807
------- ---- ----- ------ ------- ------ -------
Consolidated balances, December 31, 2001......... 12,822 241 5,915 6,074 389,308 34,297 448,657
Nine months ended September 30, 2002 (unaudited):
Comprehensive income:
Net income................................. -- -- -- -- 30,362 30,362 -- 30,362
Other comprehensive income, net of tax:
Unrealized gains on securities, net of
reclassification adjustment (1)........ -- -- -- -- 7,121 -- 7,121 7,121
Derivative instruments:
Current period transactions............ -- -- -- -- 20,702 -- 20,702 20,702
-------
Comprehensive income....................... 58,185
=======
Class A preferred stock dividends,
$0.80 per share........................... -- -- -- -- (513) -- (513)
Class B preferred stock dividends,
$0.07 per share........................... -- -- -- -- (11) -- (11)
Effect of capital stock transactions of
majority-owned subsidiary................. -- -- -- (124) -- -- (124)
------- ---- ----- ------ ------- ------ -------
Consolidated balances, September 30, 2002
(unaudited).................................. $12,822 241 5,915 5,950 419,146 62,120 506,194
======= ==== ===== ====== ======= ====== =======
- -------------------------
(1) Disclosure of reclassification adjustment:
Nine Months Ended
September 30, Years Ended December 31,
------------------- ----------------------------
2002 2001 2001 2000 1999
---- ---- ---- ---- ----
Unrealized gains (losses) on investment
securities arising during the period...................... $ 7,180 10,461 10,298 3,780 (8,874)
Less reclassification adjustment for
gains (losses) included in net income..................... 59 (94) 12,169 109 514
------- ------ ------ ----- ------
Unrealized gains (losses) on
investment securities..................................... $ 7,121 10,555 (1,871) 3,671 (9,388)
======= ====== ====== ===== ======
The accompanying notes are an integral part of the consolidated financial statements.
FIRST BANKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars expressed in thousands)
Nine Months Ended
September 30, Years Ended December 31,
---------------------- ---------------------------
2002 2001 2001 2000 1999
---- ---- ---- ---- ----
(unaudited) (unaudited)
Cash flows from operating activities:
Net income................................................. $ 30,362 34,632 64,514 56,107 44,178
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 1,376 -- --
Depreciation and amortization of
bank premises and equipment....................... 13,857 8,954 12,713 9,536 7,609
Amortization, net of accretion........................ 11,869 6,641 11,203 8,370 12,632
Originations and purchases of loans held for sale.....(1,299,522) (1,088,069) (1,524,156) (532,178) (452,941)
Proceeds from sales of loans held for sale............ 1,092,359 982,205 1,348,772 413,247 507,077
Provision for loan losses............................. 38,700 13,910 23,510 14,127 13,073
Provision for income taxes............................ 17,471 24,120 30,048 34,482 26,313
Payments of income taxes.............................. (18,096) (21,290) (19,297) (10,525) (23,904)
Decrease (increase) in accrued interest receivable.... 3,891 5,488 11,513 (7,338) (3,164)
Interest accrued on liabilities....................... 121,735 164,840 209,604 200,852 170,751
Payments of interest on liabilities................... (125,303) (165,105) (218,329) (190,937) (166,106)
Gain on mortgage loans sold and held for sale......... (20,316) (9,718) (14,983) (7,806) (6,909)
Gain on sale of credit card portfolio,
net of expenses................................... -- (1,853) (1,853) -- --
Net (gain) loss on sales of available-for-sale
investment securities............................. (90) 145 (18,722) (168) (791)
Gain on sales of branches, net of expenses............ -- -- -- (1,355) (4,406)
Net gain on derivative instruments.................... (1,714) (14,401) (18,583) -- --
Other operating activities, net....................... 13,381 (18,928) 4,690 (3,978) 8,330
Minority interest in income of subsidiary............. 1,066 1,622 2,629 2,046 1,660
---------- ---------- ---------- ------- --------
Net cash (used in) provided by
operating activities.......................... (120,350) (75,431) (95,351) (15,518) 133,402
---------- ---------- ---------- -------- --------
Cash flows from investing activities:
Cash received (paid) for acquired entities, net of
cash and cash equivalents (paid) received................ 44,097 -- 6,351 (86,106) (15,961)
Proceeds from sales of investment securities............... 55,130 74,991 85,824 46,279 63,938
Maturities of investment securities available for sale..... 855,121 425,492 762,548 347,642 350,940
Maturities of investment securities held to maturity....... 3,456 2,765 4,292 1,169 2,708
Purchases of investment securities available for sale...... (957,312) (455,190) (822,593) (289,875) (288,023)
Purchases of investment securities held to maturity........ (2,260) (240) (750) (3,806) (2,627)
Proceeds from terminations of derivative instruments....... -- 5,396 22,203 -- --
Net decrease (increase) in loans........................... 114,333 57,944 (6,252) (339,575) (268,238)
Recoveries of loans previously charged-off................. 11,692 7,202 9,469 9,842 9,281
Purchases of bank premises and equipment................... (13,576) (29,212) (36,452) (30,856) (17,099)
Other investing activities................................. 8,622 3,147 (331) 5,052 (10)
---------- ---------- ---------- ------- --------
Net cash provided by (used in)
investing activities........................... 119,303 92,295 24,309 (340,234) (165,091)
---------- ---------- ---------- -------- --------
Cash flows from financing activities:
Increase (decrease) in demand and savings deposits......... 213,963 148,576 299,466 155,058 (72,895)
(Decrease) increase in time deposits....................... (157,154) (95,111) (254,748) 129,008 144,499
(Decrease) increase in federal funds purchased............. (81,000) -- 70,000 (27,100) --
Decrease in Federal Home Loan Bank advances................ (10,600) -- (5,000) -- (50,000)
Increase (decrease) in securities sold
under agreements to repurchase........................... 44,399 (5,417) 8,438 52,015 2,223
Advances drawn on note payable............................. 36,500 5,000 69,500 137,000 32,000
Repayments of note payable................................. (64,000) (58,500) (125,000) (118,000) (18,048)
Proceeds from issuance of guaranteed preferred
subordinated debentures.................................. 24,233 -- 52,767 55,050 --
Sales of branch deposits................................... -- -- -- 892 (49,172)
Payment of preferred stock dividends....................... (524) (524) (786) (786) (786)
Other financing activities, net............................ -- (94) -- -- --
---------- ---------- ---------- -------- --------
Net cash provided by (used in)
financing activities........................... 5,817 (6,070) 114,637 383,137 (12,179)
---------- ---------- ---------- -------- --------
Net increase (decrease) in cash
and cash equivalents........................... 4,770 10,794 43,595 27,385 (43,868)
Cash and cash equivalents, beginning of period.................. 241,874 198,279 198,279 170,894 214,762
---------- ---------- ---------- -------- --------
Cash and cash equivalents, end of period........................$ 246,644 209,073 241,874 198,279 170,894
========== ========== ========== ======== ========
Noncash investing and financing activities:
Reduction of deferred tax asset valuation reserve..........$ -- 565 4,971 1,267 --
Loans transferred to other real estate..................... 3,584 2,821 3,493 1,761 4,039
Loans exchanged for and transferred to available-for-sale
investment securities.................................... -- -- -- 37,634 --
Loans held for sale exchanged for and transferred
to available-for-sale investment securities.............. 149,830 753 -- 19,805 3,985
Loans held for sale transferred to loans................... 2,923 35,074 38,343 72,847 32,982
========== ========== ========== ======== ========
The accompanying notes are an integral part of the consolidated financial statements.
FIRST BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the 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 2000 and
1999 amounts have been made to conform with the 2001 presentation.
First Banks operates through its subsidiary bank holding companies and
subsidiary financial institutions (collectively referred to as the Subsidiary
Banks) as follows:
Union Financial Group, Ltd., headquartered in Swansea, Illinois (UFG)
and its wholly owned subsidiary:
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 San Francisco, California
(FBA) and its wholly owned subsidiaries:
The San Francisco Company, headquartered in San Francisco,
California (SFC), and its wholly owned subsidiary:
First Bank & Trust, headquartered in San Francisco,
California (FB&T).
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%. On October 31, 2001, FBA
issued 803,757 shares of its common stock to First Banks in conjunction with
FBA's acquisition of BYL Bancorp. First Banks owned 93.69% of FBA at December
31, 2001.
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 $24.2 million and
$22.3 million at December 31, 2001 and 2000, respectively.
Investment Securities. The classification of investment securities
available for sale or held to maturity is determined at the date of purchase.
First Banks does not engage in the trading of investment securities.
Investment securities designated as available for sale, which include
any security 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.
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 to interest
income 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.
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. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the allowance for loan losses. Such agencies may require First Banks to increase
its allowance for loan losses based on their judgment about information
available to them at the time of their examination.
Derivative Instruments and Hedging Activities. In June 1998, the
Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 133 -- Accounting for Derivative Instruments and
Hedging Activities (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.
On January 1, 2001, First Banks 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, First Banks 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.
First Banks utilizes 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. First Banks uses such derivative instruments solely to reduce its
interest rate risk exposure. First Banks' accounting policies for derivative
instruments and hedging activities under SFAS 133, as amended, are as follows:
o 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 noninterest income on each
monthly measurement date. The net interest differential is
recognized as an adjustment to interest income or interest
expense of the related asset or liability being hedged. In the
event of early termination, the net proceeds received or paid on
the interest rate swap agreements are recognized immediately in
noninterest income.
o 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 of 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 net
interest differential is recognized as an adjustment to interest
income or interest expense of the related asset or liability. In
the event of early termination, the net proceeds received or paid
are recognized immediately in noninterest income. The cumulative
change in the fair value of the underlying hedged item is
deferred and amortized or accreted to noninterest income over the
weighted average life of the related asset or liability. If,
however, the underlying hedged item is repaid, the cumulative
change in the fair value of the underlying hedged item is
recognized immediately in noninterest income.
o 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 noninterest income on each monthly measurement
date.
o Interest Rate Lock Commitments. Commitments to originate loans
(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.
o Forward Contracts to Sell Mortgage-Backed Securities. Forward
commitments 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.
Prior to the implementation of SFAS 133, interest rate swap, floor and
cap agreements were 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 were amortized over the
life of the agreements using the straight-line method. In the event of early
termination of the derivative financial instruments, the net proceeds received
or paid were 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 asset or liability was
repaid, then the gains or losses on the agreements were recognized immediately
in the consolidated statements of income. The unamortized premiums and fees paid
are included in derivative instruments in the accompanying consolidated balance
sheets.
In addition, interest rate lock commitments represented
off-balance-sheet items and, therefore, were not reflected in the consolidated
balance sheets. Gains and losses on forward contracts to sell mortgage-backed
securities, which qualified as hedged, were deferred. The net unamortized
balance of such deferred gains and losses was applied to the carrying value of
the loans held for sale as part of the lower of cost or market valuation.
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 include excess of cost over net
assets acquired and core deposit intangibles. 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 10 to 15 years. The
core deposit intangibles are amortized using the straight-line method over the
estimated periods to be benefited, which has been estimated at seven 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.
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 taxes.
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.
Earnings Per Common Share. Basic earnings per share (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.
(2) ACQUISITIONS AND DIVESTITURES
During the three years ended December 31, 2001, First Banks completed
the following acquisitions:
Total Purchase Excess
Entity Date Assets Price Cost
------ ---- ------ ----- ----
(dollars expressed in thousands)
2001
----
Union Financial Group, Ltd.
Swansea, Illinois December 31, 2001 $ 360,000 26,700 11,500
BYL Bancorp
Orange, California October 31, 2001 281,500 49,000 19,000
Charter Pacific Bank
Agoura Hills, California October 16, 2001 101,500 18,900 6,300
--------- -------- --------
$ 743,000 94,600 36,800
========= ======== ========
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
========= ======== ========
In addition to the acquisitions included in the table above, in
September 1999, First Banks also completed one branch office purchase in Malibu,
California. Furthermore, on January 15, 2002, First Banks completed its
acquisition of Plains Financial Corporation, or PFC, and its wholly owned
banking subsidiary, PlainsBank of Illinois, National Association, Des Plaines,
Illinois, in exchange for $36.5 million in cash. PFC operated a total of three
banking facilities in Des Plaines, Illinois, and one banking facility in Elk
Grove Village, Illinois. At the time of the transaction, PFC had $256.3 million
in total assets, $150.4 million in loans, net of unearned discount, $81.0
million in investment securities and $213.4 million in deposits.
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.
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.
(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, 2001 and 2000 were as follows:
Maturity Total Gross
----------------------------- After Amor Unrealized Weighted
1 Year 1-5 5-10 10 tized ---------------- Fair Average
or Less Years Years Years Cost Gains Losses Value Yield
------- ----- ----- ----- ---- ----- ------ ----- -----
(dollars expressed in thousands)
December 31, 2001:
Carrying value:
U.S. Treasury.................. $136,326 -- -- -- 136,326 3 (39) 136,290 1.76%
U.S. Government agencies
and corporations:
Mortgage-backed......... 88 21,650 18,224 262,846 302,808 2,422 -- 305,230 6.00
Other................... 22,284 99,353 6,612 974 129,223 2,235 (16) 131,442 4.58
State and political
subdivisions............... 317 1,191 46 -- 1,554 -- -- 1,554 3.92
Corporate debt securities...... -- 1,985 -- -- 1,985 107 -- 2,092 6.76
Equity investments in other
financial institutions
(no stated maturity)........ 15,916 -- -- -- 15,916 2,171 (272) 17,815 8.55
Federal Home Loan Bank and
Federal Reserve Bank stock
(no stated maturity)........ 16,043 -- -- -- 16,043 -- -- 16,043 6.49
-------- ------- ------ ------- ------- ------ ------ -------
Total................... $190,974 124,179 24,882 263,820 603,855 6,938 (327) 610,466 4.75
======== ======= ====== ======= ======= ====== ====== ======= ====
Fair value:
Debt securities................ $159,303 126,673 25,378 265,254
Equity securities.............. 33,858 -- -- --
-------- ------- ------ -------
Total................... $193,161 126,673 25,378 265,254
======== ======= ====== =======
Weighted average yield............ 3.25% 4.67% 5.76% 5.92%
======== ======= ====== =======
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
(no stated maturity)........ 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%
======== ======= ====== =======
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, 2001 and 2000 were as follows:
Maturity
---------------------------------------- Total Gross
After Amor- Unrealized Weighted
1 Year 1-5 5-10 10 tized -------------- Fair Average
or Less Years Years Years Cost Gains Losses Value Yield
------- ----- ----- ----- ---- ----- ------ ----- -----
(dollars expressed in thousands)
December 31, 2001:
Carrying value:
Mortgage-backed securities..... $ -- -- -- 4,051 4,051 67 (10) 4,108 6.83%
State and political
subdivisions................. 1,943 8,802 5,806 -- 16,551 300 (147) 16,704 4.93
-------- ------- ------ ------- ------ ------ ------- ------
Total................. $ 1,943 8,802 5,806 4,051 20,602 367 (157) 20,812 5.25
======== ======= ====== ======= ====== ===== ====== ======= ====
Fair value:
Debt securities................ $ 1,930 9,071 5,703 4,108
======== ======= ====== =======
Weighted average yield............ 4.58% 4.98% 4.98% 6.83%
======== ======= ====== =======
December 31, 2000:
Carrying value:
Mortgage-backed securities..... $ -- -- -- 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%
======== ======= ====== =======
Proceeds from sales of available-for-sale investment securities were
$85.8 million, $46.3 million and $63.9 million for the years ended December 31,
2001, 2000 and 1999, respectively. Gross gains of $19.1 million, $565,000 and
$791,000 were realized on these sales during the years ended December 31, 2001,
2000 and 1999, respectively. Gross losses of $384,000 and $396,000 were realized
on these sales during the years ended December 31, 2001 and 2000, respectively.
There were no losses realized on these sales in 1999.
Proceeds from calls of investment securities were $121.8 million,
$111,000 and $20,000 for the years ended December 31, 2001, 2000 and 1999,
respectively. Gross gains of $6,800 and $300 were realized on these called
securities during the years ended December 31, 2001 and 2000, respectively.
There were no gross gains on called securities in 1999. Gross losses of $1,400,
$1,800 and $1,200 were realized on these called securities during the years
ended December 31, 2001, 2000 and 1999, respectively.
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 and FB&T 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 is a member of the FRB system.
Investment securities with a carrying value of approximately $300.0
million and $180.5 million at December 31, 2001 and 2000, 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:
2001 2000 1999
---- ---- ----
(dollars expressed in thousands)
Balance, beginning of year..................................... $ 81,592 68,611 60,970
Acquired allowances for loan losses............................ 14,046 6,062 3,008
-------- -------- ---------
95,638 74,673 63,978
-------- -------- ---------
Loans charged-off.............................................. (31,453) (17,050) (17,721)
Recoveries of loans previously charged-off..................... 9,469 9,842 9,281
-------- -------- ---------
Net loans charged-off....................................... (21,984) (7,208) (8,440)
-------- -------- ---------
Provision charged to operations................................ 23,510 14,127 13,073
-------- -------- ---------
Balance, end of year........................................... $ 97,164 81,592 68,611
======== ======== =========
At December 31, 2001 and 2000, First Banks had $67.3 million and $53.2
million of impaired loans, including $65.3 million and $50.2 million,
respectively, of loans on nonaccrual status. At December 31, 2001 and 2000,
impaired loans also include $2.0 million and $3.0 million, respectively, of
restructured loans. Interest on nonaccrual loans, which would have been recorded
under the original terms of the loans, was $8.2 million, $5.8 million and $5.8
million for the years ended December 31, 2001, 2000 and 1999, respectively. Of
these amounts, $2.9 million, $1.9 million and $2.7 million was actually recorded
as interest income on such loans in 2001, 2000 and 1999, respectively. 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 $16.5 million and $10.3 million at December 31, 2001 and 2000,
respectively. The average recorded investment in impaired loans was $62.4
million, $45.1 million and $46.0 million for the years ended December 31, 2001,
2000 and 1999, respectively. The amount of interest income recognized using a
cash basis method of accounting during the time these loans were impaired was
$5.8 million, $2.2 million and $2.8 million in 2001, 2000 and 1999,
respectively.
First Banks' primary market areas are the states of Missouri, Illinois,
Texas and California. At December 31, 2001 and 2000, approximately 92% and 91%
of the total loan portfolio, respectively, and 80% and 83% of the commercial,
financial and agricultural loan portfolio, respectively, were made to borrowers
within these states.
Real estate lending constituted the only significant concentration of
credit risk. Real estate loans comprised approximately 67% and 65% of the loan
portfolio at December 31, 2001 and 2000, of which 28% and 26%, respectively,
were made to consumers 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, 2001 and
2000, 96% 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) DERIVATIVE INSTRUMENTS
First Banks utilizes derivative financial instruments to assist in the
management of interest rate sensitivity by modifying the repricing, maturity and
option characteristics of certain assets and liabilities. The use of such
derivative financial instruments is limited to reducing First Banks' interest
rate exposure. Derivative financial instruments held by First Banks for purposes
of managing interest rate risk are summarized as follows:
December 31,
------------------------------------------------
2001 2000
---------------------- ----------------------
Notional Credit Notional Credit
Amount Exposure Amount Exposure
-------- -------- -------- --------
(dollars expressed in thousands)
Cash flow hedges.............................. $900,000 1,764 1,055,000 3,449
Fair value hedges............................. 200,000 6,962 50,000 758
Interest rate floor agreements................ -- -- 35,000 6
Interest rate cap agreements.................. 450,000 2,063 450,000 3,753
Interest rate lock commitments................ 88,000 -- 4,100 --
Forward commitments to sell
mortgage-backed securities............... 209,000 -- 32,000 --
======== ===== ========= ======
The notional amounts of derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
First Banks' credit exposure through its use of these instruments. The credit
exposure represents the accounting loss First Banks 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 2001 and 1999, First Banks realized net interest income on
derivative financial instruments of $23.4 million and $430,000, respectively, in
comparison to net interest expense of $4.7 million in 2000. In addition, First
Banks realized a net gain on derivative instruments, which is included in
noninterest income in the consolidated statements of income, of $18.6 million
for the year ended December 31, 2001.
Cash Flow Hedges
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 prior to 1998. 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.
First Banks entered into the following interest rate swap agreements,
designated as cash flow hedges, 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:
o During 1998, First Banks entered into $280.0 million notional
amount of interest rate swap agreements that provided for First
Banks 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
provided for First Banks to pay quarterly and receive payment
semiannually. In June 2001 and November 2001, First Banks
terminated $205.0 million and $75.0 million notional amount,
respectively, of these swap agreements, which would have expired
in 2002, in order to appropriately modify its overall hedge
position in accordance with its interest rate risk management
program. In conjunction with these terminations, First Banks
recorded pre-tax gains of $2.8 million and $1.7 million,
respectively.
o During September 1999, First Banks entered into $175.0 million
notional amount of interest rate swap agreements that provided
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 provided for
First Banks to pay and receive interest on a quarterly basis. In
April 2001, First Banks terminated these swap agreements, which
would have expired in September 2001, and replaced them with
similar swap agreements with extended maturities in order to
lengthen the period covered by the swaps. In conjunction with the
termination of these swap agreements, First Banks recorded a
pre-tax gain of $985,000.
o During September 2000, March 2001 and April 2001, First Banks
entered into $600.0 million, $200.0 million, and $175.0 million
notional amount, respectively, of interest rate swap agreements
that 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 either 2.70% or 2.82%. The terms of the
swap agreements provide for First Banks to pay and receive
interest on a quarterly basis. In November 2001, First Banks
terminated $75.0 million notional amount of these swap
agreements, which would have expired in April 2006, in order to
appropriately modify its overall hedge position in accordance
with its interest rate risk management program. First Banks
recorded a pre-tax gain of $2.6 million in conjunction with the
termination of these swap agreements. The amount receivable by
First Banks under the remaining swap agreements was $2.9 million
at December 31, 2001, and the amount payable by First Banks under
the swap agreements was $1.1 million at December 31, 2001. The
amount receivable and payable by First Banks under the swap
agreements was $1.2 million at December 31, 2000.
The maturity dates, notional amounts, interest rates paid and received
and fair value of First Banks' interest rate swap agreements designated as cash
flow hedges as of December 31, 2001 and 2000 were as follows:
Notional Interest Rate Interest Rate Fair
Maturity Date Amount Paid Received Value
------------- -------- ------------- ------------ -----
(dollars expressed in thousands)
December 31, 2001:
September 20, 2004....................... $ 600,000 2.05% 6.78% $40,980
March 21, 2005........................... 200,000 1.93 5.24 4,951
April 2, 2006............................ 100,000 1.93 5.45 2,305
---------- --------
$ 900,000 2.01 6.29 $ 48,236
========== ==== ==== ========
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
First Banks entered into the following interest rate swap agreements,
designated as fair value hedges, to effectively shorten the repricing
characteristics of certain interest-bearing liabilities to correspond more
closely with their funding source with the objective of stabilizing net interest
income over time:
o During September 2000, First Banks 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 that provided for First Banks to receive
fixed rates of interest ranging from 6.60% 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 provided for First Banks to pay interest
on a quarterly basis and receive interest on either a semiannual
basis or an annual basis. In September 2001, the one-year
interest rate swap agreements matured, and First Banks terminated
the five and one-half year interest rate swap agreements because
the underlying interest-bearing liabilities had either matured or
been called by their respective counterparties. There was no gain
or loss recorded as a result of the terminations.
o During January 2001, First Banks 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 that provide for First Banks 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 First Banks to pay and receive
interest on a quarterly basis. The amount receivable and payable
by First Banks under the swap agreements was $5.2 million and
$1.2 million at December 31, 2001, respectively.
The maturity dates, notional amounts, interest rates paid and received
and fair value of First Banks' interest rate swap agreements designated as fair
value hedges as of December 31, 2001 and 2000 were as follows:
Notional Interest Rate Interest Rate Fair
Maturity Date Amount Paid Received Value
------------- -------- ------------- ------------- -----
(dollars expressed in thousands)
December 31, 2001:
January 9, 2004.......................... $ 50,000 2.48% 5.37% $1,761
January 9, 2006.......................... 150,000 2.48 5.50 3,876
-------- ------
$200,000 2.48 5.47 $5,637
======== ==== ==== ======
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, First Banks 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 provided for First
Banks 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. In November
2001, First Banks terminated these interest rate floor agreements in order to
appropriately modify its overall hedge position in accordance with its interest
rate risk management program. In conjunction with the termination, First Banks
recorded a pre-tax adjustment of $4.0 million representing a decline in the fair
value from the previous month-end measurement date. These agreements provided
net interest income of $2.1 million for the year ended December 31, 2001.
Interest Rate Cap Agreements
In conjunction with the interest rate swap agreements entered into in
September 2000, First Banks also entered into $450.0 million notional amount of
four-year interest rate cap agreements to limit the net interest expense
associated with the interest rate swap agreements in the event of a rising rate
scenario. The interest rate cap agreements provide for First Banks 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
December 31, 2001 and 2000, the carrying value of these interest rate cap
agreements, which is included in derivative instruments in the consolidated
balance sheets, was $2.1 million and $3.8 million, respectively.
Pledged Collateral
At December 31, 2001 and 2000, First Banks had pledged investment
securities available for sale with a carrying value of $1.1 and $8.6 million,
respectively, in connection with the interest rate swap agreements. In addition,
at December 31, 2001 and 2000, First Banks had accepted, as collateral in
connection with the interest rate swap agreements, cash of $4.9 million and
$400,000, respectively, and investment securities with a fair value of $53.9
million and $18.6 million, respectively. First Banks is permitted by contract to
sell or repledge the collateral accepted from counterparties; however, at
December 31, 2001 and 2000, First Banks had not done so.
Interest Rate Lock Commitments / Forward Commitments to Sell
Mortgage-Backed Securities Derivative financial instruments issued by First
Banks 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.
(6) MORTGAGE BANKING ACTIVITIES
At December 31, 2001 and 2000, First Banks serviced loans for others
amounting to $1.07 billion and $957.2 million, respectively. Borrowers' escrow
balances held by First Banks on such loans were $485,000 and $653,000 at
December 31, 2001 and 2000, respectively.
Changes in mortgage servicing rights, net of amortization, for the
years ended December 31 were as follows:
2001 2000
---- ----
(dollars expressed
in thousands)
Balance, beginning of year.................. $ 7,048 8,665
Originated mortgage servicing rights........ 6,802 1,455
Amortization................................ (3,725) (3,072)
--------- --------
Balance, end of year........................ $ 10,125 7,048
========= ========
The fair value of mortgage servicing rights was $15.8 million and $13.0
million at December 31, 2001 and 2000, respectively.
(7) BANK PREMISES AND EQUIPMENT
Bank premises and equipment were comprised of the following at December 31:
2001 2000
---- ----
(dollars expressed in thousands)
Land................................................................ $ 22,063 18,266
Buildings and improvements........................................... 87,372 66,474
Furniture, fixtures and equipment.................................... 95,626 66,460
Leasehold improvements............................................... 28,400 23,794
Construction in progress............................................. 13,865 15,655
-------- -------
Total............................................................ 247,326 190,649
Less accumulated depreciation and amortization....................... 97,722 75,878
-------- -------
Bank premises and equipment, net................................. $149,604 114,771
======== =======
Depreciation and amortization expense for the years ended December 31,
2001, 2000 and 1999 totaled $12.7 million, $9.5 million and $7.6 million,
respectively.
First Banks leases land, office properties and equipment under
operating leases. Certain of the leases contain renewal options and escalation
clauses. Total rent expense was $12.9 million, $10.7 million and $7.4 million
for the years ended December 31, 2001, 2000 and 1999, respectively. Future
minimum lease payments under noncancellable operating leases extend through 2084
as follows:
(dollars expressed
in thousands)
Year ending December 31:
2002............................................... $ 8,681
2003............................................... 7,760
2004............................................... 5,880
2005............................................... 5,058
2006............................................... 4,137
Thereafter......................................... 22,385
--------
Total future minimum lease payments............ $ 53,901
========
First Banks leases to unrelated parties a portion of its banking
facilities. Total rental income was $4.8 million, $2.6 million and $2.6 million
for the years ended December 31, 2001, 2000 and 1999, respectively.
(8) SHORT-TERM BORROWINGS
Short-term borrowings were comprised of the following at December 31:
2001 2000
---- ----
(dollars expressed in thousands)
Securities sold under agreements to repurchase....................... $ 142,534 125,025
Federal funds purchased.............................................. 70,000 --
FHLB borrowings...................................................... 30,600 15,544
--------- --------
Total short-term borrowings...................................... $ 243,134 140,569
========= ========
The average balance of short-term borrowings was $158.0 million and
$106.1 million, respectively, and the maximum month-end balance of short-term
borrowings was $243.1 million and $158.4 million, respectively, for the years
ended December 31, 2001 and 2000. The average rates paid on short-term
borrowings during the years ended December 31, 2001, 2000 and 1999 were 3.70%,
5.54% and 4.83%, respectively. The assets underlying the securities sold under
agreements to repurchase and FHLB borrowings are under First Banks' physical
control.
(9) 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 23,
2001, replaced a similar revolving credit agreement dated August 24, 2000.
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
2.94% at December 31, 2001, 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, 2002, at which time the principal and accrued interest is due and
payable.
Loans under the Credit Agreement are secured by First Banks' ownership
interest in the capital stock of FBA and First Bank, and a $100.0 million
intercompany promissory note receivable due from FBA. Under the Credit
Agreement, there were outstanding borrowings of $27.5 million at December 31,
2001. At December 31, 2000, there were outstanding borrowings of $83.0 million
under the previous credit agreement.
The Credit Agreement requires maintenance of certain minimum capital
ratios for First Banks and each of the Subsidiary Banks, certain maximum
nonperforming assets ratios for First Banks and each of the Subsidiary Banks and
a minimum return on assets ratio for First Banks and the Subsidiary Banks. In
addition, it prohibits the payment of dividends on First Banks' common stock. At
December 31, 2001 and 2000, 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 of advances
outstanding under the Credit Agreement during the years ended December 31 were
as follows:
2001 2000
---- ----
(dollars expressed in thousands)
Average balance........................ $ 41,590 51,897
Maximum month-end balance.............. 66,500 83,000
======== ======
The average rates paid on the outstanding advances during the years
ended December 31, 2001, 2000 and 1999 were 6.32%, 7.66% and 6.44%,
respectively.
(10) 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, 2001, 2000 and 1999.
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 $4.0 million for years ended December 31,
2001, 2000 and 1999, respectively.
In October 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 $6.0 million and $1.2 million for the years ended
December 31, 2001 and 2000, respectively.
On November 15, 2001, First Preferred Capital Trust III (First
Preferred III), a newly formed Delaware business trust subsidiary of First
Banks, issued 2.2 million shares of 9.00% cumulative trust preferred securities
at $25 per share in an underwritten public offering, and issued 68,290 shares of
common securities to First Banks at $25 per share. First Banks owns all of First
Preferred III's common securities. The gross proceeds of the offering were used
by First Preferred III to purchase $56.9 million of 9.00% subordinated
debentures from First Banks, maturing on September 30, 2031. The maturity date
may be shortened to a date not earlier than September 30, 2006, if certain
conditions are met. The subordinated debentures are the sole asset of First
Preferred III. 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 III under the First Preferred III preferred securities. First
Banks' proceeds from the issuance of the subordinated debentures to First
Preferred III, net of underwriting fees and offering expenses, were $52.9
million. Distributions on First Preferred III's preferred securities, which are
payable quarterly in arrears, were $634,000 for the year ended December 31,
2001.
The distributions payable on all issues of First Banks' and FBA's trust
preferred securities are included in interest expense in the consolidated
statements of income.
(11) INCOME TAXES
Income tax expense attributable to income from continuing operations
for the years ended December 31 consists of:
2001 2000 1999
---- ---- ----
(dollars expressed in thousands)
Current income tax expense:
Federal.................................................... $22,252 28,215 19,731
State...................................................... 1,583 2,731 2,247
------- ------ ------
23,835 30,946 21,978
------- ------ ------
Deferred income tax expense:
Federal.................................................... 13,691 4,001 5,056
State...................................................... 626 (60) 14
------- ------ ------
14,317 3,941 5,070
------- ------ ------
Reduction in deferred valuation allowance...................... (8,104) (405) (735)
------- ------ ------
Total.................................................. $30,048 34,482 26,313
======= ====== ======
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,
----------------------------------------------------------
2001 2000 1999
---------------- ---------------- ------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(dollars expressed in thousands)
Income before provision for income taxes,
minority interest in income of subsidiary
and cumulative effect of change in
accounting principle......................... $98,567 $92,635 $ 72,151
======= ======= ========
Provision for income taxes calculated
at federal statutory income tax rates........ $34,498 35.0% $32,422 35.0% $ 25,253 35.0%
Effects of differences in tax reporting:
Tax-exempt interest income, net of
tax preference adjustment................ (539) (0.5) (587) (0.6) (439) (0.6)
State income taxes........................... 1,436 1.5 1,736 1.8 1,470 2.0
Amortization of intangibles associated
with the purchase of subsidiaries........ 2,827 2.9 1,567 1.7 1,261 1.8
Reduction in deferred valuation allowance.... (8,104) (8.2) (405) (0.4) (735) (1.0)
Other, net................................... (70) (0.2) (251) (0.3) (497) (0.7)
------- ----- ------- ------ -------- ------
Provision for income taxes............. $30,048 30.5% $34,482 37.2% $ 26,313 36.5%
======= ===== ======= ====== ======== ======
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,
------------
2001 2000
---- ----
(dollars expressed in thousands)
Deferred tax assets:
Net operating loss carryforwards................................ $ 44,100 47,043
Allowance for loan losses....................................... 36,000 29,965
Alternative minimum tax credits................................. 2,841 3,319
Disallowed losses on investment securities...................... 1,287 3,197
Quasi-reorganization adjustment of bank premises................ 1,176 1,226
Interest on non-accrual loans................................... 2,084 1,673
Mortgage servicing rights....................................... 4,161 1,547
Other real estate............................................... 184 65
Other........................................................... 2,713 2,996
-------- --------
Gross deferred tax assets................................... 94,546 91,031
Valuation allowance............................................. -- (13,075)
-------- --------
Deferred tax assets, net of valuation allowance............. 94,546 77,956
-------- --------
Deferred tax liabilities:
Depreciation on bank premises and equipment..................... 6,936 6,151
Net fair value adjustment for securities available for sale..... 2,314 3,258
Net fair value adjustment for derivative instruments............ 16,883 --
Operating leases................................................ 6,424 1,313
Deposit base premiums........................................... 2,777 --
Discount on loans............................................... 2,900 2,257
Equity investments in other financial institutions.............. 3,656 --
FHLB stock dividends............................................ 462 890
State taxes..................................................... 766 568
Other........................................................... 738 594
-------- --------
Deferred tax liabilities.................................... 43,856 15,031
-------- --------
Net deferred tax assets..................................... $ 50,690 62,925
======== ========
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 $50.7 million. The net change
in the valuation allowance, related to deferred tax assets, was a decrease of
$13.1 million for the year ended December 31, 2001. The decrease was comprised
of the reversal of valuation allowances resulting from the utilization of net
operating losses and the reversal of the valuation allowances due to
management's expectation of future taxable income sufficient to realize the net
deferred assets of $50.7 million.
Changes to the deferred tax asset valuation allowance for the years
ended December 31 were as follows:
2001 2000 1999
---- ---- ----
(dollars expressed in thousands)
Balance, beginning of year......................................... $ 13,075 14,746 17,179
Current year deferred provision, change in
deferred tax valuation allowance............................... (8,104) (405) (735)
Reduction attributable to utilization of deferred tax assets:
Adjustment to capital surplus................................... (4,971) -- (811)
Adjustment to intangibles associated with the
purchase of subsidiaries..................................... -- (1,266) (887)
-------- ------- -------
Balance, end of year............................................... $ -- 13,075 14,746
======== ======= =======
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 included $5.0 million
which was credited to capital surplus in 2001 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, 2001 and 2000, 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, 2001 and 2000, for federal income taxes purposes, First
Banks had net operating loss carryforwards of approximately $126.0 million and
$134.4 million, respectively. The net operating loss carryforwards for First
Banks expire as follows:
(dollars expressed
in thousands)
Year ending December 31:
2002................................................. $ 1,362
2003................................................. 1,854
2004................................................. 2,407
2005................................................. 16,523
2006................................................. 3,461
2007 - 2020.......................................... 100,392
---------
Total............................................ $ 125,999
=========
(12) 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 per share data)
Year ended December 31, 2001:
Basic EPS - income before cumulative effect..................... $ 65,104 23,661 $2,751.54
Cumulative effect of change in accounting principle, net of tax. (1,376) -- (58.16)
--------- ------- ---------
Basic EPS - income available to common stockholders............. 63,728 23,661 $2,693.38
Effect of dilutive securities:
Class A convertible preferred stock........................... 769 893 (66.61)
--------- ------- ---------
Diluted EPS - income available to common stockholders........... $ 64,497 24,554 $2,626.77
========= ======= =========
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 (70.63)
--------- ------- ---------
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 (58.44)
--------- ------- ---------
Diluted EPS - income available to common stockholders........... $ 44,161 24,873 $1,775.47
========= ======= =========
(13) CREDIT COMMITMENTS
First Banks is a party to commitments to extend credit and commercial
and standby letters in credit in the normal course of business to meet the
financing needs of its customers. These instruments involve, in 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 5 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,
------------
2001 2000
---- ----
(dollars expressed in thousands)
Commitments to extend credit.......................................... $ 1,723,568 1,484,278
Commercial and standby letters of credit.............................. 137,345 94,802
----------- --------
$ 1,860,913 1,579,080
=========== =========
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 typically 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.
The estimated fair value of First Banks' financial instruments at
December 31 were as follows:
2001 2000
------------------------ -----------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
----- ---------- ----- ----------
(dollars expressed in thousands)
Financial Assets:
Cash and cash equivalents.......................... $ 241,874 241,874 198,279 198,279
Investment securities:
Available for sale............................... 610,466 610,466 539,386 539,386
Held to maturity................................. 20,602 20,812 24,148 24,507
Net loans.......................................... 5,311,705 5,346,853 4,670,673 4,694,594
Derivative instruments............................. 54,889 54,889 3,759 16,208
Accrued interest receivable........................ 37,349 37,349 45,226 45,226
Forward contracts to sell
mortgage-backed securities....................... 545 545 -- (202)
========= ========= ========= =========
Financial Liabilities:
Deposits:
Demand:
Non-interest-bearing........................... $ 921,455 921,455 808,251 808,251
Interest-bearing............................... 629,015 629,015 448,146 448,146
Savings and money market......................... 1,832,939 1,832,939 1,447,898 1,447,898
Time deposits.................................... 2,300,495 2,342,892 2,308,120 2,351,418
Short-term borrowings............................ 243,134 243,134 140,569 140,569
Note payable..................................... 27,500 27,500 83,000 83,000
Accrued interest payable......................... 16,006 16,006 23,227 23,227
Interest rate lock commitments................... 1,048 1,048 -- 4,183
Guaranteed preferred beneficial interests
in subordinated debentures..................... 235,881 256,278 182,849 185,608
========== ========== ========== ==========
Off-Balance Sheet - Credit commitments............... $ -- -- -- --
========== ========== ========== ==========
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 were not available, the fair value was based
upon quoted market prices of comparable instruments. The carrying value of loans
is net of the allowance for loan losses and unearned discount.
Derivative instruments: The fair value of derivative instruments 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.
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.
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. 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.
Short-term borrowings, note payable, accrued interest payable and
interest rate lock commitments: The carrying values reported in the consolidated
balance sheets approximate fair value.
Guaranteed preferred beneficial interests in subordinated debentures:
The fair value is based on quoted market prices.
Off-Balance-Sheet:
Credit commitments: The majority of the commitments to extend credit
and commercial and standby letters of credit contain variable interest rates and
credit deterioration clauses and, therefore, the carrying value of these credit
commitments 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 2001. Total employer contributions under the plan were
$1.3 million, $1.1 million and $863,000 for the years ended December 31, 2001,
2000 and 1999, 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, 2001, 2000 and 1999.
In addition to the Class A and Class B preferred stock, First Banks has
three 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 10, satisfies the regulatory
requirements for inclusion, subject to certain limitation, in First Banks'
capital base.
(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 that which arises by virtue of such position or
ownership interest in First Banks or its subsidiaries, except as described in
the following paragraphs.
During 2001, 2000 and 1999, Tidal Insurance Limited (Tidal), a
corporation owned indirectly by First Banks' Chairman and his adult children,
received approximately $132,000, $212,000 and $316,000, 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 2001, 2000 and 1999, 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 $316,000,
$235,000 and $194,000, 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 $3.0 million, $2.1 million and $2.3 million for
the years ended December 31, 2001, 2000 and 1999, 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 information technology and
various related services to First Banks, Inc. and its Subsidiary Banks. Fees
paid under agreements with First Services, L.P., were $23.1 million, $19.3
million and $16.4 million for the years ended December 31, 2001, 2000 and 1999,
respectively. During 2001, 2000 and 1999, First Services, L.P. paid First Banks
$2.0 million, $1.8 million and $1.2 million, respectively, in rental fees for
the use of data processing and other equipment owned by First Banks.
(18) CAPITAL STOCK OF FIRST BANKS AMERICA, INC.
First Banks owned 2,500,000 shares of FBA's Class B common stock and
9,545,107 shares of FBA's common stock at December 31, 2001, representing 93.69%
of FBA's outstanding voting stock. In comparison, 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, 2001, representing 92.86% of FBA's outstanding voting stock. The
increase for 2001 is attributable to FBA's issuance of 803,757 shares of its
common stock to First Banks in conjunction with FBA's purchase of BYL Bancorp on
October 31, 2001. FBA's common stock is publicly traded on the New York Stock
Exchange.
(19) 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)
--------------------------------- ----------------------------------
2001 2000 1999 2001 2000 1999
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
Balance sheet information:
Investment securities................... $ 245,365 214,005 241,624 368,207 330,478 192,357
Loans, net of unearned discount......... 3,086,023 2,694,005 2,527,649 2,323,263 2,058,628 1,469,093
Intangibles associated with
the purchase of subsidiaries,
net of amortization.................. 22,287 9,281 12,303 103,153 74,609 32,343
Total assets............................ 3,707,081 3,152,885 3,028,046 3,057,920 2,733,545 1,854,827
Deposits................................ 3,142,676 2,729,489 2,689,671 2,555,396 2,306,469 1,590,490
Note payable............................ -- -- -- -- -- --
Stockholders' equity.................... 321,336 273,848 263,466 398,713 333,186 204,617
========== ========== ========= ========= ========= =========
Income statement information:
Interest income......................... $ 236,889 247,290 221,195 208,291 176,902 132,407
Interest expense........................ 111,410 115,421 105,231 78,547 71,167 51,544
---------- ---------- --------- --------- --------- ---------
Net interest income................ 125,479 131,869 115,964 129,744 105,735 80,863
Provision for loan losses............... 18,500 12,250 8,890 5,010 1,877 4,183
---------- ---------- --------- --------- --------- ---------
Net interest income after
provision for loan losses........ 106,979 119,619 107,074 124,734 103,858 76,680
Noninterest income...................... 53,623 32,152 32,260 27,469 12,343 10,774
Noninterest expense..................... 105,550 90,746 77,786 89,112 65,567 54,992
---------- ---------- --------- --------- --------- ---------
Income before provision for
income taxes, minority interest
in income of subsidiary and
cumulative effect of change in
accounting principle............. 55,052 61,025 61,548 63,091 50,634 32,462
Provision for income taxes.............. 19,246 20,889 20,811 16,972 20,064 12,353
---------- ---------- --------- --------- --------- ---------
Income before minority interest
in income of subsidiary and
cumulative effect of change
in accounting principle.......... 35,806 40,136 40,737 46,119 30,570 20,109
Minority interest in income
of subsidiary...................... -- -- -- -- -- --
---------- ---------- --------- --------- -------- ---------
Income before cumulative effect
of change in accounting
principle........................ 35,806 40,136 40,737 46,119 30,570 20,109
Cumulative effect of change in
accounting principle, net of tax..... (917) -- -- (459) -- --
---------- ---------- --------- --------- --------- ---------
Net income......................... $ 34,889 40,136 40,737 45,660 30,570 20,109
========== ========== ========= ========= ========= =========
- ------------------------
(1) Includes BSF, which was acquired by FBA on December 31, 2000.
(2) Corporate and other includes $12.1 million, $8.6 million and $7.9 million
of guaranteed preferred debentures interest expense, after applicable
income tax benefit of $6.5 million, $4.6 million and $4.2 million, for the
years ended December 31, 2001, 2000 and 1999, respectively.
Other financial services 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. 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
---------------------------------------- -------------------------------------------
2001 2000 1999 2001 2000 1999
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
17,496 19,051 17,666 631,068 563,534 451,647
(417) (368) (418) 5,408,869 4,752,265 3,996,324
-- 1,131 1,439 125,440 85,021 46,085
13,450 (9,739) (15,126) 6,778,451 5,876,691 4,867,747
(14,168) (23,543) (28,347) 5,683,904 5,012,415 4,251,814
27,500 83,000 64,000 27,500 83,000 64,000
(271,392) (254,188) (173,178) 448,657 352,846 294,905
========= ========= ========= ========== ========= =========
(437) (1,366) (520) 444,743 422,826 353,082
19,647 14,264 13,976 209,604 200,852 170,751
--------- --------- --------- ---------- --------- ---------
(20,084) (15,630) (14,496) 235,139 221,974 182,331
-- -- -- 23,510 14,127 13,073
--------- --------- --------- ---------- --------- ---------
(20,084) (15,630) (14,496) 211,629 207,847 169,258
17,517 (1,717) (1,384) 98,609 42,778 41,650
17,009 1,677 5,979 211,671 157,990 138,757
--------- --------- --------- ---------- --------- ---------
(19,576) (19,024) (21,859) 98,567 92,635 72,151
(6,170) (6,471) (6,851) 30,048 34,482 26,313
--------- --------- --------- ---------- --------- ---------
(13,406) (12,553) (15,008) 68,519 58,153 45,838
2,629 2,046 1,660 2,629 2,046 1,660
--------- --------- --------- ---------- --------- ---------
(16,035) (14,599) (16,668) 65,890 56,107 44,178
-- -- -- (1,376) -- --
--------- --------- --------- ---------- --------- ---------
(16,035) (14,599) (16,668) 64,514 56,107 44,178
========= ========= ========= ========== ========= =========
(20) 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, 2001, First Banks and the Subsidiary Banks were
each well capitalized.
As of December 31, 2001, 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 1 leverage ratios
as set forth in the table below.
At December 31, 2001 and 2000, First Banks' and the Subsidiary Banks'
required and actual capital ratios were as follows:
To be Well
Actual Capitalized Under
------ For Capital Prompt Corrective
2001 2000 Adequacy Purposes Action Provisions
---- ---- ----------------- -----------------
Total capital (to risk-weighted assets):
First Banks............................. 10.53 10.21% 8.0% 10.0%
First Bank.............................. 10.14 10.71 8.0 10.0
FB&T.................................... 11.27 10.58 8.0 10.0
Tier 1 capital (to risk-weighted assets):
First Banks............................. 7.57 7.56 4.0 6.0
First Bank.............................. 8.89 9.46 4.0 6.0
FB&T.................................... 10.02 9.32 4.0 6.0
Tier 1 capital (to average assets):
First Banks............................. 7.25 7.46 3.0 5.0
First Bank.............................. 8.67 8.49 3.0 5.0
FB&T.................................... 9.47 9.27 3.0 5.0
(21) 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
9, 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 $12.3 million at
December 31, 2001, unless prior permission of the regulatory authorities and/or
the lending banks is obtained.
(22) PARENT COMPANY ONLY FINANCIAL INFORMATION
Following are condensed balance sheets of First Banks, Inc. as of
December 31, 2001 and 2000, and condensed statements of income and cash flows
for the years ended December 31, 2001, 2000 and 1999:
CONDENSED BALANCE SHEETS
December 31,
------------
2001 2000
---- ----
(dollars expressed in thousands)
Assets
------
Cash deposited in subsidiary banks........................................... $ 4,894 8,079
Investment securities........................................................ 17,497 14,309
Investment in subsidiaries................................................... 594,152 461,753
Advances to FBA.............................................................. 71,000 98,000
Other assets................................................................. 10,232 15,333
---------- --------
Total assets........................................................... $ 697,775 597,474
========== ========
Liabilities and Stockholders' Equity
------------------------------------
Note payable................................................................ $ 27,500 83,000
Subordinated debentures..................................................... 205,103 148,196
Accrued expenses and other liabilities...................................... 16,515 13,432
---------- --------
Total liabilities..................................................... 249,118 244,628
Stockholders' equity........................................................ 448,657 352,846
---------- --------
Total liabilities and stockholders' equity............................ $ 697,775 597,474
========== ========
CONDENSED STATEMENTS OF INCOME
Years Ended December 31,
---------------------------------
2001 2000 1999
---- ---- ----
(dollars expressed in thousands)
Income:
Dividends from subsidiaries........................................ $ 53,500 43,000 25,250
Management fees from subsidiaries.................................. 20,443 17,325 12,977
Gain on sale of securities......................................... 19,134 -- --
Other.............................................................. 6,008 1,956 1,313
--------- ------ ------
Total income................................................... 99,085 62,281 39,540
--------- ------ ------
Expense:
Interest........................................................... 17,759 13,511 11,958
Salaries and employee benefits..................................... 13,309 12,180 8,999
Legal, examination and professional fees........................... 2,895 2,031 7,006
Other.............................................................. 20,339 4,422 4,617
--------- ------ ------
Total expense.................................................. 54,302 32,144 32,580
--------- ------ ------
Income before income tax benefit and equity
in undistributed earnings of subsidiary..................... 44,783 30,137 6,960
Income tax benefit................................................... (2,418) (3,922) (5,649)
--------- ------ ------
Income before equity in undistributed earnings of subsidiary... 47,201 34,059 12,609
Equity in undistributed earnings of subsidiary....................... 17,313 22,048 31,569
--------- ------ ------
Net income..................................................... $ 64,514 56,107 44,178
========= ====== ======
CONDENSED STATEMENTS OF CASH FLOWS
Years Ended December 31,
-------------------------------------
2001 2000 1999
---- ---- ----
(dollars expressed in thousands)
Cash flows from operating activities:
Net income...................................................... $ 64,514 56,107 44,178
Adjustments to reconcile net income to net cash provided by
operating activities:
Net income of subsidiaries.................................. (70,730) (64,937) (56,676)
Dividends from subsidiaries................................. 53,500 43,000 25,250
Other, net.................................................. (3,875) 272 1,900
--------- -------- -------
Net cash provided by operating activities................ 43,409 34,442 14,652
--------- -------- -------
Cash flows from investing activities:
Increase in investment securities............................... (9,382) (860) (100)
Investment in common securities of First Preferred III and II... (1,707) (1,778) --
Acquisitions of subsidiaries.................................... (63,767) -- (31,500)
Capital contributions to subsidiaries........................... (5,900) (6,100) (3,000)
Return of subsidiary capital.................................... -- -- 10,000
Decrease (increase) in advances to subsidiary................... 27,000 (98,000) --
Other, net...................................................... 6,540 (1,464) (3,646)
--------- -------- -------
Net cash used in investing activities.................... (47,216) (108,202) (28,246)
--------- -------- -------
Cash flows from financing activities:
(Decrease) increase in note payable............................. (55,500) 19,000 13,952
Proceeds from issuance of First Preferred III and II
subordinated debentures....................................... 56,908 59,278 --
Payment of preferred stock dividends............................ (786) (786) (786)
--------- -------- -------
Net cash provided by financing activities................ 622 77,492 13,166
--------- -------- -------
Net (decrease) increase in cash and cash equivalents..... (3,185) 3,732 (428)
Cash deposited in subsidiary banks, beginning of year............. 8,079 4,347 4,775
--------- -------- -------
Cash deposited in subsidiary banks, end of year................... $ 4,894 8,079 4,347
========= ======== =======
Noncash investing activities:
Cash paid for interest.......................................... $ 21,068 10,410 11,750
Reduction of deferred tax valuation reserve..................... 636 -- 811
========= ======== =======
(23) CONTINGENT LIABILITIES
In the ordinary course of business, First Banks and its subsidiaries
become involved in legal proceedings. Management, in consultation with legal
counsel, believes the ultimate resolution of these proceedings will not have a
material adverse effect on the financial condition or results of operations of
First Banks and/or its subsidiaries.
(24) SUBSEQUENT EVENTS
On January 15, 2002, First Banks completed its acquisition of Plains
Financial Corporation (PFC) and its wholly owned banking subsidiary, PlainsBank
of Illinois, National Association (PlainsBank), Des Plaines, Illinois, in
exchange for $36.5 million in cash. PFC operated a total of three banking
facilities in Des Plaines, Illinois, and one banking facility in Elk Grove
Village, Illinois. The acquisition was funded from borrowings under First Banks'
credit agreement with a group of unaffiliated financial institutions. At the
time of the transaction, PFC had $256.3 million in total assets, $150.4 million
in loans, net of unearned discount, $81.0 million in investment securities and
$213.4 million in deposits. This transaction was accounted for using the
purchase method of accounting. The excess of the cost over the fair value of the
net assets acquired was approximately $11.1 million and is not expected to be
tax deductible. The excess of the cost over the fair value of the net assets
acquired will not be amortized, but instead will be periodically tested for
impairment in accordance with the requirements of SFAS 142. The core deposit
intangibles were approximately $2.9 million and will be amortized over
approximately seven years utilizing the straight-line method. PFC was merged
with and into UFG, and PlainsBank was merged with and into First Bank.
(25) 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 nine months
ended September 30, 2002 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2002.
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 2001 amounts have been made to
conform with the 2002 presentation. In particular, the guaranteed preferred
beneficial interests in First Banks, Inc. and First Banks America, Inc.
subordinated debentures have been reclassified into the liabilities section on
the consolidated balance sheets rather than presented as a separate line item
excluded from the calculation of total liabilities. Consequently, the guaranteed
preferred debentures expense has been reclassified to interest expense from
noninterest expense in the consolidated statements of income.
Implementation of New Accounting Standard. In July 2001, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 142 -- Goodwill and Other Intangible Assets. 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. 144 -- Accounting for the Impairment or
Disposal of Long-Lived Assets, as discussed below. The amortization of goodwill
ceased upon adoption of SFAS No. 142, which for calendar year-end companies was
January 1, 2002.
On January 1, 2002, First Banks adopted SFAS No. 142. At the date of
adoption, First Banks had unamortized goodwill of $115.9 million and core
deposit intangibles of $9.6 million, which were subject to the transition
provisions of SFAS No. 142. Under SFAS No. 142, First Banks continues to
amortize, on a straight-line basis, its core deposit intangibles and goodwill
associated with purchases of branch offices. Goodwill associated with the
purchase of subsidiaries will no longer be amortized, but instead, will be
tested annually for impairment following First Banks' existing methods of
measuring and recording impairment losses.
First Banks completed the transitional goodwill impairment test
required under SFAS No. 142, to determine the potential impact, if any, on the
consolidated financial statements. The results of the transitional goodwill
impairment testing did not identify any goodwill impairment losses.
Intangible assets associated with the purchase of subsidiaries, net of
amortization, were comprised of the following at September 30, 2002 and December
31, 2001:
September 30, 2002 December 31, 2001
---------------------------- ----------------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
------ ------------ ------ ------------
(dollars expressed in thousands)
Amortized intangible assets:
Core deposit intangibles........... $ 13,871 (1,372) 9,580 --
Goodwill associated with
purchases of branch offices...... 2,210 (684) 2,210 (576)
---------- ------- -------- -------
Total......................... $ 16,081 (2,056) 11,790 (576)
========== ======= ======== =======
Unamortized intangible assets:
Goodwill associated with the
purchase of subsidiaries......... $ 126,234 114,226
========== ========
Amortization of intangibles associated with the purchase of
subsidiaries and branch offices was $1.5 million for the nine months ended
September 30, 2002, and $5.6 million for the comparable period in 2001.
Amortization of intangibles associated with the purchase of subsidiaries,
including amortization of core deposit intangibles and branch purchases, has
been estimated through 2007 in the following table, and does not take into
consideration any potential future acquisitions or branch purchases.
(dollars expressed
in thousands)
Year ending December 31:
2002 (1)........................................... $ 2,012
2003............................................... 2,129
2004............................................... 2,129
2005............................................... 2,129
2006............................................... 2,129
2007............................................... 2,129
-------
Total........................................... $12,657
=======
---------------------
(1) Includes $1.5 million of amortization for the nine months ended
September 30, 2002.
Changes in the carrying amount of goodwill for the nine months ended
September 30, 2002 were as follows:
Nine Months Ended September 30, 2002
------------------------------------
First Bank FB&T Total
---------- ---- -----
(dollars expressed in thousands)
Balance, beginning of period.................... $ 19,165 96,695 115,860
Goodwill acquired during period................. 12,577 -- 12,577
Acquisition-related adjustments................. (569) -- (569)
Amortization - purchases of branch offices...... -- (108) (108)
-------- ------ --------
Balance, end of period.......................... $ 31,173 96,587 127,760
======== ====== ========
The following is a reconciliation of reported net income to net income
adjusted to reflect the adoption of SFAS No. 142, as if it had been implemented
on January 1, 2001:
Nine Months Ended
September 30,
---------------------
2002 2001
---- ----
(dollars expressed in thousands)
Net income:
Reported net income...................................... $ 30,362 34,632
Add back - goodwill amortization......................... -- 5,438
--------- --------
Adjusted net income.................................... $ 30,362 40,070
========= ========
Basic earnings per share:
Reported net income...................................... $1,261.05 1,441.51
Add back - goodwill amortization......................... -- 229.86
--------- --------
Adjusted net income.................................... $1,261.05 1,671.37
========= ========
Diluted earnings per share:
Reported net income...................................... $1,246.05 1,409.98
Add back - goodwill amortization......................... -- 221.50
--------- --------
Adjusted net income.................................... $1,246.05 1,631.48
========= ========
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 10 years. The weighted average
amortization period of the mortgage servicing rights is approximately seven
years.
Changes in mortgage servicing rights, net of amortization, for the
periods indicated were as follows:
Nine Months Ended
September 30,
-------------------
2002 2001
---- ----
(dollars expressed in thousands)
Balance, beginning of period........................... $10,125 7,048
Originated mortgage servicing rights................... 5,958 4,693
Amortization........................................... (2,715) (2,675)
------- ------
Balance, end of period................................. $13,368 9,066
======= ======
Amortization of mortgage servicing rights, as it relates to the balance
at September 30, 2002 of $13.4 million, has been estimated through 2006 in the
following table:
(dollars expressed
in thousands)
Year ending December 31:
2002 (1)........................................ $ 3,699
2003............................................ 3,946
2004............................................ 3,758
2005............................................ 3,662
2006............................................ 1,095
-------
Total........................................ $16,160
=======
--------------------
(1) Includes $2.7 million of amortization for the nine months ended
September 30, 2002.
In August 2001, the FASB issued SFAS No. 144 -- Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121 -- Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and requires that
one accounting model be used for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. SFAS No. 144 broadens the
presentation of discontinued operations to include more disposal transactions.
Therefore, the accounting for similar events and circumstances will be the same.
The provisions of SFAS No. 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years, with early application encouraged. The provisions of SFAS No. 144
generally are to be applied prospectively. On January 1, 2002, First Banks
implemented SFAS No. 144, which did not have a material effect on the
consolidated financial statements.
On October 1, 2002, the FASB issued SFAS No. 147 -- Acquisitions of
Certain Financial Institutions, an amendment of SFAS No. 72 -- Accounting for
Certain Acquisitions of Banking or Thrift Institutions and SFAS No. 144 --
Accounting for the Impairment or Disposal of Long-Lived Assets and FASB
Interpretation No. 9 -- Applying APB Opinions No. 16 and 17 When a Savings and
Loan Association or a Similar Institution Is Acquired in a Business Combination
Accounted for by the Purchase Method. SFAS No. 147 addresses the financial
accounting and reporting for the acquisition of all or part of a financial
institution, except for transactions between two or more mutual enterprises.
SFAS No. 147 removes acquisitions of financial institutions, other than
transactions between two or more mutual enterprises, from the scope of SFAS No.
72. SFAS No. 147 also provides guidance on the accounting for impairment or
disposal of acquired long-term customer-relationship intangible assets,
including those acquired in transactions between two or more mutual enterprises.
The provisions of SFAS No. 147 are effective for acquisitions on or after
October 1, 2002. On October 1, 2002, First Banks implemented SFAS No. 147, which
did not have a material effect on the 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 Lisa K. Vansickle, First
Banks, Inc., 600 James S. McDonnell Boulevard, Mail Code - #014, 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" "FBNKN" and "FBNKM." As
of March 22, 2002, there were approximately 420 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
and First Preferred Capital Trust III 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 2001 and 2000
are summarized as follows:
FIRST PREFERRED CAPITAL TRUST (ISSUE DATE - FEBRUARY 1997) - FBNKO
2002 2001 2000
------------------ ----------------- ----------------- Dividend
High Low High Low High Low Declared
---- --- ---- --- ---- --- --------
First quarter...................... $26.25 25.20 26.25 24.38 25.25 23.13 $0.578125
Second quarter..................... 27.24 25.15 27.35 25.00 26.00 23.50 0.578125
Third quarter...................... 26.49 25.00 27.25 25.00 25.13 23.50 0.578125
Fourth quarter..................... 26.50 25.20 26.90 25.02 25.00 23.38 0.578125
FIRST PREFERRED CAPITAL TRUST II (ISSUE DATE - OCTOBER 2000) - FBNKN
2002 2001 2000
--------------------------- -------------------------------- ------------------------------
Dividend Dividend Dividend
High Low Declared High Low Declared High Low Declared
---- --- -------- ---- --- -------- ---- --- --------
First quarter.... $28.50 27.55 $0.640000 $27.75 26.38 $0.640000 $ -- -- $ --
Second quarter... 28.40 26.85 0.640000 27.40 26.25 0.640000 -- -- --
Third quarter.... 28.65 27.85 0.640000 28.50 26.95 0.640000 -- -- --
Fourth quarter... 28.25 27.30 0.640000 28.30 27.00 0.640000 27.00 25.13 0.504888
FIRST PREFERRED CAPITAL TRUST III (ISSUE DATE - NOVEMBER 2001) - FBNKM
2002 2001
-------------------------------- ------------------------------
Dividend Dividend
High Low Declared High Low Declared
---- --- -------- ---- --- --------
First quarter.................................. $26.75 25.90 $0.562500 $ -- -- $ --
Second quarter................................. 27.22 26.25 0.562500 -- -- --
Third quarter.................................. 27.00 26.50 0.562500 -- -- --
Fourth quarter................................. 27.05 26.50 0.562500 26.10 25.25 0.281250
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 22, 2002, there were approximately
200 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 2001 and 2000 are summarized as follows:
FIRST AMERICA CAPITAL TRUST (ISSUE DATE - JULY 1998) - FBAPrT
2002 2001 2000
----------------- --------------- ---------------- Dividend
High Low High Low High Low Declared
---- --- ---- --- ---- --- --------
First quarter....................... $25.90 24.70 25.00 21.63 23.00 19.50 $ 0.53125
Second quarter...................... 25.38 24.75 25.05 23.95 23.88 20.69 0.53125
Third quarter....................... 25.65 24.85 25.80 24.80 23.75 21.13 0.53125
Fourth quarter...................... 25.75 24.80 25.67 24.75 22.63 20.75 0.53125
----------
$ 2.12500
==========
For information concerning First Banks, please contact:
Allen H. Blake Lisa K. Vansickle
President, Chief Operating Officer Senior Vice President and Controller
and Chief Financial Officer 600 James S. McDonnell Boulevard
600 James S. McDonnell Boulevard Mail Code - #014
Mail Code - #014 Hazelwood, Missouri 63042
Hazelwood, Missouri 63042 Telephone - (314) 592-5000
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 ==========================================
2,400,000 Preferred Securities
Page
FIRST PREFERRED
CAPITAL TRUST IV
SUMMARY.....................................................1
RISK FACTORS................................................10 % Cumulative Trust Preferred
SPECIAL NOTES REGARDING FORWARD LOOKING Securities
STATEMENTS.........................................18
USE OF PROCEEDS.............................................18
ACCOUNTING TREATMENT........................................19 (Liquidation Amount $25 per
MARKET FOR PREFERRED SECURITIES.............................19 Preferred Security)
CAPITALIZATION..............................................20
SELECTED CONSOLIDATED AND OTHER
FINANCIAL DATA.....................................21 Fully, irrevocably and unconditionally
MANAGEMENT'S DISCUSSION AND ANALYSIS OF guaranteed on a subordinated basis, as
FINANCIAL CONDITION AND RESULTS OF described in this prospectus, by
OPERATIONS.........................................22
BUSINESS....................................................66
MANAGEMENT..................................................74
DESCRIPTION OF THE TRUST....................................76 FIRST BANKS, INC.
DESCRIPTION OF THE PREFERRED SECURITIES.....................77
DESCRIPTION OF THE SUBORDINATED DEBENTURES..................89 ---------------
RELATIONSHIP AMONG THE PREFERRED SECURITIES
THE SUBORDINATED DEBENTURES AND THE
GUARANTEE..........................................102 $60,000,000
MATERIAL UNITED STATES FEDERAL % Subordinated Debentures
INCOME TAX CONSEQUENCES............................104 of
ERISA CONSIDERATIONS........................................108
UNDERWRITING................................................109 FIRST BANKS, INC.
LEGAL MATTERS...............................................111
WHERE YOU CAN FIND INFORMATION..............................111 -------------
EXPERTS.....................................................111
DOCUMENTS INCORPORATED BY REFERENCE.........................112
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..................113 Prospectus
, 2003
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 Stifel, Nicolaus & Company
not rely on it. Incorporated
o We are not, and our underwriters are not, making an Fahnestock & Co. Inc.
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.
FIRST BANKS, INC.
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
SEC Registration Fee.................................................................................. $ 6,348
NASD Filing Fee....................................................................................... 7,400
New York Stock Exchange Fee........................................................................... 32,460
Blue Sky Qualification Fees and Expenses.............................................................. 3,000
Accounting Fees and Expenses.......................................................................... 50,000
Legal Fees and Expenses............................................................................... 100,000
Printing and Engraving Expenses....................................................................... 50,000
Trustees' Fees and Expenses........................................................................... 20,000
Miscellaneous......................................................................................... 5,792
--------------
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 IV (First
Capital IV) or any predecessor Trustee for First Capital IV, 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 IV have agreed
to indemnify the Underwriters, and the Underwriters have agreed to indemnify
First Capital IV 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-5 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 SEC 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) 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 January 16, 2003.
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 IV 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 January 16, 2003.
FIRST PREFERRED CAPITAL TRUST IV
By:/s/ Allen H. Blake
-------------------------------------------
Allen H. Blake, Trustee
By:/s/ Terrance M. McCarthy
------------------------------------------
Terrance M. McCarthy, 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 Allen H. Blake, Terrance M. McCarthy 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 SEC,
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 Chief Executive January 16, 2003
- ------------------------------------ Officer (Principal Executive Officer)
James F. Dierberg
/s/ Allen H. Blake Director and President, Chief Financial Officer January 16, 2003
- ------------------------------------ and Secretary
Allen H. Blake (Principal Financial Officer)
/s/ Michael J. Dierberg Director and General Counsel January 16, 2003
- ------------------------------------
Michael J. Dierberg
/s/ Gordon A. Gundaker Director January 16, 2003
- ------------------------------------
Gordon A. Gundaker
/s/ David L. Steward Director January 16, 2003
- ------------------------------------
David L. Steward
/s/ Hal J. Upbin Director January 16, 2003
- ------------------------------------
Hal J. Upbin
/s/ Douglas H. Yaeger Director January 16, 2003
- ------------------------------------
Douglas H. Yaeger
/s/ Donald W. Williams Director and Senior Executive Vice President and January 16, 2003
- ------------------------------------ Chief Credit Officer
Donald W. Williams
/s/ Lisa K. Vansickle Senior Vice President and Controller January 16, 2003
- ------------------------------------
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 IV.
4.4 Trust Agreement of First Preferred Capital Trust IV.
4.5 Form of Amended and Restated Trust Agreement of First Preferred Capital
Trust IV.
4.6 Form of Preferred Security Certificate of First Preferred Capital Trust
IV (included as an exhibit to Exhibit 4.5).
4.7 Form of Preferred Securities Guarantee Agreement for First Preferred
Capital Trust IV.
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 $110,000,000 Secured Credit Agreement, dated as of August 22, 2002,
among First Banks, Inc. and Wells Fargo Bank Minneapolis, National
Association, American National Bank & Trust Company of Chicago, The
Northern Trust Company, Union Bank of California N.A., SunTrust Bank,
Nashville and Fifth Third Bank - incorporated herein by reference to
Exhibit B to the Company's Schedule 13-E, dated October 8, 2002.
10.7 First Amendment to Secured Credit Agreement, dated as of December 31,
2002, by and among First Banks, Inc. and Wells Fargo Bank Minneapolis,
National Association, American National Bank & Trust Company of
Chicago, The Northern Trust Company, Union Bank of California N.A.,
SunTrust Bank, Nashville and Fifth Third Bank - filed herewith.
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 Fifth Third Bank to act as trustee
under the Indenture.
25.2 Form T-1 Statement of Eligibility of Fifth Third Bank to act as trustee
under Amended and Restated Trust Agreement.
25.3 Form T-1 Statement of Eligibility of Fifth Third Bank to act as trustee
under the Preferred Securities Guarantee Agreement.
Exhibit 1.1
2,400,000 Preferred Securities
First Preferred Capital Trust IV
_____% Cumulative Trust Preferred Securities
(Liquidation Amount of $25.00 per Preferred Security)
UNDERWRITING AGREEMENT
_______________ ____, 2003
STIFEL, NICOLAUS & COMPANY, INCORPORATED
One Financial Plaza
501 North Broadway, 9th Floor
St. Louis, Missouri 63102
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 IV, a Delaware statutory
trust (the "Trust," and hereinafter together with the Company, the "Offerors"),
----- --------
propose that the Trust issue and sell to the several underwriters listed on
Schedule I hereto (the "Underwriters"), pursuant to the terms of this Agreement,
------------
2,400,000 of the Trust's ____% Cumulative Trust Preferred Securities, with a
liquidation amount of $25.00 per preferred security (the "Preferred
Securities"), to be issued under the Trust Agreement (as hereinafter defined),
the terms of which are more fully described in the Prospectus (as hereinafter
defined). The aforementioned 2,400,000 Preferred Securities to be sold to the
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 360,000 Preferred Securities
(the "Option Preferred Securities") upon exercise of the over-allotment option
---------------------------
granted in Section 1 hereof. The Firm Preferred Securities and any Option
Preferred Securities are herein collectively referred to as the "Designated
Preferred Securities." Stifel, Nicolaus & Company, 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 2,400,000.
In addition, on the basis of the representations, warranties
and agreements herein contained and subject to the terms and conditions herein
set forth, the Trust hereby grants to the Underwriters, severally and not
jointly, an option to purchase all or any portion of the 360,000 Option
Preferred Securities, and upon the exercise of such option in accordance with
this Section 1, the Offerors hereby agree that the Trust shall issue and sell to
the Underwriters, severally and not jointly, all or any portion of the Option
Preferred Securities at the same Purchase Price per share paid for the Firm
Preferred Securities. If any Option Preferred Securities are to be purchased,
each Underwriter, severally and not jointly, agrees to purchase from the Trust
that proportion (subject to adjustment as 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 2,400,000. 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
Fifth Third Bank, as Property Trustee named therein, Wilmington Trust Company,
as Delaware Trustee named therein, the Administrative Trustees named therein,
(collectively, the "Trustees"), and the Company, in substantially the form
--------
heretofore delivered to the Underwriters, said Agreement being hereinafter
referred to as the "Trust Agreement." In connection with the issuance of the
---------------
Designated Preferred Securities, the Company proposes (i) to issue its ______%
Subordinated Debentures due 2033 (the "Debentures") pursuant to an Indenture, to
----------
be dated as of _______________ _____, 2003, between the Company and Fifth Third
Bank, 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 ____________ ____, 2003, between the Company and
Fifth Third Bank, 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 333-__________ and
333-__________-01) for the registration of the Designated Preferred Securities,
the Guarantee and $71,134,025 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").
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(ii) The Trust has been duly created and is validly
existing as a statutory trust in good standing under the Delaware
Statutory 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 fifteen (15) direct or indirect
subsidiaries that have material ongoing operations. They are listed on Exhibit A
attached hereto and incorporated herein (the "Subsidiaries"). The Company does
------------
not own or control, directly or indirectly, more than 5% of any class of equity
security of any corporation, association or other entity that conducts material
ongoing operations other than the Subsidiaries, except for the ownership of
1,205,929 shares (approximately 7.61 %, based on the number of shares
outstanding on September 30, 2002) of the common stock of Allegiant Bancorp,
Inc. First Bank and First Bank & Trust are collectively referred to as
the "Banks." Each Subsidiary is a bank holding company, state bank, trust
-----
company, statutory 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 or lessees from the Banks),
or (B) except as disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), any order, decree, judgment,
rule or regulation of any court, arbitrator, government, or governmental agency
or instrumentality, domestic or foreign, having jurisdiction over the Offerors
or the Subsidiaries or any of their respective properties the breach, violation
or default of which could have a material adverse effect on the condition
(financial or otherwise), earnings, affairs, business, prospects, or results of
operations of the Offerors and the Subsidiaries on a consolidated basis.
(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 New York Stock Exchange relating to the listing 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, except for dividends on the Company's Class A
and Class B preferred stock declared in January 2003, in amounts
comparable to those declared and paid in prior periods;
(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 listing on the New York Stock Exchange, 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 request of the Commission to amend or
supplement the Registration Statement, any Preliminary Prospectus or
the Prospectus or for additional information; and
(iv) of the issuance by the Commission or any state
or other regulatory body of any stop order or other order suspending
the effectiveness of the Registration Statement, preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, or
suspending the qualification of any of the Designated Preferred
Securities for offering or sale in any jurisdiction or the institution
or threat of institution of any proceedings for any of such purposes.
The Offerors shall use their best efforts to prevent the issuance of
any such stop order or of any other such order and if any such order is
issued, to cause such order to be withdrawn or lifted as soon as
possible.
(c) The Offerors shall furnish to the Underwriters, from time
to time without charge, as soon as available, as many copies as the Underwriters
may reasonably request of (i) the registration statement as originally filed and
of all amendments thereto, in executed form, including exhibits, whether filed
before or after the 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
New York Stock Exchange, 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 listed on the New York Stock Exchange
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 listed on the New York Stock Exchange 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, except for the trust preferred
securities issued by First Preferred Capital Trust and First America Capital
Trust and the related debentures issued by the Company and First Banks America,
Inc.
(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; provided, however, that
--------
if an Offeror is advised by legal counsel that it is legally required to issue a
press release or other communication, then such Offeror shall be permitted to do
so, after giving written notice thereof to you.
(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 listing of the Designated Preferred Securities and, if
applicable, the Guarantee and the Debentures on the New York Stock Exchange;
(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 September
30, 2002 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 listing on the
New York Stock Exchange 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 statutory trust under the Delaware
Statutory 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 Statutory 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 Statutory 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 Statutory 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 Statutory 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, Missouri 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, 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, 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 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 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: Allen H. Blake
Title: President, Chief Financial Officer
and Secretary
FIRST PREFERRED CAPITAL TRUST IV
By:
----------------------------------------
Name: Allen H. Blake
Title: Administrative Trustee
CONFIRMED AND ACCEPTED,
as of _____________ ____, 2003
STIFEL, NICOLAUS & COMPANY, INCORPORATED
By:
-----------------------------------------
Name: Mark J. Ross
Title: Managing Director
FAHNESTOCK & CO. INC.
By:
-----------------------------------------
Name: Jason Janosz
Title: Vice President
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
Fahnestock & Co., Inc.
---------
Total 2,400,000
=========
EXHIBIT A
LIST OF SIGNIFICANT DIRECT AND INDIRECT SUBSIDIARIES
First Bank
First Bank & Trust
First America Capital Trust
First Land Trustee Corp.
FB Commercial Finance, Inc.
Star Lane Holdings Trust, Statutory Trust
Star Lane Trust
First Preferred Capital Trust
Missouri Valley Partners, Inc.
First Banc Mortgage, Inc.
First Preferred Capital Trust II
First Preferred Capital Trust III
Bank of San Francisco Realty Investors, Inc.
The San Francisco Company
First Bank Capital Trust
Exhibit 4.1
FIRST BANKS, INC.
AND
FIFTH THIRD BANK, AS TRUSTEE
INDENTURE
______% SUBORDINATED DEBENTURES DUE 2033
DATED AS OF ______________ ____, 2003
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....................10
Section 2.1. Designation and Principal Amount............................................................10
Section 2.2. Maturity....................................................................................10
Section 2.3. Form and Payment............................................................................11
Section 2.4. [Intentionally Omitted].....................................................................11
Section 2.5. Interest....................................................................................11
Section 2.6. Execution and Authentication................................................................12
Section 2.7. Registration of Transfer and Exchange.......................................................13
Section 2.8. Temporary Debentures........................................................................13
Section 2.9. Mutilated, Destroyed, Lost or Stolen Debentures.............................................14
Section 2.10. Cancellation................................................................................15
Section 2.11. Benefit of Indenture........................................................................15
Section 2.12. Authenticating Agent........................................................................15
ARTICLE III REDEMPTION OF DEBENTURES.............................................................................16
Section 3.1. Redemption..................................................................................16
Section 3.2. Special Event Redemption....................................................................16
Section 3.3. Optional Redemption by the Company..........................................................16
Section 3.4. Notice of Redemption........................................................................17
Section 3.5. Payment Upon Redemption.....................................................................18
Section 3.6. No Sinking Fund.............................................................................18
ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD..................................................................18
Section 4.1. Extension of Interest Payment Period........................................................18
Section 4.2. Notice of Extension.........................................................................19
Section 4.3. Limitation on Transactions..................................................................19
ARTICLE V PARTICULAR COVENANTS OF THE COMPANY....................................................................20
Section 5.1. Payment of Principal and Interest...........................................................20
Section 5.2. Maintenance of Agency.......................................................................20
Section 5.3. Paying Agents...............................................................................21
Section 5.4. Appointment to Fill Vacancy in Office of Trustee............................................21
Section 5.5. Compliance with Consolidation Provisions....................................................21
Section 5.6. Limitation on Transactions..................................................................22
Section 5.7. Covenants as to the Trust...................................................................22
Section 5.8. Covenants as to Purchases...................................................................23
Section 5.9. Waiver of Usury; Stay or Extension Laws.....................................................23
Section 5.10. Limitation on Additional Junior Indebtedness................................................23
ARTICLE VI DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE....................................25
Section 6.1. Company to Furnish the Trustee Names and Addresses of Debentureholders......................25
Section 6.2. Preservation of Information Communications with the Debentureholders........................25
Section 6.3. Reports by the Company......................................................................25
Section 6.4. Reports by the Trustee......................................................................26
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.............................28
Section 7.3 Application of Money Collected..............................................................29
Section 7.4. Limitation on Suits.........................................................................29
Section 7.5. Rights and Remedies Cumulative; Delay or Omission Not Waiver................................30
Section 7.6. Control by Debentureholders.................................................................30
Section 7.7. Undertaking to Pay Costs....................................................................31
Section 7.8. Direct Action; Right of Set-Off.............................................................31
ARTICLE VIII FORM OF DEBENTURE AND ORIGINAL ISSUE................................................................32
Section 8.1. Form of Debenture...........................................................................32
Section 8.2. Original Issue of the Debentures............................................................32
ARTICLE IX CONCERNING THE TRUSTEE................................................................................32
Section 9.1. Certain Duties and Responsibilities of the Trustee..........................................32
Section 9.2. Notice of Defaults..........................................................................33
Section 9.3. Certain Rights of Trustee...................................................................33
Section 9.4. Trustee Not Responsible for Recitals, etc...................................................34
Section 9.5. May Hold the Debentures.....................................................................35
Section 9.6. Money Held in Trust.........................................................................35
Section 9.7. Compensation and Reimbursement..............................................................35
Section 9.8. Reliance on Officers' Certificate...........................................................35
Section 9.9. Disqualification; Conflicting Interests.....................................................36
Section 9.10. Corporate Trustee Required; Eligibility.....................................................36
Section 9.11. Resignation and Removal; Appointment of Successor...........................................36
Section 9.12. Acceptance of Appointment by Successor......................................................37
Section 9.13. Merger, Conversion, Consolidation or Succession to Business.................................38
Section 9.14. Preferential Collection of Claims Against the Company.......................................38
ARTICLE X CONCERNING THE DEBENTUREHOLDERS........................................................................38
Section 10.1. Evidence of Action by Holders...............................................................38
Section 10.2. Proof of Execution by Debentureholders......................................................39
Section 10.3. Who May be Deemed Owners....................................................................39
Section 10.4. Certain Debentures Owned by Company Disregarded.............................................39
Section 10.5. Actions Binding on Future Debentureholders..................................................40
ARTICLE XI SUPPLEMENTAL INDENTURES...............................................................................40
Section 11.1. Supplemental Indentures Without the Consent of Debentureholders.............................40
Section 11.2. Supplemental Indentures with Consent of Debentureholders....................................41
Section 11.3. Effect of Supplemental Indentures...........................................................41
Section 11.4. The Debentures Affected by Supplemental Indentures..........................................41
Section 11.5. Execution of Supplemental Indentures........................................................42
ARTICLE XII SUCCESSOR CORPORATION................................................................................42
Section 12.1. Company May Consolidate, etc................................................................42
Section 12.2. Successor Corporation Substituted...........................................................43
Section 12.3. Evidence of Consolidation, etc. to Trustee..................................................43
ARTICLE XIII SATISFACTION AND DISCHARGE..........................................................................43
Section 13.1. Satisfaction and Discharge of Indenture.....................................................43
Section 13.2. Discharge of Obligations....................................................................44
Section 13.3. Deposited Money to be Held in Trust.........................................................44
Section 13.4. Payment of Money Held by Paying Agents......................................................44
Section 13.5. Repayment to the Company....................................................................44
ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS......................................44
Section 14.1. No Recourse.................................................................................44
ARTICLE XV MISCELLANEOUS PROVISIONS..............................................................................45
Section 15.1. Effect on Successors and Assigns............................................................45
Section 15.2. Actions by Successor........................................................................45
Section 15.3. Surrender of Company Powers.................................................................45
Section 15.4. Notices.....................................................................................45
Section 15.5. Governing Law...............................................................................45
Section 15.6. Treatment of Debentures as Debt.............................................................46
Section 15.7. Compliance Certificates and Opinions........................................................46
Section 15.8. Payments on Business Days...................................................................46
Section 15.9. Conflict with Trust Indenture Act...........................................................46
Section 15.10. Counterparts................................................................................46
Section 15.11. Separability................................................................................46
Section 15.12. Assignment..................................................................................47
Section 15.13. Acknowledgment of Rights....................................................................47
ARTICLE XVI SUBORDINATION OF THE DEBENTURES......................................................................47
Section 16.1. Agreement to Subordinate....................................................................47
Section 16.2. Default on Senior Debt, Subordinated Debt or Additional Senior Obligations..................47
Section 16.3. Liquidation; Dissolution; Bankruptcy........................................................48
Section 16.4. Subrogation.................................................................................49
Section 16.5. Trustee to Effectuate Subordination.........................................................50
Section 16.6. Notice by the Company.......................................................................50
Section 16.7. Rights of the Trustee; Holders of the Senior Indebtedness...................................51
Section 16.8. Subordination May Not be Impaired...........................................................51
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 ______________ ___, 2003, between FIRST BANKS,
INC., a Missouri corporation (the "Company") and FIFTH THIRD BANK, a bank
------------
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
2033 (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 IV, a Delaware statutory trust
(the "Trust"), has offered to the public $60,000,000 aggregate liquidation
amount of its Preferred Securities (as defined herein) ($69,000,000 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 $1,855,675 aggregate liquidation amount of
its Common Securities (as defined herein) ($2,134,025 if the Underwriters
exercise their Option), in $61,855,675 aggregate principal amount of the
Debentures ($71,134,025 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 March 31,
2008.
"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, the Company's 10.24% Subordinated Debentures due 2030
issued to First Preferred Capital Trust II, the Company's 9.00% Subordinated
Debentures due 2031 issued to First Preferred Capital Trust III, the Company's
Floating Rate Junior Subordinated Debt Securities due 2032 issued to First Bank
Capital Trust, and by virtue of First Banks America, Inc.'s merger with and
into the Company, the First Banks America, Inc. 8.50% Subordinated Debentures
due 2028 issued to First America Capital Trust. 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 38 Fountain Square
Plaza, MD 10AT60, Cincinnati, Ohio 45202, 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, estate, partnership,
------
limited partnership, joint venture, trust, association, joint-stock company,
limited liability company, trust, statutory trust, unincorporated organization
or government or any agency or political subdivision thereof or any other entity
of whatever nature.
"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 March 31, 2033.
-----------------------
"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, the Company's
10.24% Subordinated Debentures due 2030 issued to First Preferred Capital Trust
II, the Company's 9.00% Subordinated Debentures due 2031 issued to First
Preferred Capital Trust III, the Company's Floating Rate Junior Subordinated
Debt Securities due 2032 issued to First Bank Capital Trust, and by virtue of
First Banks America, Inc.'s merger with and into the Company, the First Banks
America, Inc. 8.50% Subordinated Debentures due 2028 issued to First America
Captial Trust), 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.
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"Special Event" means a Tax Event, a Capital Treatment Event or an
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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
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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 IV, a Delaware statutory
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trust.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
---------------
__________ ____, 2003, of the Trust.
"Trustee" means Fifth Third Bank and, subject to the provisions of
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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 2033,"
limited in aggregate principal amount up to $71,134,025 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 March 31, 2008 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 March 31, 2008, 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
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Payment Date"), commencing on March 31, 2003, to the Person in whose name such
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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
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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
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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 March 31,
2008, 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 listing of the Preferred Securities on the New York Stock
Exchange 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 New York Stock Exchange 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
New York Stock Exchange 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, the Company's 10.24% Subordinated Debentures due 2030 issued to
First Preferred Capital Trust II and the Company's 9.00% Subordinated Debentures
due 2031 issued to First Preferred Capital Trust III) 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); (b) 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, the Company's 10.24%
Subordinated Debentures due 2030 issued to First Preferred Capital Trust II, the
Company's 9.00% Subordinated Debentures due 2031 issued to First Preferred
Capital Trust III, the Company's Floating Rate Junior Subordinated Debt
Securities due 2032 issued to First Bank Capital Trust, and the First Banks
America, Inc. 8.50% Subordinated Debentures due 2028 issued to First America
Capital Trust) 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 New York Stock
Exchange) 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 list such Debentures on the New York Stock
Exchange 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 March 31, 2008.
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 after such
payment or distribution, the quotient referred to in Section 5.10(b) would
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 New York
Stock Exchange, 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
listing on the New York Stock Exchange 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
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Default" means any one or more of the following events that has occurred and is
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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"
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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
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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 $61,855,675 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 ____________ ___,
2003, by and among the Company, the Trust and Stifel, Nicolaus & Company,
Incorporated and Fahnestock & Co. Inc., as representatives of the several
Underwriters named therein), then on such Option Closing Date, Debentures in the
additional aggregate principal amount of up to $9,278,350 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. Notwithstanding any provision of this Indenture to the
contrary, the obligations of the Company under this Indenture shall not be (i)
superior in right of payment or (ii) subordinate and junior in right of payment,
to the Company's 9.25% Subordinated Debentures due 2027 issued to First
Preferred Capital Turst I, the Company's 10.24% Subordinated Debentures due 2030
issued to First Preferred Capital Trust II, the Company's 9.00% Subordinated
Debentures due 2031 issued to First Preferred Capital Trust III, the Company's
Floating Rate Junior Subordinated Debt Securities due 2032 issued to First Bank
Capital Trust, or the First Banks America, Inc. 8.50% Subordinated Debentures
due 2028 issued to First America Capital Trust.
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:
-----------------------------
FIFTH THIRD BANK, as Trustee
By:
--------------------------------
Name:
-------------------------------
Title:
-----------------------------
STATE OF MISSOURI )
) ss
COUNTY OF ST. LOUIS )
On this ______ day of ______________, 2003, 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 ________________, 2003, before me appeared
___________________, to me personally known, who, being by me duly sworn, did
say that he is the _____________________ of Fifth Third Bank, 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 4.2
EXHIBIT A
(Form of Face of Debenture)
FIRST BANKS, INC.
____% SUBORDINATED DEBENTURE
DUE MARCH 31, 2033
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 March
31, 2033 (the "Stated Maturity"), and to pay interest on said principal sum from
---------------
___________, 2003, 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
March 31, 2003, 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 March 31, 2008, 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 ___________________, 2003
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:_________________________, 2003
Fifth Third Bank, _____________________________
as Trustee or Authenticating Agent
By: _______________________________ By: _________________________
Authorized Signatory
FORM OF REVERSE OF DEBENTURE
_____% SUBORDINATED DEBENTURE DUE 2033
(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 ______________ ___, 2003 (the
"Indenture") duly executed and delivered between the Company and Fifth Third
---------
Bank, 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 March
31, 2008 (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 March 31, 2033, 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
listing on the New York Stock Exchange 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 IV
THIS CERTIFICATE OF TRUST OF FIRST PREFERRED CAPITAL TRUST IV (the
"Trust"), dated as of January 2, 2003, 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
statutory trust under the Delaware Statutory Trust Act (12 Delaware Code Section
3801 et seq.).
1. NAME. The name of the statutory trust formed hereby is First
Preferred Capital Trust IV.
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 Department.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective on
January 2, 2003.
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 Statutory Trust Act.
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 January 2, 2003 (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 IV" 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 statutory trust under Chapter 38 of Title 12
of the Delaware Code, 12 Del. C. Section 3801, et seq. (the "Statutory 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 Statutory 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 sponsor of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
----------
the Trust,
(a) the Registration Statement on Form S-2 (the "1933 Act Registration
---------------------
Statement"), including any pre-effective or post-effective amendments to the
- ---------
1933 Act Registration Statement, relating to the registration under the
Securities Act of 1933, as amended, of the Preferred Securities of the Trust and
possibly certain other securities and (b) a Registration Statement on Form 8-A
(the "1934 Act Registration Statement") (including all pre-effective and
-------------------------------
post-effective amendments thereto) relating to the registration of the Preferred
Securities of the Trust under the Securities Exchange Act of 1934, as amended;
(ii) to file with the Nasdaq 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
Statutory 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).
[The remainder of this page has been left blank intentionally]
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
---------------------------------------
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 IV
AMENDED AND RESTATED
TRUST AGREEMENT
among
FIRST BANKS, INC., as Depositor
FIFTH THIRD BANK,
as Property Trustee
WILMINGTON TRUST COMPANY, as Delaware Trustee,
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF____________ ____, 2003
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINED TERMS..........................................................................................2
Section 101. Definitions..................................................................................2
ARTICLE II ESTABLISHMENT OF THE TRUST............................................................................10
Section 201. Name........................................................................................10
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..................11
Section 206. Declaration of Trust........................................................................11
Section 207. Authorization to Enter into Certain Transactions............................................12
Section 208. Assets of Trust.............................................................................15
Section 209. Title to Trust Property.....................................................................15
ARTICLE III PAYMENT ACCOUNT......................................................................................15
Section 301. Payment Account.............................................................................15
ARTICLE IV DISTRIBUTIONS; REDEMPTION.............................................................................16
Section 401. Distributions...............................................................................16
Section 402. Redemption..................................................................................16
Section 403. Subordination of Common Securities..........................................................18
Section 404. Payment Procedures..........................................................................19
Section 405. Tax Returns and Reports.....................................................................19
Section 406. Payment of Taxes, Duties, etc. of the Trust..............................................19
Section 407. Payments Under Indenture....................................................................20
ARTICLE V TRUST SECURITIES CERTIFICATES..........................................................................20
Section 501. Initial Ownership...........................................................................20
Section 502. The Trust Securities Certificates...........................................................20
Section 503. Execution, Authentication and Delivery of Trust Securities Certificates.....................20
Section 503A. Global Preferred Security................................................................21
Section 504. Registration of Transfer and Exchange of Preferred Securities Certificates..................22
Section 505. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates..........................23
Section 506. Persons Deemed Securityholders..............................................................23
Section 507. Access to List of Securityholders' Names and Addresses......................................24
Section 508. Maintenance of Office or Agency.............................................................24
Section 509. Appointment of Paying Agent.................................................................24
Section 510. Ownership of Common Securities by Depositor.................................................25
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...............................................................................28
Section 605. Proxies, etc................................................................................28
Section 606. Securityholder Action by Written Consent....................................................28
Section 607. Record Date for Voting and Other Purposes...................................................28
Section 608. Acts of Securityholders.....................................................................29
Section 609. Inspection of Records.......................................................................30
ARTICLE VII REPRESENTATIONS AND WARRANTIES.......................................................................30
Section 701. Representations and Warranties of the Bank and the Property Trustee.........................30
Section 702. Representations and Warranties of the Delaware Bank and the Delaware Trustee................31
Section 703. Representations and Warranties of the Depositor.............................................32
ARTICLE VIII TRUSTEES............................................................................................32
Section 801. Certain Duties and Responsibilities.........................................................32
Section 802. Certain Notices.............................................................................34
Section 803. Certain Rights of Property Trustee..........................................................34
Section 804. Not Responsible for Recitals or Issuance of Securities......................................36
Section 805. May Hold Securities.........................................................................36
Section 806. Compensation; Indemnity; Fees...............................................................36
Section 807. Corporate Property Trustee Required; Eligibility of Trustees................................37
Section 808. Conflicting Interests.......................................................................37
Section 809. Co-Trustees and Separate Trustee............................................................37
Section 810. Resignation and Removal; Appointment of Successor...........................................39
Section 811. Acceptance of Appointment by Successor......................................................40
Section 812. Merger, Conversion, Consolidation or Succession to Business.................................41
Section 813. Preferential Collection of Claims Against Depositor or Trust................................41
Section 814. Reports by Property Trustee.................................................................41
Section 815. Reports to the Property Trustee.............................................................41
Section 816. Evidence of Compliance with Conditions Precedent............................................41
Section 817. Number of Trustees..........................................................................42
Section 818. Delegation of Power.........................................................................42
Section 819. Voting......................................................................................42
ARTICLE IX TERMINATION, LIQUIDATION AND MERGER...................................................................42
Section 901. Termination Upon Expiration Date............................................................42
Section 902. Early Termination...........................................................................42
Section 903. Termination.................................................................................43
Section 904. Liquidation.................................................................................43
Section 905. Mergers, Consolidations, Amalgamations or Replacements of the Trust.........................45
ARTICLE X MISCELLANEOUS PROVISIONS...............................................................................46
Section 1001. Limitation of Rights of Securityholders......................................................46
Section 1002. Amendment....................................................................................46
Section 1003. Separability.................................................................................47
Section 1004. Governing Law................................................................................47
Section 1005. Payments Due on Non-Business Day.............................................................47
Section 1006. Successors...................................................................................48
Section 1007. Headings.....................................................................................48
Section 1008. Reports, Notices and Demands.................................................................48
Section 1009. Agreement Not to Petition....................................................................48
Section 1010. Trust Indenture Act; Conflict with Trust Indenture Act.......................................49
Section 1011. Acceptance of Terms of Trust Agreement, Guarantee and Indenture..............................49
ARTICLE I........................................................................................................54
Section 1.1. Guarantee by First Banks.....................................................................54
Section 1.2. Term of Agreement............................................................................54
Section 1.3. Waiver of Notice.............................................................................55
Section 1.4. No Impairment................................................................................55
Section 1.5. Enforcement..................................................................................55
ARTICLE II.......................................................................................................55
Section 2.1. Binding Effect...............................................................................55
Section 2.2. Amendment....................................................................................56
Section 2.3. Notices......................................................................................56
Section 2.4. Governing Law................................................................................56
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____________ ___,
2003, among (i) FIRST BANKS, INC., a Missouri corporation (including any
successors or assigns, the "Depositor"), (ii) FIFTH THIRD BANK, a bank 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) ALLEN H. BLAKE, an individual, TERRANCE M. MCCARTHY,
-------------
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, as an
original administrative trustee, and Allen H. Blake and Lisa K. Vansickle, each
as an Administrative Trustee, have heretofore duly declared and established a
statutory trust pursuant to the Delaware Statutory Trust Act by entering into
that certain Trust Agreement, dated as of January 2, 2003 (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 January 2, 2003, the
form of which is attached as Exhibit A;
---------
WHEREAS, effective January 6, 2003 James F. Dierberg resigned as an
administrative trustee, the Depositor appointed Terrance M. McCarthy as a
successor trustee and Terrance M. McCarthy accepted the appointment as an
Administrative Trustee;
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 Allen H. Blake, Terrance M.
----------------------
McCarthy 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 38 Fountain Square Plaza, MD
10AT60, Cincinnati, Ohio 45202 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 Fifth Third Bank, a bank organized under the
-----------------
laws of the United States of America, and any successor thereto, as trustee
under the Indenture.
"Debentures" means the $61,855,675 (or $71,134,025 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
2033, 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 Statutory 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 Fifth Third Bank, 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 _____________ _____, 2003,
---------
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, estate, partnership,
------
limited partnership, joint venture, trust, association, joint-stock company,
limited liability company, trust, statutory trust, unincorporated organization
or government or any agency or political subdivision thereof or any other entity
of whatever nature.
"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 Statutory Trust Act.
"Trust" means the Delaware statutory 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 ___________ ____, 2003, among the Trust, the Depositor, Stifel
Nicolaus & Company, 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 IV," 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 ______________ ___, 2003, 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 2,400,000 Preferred Securities having an aggregate Liquidation Amount of
$60,000,000 against receipt of the aggregate purchase price of such Preferred
Securities of $60,000,000, 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
360,000 Preferred Securities having an aggregate Liquidation Amount of up to
$9,000,000 against receipt of the aggregate purchase price of such Preferred
Securities of up to $9,000,000, 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 74,227 Common Securities having an aggregate Liquidation Amount of
$1,855,675 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 $61,855,675 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 $61,855,675.
(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 11,135 Common Securities having an
aggregate Liquidation Amount of up to $278,375 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 $9,278,375, 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 $9,278,375, 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 Statutory 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 listing of the Preferred
Securities on the New York Stock Exchange 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
New York Stock Exchange 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 New York Stock Exchange 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
March 31, 2003. 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").
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(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
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registrar designated by the Depositor (the "Securities Registrar"), subject to
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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, 38 Fountain Square
Plaza, MD 10AT60, Cincinnati, Ohio 45202, 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 Ohio, 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 Ohio;
(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
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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 New York
Stock Exchange 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
March 31, 2033 (the "Expiration Date"), subject to distribution of the Trust
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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:"
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(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 listed
on the New York Stock Exchange 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
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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 Fifth Third Bank, 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 New York Stock
Exchange); 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 Fifth Third Bank, 1209 North
Milwaukee Ave., Chicago, IL, 60622, Attention: Ms. Sheetal Shah; (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 IV." 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]
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Trust Agreement to be duly executed as of the day and year
first above written.
FIRST BANKS, INC.
By:
-----------------------------------------------
Its:
----------------------------------------------
FIFTH THIRD BANK,
as Property Trustee
By:
-----------------------------------------------
Its:
-----------------------------------------------
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:
-----------------------------------------------
Its:
-----------------------------------------------
--------------------------------------------------
ALLEN H. BLAKE, as Administrative Trustee
--------------------------------------------------
TERRANCE M. MCCARTHY, as Administrative Trustee
--------------------------------------------------
LISA K. VANSICKLE, as Administrative Trustee
EXHIBIT A
CERTIFICATE OF TRUST
OF
FIRST PREFERRED CAPITAL TRUST IV
THIS CERTIFICATE OF TRUST OF FIRST PREFERRED CAPITAL TRUST IV (the
"Trust"), dated as of __________ ___, 2003, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, and ______________,
________________ and __________________, each an individual, as trustees, to
form a statutory trust under the Delaware Statutory Trust Act (12 Delaware Code
Section 3801 et seq.).
1. NAME. The name of the statutory trust formed hereby is First
Preferred Capital Trust IV.
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 Department.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective on
___________ ___, 2003.
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 Statutory Trust Act.
WILMINGTON TRUST COMPANY, as Trustee
By:
--------------------------------------
Name:
------------------------------------
Title:
------------------------------------
------------------------------------------
----------------------, as Trustee
------------------------------------------
----------------------, as Trustee
------------------------------------------
-----------------------, 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 IV
COMMON SECURITIES
LIQUIDATION AMOUNT $25 PER COMMON SECURITY
FIRST PREFERRED CAPITAL TRUST IV, a statutory 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______________ _____, 2003, 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 ____________, 2003.
FIRST PREFERRED CAPITAL TRUST IV
By:
----------------------------------------
Name:
---------------------------------
Title:
--------------------------------
EXHIBIT C
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement")
---------
dated as of_______________ _____, 2003 between FIRST BANKS, INC., a Missouri
corporation ("First Banks"), and FIRST PREFERRED CAPITAL TRUST IV, a Delaware
-----------
statutory 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 2,400,000 _____%
----------
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____________ _____,
2003, as the same may be amended from time to time (the "Trust Agreement");
---------------
WHEREAS, First Banks shall directly or indirectly own all of
the Common Securities of the Trust and shall issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each
holder of the Preferred Securities, which purchase First Banks hereby agrees
shall benefit First Banks and which purchase First Banks acknowledges shall be
made in reliance upon the execution and delivery of this Agreement, First Banks,
including in its capacity as holder of the Common Securities, and the Trust
hereby agree as follows:
ARTICLE I
Section 1.1. Guarantee by First Banks.
Subject to the terms and conditions hereof, First Banks, including in
its capacity as holder of the Common Securities, hereby irrevocably and
unconditionally guarantees to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment when
-------------
and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
-----------
liabilities of the Trust other than obligations of the Trust to pay to the
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 the 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 Wilmington Trust Company as guarantee trustee, or under this
Agreement for any reason whatsoever. This Agreement is continuing, irrevocable,
unconditional and absolute.
Section 1.3. Waiver of Notice.
First Banks hereby waives notice of acceptance of this Agreement and of
any obligation to which it applies or may apply, and First Banks hereby waives
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
Section 1.4. No Impairment.
The obligations, covenants, agreements and duties of First Banks under
this Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of
all or any portion of the Obligations or for the performance of any other
obligation under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on
the part of the Beneficiaries to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Beneficiaries with respect to the
Obligations or any action on the part of the Trust granting indulgence or
extension of any kind; or
(c) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings affecting,
the Trust or any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or
obtain the consent of, First Banks with respect to the happening of any of the
foregoing.
Section 1.5. Enforcement.
A Beneficiary may enforce this Agreement directly against First Banks,
and First Banks waives any right or remedy to require that any action be brought
against the Trust or any other person or entity before proceeding against First
Banks.
ARTICLE II
Section 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind
the successors, assigns, receivers, trustees and representatives of First Banks
and shall inure to the benefit of the Beneficiaries.
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 IV
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. Governing Law.
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).
IN WITNESS WHEREOF, this Agreement is executed as of the day and year
first above written.
FIRST BANKS, INC.
By:
---------------------------------------
Its:
--------------------------------------
FIRST PREFERRED CAPITAL TRUST IV
By:
---------------------------------------
Name:
------------------------------
Title: Administrative Trustee
EXHIBIT D
Certificate Number Number of Preferred Securities ________
P
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
FIRST PREFERRED CAPITAL TRUST IV
____% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
CUSIP NO. ______________
FIRST PREFERRED CAPITAL TRUST IV, a statutory 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 _____________ ____, 2003, 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 Fifth Third Bank, as guarantee trustee,
dated as of ________________ ___, 2003, (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 _____________, 2003.
Dated: _________________, 2003 FIRST PREFERRED CAPITAL TRUST IV
CERTIFICATE OF AUTHENTICATION By:-----------------------------
This is one of the ____% Trustee
Cumulative Trust Preferred
Securities referred to in the
within-mentioned Trust Agreement.
FIFTH THIRD BANK, By:-----------------------------
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
IV, c/o First Banks, Inc., 600 James S. McDonnell Boulevard, Mail Code 014,
Hazelwood, Missouri 63042, Facsimile No.: (314) 592-6621 or 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...........................
(Cust) (Minor)
TEN ENT -as tenants by the under Uniform Gifts to
entireties Minors Act................................
(State)
JT TEN -as joint tenants UNIF TRF MIN ACT - ........Custodian
with right of survivorship (until age)................................
and not as tenants 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
FIFTH THIRD BANK
Dated as of______________ ____, 2003
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................................................................5
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.....................................................................6
Section 2.8. Conflicting Interests........................................................................6
ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE....................................................6
Section 3.1. Powers and Duties of the Guarantee Trustee...................................................6
Section 3.2. Certain Rights of the Guarantee Trustee......................................................8
Section 3.3. Not Responsible for Recitals or Issuance of Guarantee........................................9
ARTICLE IV GUARANTEE TRUSTEE......................................................................................9
Section 4.1. Guarantee Trustee; Eligibility...............................................................9
Section 4.2. Appointment, Removal and Resignation of Guarantee Trustee...................................10
ARTICLE V GUARANTEE..............................................................................................11
Section 5.1. Guarantee...................................................................................11
Section 5.2. Waiver of Notice and Demand.................................................................11
Section 5.3. Obligations not Affected....................................................................11
Section 5.4. Rights of Holders...........................................................................12
Section 5.5. Guarantee of Payment........................................................................12
Section 5.6. Subrogation.................................................................................12
Section 5.7. Independent Obligations.....................................................................12
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION.............................................................13
Section 6.1. Limitation on Transactions..................................................................13
Section 6.2. Ranking.....................................................................................13
ARTICLE VII TERMINATION..........................................................................................13
Section 7.1. Termination.................................................................................13
ARTICLE VIII INDEMNIFICATION.....................................................................................13
Section 8.1. Exculpation.................................................................................13
Section 8.2. Indemnification.............................................................................14
ARTICLE IX MISCELLANEOUS.........................................................................................14
Section 9.1. Successors and Assigns......................................................................14
Section 9.2. Amendments..................................................................................14
Section 9.3. Notices.....................................................................................14
Section 9.4. Benefit.....................................................................................15
Section 9.5. Governing Law...............................................................................15
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)
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 ________________ _____, 2003, is executed
- --------------------
and delivered by FIRST BANKS, INC., a Missouri corporation (the "Guarantor"),
---------
and FIFTH THIRD BANK, a bank 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 IV, a Delaware statutory trust
(the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of _______________ ____, 2003, 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 2,400,000 preferred securities, having
an aggregate liquidation amount of $60,000,000, 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 38 Fountain
Square Plaza, MD 10AT60, Cincinnati, Ohio 45202, Attention: Corporate Trust
Department.
"Covered Person" means any Holder or beneficial owner of Preferred
--------------
Securities.
"Debentures" means the _____% Subordinated Debentures due March 31,
----------
2033, 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 Fifth Third Bank, 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 ______________ ____, 2003,
---------
among the Debenture Issuer and Fifth Third Bank, 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, limited partnership, joint venture, association, joint
stock company, limited liability company, trust, statutory 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, the Guarantor's 10.24% Subordinated Debentures due 2030 issued
to First Preferred Capital Trust II and the Guarantor's 9.00% Subordinated
Debentures due 2031 issued to First Preferred Capital Trust III) 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):
Fifth Third Bank
1209 North Milwaukee Avenue
Chicago, IL 60622
Attention: Ms. Sheetal Shah
(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]
IN WITNESS WHEREOF, this Preferred Securities Guarantee is executed as
of the day and year first above written.
FIRST BANKS, INC.
By:
-----------------------------------------
Its:
----------------------------------------
FIFTH THIRD BANK, as Property Trustee
By:
-----------------------------------------
Its:
----------------------------------------
Exhibit 4.8
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement")
---------
dated as of_______________ _____, 2003 between FIRST BANKS, INC., a Missouri
corporation ("First Banks"), and FIRST PREFERRED CAPITAL TRUST IV, a Delaware
-----------
statutory 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 2,400,000 _____%
----------
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____________ _____,
2003, as the same may be amended from time to time (the "Trust Agreement");
---------------
WHEREAS, First Banks shall directly or indirectly own all of
the Common Securities of the Trust and shall issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each
holder of the Preferred Securities, which purchase First Banks hereby agrees
shall benefit First Banks and which purchase First Banks acknowledges shall be
made in reliance upon the execution and delivery of this Agreement, First Banks,
including in its capacity as holder of the Common Securities, and the Trust
hereby agree as follows:
ARTICLE I
Section 1.1. Guarantee by First Banks.
Subject to the terms and conditions hereof, First Banks, including in
its capacity as holder of the Common Securities, hereby irrevocably and
unconditionally guarantees to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment when
-------------
and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
-----------
liabilities of the Trust other than obligations of the Trust to pay to the
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 the 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 Wilmington Trust Company as guarantee trustee, or under this
Agreement for any reason whatsoever. This Agreement is continuing, irrevocable,
unconditional and absolute.
Section 1.3. Waiver of Notice.
First Banks hereby waives notice of acceptance of this Agreement and of
any obligation to which it applies or may apply, and First Banks hereby waives
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
Section 1.4. No Impairment.
The obligations, covenants, agreements and duties of First Banks under
this Agreement shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the extension of time for the payment by the Trust of
all or any portion of the Obligations or for the performance of any other
obligation under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on
the part of the Beneficiaries to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Beneficiaries with respect to the
Obligations or any action on the part of the Trust granting indulgence or
extension of any kind; or
(c) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings affecting,
the Trust or any of the assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or
obtain the consent of, First Banks with respect to the happening of any of the
foregoing.
Section 1.5. Enforcement.
A Beneficiary may enforce this Agreement directly against First Banks,
and First Banks waives any right or remedy to require that any action be brought
against the Trust or any other person or entity before proceeding against First
Banks.
ARTICLE II
Section 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind
the successors, assigns, receivers, trustees and representatives of First Banks
and shall inure to the benefit of the Beneficiaries.
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 IV
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. Governing Law.
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).
[The remainder of this page has been left blank intentionally]
IN WITNESS WHEREOF, this Agreement is executed as of the day and year
first above written.
FIRST BANKS, INC.
By:
--------------------------------------------
Its:
-------------------------------------------
FIRST PREFERRED CAPITAL TRUST IV
By:
--------------------------------------------
Name:
-----------------------------------
Title: Administrative Trustee
Exhibit 5.1
[Letterhead of Jackson Walker, L.L.P.]
January 16, 2003
First Banks, Inc.
135 North Meramec
St. Louis, Missouri 63105
First Preferred Capital Trust IV
135 North Meramec
St. Louis, Missouri 63105
Re: First Preferred Capital Trust IV % 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 IV, a statutory 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 Fifth Third Bank, as Property Trustee
(the "Trust Agreement"), to be offered in an underwritten public offering; and
(ii) subordinated debentures of the Company (the "Subordinated Debentures")
pursuant to the terms of an indenture between the Company and Fifth Third Bank,
as Indenture 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 Fifth Third Bank, 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 January
16, 2003 (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.
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.
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
[Letterhead of Richards, Layton & Finger, P.A.]
January 14, 2003
First Banks, Inc.
600 James S. McDonnell Boulevard
Mail Code M1-199-014
Hazelwood, Missouri 63042
Re: First Preferred Capital Trust IV
--------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for First Banks, Inc., a
Missouri corporation (the "Company") and First Preferred Capital Trust IV, a
Delaware statutory 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 January 2, 2003;
(b) The Trust Agreement of the Trust, dated as of January 2, 2003,
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 January 14, 2003.
(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"), filed
as an exhibit to the Registration Statement; and
(e) A Certificate of Good Standing for the Trust, dated January 14,
2003, 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.
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 statutory trust under the Statutory 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
[Letterhead of Jackson Walker, L.L.P.]
January 16, 2003
First Banks, Inc.
135 North Meramec
Clayton, Missouri 63105
First Preferred Capital Trust IV
135 North Meramec
Clayton, Missouri 63105
Re: First Preferred Capital Trust IV, ___% 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 IV, a
statutory trust created under the laws of Delaware (the "Trust"), in connection
with the proposed issuance, pursuant to a registration statement on Form S-2
dated January 16, 2003 filed by the Company and the Trust (the "Registration
Statement"), of: (i) % Cumulative Trust Preferred Securities of the Trust (the
"Preferred Securities") pursuant to the terms of an Amended and Restated Trust
Agreement between the Company and Fifth Third Bank, as Property Trustee (the
"Trust Agreement"); (ii) subordinated debentures of the Company (the
"Subordinated Debentures") pursuant to the terms of an indenture between the
Company and Fifth Third Bank, as Indenture Trustee; and (iii) the Company's
guarantee pursuant to the terms of a Preferred Securities Guarantee Agreement
for the Trust between the Company and Fifth Third Bank, as Guarantee Trustee. In
connection with our engagement, we have participated in the preparation of the
discussion set forth under the caption "Material United States Federal Income
Tax Consequences" in the Registration Statement. Except as otherwise indicated,
capitalized 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, the Registration Statement and the forms of the documents attached
as exhibits 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, as appropriate,
the initial and continuing accuracy of which constitute an integral basis for
the opinions expressed herein:
o 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.
o The sole assets of the Trust will be the Subordinated Debentures.
o 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.
o 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.
o The Company expects that it will be able to cause its
subsidiaries to pay dividends and, as necessary, make payments of
principal and interest pursuant to the terms of any outstanding
intercompany notes 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.
o The Company has and expects to continue to have material amounts
of trade accounts payable.
o 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 in this opinion and under the caption "Material United States Federal
Income Tax Consequences" in the Registration Statement:
1. We are of the opinion that the Trust will be characterized for
United States federal income tax purposes as a grantor trust;
2. We are of the opinion that the Subordinated Debentures will be
classified for United States federal income tax purposes as debt
of the Company; and
3. The other legal conclusions contained in the discussion set forth
under the caption "Material United States 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 thereby.
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 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. 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 of the transactions described in the
Registration Statement, nor do we render any opinion as to any United States
federal income tax consequences of the transactions described in the
Registration Statement except as expressly provided in this opinion letter. We
undertake no obligation to update this opinion after the date hereof.
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 "Material
United States Federal Income Tax Consequences" and "Legal Matters" in the
Registration Statement.
Sincerely,
/s/ Jackson Walker L.L.P.
-------------------------
Exhibit 10.7
FIRST AMENDMENT
TO
SECURED CREDIT AGREEMENT
This First Amendment is made as of this 31st day of December, 2002, by
and among First Banks, Inc., a Missouri corporation (the "Borrower"); Wells
Fargo Bank, National Association, a national banking association (the "Agent");
and the undersigned financial institutions.
Whereas the parties have made and entered into a Secured Credit
Agreement dated as of August 22, 2002 (the "Credit Agreement").
Whereas the Borrower is concerned that it will be unable to achieve the
Minimum Return on Assets determined for the quarter ending December 31, 2002,
pursuant to Section 7.04 of the Credit Agreement.
Whereas the Borrower has requested that the Credit Agreement be amended
for the purpose of reducing the Minimum Return on Assets requirement for the
quarter ending December 31, 2002 only.
Whereas the Agent and the financial institutions that have executed
this First Amendment have consented to the amendment requested by the Borrower,
on the terms and conditions set forth in this First Amendment.
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements hereinafter contained, it is agreed as follows:
1. All of the capitalized terms used in this First Amendment
which are not otherwise defined herein shall have the meanings ascribed
to such terms in the Credit Agreement.
2. Section 7.04 of the Credit Agreement is hereby amended to
be and read as follows:
"Section 7.04 Minimum Return on Assets. The Borrower
------------------------
will maintain (on a consolidated basis) its Return on Assets,
determined as of each calendar quarter end, at not less than
.70%; provided, however, that such Return on Assets determined
-------- -------
for the calendar quarter ended December 31, 2002 shall be not
less than .60%."
3. A new Section 7.07 is hereby added to the Credit Agreement,
to be and read as follows:
"Section 7.07 Current Quarter Return on Assets.
--------------------------------
Commencing with the calendar quarter ending December 31, 2002,
the Borrower will maintain at or above .80% the percentage
determined by multiplying its consolidated Net Income for the
calendar quarter immediately preceding the date of
determination by four, and dividing the resulting amount by
the Borrower's consolidated assets as of such quarter-end."
4. This First Amendment shall take effect when the Agent shall
have received counterparts hereof executed on behalf of the Borrower
and at least the Required Lenders and shall have received for the
account of each Bank, in form and substance satisfactory to the Agent
and its counsel, a signed copy of an opinion of counsel for the
Borrower, addressed to the Banks, to the effect that the Credit
Agreement as amended by this First Amendment constitutes the valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms.
5. Except as amended by this First Amendment, all of the
original terms and conditions of the Credit Agreement shall remain in
full force and effect. On the date this First Amendment becomes
effective, each reference in the Credit Agreement to "this Agreement"
shall be deemed to be a reference to the Credit Agreement as amended by
this First Amendment.
6. This First Amendment may be executed in any number of
counterparts, each of which shall be an original with the same effect
as if the signatures hereto were upon the same instrument.
7. The Borrower will reimburse the Agent upon demand for its
out-of-pocket expenses, including fees and expenses of outside counsel,
in connection with the preparation and review of this First Amendment
and any related documents and agreements. In addition, the Borrower
will pay to the Agent, for the pro rata account of the Lenders that
execute this First Amendment, an amendment fee equal to .125% of the
sum of (i) the aggregate Commitment Amounts of such Lenders, determined
as of December 31, 2002, plus (ii) the aggregate maximum amount that
such Lenders could be required to pay to the Agent pursuant to Section
2.15(b) of the Secured Credit Agreement.
(Signature Page Follows)
In Witness Whereof, the parties hereto have caused this First Amendment
to be duly executed by their respective officers thereunto duly authorized as of
the date first above written.
Address: FIRST BANKS, INC.
600 James S. McDonnell Blvd.
Mail Code M1-199-014
Hazelwood, MO 63042
Attention: Allen H. Blake By /s/ Allen H. Blake
-----------------------------
Telecopier: (314) 592-6621 Its President
Address: WELLS FARGO BANK, NATIONAL
MAC: N9305-071 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
-------------------------
Address: WELLS FARGO BANK, NATIONAL
MAC: N9305-071 ASSOCIATION, as a Lender
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Doug Gallun By /s/ Doug Gallun
-----------------------------
Telecopier: 612-667-3510 Its Vice President
-------------------------
Address:
120 South LaSalle Street Bank One, N.A.
Chicago, Illinois 60603-3400
Attention:
Telecopier: (312) 661-9511 By /s/ Sunil Mehta
-----------------------------
Its Commercial Banking
Officer
------------------------
Address: LASALLE BANK NATIONAL
One Metropolitan Square ASSOCIATION
211 North Broadway, Suite 4050
St. Louis, Missouri 63102
Attention: Robert J. Mathias By /s/ Robert J. Mathias
-----------------------------
Telecopier: (314) 621-3947 Its Senior Banker
-------------------------
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
-------------------------
Address: UNION BANK OF CALIFORNIA, N.A.
445 South Figureroa Street
Los Angeles, California 90071
Attention: Dennis A. Cattell By /s/ Dennis A. Cattell
-----------------------------
Telecopier: (213) 236-5548 Its Vice President
-------------------------
Address: SUNTRUST BANK, NASHVILLE
201 Fourth Avenue North
Nashville, Tennessee 37219
Attention: Richard B. Boring By /s/ Richard B. Boring
-----------------------------
Telecopier: (615) 748-5161 Its Vice President
-------------------------
Address: FIFTH THIRD BANK
1701 Golf Road, Tower One, Suite 700
Rolling Meadows, IL 60008
Attention: Patrick A. Horne By /s/ Patrick A. Horne
-----------------------------
Telecopier: (847) 871-6026 Its Vice President
-------------------------
EXHIBIT 12.1
FIRST BANKS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
As of or for the
Nine Months Ended
September 30, As of or for the Year Ended December 31,
--------------------- -------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- --------- --------- --------- ----------- --------- ---------
(dollars expressed in thousands)
Income before provision for income
taxes and minority interest
in income of subsidiary................$ 48,899 61,750 98,567 92,635 72,151 54,474 50,380
Add back:
Interest:
With deposits.................... 121,735 164,840 209,604 200,852 170,751 172,021 156,153
Without deposits................. 22,103 20,795 27,066 23,030 25,059 19,966 17,492
Rent expense.......................... 11,500 9,100 12,900 10,700 7,400 5,200 4,900
Earnings base:
With deposits........................ 182,134 235,690 321,071 304,187 250,302 231,695 211,433
Without deposits..................... 82,502 91,645 138,533 126,365 104,610 79,640 72,772
Fixed charges:
Including interest on deposits....... 133,235 173,940 222,504 211,552 178,151 177,221 161,053
Excluding interest on deposits....... 33,603 29,895 39,966 33,730 32,459 25,166 22,392
Ratio of earnings to fixed charges:
Including interest on deposits....... 1.37x 1.36x 1.44x 1.44x 1.40x 1.31x 1.31x
Excluding interest on deposits....... 2.46 3.07 3.47 3.75 3.22 3.16 3.25
Exhibit 23.1
[Letterhead of KPMG LLP]
Independent Auditors' Consent
The 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.
Our report refers to First Banks, Inc. changing its method of accounting
for derivative instruments and hedging activities in 2001.
St. Louis, Missouri
January 14, 2003
Exhibit 25.1
FORM T-1 File No. ____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(B)(2)
FIFTH THIRD BANK
(Exact name of trustee as specified in its charter)
OHIO
(Jurisdiction of incorporation or organization if not a national bank)
31-0854433
(I.R.S. Employer Identification No.)
38 Fountain Square Plaza, Cincinnati, Ohio
(Address of principal executive offices)
45263
-----
(Zip Code)
Paul L. Reynolds, 5th and Walnut Streets
Cincinnati, Ohio, 45263 (513) 579-5300
(Name, address and telephone number of agent for service)
FIRST BANKS, INC.
(Exact name of obligor as specified in its charter)
MISSOURI
(State or other jurisdiction of incorporation or organization)
43-1175538
(I.R.S. Employer Identification No.)
135 NORTH MERAMEC
ST. LOUIS, MISSOURI
(Address of principal executive offices)
63105
(Zip Code)
% SUBORDINATED DEBENTURES
(Title of the indenture securities)
Item 1. General information.
Furnish the following information as to the trustee -
(a) Name and address of each examining or supervising authority to
which it is subject.
Ohio Superintendent of Banks
State Office Tower
30 E. Broad Street
Columbus, Ohio 43215
Federal Reserve Bank of Cleveland
East Sixth Street and Superior Avenue
Cleveland, Ohio 44101
Federal Deposit Insurance Corporation,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None.
Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14 and 15 are not applicable by virtue of
the answer to Item 13.
Item 13. Defaults by the obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such default.
None.
(b) If the Trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
None.
Item 16. List of Exhibits.
List below all exhibits filed as a part of this statement of
eligibility.
(1) A copy of the Certificate of Incorporation of the trustee as
now in effect.
(2) A copy of the certificate of authority of the trustee to
commence business. (Included in Exhibit 1)
(3) A copy of the authorization of the trustee to exercise
corporate trust powers.
(4) A copy of the existing code of regulations of the trustee
incorporating amendments to date.
(5) A copy of each indenture referred to in Item 4.
(6) The consent of the trustee required by Section 321 (b) of the
Trust Indenture Act of 1939.
(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.
(8) A copy of any order pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified
or to be qualified under the Act.
(9) Foreign trustees are required to file a consent to service of
process of Form F-X
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, the trustee, Fifth Third Bank, a corporation organized and existing under
the laws of the State of Ohio, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Cincinnati and the State of Ohio, on the 14th day
of January, 2003.
FIFTH THIRD BANK
By: /s/ Geoffrey D. Anderson
----------------------------
Geoffrey D. Anderson
Its: Assistant Vice President
EXHIBIT 1
CERTIFICATE OF INCORPORATION
OF THE TRUSTEE AS NOW IN EFFECT
AMENDED ARTICLES OF INCORPORATION
OF
FIFTH THIRD BANK, WESTERN OHIO
FIRST: The name of this Corporation shall be Fifth Third Bank.
SECOND: The place in Ohio where its principal office is to be located
is Cincinnati, Hamilton County, Ohio.
THIRD: This Corporation is formed for the purpose of (a) receiving
on deposit or in trust, moneys, securities and other
valuable property, on such terms as may be agreed, and of
doing the business of a savings bank and of a trust
company; (b) disposing of box vaults for safekeeping of
valuables by lease or otherwise; (c) investing and loaning
the funds of the company and those received by it on deposit
or in trust; (d) doing a commercial banking business;
(e) doing the business of a special plan bank; and (f)
doing any other lawful act or activity for which banking
corporations may be formed under Ohio law; and in furtherance
of said purposes, to exercise all of the powers which
may be lawfully exercised by a corporation formed therefor,
and to do all things necessary or incident thereto.
FOURTH: The maximum number of shares which this Corporation is
authorized to have outstanding shall be Four Hundred
Fifty-Four Thousand Forty-Two (454,042) shares of common
stock, with a par value of Ten Dollars ($10.00) per share.
FIFTH: No holder of any share or shares of any class issued by this
Corporation shall be entitled as such, as a matter of
right, at any time, to subscribe for or purchase (i)
shares of any class issued by this Corporation, now or
hereafter authorized, (ii) securities of this Corporation
convertible into or exchangeable for shares of any class
issued by this Corporation, now or hereafter authorized,
or (iii) securities of this Corporation to which shall be
attached or appertain to any rights or options whether
by the terms of such securities or in the contracts,
warrants, or other instruments (whether transferable or
non-transferable or separable or inseparable from such
securities) evidencing such rights or options entitling
the holders thereof to subscribe for or purchase shares of
any class issued by this Corporation, now or hereafter
authorized; it being the intent and is the effect of this
Article Fifth to fully eliminate any and all pre-emptive
rights with respect to the shares of any class issued by
this Corporation now or hereafter authorized.
SIXTH: When authorized by the affirmative vote of a majority of the
Board of Directors, without the action or approval of the
shareholders of this Corporation, and when approved in advance
by the Ohio Superintendent of Banks, this Corporation may
redeem, purchase, or contract to purchase, at any time and
from time to time, shares of any class issued by this
Corporation for such prices and upon and subject to such terms
and conditions that the Board of Directors may determine.
SEVENTH: These Amended Articles of Incorporation supersede and take the
place of the existing Articles of Incorporation.
EXHIBIT 2
CERTIFICATE OF AUTHORITY OF THE
TRUSTEE TO COMMENCE BUSINESS
(INCLUDED IN EXHIBIT 1)
EXHIBIT 3
A COPY OF THE AUTHORIZATION OF THE TRUSTEE
TO EXERCISE CORPORATE TRUST POWERS
[See Attached]
STATE OF OHIO
DIVISION OF FINANCIAL INSTITUTIONS
This is to certify that Fifth Third Bank, Cincinnati, Ohio, organized under the
laws of the State of Ohio has complied with the laws relating to trust companies
under Section 1111.04 of the Ohio Revised Code and is qualified to exercise
trust powers in Ohio.
Witness my hand at Columbus, Ohio, this 14th day of January, 2003.
/s/ F. Scott O'Donnell
-----------------------------------------
F. Scott O'Donnell
Superintendent
Division of Financial Institutions
EXHIBIT 4
A COPY OF THE EXISTING CODE OF REGULATIONS OF THE TRUSTEE
INCORPORATING AMENDMENTS TO DATE
[See Attached]
CODE OF REGULATIONS OF FIFTH THIRD BANK
---------------------------------------
ARTICLE I
SHAREHOLDERS
Section 1. Meetings. The annual meeting of the Shareholders shall be
held at the principal office of the Corporation at such hour, as may be fixed in
the notice of such meeting, and on such date, not earlier than the second
Tuesday of January or later than the third Tuesday of April of each year, as
shall be fixed by the Board of Directors and communicated in writing to the
Shareholders not later than twenty (20) days prior to such meeting.
Section 2. Quorum. Shareholders, whether in person or by lawful
proxies, representing a majority in amount of the outstanding stock of the
Corporation, shall constitute a quorum at any Shareholders' meeting. If there be
less than a majority in amount of such stock at any meeting, the meeting may be
adjourned from time to time.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Election and Number. The Board of Directors shall be elected
by the Shareholders. The Board of Directors shall be composed of eighteen (18)
persons unless this number is changed by: (1) the Shareholders in accordance
with the applicable laws of Ohio or (2) the vote of a majority of the Directors
in office. The Directors may increase the number to not more than twenty four
(24) persons and may decrease the number to not less than fifteen (15) persons.
Any Director's office created by the Directors by reason of an increase in their
number may be filled by action of a majority of the Directors in office. Within
sixty (60) days of the election or appointment of each Director, the Director
shall take and subscribe to an oath to diligently and honestly perform the
duties of a director and to not knowingly violate, or permit to be violated, any
federal or Ohio banking law.
Section 2. Term. Directors shall hold office until the expiration of
the term for which they were elected, and shall continue in office until their
respective successors shall have been duly elected and qualified. Any such term
of office shall be no longer than three (3) years.
Section 3. Qualifications and Compensation. No person shall serve as a
Director who does not meet the qualification requirements of the applicable laws
of Ohio. Each Director shall be entitled to receive such compensation for
attendance at meetings of the Board of Directors or Committees thereof as the
Board of Directors may, from time to time, fix.
Section 4. Replacement or Removal. Directors may be replaced or removed
as provided by the laws of Ohio, provided that Directors may be removed without
cause only by an affirmative vote of not less than two-thirds (2/3) of the
outstanding shares of the Corporation.
Section 5. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the Board of Directors until an election to fill such vacancy
is had.
Section 6. Quorum. A majority of the whole authorized number of
Directors, as the same shall be established from time to time in accordance with
Section 1 of this Code of Regulations, shall constitute a quorum for a meeting
of the Directors, except that a majority of the Directors in office constitutes
a quorum for the filling of a vacancy or vacancies of the Board.
Section 7. Meetings of the Board. Regular meetings of the Board of
Directors shall be held on the third Tuesday of each month, or at such other
times as may be determined by the Board of Directors. Except as otherwise
provided by the laws of Ohio, any business may be transacted at any regular
meeting of the Board of Directors. Special meetings shall be held upon the call
of the Chairman of the Board, if one be elected, or by the President, or in
their absence, by a Vice President or any three (3) Directors.
Section 8. Notice of Meetings. The Secretary shall give notice of each
meeting of the Board of Directors, whether regular or special, to each member to
the Board.
Section 9. Committees.
9.1 Executive Committee. The Board of Directors shall appoint an
Executive Committee consisting of at least three (3) members of the Board of
Directors. Such executive Committee shall serve until their successors are
appointed. A majority of the members of said Committee shall constitute a
quorum. The Executive Committee shall conduct the business of the Corporation
and shall have all the powers of the Board of Directors when said Board is not
in session, except that of declaring a dividend. The Secretary of the
Corporation shall keep a record of the Committee's proceedings, which, signed by
the Chairman of the Committee, shall be presented at the meetings of the
Committees and at the meetings of the Board of Directors.
9.2 Other Committees. The Board of Directors shall appoint a Trust
Committee of which the Vice President and Trust Officer and at least three (3)
of its members who are not officers of the Corporation shall be members. The
Vice President and Trust Officer shall be Chairman of the Trust Committee. In
addition thereto, the Chairman of the Board, Chief Executive Officer or
President, may appoint such additional Committees, by and with the approval of
the Board of Directors, as may be deemed desirable or necessary.
Each such Committee, so appointed, shall have such powers and perform
such duties, not inconsistent with the applicable laws of Ohio, as may be
delegated to it by the Board of Directors.
Section 10. Indemnification. The Corporation shall indemnify each Director and
each Officer of the Corporation, and each person employed by the Corporation who
serves at the written request of the President of the Corporation as a director,
trustee, officer, employee, or agent of another corporation, domestic or
foreign, non-profit or for profit, partnership, joint venture, trust or other
enterprise, to the full extent permitted by the applicable laws of Ohio. The
term `Officer' as used in this Section shall include the Chairman of the Board
and the Vice Chairman of the Board if such offices are filled, the Chief
Executive Officer, the President, each Vice President, each Affiliate Director,
the Treasurer, the Secretary, the Cashier, the Controller, the Auditor, the
Counsel and any other person who is specifically designated as an `Officer'
within the operation of this Section by action of the Board of Directors. The
Corporation may indemnify assistant Officers, employees and others by action of
the Board of Directors to the extent permitted by the applicable laws of Ohio.
ARTICLE III
OFFICERS
Section 1. Election of Officers. The Board of Directors at the first
meeting after the election of Directors may elect one of its own number Chairman
of the Board and one of its own number Vice Chairman of the Board; and it shall
elect one of its own number President. It may also elect a Chief Executive
Officer, one or more Vice Presidents (one or more of whom may be designated
Executive Vice President and/or Senior Vice President and/or Vice President and
Trust Officer), one or more Affiliate Directors, a Cashier, a Secretary, and a
Treasurer, and it may appoint such other officers as the Board may deem
advisable. The Corporation may also elect a Chief Executive Officer, President,
Chief Financial Officer, Secretary and/or Treasurer for each affiliate of the
Corporation as determined appropriate from time to time by the Board of
Directors, with such officers having the name of such affiliate appended to his
of her title (e.g., President (Northeastern Ohio)). Any two or more offices may
be held by the same person. Officers so elected shall hold office during the
term of the Board by whom they are elected, subject to the power of the Board to
remove them at its discretion. They shall be bonded in such amount and with such
surety or securities as the Board of Directors shall require.
Section 2. Powers and Duties. The Chairman of the Board of Directors,
if the office be filled, otherwise the Vice Chairman of the Board of Directors,
if the office be filled, otherwise the President shall preside at all meetings
of the Shareholders and the Board of Directors, shall be responsible for the
supervision and control over the business of the Corporation and shall serve at
the pleasure of the Board of Directors. In the absence or disability of any of
the foregoing officers, their respective duties shall be performed by the
Chairman of the Board, the Vice Chairman of the Board, the President, or by a
Vice President specifically designated by the Board of Directors, in the order
named.
The Secretary, or in his absence or disability, the assistant
Secretary, shall act, ex officio, as Secretary of all meetings of the
Shareholders, the Board of Directors and the Executive Committee. The other
officers of the Corporation shall have such powers and duties as usually and
customarily attach to their offices.
ARTICLE IV
AFFILIATE BOARDS OF DIRECTORS
Section 1. Affiliate Boards of Directors. The Board of Directors may
elect such of its members and Officers of the Corporation (whether or not such
other persons are employed by the Corporation) in such numbers as the Board of
Directors deems necessary to form an affiliate board of directors for such
affiliates of the Corporation as determined appropriate from time to time by the
Board of Directors. As of December 29, 2000, such affiliates are anticipated to
be known as: Fifth Third Bank (Central Ohio), Fifth Third Bank (Ohio Valley),
Fifth Third Bank (Northwestern Ohio), Fifth Third Bank (Northeastern Ohio), and
Fifth Third Bank (Western Ohio). Any person designated as an Affiliate Director,
who is not employed by the Corporation, shall be a Non-Employee Officer of the
Corporation. Affiliate Directors so elected shall hold office during the term of
the Board by whom they are appointed, subject to the power of the Board to
remove them at its discretion and/or until such time as their successors have
been duly elected and qualified.
Section 2. Powers and Duties. The Board of Directors may delegate to
each Affiliate Board of Directors the power and authority to take by majority
vote of the members of such Affiliate Board of Directors any and all such
actions that may be legally delegated by the Board of Directors to any one or
more officers of the Corporation pursuant to the laws of Ohio. Any action taken
by any Affiliate Director pursuant to the direction given or authorization
granted to him or her by such Affiliate Board of Directors shall constitute the
valid and legal act of the Corporation pursuant to the approval and
authorization of the Board of Directors.
Section 3. Executive Committees. Each Affiliate Board of Directors
shall appoint an Executive Committee consisting of at least three (3) members of
the respective Affiliate Board of Directors. Such executive Committee shall
serve until their successors are appointed. The Board of Directors may delegate
to each such Executive Committee of an Affiliate Board of Directors any and all
such actions that may be legally delegated to the respective Affiliate Board of
Directors pursuant to the laws of Ohio. Any action taken by any officer of the
Corporation pursuant to the direction given or authorization granted to him or
her by such an Executive Committee shall constitute the valid and legal act of
the Corporation pursuant to the approval and authorization of the Board of
Directors.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Form. Certificates for shares of stock shall be signed by
the Chairman of the Board, or by the President, or by one of the Vice
Presidents, and by the Secretary or Treasurer or by the Cashier or an Assistant
Cashier, shall contain such statements as are required by applicable Ohio law,
and shall otherwise be in such form as the Board of Directors may, from time to
time, require.
Section 2. Transfers. Shares shall be transferable on the books of the
Corporation by the holders thereof in person or by duly authorized attorney upon
surrender of the certificates therefor with duly executed assignment endorsed
thereon or attached thereto.
Section 3. Closing of Transfer Books. The books for the transfer of the
stock of the Corporation shall be closed for at least five (5) days preceding
the annual meeting of Shareholders, and may be closed by order of the Board of
Directors, or Executive Committee, for a like period before any other meeting of
the Shareholders.
ARTICLE VI
AMENDMENTS
These regulations may be changed, and new regulations adopted by the
assent thereto in writing of at least two-thirds (2/3) of the Shareholders of
the Corporation in number and in amount or by a majority of such Shareholders in
number and in amount; at a meeting held for that purpose, notice of which has
been given by the President, the Secretary, or any two (2) Directors on behalf
of the Corporation, personally or by written notice, to each Shareholder, or in
such other manner as may then be authorized by the applicable laws of Ohio.
EXHIBIT 5
A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4
(NOT APPLICABLE)
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321 (B)
OF THE TRUST INDENTURE ACT OF 1939
[See Attached]
EXHIBIT 6 TO FORM T-1
CONSENT OF 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.
FIFTH THIRD BANK
By:/s/ Geoffrey D. Anderson
--------------------------------
Geoffrey D. Anderson
Its: Assistant Vice President
Dated: January 14, 2003
EXHIBIT 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
[See Attached]
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for September 30, 2002
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
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balance due from depository institutions (from Schedule RC-A): RCFD
----
-------------
a. Noninterest-bearing balances and currency and coin (1) 0081 932,991 1.a
----------------------- -------------
b. Interest-bearing balances (2) 0071 32,509 1.b
------------------------------------------------ -------------
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 12,908 2.a
------------------- -------------
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 13,880,429 2.b
----------------- -------------
3. Federal Funds sold and securities purchased under agreements to resell RCON
-------------
a. Federal funds sold in domestic offices B987 933,368 3.a
-------------
RCFD
b. Securities purchased under agreements to resell (3) B989 0 3.b
-------------------------- -------------
4. Loans and lease financing receivables (from Schedule RC-C):
-------------
a. Loans and leases held for sale 5369 2,558,712 4.a
---------------------------------------
-------------
-----------
b. Loans and leases, net of unearned income B528 22,815,854 4.b
----------------------------- -----------
c. LESS: Allowance for loan and lease losses 3123 335,331 4.c
---------------------------- -----------
d. Loans and leases, net of unearned income and
allowance (Item 4.b minus 4.c) B529 22,480,523 4.d
----------------------------------------------- -------------
5. Trading assets (from Schedule RC-D) 3545 5,147 5.
------------------------------------------ -------------
6. Premises and fixed assets (including capitalized leases) 2145 394,056 6.
--------------------- -------------
7. Other real estate owned (from Schedule RC-M) 2150 15,015 7.
--------------------------------- -------------
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M)
--------------------------------------------------------------- 2130 0 8.
-------------
9. Customers' liability to this bank on acceptances outstanding 2155 21,896 9.
----------------- -------------
10.Intangible assets 10.
a. Goodwill 3163 156,985 10.a
--------------------------------------------------------------- -------------
b. Other intangible assets (from Schedule RC-M) 0426 427,493 10.b
------------------------------ -------------
11.Other assets (from Schedule RC-F) 2160 1,903,953 11.
-------------------------------------------- -------------
12.Total Assets (sum of items 1 through 11) 2170 43,755,985 12.
------------------------------------- -------------
- -------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposits not held for trading.
(3) Includes all securities resale agreements in domestic and foreign offices, regardless of maturity.
Schedule RC - Continued
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RCON
----
------------
RC-E, part 1) RCON 2200 21,355,597 13.a.
---------------------------------------------- ---- ------------
1. Noninterest-bearing (1) 6631 1,339,504 13.a.1.
----------------------------------------- ------------
2. Interest-bearing 6636 20,016,093 13.a.2.
-------------------------------------------
------------
RCFN
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs ---- ------------
(from Schedule RC-E, part II) 2200 2,419,892 13.b.
------------------------------ ------------
RCFN
----
------------
1. Noninterest-bearing 6631 0 13.b1
--------------------------------------------- ------------
2. Interest-bearing 6636 2,419,892 13.b2
------------------------------------------------ ------------
14. Federal Funds purchased and securities sold under agreements to repurchase----------
RCON
---- ------------
a. Federal funds sold in domestic offices B993 6,758,013 14.a
------------
RCFD
---- ------------
b. Securities sold under agreements to repurchase (3) B995 2,974,276 14.b
------------
15. Trading liabilities (from Schedule RC-D) 3548 0 15
--------------------------------------- ------------
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases) (from Schedule RC-M): 3190 3,146,643 16
------------------------------------------ ------------
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 2920 21,896 18
---------------------------- ------------
19. Subordinated notes and debentures (4) 3200 609,663 19
----------------------------------------------- ------------
20. Other liabilities (from Schedule RC-G) 2930 2,382,665 20
---------------------------------------------- ------------
21. Total liabilities (sum of items 13 through 20) 2948 39,668,645 21
-------------------------------------- ------------
22. Minority interest in consolidated subsidiaries 3000 452,205 22
------------
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus 3838 0 23
-------------------------------------- ------------
24. Common Stock 3230 4,540 24
------------------------------------------------------------------------ ------------
25. Surplus (exclude all surplus related to preferred stock) 3839 1,240,811 25
------------
26. a. Retained earnings 3632 2,234,357 26.a.
------------
b. Accumulated other comprehensive income (5) B530 155,427 26.b.
------------
27. Other equity capital components (6) A130 0 27
------------------------------------------------- ------------
28. Total equity capital (sum of items 23 through 27) 3210 3,635,135 28
----------------------------------- ------------
29. Total liabilities, minority interest and equity capital (sum of items 21, 22
and 28) 3300 43,755,985 29
----------------------------------------------------------------------- ------------
- -----------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Report overnight Federal Home Loan Bank advances in Schedule RC, item 16, "other borrowed money."
(3) Includes all securities repurchase agreements in domestic and foreighn offices, regardless of maturity.
(4) Includes limited-life preferred stock and related surplus.
(5) Includes net unrealized holding gains (losses) on available-for-sale securities, accumulated net gains (losses) on cash flow
hedges, cumulative foreign currency translation adjustments, and minimum pension liability adjustments.
(6) includes treasury stock and unearned Employee Stock Ownership Plan shares.
Memorandum
To be reported only with the March Report of Condition
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the bank by RCFD Number
---- ------
independent external auditors as of any date during 2001
--------------------------- 6724 N/A
----- ------- M.1
1= Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank.
2= Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards
by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank
separately)
3= Attestation on bank management's assertion on the effectiveness of the bank's internal control over financial reporting by
a certified public accounting firm
4= Directors' examination of the bank conducted in accordance with generally accepted auditing standards by certified public
accounting firm (may be required by state chartering authority)
5= Director's examination of the bank performed by other external auditors (may be required by state chartering authority)
6= Review of the bank's financial statements by external auditors
7= Compilation of bank's financial statements by external auditors
8= Other audit procedures (excluding tax preparation work)
9= No external audit work
EXHIBIT 8
A COPY OF ANY ORDER PURSUANT TO WHICH THE FOREIGN TRUSTEE IS AUTHORIZED TO ACT
AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED UNDER THE ACT
(NOT APPLICABLE)
EXHIBIT 9
FOREIGN TRUSTEES ARE REQUIRED TO FILE A CONSENT TO SERVICE OF
PROCESS OF FORM F-X
(NOT APPLICABLE)
Exhibit 25.2
FORM T-1 File No. ____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(B)(2)
FIFTH THIRD BANK
(Exact name of trustee as specified in its charter)
OHIO
(Jurisdiction of incorporation or organization if not a national bank)
31-0854433
(I.R.S. Employer Identification No.)
38 Fountain Square Plaza, Cincinnati, Ohio
(Address of principal executive offices)
45263
-----
(Zip Code)
Paul L. Reynolds, 5th and Walnut Streets
Cincinnati, Ohio, 45263 (513) 579-5300
(Name, address and telephone number of agent for service)
FIRST PREFERRED CAPITAL TRUST IV
(Exact name of obligor as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
APPLIED FOR
(I.R.S. Employer Identification No.)
135 NORTH MERAMEC
ST. LOUIS, MISSOURI
(Address of principal executive offices)
63105
(Zip Code)
% TRUST PREFERRED SECURITIES
(Title of the indenture securities)
Item 1. General information.
Furnish the following information as to the trustee -
(a) Name and address of each examining or supervising authority to
which it is subject.
Ohio Superintendent of Banks
State Office Tower
30 E. Broad Street
Columbus, Ohio 43215
Federal Reserve Bank of Cleveland
East Sixth Street and Superior Avenue
Cleveland, Ohio 44101
Federal Deposit Insurance Corporation,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14 and 15 are not applicable by virtue of
the answer to Item 13.
Item 13. Defaults by the obligor.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any such default.
None.
(b) If the Trustee is a trustee under another indenture under
which any other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, or is trustee for more than
one outstanding series of securities under the indenture, state whether there
has been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
None.
Item 16. List of Exhibits.
List below all exhibits filed as a part of this statement of
eligibility.
(1) A copy of the Certificate of Incorporation of the trustee as
now in effect.
(2) A copy of the certificate of authority of the trustee to
commence business. (Included in Exhibit 1)
(3) A copy of the authorization of the trustee to exercise
corporate trust powers.
(4) A copy of the existing code of regulations of the trustee
incorporating amendments to date.
(5) A copy of each indenture referred to in Item 4.
(6) The consent of the trustee required by Section 321 (b) of the
Trust Indenture Act of 1939.
(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.
(8) A copy of any order pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified
or to be qualified under the Act.
(9) Foreign trustees are required to file a consent to service of
process of Form F-X
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Fifth Third Bank, a corporation organized and existing under the laws
of the State of Ohio, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Cincinnati and the State of Ohio, on the 14th day
of January, 2003.
FIFTH THIRD BANK
By: /s/ Geoffrey D. Anderson
-------------------------------
Geoffrey D. Anderson
Its: Assistant Vice President
EXHIBIT 1
CERTIFICATE OF INCORPORATION
OF THE TRUSTEE AS NOW IN EFFECT
AMENDED ARTICLES OF INCORPORATION
OF
FIFTH THIRD BANK, WESTERN OHIO
FIRST: The name of this Corporation shall be Fifth Third Bank.
SECOND: The place in Ohio where its principal office is to be located is
Cincinnati, Hamilton County, Ohio.
THIRD: This Corporation is formed for the purpose of (a) receiving on
deposit or in trust, moneys, securities and other valuable
property, on such terms as may be agreed, and of doing the
business of a savings bank and of a trust company; (b) disposing
of box vaults for safekeeping of valuables by lease or otherwise;
(c) investing and loaning the funds of the company and those
received by it on deposit or in trust; (d) doing a commercial
banking business; (e) doing the business of a special plan bank;
and (f) doing any other lawful act or activity for which banking
corporations may be formed under Ohio law; and in furtherance of
said purposes, to exercise all of the powers which may be lawfully
exercised by a corporation formed therefor, and to do all things
necessary or incident thereto.
FOURTH: The maximum number of shares which this Corporation is
authorized to have outstanding shall be Four Hundred
Fifty-Four Thousand Forty-Two (454,042) shares of common stock,
with a par value of Ten Dollars ($10.00) per share.
FIFTH: No holder of any share or shares of any class issued by this
Corporation shall be entitled as such, as a matter of
right, at any time, to subscribe for or purchase (i) shares
of any class issued by this Corporation, now or hereafter
authorized, (ii) securities of this Corporation convertible into
or exchangeable for shares of any class issued by this
Corporation, now or hereafter authorized, or (iii) securities
of this Corporation to which shall be attached or appertain to
any rights or options whether by the terms of such securities
or in the contracts, warrants, or other instruments (whether
transferable or non-transferable or separable or inseparable from
such securities) evidencing such rights or options entitling
the holders thereof to subscribe for or purchase shares of
any class issued by this Corporation, now or hereafter authorized;
it being the intent and is the effect of this Article Fifth to
fully eliminate any and all pre-emptive rights with respect to
the shares of any class issued by this Corporation now or
hereafter authorized.
SIXTH: When authorized by the affirmative vote of a majority of the
Board of Directors, without the action or approval of the
shareholders of this Corporation, and when approved in advance
by the Ohio Superintendent of Banks, this Corporation may
redeem, purchase, or contract to purchase, at any time and
from time to time, shares of any class issued by this
Corporation for such prices and upon and subject to such terms
and conditions that the Board of Directors may determine.
SEVENTH: These Amended Articles of Incorporation supersede and take the
place of the existing Articles of Incorporation.
EXHIBIT 2
CERTIFICATE OF AUTHORITY OF THE
TRUSTEE TO COMMENCE BUSINESS
(INCLUDED IN EXHIBIT 1)
EXHIBIT 3
A COPY OF THE AUTHORIZATION OF THE TRUSTEE
TO EXERCISE CORPORATE TRUST POWERS
[See Attached]
STATE OF OHIO
DIVISION OF FINANCIAL INSTITUTIONS
This is to certify that Fifth Third Bank, Cincinnati, Ohio, organized under the
laws of the State of Ohio has complied with the laws relating to trust companies
under Section 1111.04 of the Ohio Revised Code and is qualified to exercise
trust powers in Ohio.
Witness my hand at Columbus, Ohio, this 14th day of January, 2003.
/s/ F. Scott O'Donnell
-------------------------------------
F. Scott O'Donnell
Superintendent
Division of Financial Institutions
EXHIBIT 4
A COPY OF THE EXISTING CODE OF REGULATIONS OF THE TRUSTEE
INCORPORATING AMENDMENTS TO DATE
[See Attached]
CODE OF REGULATIONS OF FIFTH THIRD BANK
---------------------------------------
ARTICLE I
SHAREHOLDERS
Section 1. Meetings. The annual meeting of the Shareholders shall be
held at the principal office of the Corporation at such hour, as may be fixed in
the notice of such meeting, and on such date, not earlier than the second
Tuesday of January or later than the third Tuesday of April of each year, as
shall be fixed by the Board of Directors and communicated in writing to the
Shareholders not later than twenty (20) days prior to such meeting.
Section 2. Quorum. Shareholders, whether in person or by lawful
proxies, representing a majority in amount of the outstanding stock of the
Corporation, shall constitute a quorum at any Shareholders' meeting. If there be
less than a majority in amount of such stock at any meeting, the meeting may be
adjourned from time to time.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Election and Number. The Board of Directors shall be elected
by the Shareholders. The Board of Directors shall be composed of eighteen (18)
persons unless this number is changed by: (1) the Shareholders in accordance
with the applicable laws of Ohio or (2) the vote of a majority of the Directors
in office. The Directors may increase the number to not more than twenty four
(24) persons and may decrease the number to not less than fifteen (15) persons.
Any Director's office created by the Directors by reason of an increase in their
number may be filled by action of a majority of the Directors in office. Within
sixty (60) days of the election or appointment of each Director, the Director
shall take and subscribe to an oath to diligently and honestly perform the
duties of a director and to not knowingly violate, or permit to be violated, any
federal or Ohio banking law.
Section 2. Term. Directors shall hold office until the expiration of
the term for which they were elected, and shall continue in office until their
respective successors shall have been duly elected and qualified. Any such term
of office shall be no longer than three (3) years.
Section 3. Qualifications and Compensation. No person shall serve as a
Director who does not meet the qualification requirements of the applicable laws
of Ohio. Each Director shall be entitled to receive such compensation for
attendance at meetings of the Board of Directors or Committees thereof as the
Board of Directors may, from time to time, fix.
Section 4. Replacement or Removal. Directors may be replaced or removed
as provided by the laws of Ohio, provided that Directors may be removed without
cause only by an affirmative vote of not less than two-thirds (2/3) of the
outstanding shares of the Corporation.
Section 5. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the Board of Directors until an election to fill such vacancy
is had.
Section 6. Quorum. A majority of the whole authorized number of
Directors, as the same shall be established from time to time in accordance with
Section 1 of this Code of Regulations, shall constitute a quorum for a meeting
of the Directors, except that a majority of the Directors in office constitutes
a quorum for the filling of a vacancy or vacancies of the Board.
Section 7. Meetings of the Board. Regular meetings of the Board of
Directors shall be held on the third Tuesday of each month, or at such other
times as may be determined by the Board of Directors. Except as otherwise
provided by the laws of Ohio, any business may be transacted at any regular
meeting of the Board of Directors. Special meetings shall be held upon the call
of the Chairman of the Board, if one be elected, or by the President, or in
their absence, by a Vice President or any three (3) Directors.
Section 8. Notice of Meetings. The Secretary shall give notice of each
meeting of the Board of Directors, whether regular or special, to each member to
the Board.
Section 9. Committees.
9.1 Executive Committee. The Board of Directors shall appoint an
Executive Committee consisting of at least three (3) members of the Board of
Directors. Such executive Committee shall serve until their successors are
appointed. A majority of the members of said Committee shall constitute a
quorum. The Executive Committee shall conduct the business of the Corporation
and shall have all the powers of the Board of Directors when said Board is not
in session, except that of declaring a dividend. The Secretary of the
Corporation shall keep a record of the Committee's proceedings, which, signed by
the Chairman of the Committee, shall be presented at the meetings of the
Committees and at the meetings of the Board of Directors.
9.2 Other Committees. The Board of Directors shall appoint a Trust
Committee of which the Vice President and Trust Officer and at least three (3)
of its members who are not officers of the Corporation shall be members. The
Vice President and Trust Officer shall be Chairman of the Trust Committee. In
addition thereto, the Chairman of the Board, Chief Executive Officer or
President, may appoint such additional Committees, by and with the approval of
the Board of Directors, as may be deemed desirable or necessary.
Each such Committee, so appointed, shall have such powers and perform
such duties, not inconsistent with the applicable laws of Ohio, as may be
delegated to it by the Board of Directors.
Section 10. Indemnification. The Corporation shall indemnify each Director and
each Officer of the Corporation, and each person employed by the Corporation who
serves at the written request of the President of the Corporation as a director,
trustee, officer, employee, or agent of another corporation, domestic or
foreign, non-profit or for profit, partnership, joint venture, trust or other
enterprise, to the full extent permitted by the applicable laws of Ohio. The
term `Officer' as used in this Section shall include the Chairman of the Board
and the Vice Chairman of the Board if such offices are filled, the Chief
Executive Officer, the President, each Vice President, each Affiliate Director,
the Treasurer, the Secretary, the Cashier, the Controller, the Auditor, the
Counsel and any other person who is specifically designated as an `Officer'
within the operation of this Section by action of the Board of Directors. The
Corporation may indemnify assistant Officers, employees and others by action of
the Board of Directors to the extent permitted by the applicable laws of Ohio.
ARTICLE III
OFFICERS
Section 1. Election of Officers. The Board of Directors at the first
meeting after the election of Directors may elect one of its own number Chairman
of the Board and one of its own number Vice Chairman of the Board; and it shall
elect one of its own number President. It may also elect a Chief Executive
Officer, one or more Vice Presidents (one or more of whom may be designated
Executive Vice President and/or Senior Vice President and/or Vice President and
Trust Officer), one or more Affiliate Directors, a Cashier, a Secretary, and a
Treasurer, and it may appoint such other officers as the Board may deem
advisable. The Corporation may also elect a Chief Executive Officer, President,
Chief Financial Officer, Secretary and/or Treasurer for each affiliate of the
Corporation as determined appropriate from time to time by the Board of
Directors, with such officers having the name of such affiliate appended to his
of her title (e.g., President (Northeastern Ohio)). Any two or more offices may
be held by the same person. Officers so elected shall hold office during the
term of the Board by whom they are elected, subject to the power of the Board to
remove them at its discretion. They shall be bonded in such amount and with such
surety or securities as the Board of Directors shall require.
Section 2. Powers and Duties. The Chairman of the Board of Directors,
if the office be filled, otherwise the Vice Chairman of the Board of Directors,
if the office be filled, otherwise the President shall preside at all meetings
of the Shareholders and the Board of Directors, shall be responsible for the
supervision and control over the business of the Corporation and shall serve at
the pleasure of the Board of Directors. In the absence or disability of any of
the foregoing officers, their respective duties shall be performed by the
Chairman of the Board, the Vice Chairman of the Board, the President, or by a
Vice President specifically designated by the Board of Directors, in the order
named.
The Secretary, or in his absence or disability, the assistant
Secretary, shall act, ex officio, as Secretary of all meetings of the
Shareholders, the Board of Directors and the Executive Committee. The other
officers of the Corporation shall have such powers and duties as usually and
customarily attach to their offices.
ARTICLE IV
AFFILIATE BOARDS OF DIRECTORS
Section 1. Affiliate Boards of Directors. The Board of Directors may
elect such of its members and Officers of the Corporation (whether or not such
other persons are employed by the Corporation) in such numbers as the Board of
Directors deems necessary to form an affiliate board of directors for such
affiliates of the Corporation as determined appropriate from time to time by the
Board of Directors. As of December 29, 2000, such affiliates are anticipated to
be known as: Fifth Third Bank (Central Ohio), Fifth Third Bank (Ohio Valley),
Fifth Third Bank (Northwestern Ohio), Fifth Third Bank (Northeastern Ohio), and
Fifth Third Bank (Western Ohio). Any person designated as an Affiliate Director,
who is not employed by the Corporation, shall be a Non-Employee Officer of the
Corporation. Affiliate Directors so elected shall hold office during the term of
the Board by whom they are appointed, subject to the power of the Board to
remove them at its discretion and/or until such time as their successors have
been duly elected and qualified.
Section 2. Powers and Duties. The Board of Directors may delegate to
each Affiliate Board of Directors the power and authority to take by majority
vote of the members of such Affiliate Board of Directors any and all such
actions that may be legally delegated by the Board of Directors to any one or
more officers of the Corporation pursuant to the laws of Ohio. Any action taken
by any Affiliate Director pursuant to the direction given or authorization
granted to him or her by such Affiliate Board of Directors shall constitute the
valid and legal act of the Corporation pursuant to the approval and
authorization of the Board of Directors.
Section 3. Executive Committees. Each Affiliate Board of Directors
shall appoint an Executive Committee consisting of at least three (3) members of
the respective Affiliate Board of Directors. Such executive Committee shall
serve until their successors are appointed. The Board of Directors may delegate
to each such Executive Committee of an Affiliate Board of Directors any and all
such actions that may be legally delegated to the respective Affiliate Board of
Directors pursuant to the laws of Ohio. Any action taken by any officer of the
Corporation pursuant to the direction given or authorization granted to him or
her by such an Executive Committee shall constitute the valid and legal act of
the Corporation pursuant to the approval and authorization of the Board of
Directors.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Form. Certificates for shares of stock shall be signed by
the Chairman of the Board, or by the President, or by one of the Vice
Presidents, and by the Secretary or Treasurer or by the Cashier or an Assistant
Cashier, shall contain such statements as are required by applicable Ohio law,
and shall otherwise be in such form as the Board of Directors may, from time to
time, require.
Section 2. Transfers. Shares shall be transferable on the books of the
Corporation by the holders thereof in person or by duly authorized attorney upon
surrender of the certificates therefor with duly executed assignment endorsed
thereon or attached thereto.
Section 3. Closing of Transfer Books. The books for the transfer of the
stock of the Corporation shall be closed for at least five (5) days preceding
the annual meeting of Shareholders, and may be closed by order of the Board of
Directors, or Executive Committee, for a like period before any other meeting of
the Shareholders.
ARTICLE VI
AMENDMENTS
These regulations may be changed, and new regulations adopted by the
assent thereto in writing of at least two-thirds (2/3) of the Shareholders of
the Corporation in number and in amount or by a majority of such Shareholders in
number and in amount; at a meeting held for that purpose, notice of which has
been given by the President, the Secretary, or any two (2) Directors on behalf
of the Corporation, personally or by written notice, to each Shareholder, or in
such other manner as may then be authorized by the applicable laws of Ohio.
EXHIBIT 5
A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4
(NOT APPLICABLE)
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321 (B)
OF THE TRUST INDENTURE ACT OF 1939
[See Attached]
EXHIBIT 6 TO FORM T-1
CONSENT OF 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 IV of its % Trust 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.
FIFTH THIRD BANK
By:/s/ Geoffrey D. Anderson
---------------------------------
Geoffrey D. Anderson
Its: Assistant Vice President
Dated: January 14, 2003
EXHIBIT 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
[See Attached]
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for September 30, 2002
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
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balance due from depository institutions (from Schedule RC-A): RCFD
----
-------------
a. Noninterest-bearing balances and currency and coin (1) 0081 932,991 1.a
----------------------- -------------
b. Interest-bearing balances (2) 0071 32,509 1.b
------------------------------------------------ -------------
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 12,908 2.a
------------------- -------------
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 13,880,429 2.b
----------------- -------------
3. Federal Funds sold and securities purchased under agreements to resell RCON
-------------
a. Federal funds sold in domestic offices B987 933,368 3.a
-------------
RCFD
b. Securities purchased under agreements to resell (3) B989 0 3.b
-------------------------- -------------
4. Loans and lease financing receivables (from Schedule RC-C):
-------------
a. Loans and leases held for sale 5369 2,558,712 4.a
---------------------------------------
-------------
-----------
b. Loans and leases, net of unearned income B528 22,815,854 4.b
----------------------------- -----------
c. LESS: Allowance for loan and lease losses 3123 335,331 4.c
---------------------------- -----------
d. Loans and leases, net of unearned income and
allowance (Item 4.b minus 4.c) B529 22,480,523 4.d
----------------------------------------------- -------------
5. Trading assets (from Schedule RC-D) 3545 5,147 5.
------------------------------------------ -------------
6. Premises and fixed assets (including capitalized leases) 2145 394,056 6.
--------------------- -------------
7. Other real estate owned (from Schedule RC-M) 2150 15,015 7.
--------------------------------- -------------
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M)
--------------------------------------------------------------- 2130 0 8.
-------------
9. Customers' liability to this bank on acceptances outstanding 2155 21,896 9.
----------------- -------------
10.Intangible assets 10.
a. Goodwill 3163 156,985 10.a
--------------------------------------------------------------- -------------
b. Other intangible assets (from Schedule RC-M) 0426 427,493 10.b
------------------------------ -------------
11.Other assets (from Schedule RC-F) 2160 1,903,953 11.
-------------------------------------------- -------------
12.Total Assets (sum of items 1 through 11) 2170 43,755,985 12.
------------------------------------- -------------
- -------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposits not held for trading.
(3) Includes all securities resale agreements in domestic and foreign offices, regardless of maturity.
Schedule RC - Continued
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RCON
----
------------
RC-E, part 1) RCON 2200 21,355,597 13.a.
---------------------------------------------- ---- ------------
1. Noninterest-bearing (1) 6631 1,339,504 13.a.1.
----------------------------------------- ------------
2. Interest-bearing 6636 20,016,093 13.a.2.
-------------------------------------------
------------
RCFN
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs ---- ------------
(from Schedule RC-E, part II) 2200 2,419,892 13.b.
------------------------------ ------------
RCFN
----
------------
1. Noninterest-bearing 6631 0 13.b1
--------------------------------------------- ------------
2. Interest-bearing 6636 2,419,892 13.b2
------------------------------------------------ ------------
14. Federal Funds purchased and securities sold under agreements to repurchase----------
RCON
---- ------------
a. Federal funds sold in domestic offices B993 6,758,013 14.a
------------
RCFD
---- ------------
b. Securities sold under agreements to repurchase (3) B995 2,974,276 14.b
------------
15. Trading liabilities (from Schedule RC-D) 3548 0 15
--------------------------------------- ------------
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases) (from Schedule RC-M): 3190 3,146,643 16
------------------------------------------ ------------
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 2920 21,896 18
---------------------------- ------------
19. Subordinated notes and debentures (4) 3200 609,663 19
----------------------------------------------- ------------
20. Other liabilities (from Schedule RC-G) 2930 2,382,665 20
---------------------------------------------- ------------
21. Total liabilities (sum of items 13 through 20) 2948 39,668,645 21
-------------------------------------- ------------
22. Minority interest in consolidated subsidiaries 3000 452,205 22
------------
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus 3838 0 23
-------------------------------------- ------------
24. Common Stock 3230 4,540 24
------------------------------------------------------------------------ ------------
25. Surplus (exclude all surplus related to preferred stock) 3839 1,240,811 25
------------
26. a. Retained earnings 3632 2,234,357 26.a.
------------
b. Accumulated other comprehensive income (5) B530 155,427 26.b.
------------
27. Other equity capital components (6) A130 0 27
------------------------------------------------- ------------
28. Total equity capital (sum of items 23 through 27) 3210 3,635,135 28
----------------------------------- ------------
29. Total liabilities, minority interest and equity capital (sum of items 21, 22
and 28) 3300 43,755,985 29
----------------------------------------------------------------------- ------------
- -----------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Report overnight Federal Home Loan Bank advances in Schedule RC, item 16, "other borrowed money."
(3) Includes all securities repurchase agreements in domestic and foreighn offices, regardless of maturity.
(4) Includes limited-life preferred stock and related surplus.
(5) Includes net unrealized holding gains (losses) on available-for-sale securities, accumulated net gains (losses) on cash flow
hedges, cumulative foreign currency translation adjustments, and minimum pension liability adjustments.
(6) includes treasury stock and unearned Employee Stock Ownership Plan shares.
Memorandum
To be reported only with the March Report of Condition
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the bank by RCFD Number
---- ------
independent external auditors as of any date during 2001
--------------------------- 6724 N/A
----- ------- M.1
1= Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank.
2= Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards
by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank
separately)
3= Attestation on bank management's assertion on the effectiveness of the bank's internal control over financial reporting by
a certified public accounting firm
4= Directors' examination of the bank conducted in accordance with generally accepted auditing standards by certified public
accounting firm (may be required by state chartering authority)
5= Director's examination of the bank performed by other external auditors (may be required by state chartering authority)
6= Review of the bank's financial statements by external auditors
7= Compilation of bank's financial statements by external auditors
8= Other audit procedures (excluding tax preparation work)
9= No external audit work
EXHIBIT 8
A COPY OF ANY ORDER PURSUANT TO WHICH THE FOREIGN TRUSTEE IS AUTHORIZED TO ACT
AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED UNDER THE ACT
(NOT APPLICABLE)
EXHIBIT 9
FOREIGN TRUSTEES ARE REQUIRED TO FILE A CONSENT TO SERVICE OF
PROCESS OF FORM F-X
(NOT APPLICABLE)
Exhibit 25.3
FORM T-1 File No. ____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(B)(2)
FIFTH THIRD BANK
(Exact name of trustee as specified in its charter)
OHIO
(Jurisdiction of incorporation or organization if not a national bank)
31-0854433
(I.R.S. Employer Identification No.)
38 Fountain Square Plaza, Cincinnati, Ohio
(Address of principal executive offices)
45263
-----
(Zip Code)
Paul L. Reynolds, 5th and Walnut Streets
Cincinnati, Ohio, 45263 (513) 579-5300
(Name, address and telephone number of agent for service)
FIRST BANKS, INC.
(Exact name of obligor as specified in its charter)
MISSOURI
(State or other jurisdiction of incorporation or organization)
43-1175538
(I.R.S. Employer Identification No.)
135 NORTH MERAMEC
ST. LOUIS, MISSOURI
(Address of principal executive offices)
63105
(Zip Code)
GUARANTEE
(Title of the indenture securities)
Item 1. General information.
Furnish the following information as to the trustee -
(a) Name and address of each examining or supervising authority to
which it is subject.
Ohio Superintendent of Banks
State Office Tower
30 E. Broad Street
Columbus, Ohio 43215
Federal Reserve Bank of Cleveland
East Sixth Street and Superior Avenue
Cleveland, Ohio 44101
Federal Deposit Insurance Corporation,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None.
Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14 and 15 are not applicable by virtue of
the answer to Item 13.
Item 13. Defaults by the obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such default.
None.
(b) If the Trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
None.
Item 16. List of Exhibits.
List below all exhibits filed as a part of this statement of
eligibility.
(1) A copy of the Certificate of Incorporation of the trustee as
now in effect.
(2) A copy of the certificate of authority of the trustee to
commence business. (Included in Exhibit 1)
(3) A copy of the authorization of the trustee to exercise
corporate trust powers.
(4) A copy of the existing code of regulations of the trustee
incorporating amendments to date.
(5) A copy of each indenture referred to in Item 4.
(6) The consent of the trustee required by Section 321 (b) of the
Trust Indenture Act of 1939.
(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.
(8) A copy of any order pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified
or to be qualified under the Act.
(9) Foreign trustees are required to file a consent to service of
process of Form F-X
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Fifth Third Bank, a corporation organized and existing under the laws
of the State of Ohio, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Cincinnati and the State of Ohio, on the 14th day
of January, 2003.
FIFTH THIRD BANK
By: /s/ Geoffrey D. Anderson
---------------------------------
Geoffrey D. Anderson
Its: Assistant Vice President
EXHIBIT 1
CERTIFICATE OF INCORPORATION
OF THE TRUSTEE AS NOW IN EFFECT
AMENDED ARTICLES OF INCORPORATION
OF
FIFTH THIRD BANK, WESTERN OHIO
FIRST: The name of this Corporation shall be Fifth Third Bank.
SECOND: The place in Ohio where its principal office is to be located is
Cincinnati, Hamilton County, Ohio.
THIRD: This Corporation is formed for the purpose of (a) receiving on
deposit or in trust, moneys, securities and other valuable
property, on such terms as may be agreed, and of doing the
business of a savings bank and of a trust
company; (b) disposing of box vaults for safekeeping of valuables
by lease or otherwise; (c) investing and loaning the funds of the
company and those received by it on deposit or in trust; (d) doing
a commercial banking business; (e) doing the business of a
special plan bank; and (f) doing any other lawful act or
activity for which banking corporations may be formed under Ohio
law; and in furtherance of said purposes, to exercise all of the
powers which may be lawfully exercised by a corporation formed
therefor, and to do all things necessary or incident thereto.
FOURTH: The maximum number of shares which this Corporation is
authorized to have outstanding shall be Four Hundred
Fifty-Four Thousand Forty-Two (454,042) shares of common
stock, with a par value of Ten Dollars ($10.00) per share.
FIFTH: No holder of any share or shares of any class issued by this
Corporation shall be entitled as such, as a matter of right, at
any time, to subscribe for or purchase (i) shares of any
class issued by this Corporation, now or hereafter authorized,
(ii) securities of this Corporation convertible into or
exchangeable for shares of any class issued by this Corporation,
now or hereafter authorized, or (iii) securities of this
Corporation to which shall be attached or appertain to any
rights or options whether by the terms of such securities or
in the contracts, warrants, or other instruments (whether
transferable or non-transferable or separable or inseparable from
such securities) evidencing such rights or options entitling the
holders thereof to subscribe for or purchase shares of any class
issued by this Corporation, now or hereafter authorized; it
being the intent and is the effect of this
Article Fifth to fully eliminate any and all pre-emptive rights
with respect to the shares of any class issued by
this Corporation now or hereafter authorized.
SIXTH: When authorized by the affirmative vote of a majority of the
Board of Directors, without the action or approval of the
shareholders of this Corporation, and when approved in advance
by the Ohio Superintendent of Banks, this Corporation may
redeem, purchase, or contract to purchase, at any time and
from time to time, shares of any class issued by this
Corporation for such prices and upon and subject to such terms
and conditions that the Board of Directors may determine.
SEVENTH: These Amended Articles of Incorporation supersede and take the
place of the existing Articles of Incorporation.
EXHIBIT 2
CERTIFICATE OF AUTHORITY OF THE
TRUSTEE TO COMMENCE BUSINESS
(INCLUDED IN EXHIBIT 1)
EXHIBIT 3
A COPY OF THE AUTHORIZATION OF THE TRUSTEE
TO EXERCISE CORPORATE TRUST POWERS
[See Attached]
STATE OF OHIO
DIVISION OF FINANCIAL INSTITUTIONS
This is to certify that Fifth Third Bank, Cincinnati, Ohio, organized under the
laws of the State of Ohio has complied with the laws relating to trust companies
under Section 1111.04 of the Ohio Revised Code and is qualified to exercise
trust powers in Ohio.
Witness my hand at Columbus, Ohio, this 14th day of January, 2003.
/s/ F. Scott O'Donnell
---------------------------------------
F. Scott O'Donnell
Superintendent
Division of Financial Institutions
EXHIBIT 4
A COPY OF THE EXISTING CODE OF REGULATIONS OF THE TRUSTEE
INCORPORATING AMENDMENTS TO DATE
[See Attached]
CODE OF REGULATIONS OF FIFTH THIRD BANK
---------------------------------------
ARTICLE I
SHAREHOLDERS
Section 1. Meetings. The annual meeting of the Shareholders shall be
held at the principal office of the Corporation at such hour, as may be fixed in
the notice of such meeting, and on such date, not earlier than the second
Tuesday of January or later than the third Tuesday of April of each year, as
shall be fixed by the Board of Directors and communicated in writing to the
Shareholders not later than twenty (20) days prior to such meeting.
Section 2. Quorum. Shareholders, whether in person or by lawful
proxies, representing a majority in amount of the outstanding stock of the
Corporation, shall constitute a quorum at any Shareholders' meeting. If there be
less than a majority in amount of such stock at any meeting, the meeting may be
adjourned from time to time.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Election and Number. The Board of Directors shall be elected
by the Shareholders. The Board of Directors shall be composed of eighteen (18)
persons unless this number is changed by: (1) the Shareholders in accordance
with the applicable laws of Ohio or (2) the vote of a majority of the Directors
in office. The Directors may increase the number to not more than twenty four
(24) persons and may decrease the number to not less than fifteen (15) persons.
Any Director's office created by the Directors by reason of an increase in their
number may be filled by action of a majority of the Directors in office. Within
sixty (60) days of the election or appointment of each Director, the Director
shall take and subscribe to an oath to diligently and honestly perform the
duties of a director and to not knowingly violate, or permit to be violated, any
federal or Ohio banking law.
Section 2. Term. Directors shall hold office until the expiration of
the term for which they were elected, and shall continue in office until their
respective successors shall have been duly elected and qualified. Any such term
of office shall be no longer than three (3) years.
Section 3. Qualifications and Compensation. No person shall serve as a
Director who does not meet the qualification requirements of the applicable laws
of Ohio. Each Director shall be entitled to receive such compensation for
attendance at meetings of the Board of Directors or Committees thereof as the
Board of Directors may, from time to time, fix.
Section 4. Replacement or Removal. Directors may be replaced or removed
as provided by the laws of Ohio, provided that Directors may be removed without
cause only by an affirmative vote of not less than two-thirds (2/3) of the
outstanding shares of the Corporation.
Section 5. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the Board of Directors until an election to fill such vacancy
is had.
Section 6. Quorum. A majority of the whole authorized number of
Directors, as the same shall be established from time to time in accordance with
Section 1 of this Code of Regulations, shall constitute a quorum for a meeting
of the Directors, except that a majority of the Directors in office constitutes
a quorum for the filling of a vacancy or vacancies of the Board.
Section 7. Meetings of the Board. Regular meetings of the Board of
Directors shall be held on the third Tuesday of each month, or at such other
times as may be determined by the Board of Directors. Except as otherwise
provided by the laws of Ohio, any business may be transacted at any regular
meeting of the Board of Directors. Special meetings shall be held upon the call
of the Chairman of the Board, if one be elected, or by the President, or in
their absence, by a Vice President or any three (3) Directors.
Section 8. Notice of Meetings. The Secretary shall give notice of each
meeting of the Board of Directors, whether regular or special, to each member to
the Board.
Section 9. Committees.
9.1 Executive Committee. The Board of Directors shall appoint an
Executive Committee consisting of at least three (3) members of the Board of
Directors. Such executive Committee shall serve until their successors are
appointed. A majority of the members of said Committee shall constitute a
quorum. The Executive Committee shall conduct the business of the Corporation
and shall have all the powers of the Board of Directors when said Board is not
in session, except that of declaring a dividend. The Secretary of the
Corporation shall keep a record of the Committee's proceedings, which, signed by
the Chairman of the Committee, shall be presented at the meetings of the
Committees and at the meetings of the Board of Directors.
9.2 Other Committees. The Board of Directors shall appoint a Trust
Committee of which the Vice President and Trust Officer and at least three (3)
of its members who are not officers of the Corporation shall be members. The
Vice President and Trust Officer shall be Chairman of the Trust Committee. In
addition thereto, the Chairman of the Board, Chief Executive Officer or
President, may appoint such additional Committees, by and with the approval of
the Board of Directors, as may be deemed desirable or necessary.
Each such Committee, so appointed, shall have such powers and perform
such duties, not inconsistent with the applicable laws of Ohio, as may be
delegated to it by the Board of Directors.
Section 10. Indemnification. The Corporation shall indemnify each Director and
each Officer of the Corporation, and each person employed by the Corporation who
serves at the written request of the President of the Corporation as a director,
trustee, officer, employee, or agent of another corporation, domestic or
foreign, non-profit or for profit, partnership, joint venture, trust or other
enterprise, to the full extent permitted by the applicable laws of Ohio. The
term `Officer' as used in this Section shall include the Chairman of the Board
and the Vice Chairman of the Board if such offices are filled, the Chief
Executive Officer, the President, each Vice President, each Affiliate Director,
the Treasurer, the Secretary, the Cashier, the Controller, the Auditor, the
Counsel and any other person who is specifically designated as an `Officer'
within the operation of this Section by action of the Board of Directors. The
Corporation may indemnify assistant Officers, employees and others by action of
the Board of Directors to the extent permitted by the applicable laws of Ohio.
ARTICLE III
OFFICERS
Section 1. Election of Officers. The Board of Directors at the first
meeting after the election of Directors may elect one of its own number Chairman
of the Board and one of its own number Vice Chairman of the Board; and it shall
elect one of its own number President. It may also elect a Chief Executive
Officer, one or more Vice Presidents (one or more of whom may be designated
Executive Vice President and/or Senior Vice President and/or Vice President and
Trust Officer), one or more Affiliate Directors, a Cashier, a Secretary, and a
Treasurer, and it may appoint such other officers as the Board may deem
advisable. The Corporation may also elect a Chief Executive Officer, President,
Chief Financial Officer, Secretary and/or Treasurer for each affiliate of the
Corporation as determined appropriate from time to time by the Board of
Directors, with such officers having the name of such affiliate appended to his
of her title (e.g., President (Northeastern Ohio)). Any two or more offices may
be held by the same person. Officers so elected shall hold office during the
term of the Board by whom they are elected, subject to the power of the Board to
remove them at its discretion. They shall be bonded in such amount and with such
surety or securities as the Board of Directors shall require.
Section 2. Powers and Duties. The Chairman of the Board of Directors,
if the office be filled, otherwise the Vice Chairman of the Board of Directors,
if the office be filled, otherwise the President shall preside at all meetings
of the Shareholders and the Board of Directors, shall be responsible for the
supervision and control over the business of the Corporation and shall serve at
the pleasure of the Board of Directors. In the absence or disability of any of
the foregoing officers, their respective duties shall be performed by the
Chairman of the Board, the Vice Chairman of the Board, the President, or by a
Vice President specifically designated by the Board of Directors, in the order
named.
The Secretary, or in his absence or disability, the assistant
Secretary, shall act, ex officio, as Secretary of all meetings of the
Shareholders, the Board of Directors and the Executive Committee. The other
officers of the Corporation shall have such powers and duties as usually and
customarily attach to their offices.
ARTICLE IV
AFFILIATE BOARDS OF DIRECTORS
Section 1. Affiliate Boards of Directors. The Board of Directors may
elect such of its members and Officers of the Corporation (whether or not such
other persons are employed by the Corporation) in such numbers as the Board of
Directors deems necessary to form an affiliate board of directors for such
affiliates of the Corporation as determined appropriate from time to time by the
Board of Directors. As of December 29, 2000, such affiliates are anticipated to
be known as: Fifth Third Bank (Central Ohio), Fifth Third Bank (Ohio Valley),
Fifth Third Bank (Northwestern Ohio), Fifth Third Bank (Northeastern Ohio), and
Fifth Third Bank (Western Ohio). Any person designated as an Affiliate Director,
who is not employed by the Corporation, shall be a Non-Employee Officer of the
Corporation. Affiliate Directors so elected shall hold office during the term of
the Board by whom they are appointed, subject to the power of the Board to
remove them at its discretion and/or until such time as their successors have
been duly elected and qualified.
Section 2. Powers and Duties. The Board of Directors may delegate to
each Affiliate Board of Directors the power and authority to take by majority
vote of the members of such Affiliate Board of Directors any and all such
actions that may be legally delegated by the Board of Directors to any one or
more officers of the Corporation pursuant to the laws of Ohio. Any action taken
by any Affiliate Director pursuant to the direction given or authorization
granted to him or her by such Affiliate Board of Directors shall constitute the
valid and legal act of the Corporation pursuant to the approval and
authorization of the Board of Directors.
Section 3. Executive Committees. Each Affiliate Board of Directors
shall appoint an Executive Committee consisting of at least three (3) members of
the respective Affiliate Board of Directors. Such executive Committee shall
serve until their successors are appointed. The Board of Directors may delegate
to each such Executive Committee of an Affiliate Board of Directors any and all
such actions that may be legally delegated to the respective Affiliate Board of
Directors pursuant to the laws of Ohio. Any action taken by any officer of the
Corporation pursuant to the direction given or authorization granted to him or
her by such an Executive Committee shall constitute the valid and legal act of
the Corporation pursuant to the approval and authorization of the Board of
Directors.
ARTICLE V
CERTIFICATES OF STOCK
Section 1. Form. Certificates for shares of stock shall be signed by
the Chairman of the Board, or by the President, or by one of the Vice
Presidents, and by the Secretary or Treasurer or by the Cashier or an Assistant
Cashier, shall contain such statements as are required by applicable Ohio law,
and shall otherwise be in such form as the Board of Directors may, from time to
time, require.
Section 2. Transfers. Shares shall be transferable on the books of the
Corporation by the holders thereof in person or by duly authorized attorney upon
surrender of the certificates therefor with duly executed assignment endorsed
thereon or attached thereto.
Section 3. Closing of Transfer Books. The books for the transfer of the
stock of the Corporation shall be closed for at least five (5) days preceding
the annual meeting of Shareholders, and may be closed by order of the Board of
Directors, or Executive Committee, for a like period before any other meeting of
the Shareholders.
ARTICLE VI
AMENDMENTS
These regulations may be changed, and new regulations adopted by the
assent thereto in writing of at least two-thirds (2/3) of the Shareholders of
the Corporation in number and in amount or by a majority of such Shareholders in
number and in amount; at a meeting held for that purpose, notice of which has
been given by the President, the Secretary, or any two (2) Directors on behalf
of the Corporation, personally or by written notice, to each Shareholder, or in
such other manner as may then be authorized by the applicable laws of Ohio.
EXHIBIT 5
A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4
(NOT APPLICABLE)
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321 (B)
OF THE TRUST INDENTURE ACT OF 1939
[See Attached]
EXHIBIT 6 TO FORM T-1
CONSENT OF 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.
FIFTH THIRD BANK
By:/s/ Geoffrey D. Anderson
----------------------------------
Geoffrey D. Anderson
Its: Assistant Vice President
Dated: January 14, 2003
EXHIBIT 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
[See Attached]
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for September 30, 2002
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
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balance due from depository institutions (from Schedule RC-A): RCFD
----
-------------
a. Noninterest-bearing balances and currency and coin (1) 0081 932,991 1.a
----------------------- -------------
b. Interest-bearing balances (2) 0071 32,509 1.b
------------------------------------------------ -------------
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 12,908 2.a
------------------- -------------
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 13,880,429 2.b
----------------- -------------
3. Federal Funds sold and securities purchased under agreements to resell RCON
-------------
a. Federal funds sold in domestic offices B987 933,368 3.a
-------------
RCFD
b. Securities purchased under agreements to resell (3) B989 0 3.b
-------------------------- -------------
4. Loans and lease financing receivables (from Schedule RC-C):
-------------
a. Loans and leases held for sale 5369 2,558,712 4.a
---------------------------------------
-------------
-----------
b. Loans and leases, net of unearned income B528 22,815,854 4.b
----------------------------- -----------
c. LESS: Allowance for loan and lease losses 3123 335,331 4.c
---------------------------- -----------
d. Loans and leases, net of unearned income and
allowance (Item 4.b minus 4.c) B529 22,480,523 4.d
----------------------------------------------- -------------
5. Trading assets (from Schedule RC-D) 3545 5,147 5.
------------------------------------------ -------------
6. Premises and fixed assets (including capitalized leases) 2145 394,056 6.
--------------------- -------------
7. Other real estate owned (from Schedule RC-M) 2150 15,015 7.
--------------------------------- -------------
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M)
--------------------------------------------------------------- 2130 0 8.
-------------
9. Customers' liability to this bank on acceptances outstanding 2155 21,896 9.
----------------- -------------
10.Intangible assets 10.
a. Goodwill 3163 156,985 10.a
--------------------------------------------------------------- -------------
b. Other intangible assets (from Schedule RC-M) 0426 427,493 10.b
------------------------------ -------------
11.Other assets (from Schedule RC-F) 2160 1,903,953 11.
-------------------------------------------- -------------
12.Total Assets (sum of items 1 through 11) 2170 43,755,985 12.
------------------------------------- -------------
- -------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposits not held for trading.
(3) Includes all securities resale agreements in domestic and foreign offices, regardless of maturity.
Schedule RC - Continued
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RCON
----
------------
RC-E, part 1) RCON 2200 21,355,597 13.a.
---------------------------------------------- ---- ------------
1. Noninterest-bearing (1) 6631 1,339,504 13.a.1.
----------------------------------------- ------------
2. Interest-bearing 6636 20,016,093 13.a.2.
-------------------------------------------
------------
RCFN
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs ---- ------------
(from Schedule RC-E, part II) 2200 2,419,892 13.b.
------------------------------ ------------
RCFN
----
------------
1. Noninterest-bearing 6631 0 13.b1
--------------------------------------------- ------------
2. Interest-bearing 6636 2,419,892 13.b2
------------------------------------------------ ------------
14. Federal Funds purchased and securities sold under agreements to repurchase----------
RCON
---- ------------
a. Federal funds sold in domestic offices B993 6,758,013 14.a
------------
RCFD
---- ------------
b. Securities sold under agreements to repurchase (3) B995 2,974,276 14.b
------------
15. Trading liabilities (from Schedule RC-D) 3548 0 15
--------------------------------------- ------------
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases) (from Schedule RC-M): 3190 3,146,643 16
------------------------------------------ ------------
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 2920 21,896 18
---------------------------- ------------
19. Subordinated notes and debentures (4) 3200 609,663 19
----------------------------------------------- ------------
20. Other liabilities (from Schedule RC-G) 2930 2,382,665 20
---------------------------------------------- ------------
21. Total liabilities (sum of items 13 through 20) 2948 39,668,645 21
-------------------------------------- ------------
22. Minority interest in consolidated subsidiaries 3000 452,205 22
------------
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus 3838 0 23
-------------------------------------- ------------
24. Common Stock 3230 4,540 24
------------------------------------------------------------------------ ------------
25. Surplus (exclude all surplus related to preferred stock) 3839 1,240,811 25
------------
26. a. Retained earnings 3632 2,234,357 26.a.
------------
b. Accumulated other comprehensive income (5) B530 155,427 26.b.
------------
27. Other equity capital components (6) A130 0 27
------------------------------------------------- ------------
28. Total equity capital (sum of items 23 through 27) 3210 3,635,135 28
----------------------------------- ------------
29. Total liabilities, minority interest and equity capital (sum of items 21, 22
and 28) 3300 43,755,985 29
----------------------------------------------------------------------- ------------
- -----------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Report overnight Federal Home Loan Bank advances in Schedule RC, item 16, "other borrowed money."
(3) Includes all securities repurchase agreements in domestic and foreighn offices, regardless of maturity.
(4) Includes limited-life preferred stock and related surplus.
(5) Includes net unrealized holding gains (losses) on available-for-sale securities, accumulated net gains (losses) on cash flow
hedges, cumulative foreign currency translation adjustments, and minimum pension liability adjustments.
(6) includes treasury stock and unearned Employee Stock Ownership Plan shares.
Memorandum
To be reported only with the March Report of Condition
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the bank by RCFD Number
---- ------
independent external auditors as of any date during 2001
--------------------------- 6724 N/A
----- ------- M.1
1= Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank.
2= Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards
by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank
separately)
3= Attestation on bank management's assertion on the effectiveness of the bank's internal control over financial reporting by
a certified public accounting firm
4= Directors' examination of the bank conducted in accordance with generally accepted auditing standards by certified public
accounting firm (may be required by state chartering authority)
5= Director's examination of the bank performed by other external auditors (may be required by state chartering authority)
6= Review of the bank's financial statements by external auditors
7= Compilation of bank's financial statements by external auditors
8= Other audit procedures (excluding tax preparation work)
9= No external audit work
EXHIBIT 8
A COPY OF ANY ORDER PURSUANT TO WHICH THE FOREIGN TRUSTEE IS AUTHORIZED TO ACT
AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED UNDER THE ACT
(NOT APPLICABLE)
EXHIBIT 9
FOREIGN TRUSTEES ARE REQUIRED TO FILE A CONSENT TO SERVICE OF
PROCESS OF FORM F-X
(NOT APPLICABLE)