Exhibit 99.1
AGREEMENT TO MERGE
AND PLAN OF REORGANIZATION
dated as of April 21, 2005
by and among
Community Bancorp Inc.
Community National Bank
and
Rancho Xxxxxxxx Community Bank
AGREEMENT TO MERGE
AND PLAN OF REORGANIZATION
THIS AGREEMENT TO MERGE AND PLAN OF REORGANIZATION
("Agreement") is entered into as of April 21, 2005, among Community National
Bank, a national banking association organized under the laws of the United
States ("Bank"), being located in Escondido, California, Community Bancorp Inc.,
a corporation and registered bank holding company organized under the laws of
Delaware ("Company") located in Escondido, California, and Rancho Xxxxxxxx
Community Bank, a state bank organized under the laws of California ("Seller"),
located in Rancho Xxxxxxxx, California.
R E C I T A L S:
A. Bank is a wholly owned subsidiary of Company.
B. Company and Seller believe that it would be in their respective best
interests and in the best interests of their respective shareholders for Seller
to merge with and into Bank (the "Bank Merger"), all in accordance with the
terms set forth in this Agreement and applicable law.
C. The respective Boards of Directors of Company, Bank, and Seller have
adopted by at least majority vote resolutions approving and authorizing the Bank
Merger, this Agreement and the transactions contemplated herein.
D. Company, Bank, and Seller desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement.
E. It is the intention of the parties to this Agreement that the
business combination contemplated hereby be treated as a "reorganization" under
Section 368 of the Internal Revenue Code, as amended (the "Code").
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A G R E E M E N T
IN CONSIDERATION of the premises and mutual covenants hereinafter
contained, Company, Bank, and Seller agree as follows:
ARTICLE 1
DEFINITIONS AND DETERMINATIONS
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1.1 Definitions. Capitalized terms used in this Agreement shall have
the meanings set forth below:
"Agreement of Bank Merger" means the Agreement of Merger substantially
in the form attached as Exhibit A.
"Affiliate" means a person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the person specified.
"Aggregate Cash Amount" means the sum of (A) $10,000,000 and (B) the
product obtained by multiplying (i) the Per Share Amount by (ii) 0.350 by (iii)
the number of shares of Seller Stock issued after the date hereof upon exercise
of any outstanding Seller Stock Option prior to the Effective Time.
"Aggregate Company Share Amount" means the sum of (A) 600,000 shares of
Company Stock and (B) the product obtained by multiplying (i) the Exchange Ratio
by (ii) 0.650 by (iii) the number of shares of Seller Stock issued after the
date hereof upon exercise of any outstanding Seller Stock Option prior to the
Effective Time; provided, however, (I) if the Average Closing Price is less than
$26.35, the Aggregate Company Share Amount will be equal to (x) the quotient
obtained by dividing $15,810,000 by the Average Closing Price plus (y) the
product obtained by multiplying (i) the Exchange Ratio by (ii) 0.650 by (iii) by
the number of shares of Seller Stock issued after the date hereof upon exercise
of any outstanding Seller Stock Option prior to the Effective Time, or (II) if
the Average Closing Price is greater than $35.65, the Aggregate Company Share
Amount will be equal to the sum of (x) the quotient obtained by dividing
$21,390,000 by the Average Closing Price plus (y) the product obtained by
multiplying (i) the Exchange Ratio by (ii) 0.650 by (iii) the number of shares
of Seller Stock issued after the date hereof upon exercise of any outstanding
Seller Stock Option prior to the Effective Time.
"Average Closing Price" means the average of the daily closing price of
a share of Company's Stock reported over NASDAQ National Market during the
twenty (20) consecutive trading days ending at the end of the fifth trading day
immediately preceding the Effective Day.
"Bank" shall have the meaning given such term in the introductory
clause.
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"Bank Merger" shall have the meaning given such term in the Recitals.
"Bank Stock" means the common stock, $ 0.625 par value, of Bank.
"Benefit Arrangement" means any plan or arrangement maintained or
contributed to by a Party, including an "employee benefit plan" within the
meaning of ERISA, (but exclusive of base salary and base wages) which provides
for any form of current or deferred compensation, bonus, stock option, profit
sharing, benefit, retirement, incentive, group health or insurance, welfare or
similar plan or arrangement for the benefit of any employee, officer or director
or class of employee, officer or director, whether active or retired, of a
Party.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means any day other than a Saturday, Sunday or day on
which commercial banks in California are authorized or required to be closed.
"Cash Election" shall have the meaning given such term in Section
2.7(a).
"Cash Proration Factor" shall have the meaning given such term in
Section 2.7(c).
"Certificates" shall have the meaning given such term in Section
2.5(b).
"Change in Recommendation" shall have the meaning given such term in
Section 6.6.
"Charter Documents" means, with respect to any business organization,
any certificate of incorporation, articles of incorporation or articles of
association and any bylaws, each as amended to date, that regulate the basic
organization of the business organization and its internal relations.
"Closing" means the consummation of the Bank Merger on the Effective
Day at the main office of Company or at such other place as may be agreed upon
by the Parties.
"Code" shall have the meaning given such term in the Recitals.
"Combination Cash Election" shall have the meaning given such term in
Section 2.7(a).
"Combination Stock Election" shall have the meaning given such term in
Section 2.7(a).
"Company" shall have the meaning given such term in the introductory
clause.
"Company Benefit Arrangement" means the Benefit Arrangements maintained
or otherwise contributed to by Company or Bank.
"Company Property" shall have the meaning given such term in Section
3.24.
"Company Stock" means the common stock, $0.625 par value, of Company.
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"Company Stock Option" means any option issued pursuant to the Company
Stock Option Plans.
"Company Shareholders' Meeting" shall have the meaning given such term
in Section 5.10.
"Company Stock Option Plans" means the Company's 1985, 1993 and 2003
Stock Option Plans, as amended, and the 2005 Equity Based Compensation Plan.
"Competing Transaction" shall have the meaning given such term in
Section 6.12.
"Confidential Information" means all information exchanged heretofore
or hereafter between Seller and its affiliates and agents, on the one hand, and
Company and Bank, their affiliates and agents, on the other hand, which is
information related to the business, financial position or operations of the
Person responsible for furnishing the information or an Affiliate of such Person
(such information to include, by way of example only and not of limitation,
client lists, company manuals, internal memoranda, strategic plans, budgets,
forecasts/ projections, computer models, marketing plans, files relating to
loans originated by such Person, loans and loan participations purchased by such
Person from others, investments, deposits, leases, contracts, employment
records, minutes of board of directors meetings (and committees thereof) and
stockholder meetings, legal proceedings, reports of examination by any
Governmental Entity, and such other records or documents such Person may supply
to the other Party pursuant to the terms of this Agreement or as contemplated
hereby). Notwithstanding the foregoing, "Confidential Information" shall not
include any information that (i) at the time of disclosure or thereafter is
generally available to and known by the public (other than as a result of a
disclosure directly or indirectly by the recipients or any of their officers,
directors, employees or other representatives or agents), (ii) was available to
the recipients on a nonconfidential basis from a source other than Persons
responsible for furnishing the information, provided that such source is not and
was not bound by a confidentiality agreement with respect to the information, or
(iii) has been independently acquired or developed by the recipients without
violating any obligations under this Agreement.
"Consents" means every required consent, approval, absence of
disapproval, waiver or authorization from, or notice to, or registration or
filing with, any Person.
"DFI" shall mean the California Department of Financial Institutions.
"Directors Agreement" shall mean an agreement substantially in the form
attached as either as Exhibits 2.6(a), (b) or 2.6(c), as the case may be.
"Disclosure Letter" means a disclosure letter from the Party making the
disclosure and delivered to the other Party.
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"DPC Property" means voting securities, other personal property and
real property acquired by foreclosure or otherwise, in the ordinary course of
collecting a debt previously contracted for in good faith, retained with the
object of sale for any applicable statutory holding period, and recorded in the
holder's business records as such.
"Effective Day" means the day on which the Effective Time occurs.
"Effective Time" shall have the meaning given such term in Section 2.2.
"Election" shall have the meaning given such term in Section 2.7(a).
"Election Deadline" shall have the meaning given such term in Section
2.7(b).
"Election Form" shall have the meaning given such term in Section
2.7(a).
"Election Form Record Date" shall have the meaning given such term in
Section 2.7(a).
"Encumbrances" means any option, pledge, security interest, lien,
charge, encumbrance, mortgage, assessment, claim or restriction (whether on
voting, disposition or otherwise), whether imposed by agreement, understanding,
law or otherwise.
"Environmental Laws" shall have the meaning given such term in Section
4.25.
"Equity Securities" means capital stock or any options, rights,
warrants or other rights to subscribe for or purchase capital stock, or any
plans, contracts or commitments that are exercisable in such capital stock or
that provide for the issuance of, or grant the right to acquire, or are
convertible into, or exchangeable for, such capital stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all regulations thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means U.S. Stock Transfer Corporation or other
institution appointed by Company to reflect the exchange contemplated by Section
2.5 hereof.
"Exchange Fund" shall have the meaning given such term in Section 2.5.
"Exchange Ratio" means the number of shares of Company Stock into which
a share of Seller Stock shall be converted which shall be equal to the amount
(to the nearest ten thousandth) obtained by dividing the Per Share Amount by the
Average Closing Price.
"Executive Officer" means with respect to any company a natural Person
who participates or has the authority to participate (other than solely in the
capacity of a director) in major policy making functions of the company, whether
or not such Person has a title or is serving with salary or compensation and, in
the case of Seller, shall mean Seller's Chief Executive Officer and Chief
Financial Officer.
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"FDIC" means the Federal Deposit Insurance Corporation.
"Financial Statements of Company" means the audited consolidated
financial statements (balance sheets, statements of income, statements of cash
flow and statements of changes in financial position) and notes thereto of
Company and the related opinions thereon for the years ended December 31, 2002,
2003 and 2004 and the unaudited consolidated statements of financial condition
and statements of operations and cash flow of Company for the three months ended
March 31, 2005.
"Financial Statements of Seller" means the audited financial statements
(balance sheets, statements of income, statements of cash flow and statements of
changes in financial position) and notes thereto of Seller and the related
opinions thereon for the years ended December 31, 2002, 2003 and 2004 and the
unaudited statements of financial condition and statements of operations and
cash flow of Seller for the three months ended March 31, 2005.
"FRB" shall mean the Board of Governors of the Federal Reserve System.
"GAAP" means generally accepted accounting principles accepted in the
United States of America.
"Governmental Entity" means any court or tribunal in any jurisdiction
or any United States federal, state, district, domestic, or other administrative
agency, department, commission, board, bureau or other governmental authority or
instrumentality.
"Hazardous Materials" shall have the meaning given such term in Section
4.25.
"Immediate Family" shall mean a Person's spouse, parents, in-laws,
children and siblings.
"Insurance Amount" shall have the meaning given such term in Section
5.8.
"IRS" shall mean the Internal Revenue Service.
"Investment Securities" means any equity security or debt security as
defined in Statement of Financial Accounting Standard No. 115.
"Mailing Date" shall have the meaning given such term in Section
2.7(a).
"OCC" means the Office of the Comptroller of the Currency.
"Operating Loss" shall have the meaning given such term in Section
4.24.
"Party" means Company/Bank or Seller.
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"Per Share Amount" means the quotient of (i) the sum of (a) the product
of 600,000 multiplied by the Average Closing Price plus (b) 10,000,000, divided
by (ii) 950,114; provided, however, (A) if the Average Closing Price is less
than $26.35, the Per Share Amount will be $27.16, or (B) if the Average Closing
Price is greater than $35.65, the Per Share Amount will be $33.03.
"Per Share Cash Consideration" is an amount of cash, without interest,
equal to the Per Share Amount.
"Permit" means any United States federal, foreign, state, local or
other license, permit, franchise, and certificate of authority, order of
approval necessary or appropriate under applicable Rules.
"Person" means any natural person, corporation, trust, association,
unincorporated body, partnership, joint venture, Governmental Entity,
statutorily or regulatory sanctioned unit or any other person or organization.
"Proxy Statement" means the proxy statement that is included as part of
the S-4 and used to solicit proxies for the Seller Shareholders' Meeting, to
solicit proxies for the Company Shareholders' Meeting and to offer and sell the
shares of Company Stock to be issued in connection with the Bank Merger.
"Related Group of Persons" means Affiliates, members of an Immediate
Family or Persons the obligation of whom would be attributed to another Person
pursuant to the regulations promulgated by the SEC.
"Rule" means any statute or law or any judgment, decree, injunction,
order, regulation or rule of any Governmental Entity.
"S-4" means the registration statement on Form S-4, and such amendments
thereto, that is filed with the SEC to register the shares of Company Stock to
be issued in the Bank Merger under the Securities Act and includes the Proxy
Statement that will be used to solicit proxies for the Seller Shareholders'
Meeting.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" mean all reports filed by a Party hereto pursuant to the
Exchange Act with the SEC or other Governmental Entity.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" shall have the meaning given such term in the introductory
clause.
"Seller Benefit Arrangement" shall have the meaning given such term in
Section 4.18.
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"Seller Dissenting Shares" means shares of Seller Stock held by
dissenting shareholders pursuant to 12 USC 215a(b).
"Seller Perfected Dissenting Shares" means Dissenting Shares, which the
holders thereof have not withdrawn or caused to lose their status as Seller
Dissenting Shares.
"Seller Property" shall have the meaning given such term in Section
4.25.
"Seller Scheduled Contracts" shall have the meaning given such term in
Section 4.29.
"Seller Shareholders' Meeting" shall have the meaning given such term
in Section 6.6.
"Seller Stock" means the common stock, no par value of Seller.
"Seller Stock Option Plan" means Seller's 1997 Stock Option Plan.
"Seller Stock Options" means the stock options issued pursuant to
Seller's 1997 Stock Option Plan and as listed on Seller's Disclosure Letter
pursuant to Section 4.2.
"Stock Election" shall have the meaning given such term in Section
2.7(a).
"Stock Proration Factor" shall have the meaning given such term in
Section 2.7(c).
"Surviving Bank" means the Bank as the national banking association
surviving the Bank Merger of Seller with and into Bank.
"Tank" shall have the meaning given such term in Section 4.25.
"Third Party Consent" shall have the meaning given such term in
subsection (b) of Section 5.6.
"To the knowledge" shall have the meaning given such term in Section
11.13.
"Undesignated Shares" shall have the meaning given such term in Section
2.7(a).
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ARTICLE 2
CONSUMMATION OF THE BANK MERGER
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2.1 The Bank Merger; Plan of Reorganization.
(a) Subject to the terms and conditions of this Agreement and the
Agreement of Bank Merger, at the Effective Time, Seller will be merged into Bank
in accordance with the procedures specified in 12 USC 215a. Bank will be the
Surviving Bank in the Bank Merger. The Surviving Bank will continue operations
as a national banking association retaining the use of Bank's name. The main
office of the Surviving Bank will be 000 Xxxxxxxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxxxx, and it will maintain offices at the legally established offices of
Bank and Seller prior to the Bank Merger.
(b) The Charter Documents of Bank as in effect immediately prior to the
Effective Time shall continue in effect after the Bank Merger until thereafter
amended in accordance with applicable law and the members of the Board of
Directors and the Executive Officers of Bank immediately prior to the Bank
Merger shall continue in their respective positions after the Bank Merger and be
the Board of Directors and Executive Officers of the Surviving Bank; provided,
however, that Bank shall have taken prior to the Effective Time all necessary
steps so that at the Effective Time (i) the number of directors of Bank shall be
increased by one and (ii) Xxxx X. Xxxxxxx, the current Chairman and Chief
Executive Officer of Seller shall be added to the Board of Directors of Bank and
shall serve until the earlier of his resignation or until his successor is duly
elected and qualified.
(c) The Charter Documents of Company as in effect immediately prior to
the Effective Time shall continue in effect after the Bank Merger until
thereafter amended in accordance with applicable law, the members of the Board
of Directors and the Executive Officers of Company immediately prior to the Bank
Merger shall continue in their respective positions after the Bank Merger and be
the Board of Directors and Executive Officers of Company and the operations of
Company shall continue in effect after the Bank Merger; provided, however, that
Company shall have taken prior to the Effective Time all necessary steps so that
at the Effective Time (i) the number of directors of Company shall be increased
by one and (ii) Xxxx X. Xxxxxxx, the current Chairman and Chief Executive
Officer of Seller shall be added to the Board of Directors of Company and shall
serve until the earlier of his resignation or until his successor is duly
elected and qualified.
(d) At the Effective Time, the corporate existence of Seller shall be
merged and continued in Bank under Bank's certificate of authority. All assets,
rights, franchises, titles and interests of Seller and Bank, in and to every
type of property (real, personal and mixed, including all the right, title and
interest to Seller's names, trade names, service marks and the like) and choses
in action shall be transferred to and vested in Surviving Bank by virtue of the
Bank Merger without any deed or other transfer, and Bank, without order or
action on the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises and interests in the same manner and to the same extent
that such rights, franchises and interests were held by Seller and Bank at the
Effective Time. At the Effective Time, the Surviving Bank shall be liable for
all liabilities of Seller and Bank, and all debts, liabilities, obligations and
contracts of Seller and Bank, whether matured or unmatured, accrued, absolute,
contingent or otherwise, and whether or not reflected or reserved against on
balance sheets, books of accounts or records of Seller and Bank, shall be those
of Surviving Bank; and all rights of creditors or other obligees and all liens
on property of Seller and Bank shall be preserved unimpaired.
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2.2 Effective Time. The Closing shall take place as soon as practicable
following (i) the satisfaction or waiver of the conditions set forth in Sections
8.1, 8.2 and 8.3, (ii) receipt of approval of all required Governmental Entities
for the Bank Merger, and (iii) the expiration of all required waiting periods,
or such other time and date as to which the Parties may agree. The Merger shall
be effective at the date and time specified in a merger approval issued by the
OCC. Such time is referred to herein as the "Effective Time."
2.3 Conversion of Shares. At the Effective Time and pursuant to the
Agreement of Bank Merger:
(a) Subject to the exceptions and limitations in Section 2.4, each
outstanding share of Seller Stock shall, by virtue of the Bank Merger, be
converted into the right to receive, at the election of the holder thereof as
provided in Section 2.7, either:
(1) shares of Company Stock in accordance with the Exchange
Ratio; or
(2) cash in the amount of the Per Share Cash Consideration.
(b) Each outstanding share of Company Stock shall remain outstanding
and shall not be converted or otherwise affected by the Bank Merger.
2.4 Certain Exceptions and Limitations. (A) Any shares of Seller Stock
held by Company or any subsidiary of Company (other than shares held in a
fiduciary capacity or as DPC Property) will be canceled at the Effective Time;
(B) Seller Perfected Dissenting Shares shall not be converted, but shall, after
the Effective Time, be entitled only to such rights as are granted them by 12
USC 215a(b) (each dissenting shareholder who is entitled to payment for his
shares of Seller Stock shall receive such payment in an amount as determined
pursuant to 12 USC 215a(b)), and (C) no fractional shares of Company Stock shall
be issued in the Bank Merger and, in lieu thereof, each holder of Seller Stock
who would otherwise be entitled to receive a fractional share shall receive an
amount in cash equal to the product (calculated to the nearest hundredth)
obtained by multiplying such fractional share interest by the Per Share Cash
Consideration.
2.5 Exchange Procedures.
(a) As of the Effective Time, Company shall have deposited with the
Exchange Agent for the benefit of the holders of shares of Seller Stock, for
exchange in accordance with this Section 2.5 through the Exchange Agent,
certificates representing the shares of Company Stock issuable pursuant to
Section 2.3 and funds in an amount not less than the amount of cash payable
pursuant to Elections (as hereinafter defined) and to fractional shares of
Company Stock which would otherwise be payable in connection with Section 2.3
hereof, but for the operation of Section 2.4 of this Agreement (collectively,
the "Exchange Fund").
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(b) Company shall direct the Exchange Agent to mail on the Mailing Date
(as hereinafter defined) to each holder of record of a certificate or
certificates of Seller Stock (the "Certificates"): (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent), (ii) an Election Form (as hereinafter defined), and (iii)
instructions for use in effecting the surrender of the Certificates. Upon
surrendering of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Company, together with such letters
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor the consideration provided herein (subject to
the provisions of Section 2.7), and the Certificate so surrendered shall
forthwith be canceled. In the event a Certificate is surrendered representing
Seller Stock, the transfer of ownership which is not registered in the transfer
records of Seller, the consideration provided herein will be paid if the
Certificate representing such Seller Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.5 and except as provided in
subsection (g) hereof, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
consideration provided herein. Notwithstanding anything to the contrary set
forth herein, if any holder of shares of Seller Stock should be unable to
surrender the Certificates for such shares, because they have been lost or
destroyed, such holder may deliver in lieu thereof, in the discretion of
Company, such bond in form and substance and with surety reasonably satisfactory
to Company and thereafter shall be entitled to receive the consideration
provided herein. No interest shall be paid on the Per Share Cash Consideration
(as hereinafter defined).
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Company Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate who
is to receive Company Stock pursuant to the provisions hereof until the holder
of record of such Certificate shall surrender such Certificate. Subject to the
effect of applicable laws, following surrender of any such Certificate by a
holder receiving Company Stock pursuant to the provisions hereof, there shall be
paid to the record holder of the Certificates representing whole shares of
Company Stock issued in exchange therefore, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
Company Stock to which such holder is entitled pursuant to Section 2.4 and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Company
Stock, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Company Stock.
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(d) There shall be no further registration of transfers on the stock
transfer books of Seller or Company of the shares of Seller Stock, which were
outstanding immediately prior to the Effective Time. If after the Effective
Time, Certificates are presented to Company for any reason, they shall be
canceled and exchanged as provided in this Agreement.
(e) Any portion of the Exchange Fund which remains undistributed to the
shareholders of Seller following the passage of six months after the Effective
Time shall be delivered to Company, upon demand, and any shareholders of Seller
who have not theretofore complied with this Section 2.5 shall thereafter look
only to Company for payment of their claim for the consideration provided
herein.
(f) Neither Company nor Seller shall be liable to any holder of shares
of Seller Stock for such shares (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(g) The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to the shares of Company Stock held by it from
time to time hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect to such shares of Company
Stock for the account of the Persons entitled thereto. Former shareholders of
record of Seller Stock who are to receive shares of Company Stock pursuant to
the provisions hereof shall be entitled to vote after the Effective Time at any
meeting of Company shareholders the number of whole shares of Company Stock into
which their respective shares of Seller Stock are converted, regardless of
whether such holders have exchanged their Certificates for certificates
representing Company Stock in accordance with the provisions of this Agreement.
2.6 Directors Agreements. Concurrently with the execution of this
Agreement, Seller shall cause each of its directors to enter into a Directors
Agreement (substantially in the form of Exhibit 2.6(a)); provided, however, that
in lieu of such agreement, Seller shall cause Seller's chief executive officer
to enter into a Directors Agreement (substantially in the form of Exhibit
2.6(b)) and Seller's chief financial officer to enter into a Directors Agreement
(substantially in the form of Exhibit 2.6(c)).
2.7 Election and Proration Procedures.
(a) An election form and other appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates theretofore representing Seller Stock shall pass
only upon delivery of such Certificates to the Exchange Agent) in such form as
Company and Seller shall mutually agree ("Election Form") shall be mailed no
less than 35 days prior to the anticipated Effective Time or on such other date
as Seller and Company shall mutually agree ("Mailing Date") to each holder of
record of Seller Stock as of five Business Days prior to the Mailing Date
("Election Form Record Date"). Company shall make available one or more Election
Forms as may be reasonably requested by all persons who become holders (or
beneficial owners) of Seller Stock after the Election Form Record Date and prior
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to the Election Deadline (as defined below), and Seller shall provide to the
Exchange Agent all information reasonably necessary for it to perform its
obligations as specified herein. Each Election Form shall permit the holder (or
the beneficial owner through appropriate and customary documentation and
instructions) to elect (an "Election") to receive either (i) Company Stock (a
"Stock Election") with respect to all of such holder's Seller Stock, (ii) cash
(a "Cash Election") with respect to all of such holder's Seller Stock, or (iii)
a specified number of shares of Seller Stock to receive Company Stock (a
"Combination Stock Election") and a specified number of shares of Seller Stock
to receive cash (a "Combination Cash Election"), subject to the provisions
contained in this Agreement. Any Seller Stock (other than Seller Dissenting
Shares) with respect to which the holder (or the beneficial owner, as the case
may be) shall not have submitted to the Exchange Agent, an effective, properly
completed Election Form received prior to the Election Deadline shall be deemed
to be "Undesignated Shares" hereunder.
(b) Any Election shall have been properly made and effective only if
the Exchange Agent shall have actually received a properly completed Election
Form by 5:00 P.M. California time on or before the 30th day following the
Mailing Date, or such other time and date as Company and Seller may mutually
agree (the "Election Deadline"). An Election Form shall be deemed properly
completed only if an Election is indicated for each share of Seller Stock
covered by such Election Form and if accompanied by one or more Certificates (or
customary affidavits and indemnification regarding the loss or destruction of
such Certificates or the guaranteed delivery of such Certificates) representing
all shares of Seller Stock covered by such Election Form, together with duly
executed transmittal materials included in or required by the Election Form. Any
Election Form may be revoked or changed by the person submitting such Election
Form at or prior to the Election Deadline. In the event an Election Form is
revoked prior to the Election Deadline, the shares of Seller Stock represented
by such Election Form shall automatically become Undesignated Shares unless and
until a new Election is properly completed and made with respect to such shares
on or before the Election Deadline, and Company shall cause the Certificates
representing such shares of Seller Stock to be promptly returned without charge
to the person submitting the revoked Election Form upon written request to that
effect from the holder who submitted such Election Form. Subject to the terms of
this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any decisions of Company and Seller required by the Exchange
Agent and made in good faith in determining such matters shall be binding and
conclusive. The Exchange Agent shall notify as soon as reasonably possible any
person of any material defect in his or her Election Form.
14
(c) Company shall use its best efforts to cause the Exchange Agent to
effect the allocation among the holders of Seller Stock of rights to receive
Company Stock or cash in the Bank Merger as follows:
(i) If the conversion of shares of Seller Stock for which Cash
Election and Combination Cash Elections shall have effectively
been made would result in a number of shares of Company Stock
being issued that is greater than the Aggregate Company Share
Amount (which shall be determined for this purpose on the
assumption that all shares of Seller Stock [other than those
for which Cash Elections or Combination Cash Elections have
been made] would be entitled to receive Company Stock,) then,
to the extent necessary so that the number of shares of
Company Stock to be issued in the Bank Merger shall be equal
to the Aggregate Company Share Amount, the Exchange Agent
shall make the following allocations and adjustments in the
following order:
(1) shares of Seller Stock for which effective Cash Elections
or Combination Cash Elections have been made shall be
converted into the right to receive cash in an amount equal to
the Per Share Cash Consideration;
(2) the Exchange Agent shall select by lot such number of
holders of Undesignated Shares to receive the Per Share Cash
Consideration as shall be necessary so that the shares of
Company Stock to be received by other holders of Undesignated
Shares, when combined with the number of shares of Company
Stock for which Stock Elections or Combination Stock Elections
have been made shall be equal to the Aggregate Company Share
Amount. If all Undesignated Shares are converted into the
right to receive the Per Share Cash Consideration and the
shares for which Stock Election and Combination Stock
Elections are still greater than the Aggregate Company Share
Amount, then;
(3) a stock proration factor (the "Stock Proration Factor")
shall be determined by dividing (x) the Aggregate Company
Share Amount by (y) the product of (i) the total number of
shares of Seller Stock with respect to which effective Stock
Elections and Combination Stock Elections were made multiplied
by (ii) the Exchange Ratio. Each holder of Seller Stock who
made an effective Stock Election or Combination Stock Election
shall be entitled to:
(a) the number of shares of Company Stock equal to
the product of (x) the Exchange Ratio, multiplied by (y) the
number of shares of Seller Stock covered by such Stock
Election or Combination Stock Election, multiplied by (z) the
Stock Proration Factor; and
(b) cash in an amount equal to the product of (x) the
Per Share Cash Consideration, multiplied by (y) the number of
shares Seller Stock covered by such Stock Election or
Combination Stock Election, multiplied by (z) one minus the
Stock Proration Factor.
15
(ii) If the conversion of the shares of Seller Stock for which
Stock Elections and Combination Stock Elections shall have
effectively been made (based upon the Exchange Ratio) would
result in a number of shares of Company Stock being issued
that is less than the Aggregate Company Share Amount (which
shall be determined for this purpose on the assumption that
all shares of Seller Stock [other than those for which Stock
Elections or Combination Stock Elections have been made] would
be entitled to receive the Per Share Cash Consideration),
then, to the extent necessary so that the number of shares of
Company Stock to be issued in the Bank Merger shall be equal
to the Aggregate Company Share Amount, the Exchange Agent
shall make the following allocations and adjustments in the
following order:
(1) each holder of Seller Stock who made an effective Stock
Election or Combination Stock Election shall receive the
number of shares of Company Stock equal to the product of the
Exchange Ratio multiplied by the number of shares of Seller
Stock covered by such Stock Election or Combination Stock
Election;
(2) the Exchange Agent shall select by lot such number of
holders of Undesignated
Shares to receive Company Stock as shall be necessary so that
the shares of Company Stock to be received by those holders,
when combined with the number of shares of Company Stock for
which a Stock Election or Combination Stock Election has been
made shall be equal to at least the Aggregate Company Share
Amount. If all Undesignated Shares plus all shares as to which
Stock Elections and Combination Stock Elections have been made
together are still less than the Aggregate Company Share
Amount, then;
(3) a cash proration factor (the "Cash Proration Factor")
shall be determined by dividing (x) the Aggregate
Company Share Amount (less the product of (i) the sum
of the shares for which an effective Stock Election and
Combination Stock Election has been made plus all the
Undesignated Shares multiplied by (ii) the Exchange
Ratio) by (y) the product of (i) the sum of the total
number of shares of Seller Stock with respect to which
effective Cash Elections and Combination Cash Elections
were made multiplied by (ii) the Exchange Ratio. Each
holder of Seller Stock who made an effective Cash
Election or Combination Cash Election shall be entitled to:
(a) cash equal to the product of (x) the Per Share Cash
Consideration, multiplied by (y) the number of shares
of Seller Stock covered by such Cash Election or
Combination Cash Election, multiplied by (z) one minus
the Cash Proration Factor; and
16
(b) the number of shares of Company Stock equal to the
product of (x) the Exchange Ratio, multiplied by (y)
the number of shares of Seller Stock covered by such
Cash Election or Combination Cash Election, multiplied
by (z) the Cash Proration Factor.
(iii) If the aggregate number of shares of Seller Stock for
which Stock Elections and Combination Stock Elections shall
have effectively been made would result in a number of shares
of Company Stock being issued that is equal to the Aggregate
Company Share Amount,
(1) the shares of Seller Stock for which effective Stock
Elections and Combination Stock Elections have been made shall
be converted into the right to receive Company Stock equal to
the product of the Exchange Ratio multiplied by the number of
shares of Seller Stock covered by such Stock Elections and
Combination of Stock Elections;
(2) the shares of Seller Stock for which effective Cash
Elections and Combination Cash Elections have been made shall
be converted into the right to receive the Per Share Cash
Consideration; and
(3) the Undesignated Shares shall be converted into the right
to receive the Per Share Cash Consideration.
(iv) Notwithstanding any other provision of this Agreement,
if, after applying the allocation rules set forth in the
preceding subsections of this Section 2.7(c), the number of
shares of Company Stock that would be issued pursuant to the
Bank Merger is less than the Aggregate Company Share Amount or
more than the Aggregate Company Share Amount, Company shall be
authorized to reallocate shares of Company Stock and cash
among the holders of the Seller Stock in good faith and in
such a manner as Company reasonably determines to be fair and
equitable, or to vary the number of shares of Company Stock to
be issued in the Bank Merger, in a manner such that the number
of shares of Company Stock to be issued in the Bank Merger
shall be equal to the Aggregate Company Share Amount.
(v) Notwithstanding any other provision of this Agreement
(other than Section 2.7(c)(iv) hereof), if any share of Seller
Dissenting Shares fails to become Seller Perfected Dissenting
Shares, such Seller Dissenting Shares shall automatically be
converted into and represent the right to receive the
consideration for such shares provided in this Agreement,
without interest thereon. The consideration payable for any
such shares of Seller Dissenting Stock shall be payable in
cash, in shares of Company Stock, or in such combination of
cash and Company Stock as shall be determined by Company as
being necessary or appropriate to preserve the status of the
Bank Merger as a "reorganization" within the meaning of
section 368(a) of the Code.
17
(d) The calculations required by Section 2.7(c) shall be prepared by
Company prior to the Effective Time and shall be set forth in a certificate
executed by the Chief Financial Officer of Company and furnished to Seller at
least two Business Days prior to the Effective Time showing the manner of
calculation in reasonable detail. Any calculation of a portion of a share of
Company Stock shall be rounded to the nearest ten-thousandth of a share, and any
cash payment shall be rounded to the nearest cent.
2.8 Stock Options. Subject to the terms of the Seller Stock Option
Plan, each person who holds one or more options to purchase Seller Stock shall
be permitted to exercise any options granted under the Seller Stock Option Plan,
prior to the Effective Time of the Bank Merger, in accordance with the terms of
the Seller Stock Option Plan. Seller will facilitate the exercise of those
options by allowing those options to be exercised and taxes paid by Seller or
holder as permitted by applicable law. For any options not exercised prior to
the Effective Time of the Bank Merger, each optionee shall receive, at his
election, for each option share (i) cash, in consideration of the termination of
such option, equal to the difference between the Per Share Cash Consideration
and the exercise price per share of the Seller Stock Option or (ii) shares of
Company Stock, in consideration of the termination of such option, equal to the
difference between the Per Share Cash Consideration and the exercise price per
share of the Seller Stock Option divided by the Average Closing Price.
Additionally, Xxxx X. Xxxxxxx, the current Chairman and Chief Executive Officer
of Seller, and continuing employees may receive a substitute option pursuant to
Section 9.2 hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY AND BANK
--------------------------------------------------
Company and Bank represent and warrant to Seller as follows:
3.1 Incorporation, Standing and Power. Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Delaware and is registered as a bank holding company under
the BHC Act. Bank has been duly incorporated and is validly existing as a
national banking association under the laws of the United States and is
authorized by the OCC to conduct a general banking business. Bank's deposits are
insured by the FDIC in the manner and to the extent provided by law. Company and
Bank have all requisite corporate power and authority to own, lease and operate
their respective properties and assets and to carry on their respective
businesses as presently conducted. Neither the scope of the business of Company
or Bank nor the location of any of their respective properties requires that
Company or Bank be licensed to do business in any jurisdiction other than in
California where the failure to be so licensed would, individually or in the
aggregate, have a materially adverse effect on the financial condition, results
of operation or business of Company on a consolidated basis.
18
3.2 Capitalization. As of March 31, 2005, the authorized capital stock
of Company consisted of (i) 10,000,000 shares of Company Stock, of which
5,263,123 shares were outstanding and (ii) 1,000,000 shares of $0.001 par value
preferred stock of which no shares were outstanding. As of the date of this
Agreement, the authorized capital stock of Bank consists of 40,000,000 shares of
Bank Stock, of which 2,407,065 shares are outstanding and are owned by Company
without Encumbrance. All the outstanding shares of Company Stock and Bank Stock
are duly authorized, validly issued, fully paid, nonassessable (except in the
case of Bank to the extent provided in 12 USC 55) and without preemptive rights.
Except for Company Stock Options covering shares of Company Stock granted
pursuant to the Company Stock Option Plans and except as set forth in Company's
Disclosure Letter, there are no outstanding options, warrants or other rights in
or with respect to the unissued shares of Company Stock or Bank Stock or any
other securities convertible into such stock, and neither Company nor Bank is
obligated to issue any additional shares of its capital stock or any options,
warrants or other rights in or with respect to the unissued shares of its
capital stock or any other securities convertible into such stock.
3.3 Subsidiaries. Except as set forth in Company's Disclosure Letter,
neither Company nor Bank own, directly or indirectly, any outstanding stock,
Equity Securities or other voting interest in any corporation, partnership,
joint venture or other entity or Person, other than DPC Property.
3.4 Financial Statements. Company has previously furnished to Seller a
copy of the Financial Statements of Company. The Financial Statements of
Company: (a) present fairly the consolidated financial condition of Company as
of the respective dates indicated and its consolidated results of operations for
the respective periods indicated; and (b) have been prepared in accordance with
GAAP. The audits of Company have been conducted in accordance with generally
accepted auditing standards. The books and records of Company and Bank are being
maintained in material compliance with applicable legal and accounting
requirements. Except to the extent (i) reflected in the Financial Statements of
Company and (ii) of liabilities incurred since December 31, 2004 in the ordinary
course of business and consistent with past practice, neither Company nor Bank
has any liabilities, whether absolute, accrued, contingent or otherwise.
3.5 Authority of Company and Bank. The execution and delivery by
Company and Bank of this Agreement and, subject to the requisite approval of
Company as the sole shareholder of Bank, the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Company and Bank, and this Agreement is a valid
and binding obligation of Company and Bank enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
liquidation, receivership, conservatorship, insolvency, moratorium or other
similar laws affecting the rights of creditors generally and by general
equitable principles and by Section 8(b)(6)(D) of the Federal Deposit Insurance
Act, 12 USC 1818(b)(6)(D). Neither the execution and delivery by Company and
Bank of this Agreement, the consummation of the Bank Merger or the transactions
contemplated herein, nor compliance by Company and Bank with any of the
19
provisions hereof, will: (a) violate any provision of their respective Charter
Documents; (b) constitute a breach of or result in a default (or give rise to
any rights of termination, cancellation or acceleration, or any right to acquire
any securities or assets) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, franchise, license, permit, agreement,
Encumbrances or other instrument or obligation to which Company or Bank is a
party, or by which Company or Bank or any of their respective properties or
assets is bound, if in any such circumstances, such event could have
consequences materially adverse to Company on a consolidated basis; or (c)
violate any Rule applicable to Company or Bank or any of their respective
properties or assets. No Consent of any Governmental Entity having jurisdiction
over any aspect of the business or assets of Company or Bank, and no Consent of
any Person or shareholder approval, is required in connection with the execution
and delivery by Company and Bank of this Agreement or the consummation by
Company and Bank of the Bank Merger and the transactions contemplated hereby,
except (i) the approval of this Agreement and the transactions contemplated
hereby by Company as the sole shareholder of Bank; (ii) such approvals or
notices as may be required by the FRB, the DFI and the OCC; (iii) the declaring
effective of the S-4 by the SEC and the approvals of all necessary blue sky
administrators; and (iv) as otherwise set forth in Company's Disclosure Letter.
3.6 Litigation. Except as set forth in Company's Disclosure Letter,
there is no private or governmental suit, claim, action, investigation or
proceeding pending, nor to Company's and Bank's knowledge threatened, against
Company, Bank or against any of their directors, officers or employees relating
to the performance of their duties in such capacities or against or affecting
any properties of Company or Bank. There are no judgments, decrees, stipulations
or orders against Company enjoining it or any of its directors, officers or
employees in respect of, or the effect of which is to prohibit, any business
practice or the acquisition of any property or the conduct of business in any
area of Company or Bank. To the knowledge of Company and Bank, neither Company
nor Bank is not a party to any pending or, to the knowledge of any of its
officers, threatened legal, administrative or other claim, action, suit,
investigation, arbitration or proceeding challenging the validity or propriety
of any of the transactions contemplated by this Agreement.
3.7 Compliance with Laws and Regulations. Except as set forth in
Company's Disclosure Letter, neither Company nor Bank is in default under or in
breach of any provision of its Charter Documents or any Rule promulgated by any
Governmental Entity having authority over it or any agreement with any
Governmental Entity, where such default or breach would have a material adverse
effect on the business, financial condition or results of operations of Company
or Bank.
3.8 Absence of Material Change. Since December 31, 2004, the businesses
of Company and Bank have been conducted only in the ordinary course, in
substantially the same manner as theretofore conducted, and, except as set forth
in Company's Disclosure Letter, there has not occurred since December 31, 2004
any event that has had or may reasonably be expected to have a material adverse
effect on the business, prospects, financial condition or results of operation
of Company or Bank.
20
3.9 Community Reinvestment Act. Bank received a rating of
"satisfactory" or better in its most recent examination or interim review with
respect to the Community Reinvestment Act. Neither Company nor Bank has been
advised of any concerns regarding compliance with the Community Reinvestment Act
by any Governmental Entity or by any other Person.
3.10 SEC Reports. As of the respective dates, since December 31, 2002,
Company has timely filed all SEC Reports required to be filed by it and none of
Company's SEC Reports contained at the time of filing any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstance
under which they were made, not misleading.
3.11 Regulatory Approvals. To the knowledge of Company and Bank,
Company and Bank have no reason to believe that they would not receive all
required approvals from any Governmental Entity of any application to consummate
the transactions contemplated by this Agreement without the imposition of a
materially burdensome condition in connection with the approval of any such
application.
3.12 Performance of Obligations. Company and Bank has each performed
all of the obligations required to be performed by it to date and is not in
material default under or in breach of any term or provision of any material
contract, and no event has occurred that, with the giving of notice or the
passage of time or both, would constitute such default or breach. To Company and
Bank's knowledge, no party with whom either has an agreement that is material to
its business is in default thereunder.
3.13 Licenses and Permits. Each of Company and Bank has all licenses
and permits that are necessary for the conduct of its businesses, and such
licenses are in full force and effect, except for any failure to be in full
force and effect that would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition or results of
operations of Company. The properties and operations of Company and Bank are and
have been maintained and conducted, in all material respects, in compliance with
all applicable Rules.
3.14 Undisclosed Liabilities. Except as set forth in Company's
Disclosure Letter neither Company nor Bank has any liabilities or obligations,
either accrued or contingent, that are material to it and that have not been:
(a) reflected or disclosed in the Financial Statements of Company or (b)
incurred subsequent to December 31, 2004 in the ordinary course of business.
Neither Company nor Bank knows of any basis for the assertion against it of any
liability, obligation or claim (including, without limitation, that of any
Governmental Entity) that is likely to result in or cause a material adverse
change in the business, financial condition or results of operations of Company
that is not fairly reflected in the Financial Statements of Company or otherwise
disclosed in this Agreement.
21
3.15 Accounting Records. Each of Company and Bank maintains accounting
records which fairly and validly reflect, in all material respects, its
transactions and accounting controls sufficient to provide reasonable assurances
that such transactions are (i) executed in accordance with its management's
general or specific authorization, and (ii) recorded as necessary to permit the
preparation of financial statements in conformity with GAAP. Such records, to
the extent they contain material information pertaining to Company or Bank which
is not easily and readily available elsewhere, have been duplicated, and such
duplicates are stored safely and securely.
3.16 Absence of Adverse Agreements. Neither Company nor any of its
subsidiaries is a party to any agreement or instrument, nor is Company or any
such subsidiary subject to any judgment, order, decree, rule or regulation of
any court or other governmental agency or authority which materially and
adversely affects or in the future may materially and adversely affect the
financial condition, results of operations, business or prospects of Company or
any subsidiary of Company.
3.17 Disclosure. Neither the Company Financial Statements nor any
representation or warranty contained herein, nor any information delivered or to
be delivered by Company pursuant to this Agreement, contains or shall contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.18 Bank Secrecy Act. Neither Company nor Bank has been advised of any
supervisory concerns regarding their compliance with the Bank Secrecy Act (31
USC 5322, et seq.) or related state or federal anti-money laundering laws,
regulations and guidelines, including without limitation those provisions of
federal regulations requiring (a) the filing of reports, such as Currency
Transaction Reports and Suspicious Activity Reports, (b) the maintenance of
records and (c) the exercise of due diligence in identifying customers.
3.19 Brokers and Finders. Except as provided in Company's Disclosure Letter with
copies of any such written agreements attached, neither Company nor Bank is a
party to or obligated under any agreement with any broker or finder relating to
the transactions contemplated hereby, and neither the execution of this
Agreement nor the consummation of the transactions provided for herein or
therein will result in any liability by Company or Bank to any broker or finder.
3.20 Insurance. Company and Bank have policies of insurance and bonds
covering their assets and businesses against such casualties and contingencies
and in such amounts, types and forms as are customary in the banking industry
for their business, operations, properties and assets. All such insurance
policies and bonds are in full force and effect. Except as set forth in
Company's Disclosure Letter, neither Company nor Bank has received notice from
any insurer that any such policy or bond has canceled or indicating an intention
to cancel or not to renew any such policy or bond or generally disclaiming
liability thereunder. Except as set forth in Company's Disclosure Letter,
neither Company nor Bank is in default under any such policy or bond and all
material claims thereunder have been filed in a timely fashion. The existing
insurance carried by Company and Bank are sufficient for compliance by them with
all material requirements of law and regulations and agreements to which they
are subject or are a party.
22
3.21 Taxes. Except as set forth in Company's Disclosure Letter, Company
and Bank have filed all federal and foreign income tax returns, all state and
local franchise and income tax, real and personal property tax, sales and use
tax, premium tax, excise tax and other tax returns of every character required
to be filed by them and have paid all taxes, together with any interest and
penalties owing in connection therewith, shown on such returns to be due in
respect of the periods covered by such returns, other than taxes which are being
contested in good faith and for which adequate reserves have been established.
Except as set forth in Company's Disclosure Letter, Company and Bank have filed
all required payroll tax returns, have fulfilled all tax withholding obligations
and have paid over to the appropriate governmental authorities the proper
amounts with respect to the foregoing. The tax and audit positions taken by
Company and Bank in connection with the tax returns described in the preceding
sentences were reasonable and asserted in good faith. Adequate provision has
been made in the books and records of Company or Bank and, to the extent
required by GAAP, reflected in the Financial Statements of Company, for all tax
liabilities, including interest or penalties, whether or not due and payable and
whether or not disputed, with respect to any and all federal, foreign, state,
local and other taxes for the periods covered by such financial statements and
for all prior periods. To the knowledge of Company and Bank, neither the IRS nor
any foreign, state, local or other taxing authority is now asserting or
threatening to assert any deficiency or claim for additional taxes (or interest
thereon or penalties in connection therewith) except as set forth in Company's
Disclosure Letter.
3.22 Loan Portfolio. Company's Disclosure Letter sets forth a
description of: (a) by type and classification, all loans, leases, other
extensions and commitments to extend credit of Bank of $100,000 or more, that
have been classified by itself, any external loan reviewer or grader, its bank
examiners or auditors (external or internal) as "Watch List," "Substandard,"
"Doubtful," "Loss" or any comparable classification; and (b) all loans due to
Bank as to which any payment of principal, interest or any other amount is 30
days or more past due. Bank's allowance for loan losses is and will be at the
Effective Time adequate in accordance with GAAP in all materials respects and in
accordance with all applicable regulatory requirements of any Governmental
Entity.
3.23 Operating Losses. Company's Disclosure Letter sets forth any
Operating Loss (as hereinafter defined), which has occurred at Company or Bank
during the period after December 31, 2004. To the knowledge of Company and Bank,
no action has been taken or omitted to be taken by an employee of Company or
Bank that has resulted in the incurrence by Company or Bank of an Operating Loss
or that might reasonably be expected to result in an Operating Loss after
December 31, 2004, which, net of any insurance proceeds payable in respect
thereof, would exceed $100,000.
23
3.24 Environmental Matters. Except as set forth in Company's Disclosure
Letter, to the knowledge of Company and Bank, (i) Company and Bank are in
compliance with all Environmental Laws (as hereinafter defined); (ii) there are
no Tanks (as hereinafter defined) on or about any Company Property; (iii) there
are no Hazardous Materials (as hereinafter defined) on, below or above the
surface of, or migrating to or from Company Property; (iv) Bank does not have
loans outstanding secured by real property that is not in compliance with
Environmental Laws or which has a leaking Tank or upon which there are Hazardous
Materials on or migrating to or from; and (v) without limiting the foregoing
representations and warranties contained in clauses (i) through (iv), as of the
date of this Agreement, to the knowledge of Company and Bank, there is no claim,
action, suit, or proceeding or notice thereof before any Governmental Entity
pending against Company or Bank or concerning property securing Bank's loans and
there is no outstanding judgment, order, writ, injunction, decree, or award
against or affecting Company Property or property securing Bank's loans,
relating to the foregoing representations (i) - (iv), in each case the
noncompliance with which, or the presence of which would have a material adverse
effect on the business, financial condition, results of operations or prospects
of Company on a consolidated basis. "Company Property" shall mean real estate
currently owned, leased, or otherwise used by Company or Bank, or in which
either has an investment or security interest by mortgage, deed of trust, sale
and lease-back or otherwise, including without limitation, properties under
foreclosure and properties held by Bank in its capacity as a trustee or
otherwise. For purposes of this Section only, "knowledge" shall mean the actual
knowledge of Company or Bank without the imposition of any duty of inquiry
beyond that required in Bank's lending policies.
3.25 Financial Resources. Except as set forth in Company's Disclosure
letter, Company has the financial resources and liquidity to complete the
transactions contemplated by this Agreement, including the payment of a dividend
by the Bank to the Company. Bank is legally able to pay such a dividend and
there are no legal, regulatory or other restrictions of any kind which will
adversely affect its ability to pay such a dividend.
3.26 Employees. There are no controversies pending or threatened
between Company or the Bank and any of their employees that are likely to have a
material adverse effect on Company's or the Bank's business, financial condition
or results of operation. Neither Company nor Bank is a party to any collective
bargaining agreement with respect to any of its employees or any labor
organization to which its employees or any of them belong.
24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
SELLER
------
Seller represents and warrants to Company and Bank as follows:
4.1 Incorporation, Standing and Power. Seller has been duly
incorporated and is validly existing as a California state bank under the laws
of the state of California and is authorized by the DFI to conduct a general
banking business. Seller's deposits are insured by the FDIC in the manner and to
the extent provided by law. Seller has all requisite corporate power and
authority to own, lease and operate Seller's properties and assets and to carry
on Seller's business as presently conducted. Neither the scope of the business
of Seller nor the location of any of Seller's properties requires that Seller be
licensed to do business in any jurisdiction other than in California where the
failure to be so licensed would have a materially adverse effect on the
financial condition, results of operation or business of Seller.
4.2 Capitalization. As of the date of this Agreement, the authorized
capital stock of Seller consists of (i) 15,000,000 shares of Seller Stock, of
which 950,114 shares are outstanding and (ii) 10,000,000 shares of preferred
stock, of which none are outstanding. All the outstanding shares of Seller Stock
are duly authorized, validly issued, fully paid, nonassessable, and without
preemptive rights. Except as set forth in Seller's Disclosure Letter, there are
no outstanding options, warrants or other rights in or with respect to the
unissued shares of Seller Stock or any other securities convertible into such
stock, and Seller is not obligated to issue any additional shares of its capital
stock or any options, warrants or other rights in or with respect to the
unissued shares of its capital stock or any other securities convertible into
such stock. Seller's Disclosure Letter sets forth a list of all Seller Stock
Options, including the name of the optionee, the number of shares of Seller
Stock to be issued pursuant to the option and the exercise price of the option.
4.3 Subsidiaries. Except as set forth in Seller's Disclosure Letter,
Seller does not own, directly or indirectly, any outstanding stock, Equity
Securities or other voting interest in any corporation, partnership, joint
venture or other entity or Person.
4.4 Financial Statements. Seller has previously furnished to Company a
copy of the Financial Statements of Seller. The Financial Statements of Seller:
(a) present fairly the financial condition of Seller as of the respective dates
indicated and its results of operations and cash flow for the respective periods
indicated; and (b) have been prepared in accordance with GAAP. The audits of
Seller have been conducted in accordance with generally accepted auditing
standards. The books and records of Seller are being maintained in material
compliance with applicable legal and accounting requirements. Except to the
extent (i) reflected in the Financial Statements of Seller and (ii) of
liabilities incurred since December 31, 2004 in the ordinary course of business
and consistent with past practice, Seller does not have any liabilities, whether
absolute, accrued, contingent or otherwise.
25
4.5 Authority of Seller. The execution and delivery by Seller of this
Agreement and, subject to the requisite approval of the shareholders of Seller,
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Seller, and
this Agreement is a valid and binding obligation of Seller enforceable in
accordance with its terms, except as the enforce ability thereof may be limited
by bankruptcy, liquidation, receivership, conservatorship, insolvency,
moratorium or other similar laws affecting the rights of creditors generally and
by general equitable principles and by Section 8(b)(6)(D) of the Federal Deposit
Insurance Act, 12 USC 1818(b)(6)(D). Except as set forth in Seller's Disclosure
Letter, neither the execution and delivery by Seller of this Agreement, the
consummation of the Bank Merger or the transactions contemplated herein, nor
compliance by Seller with any of the provisions hereof, will: (a) violate any
provision of Seller's Charter Documents; (b) constitute a breach of or result in
a default (or give rise to any rights of termination, cancellation or
acceleration, or any right to acquire any securities or assets) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
franchise, license, permit, agreement, Encumbrances or other instrument or
obligation to which Seller is a party, or by which Seller or any of Seller's
properties or assets is bound, if in any such circumstances, such event could
have consequences materially adverse to Seller; or (c) violate any Rule
applicable to Seller or any of Seller's properties or assets. No Consent of any
Governmental Entity having jurisdiction over any aspect of the business or
assets of Seller, and no Consent of any Person, is required in connection with
the execution and delivery by Seller of this Agreement or the consummation by
Seller of the Bank Merger and the transactions contemplated hereby, except (i)
the approval of this Agreement and the transactions contemplated hereby by the
shareholders of Seller; (ii) such approvals or notices as may be required by the
FRB, the DFI and the OCC; (iii) the declaring effective of the S-4 by the SEC
and the approvals of all necessary blue sky administrators; and (iv) as
otherwise set forth in Seller's Disclosure Letter.
4.6 Insurance. Seller has policies of insurance and bonds covering
Seller's assets and businesses against such casualties and contingencies and in
such amounts, types and forms as are customary in the banking industry for
Seller's business, operations, properties and assets. All such insurance
policies and bonds are in full force and effect. Except as set forth in Seller's
Disclosure Letter, Seller has not received notice from any insurer that any such
policy or bond has canceled or indicating an intention to cancel or not to renew
any such policy or bond or generally disclaiming liability thereunder. Except as
set forth in Seller's Disclosure Letter, Seller is not in default under any such
policy or bond and all material claims thereunder have been filed in a timely
fashion. Seller's Disclosure Letter sets forth a list of all policies of
insurance carried and owned by Seller, showing the name of the insurance
company, the nature of the coverage, the policy limit, the annual premiums and
the expiration dates. The existing insurance carried by Seller is sufficient for
compliance by Seller with all material requirements of law and regulations and
agreements to which Seller is subject or is a party.
26
4.7 Title to Assets. Seller's Disclosure Letter sets forth a summary of
all items of personal property and equipment with a gross book value of $50,000
or more, or having an annual lease payment of $25,000 or more, owned or leased
by Seller. Seller has good and marketable title to all of Seller's properties
and assets, free and clear of all Encumbrances except: (a) as set forth in the
Financial Statements of Seller; (b) Encumbrances for current taxes not yet due;
(c) Encumbrances incurred in the ordinary course of business, if any, that, to
the knowledge of Seller, (i) are not substantial in character, amount or extent,
(ii) do not materially detract from the value, (iii) do not interfere with
present use, of the property subject thereto or affected thereby, and (iv) do
not otherwise materially impair the conduct of business of Seller; or (d) as set
forth in Seller's Disclosure Letter.
4.8 Real Estate. Seller's Disclosure Letter sets forth a list of all
real property, including leaseholds, owned by Seller, together with (i) a
description of the locations thereof, (ii) a description of each real property
lease, sublease, installment purchase, or similar arrangement to which Seller is
a party, and (iii) a description of each contract for the purchase, sale or
development of real estate to which Seller is a party. Seller has good and
marketable title to the real property, and valid leasehold interests in the
leaseholds, set forth in Seller's Disclosure Letter, free and clear of all
Encumbrances, except (a) for rights of lessors, co-lessees or subleases in such
matters that are reflected in the lease; (b) Encumbrances for current taxes not
yet due and payable; (c) Encumbrances incurred in the ordinary course of
business, if any, that, to the knowledge of Seller, (i) are not substantial in
character, amount or extent, (ii) do not materially detract from the value,
(iii) do not interfere with present use, of the property subject thereto or
affected thereby, and (iv) do not otherwise materially impair the conduct of
business of Seller; or (d) as set forth in Seller's Disclosure Letter. Seller,
as lessee, has the right under valid and subsisting leases to occupy, use and
possess all property leased by Seller, as identified in Seller's Disclosure
Letter, and, to the knowledge of Seller, there has not occurred under any such
lease any breach, violation or default. Except as set forth in Seller's
Disclosure Letter and except with respect to deductibles under insurance
policies set forth in Seller's Disclosure Letter, Seller has not experienced any
uninsured damage or destruction with respect to the properties identified in
Seller's Disclosure Letter. To the knowledge of Seller, all properties and
assets used by Seller are in good operating condition and repair, suitable for
the purposes for which they are currently utilized, and comply with all
applicable Rules related thereto. Seller enjoys peaceful and undisturbed
possession under all leases for the use of real or personal property under which
Seller is the lessee, and, to the knowledge of Seller, all leases to which
Seller is a party are valid and enforceable in all material respects in
accordance with the terms thereof except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights and
except as may be limited by the exercise of judicial discretion in applying
principles of equity. Seller is not in default with respect to any such lease,
and to the knowledge of the officers of Seller no event has occurred which with
the lapse of time or the giving of notice, or both, would constitute a default
under any such lease. Copies of each such lease are attached to Seller's
Disclosure Letter.
27
4.9 Litigation. Except as set forth in Seller's Disclosure Letter, to
the knowledge of Seller there is no private or governmental suit, claim, action,
investigation or proceeding pending, nor to Seller's knowledge is one
threatened, against Seller or against any of Seller's directors, officers or
employees relating to the performance of their duties in such capacities or
against or affecting any properties of Seller. There are no judgments, decrees,
stipulations or orders against Seller enjoining Seller or any of Seller's
directors, officers or employees in respect of, or the effect of which is to
prohibit, any business practice or the acquisition of any property or the
conduct of business in any area of Seller. To the knowledge of Seller, Seller is
not a party to any pending or, to the knowledge of any of its Executive
Officers, threatened legal, administrative or other claim, action, suit,
investigation, arbitration or proceeding challenging the validity or propriety
of any of the transactions contemplated by this Agreement.
4.10 Taxes. Except as set forth in Seller's Disclosure Letter, Seller
has filed all federal and foreign income tax returns, all state and local
franchise and income tax, real and personal property tax, sales and use tax,
premium tax, excise tax and other tax returns of every character required to be
filed by Seller and has paid all taxes, together with any interest and penalties
owing in connection therewith, shown on such returns to be due in respect of the
periods covered by such returns, other than taxes which are being contested in
good faith and for which adequate reserves have been established. Except as set
forth in Seller's Disclosure Letter, Seller has filed all required payroll tax
returns, has fulfilled all tax withholding obligations and has paid over to the
appropriate governmental authorities the proper amounts with respect to the
foregoing. The tax and audit positions taken by Seller in connection with the
tax returns described in the preceding sentences were reasonable and asserted in
good faith. Adequate provision has been made in the books and records of Seller
and, to the extent required by GAAP, reflected in the Financial Statements of
Seller, for all tax liabilities, including interest or penalties, whether or not
due and payable and whether or not disputed, with respect to any and all
federal, foreign, state, local and other taxes for the periods covered by such
financial statements and for all prior periods. Seller's Disclosure Letter sets
forth (i) the date or dates through which the IRS has examined the federal tax
returns of Seller and the date or dates through which any foreign, state, local
or other taxing authority has examined any other tax returns of Seller; (ii) a
complete list of each year for which any federal, state, local or foreign tax
authority has obtained or has requested an extension of the statute of
limitations from Seller and lists each tax case of Seller currently pending in
audit, at the administrative appeals level or in litigation; and (iii) the date
and issuing authority of each statutory notice of deficiency, notice of proposed
assessment and revenue agent's report issued to Seller within the last twelve
(12) months. Except as set forth in Seller's Disclosure Letter, to the knowledge
of Seller, neither the IRS nor any foreign, state, local or other taxing
authority has, during the past three years, examined or is in the process of
examining any federal, foreign, state, local or other tax returns of Seller. To
the knowledge of Seller, neither the IRS nor any foreign, state, local or other
taxing authority is now asserting or threatening to assert any deficiency or
claim for additional taxes (or interest thereon or penalties in connection
therewith) except as set forth in Seller's Disclosure Letter.
28
4.11 Compliance with Laws and Regulations. Except as set forth in
Seller's Disclosure Letter, Seller is not in default under or in breach of any
provision of its Charter Documents or any Rule promulgated by any Governmental
Entity having authority over it, where such default or breach would have a
material adverse effect on the business, financial condition or results of
operations of Seller.
4.12 Performance of Obligations. Seller has performed all of the
obligations required to be performed by it to date and is not in material
default under or in breach of any term or provision of any material contract,
and no event has occurred that, with the giving of notice or the passage of time
or both, would constitute such default or breach. To Seller's knowledge, no
party with whom Seller has an agreement that is material to its business is in
default thereunder.
4.13 Employees. There are no controversies pending or threatened
between Seller and any of Seller's employees that are likely to have a material
adverse effect on Seller's business, financial condition or results of operation
of Seller. Seller is not a party to any collective bargaining agreement with
respect to any of its employees or any labor organization to which its employees
or any of them belong.
4.14 Brokers and Finders. Except as provided in Seller's Disclosure
Letter with copies of any such agreements attached, Seller is not a party to or
obligated under any agreement with any broker or finder relating to the
transactions contemplated hereby, and, except as provided in Seller's Disclosure
Letter, neither the execution of this Agreement nor the consummation of the
transactions provided for herein or therein will result in any liability to any
broker or finder.
4.15 Absence of Material Change. Since December 31, 2004, the business
of Seller has been conducted only in the ordinary course, in substantially the
same manner as theretofore conducted, and, except as set forth in Seller's
Disclosure Letter, there has not occurred since December 31, 2004 any event that
has had or may reasonably be expected to have a material adverse effect on the
business, prospects, financial condition or results of operation of Seller.
4.16 Licenses and Permits. Seller has all licenses and permits
necessary for the conduct of its business, and such licenses are in full force
and effect, except for any failure to be in full force and effect that would
not, individually or in the aggregate, have a material adverse effect on the
business, financial condition or results of operations of Seller. The properties
and operations of Seller are and have been maintained and conducted, in all
material respects, in compliance with all applicable Rules.
4.17 Undisclosed Liabilities. Except as set forth in Seller's
Disclosure Letter Seller does not have any liabilities or obligations, either
accrued or contingent, that are material to it and that have not been: (a)
reflected or disclosed in the Financial Statements of Seller or (b) incurred
subsequent to December 31, 2004 in the ordinary course of business. Seller does
not know of any basis for the assertion against it of any liability, obligation
or claim (including, without limitation, that of any Governmental Entity) that
is likely to result in or cause a material adverse change in the business,
prospects, financial condition or results of operations of Seller that is not
fairly reflected in the Financial Statements of Seller or otherwise disclosed in
this Agreement.
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4.18 Employee Benefit Plans.
(a) Except as set forth in Seller's Disclosure Letter, Seller does not
have any "employee benefit plan," as defined in Section 3(3) of ERISA, any
"multiemployer plan" as defined in Section 3(37) of ERISA, any "defined benefit
pension plan" within the meaning of Section 3(35) of ERISA nor has Seller ever
sponsored or maintained any such plan.
(b) Seller's Disclosure Letter sets forth copies and descriptions of
each Benefit Arrangement maintained or otherwise contributed to by Seller (such
plans and arrangements being collectively referred to herein as "Seller Benefit
Arrangements"). Except as set forth in Seller's Disclosure Letter, there has
been no material amendment thereof or increase in the cost thereof or benefits
payable thereunder since December 31, 2004. Except as set forth in Seller's
Disclosure Letter, there has been no material increase in the compensation of or
benefits payable to any senior executive employee of Seller since December 31,
2004, nor any employment, severance or similar contract entered into with any
such employee, nor any amendment to any such contract, since December 31, 2004.
Except as set forth in Seller's Disclosure Letter, there is no contract,
agreement or benefit arrangement covering any employee of Seller which
individually or collectively could give rise to the payment of any amount which
would constitute an "excess parachute payment," as such term is defined in
Section 280(G) of the Code.
(c) With respect to all Seller Benefit Arrangements, Seller is in
substantial compliance (other than noncompliance the cost or liability for which
is not material) with the requirements prescribed by any and all statutes,
governmental or court orders, or governmental rules or regulations currently in
effect, applicable to such plans or arrangements.
(d) Except for the contracts set forth in Seller's Disclosure Letter,
each Seller Benefit Arrangement and each personal services contract, fringe
benefit, consulting contract or similar arrangement with or for the benefit of
any officer, director, employee or other person can be terminated by Seller
within a period of 30 days following the Effective Time of the Bank Merger,
without payment of any amount as a penalty, bonus, premium, severance pay or
other compensation for such termination.
(e) Notwithstanding any statement or indication in this Agreement to
the contrary, except as set forth on Seller's Disclosure Letter, there are no
Seller Benefit Arrangements as to which Seller or Company/Bank will be required
to make any contribution or to make any other payments, whether on behalf of any
of the current employees, directors or officers of Seller or on behalf of any
other person after the Closing. Seller has no formal plan or commitment, whether
legally binding or not, to create any additional Benefit Arrangement, or to
modify or change any existing Seller Benefit Arrangement.
30
(f) None of the Seller Benefit Arrangements nor any trust created
thereunder has ever incurred any "accumulated funding deficiency" as such term
is defined in Section 412 of the Code, whether or not waived. Furthermore,
Seller has no unfunded liability under ERISA in respect of any of the Benefit
Arrangements. Seller has made all contributions and paid all amounts due and
owing under all of the Seller Benefit Arrangements. Each of the Seller Benefit
Arrangements that is intended to be a qualified plan under Section 401(a) of the
Code has received a favorable determination letter that it is so qualified from
the Internal Revenue Service and Seller does not know of any fact, which could
adversely affect the qualified status of any such Benefit Arrangement. All
amendments required to bring all of the Seller Benefit Arrangements into
conformity with all of the applicable provisions of ERISA, the Code, COBRA,
HIPAA and all other applicable laws have been made. All contributions required
to be made to each of the Seller Benefit Arrangements under the terms of the
Benefit Arrangement, ERISA, the Code or any other applicable laws have been
timely made. The Financial Statements of Seller properly reflect all amounts
required to be accrued as liabilities to date under each of the Seller Benefit
Arrangements.
(g) There has not occurred and there does not exist (i) any pending
litigation or controversy against any of the Seller Benefit Arrangements or
against Seller as the "Employer" or "Sponsor" under the Benefit Arrangements or
against the trustee, fiduciaries or administrators of any of the Benefit
Arrangements or (ii) any pending or threatened investigation, proceeding,
lawsuit, dispute, action or controversies involving any of the Seller Benefit
Arrangements, the administrator or trustee of any of the Benefit Arrangements
with any of the Internal Revenue Service, Department of Labor, Pension Benefit
Guaranty Corporation, any participant in the Benefit Arrangements, any service
provider to any of the Benefit Arrangements or any other person whatsoever.
(h) Seller has not used the services of (i) workers who have been
provided by a third party contract labor supplier for more than six months or
who may otherwise be eligible to participate in any of the Seller Benefit
Arrangements or to an extent that would reasonably be expected to result in the
disqualification or loss of preferred tax status of any of the Seller Benefit
Arrangements or the imposition of penalties or excise taxes with respect to the
Internal Revenue Service, Department of Labor, Pension Benefit Guaranty
Corporation or any other governmental entity; (ii) temporary employees who have
worked for more than six months or who may otherwise be eligible to participate
in any of the Seller Benefit Arrangements or to an extent that would reasonably
be expected to result in the disqualification or loss of preferred tax status of
any of the Seller Benefit Arrangements or the imposition of penalties or excise
taxes with respect to the Internal Revenue Service, Department of Labor, Pension
Benefit Guaranty Corporation or any other governmental entity; (iii) individuals
who have provided services to Seller as independent contractors for more than
six months or who may otherwise be eligible to participate in any of the Seller
Benefit Arrangements or to an extent that would reasonably be expected to result
in the disqualification or loss of preferred tax status of any of the Seller
Benefit Arrangement or the imposition of penalties or excise taxes with respect
to the Internal Revenue Service, Department of Labor, Pension Benefit Guaranty
Corporation or any other governmental entity or (iv) leased employees, as that
term is defined in section 414(n) of the Code.
31
4.19 Corporate Records. The Charter Documents of Seller and all
amendments thereto to the date hereof (true, correct and complete copies of
which are set forth in Seller's Disclosure Letter) are in full force and effect
as of the date of this Agreement. The minute books of Seller, together with the
documents and other materials incorporated therein by reference, reflect all
meetings held and contain complete and accurate records of all corporate actions
taken by the board of directors of Seller (or any committees thereof) and
stockholders. Except as reflected in such minute books, there are no minutes of
meetings or consents in lieu of meetings of the board of directors (or any
committees thereof) or of the stockholders of Seller.
4.20 Accounting Records. Seller maintains accounting records which
fairly and validly reflect, in all material respects, its transactions and
accounting controls sufficient to provide reasonable assurances that such
transactions are (i) executed in accordance with its management's general or
specific authorization, and (ii) recorded as necessary to permit the preparation
of financial statements in conformity with GAAP. Such records, to the extent
they contain material information pertaining to Seller, which is not easily, and
readily available elsewhere, have been duplicated, and such duplicates are
stored safely and securely.
4.21 Offices and ATMs. Set forth in Seller's Disclosure Letter is a
list of the headquarters of Seller (identified as such) and each of the offices
and automated teller machines ("ATMs") maintained and operated (or to be
maintained and operated) by Seller (including, without limitation,
representative and loan production offices and operations centers) and the
location thereof. Except as set forth in Seller's Disclosure Letter, Seller
maintains no other office or ATM and conducts business at no other location, and
Seller has not applied for nor received permission to open any additional branch
nor operate at any other location. Each ATM maintained and operated by Seller is
triple DES compliant.
4.22 Loan Portfolio. Seller's Disclosure Letter sets forth a
description of: (a) by type and classification, all loans, leases, other
extensions and commitments to extend credit of Seller of $25,000 or more, that
have been classified by itself, any external loan reviewer or grader, its bank
examiners or auditors (external or internal) as "Watch List," "Substandard,"
"Doubtful," "Loss" or any comparable classification; and (b) all loans due to
Seller as to which any payment of principal, interest or any other amount is 30
days or more past due. Seller's allowance for loan losses is and will be at the
Effective Time adequate in accordance with GAAP in all materials respects and in
accordance with all applicable regulatory requirements of any Governmental
Entity.
4.23 Power of Attorney. Except as set forth in Seller's Disclosure
Letter, Seller has not granted any Person a power of attorney or similar
authorization that is presently in effect or outstanding.
32
4.24 Operating Losses. Seller's Disclosure Letter sets forth any
Operating Loss, which has occurred at Seller during the period after December
31, 2004. To the knowledge of Seller, no action has been taken or omitted to be
taken by an employee of Seller that has resulted in the incurrence by Seller of
an Operating Loss or that might reasonably be expected to result in an Operating
Loss after December 31, 2004, which, net of any insurance proceeds payable in
respect thereof, would exceed $25,000. "Operating Loss" means any loss resulting
from cash shortages, lost or misposted items, disputed clerical and accounting
errors, forged checks, payment of checks over stop payment orders, counterfeit
money, wire transfers made in error, theft, robberies, defalcations, check
kiting, fraudulent use of credit cards or electronic teller machines or other
similar acts or occurrences.
4.25 Environmental Matters. Except as set forth in Seller's Disclosure
Letter, to the knowledge of Seller, (i) Seller is in compliance with all
Environmental Laws; (ii) there are no Tanks on or about Seller Property; (iii)
there are no Hazardous Materials on, below or above the surface of, or migrating
to or from Seller Property; (iv) Seller does not have loans outstanding secured
by real property that is not in compliance with Environmental Laws or which has
a leaking Tank or upon which there are Hazardous Materials on or migrating to or
from; and (v) without limiting the foregoing representations and warranties
contained in clauses (i) through (iv), as of the date of this Agreement, to the
knowledge of Seller, there is no claim, action, suit, or proceeding or notice
thereof before any Governmental Entity pending against Seller or concerning
property securing Seller loans and there is no outstanding judgment, order,
writ, injunction, decree, or award against or affecting Seller Property or
property securing Seller loans, relating to the foregoing representations (i) -
(iv), in each case the noncompliance with which, or the presence of which would
have a material adverse effect on the business, financial condition, results of
operations or prospects of Seller. "Seller Property" shall mean real estate
currently owned, leased, or otherwise used by Seller, or in which Seller has an
investment or security interest by mortgage, deed of trust, sale and lease-back
or otherwise, including without limitation, properties under foreclosure and
properties held by Seller in its capacity as a trustee or otherwise. For
purposes of this Agreement, the term "Environmental Laws" shall mean all
applicable statutes, regulations, rules, ordinances, codes, licenses, permits,
orders, approvals, plans, authorizations, concessions, franchises, and similar
items of all Governmental Entities and all applicable judicial, administrative,
and regulatory decrees, judgments, and orders relating to the protection of
human health or the environment, including, without limitation: all
requirements, including, but not limited to those pertaining to reporting,
licensing, permitting, investigation, and remediation of emissions, discharges,
releases, or threatened releases of Hazardous Materials, chemical substances,
pollutants, contaminants, or hazardous or toxic substances, materials or wastes
whether solid, liquid, or gaseous in nature, into the air, surface water,
groundwater, or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of chemical
substances, pollutants, contaminates, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature and all
requirements pertaining to the protection of the health and safety of employees
or the public. "Tank" shall mean treatment or storage Tanks, sumps, or water,
gas or oil xxxxx and associated piping transportation devices. "Hazardous
Materials" shall mean any substance the presence of which requires investigation
33
or remediation under any federal, state, or local statute, regulation,
ordinance, order, action, policy or common law, or which is or becomes defined
as a hazardous waste, hazardous substance, hazardous material, used oil,
pollutant or contaminant under any federal, state or local statute, regulation,
rule or ordinance or amendments thereto including without limitation, the
Comprehensive Environmental Response; Compensation and Liability Act (42 USC
9601, et seq.); the Resource Conservation and Recovery Act (42 USC 6901, et
seq.); the Clean Air Act, as amended (42 USC 7401, et seq.); the Federal Water
Pollution Control Act, as amended (33 USC 1251, et seq.); the Toxic Substances
Control Act, as amended (15 USC 2601, et seq.); the Occupational Safety and
Health Act, as amended (29 USC 65); the Emergency Planning and Community
Right-to-Know Act of 1986 (42 USC 11001, et seq.); the Mine Safety and Health
Act of 1977, as amended (30 USC 801, et seq.); the Safe Drinking Water Act (42
USC 300f, et seq.); and all comparable state and local laws, including without
limitation, the Xxxxxxxxx-Xxxxxxx-Xxxxxx Hazardous Substance Account Act (State
Superfund), the Xxxxxx-Cologne Water Quality Control Action, Section 25140,
25501(j) and (k); 25501.1.25281 and 25250.1 of the California Health and Safety
Code and/or Article I of Title 22 of the California Code of Regulations,
Division 4, Chapter 30; laws of other jurisdictions or orders and regulations;
or the presence of which causes or threatens to cause a nuisance, trespass or
other common law tort upon real property or adjacent properties or poses or
threatens to pose a hazard to the health or safety of persons or without
limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons; polychlorinated biphenyls (PCB's), asbestos or urea formaldehyde
foam insulation. For purposes of this Section only, "knowledge" shall mean the
actual knowledge of Seller without the imposition of any duty of inquiry beyond
that required in Seller's lending policies.
4.26 Community Reinvestment Act. Seller received a rating of
"satisfactory" or better in its most recent examination or interim review with
respect to the Community Reinvestment Act. Seller has not been advised of any
concerns regarding Seller's compliance with the Community Reinvestment Act by
any Governmental Entity or by any other Person.
4.27 Derivatives. Seller is not a party to or has agreed to enter into
an exchange traded or over-the-counter equity, interest rate, foreign exchange
or other swap, forward, future, option, cap, floor or collar or any other
contract that is not included on the balance sheet and is a derivative contract
(including various combinations thereof) or owns securities that are referred to
generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes," or "capped floating rate mortgage derivatives."
4.28 Bank Secrecy Act. Except as set forth in Seller's Disclosure
Letter, Seller has not been advised of any current or pending supervisory
concerns regarding its compliance with the Bank Secrecy Act (31 USC 5322, et
seq.) or related state or federal anti-money laundering laws, regulations and
guidelines, including without limitation those provisions of federal regulations
requiring (a) the filing of reports, such as Currency Transaction Reports and
Suspicious Activity Reports, (b) the maintenance of records and (c) the exercise
of due diligence in identifying customers.
34
4.29 Material Contracts. Except as set forth in Seller's Disclosure
Letter (all items listed or required to be listed in Seller's Disclosure Letter
as a result of this Section being referred to herein as "Seller Scheduled
Contracts"), Seller is not a party or otherwise subject to:
(a) any employment, deferred compensation, bonus or consulting
contract;
(b) any advertising, brokerage, licensing, dealership, representative
or agency relationship or contract;
(c) any contract or agreement that would restrict Company or the
Surviving Bank after the Effective Time from competing in any line of business
with any Person or using or employing the services of any Person;
(d) any collective bargaining agreement or other such contract or
agreement with any labor organization;
(e) any lease of real or personal property providing for annual lease
payments by or to Seller in excess of $25,000 per annum other than financing
leases entered into in the ordinary course of business in which Seller is lessor
and leases of real property presently used by Seller as banking offices.
(f) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of Seller (other than as mortgagor or pledgor in the ordinary course of their
banking business or as mortgagee, secured party or deed of trust beneficiary in
the ordinary course of Seller's business) in personal property having a value of
$25,000 or more;
(g) any stock purchase, stock option, stock bonus, stock ownership,
profit sharing, group insurance, bonus, deferred compensation, severance pay,
pension, retirement, savings or other incentive, welfare or employment plan or
material agreement providing benefits to any present or former employees,
officers or directors of Seller;
(h) any agreement to acquire equipment or any commitment to make
capital expenditures of $10,000 or more;
(i) any agreement for the sale of any property or assets in which
Seller has an ownership interest or for the grant of any preferential right to
purchase any such property or asset;
(j) any agreement for the borrowing of any money (other than
liabilities or interbank borrowings made in the ordinary course of their banking
business and reflected in the financial records of Seller);
35
(k) any restrictive covenant contained in any deed to or lease of real
property owned or leased by Seller (as lessee) that materially restricts the
use, transferability or value of such property;
(l) any guarantee or indemnification which involves the sum of $25,000
or more, other than letters of credit or loan commitments issued in the normal
course of business;
(m) any supply, maintenance or landscape contracts not terminable by
Seller without penalty on 30 days or less notice and which provides for payments
in excess of $25,000 per annum;
(n) other than as disclosed with reference to subparagraph (k) of this
Section 4.29, any agreement which would be terminable other than by Seller or as
a result of the consummation of the transactions contemplated by this Agreement;
(o) any contract of participation with any other bank in any loan
entered into by Seller subsequent to December 31, 2004 in excess of $25,000, or
any sales of assets of Seller with recourse of any kind to Seller, or any
agreement providing for the sale or servicing of any loan or other asset which
constitutes a "recourse arrangement" under applicable regulation or policy
promulgated by a Governmental Entity (except for agreements for the sale of
guaranteed portions of loans guaranteed in part by the U.S. Small Business
Administration and related servicing agreements);
(p) any other agreement of any other kind, including for data
processing and similar services, which involves future payments or receipts or
performances of services or delivery of items requiring aggregate payment of
$10,000 or more to or by Seller other than payments made under or pursuant to
loan agreements, participation agreements and other agreements for the extension
of credit in the ordinary course of Seller's business;
(q) any material agreement, arrangement or understanding not made in
the ordinary course of business;
(r) any agreement, arrangement or understanding relating to the
employment, election, retention in office or severance of any present or former
director, officer or employee of Seller;
(s) any agreement, arrangement or understanding pursuant to which any
payment (whether severance pay or otherwise) became or may become due to any
director, officer or employee of Seller upon execution of this Agreement or upon
or following consummation of the transactions contemplated hereby (either alone
or in connection with the occurrence of any additional acts or events); or
(t) any written agreement, supervisory agreement, resolution,
memorandum of understanding, consent order, cease and desist order, capital
order, or condition of any regulatory order or decree with or by the DFI, FDIC,
FRB or any other regulatory agency.
36
True copies of all Seller Scheduled Contracts, including all amendments
and supplements thereto, are attached to Seller's Disclosure Letter.
4.30 Trust Administration. Seller does not presently exercise trust
powers, including, but not limited to, trust administration, and has not
exercised such trust powers for a period of at least 3 years prior to the date
hereof. The term "trusts" as used in this Section 4.30 includes (i) any and all
common law or other trusts between an individual, corporation or other entities
and Seller, as trustee or co-trustee, including, without limitation, pension or
other qualified or nonqualified employee benefit plans, compensation,
testamentary, inter vivos, charitable trust indentures; (ii) any and all
decedents' estates where Seller is serving or has served as a co-executor or
sole executor, personal representative or administrator, administrator xx xxxxx
non, administrator xx xxxxx non with will annexed, or in any similar fiduciary
capacity; (iii) any and all guardianships, conservatorships or similar positions
where Seller is serving or has served as a co-grantor or a sole grantor or a
conservator or a co-conservator of the estate, or any similar fiduciary
capacity; and (iv) any and all agency and/or custodial accounts and/or similar
arrangements, including plan administrator for employee benefit accounts, under
which Seller is serving or has served as an agent or custodian for the owner or
other party establishing the account with or without investment authority.
4.31 Regulatory Approvals. To the knowledge of Seller, except as
described in Seller's Disclosure Letter, Seller has no reason to believe that
all required approvals from any Governmental Entity of any application to
consummate the transactions contemplated by this Agreement would not be received
without the imposition of a materially burdensome condition in connection with
the approval of any such application.
4.32 Indemnification. Seller is not a party to any indemnification
agreement with any of its present officers, directors, employees, agents or
other persons who serve or served in any capacity with any other enterprise at
the request of Seller, and to the knowledge of Seller, there are no claims for
which any of such persons would be entitled to indemnification by Seller if such
provisions were deemed in effect, except as set forth in Seller's Disclosure
Letter.
4.33 Intellectual Property. Except as set forth in Seller's Disclosure
Letter, Seller owns or possesses valid and binding licenses and other rights to
use without payment all material patents, copyrights, trade secrets, trade
names, service marks and trademarks used in Seller's business; and Seller has
not received any notice with respect thereto that asserts the rights of others.
Seller has in all material respects performed all the obligations required to be
performed by Seller, and is not in default in any material respect under any
license, contract, agreement, arrangement or commitment relating to any of the
foregoing.
37
4.34 Investment Securities. Seller has set forth on its Disclosure
Letter a list of each Investment Security held by Seller on March 31, 2005. Such
list sets forth, with respect to each such Investment Security: (i) the issuer
thereof; (ii) the outstanding balance or number of shares; (iii) the maturity,
if applicable; (iv) the title of issue; and (v) the classification under SFAS
No. 115.
4.35 Certain Interests. Seller's Disclosure Letter sets forth a
description of each instance in which an officer or director of Seller (a) has
any material interest in any property, real or personal, tangible or intangible,
used by or in connection with the business of Seller; (b) is indebted to Seller
except for normal business expense advances; or (c) is a creditor (other than as
a deposit holder) of Seller except for amounts due under normal salary and
related benefits or reimbursement of ordinary business expenses. Except as set
forth in the Seller's Disclosure Letter, all such arrangements are arm's length
transactions pursuant to normal commercial terms and conditions and comply with
all Rules.
ARTICLE 5
AGREEMENTS WITH RESPECT TO CONDUCT OF
-------------------------------------
COMPANY AND BANK AFTER THE DATE HEREOF
--------------------------------------
Company and Bank covenant and agree with Seller as follows:
5.1 Material Adverse Changes; Reports; Financial Statements; Filings.
(a) Company and Bank will promptly notify Seller (i) of any event of
which Company or Bank obtains knowledge which may materially and adversely
affect the business, financial condition, prospects or results of operations of
either Company or Bank; or (ii) in the event Company or Bank determine that it
is possible that the conditions to the performance of Seller set forth in
Sections 8.1 and 8.3 may not be satisfied.
(b) Company and Bank will furnish to Seller, as provided in Section
11.12 of this Agreement, as soon as practicable, but in no event later than 20
days after the end of the month (i) monthly unaudited consolidated balance
sheets and statements of operations for Company and Bank; (ii) as soon as
available, all letters and communications sent by Company to its shareholders
and all reports filed by Company or Bank with the SEC, the FRB, the OCC and any
other Governmental Entity; and (iii) all regulatory applications relating to the
transactions contemplated by this Agreement and all correspondence relating
thereto.
(c) Each of the financial statements delivered pursuant to subsection
(b) shall be (i) prepared in accordance with GAAP on a basis consistent with
that of the Financial Statements of Company, except that such financial
statements may omit statements of cash flows and footnote disclosures required
by GAAP; and (ii) accompanied by a certificate of the chief financial officer to
the effect that such consolidated financial statements fairly present the
financial condition and results of operations of Company and Bank for the period
covered, and reflect all adjustments (which consist only of normal recurring
adjustments) necessary for a fair presentation.
38
5.2 Conduct of Business.
(a) Between the date hereof and the Effective Time, except as
contemplated by this Agreement and subject to requirements of law and regulation
generally applicable to bank holding companies and banks, Company or Bank shall
not, without prior written consent of Seller (which consent shall not be
unreasonably withheld and which consent shall be deemed granted if within five
(5) Business Days of Seller's receipt of written notice of a request for prior
written consent, written notice of objection is not received by Company and
Bank):
(1) amend, modify, terminate or fail to renew or preserve
their material Permits;
(2) amend or modify its Charter Documents except as
contemplated hereby;
(3) agree or make any commitment to take any actions
prohibited by this Section 5.2;
(4) take any action which would or is reasonably likely to (i)
adversely affect the ability of Company or Bank to obtain any necessary approval
of any Governmental Entity required for the transactions contemplated hereby;
(ii) adversely affect Company's or Bank's ability to perform their covenants and
agreements under this Agreement; or (iii) result in any of the conditions to the
performance of Company's or Bank's obligations hereunder, as set forth in
Article 8 herein not being satisfied;
(5) knowingly take or cause to be taken any action, which
would disqualify the Bank Merger as a "reorganization" within the meaning of
Section 368 of the Code; and
(6) enter into or complete any transaction for (i) the
acquisition, merger or consolidation of the Company or the Bank where the
Company or the Bank, as the case may be, is not the surviving entity or (ii) the
sale of all or substantially all of the assets of the Company or the Bank,
without making necessary and appropriate provision in the documents for such an
acquisition, merger, consolidation or sale of assets for the consummation of the
Bank Merger and the other transactions contemplated by this Agreement; provided,
however, the public or private sale of securities for cash consideration, the
acquisition or disposition of loans or loan participations, investment
securities and related activities in the ordinary course of the banking business
shall not be prohibited by this provision.
39
(b) Between the date hereof and the Effective Time, Company and Bank
shall:
(1) duly observe and conform in all material respects to all
lawful requirements applicable to its business; and
(2) maintain their assets and properties in good condition and
repair, normal wear and tear excepted.
5.3 Disclosure Letter. Promptly in the case of material matters, and
not less than monthly in the case of all other matters, Company and Bank shall
amend or supplement the Company Disclosure Letter provided for herein pertaining
to Company and Bank as necessary so that the information contained therein
accurately reflects the then current status of Company and Bank and shall
transmit copies of such amendments or supplements to Seller in accordance with
Section 11.12 of this Agreement.
5.4 Bank Shareholder Approval. Bank will promptly take action necessary
in accordance with applicable law and its Charter Documents to obtain the
approval of its shareholder of the Bank Merger, this Agreement and related
matters. Company shall vote all shares of Bank Stock which it owns in favor of
the Bank Merger, this Agreement and related matters.
5.5 Consents and Approvals.
(a) Company and Bank will cooperate with Seller in the preparation of
all filings, applications, notices and requests for waiver for Consents
necessary or desirable for the transactions contemplated in this Agreement.
Company's and Bank's cooperation hereunder shall include, but not be limited to,
providing all information concerning Company or Bank and their respective
shareholders as may be required for such filings, applications, notices and
requests for Consents and signing, to the extent required, all such filings,
applications, notices and requests.
(b) To the extent that the consent of a third party ("Third Party
Consent") with respect to any contract, agreement, license, franchise, lease,
commitment, arrangement, Permit or release that is material to the business of
Company or Bank or that is contemplated in this Agreement is required in
connection with the transactions contemplated in this Agreement, Company and
Bank shall use its best efforts to obtain such consent prior to the Effective
Time.
5.6 Compliance with Rules. Company and Bank shall comply with the
requirements of all applicable Rules, the noncompliance with which would
materially and adversely affect the assets, liabilities, business, financial
condition or results of operations or prospects of Company or Bank.
40
5.7 Agreement of Bank Merger. As soon as practicable, Bank shall
execute the Agreement of Bank Merger.
5.8 Insurance and Indemnification.
(a) Company and Bank shall permit Seller to use commercially reasonable
efforts to extend the discovery period of its directors' and officers' liability
insurance for a period of up to 48 months with respect to all matters arising
from facts or events which occurred before the Effective Time for which Seller
would have had an obligation to indemnify its directors and officers; provided,
however, that the total aggregate costs to Seller, Company and Bank of the
premiums for such coverage shall not exceed 160% of the current annual amount
expended by Seller (the "Insurance Amount"). If Company is unable to maintain or
obtain the insurance called for by this Section 5.8 as a result of the preceding
provision, Company shall use commercially reasonable efforts to obtain as much
comparable insurance as is available for the Insurance Amount with respect to
acts or omissions occurring prior to the Effective Time of the Merger by such
directors and officers in their capacities as such. If Company shall consolidate
with or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any other entity, then and in each case, proper provision
shall be made so that the successors and assigns of Company shall assume the
obligations set forth in this Section 5.8.
(b) For a period of 48 months after the Effective Time, Company shall,
and shall cause its subsidiaries to, maintain and preserve the rights to
indemnification of officers and directors provided for in the Charter Documents
of Seller as in effect on the date hereof with respect to indemnification for
liabilities and claims arising out of acts, omissions, events, matters or
circumstances occurring or existing prior to the Effective Time, including,
without limitation, the Bank Merger and the other transactions contemplated by
this Agreement, to the extent such rights to indemnification are not in excess
of the maximum permitted by applicable state or federal laws or regulatory
authorities.
(c) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each director or officer of Seller and his or
her heirs and representatives. There shall be no duplication of benefits
pursuant to Section 5.8 (a) and (b).
5.9 Rule 144 Compliance. From and after the Effective Time, Company
shall file all reports with the SEC necessary to permit the shareholders of
Seller who may be deemed "underwriters" (within the meaning of Rule 145 under
the Securities Act) of the Seller Stock to sell Company Stock received by them
in connection with the Bank Merger pursuant to Rules 144 and 145(d) under the
1933 Act if they would otherwise be so entitled; provided, however, that Company
is otherwise required by Rule to file such reports with the SEC.
41
5.10 Access. Company and Bank will authorize and permit Seller, its
representatives, accountants and counsel, to have access during normal business
hours, on notice and in such manner as will not unreasonably interfere with the
conduct of the businesses of Company and Bank, to all properties, books,
records, branch operating reports, branch audit reports, operating instructions
and procedures, tax returns, tax settlement letters, contracts and documents,
and all other information with respect to their business affairs, financial
condition, assets and liabilities as Seller may from time to time reasonably
request. Company and Bank shall permit Seller, its representatives, accountants
and counsel to make copies of such books, records and other documents and to
discuss the business affairs, condition (financial and otherwise), assets and
liabilities of Company and Bank with such third Persons, including, without
limitation, its directors, officers, employees, accountants, counsel and
creditors, as Seller considers necessary or appropriate for the purposes of
familiarizing itself with the businesses and operations of Company and Bank,
obtaining any necessary orders, consents or approvals of the transactions
contemplated by this Agreement by any Governmental Entity and conducting an
evaluation of the assets and liabilities of Seller. Company and Bank will cause
Deloitte & Touche LLP to make available to Seller, its accountants, counsel and
other agents, such personnel, work papers and other documentation of such firm
relating to its work papers and its audits of the books and records of Company
and Bank as may be requested by Seller in connection with its review of the
foregoing matters.
5.11 Certain Loans and Other Extensions of Company. Company will
promptly inform Seller of the amounts and categories of any loans, leases or
other extensions of credit that have been classified by any Governmental Entity
or by any internal or external loan reviewer of Bank as "Watch List,"
"Substandard," "Doubtful," "Loss" or any comparable classification. Company will
furnish to Seller, as soon as practicable, and in any event by the earlier of
(i) 5 Business Days of the information becoming available or (ii) 20 days after
the occurrence of such event, schedules including a listing of the following:
(a) classified credits, showing with respect to each such credit in
amount equal to or exceeding $100,000, the classification category, credit type,
and office, and with respect to all other such credits, by credit type and
office, the aggregate dollar amount;
(b) nonaccrual credits, showing with respect to each such credit in
amount equal to or exceeding $100,000, the credit type and office, and with
respect to all other such credits, by credit type and office, the aggregate
dollar amount;
(c) accrual exception credits that are delinquent 90 or more days and
have not been placed on nonaccrual status, showing with respect to each such
credit in amount equal to or exceeding $100,000, the credit type and office, and
with respect to all other such credits, by credit type and office, the aggregate
dollar amount;
42
(d) delinquent credits showing with respect to each such credit in
amount equal to or exceeding $100,000, the credit type, office and an aging
schedule broken down into 30-59, 60-89, 90 + day categories, and with respect to
all other such credits, by credit type, office and by aging category, the
aggregate dollar amount;
(e) loan and lease participations, stating, with respect to each,
whether it is purchased or sold, the loan or lease type, and the office;
(f) loans or leases (including any commitments) by Bank to any
director, officer, or employee of Company or Bank, or any shareholder holding 5%
or more of the capital stock of Company, including with respect to each such
loan or lease, the identity and, to the best knowledge of Company, the relation
of the borrower to Company or Bank, the loan or lease type and the outstanding
and undrawn amounts;
(g) letters of credit, showing with respect to each letter of credit in
an amount equal to or exceeding $100,000, the credit type and office, and
showing with respect to all other such letters of credit, by credit type and
office, the aggregate dollar amount;
(h) loans or leases charged off during the previous month, showing with
respect to each such loan or lease, the credit type and office;
(i) loans or leases written down during the previous month, including
with respect to each the original amount, the write-off amount, credit type and
office;
(j) other real estate or assets owned, stating with respect to each its
credit type;
(k) a reconciliation of the allowance for loan and lease losses,
identifying specifically the amount and sources of all additions and reductions
to the allowance (which may be by reference to specific portions of another
schedule furnished pursuant to this Section, and, in the case of unallocated
adjustments, shall disclose the methodology and calculations through which the
amount of such adjustment was determined);
(l) extensions of credit whether unsecured or secured in amount equal
to or exceeding $1,000,000, originated on or after the date of the schedule
previously provided to Seller (or if it is the first such schedule, the date of
this Agreement) and before the date of the schedule in which reported, showing
with respect to each, the credit type and the office; and
(m) renewals or extensions of maturity of outstanding extensions of
credit whether unsecured or secured in amount equal to or exceeding $1,000,000,
showing with respect to each, the credit type and the office.
43
ARTICLE 6
AGREEMENTS WITH RESPECT TO
--------------------------
CONDUCT OF SELLER AFTER THE DATE HEREOF
---------------------------------------
Seller covenants and agrees with Company and Bank as follows:
6.1 Access. (a) Seller will authorize and permit Company, its
representatives, accountants and counsel, to have access during normal business
hours, on notice and in such manner as will not unreasonably interfere with the
conduct of the businesses of Seller, to all properties, books, records, branch
operating reports, branch audit reports, operating instructions and procedures,
tax returns, tax settlement letters, contracts and documents, and all other
information with respect to its business affairs, financial condition, assets
and liabilities as Company may from time to time reasonably request. Seller
shall permit Company, its representatives, accountants and counsel to make
copies of such books, records and other documents and to discuss the business
affairs, condition (financial and otherwise), assets and liabilities of Seller
with such third Persons, including, without limitation, its directors, officers,
employees, accountants, counsel and creditors, as Company considers necessary or
appropriate for the purposes of familiarizing itself with the businesses and
operations of Seller, obtaining any necessary orders, consents or approvals of
the transactions contemplated by this Agreement by any Governmental Entity and
conducting an evaluation of the assets and liabilities of Seller. Seller will
cause Vavrinek, Trine, Day & Co., LLP to make available to Company, its
accountants, counsel and other agents, such personnel, work papers and other
documentation of such firm relating to its work papers and its audits of the
books and records of Seller as may be requested by Company in connection with
its review of the foregoing matters.
(b) The Chairman of the Board or President of Company, or in their
absence another representative of Company shall be invited by Seller to attend
all regular and special Board of Directors and committee meetings of Seller from
the date hereof until the Effective Time. Seller shall inform Company of all
such Board meetings at least 5 Business Days in advance of each such meeting;
provided, however, that the attendance of such representative of Company shall
not be permitted at any meeting, or portion thereof, for the sole purpose of
discussing the transaction contemplated by this Agreement or the obligations of
Seller under this Agreement.
6.2 Material Adverse Changes; Reports; Financial Statements; Filings.
(a) Seller will promptly notify Company (i) of any event of which
Seller obtains knowledge which may materially and adversely affect the business,
financial condition, prospects or results of operations of Seller; (ii) in the
event Seller determines that it is possible that the conditions to the
performance of Company set forth in Sections 8.1 and 8.2 may not be satisfied;
or (iii) any event, development or circumstance other than the transactions
contemplated by this Agreement that, to the best knowledge of Seller, will or,
with the passage of time or the giving of notice or both, is reasonably expected
to result in the loss to Seller of the services of any Executive Officer of
Seller (no knowledge will be imputed to Seller for purposes of this subsection
(a)(iii) of any such event, development or circumstance if it is known only by
the Executive Officer whose services will be lost).
44
(b) Seller will furnish to Company, as provided in Section 11.12 of
this Agreement, as soon as practicable, but in no event later than 20 days after
the end of the month (i) a copy of any report submitted to the board of
directors of Seller and access to the working papers related thereto and copies
of other operating or financial reports prepared for management of any of its
businesses and access to the working papers related thereto provided, however,
that Seller need not furnish Company any privileged communications of or
memoranda prepared by its legal counsel in connection with the transactions
contemplated by, and the rights and obligations of Seller under this Agreement;
(ii) monthly unaudited balance sheets and statements of operations for Seller;
(iii) as soon as available, all letters and communications sent by Seller to its
shareholders and all reports filed by Seller with the DFI and FDIC and any other
Governmental Entity; and (iv) such other reports as Company may reasonably
request relating to Seller.
(c) Each of the financial statements delivered pursuant to subsection
(b) shall be (i) prepared in accordance with GAAP on a basis consistent with
that of the Financial Statements of Seller, except that such financial
statements may omit statements of cash flows and footnote disclosures required
by GAAP; and (ii) accompanied by a certificate of the chief financial officer to
the effect that such financial statements fairly present the financial condition
and results of operations of Seller for the period covered, and reflect all
adjustments (which consist only of normal recurring adjustments) necessary for a
fair presentation.
6.3 Conduct of Business.
(a) Between the date hereof and the Effective Time, except as
contemplated by this Agreement, and subject to requirements of law and
regulation generally applicable to banks, Seller shall not, without prior
written consent of Company (which consent shall not be unreasonably withheld and
which consent [except with respect to subparagraph (29) of this Section 6.3(a)]
shall be deemed granted if within five (5) Business Days of Company's receipt of
written notice of a request for prior written consent, written notice of
objection is not received by Seller):
(1) amend, modify, terminate or fail to renew or preserve its
material Permits;
(2) amend or modify in any material respect, or, except as they
may expire in accordance with their terms, terminate any Seller
Scheduled Contract or any other material contract or agreement to
which Seller is a party, or materially default in the performance of
any of its obligations under any such contract or agreement;
45
(3) enter into any agreement or contract that would be required
to be included as a Seller Scheduled Contract;
(4) terminate or unilaterally fail to renew any existing
insurance coverage or bonds;
(5) make any loan or other extension of credit, or enter into any
commitment to make any loan or other extension of credit to any
director, officer, employee or shareholder holding 5% or more of the
outstanding shares of Seller Stock except for any loan, extension of
credit or commitment made after the date hereof not exceeding $50,000,
to any such person; provided, however, that the aggregate of all
loans, extensions of credit or commitments made after the date hereof
to any such person shall not exceed $100,000;
(6) grant any general or uniform increase in the rate of pay to
any employee or employee benefit or profit sharing plan or increase
the salary, bonus or employee benefits of any non-exempt employee or
agent except (i) in the ordinary course of business and consistent
with past practice or established practices; or (ii) payment of
bonuses on a pro-rated basis pursuant to Seller's Management Incentive
Plans_ or pursuant to any nondiscretionary bonus payments required by
an employment agreement; or pay any severance or similar payment to
any Person;
(7) grant any promotion or any increase in the rate of pay to any
employee or pursuant to any profit sharing plan or increase in any
employee benefits or pay any bonus, severance or similar payment to
any employee except (i) in the ordinary course of business and
consistent with past practice or established practices; or (ii)
payment of bonuses on a pro-rated basis pursuant to Seller's
Management Incentive Plans or pursuant to any nondiscretionary bonus
payments required by an employment agreement; or pay any severance or
similar payment to any Person;
(8) sell, transfer, mortgage, encumber or otherwise dispose of
any assets or release or waive any claim, except in the ordinary
course of business and consistent with past practice or as required by
any existing contract or for ordinary repairs, renewals or
replacements or as contemplated in this Agreement;
(9) except for the exercise of Seller Stock Options outstanding
on the date hereof, issue, sell, or grant any Equity Securities of
Seller, any other securities (including long term debt), or any
rights, options or securities to acquire any stock of Seller Stock, or
any Equity Securities of Seller, or any other securities (including
long term debt) of Seller;
46
(10) declare, issue or pay any dividend or other distribution of
assets, whether consisting of money, other personal property, real
property or other things of value, to the shareholders of Seller, or
split, combine or reclassify any shares of its capital stock or other
Equity Securities;
(11) purchase, redeem or otherwise acquire any Equity Securities,
or other securities of Seller or any rights, options, or securities to
acquire any Equity Securities of Seller;
(12) amend or modify its Charter Documents;
(13) make its credit underwriting policies, standards or
practices relating to the making of loans and other extensions of
credit, or commitments to make loans and other extensions of credit,
less stringent than those in effect as of the date hereof;
(14) make any capital expenditures, or commitments with respect
thereto, in excess of $10,000;
(15) make extraordinary payments to any Person other than as
contemplated, or as disclosed, in this Agreement;
(16) make any investment by purchase of stock or securities
(including an Investment Security), contributions to capital, property
transfers or otherwise in any other Person, except for federal funds
or obligations of the United States Treasury, or in the ordinary
course of business and consistent with past or established practices;
(17) compromise or otherwise settle or adjust any assertion or
claim of a deficiency in taxes (or interest thereon or penalties in
connection therewith); file any appeal from an asserted deficiency
except in a form previously approved by Company in writing; file or
amend any United States federal, foreign, state or local tax return
without Company's prior written approval, which approval shall not be
unreasonably withheld; or make any tax election or change any method
or period of accounting unless required by GAAP or applicable law;
(18) enter into or consent to any new employment agreement or
other Benefit Arrangement, or amend or modify any employment agreement
or other Seller Benefit Arrangement in effect on the date of this
Agreement to which Seller is a party or bound;
(19) grant any Person a power of attorney or similar authority
except in accordance with a written policy previously disclosed to
Company;
(20) agree or make any commitment to take any actions prohibited
by this Section 6.3;
(21) change any of Seller's basic policies and practices with
respect to liquidity management and cash flow planning, marketing,
deposit origination, lending, budgeting, profit and tax planning,
personnel practices or any other material aspect of Seller's business
or operations, except such changes as may be required in the opinion
of management to respond to economic or market conditions or as may be
required by any Governmental Entity;
47
(22) take any action which would or is reasonably likely to (i)
adversely affect the ability to obtain any necessary approval of any
Governmental Entity required for the transactions contemplated hereby;
(ii) adversely affect Seller's ability to perform their covenants and
agreements under this Agreement; or (iii) result in any of the
conditions as set forth in Article 8 herein not being satisfied;
(23) reclassify any Investment Security from hold-to-maturity or
available for sale to trading;
(24) sell any Investment Security prior to maturity, except in
the ordinary course of business;
(25) knowingly take or cause to be taken any action which would
disqualify the Bank Merger as a "reorganization" within the meaning of
Section 368 of the Code;
(26) settle any claim, action or proceeding involving any
material liability for monetary damages or enter into any settlement
agreement containing material obligations;
(27) make, acquire a participation in, or reacquire an interest
in a participation sold of, any loan that is not in compliance with
its normal credit underwriting standards, policies and procedures as
in effect as of the date of this Agreement; or renew, extend the
maturity of, or alter any of the material terms of any such loan for a
period of greater than six months;
(28) incur any indebtedness for borrowed money or assume,
guaranty, endorse or otherwise as an accommodation become responsible
for the obligations of any other Person, except for (i) in connection
with banking transactions with banking customers in the ordinary
course of business, or (ii) short-term borrowings (30 days or less)
made at prevailing market rates and terms; and
(29) grant, renew or commit to grant or renew any extension of
credit if such extension of credit, together with all other credit
then outstanding to the same Person and all Affiliated Persons, would
exceed $250,000 on an unsecured basis or $500,000 on a secured basis.
Consent shall be deemed granted if within one Business Day of written
notice delivered to Bank's Chief Credit Officer, written notice of
objection is not received by Seller.
48
(b) Between the date hereof and the Effective Time, Seller shall:
(1) duly observe and conform in all material respects to all
lawful requirements applicable Seller's business and conduct Seller's
business in the ordinary course in substantially the manner heretofore
conducted and in accordance with sound banking practice;
(2) use its reasonable best efforts to maintain its assets and
properties in good condition and repair, normal wear and tear
excepted;
(3) promptly upon learning of such information, advise Company in
writing of any event or any other transaction within its knowledge
whereby any Person or Related Group of Persons acquires, directly or
indirectly, record or beneficial ownership or control (as defined in
Rule 13d-3 promulgated by the SEC under the Exchange Act) of five
percent (5%) or more of the outstanding Seller Stock prior to the
record date fixed for the Seller Shareholders' Meeting or any
adjourned meeting thereof to approve this Agreement and the
transaction contemplated herein;
(4) promptly notify Company regarding receipt from any tax
authority of any notification of the commencement of an audit, any
request to extend the statute of limitations, any statutory notice of
deficiency, any revenue agent's report, any notice of proposed
assessment, or any other similar notification of potential adjustments
to the tax liabilities of Seller, or any actual or threatened
collection enforcement activity by any tax authority with respect to
tax liabilities of Seller; and
(5) maintain an allowance for loan and lease losses consistent
with practices and methodology as in effect on the date of the
execution of this Agreement, and shall not, notwithstanding any
recoveries received with respect to loans previously charged off,
reduce the allowance for loan and lease losses below the amount in
effect on the date of the execution of this Agreement.
6.4 Certain Loans and Other Extensions of Seller. Seller will promptly
inform Company of the amounts and categories of any loans, leases or other
extensions of credit that have been classified by any Governmental Entity or by
any internal or external loan reviewer of Seller as "Watch List," "Substandard,"
"Doubtful," "Loss" or any comparable classification. Seller will furnish to
Company, as soon as practicable, and in any event by the earlier of (i) 5
Business Days of the information becoming available or (ii) 20 days after the
occurrence of such event, schedules including a listing of the following:
(a) classified credits, showing with respect to each such credit in
amount equal to or exceeding $25,000, the classification category, credit type,
and office, and with respect to all other such credits, by credit type and
office, the aggregate dollar amount;
49
(b) nonaccrual credits, showing with respect to each such credit in
amount equal to or exceeding $25,000, the credit type and office, and with
respect to all other such credits, by credit type and office, the aggregate
dollar amount;
(c) accrual exception credits that are delinquent 90 or more days and
have not been placed on nonaccrual status, showing with respect to each such
credit in amount equal to or exceeding $25,000, the credit type and office, and
with respect to all other such credits, by credit type and office, the aggregate
dollar amount;
(d) delinquent credits showing with respect to each such credit in
amount equal to or exceeding $25,000, the credit type, office and an aging
schedule broken down into 30-59, 60-89, 90 + day categories, and with respect to
all other such credits, by credit type, office and by aging category, the
aggregate dollar amount;
(e) loan and lease participations, stating, with respect to each,
whether it is purchased or sold, the loan or lease type, and the office;
(f) loans or leases (including any commitments) by Seller to any
director, officer, or employee of Seller, or any shareholder holding 5% or more
of the capital stock of Seller, including with respect to each such loan or
lease, the identity and, to the best knowledge of Seller, the relation of the
borrower to Seller, the loan or lease type and the outstanding and undrawn
amounts;
(g) letters of credit, showing with respect to each letter of credit in
an amount equal to or exceeding $25,000, the credit type and office, and showing
with respect to all other such letters of credit, by credit type and office, the
aggregate dollar amount;
(h) loans or leases charged off during the previous month, showing with
respect to each such loan or lease, the credit type and office;
(i) loans or leases written down during the previous month, including
with respect to each the original amount, the write-off amount, credit type and
office;
(j) other real estate or assets owned, stating with respect to each its
credit type;
(k) a reconciliation of the allowance for loan and lease losses,
identifying specifically the amount and sources of all additions and reductions
to the allowance (which may be by reference to specific portions of another
schedule furnished pursuant to this Section 6.4 and, in the case of unallocated
adjustments, shall disclose the methodology and calculations through which the
amount of such adjustment was determined);
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(l) extensions of credit whether unsecured or secured in amount equal
to or exceeding $100,000, originated on or after the date of the schedule
previously provided to Company (or if it is the first such schedule, the date of
this Agreement) and before the date of the schedule in which reported, showing
with respect to each, the credit type and the office; and
(m) renewals or extensions of maturity of outstanding extensions of
credit whether unsecured or secured in amount equal to or exceeding $100,000,
showing with respect to each, the credit type and the office.
6.5 Disclosure Letter. Promptly in the case of material matters, and
not less than monthly in the case of all other matters, Seller shall amend or
supplement the Seller Disclosure Letter provided for herein pertaining to Seller
as necessary so that the information contained therein accurately reflects the
then current status of Seller and shall transmit copies of such amendments or
supplements to Company in accordance with Section 11.12 of this Agreement.
6.6 Shareholder Approval. Seller will promptly take action necessary in
accordance with applicable law and its Charter Documents to convene a meeting of
its shareholders (the "Seller Shareholders' Meeting") to be held as soon as
practicable, for the purpose of voting on this Agreement and the Bank Merger. In
connection with the Seller Shareholders' Meeting, (i) the Board of Directors of
Seller shall, subject to the Board's fiduciary duties, recommend shareholder
approval of the Bank Merger, this Agreement and related matters; and (ii) Seller
shall use its reasonable best efforts to obtain such shareholder approval by the
largest possible percentage and (iii) Seller shall use its reasonable best
efforts to cause the number of Seller perfected dissenting shares to be the
least possible number. The board of directors of Seller shall not, in a manner
adverse to Company, (x) withdraw, modify or qualify, or propose to withdraw,
modify or qualify, such recommendation, (y) take any action or make any
statement in connection with the Seller Shareholders' Meeting inconsistent with
such recommendation or (z) recommend any Competing Transaction (as defined in
Section 6.12) (any action referred to in clause (x), (y) or (z) being a "Change
in Recommendation"). Notwithstanding the foregoing, the board of directors of
Seller shall be permitted to take the actions described in clauses (x) through
(z) above if Seller has complied in all material respects with Section 6.12.
6.7 Consents and Approvals.
(a) Seller will cooperate with Company in the preparation of all
filings, applications, notices and requests for waiver for Consents necessary or
desirable for the consummation of the transactions contemplated in this
Agreement. Seller's cooperation hereunder shall include, but not be limited to,
providing all information concerning Seller and its shareholders as may be
required for such filings, applications, notices and requests for Consents and
signing, to the extent required, all such filings, applications, notices and
requests.
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(b) To the extent that a Third Party Consent with respect to any
contract, agreement, license, franchise, lease, commitment, arrangement, Permit
or release that is material to the business of Seller or that is contemplated in
this Agreement is required in connection with the transactions contemplated in
this Agreement, Seller shall obtain such consent prior to the Effective Time.
6.8 Preservation of Employment Relations Prior to Effective Time.
Seller will use its reasonable best efforts consistent with current employment
practices and policies to maintain the services of the officers and employees of
Seller through the Effective Time.
6.9 Compliance with Rules. Seller shall comply with the requirements of
all applicable Rules, the noncompliance with which would materially and
adversely affect the assets, liabilities, business, financial condition or
results of operations or prospects of Seller.
6.10 Seller Benefit Arrangements. Seller and any effected officers,
directors or employees shall mutually terminate all Seller Benefit Arrangements
(including Seller's 401k Plan with continuing employees being eligible to roll
their distributions into Company's 401k Plan), without the imposition of any
liability therefor to Company, Bank or any other Party.
6.11 Agreement of Merger. As soon as practicable, Seller shall execute
the Agreement of Bank Merger.
6.12 No Shop. Seller shall not, on or before the earlier of the
Effective Time or the date of termination of this Agreement, initiate, solicit
or encourage (including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to any Competing
Transaction (as such term is defined below), or negotiate with any Person in
furtherance of such inquiries or to obtain a Competing Transaction, or agree to
or endorse any Competing Transaction, or authorize any of its officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or any other representative retained by it or any of its Affiliates
to take any such action, (with written direction to such foregoing Persons not
to take any of such actions), and Seller shall promptly notify Company (orally
and in writing) of all of the relevant details relating to all inquiries and
proposals which they may receive relating to any of such matters. For purposes
of this Agreement, "Competing Transaction" shall mean any of the following
involving Seller: any merger, consolidation, share exchange or other business
combination; a sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets representing twenty-five percent (25%) or more of the
assets of Seller; a sale of shares of capital stock (or securities convertible
or exchangeable into or otherwise evidencing, or any agreement or instrument
evidencing, the right to acquire capital stock) or other Equity Security,
representing twenty-five percent (25%) or more of the voting power of Seller; a
tender offer or exchange offer for at least twenty-five percent (25%) of the
outstanding shares of Seller Stock; a solicitation of proxies in opposition to
52
approval of the Bank Merger by Seller shareholders; or a public announcement by
another Person (besides the Company or Bank) of an unsolicited bona fide
proposal, plan, or intention to do any of the foregoing. Notwithstanding any
other provision in this Section 6.12 or elsewhere in this Agreement, nothing
shall prevent Seller from (i) engaging in any discussions or negotiations with,
or providing any information to, any Person in response to an unsolicited bona
fide written proposal concerning a Competing Transaction by such Person or (ii)
recommending such an unsolicited bona fide written proposal concerning a
Competing Transaction to the holders of Seller Stock if and only if, prior to
participating in any of the foregoing, (A) the Board of Directors of Seller
concludes in good faith that the Competing Transaction, if consummated, would
result in a transaction more favorable to holders of Seller Stock than the
transaction contemplated by this Agreement; (B) the Board of Directors of Seller
determines in good faith based upon the written advice of outside counsel that
participating in any such action is necessary or advisable for it to act in a
manner not inconsistent with its fiduciary duties under applicable law; and (C)
at least 48 hours prior to providing any information or data to any Person or
entering into discussion or negotiations with any Person, the Board of Directors
of Seller notifies Company of such inquiries, proposals or offers received by,
any information requested from, or any such discussion or negotiations sought to
be initiated or continued with Seller.
6.13 Affiliates. Within fifteen (15) days of the execution of this
Agreement, (a) Seller shall deliver to Company a letter identifying all persons
who are then "affiliates" of Seller for purposes of Rule 145 under the
Securities Act and (b) Seller shall advise the persons identified in such letter
of the resale restrictions imposed by applicable securities laws and shall use
reasonable efforts to obtain from each person identified in such letter a
written agreement substantially in the form attached hereto as Exhibit 6.13.
Seller shall use reasonable efforts to obtain from any person who becomes an
affiliate of Seller after Seller's delivery of the letter referred to above, and
on or prior to the date of the Seller Shareholders' Meeting to approve this
Agreement, a written agreement substantially in the form attached as Exhibit
6.13 hereto as soon as practicable after obtaining such status.
6.14 Access to Operations. Within thirty (30) Business Days prior to
the Effective Day, Seller shall afford to Company and its authorized agents and
representatives, access, during normal business hours, to the operations, books,
and other information relating to Seller for the sole purpose of assuring an
orderly transition of operations, including any data processing conversion, in
the Bank Merger. Company shall give reasonable notice for access to Seller, and
the date and time of such access will then be mutually agreed to by Company and
Seller. Company's access shall be conducted in a manner which does not
unreasonably interfere with Seller's normal operations, customers and employee
relations and which does not interfere with the ability of Seller to consummate
the transactions contemplated by this Agreement.
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6.15 Access to Employees. Company shall have the right, but not the
obligation, within thirty (30) Business Days prior to the Effective Day, to
provide training to employees of Seller who will become employees of Company.
Such training shall be at the expense of Company and shall be conducted during
normal business hours, or, if the foregoing is not possible, after business
hours at a location reasonably requested by Company. At the request of Company,
Company shall compensate employees, in accordance with Seller's customary
policies and practices, for the employee's time being trained by Company. Seller
shall cooperate with Company to make such employees available for such training
prior to Closing. Training shall not exceed 40 hours per employee. All travel
and other reimbursable expense incurred by the employee for training are
Company's responsibility. Nothing in this Section is intended, nor shall it be
construed, to confer any rights or benefits upon any persons other than Company,
Bank or Seller.
6.16 Stock Options. Prior to the Effective Time, Seller shall (a) use
its best efforts to cause each holder of Seller Stock Options, as listed in its
Disclosure Letter, (except for Xxxx X. Xxxxxxx and/or continuing employees) to
exchange any unexercised options prior to the Effective Time for the cash or
Company Stock set forth in Section 2.8 and (b) take all actions necessary to
cancel and terminate the Seller's 1997 Stock Option Plan, such cancellation and
termination to be effective at the Effective Time. Each holder of such canceled
Seller Stock Option shall acknowledge that upon payment of such amount set forth
in Section 2.8, no further liability shall accrue to Seller or any successor
thereto.
ARTICLE 7
FURTHER COVENANTS OF COMPANY AND SELLER
---------------------------------------
7.1 S-4 and Proxy Statement.
(a) As promptly as practicable, Company and Seller shall cooperate with
each other and exercise their best efforts to prepare and file with the SEC the
S-4, in which the Proxy Statement will be included as a prospectus. The Parties
hereto agree to provide the information necessary for inclusion in the Proxy
Statement and S-4. Each of the parties will use its respective best efforts to
have the S-4 declared effective under the Securities Act as promptly as
practicable after it is filed. Subject to the provisions of Section 11.1(d),
Company shall pay all third party costs (except Seller's legal and accounting
fees) associated with the preparation and filing of the S-4, including the
filing fees with the SEC and Blue Sky regulators as well as the costs of
printing and mailing the Proxy Statement. At the time the S-4 becomes effective,
the S-4 will comply in all material respects with the provisions of Securities
Act and the published rules and regulations thereunder, and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not false or
misleading, and at the times of mailing thereof to the Seller's and the
Company's shareholders, at the times of the Seller and Company Shareholders'
Meetings and at the Effective Time, the prospectus included as part of the S-4,
as amended or supplemented by any amendment or supplement filed by Company, will
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not false or misleading.
54
(b) After the date of the filing of the S-4 with the SEC, each of the
Parties agrees promptly to notify the other of and to correct any information
furnished by such Party that shall have become false or misleading in any
material respect and to cooperate with the other to take all steps necessary to
file with the SEC and have declared effective or cleared by the SEC any
amendment or supplement to the S-4 so as to correct such information and to
cause the Proxy Statement as so corrected to be disseminated to the shareholders
of Seller and Company to the extent required by applicable Rules. All documents
that the Parties file with the SEC or any other Governmental Entity in
connection with this Agreement will comply as to form in all material respects
with the provisions of applicable Rules.
(c) Company shall take all required action with appropriate
Governmental Entities under state securities or blue sky laws in connection with
the issuance of Company Stock pursuant to this Agreement.
7.2 Filings. Each of the Parties agree that through the Effective Time,
each of its reports, registration statements and other filings required to be
filed with any applicable Governmental Entity will comply in all material
respects with the applicable statutes, rules and regulations enforced or
promulgated by the Governmental Entity with which it will be filed and none will
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Any
financial statement contained in any such report, registration statement or
other filing that is intended to represent the financial position of the
entities or entity to which it relates will fairly present the financial
position of such entities or entity and will be prepared in accordance with GAAP
consistently applied during the periods involved.
7.3 Applications. No later than 30 days following the execution of this
Agreement, Company will promptly prepare and file, or cause to be prepared and
filed, any applications or notices to bank regulatory agencies necessary to
consummate the transactions contemplated hereby. Company shall afford Seller a
reasonable opportunity to review all such applications and all amendments and
supplements thereto before the filing thereof as well as all correspondence and
comment letters relating to such applications. The Parties covenant and agree
that the S-4 and the Proxy Statement and all applications to the appropriate
Governmental Entities for approval or consent to the transactions contemplated
hereby, with respect to information relating to it, will comply in all material
respects with the provisions of applicable law. Company will use its best
efforts to obtain all required regulatory approvals or consents and Seller shall
cooperate with Company and Bank in such efforts.
7.4 Further Assurances. Company and Seller agree that from time to
time, whether before, at or after the Effective Time, they will execute and
deliver such further instruments of conveyance and transfer and to take such
other action as may be reasonable or necessary to consummate the Bank Merger and
the transactions contemplated in this Agreement. Company, Bank, and Seller agree
to take such further action as may reasonably be requested to facilitate
consummation of the transactions contemplated in this Agreement and that are not
inconsistent with the other provisions of this Agreement.
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7.5 Listing of Company Stock. Company shall use its best efforts to
have the shares of Company Stock to be issued in the Bank Merger listed on the
NASDAQ National Market as of the Effective Date or as soon thereafter as is
practicable.
7.6 Establishment of Accruals. If requested by Company, on the business
day immediately prior to the Effective Time, Seller shall, consistent with GAAP,
establish such additional accruals and reserves as may be necessary to conform
its accounting and credit loss reserve practices and methods to those of Company
and Bank (as such practices and methods are to be applied to Seller from and
after the Effective Time) and reflect Company's plans with respect to the
conduct of Seller's business following the Bank Merger and to provide for the
costs and expenses relating to the consummation by Seller of the transactions
contemplated by this Agreement. The establishment of such accrual and reserves
shall not, in and of itself, constitute a breach of any representation or
warranty of Seller contained in the Agreement or constitute a material adverse
change in the business, operations, prospects or financial condition of Seller.
ARTICLE 8
CONDITIONS TO THE PARTIES' OBLIGATIONS TO CLOSE
-----------------------------------------------
8.1 Conditions to Each Party's Obligations to Close. The respective
obligations of Company and Bank, on the one hand, and Seller, on the other, to
consummate the Bank Merger and the other transactions contemplated hereby are
subject to the satisfaction or waiver at or prior to the Effective Time of each
of the following conditions:
(a) The Agreement and the transactions contemplated hereby shall have
received all requisite approvals of the shareholders of Seller.
(b) No judgment, decree, injunction, order or proceeding shall be
outstanding or threatened by any Governmental Entity which prohibits or
restricts the effectuation of, or threatens to invalidate or set aside, the Bank
Merger substantially in the form contemplated by this Agreement, unless counsel
to the Party against whom such action or proceeding was instituted or threatened
renders to the other Parties hereto a favorable opinion that such judgment,
decree, injunction, order or proceeding is without merit.
56
(c) On or before December 31, 2005, (i) the Parties shall have received
any required Consent from the FRB, the DFI and the OCC and, at or prior to the
Effective Time, this Agreement and the transactions contemplated hereby shall
have been approved by any other Governmental Entity whose Consent is required
for consummation of the transactions contemplated in this Agreement and in each
case either unconditionally or without the imposition of conditions or
limitations that are applicable to any Party or would become applicable to
Company or the Surviving Bank after the Bank Merger that Company reasonably and
in good faith concludes would materially adversely affect the financial
condition, prospects or operations of any Party or otherwise would be materially
burdensome to any Party and all such Consents shall be in effect at the
Effective Time, which Consents shall permit the Bank Merger and permit the
Surviving Bank to acquire and conduct all direct and indirect activities as
previously conducted by Seller, at or prior to the Effective Time, and all
required waiting periods shall have expired.
(d) No Rule shall be outstanding or threatened by any Governmental
Entity which prohibits or materially restricts the consummation of, or threatens
to invalidate or set aside, the Bank Merger substantially in the form
contemplated by this Agreement or which would not permit the businesses
presently carried on by Seller, Company or Bank to continue materially
unimpaired following the Effective Time, unless counsel to the Party or Parties
against whom such action or proceeding was instituted or threatened renders to
the other Party or Parties hereto a favorable opinion that such Rule is without
merit and counsel to the other Party concurs with such opinion.
(e) All Third Party Consents necessary to permit the Parties to
consummate the transactions contemplated in the Agreement shall have been
obtained prior to the Effective Time, unless the failure to obtain any such
Third Party Consent would not have a material adverse effect on the business,
financial condition, prospects or results of operations of Company on a
consolidated basis.
(f) The S-4 shall have been declared effective by the SEC and shall not
be the subject of any stop order or proceedings seeking or threatening a stop
order. Company shall have received all state securities or "Blue Sky" permits
and other authorizations necessary to issue the Company Stock to consummate the
Bank Merger.
(g) Seller and Company shall have received from Katten, Muchin, Zavis &
Rosenman, an opinion reasonably satisfactory to each of them to the effect that
the Bank Merger shall not result in the recognition of gain or loss for federal
income tax purposes to Seller, Company or Bank, nor shall the issuance of
Company Stock result in the recognition of gain or loss by the holders of Seller
Stock who receive such stock in connection with the Bank Merger, and that such
holders will be entitled to carryover the basis of their Seller Stock and tack
holding periods relating thereto. Such opinion shall be dated prior to the date
of the Proxy Statement is first mailed to the shareholders of Seller and Company
and such opinion shall not have been withdrawn or modified in any material
respect.
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8.2 Additional Conditions to Obligations of Company and Bank to Close.
The obligations of Company and Bank to consummate the Bank Merger and the other
transactions contemplated hereby are subject to the satisfaction or waiver at or
prior to the Effective Time of each of the following conditions:
(a) All actions necessary to authorize the execution, delivery and
performance of this Agreement, the consummation of the Bank Merger, and the
consummation of the transactions contemplated by this Agreement shall have been
duly and validly taken by the board of directors and shareholders of Seller.
(b) The representations and warranties of Seller contained in Article 4
of this Agreement shall have been true and correct in all material respects (i)
on the date of this Agreement; and (ii) at and as of the Effective Time as
though all such representations and warranties had been made on and as of the
Effective Time, except with respect to representations and warranties that, by
their terms, speak as of a different time; and Company shall have received a
certificate to that effect dated the Effective Time and executed on behalf of
Seller by its chief executive officer and chief financial officer.
(c) Each of the covenants and agreements of Seller contained in this
Agreement to be performed at or before the Effective Time shall have been so
performed in all material respects; and Company shall have received a
certificate to that effect dated the Effective Time and executed by the chief
executive officer and chief financial officer of Seller.
(d) During the period from the date of this Agreement to the Effective
Time, there shall not have occurred any event related to the business, condition
(financial or otherwise), prospects, capitalization or properties of Seller that
has had or could reasonably be expected to have a material adverse effect on the
business, financial condition, prospects or results of operations of Seller,
whether or not such event, change or effect is reflected in Seller's Disclosure
Letter to this Agreement, as amended or supplemented, after the date of this
Agreement; and Company shall have received a certificate to that effect dated
the Effective Time and signed by the chief executive officer and chief financial
officer of Seller.
(e) Concurrently with the execution of this Agreement, each director
shall have executed and delivered to Company a Directors Agreement,
substantially in the form required by Section 2.6.
(f) Within 30 days of the execution of this Agreement, Company shall
have received from each person named in the letter or otherwise referred to in
Section 6.13 of this Agreement an executed copy of the agreement required by
Section 6.13.
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(g) Company shall have received satisfactory evidence that all of
Seller's Benefit Arrangements have been treated as provided in Article 6 of this
Agreement.
(h) Company shall have received the written resignation of each
director of Seller dated as of the Effective Date.
8.3 Additional Conditions to Obligations of Seller to Close. The
obligations of Seller to consummate the Bank Merger and the other transactions
contemplated herein are subject to the satisfaction or waiver, at or prior to
the Effective Time, of each of the following conditions:
(a) All actions necessary to authorize the execution, delivery and
performance of this Agreement, consummation of the Bank Merger and the
consummation of the transactions contemplated by this Agreement shall have been
duly and validly taken by the respective boards of directors and shareholders of
Company and Bank, as the case may be.
(b) The representations and warranties of Company and Bank contained in
Article 3 of this Agreement shall be true and correct in all material respects
(i) on the date of this Agreement; and (ii) at and as of the Effective Time as
though all such representations and warranties had been made at and as of such
time, except with respect to representations and warranties that, by their
terms, speak as of a different time; and Seller shall have received a
certificate to that effect dated the Effective Time and executed on behalf of
Company and Bank by their respective chief executive officer and chief financial
officer.
(c) The covenants and agreements of Company and Bank to be performed at
or before the Effective Time shall have been duly performed in all material
respects; and Seller shall have received one or more certificates to that effect
dated the Effective Time and executed by the respective chief executive officer
and chief financial officer of Company and Bank.
(d) During the period from the date of this Agreement to the Effective
Time, there shall not have occurred any event related to the business, condition
(financial or otherwise), prospects, capitalization or properties of Company or
Bank that has had or could reasonably be expected to have a material adverse
effect on the business, financial condition, or results of operations of the
Surviving Bank or Company, whether or not such event, change or effect is
reflected in Company's Disclosure Letters to this Agreement, as amended or
supplemented, after the date of this Agreement; and Seller shall have received a
certificate to that effect dated the Effective Time and signed by the chief
executive officer and chief financial officer of Company and Bank.
(e) Prior to or concurrent with the execution of this Agreement, Seller
shall have received a fairness opinion from Xxxxxx & Xxxxxx, Inc. or another
investment banking firm acceptable to Seller, to the effect that the Total
Consideration is fair to Seller's shareholders from a financial point of view
and such fairness opinion will be affirmed by such investment banking firm when
the Proxy Statement is mailed.
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ARTICLE 9
EMPLOYEE BENEFITS
-----------------
9.1 Employee Benefits. All employees of Seller, at the Effective Time,
shall be entitled to participate in the Company Benefit Arrangements on the same
basis as other similarly situated employees of Company or Bank. Each of these
employees will be credited for eligibility, participation and vesting purposes
(provided that no more than the maximum days of sick leave provided in the
Company' sick leave program may be carried over), with such employee's
respective years of past service with Seller (or other prior service so credited
by Seller) as though they had been employees of Company. Each employee of Seller
(except for each officer and employee with an agreement in effect providing for
benefits in the event of a change in control) employed by Seller at the
Effective Time who is not offered employment by Bank will have the opportunity
to receive severance benefits to be offered by the Bank in accordance with
Bank's severance plan.
9.2 Substitute Stock Options. Company shall grant, as of the Effective
Time, substitute stock options to the continuing director and to each of those
employees who will continue their employ with the Bank and who has at the
Effective Time an outstanding Seller Stock Option and who has not elected to
receive cash or stock pursuant to Section 2.8. Each substitute stock option so
granted by Company to replace a Seller Stock Option shall be 100% vested and
shall be exercisable for that number of whole shares of Company Stock equal to
the product of (A) the number of shares of Seller Stock that were purchasable
under such Seller Stock Option immediately prior to the Effective Time
multiplied by (B) the Exchange Ratio, rounded down to the nearest whole number
of shares of Company Stock. Further, each substitute stock option so granted by
Company to replace a Seller Stock Option shall provide for a per share exercise
price which shall be equal to the quotient determined by dividing (A) the
exercise price per share of Seller Stock at which such Seller Stock Option was
exercisable immediately prior to the Effective Time by (B) the Exchange Ratio.
Each substitute option shall have a duration equal to the remaining duration of
the Seller Stock Option for which it is substituted and, in the case when an
optionee receives a substitute option for a non-qualified Seller Stock Option,
shall not terminate as a result of the holder of the substitute option not being
an officer, employee or director of Company and/or Bank. Any substitute option
granted by the Company to replace a Seller Stock Option which is an incentive
stock option will, to the extent legally permissible, be an incentive stock
option.
9.3 Employment Agreement. Concurrent with the execution of this
Agreement, the Chief Executive Officer of Seller and Bank shall have initialed a
term sheet for an employment agreement. Within thirty (30) days of the date
hereof, the Chief Executive Officer of Seller and Bank shall have documented and
executed an employment agreement based upon such term sheet.
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ARTICLE 10
TERMINATION OF AGREEMENT; WAIVER OF CONDITIONS
----------------------------------------------
10.1 Termination of Agreement. Anything herein to the contrary
notwithstanding, this Agreement and the transactions contemplated hereby
including the Bank Merger may be terminated at any time before the Effective
Time, whether before or after approval by the shareholders of Seller as follows,
and in no other manner:
(a) By mutual consent of Company and Bank, on the one hand, and Seller,
on the other;
(b) By Company or Seller, (i) if any conditions set forth in Section
8.1 shall not have been met by December 31, 2005, or (ii) upon the expiration of
20 Business Days after any Governmental Entity denies or refuses to grant any
approval, consent or authorization required to be obtained in order to
consummate the transaction contemplated by this Agreement unless, within said 20
Business Day period after such denial or refusal, all Parties hereto agree to
resubmit the application to the Governmental Entity that has denied, or refused
to grant the approval, consent or authorization requested;
(c) By Company, if any conditions set forth in Section 8.2 shall not
have been met, or by Seller, if any conditions set forth in Section 8.3 shall
not have been met, by December 31, 2005, or such earlier time as it becomes
apparent that such condition cannot be met;
(d) By Company, if Seller should (i) materially breach any of its
representations or warranties contained herein or (ii) materially default in the
observance or in the due and timely performance of any of its covenants and
agreements herein contained, and in either case, such breach and/or default
shall not have been fully cured within 20 Business Days from the date of
delivery of written notice specifying the alleged breach and/or default;
(e) By Seller, if Company or Bank should (i) materially breach any of
its representation or warranties contained herein or (ii) materially default in
the observance or in the due and timely performance of any of their covenants
and agreements herein contained, and in either case, such breach and/or default
shall not have been fully cured within 20 Business Days from the date of
delivery of written notice specifying the alleged breach and/or default; or
(f) By Company, if the shareholders of Seller fail to approve this
Agreement and the Bank Merger by the requisite vote at the Seller Shareholders'
Meeting; or
(g) By Company, if the Average Closing Price is less than $24.00,
provided, however, that if the Company elects to terminate this Agreement
pursuant to Section 10.1(g), Seller may render such election null and void, and
thereby revive this Agreement, by agreeing to set the Aggregate Company Share
Amount to 658,750 Company shares.
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10.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 10.1 hereof, all further obligations of the
Parties hereto under this Agreement shall terminate without further liability of
any Party to another; provided, however, that no termination of this Agreement
under Section 10.1 for any reason or in any manner shall release, or be
construed as so releasing, any Party from its obligations under Sections 11.1,
11.9 or 11.10, hereof and notwithstanding the foregoing if such termination
shall result from the willful failure of a Party to fulfill a condition to the
performance of the obligations of any other Party or to perform a covenant of
such Party in this Agreement, such Party shall, subject to the provision of
Section 11.1, be fully liable for any and all damages, costs and expenses
(including, but not limited to, reasonable attorneys' fees sustained or incurred
by the other Party or Parties in connection with negotiating and implementing
the transactions contemplated in this Agreement).
10.3 Waiver of Conditions. If any of the conditions specified in
Section 8.2 have not been satisfied, Company and Bank may nevertheless, at their
election, proceed with the transactions contemplated in this Agreement. If any
of the conditions specified in Section 8.3 have not been satisfied, Seller may
nevertheless, at its election, proceed with the transactions contemplated in
this Agreement. If any Party elects to proceed pursuant to the provisions
hereof, the conditions that are unsatisfied immediately prior to the Effective
Time shall be deemed to be satisfied, as evidence by a certificate delivered by
the electing Party.
10.4 Force Majeure. Company and Seller agree that, notwithstanding
anything to the contrary in this Agreement, in the event this Agreement is
terminated as a result of a failure of a condition, which failure is due to a
natural disaster or other act of God, or an act of war or of terror, and
provided neither Party has materially failed to observe the obligations of such
Party under this Agreement, neither Party shall be obligated to the other Party
to this Agreement for any expenses or otherwise be liable hereunder.
ARTICLE 11
GENERAL
-------
11.1 Expenses/Termination_Expenses.
(a) Seller hereby agrees that if this Agreement is terminated by
Company pursuant to Section 10.1(d), Seller shall promptly, and in any event
within seven Business Days after such termination, pay Company $500,000.
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(b) Company and Bank hereby agree that if this Agreement is terminated
by Seller pursuant to Section 10.1(e), Company and Bank shall promptly, and in
any event within seven Business Days after such termination, pay Seller
$500,000. The payment obligations of Company and Bank set forth in the preceding
sentence shall be deemed to be joint and several.
(c) Seller hereby agrees that if (i) (X) the board of directors of
Seller fails to recommend approval of this Agreement and the Bank Merger to the
shareholders of Seller or effects a Change in Recommendation, and this Agreement
and the Bank Merger are not approved by the shareholders of Seller by the
requisite vote at the Seller Shareholders' Meeting, or (Y) a Competing
Transaction is proposed between the date hereof and the time of the Seller
Shareholders' Meeting and the shareholders of Seller fail to approve this
Agreement and the Bank Merger under circumstances where the board of directors
of Seller continuously maintained its favorable recommendation of this Agreement
and the Bank Merger, or (Z) this Agreement is terminated after a Competing
Transaction is proposed and (ii) after the occurrence of (X), (Y) or (Z)), a
definitive agreement relating to a Competing Transaction is executed by Seller,
or a Competing Transaction is consummated, within 12 months after the
termination of this Agreement, then, upon the happening of any such events, it
shall promptly pay Company $1,000,000. There shall be no duplication of remedy
under this Section 11.1(c) and 11.1(a) and any payment to Company pursuant to
Section 11.1(a) shall be credited towards the $1,000,000 payment provided for in
this subsection.
(d) Seller hereby agrees that if this Agreement is terminated by
Company pursuant to Section 10.1(f), Seller shall promptly, and in any event
within seven Business Days after such termination, pay Company one-half of
Company documented expenses (including, but not limited to, its legal and
accounting fees, printing, mailing and filing fees and costs) incurred by the
Company in connection with the S-4 and Seller Shareholders' Meeting, but in no
event shall such payment exceed $100,000.
(e) Except as otherwise provided herein and in Section 7.1, all
expenses incurred by Company/Bank or Seller in connection with or related to the
authorization, preparation and execution of this Agreement, the solicitation of
shareholder approvals and all other matters related to the closing of the
transactions contemplated hereby, including, without limitation of the
generality of the foregoing, all fees and expenses of agents, representatives,
counsel, and accountants employed by either of the Parties or its affiliates,
shall be borne solely and entirely by the Party which has incurred the same.
(f) The amounts set forth in Section 11.1(a), (b) and (c) are in the
nature of liquidated damages and do not constitute a penalty. The Parties agree
that it would be impracticable or extremely difficult to fix actual damages and
the amounts set forth in Section 11.1(a), (b) and (c) are reasonably intended to
compensate for expenses incurred in connection with the negotiation of this
Agreement and any lost opportunity resulting from the pendency of the
transactions contemplated by this Agreement. Upon payment of an amount by a
Party pursuant to Section 11.1(a), (b) or (c), the other Party waives any and
all rights to any payments, damages, amounts, costs, fees or other expenses, and
agrees that it shall not bring any action, suit or proceeding of any kind to
recover any amounts in connection with any breach of this Agreement.
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11.2 Amendments. To the fullest extent permitted by law, this Agreement
may be amended by agreement in writing of the Parties hereto at any time prior
to the Effective Time, whether before or after approval of this Agreement by the
shareholders of Seller.
11.3 Disclosure Letter; Exhibits; Integration. Each Disclosure Letter
and exhibit delivered pursuant to this Agreement shall be in writing and shall
constitute a part of the Agreement, although Disclosure Letters need not be
attached to each copy of this Agreement. This Agreement, together with such
Disclosure Letters, and exhibits constitute the entire agreement between the
Parties pertaining to the subject matter hereof and supersedes all prior
agreements and understanding of the Parties in connection therewith.
11.4 Best Efforts. Each Party will use its best efforts to cause all
conditions to the obligations of the Parties to be satisfied.
11.5 Governing Law. This Agreement and the legal relations between the
Parties shall be governed by and construed in accordance with the laws of
California except to the extent that the provisions of federal law are
mandatorily applicable.
11.6 No Assignment. Neither this Agreement nor any rights, duties or
obligations hereunder shall be assignable by Company/Bank or Seller, in whole or
in part, without the prior written consent of the other Party. Any attempted
assignment in violation of this prohibition shall be null and void. Subject to
the foregoing, all of the terms and provisions hereof shall be binding upon, and
inure to the benefit of, the successors and assigns of the Parties hereto.
11.7 Headings. The descriptive headings contained in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
11.8 Counterparts. This Agreement and any exhibit hereto may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each Party hereto and delivered to each Party hereto.
11.9 Publicity and Reports. Company, Bank, and Seller shall coordinate
all publicity relating to the transactions contemplated by this Agreement and no
Party shall issue any press release, publicity statement or other public notice
relating to this Agreement or any of the transactions contemplated hereby
without obtaining the prior consent of the other Party, except to the extent
that legal counsel to any Party shall deliver a written opinion to the other
Party to the effect that a particular action is required by applicable Rules.
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11.10 Confidentiality. All Confidential Information disclosed
heretofore or hereafter by any Party to this Agreement to any other Party to
this Agreement shall be kept confidential by such other Party and shall not be
used by such other Party otherwise than as herein contemplated, except to the
extent that (a) it is necessary or appropriate to disclose to the OCC, the FRB,
the DFI, the SEC or any other Governmental Entity having jurisdiction over any
of the Parties or as may be otherwise be required by Rule (any disclosure of
Confidential Information to a Governmental Entity shall be accompanied by a
request that such Governmental Entity preserve the confidentiality of such
Confidential Information); or (b) to the extent such duty as to confidentiality
is waived by the other Party. Such obligation as to confidentiality and non-use
shall survive the termination of this Agreement pursuant to Article 10. In the
event of such termination and on request of another Party, each Party shall use
all reasonable efforts to (1) return to the other Parties all documents (and
reproductions thereof) received from such other Parties that contain
Confidential Information (and, in the case of reproductions, all such
reproductions made by the receiving Party); and (2) destroy the originals and
all copies of any analyses, computations, studies or other documents prepared
for the internal use of such Party that included Confidential Information.
11.11 Specific Performance. Seller, Bank and Company each acknowledge
that, in view of the uniqueness of their respective businesses and the
transactions contemplated in this Agreement, each Party would not have an
adequate remedy at law for money damages in the event that this Agreement has
not been performed in accordance with its terms, and therefore each Party agrees
that the other shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which it may be entitled, at law or in equity.
11.12 Notices. Any notice or communication required or permitted
hereunder, including, without limitation, supplemental Disclosure Letters shall
be deemed to have been given if in writing and (a) delivered in person, (b)
telexed, or (c) telecopied (provided that any notice given pursuant to clauses
(b) and (c) is also mailed by certified or registered mail, postage prepaid), as
follows:
If to Company or Bank, addressed to:
Xxxxxxx X. Xxxxxx
President
Community Bancorp Inc.
000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Fax No. (000) 000-0000
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With a copy addressed to:
Xxxx X. Xxxxxx, Esq.
Reitner & Stuart
0000 Xxxxx Xxxxxx
Xxx Xxxx Xxxxxx, XX 00000
Fax No. (000) 000-0000
If to Seller, addressed to:
Xxxx X. Xxxxxxx
President
Rancho Xxxxxxxx Community Bank
00000 Xxxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
(000) 000-0000
With a copy addressed to:
S. Xxxx Xxxxx, Esq. Horgan, Rosen, Beckham &
Coren, LLP 00000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000-0000 Fax No. (818)
591-3838
or at such other address and to the attention of such other Person as a Party
may notice to the others in accordance with this Section11.12. Notwithstanding
anything to the contrary contained herein, notice and/or delivery to Company
shall be deemed notice and/or delivery to Bank.
11.13 Knowledge. Whenever any statement herein or in any Disclosure
Letter, certificate or other document delivered to any Party pursuant to this
Agreement is made "to the knowledge" or "to the best knowledge" of any Party or
other Person such Party or other Person shall make such statement only after
conducting an investigation reasonable under the circumstances of the subject
matter thereof, and each such statement shall constitute a representation that
such investigation has been conducted.
11.14 Severability. If any portion of this Agreement shall be deemed by
a court of competent jurisdiction to be unenforceable, the remaining portions
shall be valid and enforceable only if, after excluding the portion deemed to be
unenforceable, the remaining terms hereof shall provide for the consummation of
the transactions contemplated herein in substantially the same manner as
originally set forth at the date this Agreement was executed.
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11.15 Attorneys' Fees. In the event any of the parties to this
Agreement brings an action or suit against any other party by reason of any
breach of any covenant, agreement, representation, warranty or other provision
hereof, or any breach of any duty or obligation created hereunder by such other
party, the prevailing party, as determined by the court or the body having
jurisdiction, shall be entitled to have and recover of and from the losing
party, as determined by the court or other party having jurisdiction, all
reasonable costs and expenses incurred or sustained by such prevailing party in
connection with such prevailing action, including, without limitation, legal
fees and court costs (whether or not taxable as such).
11.16 Termination of Representations, Warranties and Covenants. The
representations, warranties and covenants of each Party contained herein or in
any certificate or other writing delivered by such party pursuant hereto or in
connection herewith shall not survive the Effective Time.
(This space intentionally blank.)
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WITNESS, the signature of Community Bancorp Inc., as of the 21st day of
April, 2005, set by its Chairman of the Board and its Secretary, pursuant to a
resolution of its Board of Directors, acting by at least a majority:
COMMUNITY BANCORP INC.
By: /s/ Xxxx X. Xxxxx By: /s/ L. Xxxxx Xxxxx, Jr.
----------------- -----------------------
Xxxx X. Xxxxx L. Xxxxx Xxxxx, Jr.
Chairman of the Board Secretary
WITNESS, the signature of Community National Bank as of the 21st day of
April, 2005, set by its President and Chief Executive Officer and its Secretary,
pursuant to a resolution of its Board of Directors, acting by at least a
majority:
COMMUNITY NATIONAL BANK
By: /s/ Xxxxxxx X. Xxxxxx By:/s/ L. Xxxxx Xxxxx, Jr.
--------------------- -----------------------
Xxxxxxx X. Xxxxxx L. Xxxxx Xxxxx, Jr.
President & Chief Executive Secretary
Officer
WITNESS, the signature of Rancho Xxxxxxxx Community Bank, as of the
21st day of April, 2005 set by its Chief Executive Officer and its Secretary,
pursuant to a resolution of its Board of Directors, acting by at least a
majority:
RANCHO XXXXXXXX COMMUNITY BANK
By: /s/ Xxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxxxx
------------------- ---------------------
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxxxx
Chief Executive Officer Secretary
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