EXHIBIT 2.1
First Restatement of
Agreement and Plan of Reorganization
by and between
Pacific Community Banking Group
and
The Bank of Hemet
dated
January 5, 1999
FIRST RESTATEMENT OF
AGREEMENT AND PLAN OF REORGANIZATION
by and between
PACIFIC COMMUNITY BANKING GROUP
AND
THE BANK OF HEMET
Dated: January 5, 1999
FIRST RESTATEMENT OF
AGREEMENT AND PLAN OF REORGANIZATION
THIS FIRST RESTATEMENT OF AGREEMENT AND PLAN OF REORGANIZATION
(hereinafter referred to as the "Agreement") is made and entered into as of
January 5, 1999, by and between THE BANK OF HEMET (the "Bank"), a California
banking corporation, and PACIFIC COMMUNITY BANKING GROUP (the "Company"), a
California corporation.
R E C I T A L S
A. The Bank is a California banking corporation duly organized
and existing under the laws of the State of California with its principal
office in the City of Hemet, County of Riverside, State of California. The
Company is a proposed bank holding company duly organized and existing under
the laws of the State of California with its principal office in the City of
Laguna Hills, County of Orange, State of California;
B. The parties desire to provide for the acquisition by the
Company of all of the outstanding shares of the common stock, no par value of
the Bank ("Bank Stock") pursuant to the Merger (as defined below), subject to
the terms and conditions specified herein, as follows:
(a) The Company will establish PCBG Merger Corporation
(as defined below) as a wholly-owned subsidiary; and
(b) The Bank and PCBG Merger Corporation will enter into
an Agreement of Merger (as defined below) providing for the merger of PCBG
Merger Corporation and the Bank under the state charter of the Bank;
C. At the Effective Time (hereinafter defined below) of the
Merger, all of the issued and outstanding shares of Bank Stock, except for
shares of Bank Stock held by Dissenting Shareholders (as hereinafter defined
below), shall be converted into and exchanged for a combination of cash and
Warrants exercisable into shares of Company Stock all upon the terms and
subject to the conditions hereinafter set forth;
D. As a condition and inducement to the Company's willingness
to enter into this Agreement, the Bank and the Company are entering into,
immediately after the execution and delivery hereof, a Warrant Purchase
Agreement (the "Warrant Agreement") dated as of the date hereof and attached
hereto as EXHIBIT "C", pursuant to which the Bank shall grant to the Company
an option to purchase shares of the common stock, no par value, of the Bank
representing
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19.9% of Bank stock to be outstanding after giving pro forma effect to the
issuance of such shares at a price of $46.50 per Bank Stock;
E. The Merger requires certain shareholder and regulatory
approvals and may be effected only after the necessary approvals have been
obtained;
F. The parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger; and
G. Subject to any specific provisions of this Agreement, it is
the intent of the parties that the Company by reason of this Agreement shall
not (until consummation of the Merger) control, and shall not be deemed to
control the Bank or any of its subsidiaries, directly or indirectly, and
shall not exercise or be deemed to exercise, directly or indirectly, a
controlling influence over the management or policies of the Bank or any of
its subsidiaries;
H. The Company and the Bank desire that this First Restatement
of the Agreement and Plan of Reorganization now govern the rights and
obligations of the Parties in place of that certain Agreement and Plan of
Reorganization dated July 30, 1998.
Accordingly, to consummate the transactions set forth above and
in consideration of the mutual covenants, agreements, representations and
warranties contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms used in this Agreement
shall have the meanings set forth below unless the context otherwise requires:
"Affiliate" means any Person (as defined below) that directly, or
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Person specified.
"Aggregate Option Price" shall have the meaning given such term
in Section 2.8.
"Aggregate Purchase Consideration" shall have the meaning given
such term in Section 2.4.
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"Agreement of Merger" shall mean the Agreement of Merger to be
entered into by and between PCBG Merger Corporation and the Bank
substantially in the form of EXHIBIT "A" hereto, but subject to any changes
that may be necessary to conform to any requirements of any Governmental
Entity having authority over the Merger.
"Alternative Transaction" shall have the meaning given such term
in Section 6.5.
"Audited Bank Financial Statements" shall have the meaning given
such term in Section 4.4.
"BHC Act" shall mean the Bank Holding Company Act of 1956, as
amended.
"Bank" shall mean The Bank of Hemet.
"Bank Corporate Governance Changes" shall have the meaning given
such term in Section 2.1 (d).
"Bank Dissenting Shares" means shares of Bank Stock held by
"Dissenting shareholders" within the meaning of Chapter 13 of the CGCL.
"Bank Employment Agreements" shall mean any employment agreement,
severance agreement, "golden parachute" agreement or any other agreement
which provides for payments to employees of the Bank upon termination of
employment, including termination after a change in control.
"Bank Filings" shall have the meaning given such term in Section
4.18.
"Bank Options" shall mean options to purchase Bank Stock (as
defined below) pursuant to the Bank Stock Option Plan (as defined below).
"Bank Perfected Dissenting Shares" means Dissenting Shares which
the holders thereof have not withdrawn or caused to lose their status as Bank
Dissenting Shares.
"Bank Representatives" shall have the meaning given such term in
Section 7.3.
"Bank Stock" shall mean the meaning given such term in Recital B.
"Bank Stock Option Plan" shall mean The Bank of Hemet 1994 Stock
Option Plan.
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"▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and Company, who shall serve
as the financial advisor to the 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 (as defined below), (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 or class of employee, whether active or retired, of a Party.
"Business Day" shall mean any day other than a Saturday, Sunday
or day on which commercial banks in California are authorized or required to
be closed.
"▇▇▇▇▇▇▇" shall mean Mr. E. ▇▇▇▇ ▇▇▇▇▇▇▇, Chairman of the Board
and Chief Executive Officer of the Company.
"CERCLA" shall have the meaning given such term in the definition
of Environmental Law.
"CFC" means the California Financial Code.
"CGCL" means the California General Corporations Law.
"Charter Documents" shall mean, with respect to any business
organization, any certificate or articles of incorporation or association,
any bylaws, any partnership agreement and any other similar documents that
regulate the basic organization of the business organization and its internal
relations.
"Classified Credit" shall have the meaning given such term in
Section 6.6.
"Closing" shall mean the consummation of the transactions
contemplated by this Agreement on the Closing Date (as defined below) at the
law offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as the Parties (as defined below)
may agree upon.
"Closing Date" shall mean, unless the Parties (as defined below)
agree on another date, the first Friday or as soon as possible following the
Determination Date, and in no case more than 30 days following the receipt of
the approvals and consents and expiration of the waiting periods specified in
Section 9.1 have occurred and/or have been obtained, the receipt of the
necessary cash capital by
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the Company in order to complete the transaction as contemplated by this
Agreement, and satisfaction of the remaining conditions to the transaction as
contemplated by this Agreement.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended, and all regulations thereunder.
"Commissioner" shall mean the California Commissioner of
Financial Institutions.
"Company" shall mean Pacific Community Banking Group, a
California corporation.
"Company Corporate Governance Changes" shall have the meaning
given such term in Section 2.1(e).
"Company Filings" shall have the meaning given such term in
Section 5.13.
"Company Representatives" shall have the meaning given such term
in Section 6.3.
"Company Stock Option Plan" shall mean the proposed Pacific
Community Banking Group 1998 Stock Option Plan.
"Company Financial Statements" shall have the meaning given such
term in Section 5.4.
"Company Stock" shall mean the common stock, no par value, of the
Company.
"Confidential Information" shall mean all information exchanged
heretofore or hereafter between the Company, its affiliates and agents, on
the one hand, and the Bank, its 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, pricing information, company manuals,
internal memoranda, strategic plans, budgets, forecasts, projections,
computer models, marketing plans, files relating to loans originated by such
Person, loans and loan participation purchased by such Person from others,
investments, deposits, leases, contracts, employment records, minutes of
board 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
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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 an improper disclosure
directly or indirectly by the Company or the Bank, as the case may be, or any
of their officers, directors, employees or other representatives), (ii) was
available to the recipients on a non-confidential basis from a source other
than from the Persons responsible for furnishing the information, provided
that such source learned the information independently and 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" shall mean every consent, approval, absence of
disapproval, waiver or authorization from, or notice to, or registration or
filing with, any Person (as defined below).
"CRA" shall mean the Community Reinvestment Act.
"Deposit" shall mean any deposit as defined in Section 3(I) of
the Federal Deposit Insurance Act, as amended, to the date of this Agreement
(12 USC Section 1813(I)).
"Determination Date" shall mean the last day of the month
preceding the Closing Date.
"Directors' Agreement" shall mean an agreement, substantially in
the form of EXHIBIT "B" hereto, pursuant to which each signatory shall agree
to vote or cause to be voted all shares of Bank Stock with respect to which
such Person has voting power on the date hereof or hereafter acquires to
approve the Agreement and the transactions contemplated hereby and all
requisite matters related thereto.
"DPC Property" shall mean voting securities, other personal
property and real property acquired by foreclosure or otherwise, in the
ordinary course of collecting a debt previously contracted in good faith,
retained with the object of sale for a period not longer than one year, or
any applicable statutory holding period, and recorded in the holder's
business records as such.
"Effective Day" shall mean the day on which the Effective Time
occurs.
"Effective Time" shall mean the date and time of the filing of
the Agreement of Merger with the Secretary of State (as defined below).
"Employee Plan" shall have the meaning given such term in Section
4.11(c).
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"Encumbrance" shall mean any option, pledge, security interest,
lien, mechanic's lien, charge, encumbrance or restriction (whether on voting,
disposition or otherwise), whether imposed by agreement, understanding, law
or otherwise.
"Environmental Law" shall mean any federal, state, provincial or
local statute, law, ordinance, rule, regulation, order, consent, decree,
judicial or administrative decision or directive of the United States or
other jurisdiction whether now existing or as hereinafter promulgated, issued
or enacted relating to: (A) pollution or protection of the environment,
including natural resources; (B) exposure of persons, including employees, to
Hazardous Substances (as defined below) or other products, materials or
chemicals; (C) protection of the public health or welfare from the effects of
products, by-products, wastes, emissions, discharges or releases of chemical
or other substances from industrial or commercial activities; or (D)
regulation of the manufacture, use or introduction into commerce of
substances, including, without limitation, their manufacture, formulation,
packaging, labeling, distribution, transportation, handling, storage and
disposal. For the purposes of this definition the term "Environmental Law"
shall include, without limiting the foregoing, the following statutes, as
amended from time to time: (1) the Clean Air Act, as amended, 42 U.S.C.
Section 7401 ET SEQ.; (2) the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 ET SEQ.; (3) the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 ET SEQ., (4) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (including the Superfund Amendments and Reauthorization Act of
1986), 42 U.S.C Section 9601 ET SEQ.("CERCLA"); (5) the Toxic Substances
Control Act, as amended, 15 U.S.C. Section 2601 ET SEQ.; (6) the Occupational
Safety and Health Act, as amended, 29 U.S.C. Section 65; (7) the Emergency
Planning and Community Right-To-Know Act of 1986, 42 U.S.C. Section 11001 ET
SEQ.; (8) the Mine Safety and Health Act of 1977, as amended, 30 U.S.C.
Section 801 ET SEQ.; (9) the Safe Drinking Water Act, 42 U.S.C. Section 300f
ET SEQ.; (10) the Federal Water Pollution Control Act, as amended (33 U.S.C.
1251, ET SEQ.; and (11) all comparable state and local laws, laws of other
jurisdictions or orders and regulations including, but not limited to, the
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇- ▇▇▇▇▇▇ Hazardous Substance Account Act, Cal. Health &
Safety Code Section 25300 ET SEQ., the ▇▇▇▇▇▇-Cologne Water Quality Control
Action, 25140, 25501(j) and (k); 255501.1.25281 and 25250.1 of the California
Health and Safety Code and/or Article I or Title 22 of the California Code of
Regulations, Division ▇, ▇▇▇▇▇▇▇ ▇▇ (▇▇▇ "▇▇▇▇▇ ▇▇▇▇"); 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.
"Equity Securities" shall mean the capital stock of Bank or any
options, rights, warrants or other rights to subscribe for or purchase, or
any plans,
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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" shall mean the Employee Retirement Income Security Act of
1974, as amended, and all regulations thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations thereunder.
"Exchange Agent" shall mean U. S. Stock Transfer Corporation, or,
subject to the reasonable approval of the Bank, any other financial
institution or company appointed by the Company to effect the exchange
contemplated by Section 2.5.
"Executive Officer'' shall mean a natural person who participates
or has the authority to participate (other than in the capacity of a
director) in major policy making functions, whether or not such person has a
title or is serving with salary or other compensation.
"Expected Net Proceeds" shall mean $52.6 million.
"Expenses" shall have the meaning given such term in Section 13.1.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FRB" shall mean the Board of Governors of the Federal Reserve
System.
"GAAP" shall mean Generally Accepted Accounting Principles,
consistently applied from period to period, applicable to banks and bank
holding companies, as appropriate, for the period in question.
"Governmental Entity" shall mean any court or tribunal in any
jurisdiction or any United States federal, state, municipal, domestic,
foreign or other administrative agency, department, commission, board, bureau
or other regulatory or governmental authority or instrumentality.
"Hazardous Substances" shall mean (1) any "hazardous waste" as
defined by CERCLA and the State Acts, as such acts are in effect on the date
hereof, and any and all regulations promulgated thereunder; (2) any
"hazardous substance" as such term is defined by CERCLA; (3) any "regulated
substance" as defined by the State Acts; (4) asbestos requiring abatement,
removal or encapsulation pursuant to the requirements of any Governmental
Entity; (5) polychlorinated biphenyls; (6) petroleum products; (7) "hazardous
chemicals" or
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"extremely hazardous substances" in quantities sufficient to require
reporting, registration, notification and/or optional treatment or handling
under the Emergency Planning and Community Right to Know Act of 1986; (8) any
"hazardous chemical" in levels that would result in exposure greater than is
allowed by permissible exposure limits established pursuant to the
Occupational Safety and Health Act of 1970; (9) any substance that requires
reporting, registration, notification, removal, abatement and/or special
treatment, storage, handling or disposal, under Section 6, 7 and 8 of the
Toxic Substance Control Act (15 U.S.C. Section 2601); (10) any toxic or
hazardous chemical described in 29 C.F.R. 1910.1000-1047 in levels that would
result in exposure greater than those allowed by the permissible exposure
limits pursuant to such regulations; and (11) any (A) "hazardous waste", (B)
"solid waste" capable of causing a "release or threatened release" that
present an "imminent and substantial endangerment" to the public health and
safety of the environment, (C) "solid waste" that is capable of causing a
"hazardous substance incident" (D) "solid waste" with respect to which
special requirements are imposed by any applicable Governmental Entity upon
the generation and transportation thereof as such terms are defined and used
within the meaning of the State Acts, or (E) any "pollutant" or "toxic
pollutant" as such term is defined in the Federal Clean Water Act, 33 U.S.C.
Section 1251-1376, as ▇▇▇▇▇▇, by Public Law 100-4, February 4, 1987, and the
regulations promulgated thereunder, including 40 C.F.R. Sections 122.1 and
122.26.
"Managing Underwriter" shall mean Sutro (as defined below).
"Managing Underwriters" shall mean the Managing Underwriter and
such other firm or firms as the Company and the Managing Underwriter shall
agree.
"Material Adverse Change" shall have the meaning given such term
in Sections 4.17 and 5.9.
"Material Contract" shall have the meaning given such term in
Section 4.12.
"Merger" shall mean the merger of the PCBG Merger Corporation
with and into the Bank.
"Offering" shall mean a public offering underwritten by the
Underwriters (as defined below), as determined by the Company in its sole
discretion, and based upon current market conditions and assumptions of
sufficient shares of the Company Stock at a gross offering price to be
determined by the Company and its underwriters, in order to fund cash portion
of the acquisition of the Bank by the Company, to provide new capital for
growth of the Company following the acquisition of the Bank by the Company,
and the payment of any necessary expenses of the Company as provided herein,
as determined by the Company in its sole discretion.
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"Offering Price" shall mean the gross offering price per share of
Company Stock in the Offering.
"OREO" shall have the meaning given such term in Section 6.2(xx).
"Party" shall mean either the Company or the Bank and "Parties"
shall mean both the Company and Bank.
"Per Share Consideration" shall have the meaning given such term
in Section 2.4.
"Permit" shall mean any United States federal, foreign, state,
local or other license, permit, franchise, certificate of authority, order or
approval necessary or appropriate under any applicable Rule (as defined
below).
"Person" shall mean 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" shall have the meaning given such term in
Section 6.8.
"RAP" shall mean regulatory accounting principles, if any,
applicable to a particular person.
"Real Property" shall have the meaning given such term in
subsection (a) of Section 4.6.
"Representatives" shall have the meaning given such term in
subsection (a) of Section 6. 3.
"Rule" shall mean any statute or law or any judgment, decree,
injunction, order, regulation or rule of any Governmental Entity, including,
without limitation, those relating to disclosure, usury, equal credit
opportunity, equal employment, fair credit reporting and anticompetitive
activities.
"S-1" means the registration statement on Form S-1 to be filed
with the SEC relating to the registration under the Securities Act of the
shares of Company Stock to be issued in the Offering.
"S-4" means the registration statement on Form S-4, and such
amendments thereto, that is filed with the SEC to register the Warrants to be
issued in the Merger under the Securities Act and to clear use of the Proxy
Statement in connection with the Company Shareholders' Meeting and the Bank
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Shareholders' Meeting pursuant to the regulations promulgated under the
Exchange Act.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" shall mean all reports filed by a Party hereto
pursuant to the Exchange Act with the SEC or the FDIC.
"Secretary of State" shall mean the Secretary of State of the
State of California.
"Section 1300" shall mean Section 1300 ET SEQ. of the California
Corporations Code.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all rules and regulations thereunder.
"State Acts" shall have the meaning given such term in the
definition of "Environmental Law."
"Surviving Bank" shall mean the bank surviving the Merger.
"Surviving Bank Stock" shall mean the common stock, no par value,
of the Surviving Bank.
"Sutro" shall mean Sutro & Company who may also act as a
financial advisor to the Company and as an underwriter in the Offering.
"Tax Filings" shall have the meaning given such term in Section
4.8.
"Third Party Consent" shall have the meaning given such term in
Sections 6.17 and 7.8.
"To the knowledge" and "to the best knowledge" shall have the
meanings given such terms in Section 15.15.
"Total Acquisition Costs" shall mean the sum of the Aggregate
Purchase Consideration for the Bank and Valley Bank.
"Unaudited Bank Financial Statements" shall have the meaning
given such term in Section 4.4.
"Understanding" shall have the meaning given such term in Section
4.11(m) or 4.12.
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"Underwriter" shall mean a group of broker/dealers that include
the Managing Underwriters as assembled by the Managing Underwriter with the
consent of the Company.
"Warrant" shall mean a warrant issuable by the Company at the
Closing exercisable into one (1) share of the Company for each share of Bank
Stock exchanged for a ten year period from the Closing Date with an exercise
price equal to 122% of the Offering Price.
"Warrant Agreement" shall mean the warrant agreement attached
hereto as Exhibit "D."
ARTICLE II
THE MERGER AND RELATED MATTERS
2.1 THE MERGER. The Company agrees that it will use its best
efforts, with all necessary cooperation of the Bank, to perfect the
organization of PCBG Merger Corporation in accordance with the CGCL prior to
the Closing Date. The directors and officers of PCBG Merger Corporation, and
the Articles of Incorporation and Bylaws of PCBG Merger Corporation, shall be
determined by the Company. Subject to the provisions of this Agreement, the
Parties agree to request that the approval of the Merger to be issued by the
Commissioner, the FDIC, the FRB and any other necessary regulatory agency on
or prior to the Closing Date shall provide that the Merger shall become
effective (the "Effective Time") as of the Closing Date. The Bank shall
cause its officers to execute the Agreement of Merger, as well as all other
necessary documents, in order to effect the Merger in accordance with the
terms hereof as requested by the Company. At the Effective Time of the
Merger, the following transactions will occur simultaneously:
(a) MERGER OF THE BANK AND PCBG MERGER CORPORATION. The Bank
and PCBG Merger Corporation shall be merged under the certificate of
authority of the Bank, with the Bank being the Surviving Bank pursuant to the
provisions of, and with the effect provided in, the CGCL and the CFC, and
shall continue its corporate existence under the laws of the State of
California. The name of the Surviving Bank shall be "The Bank of Hemet."
Upon the consummation of the Merger, the separate corporate existence of PCBG
Merger Corporation shall cease.
(b) EFFECT ON BANK STOCK. Subject to Section 2.3, each share
of Bank Stock issued and outstanding immediately prior to the Effective Time
of the Merger shall, on and at the Effective Time of the Merger, pursuant to
the Agreement of Merger and without any further action on the part of the
Bank or the holders of Bank Stock, be automatically cancelled and cease to be
an issued and outstanding share of Bank Stock, and shall be exchanged for and
converted into the right to receive the Per Share Consideration.
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(c) EFFECT ON PCBG MERGER CORPORATION STOCK. Each share of
PCBG Merger Corporation Stock issued and outstanding immediately prior to the
Effective Time of the Merger shall, on and at the Effective Time of the
Merger, pursuant to the Agreement of Merger and without any further action on
the part of the Bank or the holder of the PCBG Merger Corporation Stock be
converted into, and shall for all purposes be deemed to represent, one share
of Surviving Bank Stock, and one certificate representing one share of the
Surviving Bank Stock will be issued to the Company.
(d) BANK CORPORATE GOVERNANCE CHANGES. The Charter Document of
the Bank as in effect immediately prior to the Effective Time shall continue
in effect after the Merger until thereafter amended in accordance with
applicable law and the operations of the Bank shall continue in effect after
the Merger; except that the Bank shall have taken prior to the Effective Time
all necessary steps so that at the Effective Time (i) ▇▇▇▇▇ ▇. ▇▇▇▇▇,
President, Chief Executive Officer and a director of the Bank, shall have
tendered his resignation from his positions at the Bank, in form and
substance satisfactory to the Company, without incurring any liability on the
part of any Party; the Bank and the Company will honor ▇▇. ▇▇▇▇▇'▇ Executive
Salary Continuation Agreement dated March 22, 1995; ▇▇. ▇▇▇▇▇ will continue
as Chairman of Banklink for a one (1) year period, with no management
authority and no additional compensation, subject to possible annual
reappointment as Chairman of Banklink in the sole discretion of the Company;
the Company intends to appoint ▇▇. ▇▇▇▇▇ as the Bank's representative on the
Company's Board of Directors as described in Section 2.1(e), and any such
Bank representation on the Company's Board of Directors shall be for a
minimum three (3) year period; and the Company in its sole discretion may
extend such time period. ▇▇. ▇▇▇▇▇'▇ appointments as Chairman of Banklink
and as a director of the Company shall be annual appointments to be made by
the Company in its sole discretion; and ▇▇. ▇▇▇▇▇ and the Company will enter
into a noncompetition agreement and a consulting agreement, the forms of
which are attached hereto as part of Exhibit 2.1(d)(1); (ii) ▇▇▇▇▇▇▇ shall
have been appointed Chairman of the Board and Chief Executive Officer of the
Bank; (iii) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman of the Board of the Bank, shall
resign as Chairman of the Board of the Bank but shall remain a member of the
Board of Directors of the Bank unless and until a successor is chosen by the
Company, the Bank shall honor ▇▇. ▇▇▇▇▇▇▇▇▇'▇ Executive Salary Continuation
Agreement dated August 17, 1981; and the Company and ▇▇. ▇▇▇▇▇▇▇▇▇ will enter
into a noncompetition agreement and a consulting agreement, the forms of
which are attached hereto as part of Exhibit 2.1(d)(2), (iv) except for the
persons set forth on Exhibit 2.1(d), which Exhibit shall be delivered by the
Company to the Bank within sixty (60) days of the date of the Agreement, each
of the directors of the Bank shall have tendered his resignation as a
director of the Bank, in form and substance satisfactory to the Company,
without incurring any liability on the part of any Party; (v) the number of
authorized directors, and the specific members of the Board of Directors, of
the Bank shall be changed as
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determined in the sole discretion of the Company; and (vi) the Company shall
name additional directors in its sole discretion who shall be duly elected
and appointed to the Board of Directors of the Bank (or if any such persons
is unable to serve, such other person designated by the Company) and shall
serve until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified (clauses (i)-(vi) being
hereinafter collectively referred to as the "Bank Corporate Governance
Changes.").
(e) COMPANY CORPORATE GOVERNANCE CHANGES. The Charter
Documents of the Company as in effect immediately prior to the Effective Time
shall continue in effect after the Merger until thereafter amended in
accordance with applicable law and the members of the Board of Directors and
the Executive Officers of the Company immediately prior to the Merger shall
continue in their respective positions after the Merger and be the Board of
Directors and the Executive Officers of the Company, except that the Company
shall have taken prior to the Effective Time all necessary steps so that, (i)
the Company's Charter Documents shall be amended to provide for a range of
directors of between five (5) to nine (9), and at least seven (7)
individuals, including one individual from the Board of Directors of the
Bank, which is intended to be ▇▇. ▇▇▇▇▇, and which shall be for a maximum of
(3) three years unless the Company in its sole discretion decides to extend
such time period, and two (2) individuals from the Board of Directors of
Valley Bank, all three of whom shall be annual appointments as selected in
the sole discretion of the Company, excluding ▇▇▇▇▇▇▇ who is currently the
sole director and who shall remain a director, shall be appointed to the
Board of Directors of the Company in the sole discretion of the Company
(clause (i) being hereinafter collectively referred to as the "Company
Corporate Governance Changes").
2.2 EFFECT OF THE MERGER. At the Effective Time of the Merger,
the corporate existence of PCBG Merger Corporation and the Bank shall be
merged into and continued in the Surviving Bank, and the Surviving Bank shall
be deemed the same corporation as each corporation participating in the
Merger. All rights, franchises, and interests of PCBG Merger Corporation and
Bank in and to every type of property (real, personal and mixed) and choses
in action shall be transferred to and vested in the Surviving Bank by virtue
of the Merger without any deed or other transfer and the Surviving Bank shall
hold and enjoy all rights of property, franchises and interests, in the same
manner and to the same extent as such rights, franchises and interests were
held or enjoyed by any one of the consolidating corporations at the Effective
Time of the Merger.
2.3 DISSENTING SHAREHOLDERS. (a) Any Bank Perfected Dissenting
Shares shall not be converted into the right to receive the Per Share
Consideration, but the holders thereof shall be entitled only to such rights
as are granted them by Section 1300. Each dissenting shareholder who is
entitled to payment for his
14
shares of Bank Stock under Section 1300 shall receive such payment in an
amount as determined pursuant to Section 1300.
(b) If any shareholder of the Bank shall fail to perfect, or
shall effectively withdraw or lose, his or her rights under Section 1300, the
Bank Dissenting Shares of such holder shall be treated for purposes of this
Article II as any other shares of outstanding Bank Stock. If any holder of
Bank Stock shall fail to perfect, or shall effectively withdraw or lose, his
or her right to appraisal of and payment for his or her Bank Dissenting
Shares under Section 1300, each share of Bank Dissenting Shares shall be
converted into the right to receive the Per Share Consideration.
2.4 THE AGGREGATE PURCHASE CONSIDERATION AND PER SHARE
CONSIDERATION. The Aggregate Purchase Consideration shall be equal to the
sum of (i) the product of 844,278 and the Per Share Consideration and (ii)
the Aggregate Option Price. The Per Share Consideration shall be equal to
$51.00 in cash. One (1) Warrant shall be added to the Per Share
Consideration for each $51.00 paid in cash. The Per Share Consideration will
be increased (the "Increase in Per Share Consideration"), up to a maximum of
$58.50 per share, calculated as follows: the quotient of (a) the ratio of
the Aggregate Purchase Consideration to the Total Acquisition Costs,
multiplied by the difference between the net proceeds received in the
Offering and the Expected Net Proceeds in the Offering, divided by (b) the
sum of the total number of issued and outstanding shares of Bank Stock and
the number of Bank Options outstanding as of the date of this Agreement. An
Illustration of such calculation is attached as Exhibit 2.4(a). In the event
of such increase in the Per Share Consideration, the number of Warrants shall
be reduced and shall be calculated as follows: the amount of the reduction
of the Warrants per share of Bank Stock shall be equal to the Increase in Per
Share Consideration divided by $18.00. An illustration of such calculation
is attached as Exhibit 2.4(b).
2.5 DELIVERY OF CONSIDERATION. At the Closing, the Company
will deliver to the Exchange Agent an amount of cash equal to the Aggregate
Purchase Consideration, and the Warrants, plus any cash payment for a
fractional share of Company Stock. Delivery to such holders of the cash and
Warrants to which they are entitled will subsequently be made by the Exchange
Agent against delivery of share certificates formerly evidencing Bank Stock
(duly executed and in proper form for transfer) to the Exchange Agent in
accordance with this Section 2.5 and an agreement to be entered into between
the Company and the Exchange Agent.
2.6 NAME OF SURVIVING BANK. The name of the Surviving Bank
shall be "The Bank of Hemet," unless the Company proposes to change such name
following the Closing Date, and the Board of Directors of the Bank agrees to
support such name change.
2.7 (Reserved)
15
2.8 STOCK OPTIONS. Immediately prior to the Effective Time of
the Merger, all stock options will be fully vested and each holder of a Bank
Option will be given the opportunity to, in whole or in part, cancel such
option and receive at the Closing an amount in cash equal to the number of
shares of Bank Stock covered by such option multiplied by the number obtained
by subtracting the exercise price of such option from the Per Share
Consideration in effect on the Closing Date (the total of sum of such
payments for all Bank Options so cancelled shall be defined as the "Aggregate
Option Price"). For each $51.00 of cash paid by the Company in the previous
sentence, each holder of a bank option will receive one (1) Warrant. Such
cash payment may be made either by the Bank, the Company or a combination of
both as determined in the sole discretion of the Company. All remaining Bank
Options which are entitled to participate in the Aggregate Option Price but
the holder of a Bank Option elects not to participate in the Aggregate Option
Price shall be cancelled immediately prior to the Effective Time of the
Merger.
2.9 DIRECTORS' AGREEMENTS. Concurrently with the execution of
this Agreement, the Bank shall cause each of its directors to enter into the
Directors' Agreement.
2.10 TRANSMITTAL LETTER. Immediately after the Effective Time of
the Merger, the Company shall instruct the Exchange Agent to mail appropriate
transmittal materials to the former stockholders of Bank Stock, and the form
of such transmittal letter shall be subject to the reasonable approval of the
Bank.
ARTICLE III
THE CLOSING
3.1 CLOSING DATE. Consummation of the transactions
contemplated by this Agreement shall take place at the office of the Bank,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or such other location as may be
agreed upon by the parties, on the Closing Date. The Effective Time shall
occur following the last to occur of (i) the receipt of all approvals and
consents specified in this Agreement and the expiration of the applicable
waiting periods specified in Article IX, and (ii) satisfaction of the
conditions precedent set forth in Articles IX, X and XI or written waiver of
such conditions as provided herein (the "Closing Date", "Effective Time of
the Merger" or "Effective Time").
3.2 EXECUTION OF AGREEMENT OF MERGER. Prior to the Closing
Date, and as soon as practicable after the organization of PCBG Merger
Corporation, the Agreement of Merger (as amended, if necessary, to conform to
any requirements of any Governmental Entity having authority over the Merger)
shall be executed by Bank and PCBG Merger Corporation. On the Closing Date,
the Merger shall become
16
effective in accordance with the approvals granted by the Commissioner, the
FDIC and the FRB, and the Agreement of Merger, together with all requisite
certificates, shall be duly filed with the California Secretary of State.
3.3 DOCUMENTS TO BE DELIVERED. At the Closing the Parties
shall deliver, or cause to be delivered, such documents or certificates as
may be necessary in the reasonable opinion of counsel for any of the parties,
to effectuate the transactions called for in this Agreement. If, at any time
after the Effective Time of the Merger, the Company or its successors or
assigns shall determine that any further conveyance, assignment or other
documents or any further action is necessary or desirable to further
effectuate the transactions set forth herein or contemplated hereby, the
officers and directors of the Parties hereto shall execute and deliver, or
cause to be executed and delivered, all such documents as may be reasonably
required to effectuate such transactions.
3.4 NO FRACTIONAL WARRANTS. Notwithstanding any other
provision of this Agreement, no fractional Warrants shall be issued, and no
cash or other consideration shall be paid in lieu of fractional Warrants.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Company as follows:
4.1 ORGANIZATION AND GOOD STANDING. The Bank is a California
banking corporation duly organized and validly existing in good standing
under the laws of the State of California and it has the corporate power and
authority to carry on its business as presently conducted, and is authorized
to transact business as a bank. The Bank is a not a member of the Federal
Reserve System and its deposits are insured by the FDIC in the manner and to
the extent provided by law. The Bank has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as presently conducted. The nature of its operations and the
business transacted by it as of the date hereof make licensing and
qualification in any other state or jurisdiction unnecessary. The Bank has
delivered to the Company true and correct copies of its Articles of
Incorporation and Bylaws, as amended and in effect as of the date hereof,
4.2 CAPITALIZATION. The authorized capital stock of Bank
consists of 20,000,000 shares of Common Stock, no par value, of which 844,278
shares are outstanding on the date hereof, all validly issued, fully paid and
nonassessable, and 10,000,000 shares of Preferred Stock, none of which are
outstanding. Except for stock options covering 46,968 shares of Bank Stock
granted pursuant to the Bank Stock Option Plan and the Warrant Agreement, no
unissued shares of Bank Stock or any other securities of the Bank are subject
to any warrants, options, rights or
17
commitments of any character, kind or nature and the Bank is not obligated to
issue or repurchase any shares of Bank Stock or any other security to or from
any person except in accordance with the terms of the Bank Stock Option Plan
and Agreements pursuant thereto, and true and correct copies, as amended and
in effect as of the date hereof have been delivered to the Company. Exhibit
4.2 sets forth the name of each holder of a Bank Option, the number of shares
of Bank Stock covered by each such holder's option, the date of grant of each
such holder's option, the exercise price per share, the vesting schedule for
each such holder's option, and the expiration date of each such holder's
option.
4.3 SUBSIDIARIES. Except as indicated in Exhibit 4.3, the Bank
does not own, directly or indirectly (except as pledgee pursuant to loans
which are not in default), any equity position or other voting interest in
any corporation, partnership, joint venture or other entity.
4.4 FINANCIAL STATEMENTS. The Bank has delivered to the
Company copies of the audited Consolidated Balance Sheets of the Bank as of
December 31, 1997 and 1996; Consolidated Statements of Operations,
Stockholders' Equity and Cash Flows for each of the years ended December 31,
1997, 1996 and 1995, and the related notes and related opinions thereon of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, certified public accountants, with respect to such
financial statements (the "Audited Bank Financial Statements"). The Bank has
delivered to the Company copies of the unaudited Consolidated Balance Sheet
of the Bank as of September 30, 1998; Consolidated Statement of Operations,
Stockholders' Equity and Cash Flows for the nine month period ended September
30, 1998, and the related notes thereon (the "Unaudited Bank Financial
Statements). The Bank has furnished the Company with true and correct copies
of each management letter or other letter delivered to the Bank by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP in connection with the Audited Bank Financial Statements or
relating to any review of the internal controls of the Bank by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP since January 1, 1996. The Audited Bank Financial Statements
and the Unaudited Bank Financial Statements: (i) present fairly the financial
condition and results of operations of the Bank as of and for the dates or
periods covered thereby in accordance with GAAP and RAP consistently applied
throughout the periods involved; (ii) are based on the books and records of
the Bank; (iii) contain and reflect reserves for all material accrued
liabilities and for all reasonably anticipated losses, and set forth adequate
reserves for loan losses and other contingencies to the extent required by
GAAP and RAP; and (iv) none of the Audited Bank Financial Statements or
Unaudited Bank Financial Statements contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading under GAAP or RAP. The books and
records of the Bank have been, and are being, maintained in all material
respects in accordance with GAAP and RAP and other applicable legal and
accounting requirements and reflect only actual transactions.
18
4.5 BOOKS AND RECORDS.
(a) The minute books of the Bank which have been made available to
the Company contain (i) true, accurate and complete records of all meetings and
actions taken by the Board of Directors, Board committees and shareholders of
the Bank, and (ii) true and complete copies of its Charter Documents.
(b) The Bank has records which accurately and validly reflect, in
all material respects, its transactions and accounting controls sufficient to
insure that such transactions are (i) in all material respects, executed in
accordance with management's general or specific authorization, and (ii)
recorded in conformity with GAAP or RAP; such records, to the extent they
contain important information pertaining to the Bank which is not easily and
readily available elsewhere, have been duplicated, and such duplicates are
stored safely and securely pursuant to procedures and techniques reasonably
adequate for companies of the size of the Bank and in the businesses in which
the Bank is engaged; and the data processing equipment and software used by the
Bank in the operation of its businesses (including any disaster recovery
facility) to generate and retrieve such records are reasonably adequate for
companies of the size of the Bank and in the businesses in which the Bank is
engaged.
4.6 PROPERTY AND ASSETS. (a) Exhibit 4.6(a) sets forth a general
description (including the character of the ownership of the Bank) of all real
property of the Bank, including fees, leaseholds and all other interest in real
property (including real property that is DPC Property) ("Real Property").
Except as set forth on Exhibit 4.6(a), (i) the Bank has good and marketable
title, free and clear of any encumbrance, lien or charge of any kind or nature
(except liens for taxes not yet due) to all of the property, real, mixed or
intangible, reflected on the Audited Bank Financial Statements, except as
reflected therein or in the notes thereto (except property sold or transferred
or Encumbrances incurred in the ordinary course of business since the date
thereof except (a) Encumbrances in the aggregate which do not materially detract
from the value, interfere with the use, or restrict the sale, transfer or
disposition, of such properties and assets or otherwise materially and adversely
affect the Bank; (b) any lien for taxes not yet due; and (c) any Encumbrances
arising under the document that created the interest in the Real Property (other
than Encumbrances arising as a result of any breach or default of the Bank);
(ii) all leasehold interests for Real Property and any material personal
property used by the Bank in its business are held pursuant to lease agreements
which are valid and enforceable, except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
other laws of general application relating to or affecting enforcement of
creditors rights and the application of equitable principles in any action,
legal or equitable in accordance with their terms; (iii) all such properties
comply in all material respects with all applicable private agreements, zoning
requirements and other governmental laws and regulations relating thereto and
there are no condemnation proceedings pending or, to the knowledge of the Bank,
threatened with respect to such
19
properties; (iv) the Bank has valid itle or other ownership rights under
licenses to all material intangible personal or intellectual property used by
the Bank in its business, free and clear of any claim, defense or right of
any other person or entity which is material to such property, subject only
to rights of the licensors pursuant to applicable license agreements, which
rights do not materially adversely interfere with the use of such property;
and (v) all material insurable properties owned or held by the Bank are
adequately insured in such amounts and against such risks as is customary
with banks of similar size. The Bank has furnished the Company with true and
correct copies of all leases included on Exhibit 4.6(a) delivered as of the
date of the Agreement.
(b) CONDITION OF PROPERTIES. All tangible properties of the
Bank that are material to the business, financial condition, or results of
operations of the Bank are in a good state of maintenance and repair, except
for ordinary wear and tear, and are adequate for the conduct of the business
of the Bank as presently conducted, and comply with all applicable Rules
related thereto. Except as set forth in Exhibit 4.6(a), (i) the execution of
this Agreement, the performance of the obligations of the Bank hereunder and
the consummation of the transactions contemplated herein, including the
Merger, does not conflict with and will not result in a breach or default
under any lease, agreement or contract described in Exhibit 4.6(a), or give
any other party thereto a right to terminate or modify any term thereof; (ii)
the Bank has no obligation to improve any Real Property; (iii) each lease and
agreement under which the Bank is a lessor is in full force and effect and is
a valid and legally binding obligation of the Bank, and, to the best
knowledge of the Bank, each other party thereto; and (iv) the Bank, and to
the best knowledge of the Bank, each other party to any such lease or
agreement have performed in all material respects all the obligations
required to be performed by them to date under such lease or agreement and
are not in default in any material respect under any such lease or agreement
and there is no pending or, to the best knowledge of the Bank, threatened
proceeding, or proceeding which the Bank has reason to believe may be
threatened, with respect to such property or any such lease.
4.7 LITIGATION PROCEEDINGS AND AGREEMENTS WITH GOVERNMENTAL
ENTITIES.
(a) The Bank is not engaged as a defendant in any legal or other
proceedings before any court, administrative agency or other Governmental Entity
except as is shown on Exhibit 4.7. Except as set forth on Exhibit 4.7, the Bank
is not aware of any "threatened or pending litigation" (within the meaning of
Paragraph 5 of the American Bar Association Statement of Policy Regarding
Lawyers' Responses to Auditors' Requests for Information adopted December 8,
1975) against the Bank. The Bank is not subject to any agreement, order, writ,
injunction or decree of any federal, state or local court, out of a proceeding
involving the Bank or any of its business or properties except as described in
Exhibit 4.7. The Bank has not been served with notice of, nor, to best of
Bank's knowledge is it currently under investigation with respect to, any
violation of
20
federal, state or local law or administrative regulation. Except as set
forth on Exhibit 4.7, there is no (i) outstanding judgment, order, writ,
injunction or decree, stipulation or award of any Governmental Entity or by
arbitration, against, or to the knowledge of the Bank, affecting the Bank or
its assets or business that (a) has had or may have a material adverse effect
on the assets, liabilities, business, financial condition or results of
operations of the Bank, (b) requires any payment by, or excuses a material
obligation of a third party to make any payment to, the Bank, or (c) has the
effect of prohibiting any business practice of, or the acquisition, retention
or disposition of property by, the Bank; or (ii) legal, administrative,
arbitration, investigatory or other proceeding pending or, to the best
knowledge of the Bank that has been threatened, or which the Bank has reason
to believe may be threatened, against or affecting any director, officer,
employee, agent or representative of the Bank, in connection with which any
such person has or may have rights to be indemnified by the Bank.
(b) Except as set forth in Exhibit 4.7, the Bank is not a party
to, or otherwise subject to, any agreement or memorandum of understanding
with or order of any Governmental Entity charged with the supervision or
regulation of banks or engaged in the insurance of bank deposits, that
restricts the conduct of its business, or in any manner relates to its
capital adequacy, its credit or investment policies or its management.
4.8 TAXES AND ASSESSMENTS. The Bank has timely filed all
federal income and state franchise tax returns and all tax reports or returns
which it is required to file with applicable federal, state, county or local
authorities and agencies except (a) where the failure to make any such filing
would not have any materially adverse effect on the business, financial
condition or results of operations of the Bank taken as a whole, and (b)
where the required filing date has been lawfully extended, and the Bank has
paid all taxes provided for and to be due in such returns and reports ("Tax
Filings"). Except as set forth in Exhibit 4.8, the Bank's Tax Filings have
not been examined by a Governmental Entity in the past five (5) years. As of
December 31, 1997, to the extent required by GAAP, the Bank had paid, or set
up adequate accruals for the payment of, all taxes, penalties and assessments
for which it was liable as of such date, whether or not disputed, with
respect to any and all United Sates federal, foreign, state, local,
environmental (including under any Environmental Law) and other taxes for the
periods covered by the financial statements of the Bank and for all prior and
subsequent periods. Except as set forth in Exhibit 4.8 the Bank has no
knowledge of any deficiency proposed to be assessed against it. The Bank has
paid all assessments made by the FDIC and the Commissioner required to be
paid prior the date hereof. There is currently no federal or state income
tax audit or investigation in process or to the best knowledge of the Bank
any other pending investigation by any authorized body of the taxes paid or
to be paid by the Bank, and the Bank has not been informed that any such
audit or investigation is proposed.
21
4.9 COMPLIANCE WITH LAWS AND REGULATIONS.
(a) Except as set forth in Exhibit 4.9, the Bank is not in default
under or in breach of any law, ordinance, rule, regulation, order, judgment or
decree applicable to it promulgated by any Governmental Entity having authority
over it, where such default or breach would have a material adverse effect on
its financial condition, results of operations, or business.
(b) The Bank has conducted in all material respects its businesses
in accordance with all applicable federal, foreign, state and local laws,
regulations and orders, including without limitation disclosure, usury, equal
credit opportunity, equal employment, fair credit reporting, antitrust,
licensing and other laws, regulations and orders, and the forms, procedures and
practices used by the Bank are in compliance with such laws, regulations, and
orders, except for such violations or noncompliance as will not have a material
adverse effect on the financial condition, results of operations, or business of
the Bank.
4.10 PERFORMANCE OF OBLIGATIONS. Except as set forth in Exhibit
4.10, the Bank has performed in all respects all of the obligations required to
be performed by it to date and is not in default under or in breach of any term
or provision of any covenant, contract, lease, indenture or any other agreement
to which the Bank is a party or is subject or is otherwise bound, and no event
has occurred which, with the giving of notice or the passage of time or both,
would constitute such default or breach, where such default or breach would have
a material adverse effect on the financial condition, results of operations, or
business of the Bank, except for loans of the Bank in default on the date of
this Agreement. No party with whom the Bank has an agreement which is material
to the financial condition, results of operations or business of the Bank is in
default thereunder.
4.11 EMPLOYEES.
(a) Except as set forth in Exhibit 4.11(a), there are no
understandings for the employment of any officer or employee of the Bank
which are not terminable by the Bank without liability on not more than 30
days' notice. Except as set forth in Exhibit 4.11(a), the Bank is not a
party to an oral or written consultant agreement not terminable upon 60 days'
or less notice or involving the payment of more than $10,000 per annum.
Except as set forth in Exhibit 4.11(a), there are no material controversies
pending or threatened between the Bank and any of its employees. Except as
disclosed in the Audited Bank Financial Statements, the Unaudited Bank
Financial Statement or in Exhibit 4.11(a), all material sums due for employee
compensation and benefits have been duly and adequately paid or provided, and
all deferred compensation obligations are fully funded. The Bank 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
22
any of them belong. Except as set forth in Exhibit 4.11(a), no director,
officer or employee of the Bank is entitled to receive any payment of any
amount under any employment agreement, severance plan or other benefit plan
as a result of the consummation of any transaction contemplated by this
Agreement.
(b) Except as disclosed in Exhibit 4.11(b), (i) the Bank is and
has been in material compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours, including, without limitation, any such laws respecting employment
discrimination and occupational safety and health requirements, and in any
unfair labor practice; (ii) there is no material unfair labor practice complaint
against the Bank pending or, to the knowledge of the Bank, threatened before the
National Labor Relations Board; (iii) there is no labor dispute, strike,
slowdown or stoppage actually pending or, to the knowledge of the Bank,
threatened against or directly affecting the Bank; and (iv) the Bank has not
experienced any material work stoppage or other material labor difficulty during
the past five years, except in each case which would not result in a Material
Adverse Change.
(c) Except as disclosed in Exhibit 4.11(c), the Bank does not
maintain, contribute to or participate in or have any material liability under
any employee benefit plans, as defined in ERISA, or any nonqualified employee
benefit plans or deferred compensation, bonus, stock or incentive plans, or
other employee benefit or fringe benefit programs for the benefit of former or
current employees of the Bank (the "Employee Plans"). To the best knowledge of
the Bank, no present or former employee of the Bank has been charged with
breaching nor has breached a fiduciary duty under any of the Employee Plans.
The Bank does not participate in, nor has it in the past five years participated
in, nor has it any present or future obligation or liability under, any
multiemployer plan (as defined at Section 3(37) of ERISA). Except as may be
separately disclosed in Exhibit 4.11(c), the Bank does not maintain, contribute
to, or participate in, any plan that provides health, major medical, disability
or life insurance benefits to former employees of the Bank.
(d) Exhibit 4.11 (d) sets forth and describes all Employee Plans
in which the Bank participates, or by which it is bound, including, without
limitation; (i) any profit sharing, deferred compensation, bonus, stock option,
stock purchase, pension, retainer, consulting, retirement, welfare or incentive
plan or agreement whether legally binding or not; (ii) any plan providing for
"fringe benefits" to its employees, including but not limited to vacation, sick
leave, medical, hospitalization, life insurance and other insurance plans, and
related benefits; (iii) any written employment agreement and any other
employment agreement not terminable at will; or (iv) any other "employee benefit
plan" (within the meaning of Section 3(3) of ERISA) (collectively, the "Employee
Plans"). Except as set forth in Exhibit 4.11(d), (i) there are no negotiations,
demands or proposals that are pending or threatened that concern matters now
covered, or that would be covered, by any employment agreements or Employee Plan
other than amendments
23
to plans qualified under Section 401 of the Code that are required by the Tax
Reform Act of 1986 and later legislation; (ii) the Bank is in compliance with
the material reporting and disclosure requirements of Part 1 of Subtitle IB
of ERISA and the corresponding provisions of the Code to the extent
applicable to all such Employee Plans; (iii) the Bank has substantially
performed all of its obligations under all such Employee Plans and employment
agreements required to be performed heretofore; and (iv) there are no
actions, suits or claims (other than routine claims for benefits) pending or,
to the best knowledge of the Bank, threatened against any such Employee Plans
and employment agreements or the assets of such plans, and to the best
knowledge of the Bank, no facts exist which could give rise to any actions,
suits or claims (other than routine claims for benefits) against such plans
or the assets of such plans.
(e) The "Employee Plans" (within the meaning of Section 3(2) of
ERISA) described on Exhibit 4.11(d) have been duly authorized by the Board of
Directors of the Bank. Except as set forth in Exhibit 4.11(d), each such plan
and associated trust intended to be qualified under Section 401(a) and to be
exempt from tax under Section 501(a) of the Code, respectively, has either
received a favorable determination letter from the Internal Revenue Service (the
"IRS"), has applied for such a determination letter or will apply for such a
determination letter before the expiration of the remedial amendment period set
forth in Section 401(b) of the Code, as the IRS may extend such period, and to
the best knowledge of the Bank, no event has occurred that will or could give
rise to disqualification of any such plan which is intended to be qualified
under Section 401(a) of the Code or loss of the exemption from tax of any such
trust which is intended to be exempt from tax under Section 501(a) of the Code.
No event has occurred that will or could subject any such plans to tax under
Section 511 of the Code. None of such plans has engaged in a merger or
consolidation with any other plan or transferred assets or liabilities from any
other plan. To the best of the Bank's knowledge, no prohibited transaction
(within the meaning of Section 409 or 502(i) of ERISA or Section 4975 of the
Code) or party-in-interest transaction (within the meaning of Section 406 of
ERISA) has occurred with respect to any of such plans which could subject the
Bank to an excise tax or penalty. To the best knowledge of the Bank, no employee
of the Bank has engaged in any transactions which could subject the Bank to
indemnify such person against liability. All costs of plans have been provided
for on the basis of consistent methods in accordance with sound actuarial
assumptions and practices. No Employee Plan has incurred any "accumulated
funding deficiency" (as defined in Section 302(2) of ERISA), whether or not
waived, taking into account contributions made within the period described in
Section 412(c)(10) of the Code; nor are there any unfunded amounts under any
Employee Plan which is required to be funded under Part 3 of Subtitle IB of
ERISA and Section 412 of the Code); nor has the Bank failed to make any
contributions or pay any amount due and owing as required by law or the terms of
any Employee Plan or employment agreement. Subject to amendments that are
required by the Tax Reform Act of 1986 and later legislation, since the last
valuation date for each
24
Employee Plan, there has been no amendment or change to such plan that would
increase the amount of benefits thereunder.
(f) The Bank does not sponsor or participate in, or has not
sponsored or participated in, any employee benefit pension plan to which Section
4021 of ERISA applies that would create a liability under Title IV of ERISA.
(g) The Bank does not sponsor or participate in, or has not
sponsored or participated in, any Employee Plan that is a "multi-employer plan"
(within the meaning of Section 3(37) of ERISA) that would subject such Person to
any liability with respect to any such plan.
(h) All group health plans of the Bank (including any plans of
Affiliates of the Bank that must be taken into account under Section 162(i) or
(k) of the Code as in effect immediately prior to the Technical and
Miscellaneous Revenue Act of 1988 and Section 4980B of the Code) have been
operated in compliance with the group health plan continuation coverage
requirements of Section 4980B of the Code to the extent such requirements are
applicable.
(i) There have been no acts or omissions by the Bank that have
given rise to or may give rise to fines, penalties, taxes, or related charges
under Sections 502(c) or (i) or 4071 of ERISA or Chapter 43 of the Code which
could be imposed on the Bank.
(j) Except as described in Section 4.11(j), the Bank does not
maintain any Employee Plan or employment agreement pursuant to which any
Employee Plan or other payment will be required to be made by the Bank or
pursuant to which any other benefit will accrue or vest in any director, officer
or employee the Bank, in either case as a result of the consummation of the
transactions contemplated by the Agreement.
(k) No "reportable event," as defined in ERISA, has occurred with
respect to any of the Employee Plans.
(l) All amendments required to bring each of the employee benefit
plans into conformity with all of the provisions of ERISA and the Code and all
other applicable laws, rules and regulations have been made, or will be made
before the expiration of the remedial amendment period set forth under Section
401(b) of the Code, as such period may be extended by the IRS.
(m) Exhibit 4.11(m) sets forth the name of each director, officer,
employee, agent or representative of the Bank and every other person entitled to
receive any benefit or any payment of any amount under any existing employment
agreement, severance plan or other benefit plan or Understanding as a result of
the consummation of any transaction contemplated in this Agreement, and with
25
respect to each such person, the nature of such benefit or the amount of such
payment, the event triggering the benefit or payment, and the date of, and
parties to, such employment agreement, severance or other benefit plan or
Understanding. The Bank has furnished the Company with true and correct copies
of all documents with respect to the plans and agreements referred to in Exhibit
4.11(d) delivered as of the date of the Agreement, including all amendments and
supplements thereto, and all related summary plan descriptions. For each of the
employee pension benefit plans of the Bank referred to in Exhibit 4.11(d)
delivered as of the date of the Agreement, the Bank has furnished the Company
with true and correct copies of (i) the Form 5500 which was filed in each of the
three most recent plan years, including without limitation, all schedules
thereto and all financial statements with attached opinions of independent
accountants to the extent required; (ii) the most recent determination letter
from the IRS; (iii) the statement of assets and liabilities as of the most
recent valuation date; and (iv) the statement of changes in fund balance and in
financial position or the statement of changes in net assets available for
benefits under each of said plans for the most recently ended plan year. The
documents referred to in subdivisions (iii) and (iv) fairly present the
financial condition of each of said plans as of and at such dates and the
results of operations of each of said plans, all in accordance with GAAP or on
the cash method of accounting applied on a consistent basis.
4.12 CONTRACTS AND AGREEMENTS. Except as listed in Exhibit 4.12,
the Bank is not a party to any oral or written agreement, commitment, or
obligation (hereinafter referred to as an "Understanding" or "Material
Contract") which individually, or with all other similar Understandings relating
to the same or similar subject matter, falls within any of the following
classifications:
(i) any Understanding dealing with advertising, brokerage,
licensing, dealership, representative or agency relationship;
(ii) any Understanding with any labor or collective
bargaining organization or association;
(iii) any mortgage, pledge, conditional sales contract,
security agreement, or any other similar Understanding with respect to any real
or personal property in an amount in excess of $25,000, under which the Bank is
a debtor or to which any of its property is subject;
(iv) any profit sharing, group insurance, bonus, deferred
compensation, stock option, severance pay, pension, retirement, or any other
similar Understanding which might provide benefits to the employees, officers or
directors of the Bank;
(v) any Understanding for the future purchase of
materials, supplies, services, merchandise or equipment, the price of which
exceeds $20,000
26
and which will not be terminable without liability as to future purchases as
of the Effective Time; it being understood that materials, supplies, service,
merchandise or equipment shall not be deemed to include loans, repurchase or
reverse repurchase agreements, securities or other financial transactions
incurred by the Bank in the ordinary course of its banking business;
(vi) any Understanding for the sale of any of its assets,
or for the grant of any right to purchase any of its assets, properties or
rights, or which requires the consent of any third party to the transfer and
assignment of any of its assets, properties or rights; it being understood that
the foregoing shall not be deemed to include any Understanding for the sale of
mortgage loans, repurchase or reverse repurchase agreements, securities or other
financial transactions incurred by the Bank in the ordinary course of its
banking business;
(vii) any guarantee, subordination or other similar or
related types of Understanding except where the Bank is a beneficiary;
(viii) any Understanding for the borrowing of any money by
the Bank (other than time savings or demand deposits) or for a line of credit to
it;
(ix) any Understanding for any one capital expenditure or
series of related capital expenditures in excess of $25,000 individually or
$100,000 in the aggregate;
(x) any real property lease, whether as lessor or lessee;
or any personal property lease, whether as lessor or lessee, involving payments
in excess of $1000 per month;
(xi) any Understanding to make or participate in a loan
(not yet fully disbursed or funded) to any borrower or related group of
borrowers, which undisbursed or unfunded amount would exceed $500,000 unsecured
or secured;
(xii) any Understanding of any kind (other than contracts
relating to demand or time deposits or otherwise made in the ordinary course of
business) with any director or officer of the Bank or with any member of the
immediate family of any such director of officer or with any partnership,
corporation, associate or entity of which any such person is an Affiliate;
(xiii) any Understanding for insurance other than as
described in Section 4.13 below; or
(xiv) any Understanding, the purpose or effect of which
could encompass (a) merging with any person or bank or bank holding company
other than with the Company (b) the selling of any of its assets (except in the
ordinary course of business) or stock to any person, (c) recommending to any of
its
27
shareholders that their Bank Stock be sold to any person or bank other
than the Company, or causing any other person to make such recommendations or
acquiescing in any such recommendations made by any other person, or (d) in
any other way transferring, directly or indirectly, control of the Bank.
Except as stated in Exhibit 4.12, true and correct copies of all
documents relating to the foregoing Understandings have been delivered by the
Bank prior to the date hereof.
As used in this Section 4.12, "immediate family" of a person shall
mean his or her spouse, parents, children, and siblings.
4.13 INSURANCE. The Bank has and at all times within three years
of the date of this Agreement has had, in full force and effect policies of
insurance and bonds (including without limitation Bankers' blanket bond,
fidelity coverage, director and officer liability, fire, third party liability,
use and occupancy) with respect to its assets and business and against such
casualties and contingencies and of such amounts, types and forms which are
customary in the banking industry and are adequate or appropriate to cover its
assets and businesses as set forth in Exhibit 4.13. Set forth in Exhibit 4.13
is a schedule of all policies of insurance (other than title or credit
insurance) carried and owned by the Bank, showing the name of the insurance or
bonding company, a summary of the coverage, the amounts, the deductible
features, the annual premiums and the expiration dates. If any such policy or
bond is changed, terminated or modified following the date of this Agreement,
such termination, change or modification shall be promptly disclosed to the
Company in writing. The Bank is not in default under any such policy of
insurance or bond such that it could be canceled, and all material claims
thereunder have been filed in a timely fashion. The Bank has filed claims with
or given notice of claim to its insurers or bonding companies with respect to
all material matters and occurrences for which it believes it has coverage.
4.14 BROKERS. Except as indicated in Exhibit 4.14, no agent,
broker, investment banker, person or firm acting on behalf or under authority of
the Bank (except for any payments for fairness opinions as required in Section
10.9) is or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly in connection with any of the
transactions contemplated by this Agreement.
4.15 AUTHORIZATION. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Bank. Assuming due and proper
execution and delivery of this Agreement by the Company, this Agreement
constitutes a legal, valid and binding agreement of the Bank in accordance with
its respective terms, except as the enforceability hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of
general
28
application relating to or affecting enforcement of creditors rights and the
application of equitable principles in any action, legal or equitable, and by
Section 8(b) 6(D) of the Federal Deposit Insurance Act, 12 U.S.C. Section
1818(b)(6)(D). Subject to obtaining the requisite approval of this Agreement
by the shareholders of the Bank, the Bank has full corporate power and
authority to perform its obligations under this Agreement and the
transactions contemplated hereby.
4.16 NO CONFLICTS; DEFAULTS. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, and compliance by the Bank with any
provision hereof and thereof will not (a) conflict with or result in a breach
of, or default or loss of any benefit under, any provision of its Charter
Documents or, except as set forth in Exhibit 4.16 any material agreement,
instrument or obligation to which it is a party or by which the property of the
Bank is bound or give any other party to any such agreement, instrument or
obligation the right to terminate or modify any term thereof; (b) except for the
prior approval of the FRB, Commissioner, any other required Governmental Entity
and as set forth in Exhibit 4.16, require any Consents; or (c) result in the
creation or imposition of any Encumbrance on any of the properties or assets of
the Bank; or (d) violate the Charter Documents or any Rules to which the Bank is
subject.
4.17 MATERIAL ADVERSE CHANGES. Except as specifically required,
permitted or effected by this Agreement, and except as set forth on Exhibit
4.17, since December 31, 1997 there has not been, occurred or arisen any of the
following (whether or not in the ordinary course of business unless otherwise
indicated) ("Material Adverse Changes"):
(a) Any materially adverse change in any of the assets,
liabilities, permits, methods of accounting or accounting practice, or manner of
conducting business, of the Bank or any other event or development that has had
or may reasonably be expected to have a material adverse effect on the assets,
liabilities, Permits, business, financial condition, or results of operations of
the Bank or which should be disclosed in order to make the Audited Bank
Financial Statements not misleading;
(b) Any damage, destruction or other casualty loss (whether or not
covered by insurance) that has had or may reasonably be expected to have a
material adverse effect on the assets, liabilities, business, financial
condition, or results of operations of the Bank or that may involve a loss of
more than $20,000 in excess of applicable insurance coverage;
(c) Any amendment, modification or termination of any existing, or
entry into any new Material Contract or Permit that has had or may reasonably be
expected to have a material adverse effect on the assets, liabilities, business,
financial condition, or results of operations of the Bank;
29
(d) Any disposition by the Bank of an asset the lack of which has
had or may reasonably be expected to have a material adverse effect on the
business, financial condition, or results of operations of the Bank;
(e) Any direct or indirect redemption, purchase or other
acquisition by the Bank of any Equity Securities or any declaration, setting
aside or payment of any dividend or other distribution on or in respect of Bank
Stock whether consisting of money, other personal property, real property or
other things of value;
(f) Any changes by the Bank in accounting principles or methods or
tax methods, except as required or permitted by, the Financial Accounting
Standards Board or by any Governmental Entity having jurisdiction over the Bank;
(g) A reduction in the Bank's CAMELS rating;
(h) A reduction in the Bank's CRA rating to less than
satisfactory;
(i) A reduction in shareholders' equity to less than 100% of the
Bank's shareholders' equity at December 31, 1998 as reduced for any cash
dividends paid in 1999 or as authorized by Section 6.2(vii) and as determined in
accordance with GAAP or RAP; and/or a reduction in the Bank's 1999 net income to
less than 85% of the Bank's 1999 projected net income, as agreed between the
Bank and Company;
(j) Any event of which the Bank obtains knowledge which may
materially and adversely affect the business, financial condition, results of
operations or prospects of the Bank; or
(k) Any event, development or circumstance that, to the best
knowledge of the Bank, will or, with the passage of time or the giving of notice
or both, is reasonably expected to result in the loss to the Bank of the
services of any Executive Officers of the Bank.
4.18 REPORTS AND FILINGS. Since January 1, 1995, the Bank has
filed all reports, returns, registrations and statements (such reports and
filings referred to as "Bank Filings"), together with any amendments required
to be made with respect thereto, that were required to be filed with (a) the
FDIC, (b) the Commissioner and (c) any other applicable Governmental Entity,
including taxing authorities, except where the failure to file such reports,
returns, registrations and statements has not had and is not reasonably expected
to have a material adverse effect on the business, financial condition, or
results of operations of the Bank. No administrative actions have been taken or
orders issued in connection with such Bank Filings. As of their respective
dates, each of such Bank Filings complied in all material respects with all
Rules enforced or promulgated by the Governmental
30
Entity with which it was filed (or was amended so as to be so promptly
following discovery of any such noncompliance). Any financial statement
contained in any of such Bank Filings that was intended to present the
financial position of Bank fairly and was prepared in accordance with GAAP or
RAP consistently applied, except as stated therein, during the periods
involved. The Bank has made available to the Company true and correct copies
of all Bank Filings filed by the Bank since January 1, 1995.
4.19 INFORMATION REGARDING LOANS. The Bank has provided the
Company access to all of the information in its possession concerning its loans,
and such information was true and correct in all material respects as of the
date access was provided. Except as may be disclosed in Exhibit 4.19, (i) all
loans and discounts shown on the Audited Bank Financial Statements at December
31, 1997 or which were entered into after December 31, 1997, but before the
Closing Date, were and will be made in all material respects for good, valuable
and adequate consideration in the ordinary course of the business of the Bank,
in accordance in all material respects with the Bank's lending practices, and
are not subject to any material known defenses, setoffs or counterclaims,
including without limitation any such as are afforded by usury or truth in
lending laws, except as may be provided by bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
enforcement of creditor rights and the application of equitable principles in
any action, legal or equitable; (ii) the notes or other evidences of
indebtedness evidencing such loans and all forms of pledges, mortgages and other
collateral documents and security agreements constituting the Bank's loan
portfolio, taken as a whole, are and will be, in all material respects,
enforceable except as the enforceability hereof and thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of
general application relating to or affecting enforcement of creditors rights and
the application of equitable principles; and (iii) the Bank has complied in all
material respects, and will prior to the Closing Date comply with all laws and
regulations relating to such loans, or to the extent there has not been such
compliance, such failure to comply will not materially interfere with the
collection of any such loan. All loans and loan commitments extended by the
Bank and any extensions, renewals or continuations of such loans and loan
commitments that are n the Bank's books were made in accordance with customary
lending standards of the Bank in the ordinary course of business. Such loans
are evidenced by documentation based upon customary and ordinary past practices
of the Bank. Prior to the date hereof, the Bank has provided the Company with a
schedule which sets forth a description (a) by type and classification, if any,
of each loan, lease or other extension of credit and commitment to extend
credit; (b) by type and classification, if any, of all loans, leases, other
extensions of credit and commitments to extend credit that have been classified
by any Governmental Entity or auditors (external or internal) as "Watch List,"
"Substandard," "Doubtful," "Loss" or any comparable classification; and (c) all
consumer loans as to which any payment of principal, interest or other amount is
90 days or more past due.
31
(b) As of (i) the date of this Agreement, (ii) the Determination
Date and (iii) the Closing Date, the allowance for loan and lease losses for the
Bank is adequate and in accordance with GAAP and RAP.
4.20 COMPLIANCE WITH CRA To the best knowledge of the Bank, the
Bank's compliance under the CRA should not constitute grounds for either the
denial by any Governmental Entity of any application to consummate the
transactions contemplated by this Agreement or the imposition of a materially
burdensome condition in connection with the approval of any such application.
4.21 CERTAIN INTERESTS. Except as described in Exhibit 4.12(xii),
Exhibit 4.21 sets forth a description of each instance in which an executive
officer or director of the Bank (a) has any material interest in any property,
real or personal, tangible or intangible, used by or in connection with the
business of the Bank; (b) is indebted to the Bank except for normal business
expense advances; or (c) is a creditor (other than as a Deposit holder) of the
Bank except for amounts due under normal salary and related benefits or
reimbursement of ordinary business expenses. Except as set forth in Exhibit
4.21, all such arrangements are arm's length transactions pursuant to normal
commercial terms and conditions.
4.22 BRANCHES. Exhibit 4.22 hereto sets forth the common name and
location of each office of the Bank, an indication of whether such office is a
branch, service center, or other place of business, whether such premises are
owned or leased, the basic terms of such leases, the common name and location of
each approved but unopened office, and a description of each application for
additional offices of the Bank, and the status of each such application. The
Bank has received appropriate and effective permits and governmental authority
where any Permit, approval or notice was required by law or regulation prior to
the establishment and operation of each such office now in operation. Except
for the offices described on Exhibit 4.22, the Bank does not operate or conduct
business out of any other location and the Bank does not have any current
application for, and the Bank has not received permission to open, any other
branch or to operate out of any other location.
4.23 UNDISCLOSED LIABILITY. The Bank has no liabilities or
obligations, either accrued or contingent, which are in excess of Twenty
Thousand Dollars ($20,000) individually or in the aggregate, which have not
been:
(i) reflected or disclosed in the Audited Bank Financial
Statements or Unaudited Bank Financial Statements;
(ii) incurred subsequent to December 31, 1997, in the
ordinary course of business; or
32
(iii) disclosed on Exhibit 4.23 or any other exhibit to this
Agreement.
To the best of the Bank's knowledge and the knowledge of their
executive officers and directors, after due investigation, there is no basis for
the assertion against the Bank of any liability, obligation or claim that is
likely to result in or cause any material adverse change in the business or
financial condition of the Bank, taken as a whole, which is not fairly reflected
in the Audited Bank Financial Statements, the Unaudited Bank Financial
Statements or otherwise disclosed on Exhibit 4.23 hereto.
4.24 ACCURACY OF INFORMATION FURNISHED. Except as to any
statements or information which shall include projections or forecasts, none of
the statements or information made or contained in any of the covenants,
representations or warranties of the Bank set forth in this Agreement or in any
of the schedules, exhibits, lists, certificates or other documents furnished
herewith taken as a whole contains any untrue statement of a material fact
required to be stated herein or therein or necessary to make the statements or
information contained herein or therein, in light of the circumstances in which
they were made, not misleading. As to any such information or statements which
include projections or forecast, such information or statements are based upon
assumptions believed by the Bank to be reasonable.
4.25 ENVIRONMENTAL LAWS. Except as may be disclosed in Exhibit
4.25, to the best of the Bank's knowledge (and without conducting any site
investigation or other analysis for the purpose of making this representation),
neither the conduct nor operation of the Bank nor any condition of any Real
Property presently or previously owned, leased or operated by the Bank violates
or violated Environmental Laws in any respect material to the business of Bank
taken as a whole and no condition or event has occurred with respect to the Bank
or any Real Property that, with notice or the passage of time, or both, would
constitute a violation material to the business of the Bank taken as a whole of
Environmental Laws or obligate (or potentially obligate) the Bank to remedy,
stabilize, neutralize or otherwise alter the environmental condition of any such
Real Property where the aggregate cost of such actions would be material to the
Bank taken as a whole. Except as may be disclosed in Exhibit 4.25, the Bank has
not received any notice from any person or entity that the Bank or the operation
or condition of any Real Property ever owned, leased or operated by the Bank is
or was in violation of any Environmental Laws or that the Bank is responsible
(or potentially responsible) for remedying, or the cleanup of, any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any such Real Property.
4.26 COMMISSIONER AND FDIC EXAMINATIONS. (a) The Commissioner has
completed an examination of the Bank as of November 30, 1996, and (i) the
Commissioner believes the Bank's allowance for loan losses is adequate and the
33
Commissioner required no material adjustments, and (ii) the Bank's CAMELS rating
did not adversely change and the Bank's financial condition is deemed by the
Commissioner to be satisfactory.
(b) The FDIC has completed an examination of the Bank as of
December 31, 1997, and (i) the FDIC believes the Bank's allowance for loan
losses is adequate and the FDIC required no material adjustments, and (ii) the
Bank's CAMELS rating did not adversely change and the Bank's financial condition
is deemed by the FDIC to be satisfactory.
(c) The FDIC has completed an examination of the Bank and Banklink
Corporation, the Bank's data processing subsidiary, for compliance with Year
2000 safety and soundness issues as of February 3, 1998, and the FDIC has rated
the Bank and Banklink Corporation at least satisfactory regarding the Bank's and
Banklink Corporation's progress in addressing Year 2000 Safety and Soundness
Progress Standards established by the FDIC. Further, Banklink Corporation has
also been rated satisfactory regarding its progress in addressing Year 2000
Safety and Soundness issues.
4.27 INSIDER LOANS; OTHER TRANSACTIONS. The Bank has previously
provided the Company with a listing, current as of November May 301, 1998, of
all extensions of credit made to the Bank and each of its Executive Officers and
directors and their related interests (all as defined under Federal Reserve
Board Regulation "O"), all of which have been made in compliance with Regulation
O, which listing is true, correct and complete in all material respects. The
Bank does not owe any amount to, nor does it have any contract or lease with or
commitment to, any of the present Executive Officers or directors of the Bank
(other than for compensation for current services not yet due and payable, and
reimbursement of expenses arising in the ordinary course of business).
4.28 DERIVATIVE TRANSACTIONS. The Bank is not a party to a
transaction in or involving forwards, futures, options on futures, swaps or
other derivative instruments.
4.29 TRUST ADMINISTRATION. The Bank presently does not 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 4.29 includes (i) any and all
common law or other trusts between an individual, corporation or other entities
and the Bank, as trustee or co-trustee, including, without limitation, pension
or other qualified or nonqualified employee benefit plans, compensation,
testamentary, intervivos, and charitable trust indentures; (ii) any and all
decedents' estates where the Bank is serving or has served as a co-executor or
sole executor, personal representative or administrator, administrator ▇▇ ▇▇▇▇▇
non, administrator ▇▇ ▇▇▇▇▇ non with will annexed, or in any similar fiduciary
capacity; (iii) any and all guardianships,
34
conservatorships or similar positions where the Bank 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 the Bank is serving or has served
as an agent or custodian for the owner or other party establishing the
account with or without investment authority.
4.30 STATEMENTS TRUE AND CORRECT. None of the information
supplied or to be supplied by the Bank for inclusion in the S-1, the S-4 or
the Proxy Statement, or incorporated by reference therein, or any other
document to be filed with any Governmental Entity in connection with the
transactions contemplated hereby will, in the case of the S-1, the S-4 and
the Proxy Statement, when it is first mailed to the shareholders of the Bank,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which such statements are made, not misleading or, in the
case of the S-1 and the S-4, when it becomes effective, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein not misleading, or, in
the case of the S-1, the S-4 and Proxy Statement or any amendment thereof or
supplement thereto, at the time of the meeting of shareholders of the Bank,
be false or misleading with respect to any material fact or omit to state any
material fact necessary to correct any statement or remedy any omission in
any earlier communication with respect to the solicitation of any proxy of
the Bank shareholders' meeting.
4.31 ACCURATE DISCLOSURE. The Bank agrees that through the
Effective Time of the Merger, each of its reports, and other filings required to
be filed with any applicable Governmental Entity will comply in all material
respects with all of 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 will be made, not misleading. Any
financial statement contained in any such report, or other filing that is
intended to present the financial position of the Bank will fairly present the
financial position of the Bank and will be prepared in accordance with GAAP or
RAP consistently applied during the periods involved. Notwithstanding anything
to the contrary set forth in this Section 4.31, the Bank makes no representation
or warranty with respect to any information supplied by the Company.
4.32 YEAR 2000. The Bank and Banklink Corporation have formed a
Year 2000 management committee to identify potential problems associated with
the Year 2000 issues and to develop resolutions to any problems. The Bank and
Banklink Corporation are making satisfactory progress for compliance with Year
35
2000 safety and soundness issues in order to ensure that the Bank's and Banklink
Corporation's existing computer systems are Year 2000 compliant.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Bank as follows:
5.1 ORGANIZATION AND GOOD STANDING. The Company is a California
corporation duly organized and validly existing in good standing under the laws
of the State of California, is proposed to be registered with the FRB to become
a bank holding company and it has the corporate power and authority to carry on
its business as presently conducted. The Company has all requisite corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as presently conducted. The nature of its operations and
the business transacted by it as of the date hereof make licensing and
qualification in any other state or jurisdiction unnecessary. The Company has
delivered to the Bank true and correct copies of its Articles of Incorporation
and Bylaws, as amended and in effect as of the date hereof.
5.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, no par value, of which 10,000
shares are outstanding on the date hereof, all validly issued, fully paid and
nonassessable, and 100,000,000 shares of Preferred Stock, none of which are
outstanding. Except as provided in Exhibit 5.2, no unissued shares of Company
Stock or any other securities of the Company are subject to any warrants,
options, rights or commitments of any character, kind or nature and the Company
is not obligated to issue or repurchase any shares of Company Stock or any other
security to or from any person except in accordance with the terms of the
proposed Company Stock Option Plan and Agreements pursuant thereto. Exhibit 5.2
sets forth the name of each holder of a Company stock option, the number of
shares of Company Stock covered by each such holder's option, the date of grant
of each such holder's option, the exercise price per share, the vesting schedule
for each such holder's option and the expiration date of each such holder's
option.
5.3 SUBSIDIARIES. Except for PCBG Merger Corporation, which the
Company intends to own prior to the Closing Date, the Company does not own,
directly or indirectly (except as pledgee pursuant to loans which are not in
default), any equity position or other voting interest in any corporation,
partnership, joint venture or other entity.
5.4 FINANCIAL STATEMENTS. The Company has delivered to the Bank
copies of the unaudited Statements of Financial Condition of the Company as of
December 31, 1997 (the "Company Financial Statements"). The Company Financial
36
Statements: (i) present fairly the financial condition and results of operations
of the Company as of and for the dates or periods covered thereby in accordance
with GAAP consistently applied throughout the periods involved; (ii) are based
on the books and records of the Company; (iii) contain and reflect reserves for
all material accrued liabilities and for all reasonably anticipated losses, and
set forth adequate reserves loan losses and other contingencies to the extent
required by GAAP; and (iv) none of the Company Financial Statements contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading under GAAP.
The books and records of the Company have been, and are being, maintained in all
material respects in accordance with GAAP and other applicable legal and
accounting requirements and reflect any actual transactions. Since the Company
was recently incorporated, there are no audited financial statements of the
Company for December 31, 1997 or previous years.
5.5 LITIGATION PROCEEDINGS AND AGREEMENTS WITH GOVERNMENTAL
ENTITIES.
(a) The Company is not engaged as a defendant in any legal or
other proceedings before any court, administrative agency or other Governmental
Entity except as is shown on Exhibit 5.5. Except as set forth on Exhibit 5.5,
the Company is not aware of any "threatened or pending litigation" (within the
meaning of Paragraph 5 of the American Bar Association Statement of Policy
Regarding Lawyers' Responses to Auditors' Requests for Information adopted
December 8, 1975) against the Company. The Company is not subject to any
agreement, order, writ, injunction or decree of any federal, state or local
court, out of a proceeding involving the Company or any of its business or
properties except as described in Exhibit 5.5. The Company has not been served
with notice of, nor, to best of the Company's knowledge is it currently under
investigation with respect to, any violation of federal, state or local law or
administrative regulation. Except as set forth on Exhibit 5.5, there is no (i)
outstanding judgment, order, writ, injunction or decree, stipulation or award of
any Governmental Entity or by arbitration, against, or to the knowledge of the
Company, affecting the Company or its assets or business that (a) has had or may
have a material adverse effect on the assets, liabilities, business, financial
condition or results of operations of the Company, (b) requires any payment by,
or excuses a material obligation of a third party to make any payment to, the
Company, or (c) has the effect of prohibiting any business practice of, or the
acquisition, retention or disposition of property by, the Company; or (ii)
legal, administrative, arbitration, investigatory or other proceeding pending
or, to the best knowledge of the Company that has been threatened, or which the
Company has reason to believe may be threatened, against or affecting any
director, officer, employee, agent or representative of the Company, in
connection with which any such person has or may have rights to be indemnified
by the Company.
37
(b) Except as set forth in Exhibit 5.5, the Company is not a party
to, or otherwise subject to, any agreement or memorandum of understanding with
or order of any Governmental Entity charged with the supervision or regulation
of bank holding companies or banks or engaged in the insurance of bank deposits,
that restricts the conduct of its business, or in any manner relates to its
capital adequacy, its credit or investment policies or its management.
5.6 PERFORMANCE OF OBLIGATIONS. Except as set forth in Exhibit
5.6, the Company has performed in all respects all of obligations required to be
performed by it to date and is not in default under or in breach of any term or
provision of any covenant, contract, lease, indenture or any other agreement to
which the Company is a party or is subject or is otherwise bound, and no event
has occurred which, with the giving of notice or the passage of time or both,
would constitute such default or breach, where such default or breach would have
a material adverse effect on the financial condition, results of operations, or
business of the Company. No party with whom the Company has an agreement which
is material to the financial condition, results of operations or business of the
Company is in default thereunder.
5.7 BROKERS. Except as indicated in Exhibit 5.7, no agent,
broker, investment banker, person or firm acting on behalf or under authority of
the Company (except for any payments for fairness opinions as required in
Section 11.14) is or will be entitled to any broker's or finder's fee or any
other commission or similar fee directly or indirectly in connection with any of
the transactions contemplated by this Agreement.
5.8 INSURANCE. The Company has in full force and effect policies
of insurance and bonds with respect to its assets and business and against such
casualties and contingencies and of such amounts, types and forms which in the
judgment of the Company are adequate or appropriate to cover its assets and
businesses as set forth in Exhibit 5.8. Set forth in Exhibit 5.8 is a schedule
of all policies of insurance (other than title or credit insurance) carried and
owned by the Company, showing the name of the insurance or bonding company, a
summary of the coverage, the amounts, the deductible features, the annual
premiums and the expiration dates. If any such policy or bond is changed,
terminated or modified following the date of this Agreement, such termination,
change or modification shall be promptly disclosed to the Bank in writing. The
Company is not in default under any such policy of insurance or bond such that
it could be canceled, and all material claims thereunder have been filed in a
timely fashion. The Company has filed claims with or given notice of claim to
its insurers or bonding companies with respect to all material matters and
occurrences for which it believes it has coverage.
5.9 MATERIAL ADVERSE CHANGES. Except as specifically required,
permitted or effected by this Agreement, and except as set forth on Exhibit 5.9
38
since inception there has not been, occurred or arisen any of the following
(whether or not in the ordinary course of business unless otherwise
indicated)("Material Adverse Changes"):
(a) Any materially adverse change in any of the assets,
liabilities, permits, methods of accounting or accounting practice, or manner of
conducting business, of the Company or any other event or development that has
had or may reasonably be expected to have a material adverse effect on the
assets, liabilities, Permits, business, financial condition, or results of
operations of the Company or which should be disclosed in order to make the
Company Financial Statements not misleading.
(b) Any damage, destruction or other casualty loss (whether or not
covered by insurance) that has had or may reasonably be expected to have a
material adverse effect on the assets, liabilities, business, financial
condition, or results of operations of the Company or that may involve a loss of
more than $10,000 in excess of applicable insurance coverage;
(c) Any amendment, modification or termination of any existing, or
entry into any new, Material Contract or Permit that has had or may reasonably
be expected to have a material adverse effect on the assets, liabilities,
business, financial condition, or results of operations of the Company;
(d) Any disposition by the Company of an asset the lack of which
has had or may reasonably be expected to have a material adverse effect on the
business, financial condition, or results of operations of the Company; or
(e) Any direct or indirect redemption, purchase or other
acquisition by the Company of any Equity Securities or any declaration, setting
aside or payment of any dividend or other distribution on or in respect of the
Company Stock whether consisting of money, other personal property, real
property or other things of value.
5.10 COMPLIANCE WITH LAWS AND REGULATIONS.
(a) Except as set forth in Exhibit 5.10, the Company is not in
default under or in breach of any law, ordinance, rule, regulation, order,
judgment or decree applicable to it promulgated by any Governmental Entity
having authority over it, where such default or breach would have a material
adverse effect on its financial condition, results of operations, or business.
(b) To the best of its knowledge, the Company has conducted in all
material respects its businesses in accordance with all applicable federal,
foreign, state and local laws, regulations and orders, including without
limitation disclosure, usury, equal credit opportunity, equal employment, fair
credit reporting, antitrust,
39
licensing and other laws, regulations and orders, and the forms, procedures
and practices used by the Company are in compliance with such laws,
regulations, and orders, except for such violations or noncompliance as will
not have a material adverse effect on the financial condition, results of
operations, or business of the Company.
5.11 AUTHORIZATION. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company. Assuming due and proper
execution and delivery of this Agreement by the Bank, this Agreement constitutes
a legal, valid and binding agreement of the Company in accordance with its
respective terms, except as the enforceability hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of
general application relating to or affecting enforcement of creditors rights and
the application of equitable principles in any action, legal or equitable.
Subject to obtaining requisite approval of this Agreement by the shareholders of
the Company, if required, the Company has full corporate power and authority to
perform its obligations under this Agreement and the transactions contemplated
hereby.
5.12 NO CONFLICTS; DEFAULTS. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, and compliance by the Company with
any provision hereof will not (a) conflict with or result in a breach of, or
default or loss of any benefit under, any provision of its Charter Documents or,
except as set forth in Exhibit 5.12 any material agreement, instrument or
obligation to which it is a party or by which the property of the Company is
bound or give any other party to any such agreement, instrument or obligation
the right to terminate or modify any term thereof; (b) except for the prior
approval of the FRB, the Commissioner and any other required Governmental
Entity, and as set forth in Exhibit 5.12, require any Consents; (c) result in
the creation or imposition of any Encumbrance on any of the properties or assets
or the Company; or (d) violate the Charter Documents or any Rules to which the
Company is subject.
5.13 REPORTS AND FILINGS. Since inception, the Company has filed
all reports, returns, registrations and statements (such reports and filings
referred to as "the Company Filings"), together with any amendments required to
be made with respect thereto, that were required to be filed with (a) the FRB,
(b) the Commissioner and (c) any other applicable Governmental Entity, including
taxing authorities, except where the failure to file such reports, returns,
registrations and statements has not had and is not reasonably expected to have
a material adverse effect on the business, financial condition, or results of
operations of the Company. No administrative actions have been taken or orders
issued in connection with the Company Filings. As of their respective dates,
each of the Company Filings complied in all material respects with all Rules
enforced or promulgated by the Governmental Entity with which it was filed (or
was amended so as to be so
40
promptly following discovery of any such noncompliance). Any financial
statement contained in any of the Company Filings that was intended to
present the financial position of the Company fairly and was prepared in
accordance with GAAP or RAP consistently applied, except as stated therein,
during the periods involved.
5.14 (reserved)
5.15 UNDISCLOSED LIABILITY. The Company has no liabilities or
obligations, either accrued or contingent, which are in excess of Ten Thousand
Dollars ($10,000) individually or in the aggregate, which have not been:
(i) reflected or disclosed in the Company Financial
Statements;
(ii) incurred since inception, in the ordinary course of
business; or
(iii) disclosed on Exhibit 5.15 or any other exhibit to this
Agreement.
To the best of the Company's knowledge and the knowledge of its
officers and directors, after due investigation, there is no basis for the
assertion against the Company of any liability, obligation or claim that is
likely to result in or cause any material adverse change in the business or
financial condition of the Company, taken as a whole, which is not fairly
reflected in the Company Financial Statements, or otherwise disclosed on Exhibit
5.15 hereto.
5.16 ACCURACY OF INFORMATION FURNISHED. Except as to any
statements or information which shall include projections or forecasts, none of
the statements or information made or contained in any of the covenants,
representations or warranties of the Company set forth in this Agreement or in
any of the schedules, exhibits, lists, certificates or other documents furnished
herewith taken as a whole contains any untrue statement of a material fact
required to be stated herein or therein or necessary to make the statements or
information contained herein or therein, in light of the circumstances in which
they were made, not misleading. As to any such information or statements which
include projections or forecast, such information or statements are based upon
assumptions believed by the Company to be reasonable.
5.17 AUTHORITY OF PCBG MERGER CORPORATION. The execution and
delivery by PCBG Merger Corporation of the Agreement of Merger and, subject to
the requisite approval of the shareholder of PCBG Merger Corporation, the
consummation of the transactions completed thereby will be duly and validly
authorized by all necessary corporation action on the part of PCBG Merger
Corporation, and the Agreement of Merger will be, upon execution by the parties
41
thereto, a valid and binding obligation of PCBG Merger Corporation, enforceable
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally, by general equitable principles. Except as
set forth in Exhibit 5.17, neither the execution and delivery by PCBG Merger
Corporation of the Agreement of Merger, nor the consummation of the transaction
contemplated therein, nor compliance by PCBG Merger Corporation with any of the
provisions thereof will (a) conflict with or result in a breach of any provision
of its Charter Documents; (b) except for approval by the shareholder of PCBG
Merger Corporation and the prior approval of the Commissioner or the FRB,
require any Consents; (c) result in the creation or imposition of any
Encumbrance on any of the properties or assets of PCBG Merger Corporation; or
(d) subject to obtaining the Consents referred to in subsection (b) of this
Section 5.17, and the expiration of any waiting period, violate any Rules to
which PCBG Merger Corporation is subject.
5.18 CAPITAL OF COMPANY, OFFERING AND COMMITMENTS. As of the date
of this Agreement, the Company does not have sufficient capital to consummate
the transactions contemplated by this Agreement. The Company intends to conduct
the Offering in order to raise sufficient cash capital to carry out the
acquisition of the Bank, provide capital for growth and operations of the
Company, and the other transactions contemplated by this Agreement.
5.19 REGULATORY APPROVALS. To the best knowledge of the Company,
except as described in Section 5.19 of this Agreement, the Company has no reason
to believe that it 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.
5.20 STATEMENTS TRUE AND CORRECT. None of the information supplied
or to be supplied by the Company for inclusion in the S-1, the S-4 or the Proxy
Statement, or incorporated by reference therein, or any other document to be
filed with any Governmental Entity in connection with the transactions
contemplated hereby will, in the case of the ▇-▇, ▇-▇ and the Proxy Statement
(or incorporated by reference therein), contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which such
statements are made, not misleading, or, in the case of the S-1 and the S-4,
when it becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein not misleading.
5.21 ACCURATE DISCLOSURE. The Company agrees that through the
Effective Time of the Merger, each of its reports, and other filings required to
be filed with any applicable Governmental Entity will comply in all material
respects with all of the applicable statutes, Rules and regulations enforced or
promulgated
42
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 will be made, not misleading.
Any financial statement contained in any such report, or other filing that is
intended to present the financial position of the Company will fairly present
the financial position of the Company and will be prepared in accordance with
GAAP or RAP consistently applied during the periods involved.
Notwithstanding anything to the contrary set forth in this Section 5.21, the
Company makes no representation or warranty with respect to any information
supplied by the Bank.
5.22 OTHER TRANSACTIONS. The Company has informed the Bank of all
other acquisition transactions that the Company is contemplating or reviewing as
of the date of this Agreement.
5.23 DUE DILIGENCE. The Company and its representatives have had
the opportunity to conduct a due diligence of the Bank, and such due diligence
has been shared with the Managing Underwriter. As of December 15, 1998, the
Company and its agents have completed a primary review of the financial
condition of the Bank, and to the best knowledge of the Company and its agents,
no item concerning the financial condition of the Bank has come to the attention
of the Company or its agents that would preclude the consummation of the Merger
as described herein.
ARTICLE VI
COVENANTS OF THE BANK
The Bank covenants and agrees with the Company as follows:
6.1 BEST EFFORTS. The Bank shall use its best efforts to bring
about the satisfaction of the conditions specified in Articles IX and XI hereof.
6.2 CONDUCT OF BUSINESS. Unless the Company shall give its prior
consent, which consent will not be unreasonably withheld, or unless otherwise
indicated, until the Effective Time, the Bank will:
(i) conduct its affairs and business in the usual and
ordinary course, generally consistent with past practice, and in accordance with
safe and sound practices;
(ii) refrain from (a) creating, incurring, or suffering to
exist, any encumbrance or restriction of any kind against or in respect of any
property or right of the Bank except for such which are not material in amount
or nature to the financial condition or results of operations of the Bank,
except for a pledge or
43
security interest given in connection with the acceptance of government or
public deposits; it being understood that the foregoing shall not be deemed
to preclude loans, repurchase or reverse repurchase agreements, securities or
other financial transactions incurred in the ordinary course of the Bank's
banking business, and (b) borrowing or agreeing to borrow any amount of funds
except in the ordinary course of business, or directly or indirectly
guaranteeing or agreeing to guarantee any obligations of others except for
such which are not material in amount or nature to the financial condition or
results of operations of the Bank;
(iii) refrain from making or becoming a party to any
Material Contract or material commitment, or renewing, extending, amending or
modifying any such contract or commitment except for loan and deposit
transactions, in the usual and ordinary course of business, consistent with past
practice; and refrain from making any loan or other extension of credit, or
entering into any commitment to make any loan or other extension of credit, to
any Bank director, executive officer or employee or 5% or more shareholder,
except in accordance with existing practice or policy; and refrain from
extending any lease;
(iv) refrain from making any capital expenditures or
commitments to do so, except for ordinary repairs and replacements, exceeding
$50,000 for any one item or $200,000 for all items in the aggregate;
(v) refrain from paying or agreeing to pay any bonus,
extra compensation, pension or severance pay, under any pension plan or
otherwise, or increasing the rate of compensation paid by the Bank at June 30,
1998, to any officer, director, agent, consultant, or employee (except for
raises and bonuses consistent with past practices accrued and paid prior to the
Determination Date and except as contemplated by this Agreement), and any such
amounts shall be accrued or paid in accordance with GAAP prior to the
Determination Date; or agreeing to enter into any employment agreements or hire
any officer level staff where such agreements or arrangements cannot be
terminated without any liability upon not more than 90 days notice; or agreeing
to hire any president of Banklink;
(vi) maintain its assets and properties in good condition
and repair (ordinary wear and tear excepted) and refrain from selling or
otherwise disposing of any of its assets or properties, except in the usual and
ordinary course, consistent with prior customary practice, and in accordance
with safe and sound practices, and maintain the Bank's present branch operations
unless changed by mutual agreement;
(vii) refrain from declaring or paying any dividend on or
making any other distribution upon, or purchasing or redeeming, any shares of
the Bank Stock;
44
(viii) refrain from (a) issuing or selling or obligating
itself to issue or sell any shares of the Bank Stock or any other securities or
any warrants, rights or options to acquire Bank Stock or other securities,
except for the exercise of the Warrant Agreement, (b) effecting a
reclassification, recapitalization, split-up, exchange of shares, readjustment
or other similar change in or to any capital stock or otherwise reorganize or
recapitalize;
(ix) refrain from directly or indirectly redeeming,
purchasing or otherwise acquiring any Bank Stock or stock of any corporation or
any interest in any business enterprise except as it relates to a foreclosure in
the usual and ordinary course of its business;
(x) refrain from amending its Charter Documents except to
the extent as may be required or contemplated by this Agreement;
(xi) use its best efforts to preserve its business
organization intact and to retain its present officers and employees in a manner
consistent with the Bank's other obligations under this Agreement;
(xii) use its best efforts to preserve the goodwill of its
depositors, customers and those having business relations with it, refrain from
materially changing the make-up of the Bank's deposit structure, refrain from
amending, modifying, terminating or failing to renew or preserve its business
organization, material rights, franchises, Permits, and refrain from taking any
action which would jeopardize the continuance of the goodwill of its customers
where such action would have a material adverse effect, taken as a whole, on the
financial condition, or results of operations of the Bank in a manner consistent
with the Bank's other obligations under this Agreement;
(xiii) use its best efforts to maintain insurance and bond
coverage at least equal to that now in effect on all its properties and all
properties for which it is responsible and on its business operations, and carry
the same coverage for public liability, personal injury and property damage that
is now in effect, except if such insurance and coverage (a) is not available
except at extraordinary rates, or (b) is not available except under materially
different terms which are inconsistent with those in effect as of the date of
this Agreement, and following the receipt of the consent of the Company, renew
the Bank's directors and officers liability insurance policy;
(xiv) meet its material contractual obligations and not
become in default in any material respect on any thereof;
(xv) duly observe and conform to lawful requirements
applicable to its business in all material respects;
45
(xvi) duly and timely file all reports and returns required
to be filed with any federal, state or local Governmental Entity unless any
extensions have been duly granted by such authorities;
(xvii) refrain from commencing any proceeding to merge,
consolidate or liquidate or dissolve (except as contemplated by this Agreement)
or obligating itself to do so;
(xviii) maintain its books of account and records in the
regular manner substantially in accordance with all applicable statutory and
regulatory requirements applied on a consistent basis;
(xix) except for instituting actions against borrowers of
the Bank to collect loans in default, refrain from instituting, settling, or
agreeing to any material claim, action or proceeding before any court or
Governmental Entity unless not instituting, settling or agreeing to any material
claim, action or proceeding would result in a Material Adverse Change to the
Bank;
(xx) refrain from making its credit underwriting policies,
standards or practices applicable to all loans relating to the making of loans
and other extensions of credit, or commitments to make loans and other
extensions of credit, less stringent than those in effect on the date hereof.
The Bank shall not grant or commit to grant, without receiving the Company's
Consent, (i) any loan or other extension of credit, including renewals, to an
existing customer of the Bank, if such loan or other extension of credit,
together with all other credit then outstanding to the same Person and all
Affiliates of such Person, would exceed $1,000,000, irrespective of any plans or
intentions to sell or participate all or a portion of such loans, on an
unsecured basis or $1,500,000 secured by a lien on real estate, cash or readily
marketable collateral, as that term is used in section 1220 ET SEQ. of the CFC,
(ii) any participation loans purchased or sold, or (iii) any renewals or other
extensions of credit to any borrower whose loans or other extensions of credit
have been classified by any Governmental Entity. In addition, Bank shall not
take any property into Other Real Estate Owned ("OREO"), or sell any OREO
property, not in the ordinary course of the Bank's business or not in accordance
with the Bank's policy concerning OREO without receiving the Company's Consent.
Consent shall be deemed granted if within three Business Days of written notice
received by the Company's designee, notice of objection in writing is not
received by Bank;
(xxi) refrain from making special or extraordinary material
payments to any Person other than as contemplated and as disclosed in this
Agreement as of the date hereof;
(xxii) except for transactions in accordance with safe and
sound banking practices, refrain from making any material investments, by
46
purchase of stock or securities, contributions to capital, property transfers,
purchases of any property or assets or otherwise, in any other individual,
corporation or other entity;
(xxiii) advise the Company promptly in writing of any Material
Adverse Change known to the Bank in the capital structure, financial condition,
results of operations or of any event or condition which with the passage of
time is reasonably likely to result in a Material Adverse Change to the Bank, or
of any other materially adverse change known to the Bank respecting the business
and operations of the Bank, or in the event the Bank determines that the Merger
will not be consummated because of any inability to meet the conditions to the
performance of the Company set forth in Article XI or of any matter which would
make the representations and warranties set forth in Article IV hereof not true
and correct in any material respect at the Closing;
(xxiv) promptly advise the Company in writing of any event or
any other transaction within the Bank's knowledge whereby any person or related
group of persons acquires, directly or indirectly, record or beneficial
ownership (as defined in Rule 13d3 promulgated by the Exchange Act or control of
5% or more of the outstanding shares of Bank Stock prior to the record date
fixed for the Bank shareholders' meeting or any adjourned meeting thereof to
approve the transactions contemplated herein;
(xxv) charge-off all loans, receivables and other assets, or
portions thereof, deemed uncollectible in accordance with GAAP or RAP,
applicable law or regulation, or classified as "loss" or as directed by any
Governmental Entity; and maintain the allowance for loan losses of the Bank at a
level which in the reasonable opinion of the Bank's management is adequate to
provide for all known and estimated credit losses on loans and leases
outstanding and other inherent risks in the Bank's loan portfolio, but in no
case less than the level which in the reasonable opinion of the Bank's
management is adequate to provide for all known and reasonably expected losses
on assets outstanding in accordance with GAAP and RAP;
(xxvi) furnish to the Company, as soon as practicable, and in
any event within ten (10) days after it is prepared (except for the reports
submitted to the Board of Directors of the Bank, as described in clause (i)
below, which shall be furnished to the Company within ten (10) days after the
Bank's Board of Directors has reviewed the report), (i) a copy of any report
submitted to the Board of Directors of the Bank and access to the working papers
related thereto and copies of other operating or financial reports prepared for
management of any of their businesses and access to the working papers thereto,
provided, however, that the Bank need not furnish the Company communications of
the Bank's legal counsel regarding the Bank's rights against and obligations to
the Company or its Affiliates under this Agreement, (ii) to the extent permitted
by law, copies of all
47
reports, renewals, filings, certificates, statements and other documents
filed with or received from the FDIC and/or the Commissioner or any other
Governmental Entity, (iii) monthly unaudited statements of condition and
statements of operations for the Bank, and quarterly unaudited statements of
condition and statements of operations for the Bank and statements of changes
in stockholders' equity for the Bank, in each case prepared in a manner
consistent with past practice, and (iv) such other reports as the Company may
reasonably request relating to the Bank. Each of the financial statements
delivered pursuant to this Section 6.2(xxvi), except as stated therein, shall
be prepared in accordance with the Bank's normal practices;
(xxvii) consistent with the standards set forth in this
subsection 6.2 (xxvii), the Bank agrees that through the Effective Time of the
Merger, as of their respective dates, (i) each of the Bank Filings will be true
and complete in all material respects; and (ii) each of the Bank Filings will
comply in all material respects with all of the 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 will be made, not
misleading. Any financial statement contained in any of such Bank Filings that
is intended to present the financial position of the Bank will be prepared in
accordance with GAAP or RAP consistently applied, except as stated therein,
during the periods involved;
(xxviii) maintain reserves for contingent liabilities in
accordance with GAAP and RAP;
(xxix) promptly notify the Company of the filing of any
material litigation, governmental or regulatory action, or similar proceeding or
notice of any claims against the Bank or any of its assets;
(xxx) Except for the ▇▇▇▇▇▇▇ litigation previously described
or those matters described in Exhibit 4.11(b), conduct good faith settlement
negotiations, and, with the written consent of the Company, settle when deemed
prudent by the Parties, of all existing or threatened litigation as specified in
Exhibits 4.7, or for any new litigation filed or threatened from the date hereof
to the Closing Date;
(xxxi) except in the ordinary course of business, refrain
from canceling or accelerating any material indebtedness owing to the Bank or
any claims which the Bank may possess or waive any material rights of
substantial value;
(xxxii) refrain from selling or otherwise disposing of any
Real Property or any material amount of any tangible or intangible personal
property
48
other than properties acquired in foreclosure or otherwise in the ordinary
collection of indebtedness to the Bank;
(xxxiii) refrain from foreclosing upon or otherwise taking
title to or possession or control of any real property without first obtaining a
phase one environmental report thereon which indicates that the property is free
of pollutants, contaminants or hazardous or toxic waste materials; provided,
however, that the Bank shall not be required to obtain such a report with
respect to single family, non-agricultural residential property of one acre or
less to be foreclosed upon unless it has reason to believe that such property
might contain any such waste materials or otherwise might be contaminated;
(xxxiv) refrain from committing any act or failing to do any
act which will cause a breach of any agreement, contract or commitment and which
will have a material adverse effect on the Bank's business, financial condition,
or results of operations; and
(xxxv) duly observe and conform, and Banklink Corporation
shall duly observe and conform, to all compliance requirements for Year 2000
safety and soundness issues.
For purposes of this Section 6.2, the Company shall be deemed to
have given its consent to any action which is contrary to any specified covenant
set forth in this Section if, within five (5) Business Days, or three (3)
Business Days for loans, after actual receipt by the Company of written notice
from the Bank of the Bank's intention to act contrary to any of the specified
covenants set forth in this Section, the Company shall not have delivered to the
Bank written objection to any such action.
6.3 ACCESS TO INFORMATION. (a) As long as the transaction
contemplated herein has not been terminated, the Bank will afford the Company,
its representatives, counsel, accountants, agents and employees including the
underwriter selected to assist in the issuance of the common stock contemplated
in Section 9.1(iii) and its counsel (collectively "Company Representatives"),
access during normal business hours to all of its business, operations,
properties, personnel books, files and records and will do everything reasonably
necessary to enable the Company and the Company Representatives to make a
complete examination of the financial statements, books, records, loans and
leases, operating reports, audit reports, contracts and documents, and all other
information with respect to assets and properties of the Bank and the condition
thereof, and to update such examination at such intervals as the Company shall
deem appropriate. Such access shall include reasonable access by the Company
and the Company Representatives to auditors' work papers with respect to the
business and properties of the Bank, other than (i) books, records and documents
covered by the attorney-client privilege, or which are attorneys' work product,
and (ii) books,
49
records and documents that the Bank is legally obligated to keep
confidential. Such examination shall be conducted in cooperation with the
officers of the Bank and in such a manner as to minimize, to the extent
possible consistent with the conducting of a comprehensive examination, any
disruption of, or interference with, the normal business operations of the
Bank. No such examination, however, shall constitute a waiver or
relinquishment on the part of the Company to rely upon the representations
and warranties made by the Bank herein or pursuant hereto; provided, that the
Company shall disclose any fact or circumstance it may discover which it
believes renders any representation or warranty made by the Bank hereunder
incorrect in any respect. The Company will hold in strict confidence all
documents and information concerning the Bank so obtained (except to the
extent that such documents or information are a matter of public record or
require disclosure in the Proxy Statement or as may be necessary for the
accomplishment of the purposes of such examination) and, if the transactions
contemplated herein are not consummated, such confidence shall be maintained
and all such documents including all copies shall be returned to the Bank.
(b) As long as the transaction contemplated hereunder has not been
terminated, (i) one Company Representative, selected by the Company in its sole
discretion, shall be invited by the Bank to attend all regular and special Board
of Directors' meetings of the Bank from the date hereof until the Effective Time
of the Merger and (ii) one representative of Sutro shall be invited by the Bank
to attend all regular and special Board of Director meetings of the Bank from
the date hereof until the Effective Time of the Merger for the purpose of
discussing the condition of the market for the Offering. The Bank shall inform
the Company of such Board of Director meeting at least five (5) days in advance
of such meeting; provided, however, that the attendance of such Company
Representative shall not be permitted at any meeting, or portion thereof, for
the sole purpose of discussing the transactions contemplated by this Agreement
on the obligations of the Bank under this Agreement.
6.4 FINANCIAL STATEMENTS. In the event the following have not
been previously delivered prior to the date hereof, within three (3) days of
receipt from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, the Bank will deliver to the Company a copy of
the audited Statements of Financial Condition of the Bank as of December 31,
1998; Statements of Earnings, Stockholders' Equity and Cash Flows for the year
ended December 31, 1998, the related notes and related opinions thereon of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, with respect to such financial statements (the "1998
Audited Bank Financial Statements"). The Bank will furnish to the Company with
a true and correct copy of the management letter or other letter delivered to
the Bank by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP in connection with the 1998 Audited Bank
Financial Statements relating to any review of the internal controls of the Bank
by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP. The 1998 Audited Bank Financial Statements will: (i)
present fairly the financial condition and results of operations of the Bank as
of and for the dates or periods covered thereby in accordance with generally
accepted accounting
50
principles consistently applied throughout the periods involved; (ii) be
based on the books and records of the Bank; (iii) contain and reflect
reserves for all material accrued liabilities and for all reasonably
anticipated losses, and set forth adequate reserves for loan losses and other
contingencies, to the extent required by GAAP; and (iv) none of the 1998
Audited Bank Financial Statements will contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading under GAAP.
6.5 NO SOLICITATION.
(a) The Bank shall not, and will cause each of its officers,
directors, employees, agents, legal and financial advisors and Affiliates not
to, directly or indirectly, make, solicit, encourage, initiate or, except as
permitted in this Section 6.5, enter into any agreement or agreement in
principle, or announce any intention to do any of the foregoing, concerning the
acquisition of the Bank, or substantially all of the Bank's business and
properties or a majority of Bank Stock or debt securities, whether by purchase,
merger (other than by the Company), purchase of assets, tender offer or
otherwise (an "Alternative Transaction").
(b) The Bank shall not, and will cause each of its officers,
directors, legal and financial advisors, agents and Affiliates not to, directly
or indirectly, participate in any negotiations or discussions regarding, or
furnish any information with respect to, or otherwise cooperate in any way in
connection with, or assist or participate in, facilitate or encourage, any
effort or attempt to effect or seek to effect, any Alternative Transaction with
or involving any Person other than the Company, unless the Bank shall have
received an unsolicited written offer from a Person other than the Company to
effect an Alternative Transaction and the Board of Directors of the Bank is
advised in writing by outside legal counsel that in the exercise of the
fiduciary obligations of the Bank's Board of Directors such information should
be provided to or such discussions or negotiations undertaken with the Person
submitting such unsolicited written offer.
(c) The Bank will promptly communicate to the Company the receipt
of any proposal with respect to any Alternative Transaction, and will keep the
Company informed as to the status of any such proposal; PROVIDED, HOWEVER, that
the Bank shall not be required to disclose any matters which, in the written
opinion of outside legal counsel, may not be disclosed in the exercise of the
fiduciary obligations of the Bank's Board of Directors.
6.6 CERTAIN LOANS AND OTHER EXTENSIONS OF CREDIT. The Bank will
promptly inform the Company of the amounts and categories of any loans, leases
or other extensions of credit that have been criticized special mention or
classified by any bank regulatory authority or deemed by the Bank to require
special attention pursuant to its internal policies (collectively "Classified
Credits"). In addition, the Bank will furnish to the Company, as soon as
practicable, and in any event within
51
seven days after receipt by the Bank's Board of Directors, schedules
including the following: (a) Classified Credits; (b) nonaccrual credits; (c)
accrual exception credits that are delinquent 90 or more days and have not
been placed on nonaccrual status; (d) participating loans and leases,
stating, with respect to each, whether it is purchased or sold, the loan or
lease type, and the originating unit; (e) loans or leases (including any
commitments) by the Bank to any director, officer or shareholder holding 5%
or more of the capital stock of such party; (f) letters of credit; (g) loans
or leases charged-off during the previous month; (h) loans or leases written
down during the previous month; and (i) OREO or assets owned, stating with
respect to each its type.
6.7 BREACHES. The Bank shall, in event it becomes aware of the
impending or threatened occurrence of any event or condition which would cause
or constitute a breach (or would have caused or constituted a breach had such
event occurred or been known prior to the date hereof) of any of its
representations or agreements contained or referred to herein, give prompt
written notice thereof to the Company and, without limiting the Company's rights
under paragraph 14.1(a)(ii), the Bank shall use its best efforts to prevent or
promptly remedy the same.
6.8 SHAREHOLDER APPROVAL. As soon as practicable, the Company and
the Bank shall prepare the S-4 and the proxy statement ("Proxy Statement") and
take all action necessary in accordance with applicable Rules and its Charter
Documents to submit the Agreement and the transactions contemplated hereby to
its shareholders for approval by April 1, 1999, or as soon thereafter as is
reasonably possible. In connection with such submission, subject to its
fiduciary obligations specified in Section 6.5(b) the Bank's Board of Directors
shall recommend shareholder approval of all the matters referred to in this
Section 6.8 and the Bank shall use its best efforts to obtain such shareholder
approval.
6.9 COMPLIANCE WITH RULES. The 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, results of operations or prospects of the Bank.
6.10 TERMINATION OF THE BANK STOCK OPTION PLAN AND AGREEMENTS. The
Bank will take all steps necessary to cause the Bank Stock Option Plan to be
terminated as of or prior to the Effective Time of the Merger, will grant no
additional options under said plan prior to the Effective Time of the Merger,
and the Bank will not permit any options to be exercised as of or prior to the
Effective Time of the Merger.
6.11 OFFICERS AND EMPLOYEES. Following the Closing Date, the
Company and the Bank will agree to consolidate and/or reduce certain back office
and administrative functions, and other overhead, of the Bank in order to reduce
52
Bank expense. Other than officers with employment contracts, the Bank will
use its best efforts to cause each officer and employee of the Bank to
indicate in writing to the Company that such officers and employees will
agree to the Bank's employment policies, procedures and handbook, acknowledge
his or her at-will employment status while employed by the Bank, and
acknowledge his or her salary or compensation and title while employed by the
Bank, in the form similar to that attached as EXHIBIT 6.11(a). The Company
also will honor all Bank Employment Agreements specified in EXHIBIT 4.11(a).
The Bank will cancel by the Closing Date the keyman life insurance policy and
the disability insurance policy for ▇▇. ▇▇▇▇▇.
6.12 TERMINATION OF CONTRACTS AND ACCRUAL OF LIABILITIES. Upon
determination by the Company, the Bank shall obtain the termination of any
contracts, commitments or Understanding as defined in Section 4.12(v), and pay
or accrue as of the Closing Date for any termination fees, for the future
purchase of materials, supplies, services, merchandise or equipment, the price
of which exceeds $20,000. The Bank shall also cancel the consulting contract
with ▇▇. ▇▇▇▇▇▇▇ effective as of the Closing Date. Before the Determination
Date, the Bank shall have paid, or set-up adequate accruals for the payment of,
all expenses, including, but not limited to, professional fees as outlined in
Section 11.18, and expenses as outlined in Section 13.1, but only to the extent
that such fees and expenses shall be chargeable to the after tax net income of
the Bank up to the Determination Date in accordance with GAAP.
6.13 EXECUTION OF AGREEMENT OF MERGER. As soon as possible after
organization of PCBG Merger Corporation, subject to receipt of any and all
necessary approvals and Permits by any Governmental Entity and approval by the
Bank's shareholders, the Bank shall execute the Agreement of Merger and any and
all related documents.
6.14 ACCOUNTANTS. Promptly upon request of the Company, the Bank
will ask its accountants to permit the Company or the Company Representatives to
review and examine the work papers relating to the Audited Bank Financial
Statements for the years ended December 31, 1995, 1996, 1997 and 1998, and the
Bank will permit such accountants to discuss with the Company any matter
relating to the audits of the Bank. In addition, the Bank will make available
to the Company copies of each management letter or other letter delivered to the
Bank by its accountants in connection with such financial statements or relating
to any review by its accountants of the internal controls of the Bank since
January 1, 1995, unless previously provided to the Company and the Bank has
instructed its accountants to make available for inspection by the Company or
the Company Representatives all reports and working papers produced or developed
by its accountants in connection with their examination of such financial
statements, as well as all such reports and working papers for any periods for
which any tax of the party has not been finally determined or barred by
applicable statutes of limitation.
53
6.15 CORPORATE ACTION. The Bank shall take or cause to be taken
all necessary corporate action required to carry out the transactions
contemplated in this Agreement.
6.16 REGULATORY APPROVALS. Promptly following execution of this
Agreement, the parties hereto shall prepare, submit and file, or cause to be
prepared, submitted and filed, all applications for approvals and consents as
may be required of any of them, respectively, by applicable law and regulations
with respect to the transactions contemplated by this Agreement, including
without limitation any and all applications required to be filed with the
Commissioner, the FRB, the FDIC and such other Governmental Entity as the
Company or the Bank may reasonably believe necessary. Each party shall
cooperate with the other in the preparation of all of such applications and will
furnish promptly upon request all documents, information, financial statements
or other materials as may be required in order to complete such applications.
Each party shall afford the other a reasonable opportunity to review all such
applications (except confidential portions thereof) and all amendments and
supplements thereto before filing. The Company and the Bank each covenant and
agree that any and all information furnished by it to the other for inclusion in
such applications will not contain any untrue statement of a material fact and
will not omit to state any material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
6.17 NECESSARY CONSENTS. In addition to the regulatory approvals
referred to in Section 6.16, the parties hereto shall each apply for and
diligently seek to obtain all other third party consents or approvals which may
be necessary for the consummation of the Merger, including, without limitation,
the written consent of any lessors of real and personal property which property
cannot be assigned without the written consent of the other such lessors ("Third
Party Consent").
6.18 FURTHER ASSURANCES. The parties agree that from time to time,
whether prior to, at or after the Effective Time of the Merger, they will
execute and deliver such further instruments of conveyance and transfer and take
such other action as may reasonably be expected to consummate the transactions
contemplated hereby. The Company and the Bank each agrees to take such further
action as may reasonably be requested by the other in order to consummate the
transactions contemplated by this Agreement and that are not inconsistent with
the other provisions hereof, including compliance with all of the terms of
Article II.
6.19 BANK EMPLOYEE BENEFITS. Upon the mutual agreement of the Bank
and the Company, the Bank shall cause all Employee Plans of the Bank to be
terminated except as otherwise provided by applicable labor laws as of the
Effective Time of the Merger.
54
6.20 ENVIRONMENTAL REPORTS. Except for the Banklink leases, the
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ lease, and foreclosed OREO, and except as otherwise agreed
to in writing by the Company, the Bank shall provide to the Company, as soon as
reasonably practical, but not later than 45 days after the date hereof, a report
of a phase one environmental investigation on all Real Property owned, leased or
operated by Bank as of the date hereof (other than space in retail and similar
establishments leased by the Bank for automatic teller machines) and within ten
days after the acquisition or lease of any Real Property acquired or leased by
the Bank after the date hereof (other than space in retail and similar
establishments leased or operated by the Bank for automatic teller machines),
except as otherwise provided in Section 6.2(xxxiii). If required by the phase
one investigation in the Company's reasonable opinion, the Bank shall provide to
the Company a report of a phase two investigation on the Real Property or Real
Properties requiring such additional study. The Company shall have 15 business
days from the receipt of any such phase two investigation report to notify the
Bank of any objection to the contents of such report. If the cost of taking all
remedial and corrective actions and measures (i) required by applicable law, or
(ii) recommended or suggested by such report or reports or prudent in light of
serious life, health or safety concerns, in the aggregate, is in excess of the
sum of Three Hundred Thousand Dollars ($300,000) as reasonably estimated by an
environmental expert retained for such purpose by the Company and reasonably
acceptable to the Bank, or if the cost of such actions and measures cannot be so
reasonably estimated by such expert to be, in the aggregate, $300,000 or less
with any reasonable degree of certainty, the Company shall have the right to
terminate the Agreement pursuant to Article IV, Section 14.1(e) hereof, for a
period of 10 business days following receipt of such estimate or indication that
the cost of such actions and meaures.
6.21 NO CONFLICTS; DEFAULTS. The execution, delivery and
performance of the Agreement of Merger and the consummation of the transactions
contemplated therein, and compliance by the Bank with any provision thereof will
not (a) conflict with or result in a breach of, or default or loss of any
benefit under, any provision of its Charter Documents or, except as set forth in
Exhibit 6.21 any material agreement, instrument or obligation to which the
Surviving Bank will become a party or by which the property of the Surviving
Bank will become bound or give any other party to any such agreement, instrument
or obligation the right to terminate or modify any term thereof; (b) except for
the prior approval of the FRB, the FDIC and the Commissioner and as set forth in
Exhibit 6.21, require any Consents; (c) result in the creation or imposition of
any Encumbrance on any of the properties or assets of the Surviving Bank; or (d)
violate the Charter Documents or any Rules to which the Surviving Bank is
subject.
6.22 THE OFFERING. The Bank will assist the Company in connection
with the preparation of the offering materials for the issuance of the Company
Stock contemplated by this Agreement, and such assistance will include, but not
necessarily be limited to, the preparation or provision, as appropriate, of
55
information concerning the business, properties and personnel of the Bank needed
in connection with the issuance of the Company Stock and the closing of the
Offering, as well as any and all comfort letters from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP , and
any and all necessary opinions from ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates, with
respect to the Offering as specified by the Underwriters. Such information to
be supplied by the Bank 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, in light of the circumstances under which they were
made, not intentionally misleading.
6.23 S-4, PROXY STATEMENT AND THE OFFERING. The Company and the
Bank will prepare the S-4 and the Proxy Statement, and the Bank will assist the
Company in connection with preparation of the S-1, contemplated by this
Agreement, and such preparation and assistance will include, but not necessarily
be limited to, the preparation or provision, as appropriate, of information
concerning the business, properties and personnel of the Bank needed in
connection with the issuance of the Company Stock, the S-4 and the Proxy
Statement and the closing of the Merger. Such information to be prepared by the
Bank including any and all information furnished by the Bank for inclusion in
all applications and statements filed with the appropriate regulatory
authorities for approval of, or consent to, the Merger 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, in light of the
circumstances under which they were made, not misleading.
6.24 PUBLICITY. The initial press release announcing this
Agreement shall be a joint press release and thereafter the Company and the Bank
shall consult with each other in issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and in
making any filings with any Governmental Entity or with any national securities
exchange with respect thereto. If any party hereto, on the advice of counsel,
determines that a disclosure is required by law, it may make such disclosure
without the consent of the other parties, but only after affording the other
party a reasonable opportunity to review and comment upon the disclosure. The
parties hereby agree that all public statements after the initial press release
announcing this Agreement referring to the Bank shall be made by ▇▇. ▇▇▇▇▇ ▇.
▇▇▇▇▇, and all public statements made after the initial press release announcing
this Agreement referring to the Company shall be made by Mr. E. ▇▇▇▇ ▇▇▇▇▇▇▇,
and both parties agree that all public statements shall be made by mutual
agreement with consultation with the Managing Underwriter.
6.25 AFFILIATES AND FIVE PERCENT SHAREHOLDER AGREEMENTS. Within
thirty (30) days of the execution of this Agreement, (a) the Bank shall deliver
to the Company a letter identifying all persons who are then "affiliates" of the
Bank for purposes of Rule 145 under the Securities Act and (b) the Bank shall
advise the persons identified in such letter of the resale restrictions imposed
by applicable
56
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 6.25. The Bank shall use reasonable efforts to
obtain from any person who becomes an affiliate of the Bank after the Bank's
delivery of the letter referred to above, and on or prior to the date of the
Bank's Shareholders' Meeting to approve this Agreement, a written agreement
substantially in the form attached as Exhibit 6.25 hereto as soon as
practicable after obtaining such status. At least 10 Business Days prior to
the filing of the S-4, the Bank shall use its best efforts to cause each
person or group of persons who holds more than five percent (5%) of Bank
Stock (regardless of whether such person is an "affiliate" under Rule 145) to
deliver to the Company's accountants and ▇▇▇▇▇▇ & ▇▇▇▇▇▇, a letter stating
that such shareholder(s) has no present plan or intention to dispose of Bank
Stock and committing that such shareholder(s) will not dispose of Bank Stock
in a manner to cause a violation of the "continuity of shareholder interest"
requirements of Treasury Regulation 1.368-1.
ARTICLE VII
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Bank as follows:
7.1 BEST EFFORTS. The Company shall use its best efforts to bring
about the satisfaction of the conditions specified in Articles IX and X hereof.
7.2 CONDUCT OF BUSINESS. Unless the Bank shall give its prior
consent, which consent will not be unreasonably withheld, or unless otherwise
indicated, until the Effective Time, the Company will:
(i) conduct its affairs and business in the usual and
ordinary course, generally consistent with past practice, and in accordance with
safe and sound practices;
(ii) refrain from amending its Charter Documents except to
the extent as may be required or contemplated by this Agreement;
(iii) use its best efforts to preserve its business
organization intact and to retain its present officers and employees in a manner
consistent with the Company's other obligations under this Agreement;
(iv) use its best efforts to preserve the goodwill of those
having business relations with the Company, refrain from amending, modifying,
terminating or failing to renew or preserve its business organization, material
rights, franchises, Permits, and refrain from taking any action which would
jeopardize the continuance of the goodwill of its customers where such action
would have, taken
57
as a whole, a material adverse effect on the financial condition, or results
of operations of the Company in a manner consistent with the Company's other
obligations under this Agreement;
(v) duly and timely file all reports and returns required
to be filed with any federal, state or local Governmental Entity unless any
extensions have been duly granted by such authorities;
(vi) maintain its books of account and records in the
regular manner substantially in accordance with all applicable statutory and
regulatory requirements applied on a consistent basis;
(vii) advise the Bank promptly in writing of any material
adverse change known to the Company in the capital structure, financial
condition, results of operations, or of any event or condition which with the
passage of time is reasonably likely to result in a material adverse change in
the capital structure, financial condition or results of operations of the
Company, or in the event the Company determines that the Merger will not be
consummated because of any inability to meet the conditions to the performance
of the Bank set forth in Article X or of any matter which would make the
representations and warranties set forth in Article V hereof not true and
correct in any material respect at the Closing;
(viii) the Company agrees that through the Effective Time of
the Merger, as of their respective dates, (i) each of the Company Filings will
be true and complete in all material respects; and (ii) each of the filings with
any regulatory agency will comply in all material respects with all of the
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 will be made, not misleading. Any financial statement contained in
any of such Company Filings that is intended to present 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
or RAP consistently applied, except as stated therein, during the periods
involved;
For purposes of this Section 7.2, the Bank shall be deemed to have
given its consent to any action which is contrary to any specified covenant set
forth in this Section if, within five (5) Business Days, after actual receipt by
the Bank of written notice from the Company of the Company's intention to act
contrary to any of the specified covenants set forth in this Section, the Bank
shall not have delivered to the Company written objection to any such action.
7.3 ACCESS TO INFORMATION. The Company will afford the Bank, its
representatives, counsel, accountants, agents and employees (collectively "Bank
58
Representatives"), access during normal business hours to all of its
business, operations, properties, books, files and records and will do
everything reasonably necessary to enable the Bank and the Bank
Representatives to make a complete examination of the financial statements,
books, records, loans and leases, operating reports, audit reports, contracts
and documents, and all other information with respect to assets and
properties of the Company and the condition thereof, and to update such
examination at such intervals as the Bank shall deem appropriate. Such
access shall include reasonable access by the Bank and the Bank
Representatives to auditors' work papers with respect to the business and
properties of the Company, other than (i) books, records and documents
covered by the attorney-client privilege, or which are attorneys' work
product, and (ii) books, records and documents that the Company is legally
obligated to keep confidential. Such examination shall be conducted in
cooperation with the officers of the Company and in such a manner as to
minimize, to the extent possible consistent with the conducting of a
comprehensive examination, any disruption of, or interference with, the
normal business operations of the Company. No such examination, however,
shall constitute a waiver or relinquishment on the part of the Bank to rely
upon the representations and warranties made by the Company herein or
pursuant hereto; provided, that the Bank shall disclose any fact or
circumstance it may discover which it believes renders any representation or
warranty made by the Company hereunder incorrect in any respect. The Bank
will hold in strict confidence all documents and information concerning the
Company so obtained (except to the extent that such documents or information
are a matter of public record or require disclosure in the Proxy Statement or
as may be necessary for the accomplishment of the purposes of such
examination) and, if the transactions contemplated herein are not
consummated, such confidence shall be maintained and all such documents
including all copies shall be returned to the Company.
7.4 BREACHES. The Company shall, in event it becomes aware of
the impending or threatened occurrence of any event or condition which would
cause or constitute a breach (or would have caused or constituted a breach
had such event occurred or been known prior to the date hereof) of any of its
representations or agreements contained or referred to herein, given prompt
written notice thereof to the Bank and, without limiting the Bank's rights
under paragraph 14.1(a)(ii), the Company shall use its best efforts to
prevent or promptly remedy the same.
7.5 COMPLIANCE WITH RULES. The Company 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 of the Company taken as a whole. The
Company shall also comply with all securities statutes, rules and
regulations, whether federal or state, in connection with the Offering.
Except for information supplied by the Bank pursuant to Section 6.22, the
information contained in the Offering disclosure documents shall not contain
any untrue statement of a material fact or omit to
59
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.
7.6 CORPORATE ACTION. The Company shall take or cause to be
taken all necessary corporate action required to carry out the transactions
contemplated in this Agreement and the Agreement of Merger, including without
limitation, all necessary action required to organize and fund PCBG Merger
Corporation.
7.7 REGULATORY APPROVALS. Promptly following execution of this
Agreement, the parties hereto shall prepare, submit and file, or cause to be
prepared, submitted and filed, all applications for approvals and consents as
may be required of any of them, respectively, by applicable law and
regulations with respect to the transactions contemplated by this Agreement,
including without limitation any and all applications required to be filed
with the Commissioner, the FRB, the FDIC and such other Governmental Entity
as the Company or the Bank may reasonably believe necessary. Each party
shall cooperate with the other in the preparation of all of such applications
and will furnish promptly upon request all documents, information, financial
statements or other materials as may be required in order to complete such
applications. Each party shall afford the other a reasonable opportunity to
review all such applications (except confidential portions thereof) and all
amendments and supplements thereto before filing. The Company and the Bank
each covenant and agree that any and all information furnished by it to the
other for inclusion in such applications will not contain any untrue
statement of a material fact and will not omit to state any material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
7.8 NECESSARY CONSENTS. In addition to the regulatory
approvals referred to in Section 7.7, the parties hereto shall each apply for
and diligently seek to obtain all other third party consents or approvals
which may be necessary for the consummation of the Merger, including, without
limitation, the written consent of any lessors of real and personal property
which property cannot be assigned without the written consent of the other
such lessors ("Third Party Consent").
7.9 FURTHER ASSURANCES. The parties agree that from time to
time, whether prior to, at or after the Effective Time of the Merger, they
will execute and deliver such further instruments of conveyance and transfer
and take such other action as may reasonably be expected to consummate the
transactions contemplated hereby. The Company and the Bank each agree to
take such further action as may reasonably be requested by the other in order
to consummate the transactions contemplated by this Agreement and that are
not inconsistent with the other provisions hereof, including compliance with
the terms of Article II.
7.10 (reserved).
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7.11 (reserved).
7.12 INDEMNIFICATION AND INSURANCE.
(a) The Company will cause the Bank to maintain in effect
policies of directors' and officers' liability insurance (with such coverage,
terms and conditions as are no less advantageous than the insurance presently
maintained by the Bank with respect to the officers and directors)with
respect to all matters arising from facts or events which occurred before the
Effective Time of the Merger, and for a three (3) year period thereafter, for
which the Bank would have had an obligation to indemnify its directors and
officers.
(b) If the Company or any of its successors or assigns (i)
shall consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity,
then and in each such case, the Company shall take no action to impair the
rights provided in this Section 7.12.
7.13 EXECUTION OF AGREEMENT OF MERGER. As soon as practicable
after the organization of PCBG Merger Corporation, the Company as the sole
shareholder of PCBG Merger Corporation, shall approve the Merger and shall
cause PCBG Merger Corporation to execute the Agreement of Merger.
7.14 THE OFFERING.
(a) The Company intends to conduct the Offering in order to
raise sufficient cash capital to complete the acquisition of the Bank,
provide capital for growth and operations of the Company, and to otherwise
carry out the transaction contemplated by this Agreement.
(b) All Directors and officers of the Company and the Surviving
Bank will undertake in writing with the Underwriters not to sell any Warrants
or shares of Company Stock held by them for a period of six months following
the completion of the Offering unless specifically granted permission to do
so by the Underwriters.
(c) Simultaneously with, and upon the condition of, the
consummation of the acquisition of the Bank, the Company through the
Underwriters intends to consummate the Offering at a gross public offering
price to be determined by the Company and the Underwriters. Based upon
current market conditions and assumptions, the Offering will consist of
sufficient shares of Company Stock offered to the public at a gross offering
price to be determined by the Company and the Managing Underwriter. The
shares constituting the Offering
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will be comprised of newly issued shares of Company Stock to fund the cash
portion of the acquisition of the Bank and to provide the Company with new
capital for growth and operations of the Company following the acquisition of
the Bank and the consummation of the Offering.
(d) The Managing Underwriter has not withdrawn, or materially
and adversely modified, the letter expressing their degree of confidence, and
the Managing Underwriter will promptly notify the parties if such withdrawal
should occur.
7.15 AUTHORIZATION. The execution and delivery of the Agreement
of Merger and the consummation of the transactions contemplated thereby will
have been duly authorized by the Board of Directors of PCBG Merger
Corporation. The Agreement of Merger will constitute a legal, valid and
binding agreement of PCBG Merger Corporation in accordance with its
respective terms, except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws
of general application relating to or affecting enforcement of creditors
rights and the application of equitable principles in any action, legal or
equitable. PCBG Merger Corporation will have full corporate power and
authority to perform its obligations under the Agreement of Merger and the
transactions contemplated thereby.
7.16 NO CONFLICTS; DEFAULTS. The execution, delivery and
performance of the Agreement of Merger and the consummation of the
transactions contemplated therein, and compliance by PCBG Merger Corporation
with any provision thereof will not (a) conflict with or result in a breach
of, or default or loss of any benefit under, any provision of its Charter
Documents or, except as set forth in Exhibit 7.16 any material agreement,
instrument or obligation to which PCBG Merger Corporation will become a party
or by which the property of PCBG Merger Corporation will become bound or give
any other party to any such agreement, instrument or obligation the right to
terminate or modify any term thereof; (b) except for the prior approval of
the FRB, the FDIC and the Commissioner and as set forth in Exhibit 7.16,
require any Consents; (c) result in the creation or imposition of any
Encumbrance on any of the properties or assets of PCBG Merger Corporation; or
(d) violate the Charter Documents or any Rules to which PCBG Merger
Corporation is subject.
7.17 ACCURACY OF INFORMATION FURNISHED. Except as to any
statements or information which shall include projections or forecasts, none
of the statements or information made or contained in any of the covenants,
representations or warranties of the Company set forth in this Agreement or
in any of the schedules, exhibits, lists, certificates or other documents
furnished herewith contains any untrue statement of a material fact required
to be stated herein or therein or necessary to make the statements or
information contained herein or therein, in light of the circumstances in
which they were made, not misleading. As
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to any such information or statements which include projections or forecast,
such information or statements are based upon assumptions believed by the
Company to be reasonable. The Company shall further amend or supplement the
schedules as of the Closing Date if necessary to reflect any additional
changes in the status of the Company.
7.18 1999 STOCK OPTION PLAN. Prior to or following the
completion of the transactions contemplated herein, the Company will use its
best efforts to establish the Company's 1999 Stock Option Plan for the
benefit of directors, officers and key employees of the Company and the Bank.
7.19 FURTHER ASSURANCES. The Company knows of no reason that
the transaction would not consummate. Without the prior approval of the
Bank, the Company will not enter into any further agreements to acquire
another financial institution that would materially and adversely affect the
transaction or the timing contemplated by this Agreement.
ARTICLE VIII
FURTHER COVENANTS OF THE COMPANY AND THE BANK
The parties covenant and agree as follows:
8.1 S-4, PROXY STATEMENT AND REGISTRATION STATEMENT FOR THE
OFFERING.
(a) As promptly as practicable, the Company and the Bank shall
use their best efforts to prepare and file the S-4, in which the Proxy
Statement will be included as a prospectus, and the S-1 with the SEC and any
other Governmental Entity. The Bank agrees to provide the information
necessary for inclusion in the S-4, the Proxy Statement and the S-1. The
Company will use its best efforts to have the S-4 and the Proxy Statement
declared effective under the Securities Act as promptly as practicable after
it is filed and to satisfy the requirements of the SEC and any other
Governmental Entity.
(b) After the date of the filing of the S-4 and the S-1 with
the SEC and any other Governmental Entity, each of the Parties agrees to
promptly 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 any other Governmental Entity and have declared effective or cleared by
the SEC and any other Governmental Entity any amendment or supplement to the
S-1 and the S-4 so as to correct such information and to cause the S-4 and
the S-1 as so corrected to be disseminated to the shareholders of the Company
and the Bank to the extent required by applicable Rules. All documents that
the Company files with the SEC or any other
63
Governmental Entity in connection with this Agreement will comply as to form
in all material respects with the provisions of applicable Rules.
(c) The 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.
(d) The Bank and the Company, through their Board of Directors,
will recommend that its shareholders approve the transactions contemplated
hereby, and both parties will use their best efforts to obtain the
affirmative votes of the holders of the largest possible percentage of its
outstanding Common Stock, so long as it is consistent with its fiduciary
obligation to do so.
8.2 FEDERAL SECURITIES LAWS. In obtaining the consent of its
shareholders of the matters described in Section 8.1 hereof, the Company, the
Bank and their respective officers, directors and controlling shareholders
will, in all respects, comply with the Rules and regulations of the SEC and
any other Governmental Entity promulgated under the Exchange Act applicable
to commercial banks which are reporting companies, other applicable
provisions of the United States Code, the Rules and regulations of the SEC
and the securities laws of all states in which shareholders of the parties
reside as applicable.
Without in any way limiting the generality of the foregoing, the
Company and the Bank agrees that the Notice of Meeting, Proxy Statement
submitted in connection therewith, form of Proxy and other solicitation
materials that will be used in soliciting the aforesaid shareholder approvals
and authorizations and the S-1:
(i) will be filed with, and not be used before the same
are cleared for use by, the SEC, other Governmental Entities having
jurisdiction over the Company and the Bank, and this transaction, and the
securities administrators of all states in which their respective
shareholders reside as applicable;
(ii) will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, except that neither
party warrants the accuracy or completeness of any information contained
therein which is furnished to it by the other relating to the business,
assets, properties, financial condition or management of the other or any
corporation or person affiliated or contractually obligated to become
affiliated therewith, whether by merger, acquisition of assets or otherwise;
(iii) the Company and the Bank will use their best
efforts to obtain clearance by all appropriate Governmental Entities for the
use of its Notice of Meeting, Proxy Statement, form of Proxy and other
solicitation materials. Each
64
party will consult and cooperate with the other in the preparation of all
such proxy solicitation materials for the Bank Shareholders' Meeting and the
Company's Shareholders Meeting, and the Bank and the Company agree not to
transmit any proxy materials without the prior consent of the other party and
its counsel; and
(iv) the Company and the Bank shall each covenant and
agree and each pay their own expenses in connection with the preparation and
filing, including attorney fees, of the Notice of Meeting, Proxy Statement,
form of Proxy and other solicitation materials.
8.3 MAILING OF PROXY STATEMENT. The Bank and the Company each
covenant and agree that they will use their best efforts and shall cooperate
with each other in the preparation, filing and mailing of the Proxy Statement
as soon as it reasonably practicable and is permitted under applicable law;
it being the intention of the Bank to include its December 31, 1998 financial
statements and information, and any necessary quarterly financial statements
and information, in the financial disclosures contained in the Proxy
Statement.
8.4 MATERIALS TO BE FURNISHED PRIOR TO MAILING DATES. On or
prior to the mailing date of the Proxy Statement ("Bank Mailing Date"), the
Bank (a) shall use its best efforts to cause an appropriate firm that shall
be selected by the Bank in its discretion, subject to the reasonable approval
of the Company, to deliver to the Company a copy of any letter to the Board
of Directors of Bank, dated as of a date not more than five days prior to
such mailing date, in form and substance satisfactory to the Company to the
effect set forth in Section 10.9 hereof, (b) shall have received a letter by
a date not more than five days prior to the Bank Mailing Date, to the effect
that the consideration to be received by the shareholders of the Bank in the
Merger is fair from a financial point of view, and (c) shall have received a
letter by a date not more than five days prior to the Bank Mailing Date, of
the valuation of dissenters rights shares as described in Section 1300.
8.5 REGULATORY APPROVALS. The Bank and the Company each agree
to use their best efforts to provide promptly such information and reasonable
assistance as may be requested by the other party to this Agreement and to
take promptly such other actions as shall be necessary or appropriate in
order to consummate the transactions contemplated hereby. Without limiting
the foregoing, the Bank and the Company will each (a) prepare, submit and
file, or cause to be prepared, submitted and filed, all applications for all
authorizations, consents, orders and approvals of federal, state, local and
other Governmental Entities and officials necessary under applicable law for
the performance of its obligations pursuant to this Agreement and the
consummation of the transactions contemplated hereby, (b) use their best
efforts to obtain all such authorizations, consents, orders and approvals as
expeditiously as possible in accordance with the terms of this Agreement, and
(c) cooperate fully with each other in promptly seeking to obtain such
authorizations, consents, orders and approvals, including
65
without limitation, in each case, the approval of the FRB, the FDIC and the
Commissioner. The Bank and the Company each agree to promptly provide the
other with copies of all applications referred to in clause (a) above and
copies of all written communications, letters, reports or other documents
delivered to or received from any Governmental Entity, and copies of all
memoranda relating to discussions with such Governmental Entity, if any, with
respect to the Merger, except that the Company and the Bank shall not be
required to provide the other with any of the foregoing documents submitted
or received on a confidential basis or which incorporate confidential
information relating to other financial institutions. The Parties agree that
through the Effective Time of the Merger, 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
statues, 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 Party to
which it relates will fairly present the financial position of such Party and
will be prepared in accordance with GAAP or RAP consistently applied during
the periods involved.
8.6 CORPORATE GOVERNANCE.
(a) Prior to the Effective Time, the Bank shall take
all necessary steps to effect the Bank Corporate Governance Changes at the
Effective Time.
(b) Prior to the Effective Time, the Company shall take
all necessary steps to effect the Company Corporate Governance Changes at the
Effective Time.
8.7 NASDAQ. The Company's Stock will be listed on the Nasdaq
National Market System at the Effective Time of the Merger.
ARTICLE IX
CONDITIONS PRECEDENT TO THE CONTEMPLATED TRANSACTIONS
The obligations of the Parties to consummate the transactions as
provided for herein are subject to the fulfillment, at or prior to the
Effective Time, of the following conditions:
9.1 PERMITS AND APPROVALS. Appropriate permits or approvals
from the Commissioner, the FRB, the FDIC and/or any other Governmental
Entities which
66
are necessary to carry out the transactions contemplated in this Agreement,
shall have been received, the United States Department of Justice shall not
have taken any adverse action within the period allowed under 12 U.S.C.
Section 1828(c)(6), and all other statutory or regulatory requirements for
the valid completion of the transactions contemplated hereby shall have been
satisfied. Said permits and approvals shall include, but shall not be limited
to, the following:
(i) prior written approval from the Commissioner
pursuant to the CFC, the FDIC pursuant to 12 U.S.C. Section 1828(c)(2) and
the FRB pursuant to the Federal Reserve Act and the BHC Act;
(ii) to the extent required by applicable Rule, all
Consents of any Governmental Entity, including, without limitation, those of
the FRB, the FDIC and the Commissioner, shall have been obtained, granted or
waived for organization of PCBG Merger Corporation and the Merger, and all
applicable waiting periods under all rules shall have expired; and
(iii) all approvals, orders and/or permits necessary for
the Offering and any other necessary regulatory approvals and the issuance of
approvals or assurances from the Commissioner, the FRB, the FDIC, the SEC,
any blue sky authority and any other necessary Governmental Entity having
authority over the Merger that the approval of the Merger will be forthcoming
that are satisfactory to the Company, that would allow the Company to
commence the marketing of the Offering by the Company to complete the Merger
as described in this Agreement.
9.2 ABSENCE OF LITIGATION. On the Closing Date and at the
Effective Time: (i) there shall be no action pending before any court of
competent jurisdiction in which any injunction is sought by any Governmental
Entity against the transactions contemplated hereby; and (ii) there shall be
in effect no order, writ, injunction or decree of any court or Governmental
Entity prohibiting the consummation of any of the transactions contemplated
hereby.
9.3 SHAREHOLDER APPROVAL. The Agreement, the Merger, and the
other transactions contemplated hereby, shall have been approved by the
holders of at least a majority of the issued and outstanding shares of Bank
Stock entitled to vote and the requisite approval of the Company as the sole
shareholder of PCBG Merger Corporation as soon as practicable. Any and all
other action required by the shareholders of the Bank or the Company to
authorize or effect the transactions called for herein shall have been duly
and validly taken.
9.4 STOCK OFFERING. The Company shall close the Offering as
soon as is reasonably possible, the Company shall have received the amount of
cash necessary to complete the Merger as provided in Section 2.5, and to
carry out the transactions contemplated hereby.
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9.5 ▇-▇, ▇-▇ AND PROXY STATEMENT. The S-4, Proxy Statement and
the S-1 shall have been declared effective by the SEC or the FDIC, as
appropriate, and shall not be the subject of any stop order or proceeding
seeking or threatening a stop order. The Company shall have received all
state securities or "Blue Sky" permits and other authorization necessary to
issue the Company Stock in the Offering and the S-4 in order to consummate
the Merger.
9.6 NASDAQ. The Company's Common Stock issued in the Offering
will be listed on the Nasdaq National Market System at the Effective Time.
9.7 SEVERANCE POLICY. The Bank and the Company shall continue
the Bank's present severance policy.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BANK
All of the obligations of the Bank to consummate the transactions
contemplated herein shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions, or their waiver by resolution of
the Board of Directors of the Bank:
10.1 LEGAL OPINION. The Bank shall have received the opinion of
▇▇▇▇▇▇ & ▇▇▇▇▇▇, acting as counsel for the Company, dated as of the Closing
Date, in substantially the form of EXHIBIT 10.1.
10.2 CERTIFICATE OF NO DEFAULT. All covenants, terms and
conditions of this Agreement to be complied with and performed by the Company
at or before the Closing Date shall have been complied with and performed in
all material respects and the representations and warranties of the Company
contained in Article V hereof shall have been true and correct in all
material respects as of the Effective Time, with the same effect as though
such representations and warranties had been made on and as of the Effective
Time, except as otherwise specified in, or permitted or contemplated by, this
Agreement. The Company shall have delivered to the Bank, a certificate dated
the Closing Date, signed by the President, certifying the fulfillment of this
condition.
10.3 CLOSING DOCUMENTS. The Company shall have delivered to the
Bank all items required by the Bank pursuant to Section 3.3, all of which
documents shall be properly executed and, if required by the Bank,
acknowledged before a notary.
10.4 EFFECTIVE S-4 AND PROXY STATEMENT. The S-4 and the Proxy
Statement shall have been approved or otherwise become effective and no stop
68
order suspending the effectiveness thereof shall be in effect and no
proceedings therefor shall be pending or threatened by any Governmental
Entity at the Closing Date.
10.5 REGULATORY APPROVALS AND RELATED CONDITIONS. Any and all
governmental and regulatory approvals and Consents referred to in Article IX
and any other section of this Agreement shall have been granted without the
imposition of conditions, or with conditions subject to the approval of the
Company and the Bank, that are or would have become applicable to the Company
or the Surviving Bank, and that the Company reasonably and in good faith
concludes would materially adversely affect the financial condition or
operations of the Company or the Surviving Bank, or otherwise would be
materially burdensome; provided, however, that conditions or requirements
which are imposed on purchasers or acquired institutions by Governmental
Entities in comparable transactions shall not be deemed to be a basis for
excuse of performance under this Agreement. All actions necessary to
authorize the execution, delivery and performance of the Agreement by the
Company and consummation of the Merger by the Company and PCBG Merger
Corporation shall have been duly and validly taken by the Board of Directors
of the Company and the PCBG Merger Corporation.
10.6 THIRD PARTY CONSENTS. The Company shall have obtained all
consents of other parties to the Company's material mortgages, notes, leases,
franchises, agreements, licenses and permits as may be necessary to permit
the transactions contemplated herein to be consummated, without default,
acceleration, breach or loss of rights or benefits thereunder.
10.7 ABSENCE OF CERTAIN CHANGES. As of the Closing Date there
shall not exist any of the following:
(i) any change(s) in the financial condition or results
of operation of the Company since inception which individually is or in the
aggregate are materially adverse to the Company; or
(ii) any damage, destruction, loss or event materially
and adversely affecting the properties, business or prospects of the Company
on a consolidated basis.
10.8 VALIDITY OF TRANSACTIONS. The validity of all transactions
herein contemplated, as well as the form and substance of all opinions,
certificates, instruments of transfer and other documents to be delivered to
the Bank hereunder, shall be subject to the approval, to be reasonably
exercised, of counsel for the Bank.
10.9 FAIRNESS OPINION. Prior to solicitation of shareholder
approval, the Bank shall have received an opinion pursuant to Section 8.4
confirming the
69
fairness of the terms of the Merger from a financial perspective, and such
opinion shall not have been withdrawn prior to the mailing date of the Proxy
Statement.
10.10 NASDAQ LISTING. The Company will have the shares of
Company Stock issuable pursuant to this transaction duly authorized for
listing, subject to notice of issuance, on the Nasdaq National Market System.
ARTICLE XI
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE COMPANY
All of the obligations of the Company to consummate the
transactions contemplated herein shall be subject to the satisfaction, at or
prior to the Closing Date, of the following conditions, or their waiver by
resolution of the Board of Directors of the Company, as appropriate:
11.1 LEGAL OPINION. The Company shall have received the opinion
of ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates acting as counsel for the Bank, dated as
of the Closing Date, in substantially the form of EXHIBIT 11.1.
11.2 CERTIFICATE OF NO DEFAULT. All covenants, terms and
conditions of this Agreement to be complied with and performed by the Bank at
or before the Closing Date shall have been complied with and performed in all
material respects and the representations and warranties of the Bank
contained in Article IV hereof shall have been true and correct in all
material respects as of the Effective Time, with the same effect as though
such representations and warranties had been made on and as of the Effective
Time, except as otherwise specified in, or permitted or contemplated by, this
Agreement. The Bank shall have delivered to the Company a certificate, dated
the Closing Date, signed by the President of the Bank, certifying the
fulfillment of this condition.
11.3 CLOSING DOCUMENTS. The Bank shall have delivered to the
Company all items required by the Company pursuant to Section 3.3, all of
which documents shall be properly executed and, if required by the Company,
acknowledged before a notary.
11.4 EFFECTIVE ▇-▇, ▇-▇ AND PROXY STATEMENT. The S-1, the S-4
and the Proxy Statement shall have become effective and no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the SEC, FDIC, the Commissioner,
the FRB or any blue sky authority at the Closing Date.
11.5 BANK DISSENTING SHAREHOLDERS AGAINST MERGER. The Bank's
shareholders voting against the Merger or the Bank's shareholders giving
notice in
70
writing to the Bank at or before the Bank's meeting that such shareholder
dissents from the Merger, on a combined basis, shall hold not more than ten
percent (10%) of the outstanding shares of the Bank.
11.6 REGULATORY APPROVALS AND RELATED CONDITIONS. Any and all
governmental and regulatory approvals and Consents referred to in Article IX
and any other section of this Agreement shall have been granted without the
imposition of conditions, or with conditions subject to the approval of the
Company, that are or would have become applicable to the Company or the
Surviving Bank and that the Company reasonably and in good faith concludes
would materially adversely affect the financial condition or operations of
the Company or the Surviving Bank, or otherwise would be materially
burdensome; provided, however, that conditions or requirements which are
imposed on purchasers or acquired institutions by Governmental Entities in
comparable transactions shall not be deemed to be a basis for excuse of
performance under this Agreement.
11.7 THIRD PARTY CONSENTS. The Company shall have obtained all
consents of other parties to the Company's material mortgages, notes, leases,
franchises, agreements, licenses and permits as may be necessary to permit
the transactions contemplated herein to be consummated, without default,
acceleration, breach or loss of rights or benefits thereunder.
11.8 ABSENCE OF CERTAIN CHANGES. As of the Closing Date, there
shall not exist any of the following: (i) any change(s) in the consolidated
financial condition, or results of operation of the Bank since December 31,
1997, which individually is or in the aggregate are materially adverse to the
Bank; (ii) any damage, destruction, loss or event materially and adversely
affecting the properties, business or prospects of the Bank; or (iii) any
material adverse change in the deposit structure of the Bank from the date of
this Agreement to the Closing Date.
11.9 BANK STOCK OPTION PLAN; AND OFFICERS AND EMPLOYEES. The
Bank shall have caused the Bank Stock Option Plan to be terminated as of or
prior to the Effective Time of the Merger and shall have obtained the
consents or agreements specified in, and otherwise shall have complied with
the terms of, Section 6.10. Pursuant to California Law and its employment
policies and practices, the Bank shall have complied with Section 6.11 of
this Agreement as of the Effective Time of the Merger.
11.10 DIRECTOR AGREEMENTS. Pursuant to Section 2.9, concurrently
with the execution of this Agreement, each director of the Bank shall enter
into separate agreements with the Company in the form attached hereto as
EXHIBIT "B".
11.11 TERMINATION OF CONTRACTS. As determined by the Company
under Section 6.12, the Bank shall have obtained the terminations of any
71
contracts, commitments or Understandings as defined in Section 4.12(v), and
paid or accrued as of the Closing Date for any termination fees for the
future purchases of materials, supplies, services, merchandise or equipment,
the price of which exceeds $20,000.
11.12 VALIDITY OF TRANSACTIONS. The validity of all transactions
herein contemplated, as well as the form and substance of all opinions,
certificates, instruments of transfer and other documents to be delivered to
the Company hereunder, shall be subject to the approval, to be reasonably
exercised, of counsel for the Company.
11.13 EMPLOYEE BENEFIT PLANS. Upon the mutual agreement of the
Company and the Bank regarding whether any Employee Plan should be
terminated, the Company shall have received satisfactory evidence that the
Bank has caused such Employee Plan to be terminated, except as otherwise
provided by applicable labor laws, as of the effective Time of the Merger,
and that all benefits payable under such plans, programs and arrangements
have been paid or accrued as of the Closing Date.
11.14 FAIRNESS OPINION. Prior to commencement of the marketing
of the Offering described in Sections 9.1(iii) and 9.4, the Company in its
discretion may receive an opinion concerning the fairness of the terms of the
Merger to the shareholders of the Company from a financial point of view.
11.15 STOCK OFFERING. The Bank shall have provided such
information as deemed necessary by the Company in connection with the sale of
stock including but not limited to, certificates of its officers and
directors attesting to, among other things, the truthfulness and correctness
of the representations contained in this Agreement, opinions of legal counsel
and comfort letters from the Bank's accountants.
11.16 S-4, PROXY STATEMENT AND REGULATORY APPLICATIONS. The Bank
shall have provided such information as deemed necessary by the Company in
connection with the S-4 and the Proxy Statement and any other regulatory
applications including but not limited to, certificates of its officers and
directors attesting to, among other things, the truthfulness and correctness
of the representations contained in this Agreement, opinions of legal counsel
and comfort letters from the Bank's accountants.
11.17 BLUE SKY MATTERS. The issuance of the Company Stock in the
Offering and the S-4 shall have been qualified or registered with the
appropriate Governmental Entity under state securities or Blue Sky laws, and
such qualification or registrations are in effect on the Closing Date.
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11.18 PROFESSIONAL FEES. The Bank's costs and expenses for
professional expenses in connection with the transaction contemplated by this
Agreement, including investment banking, accounting, attorney and any related
costs and expenses, shall not exceed the amount that would be reasonable and
customary for a transaction as described in this Agreement. Investment
banking fees are as set forth in Exhibit 4.14. The accounting and attorney
fees, and related costs and expenses thereto, of the Bank shall not exceed
$175,000 in the aggregate. The Company agrees that it will promptly
reimburse the Bank at the close or termination for the first $50,000 of legal
and attorney fees and expenses incurred by the Bank since November 15, 1998
directly related to this transaction with the Company, and the Bank shall pay
for any additional accounting and attorney fees and expenses incurred by the
Bank thereafter. The Company also consents to the Bank paying at the close
up to $25,000 to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ for his investment banking services to the
Bank related to this transaction with the Company.
11.19 YEAR 2000. The Bank shall certify that the Bank and
Banklink Corporation are making satisfactory progress toward compliance with
Year 2000 safety and soundness issues with respect to their own computer
systems.
ARTICLE XII
DISSENTING SHAREHOLDERS OF BANK
Any shareholder of the Bank who lawfully dissents shall be
entitled to receive cash for the fair market value of his or her shares
determined in accordance with Section 1300.
ARTICLE XIII
EXPENSES
13.1 EXPENSES. All fees and out-of-pocket costs incurred in
connection with the transactions contemplated by this Agreement, including
but not limited to legal, accounting, investment banking fees and cost
reimbursements, fees and cost of consultants, costs of proxy statements and
shareholder action on the Merger, shall be paid by the party incurring such
costs.
73
ARTICLE XIV
TERMINATION
14.1 Termination of this Agreement.
(a) Notwithstanding that this Agreement and the Agreement of
Merger may have already been approved by shareholders of one or both of
constituent corporations to the transactions contemplated by this Agreement,
this Agreement may be terminated prior to the Effective Time of the Merger:
(i) by mutual agreement of the parties, in writing;
(ii) by (A) the Company immediately upon the expiration
of 30 days from the date that the Company has given notice to the Bank of a
material breach or default by the Bank in the performance of any covenant,
agreement, representation, warranty, duty or obligation hereunder or (B) the
Bank immediately upon the expiration of 30 days from the date that the Bank
has given notice to the Company of a breach or default by the Company in the
performance of any covenant, agreement, representation, warranty, duty or
obligation hereunder, except for Sections 5.18 and 7.14
(iii) by the Company or the Bank if any Governmental
Entity denies or refuses to grant the approvals, consents or authorizations
required to be obtained, or if any Governmental Entity approves the
transaction covered and contemplated by this Agreement upon conditions not
reasonably acceptable to the Company, in order to consummate the transactions
covered and contemplated by this Agreement. If any regulatory application
filed pursuant to this Agreement hereof should be finally denied or
disapproved by the respective Governmental Entity, then this Agreement
thereupon shall be deemed terminated and canceled; provided, however, that a
request for additional information or undertaking by the Company, as a
condition for approval, shall not be deemed to be a denial or disapproval so
long as the Company diligently provides the requested information or
undertaking. In the event an application is denied pending an appeal,
petition for review, or similar such act on the part of the Company
(hereinafter referred to as the "appeal") then the application will be deemed
denied unless the Company prepares and timely files such appeal and continues
the appellate process for purposes of obtaining the necessary approval.
(iv) by the Company or the Bank if (A) the Board of
Directors of the Bank approves a transaction (or the Bank executes a letter
of intent or other agreement) pursuant to which any person or entity or
related group of persons or entities acquires, directly or indirectly, record
or beneficial ownership (as defined in Rule 13d3 promulgated by the SEC
pursuant to the Exchange Act) or control of 10% or more of the outstanding
shares of Bank Stock or other securities of the
74
Bank; (B) any person or entity or related group of persons or entities seeks
to acquire 10% or more of the outstanding shares of Bank Stock by tender
offer or otherwise, and the Board of Directors of the Bank does not advise
the Bank's shareholders that the Bank's Board of Directors does not support
such tender offer or acquisition and that it supports the Merger; (C) if the
Bank violates its covenant pursuant to Section 6.2 (xxiii) and (xxiv); (D)
the Merger does not receive the requisite approval of the Bank's
shareholders; or (E) any Person or entity commences an Alternative
Transaction pursuant to the terms of Section 6.5;
(v) by the Company or the Bank immediately upon the
expiration of 15 days from the date that the Bank or the Company has given
notice to the Company of a default by the Company in the performance of
Sections 5.18 and 7.14;
(vi) by the Company or the Bank by May 15, 1999, unless
regulatory approvals and/or completion of the Offering is relatively imminent
and is expected to be completed in the near future, in which case the date in
this subsection shall be automatically extended for up to an additional 30
days.
(b) Notwithstanding that this Agreement and the Agreement of
Merger may have already been approved by shareholders of one or both of the
constituent corporations to the Merger, this Agreement shall be terminated
prior to the Effective Time of the Merger if any conditions specified in
Articles IX, X or XI have not been satisfied or waived in writing by the
party authorized to waive such conditions unless mutually extended by the
parties hereto.
(c) Regulatory Enforcement Matters. In the event that Bank or
the Company or any of their respective subsidiaries shall, after the date of
this Agreement, become a party or subject to any new or amended written
agreement, memorandum of understanding, cease and desist order, imposition of
civil money penalties or other regulatory enforcement action or proceeding
with any federal or state agency charged with the supervision or regulation
of banks or bank holding companies which is material to the Bank or the
Company and their respective subsidiaries taken as a whole, then either the
Company or the Bank may terminate this Agreement.
(d) (reserved)
(e) Notwithstanding anything to the contrary contained herein:
(i) If this Agreement is terminated by the Bank before
the Closing Date pursuant to Sections 14.1(a)(ii)(B), (not including Sections
5.18 or 7.14) hereof, the Company shall pay to the Bank, as reasonable and
full liquidated damages and reasonable compensation for the loss sustained
thereby and not as a penalty or forfeiture, the expenses incurred by the Bank
in connection with the
75
transactions contemplated by this Agreement, including, but not limited to,
those costs and expenses outlined in Section 11.18, plus 50% of such
expenses, up to a maximum of $500,000, within ten (10) Business Days of such
termination;
(ii) If this Agreement is terminated by the Company
before the Closing Date pursuant to Sections 14.1(a)(ii)(A) hereof, the Bank
shall pay to the Company, as reasonable and full liquidated damages and
reasonable compensation for the loss sustained thereby, and not as a penalty
or forfeiture, the expenses incurred by the Company in connection with the
transactions contemplated by this Agreement, plus 50% of such expenses, up to
a maximum of $500,000 within ten (10) Business Days of such termination; and
(iii) If this Agreement is terminated by the Company
before the Closing pursuant to Section 14.1(a)(iv) hereof, and the Warrant is
not exercised by the Company, the Bank will pay to the Company, as reasonable
and full liquidated damages and reasonable compensation for the loss
sustained thereby, and not as a penalty or forfeiture, the expenses incurred
by the Company in connection with the transaction contemplated by this
Agreement, plus 50% of such expenses, within ten (10) Business Days of such
termination.
ARTICLE XV
GENERAL PROVISIONS
15.1 CONFIDENTIALITY. All Confidential Information disclosed
heretofore or hereafter by either Party to this Agreement to the 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 Bank
or the Company or as may 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 nonuse shall survive the termination of this Agreement
pursuant to Article XIV. In the event of such termination and on request of
the other Party, such Party shall use all reasonable efforts to (y) return to
the other Party all documents (and reproductions thereof) received from such
other Party that contain Confidential Information (and, in the case of
reproductions, all such reproductions made by the receiving Party); and (z)
destroy the originals and all copies of any analyses, computations, studies
or other documents prepared for the internal use of such Party that include
Confidential Information, unless otherwise advised by counsel in connection
with any controversy under the Agreement.
15.2 PUBLICITY. The Parties shall coordinate all publicity
relating to the transactions contemplated by this Agreement, and no Party
shall issue any
76
press release, publicity statement, shareholder communication 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 independent legal counsel to the Party, as the case may be, shall
deliver a written opinion to the Party that a particular action is required
by applicable Rules. The Parties hereby agree that all public statements
after the initial press release announcing this Agreement referring to the
Bank shall be made by ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇, and all public statements made
after the initial press release announcing this Agreement referring to the
Company shall be made by Mr. E. ▇▇▇▇ ▇▇▇▇▇▇▇, and both Parties agree that all
public statements shall be made by mutual agreement.
15.3 INDEMNIFICATION.
(a) The Bank agrees to defend, indemnify and hold harmless the
Company, its officers and directors, attorneys, accountants and each person
who controls the Company within the meaning of the Securities Act from and
against any costs, damages, liabilities and expenses of any nature, insofar
as any such costs, damages, liabilities and expenses arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the Proxy Statement, the Company's Offering disclosure
documents or any amendments or supplements thereto, or arise out of or are
based solely upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading based upon information with respect to the
Bank furnished to the Company by or on behalf of the Bank specifically for
use therein; provided, however, that the Bank shall not be liable in any such
case to the extent that any such cost, damage, liability or expense arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in the Proxy Statement, the Company's
Offering disclosure documents or amendments or supplements thereto, in
reliance upon and in conformity with information with respect to the Company
furnished to the Bank by or on behalf of the Company specifically for use
therein.
(b) The Company agrees to defend indemnify and hold harmless
the Bank, its officers and directors, attorneys, accountants and each person
who controls the Bank within the meaning of the Securities Act from and
against any costs, damages, liabilities and expenses of any nature, insofar
as any such costs, damages, liabilities or expenses arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Proxy Statement, the Company's Offering disclosure documents
or any amendments or supplements thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make statements therein not misleading
based solely upon information with respect to the Company and its
subsidiaries furnished to the Bank by or on behalf of the Company and its
subsidiaries specifically for use therein; provided, however, that the
Company shall not be liable in any such case to the extent that any such
77
cost, damage, liability or expense arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Proxy Statement, the Company's Offering disclosure documents or
amendments or supplements thereto, in reliance upon and in conformity with
information with respect to the Bank furnished to the Company by or on behalf
of the Bank specifically for use therein.
(c) Promptly after receipt by the Party to be indemnified
pursuant to this section ("Indemnified Party") of notice of (i) any claim or
(ii) the commencement of any action or proceeding, Indemnified Party will
give the other Party "(Indemnifying Party") written notice of such claim or
the commencement of such action or proceeding. Indemnifying Party shall have
the right, at its option, to compromise or defend, by its own counsel, any
such matter involving Indemnified Party's asserted liability, at the expense
of the Indemnifying Party. In the event that Indemnifying Party shall
undertake to compromise or defend any such asserted liability, it shall
promptly notify Indemnified Party of its intention to do so, and Indemnified
Party agrees to cooperate fully with Indemnifying Party and its counsel in
the compromise of, or defense against, any such asserted liability. In any
event, Indemnifying Party shall have the right to participate in the defense
of such asserted liability. In any event Indemnifying Party shall have the
right to participate in the defense of such asserted liability.
15.4 NOTICES. All notices, demands or other communications
hereunder shall be in writing and be made by (a) hand delivery; (b) overnight
mail; (c) United States mail, first class, certified or registered, postage
prepaid; or (d) facsimile transmission, and shall be deemed to have been duly
given (i) on the date of service if delivered by hand or facsimile
transmission (provided that telecopied notices are also mailed by United
States mail, first class, certified or registered, postage prepaid); (ii) on
the next day if delivered by overnight mail or delivery service; or (iii) 72
hours after mailing if mailed by United States mail, first class, certified
or registered, postage prepaid, and properly addressed as follows:
(a) If to the Bank:
▇▇▇▇▇ ▇. ▇▇▇▇▇, President and Chief Executive Officer
The Bank of Hemet
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
78
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company:
Mr. E. ▇▇▇▇ ▇▇▇▇▇▇▇, Chairman and CEO
Pacific Community Banking Group
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
The persons or addresses to which mailings or deliveries shall be made may
change from time to time by notice given pursuant to the provisions of this
Section 15.4.
15.5 SUCCESSORS AND ASSIGNS. Subject to Section 7.12 and 15.3,
all terms and provisions of this Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective transferees,
successors and assigns; provided, however, that, except as otherwise
contemplated herein, this Agreement and all rights, privileges, duties and
obligations of the Parties hereto may not be assigned or delegated by any
party hereto without the prior written consent of the other Party to this
Agreement and any purported assignment in violation of this Section 15.5
shall be null and void.
15.6 THIRD PARTY BENEFICIARIES. Except as provided in Section
7.12, each party hereto intends that this Agreement shall not benefit, or
create any right or cause of action in or on behalf of, any Person other than
the Parties hereto.
15.7 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute one
instrument.
79
15.8 GOVERNING LAW. This Agreement is made and entered into in
the State of California and the laws of the State of California shall govern
the validity and interpretation hereof and the performance of the parties
hereto of their respective duties and obligations hereunder.
15.9 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
15.10 WAIVER AND MODIFICATION. No waiver of any term, provision
or condition of this Agreement, whether by conduct or otherwise, in any one
or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition of this Agreement.
This Agreement and the Agreement of Merger, when executed and delivered, may
be modified or amended by action of the Board of Directors of the Company and
the Bank without action by their respective shareholders to the extent
permitted by law. This Agreement may be modified or amended only by an
instrument of equal formality signed by the Parties of their duly authorized
agents.
15.11 ATTORNEYS' FEES. In the event either of the Parties to
this Agreement brings an action or suit against the 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
other body having jurisdiction, shall be entitled to have and recover of and
from the losing Party, as determined by the court or other body have
jurisdiction, all reasonable costs and expenses incurred or sustained by such
prevailing Party in connection with such suit or action, including, without
limitation, legal fees and court costs (whether or not taxable as such).
15.12 ENTIRE AGREEMENT. The making, execution and delivery of
this Agreement by the Parties hereto have not been induced by any
representations, statements, warranties or agreements other than those herein
expressed. This Agreement embodies the entire understanding of the Parties
and there are no further or other agreements or understandings, written or
oral, in effect between the Parties relating to the subject matter hereof,
unless expressly referred to by reference herein.
15.13 SEVERABILITY. Whenever possible, each provision of this
Agreement and every related document shall be interpreted in such manner as
to be valid under applicable law. However, if any provision of any of the
foregoing shall be invalid or prohibited under said applicable law, it shall
be construed, interpreted and limited to effectuate its purpose to the
maximum legally permissible extent. If it cannot be so construed and
interpreted so as to be valid under such law, such provision shall be
ineffective to the extent of such invalidity or prohibition without
invalidating the remainder of such provision or the remaining provisions of
this Agreement, and this Agreement shall be construed to the maximum extent
possible
80
to carry out its terms without such invalid or unenforceable provision or
portion thereof.
15.14 EFFECT OF DISCLOSURE. Any list, statement, document,
writing or other information set forth in, referenced to or attached to any
schedule or exhibit delivered pursuant to any provision of this Agreement
shall be deemed to constitute disclosure for purposes of any other schedule
or exhibit required to be delivered pursuant to any other provision of this
Agreement.
15.15 KNOWLEDGE. Whenever any statement herein or in any
schedule, exhibit, certificate or other documents 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, who
shall be an officer of a Party, shall make such statement only after
conducting an investigation which such person determines in good faith to be
reasonable under the circumstances of the subject matter thereof, and each
such statement shall constitute a representation that such investigation has
been conducted.
15.16 TERMINATION OF REPRESENTATION, 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 Merger other than
those provided for in Sections 7.12, 13.1, 14.1(e), 15.1, 15.3, and 15.11
which shall survive a termination.
81
IN WITNESS WHEREOF, the Parties hereto have duly executed this
Agreement on the day and year first above written.
PACIFIC COMMUNITY BANKING GROUP
By: /s/ E. ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
E. ▇▇▇▇ ▇▇▇▇▇▇▇, Chairman of the
Board and Chief Executive Officer
THE BANK OF HEMET
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman of the Board
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, President and
Chief Executive Officer
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, Director
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, Director
By: /s/ E. ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
E. ▇▇▇▇▇▇▇ ▇▇▇▇▇, Director
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, Director
By: /s/ ▇▇▇▇▇▇▇ ▇. Record, Jr.,
------------------------------------
▇▇▇▇▇▇▇ ▇. Record, Jr., Director
82
EXHIBIT A AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER is made and entered into as of
this day of , 1999, by and between PCBG Merger Corporation
("PCBG"), a California corporation, The Bank of Hemet ("BOH"), a California
corporation, and Pacific Community Banking Group (the "Company"), a
California corporation, with reference to the following facts:
RECITALS
1. PCBG is a California corporation duly organized, validly
existing and in good standing under the laws of the State of California, with
authorized capital of 1,000,000 shares of no par value common stock of which, on
the date hereof, there are 100 shares issued and outstanding ("PCBG Common
Stock") owned by the Company.
2. BOH is a banking corporation duly organized, validly
existing and in good standing under the laws of the State of California and is
authorized by the California Commissioner of Financial Institutions to conduct a
general banking business, with authorized capital of 20,000,000 shares of no par
value common stock, of which, on the date hereof, there are 844,278 shares
issued and outstanding ("BOH Common Stock"), and 10,000,000 shares of Preferred
Stock of which on the date hereof there are no shares issued and outstanding.
3. The Company is a California corporation duly organized,
validly existing and in good standing under the laws of the State of California,
with authorized capital of 100,000,000 shares of no par value common stock, of
which, on the date hereof, there are 2,500 shares issued and outstanding
("Company Common Stock"), and 100,000,000 shares of Preferred Stock of which on
the date hereof there are shares issued and outstanding.
4. The respective Boards of Directors of PCBG and BOH deem it
desirable and in the best interest of their respective corporations and
stockholders that PCBG be merged (the "Merger") with and into BOH as provided in
this Agreement of Merger pursuant to the laws of the State of California and
that BOH be the surviving corporation ("Surviving Corporation").
5. In connection with the Merger, the Company and BOH have
entered into the First Restatement of Agreement and Plan of Reorganization,
dated as of January 5, 1999, as amended on 1999 and 1999 (the
"Reorganization Agreement").
1
NOW THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein set forth and for the purpose of
prescribing the terms and conditions of such Merger, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Upon consummation of the Merger at the Effective Time (as
defined in Article IX hereof), PCBG shall be merged with and into BOH which
shall thereupon be the Surviving Corporation, and the separate corporate
existence of PCBG shall cease.
ARTICLE II
NAME
The name of the Surviving Corporation shall remain "The Bank
of Hemet."
ARTICLE III
ARTICLES OF INCORPORATION
The Articles of Incorporation of BOH as in effect immediately
prior to the Effective Time shall, at and after the Effective Time, continue to
be the Articles of Incorporation of the Surviving Corporation.
ARTICLE IV
BYLAWS
The Bylaws of BOH as in effect immediately prior to the
Effective Time shall, at and after the Effective Time, continue to be the Bylaws
of the Surviving Corporation.
ARTICLE V
DIRECTORS
The Board of Directors and officers of BOH at the Effective
Time shall serve as the Board of Directors and officers of the Surviving
Corporation until such time as their successors have been elected and qualified
as provided for by the Bylaws of BOH.
ARTICLE VI
RIGHTS AND DUTIES OF SURVIVING CORPORATION
At and after the Effective Time, all rights, privileges,
powers and franchises and property and assets of every kind and description of
PCBG and BOH
2
shall be vested in and be held and enjoyed by the Surviving Corporation, without
further act or deed, and all the estates and interests of every kind of PCBG and
BOH, including all debts due to either of them, shall be as effectively the
property of the Surviving Corporation as they were of PCBG and BOH, and the
title to any real estate vested by deed or otherwise in either PCBG or BOH shall
not revert or be in any way impaired by reason of the Merger; and all rights of
creditors and liens upon any property of PCBG and BOH shall be preserved
unimpaired and all debts, liabilities and duties of PCBG and BOH shall be debts,
liabilities and duties of the Surviving Corporation and may be enforced against
it to the same extent as if said debts, liabilities and duties had been incurred
or contracted by it.
ARTICLE VII
CONVERSION OF SHARES
In and by virtue of the Merger and at the Effective Time,
pursuant to this Agreement of Merger, the shares of PCBG Stock and BOH Stock
outstanding at the Effective Time shall be converted as follows:
(a) EFFECT ON PCBG STOCK. Each share of PCBG Stock
issued and outstanding immediately prior to the Effective Time shall for all
purposes be deemed to represent, one share of common stock of the Surviving
Corporation.
(b) EFFECT ON BOH STOCK. Each share of BOH Common
Stock issued and outstanding immediately prior to the Effective Time, except for
shares as to which dissenters' rights are perfected pursuant to Section 1300 ET
SEQ. of the California Corporations Code ("Perfected Dissenting Shares") shall
be automatically cancelled and cease to be an issued and outstanding share of
BOH Stock and shall be converted into the right to receive 3.4 shares of Company
Stock, and a Warrant exercisable into one share of Company Stock. The Company
will pay or cause to be paid cash in lieu of fractional shares of BOH Stock in
an amount proportionate to the fair value of a whole share as determined by the
board of directors of the Company which would otherwise be issuable as provided
above.
ARTICLE VIII
SHAREHOLDER APPROVAL
This Agreement shall be approved by the affirmative vote of
the holders of a least a majority of the capital stock of BOH, PCBG and the
Company at meetings duly held on the call of the directors or otherwise in
accordance with law, and the Merger shall become effective on the Effective
Time.
3
ARTICLE IX
FURTHER ACTION
The parties hereto shall execute and deliver, or cause to be
executed and delivered, all such deeds and other instruments, and will take or
cause to be taken all further or other action as they may deem necessary or
desirable, in order to vest in and confirm to the Surviving Corporation title to
and possession of all of BOH's and PCBG's property, rights, privileges, powers
and franchises hereunder, and otherwise to carry out the intent and purposes of
this Agreement of Merger.
ARTICLE X
EFFECTIVE TIME
The Merger will become effective upon the filing of a copy of
this Agreement of Merger and all other requisite accompanying certificates in
the office of the Secretary of State of the State of California. The date and
time of such filing with the Secretary of State of the State of California is
referred to herein as the "Effective Time".
ARTICLE XI
SUCCESSORS AND ASSIGNS
This Agreement of Merger shall be binding upon and enforceable
by the parties hereto and their respective successors, assigns and transferees,
but this Agreement of Merger may not be assigned by either party without the
written consent of the other.
ARTICLE XII
GOVERNING LAW
This Agreement of Merger has been executed in the State of
California, and the laws of the State of California shall govern the validity
and interpretation hereof and the performance by the parties hereto.
ARTICLE XIII
TERMINATION
This Agreement of Merger may, by the mutual consent and action
of the Boards of Directors of BOH and PCBG, be abandoned at any time before or
after approval thereof by the shareholders of PCBG and BOH, but not later than
the filing of this Agreement of Merger with the Secretary of State of the State
of California.
4
ARTICLE XIV
SATISFACTION OF OBLIGATIONS AND CONDITIONS
(a) The obligations of BOH to proceed with the
Closing are subject to the satisfaction at or prior to the Closing of all of the
conditions to the obligations of PCBG and BOH under the Reorganization
Agreement, any one or more of which, to the extent it is or they are waivable,
may be waived, in whole or in part, by BOH.
(b) The obligations of PCBG to proceed with the
Closing are subject to the satisfaction at or prior to the Closing of all of the
conditions to the obligations of Pacific Community Banking Group and BOH under
the Reorganization Agreement, any one or more of which, to the extent it is or
they are waivable, may be waived, in whole or in party, by PCBG.
5
IN WITNESS WHEREOF, BOH and PCBG, pursuant to the approval and
authority duly given by resolution of their respective Board of Directors, have
caused this Agreement of Merger to be signed by their respective officers on the
day and year first above written.
THE BANK OF HEMET
By:
--------------------------------------
▇▇▇▇▇ ▇ ▇▇▇▇▇, President
By:
--------------------------------------
-------------------------, Secretary
PCBG MERGER CORPORATION
By:
--------------------------------------
E. ▇▇▇▇ ▇▇▇▇▇▇▇
Chairman of the Board
By:
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary
PACIFIC COMMUNITY BANKING GROUP
By:
--------------------------------------
E. ▇▇▇▇ ▇▇▇▇▇▇▇
Chairman of the Board
By:
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary
6
EXHIBIT B DIRECTORS AGREEMENT
This Agreement ("Agreement") is made and entered into this 30th day
of July 1998 by and between Pacific Community Banking Group, a California
corporation ("Company"), and each of the other persons executing this
Agreement (each such person is referred to individually as a "Bank Director"
and collectively as "Bank Directors" with reference to the following facts:
A. The Bank of Hemet, a California banking corporation ("Bank"),
and the Company have entered into that certain Agreement and Plan of
Reorganization dated as of July 30, 1998 ("Reorganization Agreement"),
pursuant to which the Bank will acquire a subsidiary of the Company by means
of a Merger, and the Company will exchange cash to the shareholders of the
Bank for their shares of the Bank, as those terms are defined in the
Reorganization Agreement ("Acquisition").
B. In order to facilitate Company and Bank entering into the
Reorganization Agreement, the Bank Directors (comprising the entire Board of
Directors of Bank) desire to enter into this Agreement. The execution of
this Agreement shall be a condition precedent to the execution of the
Reorganization Agreement.
NOW, THEREFORE, in consideration of the promises and of the
respective representations, warranties and covenants, agreements and
conditions contained herein and in the Reorganization Agreement, the parties
hereto agree as follows:
1. AGREEMENTS OF BANK DIRECTORS.
1.1 AGREEMENT TO VOTE. At any meeting of shareholders of
Bank or in connection with any solicitation of the written consent of
shareholders of Bank to approve the Reorganization Agreement and the
transactions contemplated thereby, each of the Bank Directors shall vote or
cause to be voted all shares of Common Stock of Bank ("Bank Stock") owned by
each such Bank Directors and any other shares of Bank Stock hereafter
acquired by each such Bank Director in favor of, and to approve, the
principal terms of the Acquisition and any other matter contemplated by the
Reorganization Agreement which requires the approval of the shareholders of
Bank, including but not limited to the "Merger," as those terms are defined
in the Reorganization Agreement.
1.2 AGREEMENT TO RECOMMEND. Each Bank Director shall
recommend to the shareholders of Bank to vote in favor of, and to approve,
the principal terms of the Acquisition and any other matter contemplated by
the Reorganization Agreement.
1
1.3 RESTRICTIONS ON DISPOSITIONS. Each Bank Director agrees
that, except (i) with the prior written consent of Company, or (ii) pursuant
to the Acquisition, such Bank Director will not pledge nor otherwise
encumber, sell, assign or otherwise dispose of any shares of Bank Stock
currently owned, or acquired after the date of this Agreement, by such Bank
Director.
1.4 COOPERATION. Each Bank Director agrees to cooperate
fully with Company in connection with the Acquisition. Each Bank Director
agrees that he or she will not, directly or indirectly, solicit any inquiries
or proposals from, or enter into, or continue any discussions, negotiations
or agreements relating to, or vote in favor of any proposal or transaction
for disposition of the business or assets of Bank or any subsidiary thereof,
or the acquisition of Bank's or any subsidiary of Bank's voting securities or
any business combination with, any person entity other than Company.
2. REPRESENTATIONS AND WARRANTIES OF BANK DIRECTORS.
Each of the Bank Directors represents and warrants to and agrees
with Company as follows:
2.1 CAPACITY. Each such Bank Director has all the requisite
capacity and authority to enter into and perform such Bank Director's
obligations under this Agreement.
2.2 BINDING AGREEMENT. This Agreement constitutes the valid
and legally binding obligation of each such Bank Director.
2.3 NON-CONTRAVENTION. The execution and delivery of this
Agreement by each such Bank Director does not, and the performance by such
Bank Director of such Bank Director's obligations hereunder will not, violate
or conflict with or constitute a default under any agreement, instrument,
contract or other obligation or any order, arbitration award, judgment or
decree to which such Bank Director is a party or by which such Bank Director
is bound, or any statute, rule or regulation to which such Bank Director or
any of such Bank Director's property is subject.
2.4 OWNERSHIP OF SHARES. SCHEDULE 1 hereto correctly sets
forth the number of shares of Bank Stock owned by each Bank Director, or with
respect to which each Bank Director has voting power or beneficial ownership,
as of the date indicated on such schedule. Each Bank Director has good title
to all of the shares of Bank Stock indicated as owned by such Bank Director
in the capacity set forth on SCHEDULE 1 as of the date indicated on such
SCHEDULE 1, and such shares of Bank Stock are so owned free and clear of any
liens, security interests, charges or other encumbrances, except as set forth
in such SCHEDULE 1.
2
3. TERMINATION.
3.1 TERMINATION DATE. Except for the terms of Section 1.4,
this Agreement shall terminate and be of no further force and effect
immediately upon the earlier of: (a) consummation of the Acquisition or (b)
termination of the Reorganization Agreement in accordance with the terms
thereof.
3.2 EFFECT OF TERMINATION. Upon the termination of this
Agreement in accordance with Section 3.1 hereof, the respective obligations
of the parties hereto shall immediately become void and have no further force
or effect except that the termination of this Agreement shall not excuse or
forgive any breach hereof.
4. SPECIFIC PERFORMANCE. The parties hereto recognize and agree
that monetary damages will not compensate adequately the parties hereto for
nonperformance. Accordingly, each party agrees that such party's obligations
shall be enforceable by court order requiring specific performance.
5. MISCELLANEOUS.
5.1 EXPENSES. Each party hereto shall pay its own costs and
expenses, including, without limitation, those of its attorneys and
accountants, in connection with this Agreement and transactions covered and
contemplated hereby.
5.2 NOTICES. All notices, demands or other communications
hereunder shall be in writing and be made by (a) hand delivery; (b) overnight
mail; (c) United States mail, first class, certified or registered, postage
prepaid; or (d) facsimile transmission, and shall be deemed to have been duly
given (i) on the date of service if delivered by hand or facsimile
transmission (provided that telecopied notices are also mailed by United
States mail, first class, certified or registered, postage prepaid); (ii) on
the next day if delivered by overnight mail; or first-class, certified or
registered, postage prepaid, and properly addressed as follows:
(a) If to Company:
Pacific Community Banking Group
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: E. ▇▇▇▇ ▇▇▇▇▇▇▇, President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
3
With copies to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to a Bank Director:
to the Bank Director and address noted on page
7 hereof
With copies to:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
The persons or addresses to which mailings or deliveries shall be made may
change from time to time by notice given pursuant to the provisions of this
SECTION 5.2.
5.3 SUCCESSORS AND ASSIGNS. Subject to Section 5.4 herein,
all terms and provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective transferees,
successors and assigns; provided, however, that, except as otherwise
contemplated herein, this Agreement and all rights, privileges, duties and
obligations of the parties hereto may not be assigned or delegated by any
Bank Director without the prior written consent of Company and any purported
assignment in violation of this Section 5.3 shall be null and void.
5.4 THIRD PARTY BENEFICIARIES. Each party hereto intends
that this Agreement shall not benefit, or create any right or cause of action
in or on behalf of, any person other than the parties hereto. As used in
this Agreement, the term "party" or "parties" shall refer only to Company and
the Bank Directors or any of them.
5.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument.
4
5.6 GOVERNING LAW. This Agreement is made and entered into
in the State of California and the laws of the State of California shall
govern the validity and interpretation hereof and the performance of the
parties hereto of their respective duties and obligations hereunder except as
specifically provided in SECTION 5.9 hereof.
5.7 CAPTIONS. The captions contained in this Agreement are
for convenience of reference only and do not form a part of this Agreement.
5.8 WAIVER AND MODIFICATION. No waiver of any term,
provision or condition of this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition of this Agreement.
This Agreement may be modified or amended only by an instrument of equal
formality signed by the parties or their duly authorized agents.
5.9 ATTORNEYS' FEES. In the event a Bank Director or Company
brings an action or suit against the 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 other body having
jurisdiction, shall be entitled to have and recover of and from the losing
party, as determined by the court or other body having jurisdiction, all
reasonable costs and expenses incurred or sustained by such prevailing party
in connection with such action or suit, including, without limitation, legal
fees and court costs (whether or not taxable as such). In an action or suit
brought by a Bank Director or Company to enforce any provision hereof, or for
damages for the breach hereof, such action or suit shall be commenced and
maintained exclusively in the state court sitting in Orange County,
California.
5.10 ENTIRE AGREEMENT. The making, execution and delivery of
this Agreement by the parties hereto have not been induced by any
representation, statements, warranties or agreements other than those
expressed herein. This Agreement, in addition to the applicable provisions
of the Reorganization Agreement, embodies the entire understanding of the
parties and there are no further or other agreements or understandings,
written or oral, in effect between the parties relating to the subject matter
hereof, unless expressly referred to by reference herein.
5.11 SEVERABILITY. Whenever possible, each provision of this
Agreement and every related document shall be interpreted in such manner as
to be valid under applicable law. However, if any provision of any of the
foregoing shall be invalid or prohibited under said applicable law, it shall
be construed, interpreted and limited to effectuate its purpose to the
maximum legally permissible extent. If it cannot be so construed and
interpreted so as to be valid under such law, such provision shall be
ineffective to the extent of such invalidity or prohibition without
invalidating the remainder of such provision or the remaining provisions of
this
5
Agreement, and this Agreement shall be construed to the maximum extent
possible to carry out its terms without such invalid or unenforceable
provision or portion thereof.
5.12 SEVERAL OBLIGATIONS. All duties and obligations of each
party to this Agreement shall be several and not joint.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
Pacific Community Banking Group
By: /s/ E. ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
E. ▇▇▇▇ ▇▇▇▇▇▇▇, Chairman
6
"Bank Director"
and address
/s/ ▇▇▇▇▇▇▇ ▇. Record., Jr. /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------- ---------------------------
▇▇▇ ▇. ▇▇▇▇ ▇▇▇. ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------- ---------------------------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ E. ▇▇▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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38122 Stone Meadow Dr. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
7
Schedule 1
as of ______________, 1998
Owned Bank Common Shares
----- ------------------
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
8
Exhibit C
TBOH WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated as of , 1999, is made between PACIFIC
COMMUNITY BANKING GROUP, a California corporation (the "Company"), and each
person to whom a warrant is issued or provided herein (the "Holder").
RECITALS
A. The Company proposes to issue warrants as hereinafter described (the
"Warrants") to each Holder to purchase shares of its Common Stock, no par value
per share (the "Common Stock"), in connection with the acquisition of The Bank
of Hemet (the "Bank") by the Company in which at the Effective Time of the
Merger, the Bank would become a wholly-owned subsidiary of the Company, and all
of the issued and outstanding shares of The Bank of Hemet Stock ("Bank Stock"),
except for shares of Bank Stock held by Dissenting Shareholders, shall be
converted into and exchanged for cash and a warrant exercisable into shares of
Company Stock, under the terms and conditions contained in the First Restatement
of the Agreement and Plan of Reorganization dated January 5, 1999, as amended in
which each warrant (the "Warrant") entitling the holder thereof to purchase
shares of Common Stock of the Company (the "Warrant Shares").
B. In consideration of the foregoing and for the purpose of defining
the terms and provisions of the Warrants and the respective rights and
obligations thereunder of the Company and the Holder, the Company and the Holder
hereby agree as follows:
SECTION 1. GRANT OF WARRANT. The Company hereby grants to the Holder,
as of the date hereof, Warrants to purchase all or any part of the number of
shares of the Company's Common Stock set forth in the Warrant, subject to the
terms, conditions and adjustment provisions as provided in this Agreement.
SECTION 2. TERM OF WARRANTS; EXERCISE OF WARRANTS.
2.1 TERM OF EXERCISE OF WARRANTS. The Warrants are
exercisable for a ten-year period commencing upon the date of issuance (the
"Issuance Date"). Subject to the terms of this Agreement, each Holder shall have
the right, which may be exercised at any time until ten years from the original
date of issuance (the "Expiration Date") to purchase from the Company that
number of shares of Common Stock of the Company specified in Section 1 at the
warrant prices specified in Section 9. Upon such purchase, the shares of Common
Stock of the Company will be fully paid and nonassessable to which the Holder
may at the time be entitled to purchase upon exercise of such Warrants.
2.2 EXERCISE OF WARRANTS. A Warrant may be exercised upon
surrender to the Company at its principal office of the certificate or
certificates evidencing the Warrants to be exercised, together with the form of
election to purchase on the reverse thereof duly
1
filled in and signed, (and upon payment to the Company for the account of the
Company in accordance with the provisions of Sections 9 and 10 hereof), for the
number of shares of Common Stock in respect of which such Warrants are then
exercised. Payment of the aggregate Warrant Price shall be made by check,
Cashier's Check, money order, or any combination thereof.
Subject to Section 6 hereof, upon such surrender of
Warrants and payment of the Warrant Price as aforesaid, the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full shares of Common Stock so
purchased upon the exercise of such Warrants, together with cash, as provided in
Section 11 hereof, in respect of any fractional shares of Common Stock otherwise
issuable upon such surrender. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Common Stock as of the date of
the surrender of such Warrants and payment of the Warrant Price, as aforesaid;
provided, however, that if, at the date of surrender of such Warrants and
payment of the Warrant Price, the transfer books for the Common Stock or other
class of stock purchasable upon the exercise of such Warrants shall be closed,
the certificates for the Common Stock in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall next be
opened (whether before or after the Expiration Date) and until such date the
Company shall be under no duty to deliver any certificate for such Common Stock;
provided further, however, that the transfer books of record, unless otherwise
required by law, shall not be closed at any one time for a period longer than
twenty days. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the Holders thereof, either in full or from time
to time in part and, in the event that a certificate evidencing Warrants is
exercised in respect of less than all of the Common Stock purchasable on such
exercise at any time prior to the date of expiration of the Warrants, a new
certificate evidencing the remaining Warrant or Warrants will be issued.
SECTION 3. REGISTRATION. Transferability. Issuance and Form of Warrant.
3.1 REGISTRATION. The Warrants shall be numbered and shall
be registered in a Warrant Register as they are issued. The Company shall be
entitled to treat the Holder of any Warrant as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person, and shall not be
liable for any registration of transfer of Warrants which are registered or to
be registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration of transfer, or with such
knowledge of such facts that its participation therein amounts to bad faith.
3.2 TRANSFER. The Common Stock and the Warrants received
from the Company pursuant to the Agreement will be separately transferable from
the date of
2
issuance. The Warrants shall be transferable on the books of the Company
maintained at the principal office of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer, with signatures properly guaranteed. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited and remain with the Company. In case
of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company in its
discretion. Upon any registration of transfer, the Company shall execute and
deliver a new Warrant or Warrants to the persons entitled thereto. The Warrants
may be exchanged at the option of the Holder thereof, when surrendered at the
principal office of the Company for another Warrant or Warrants to the persons
entitled thereto. The Warrants may be exchanged at the option of the Holder
thereof, when surrendered at the principal office of the Company for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares. The Company shall not be required to effect any registration of transfer
or exchange which will result in the issuance of a Warrant Certificate for a
fraction of a Warrant. The Holder understands that the Warrants and the
securities exercisable hereunder are intended to be registered pursuant to the
Securities Act of 1933, as amended, upon issuance, and such securities are
intended to be transferable once the registration has been completed.
3.3 ISSUANCE. Warrant certificates shall be issued and
delivered by the Company as evidence of the Warrants sold by the Company as a
part of the Offering (the "Warrant Certificates"). Each Warrant Certificate
shall evidence the right, subject to the provisions of this Agreement and of the
Warrant Certificate itself, for the registered holder thereof or his assigns to
purchase the number of shares of Common Stock of the Company stated therein.
3.4 FORM OF WARRANT. The Form of Election to Purchase
shares of Common Stock shall be substantially as set forth in EXHIBIT "A"
attached hereto. The price per share of Common Stock and the number of shares of
Common Stock issuable upon the exercise of Warrants are subject to adjustment
upon the occurrence of certain events, all as hereinafter provided. The Warrants
shall be executed on behalf of the Company by its Chairman of the Board or Chief
Executive Officer or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or an Assistant Secretary. The
signature of any of such officers on the Warrants may be manual or facsimile.
Warrants bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any one of them shall
have ceased to hold such offices prior to the delivery of such Warrants or did
not hold such offices on the date of this Agreement.
3
Warrants shall be dated as of the date of signature
thereof by the Company either upon initial issuance or upon division, exchange,
substitution or transfer.
SECTION 4. SIGNATURE OF WARRANTS. The Warrants shall be signed by the
Company (or any successor to the Company) and shall not be valid for any purpose
unless so signed. Warrants may be signed, however, by the Company and may be
delivered by the Company, notwithstanding that the persons whose manual or
facsimile signatures appear thereon as proper officers of the Company shall have
ceased to be such officers at the time of such signature, issuance or delivery.
SECTION 5. EXCHANGE OF WARRANT CERTIFICATES. Each Warrant certificate
may be exchanged for another certificate or certificates entitling the Holder
thereof to purchase a like aggregate number of shares of Common Stock as the
certificate or certificates to be so exchanged. Thereupon, the Company shall
execute and deliver to the person entitled thereto a new Warrant certificate or
certificates, as the case may be, as so requested.
SECTION 6. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of shares of Common Stock
upon the exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any Warrants or certificate for shares
of Common Stock in a name other than that of the registered Holder of Warrants
in respect of which such shares of Common Stock are issued, and in such case the
Company shall not be required to issue or deliver any certificate for shares of
Common Stock or any Warrant until the person requesting the same has paid to the
Company the amount of such tax or has established to the Company's satisfaction
that such tax has been paid.
SECTION 7. MUTILATED OR MISSING WARRANTS. In case of any of the
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company may, in its discretion, execute, issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
certificate, or in lieu of and substitution for the Warrant certificate lost,
stolen or destroyed, a new Warrant certificate of like tenor and representing an
equivalent right or interest; but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Warrant and indemnity, if
requested, also satisfactory to them. An applicant for such substitute Warrant
certificate shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 8. RESERVATION OF SHARES: PURCHASE OF WARRANTS.
8.1 RESERVATION OF WARRANT SHARES. There will be reserved,
and thereafter the Company shall at all times keep reserved, out of its
authorized Common Stock, a number of shares of Common Stock sufficient to
provide for the exercise of the rights of purchase represented by the
outstanding Warrants. The Transfer Agent for the Common Stock and
4
every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any rights of purchase aforesaid will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be requisite for such purposes. The Company will keep
a copy of this Agreement on file with the Transfer Agent for the Common Stock
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Company will supply such Transfer Agent with duly executed stock
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 11 hereof. All Warrants
surrendered in the exercise of the rights thereby evidenced shall be canceled by
the Company.
8.2 PURCHASE OF WARRANTS BY THE COMPANY. The Company shall
have the right, except as limited by law, other agreement or herein, to purchase
or otherwise acquire Warrants at such times, in such manner and for such
consideration as it may deem appropriate.
8.3 CANCELLATION OF WARRANTS. In the event the Company
shall purchase or otherwise acquire Warrants, the same shall thereupon be
canceled by the Company and retired. The Company shall cancel any Warrant
surrendered for exchange, substitution, transfer or exercise in whole or in
part.
SECTION 9. WARRANT EXERCISE PRICE. The price per share at which
shares of Common Stock shall be purchasable upon exercise of Warrants (the
"Warrant Price") shall be $ per share from the date of issuance to on or
before the end of the tenth year after the date of issuance of the Warrant,
subject to the adjustment pursuant to Section 10 hereof.
SECTION 10. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The
number and kind of securities purchasable upon the exercise of each Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as hereinafter defined.
10.1 MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant price shall be
subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in
shares of Common Stock or make a distribution in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (iv) issue a reclassification of its shares
of Common Stock or capital reorganization of other securities of the Company,
the number of Warrant Shares purchasable upon exercise of each Warrant
immediately prior thereto shall be adjusted so that the Holder of each Warrant
shall be entitled to receive the kind and number of Warrant Shares or other
securities of the Company which he would have owned or have been entitled to
receive after the occurrence of any of
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the events described above, had such Warrant been exercised immediately prior to
the happening of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
(b) In case, at any time or from time to time
after issuance of the Warrant and while the Warrant remains outstanding and
has not been exercised, the Company shall issue or sell any warrants or
options, other than options granted under the Company's 1999 Stock Option
Plan, as it may be amended from time to time, or any similar plan hereafter
adopted by the Company or any of its subsidiaries, for the purchase of the
Company's Common Stock with a price per share at which shares of Common Stock
shall be purchasable upon exercise of such warrants or options that is less
than the Warrant Price in effect immediately prior to such issue or sale,
then forthwith upon such issue or sale the Warrant Price shall be immediately
reduced to such price per share. No adjustment of the Warrant Price shall be
made as a result of the Company's issuance or sale of Common Stock or other
securities of the Company, regardless of the price at which such shares or
other securities are issued, including, without limitation, the Company's
issuance or sale of stock options under the Company's 1999 Stock Option Plan,
as it may be amended from time to time, or any similar plan hereafter adopted
by the Company or any of its subsidiaries, with an exercise price less than
the Warrant Price. In addition, no adjustment of the Warrant Price shall be
made if the adjustment would otherwise be for an amount less then $.25 per
share, but any such nonadjustment shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to $.25 per
share or more. Further, no adjustment shall be made in the case of an
issuance or sale of warrants with respect to fewer than 10% of the
then-outstanding shares of the Company's Common Stock in any 24 month period.
(c) Whenever the number of Warrant Shares purchasable
upon the exercise of each Warrant is adjusted, as herein provided, the Warrant
Price payable upon exercise of each Warrant shall be adjusted by multiplying
such Warrant Price immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Warrant Shares purchasable upon the
exercise of each Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Warrant Shares so purchasable immediately
thereafter.
(d) For the purpose of this subsection 10. 1, the
term "shares of Common Stock" shall mean (i) the class of stock designated as
the Common Stock of the Company at the date of this Agreement, or (ii) any other
class of stock resulting from successive changes or reclassifications of such
shares consisting solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to paragraph (a) above, the Holders shall
become entitled to purchase any shares of the Company other than shares so
purchasable upon exercise of each Warrant and the Warrant Price of such shares
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as
6
practicable to the provisions with respect to the shares of Common Stock
contained in paragraphs (a) and (b), inclusive, above, and the provisions of
Section 5 and subsections 10.2 through 10.4, inclusive, with respect to the
shares of Common Stock shall apply on like terms to any such other shares.
10.2 NOTICE OF ADJUSTMENT. Whenever the number of shares of
Common Stock purchasable upon the exercise of each Warrant or the Warrant Price
of such shares of Common Stock is adjusted, as herein provided, the Company,
within thirty (30) days thereafter, shall cause to be mailed promptly by first
class mail, postage prepaid, to each Holder notice of such adjustment or
adjustments and the Warrant Price of such shares of Common Stock after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
A firm of independent public accountants selected by the Board of Directors of
the Company (who may be the regular accountants employed by the Company) may
make any computation required under this Section 10.2.
10.3 NO ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS. Except as
provided in subsection 10.1, no adjustment in respect of any dividends or
distributions shall be made during the term of a Warrant or upon the exercise of
a Warrant.
10.4 PRESERVATION OF PURCHASE RIGHTS UPON CONSOLIDATION,
MERGER. ETC. In case of any consolidation of the Company with, or merger of the
Company into, another corporation, or in case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute an agreement that each Holder
shall have the right thereafter upon payment of the Warrant price in effect
immediately prior to such action to purchase upon the exercise of each Warrant
the kind and amount of shares and other securities and property (including cash)
which he would have owned or have been entitled to receive after the occurrence
of such consolidation, merger, sale or conveyance had such Warrant been
exercised immediately prior to such action. The Company shall mail by first
class mail, postage prepaid, to each Holder, notice of the execution of any such
agreement. Such agreement shall provide for adjustments, which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 10. The provisions of this subsection 10.4 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
10.5 STATEMENTS ON WARRANTS. Irrespective of any adjustments
in the Warrant Price or the number or kind of shares purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
SECTION 11. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise of shares of Common Stock in
full at the same time by the
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same Holder, the number of full shares of Common Stock which shall be issuable
upon the exercise thereof shall be computed on the basis of the aggregate number
of shares of Common Stock purchasable upon exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 11, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
difference between the then current book value price per share of Common Stock
and the exercise price of the Warrant, multiplied by such fraction.
SECTION 12. NO RIGHTS AS STOCKHOLDERS: NOTICES TO HOLDERS. Nothing
contained in this Agreement or in any of the Warrants shall be construed as
conferring upon the Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as stockholders in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company. If,
however, at any time after 60 days before the Exercise Date, and prior to the
expiration of the Warrants and prior to their exercise, any of the following
events shall occur:
(a) the Company shall declare any dividend or
distribution payable in any securities upon its shares of Common Stock to the
Holders of its shares of Common Stock; or
(b) The Company shall offer to the holders of its
shares of Common Stock any additional shares of Common Stock or securities
convertible into shares of common stock or any right to subscribe thereto; or
(c) A dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger, or sale of all
or substantially all of its property, assets, and business as an entirety) shall
be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Holders as provided in Section 13 hereof, such giving of
notice to be completed at least 20 days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, or subscription rights, or
for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall specify such record
date or the date of closing the transfer books, as the case may be. Failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed dissolution, liquidation or
winding up.
SECTION 13. NOTICES. Any notice pursuant to this Agreement be any
Holder to the Company shall be in writing and shall be mailed first class,
postage prepaid, or delivered (a) to the Company, at its office at ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with copies to
▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇. Each party hereto may from time to time change the address to which
8
notices to it are to be delivered or mailed hereunder by notice in writing to
the other party. Any notice mailed pursuant to this Agreement by the Company to
the Holders shall be in writing and shall be mailed first class, postage
prepaid, or delivered to such Holders at their respective addresses on the books
of the Company.
SECTION 14. SUPPLEMENTS AND AMENDMENTS. The Company may not supplement
or amend this Agreement without the approval of any Holder, in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Holder may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants.
SECTION 15. SUCCESSORS. All covenants and provisions of this Agreement
by or for the benefit of the Company or the Holder shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 16. APPLICABLE LAW. This Agreement and Warrant issued hereunder
shall be governed by and construed in accordance with the laws of the State of
California, without giving effect to principles of conflict of laws.
SECTION 17. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company and the
Holders any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holders of the Warrants.
SECTION 18. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 19. CAPTIONS. The captions of the Sections and subsections of
this Agreement have been inserted for convenience only and shall have no
substantive effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first written.
PACIFIC COMMUNITY BANKING GROUP
By:
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E. ▇▇▇▇ ▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
By:
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Secretary
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