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AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 30th DAY OF JULY, 1997
BY AND AMONG
WESTERN BANCORP,
WESTERN BANK
AND
SANTA ▇▇▇▇▇▇ BANK
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TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I. THE MERGERS
SECTION 1.1. Structure of the Merger. . . . . . . . . . . . . . . . . . . . 3
SECTION 1.2. Effect on Outstanding Shares . . . . . . . . . . . . . . . . . 3
SECTION 1.3. Election Procedures; Allocation. . . . . . . . . . . . . . . . 5
SECTION 1.4. Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . 8
SECTION 1.5. Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II. CONDUCT PENDING THE MERGER
SECTION 2.1 Conduct of Business Prior to the
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.2 Forbearance. . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.3. Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of
the Company. . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.2. Representations and Warranties of Western. . . . . . . . . . . 32
ARTICLE IV. COVENANTS
SECTION 4.1. Acquisition Proposals. . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.2. Certain Policies of the Company. . . . . . . . . . . . . . . . 48
SECTION 4.3. Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.4. Access and Information . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.5. Certain Filings, Consents
and Arrangements . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.6. Indemnification; Directors'
and Officers' Insurance. . . . . . . . . . . . . . . . . . . . 51
SECTION 4.7. Additional Agreements. . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.8. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 4.9. Registration Statement . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.10. Shareholders' Meetings . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.11. Notification of Certain Matters. . . . . . . . . . . . . . . . 55
SECTION 4.12. No Acquisitions of Company Common Stock. . . . . . . . . . . . 55
SECTION 4.13. Securities Act . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.14. Tax-Free Reorganization Treatment. . . . . . . . . . . . . . . 56
SECTION 4.15. Shareholder Agreements . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.16. Director and Officer Resignations. . . . . . . . . . . . . . . 56
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ARTICLE V. CONDITIONS TO CONSUMMATION
SECTION 5.1. Conditions to All Parties' Obligations . . . . . . . . . . . . 56
SECTION 5.2. Conditions to the Obligations
of Western . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.3. Conditions to the Obligation of
the Company. . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE VI. TERMINATION
SECTION 6.1. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.2. Effect of Termination. . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 7.1. Effective Date and Effective Time. . . . . . . . . . . . . . . 64
ARTICLE VIII. OTHER MATTERS
SECTION 8.1. Certain Definitions; Interpretation. . . . . . . . . . . . . . 64
SECTION 8.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.3. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.5. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.6. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.7. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.9. Entire Agreement; Etc. . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.10. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 67
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INDEX OF DEFINED TERMS
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . 2, 18, 47
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
BHC Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BIF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Book Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company Disclosure Letter. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Company Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Company ERISA Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Company ERISA Affiliate Plan . . . . . . . . . . . . . . . . . . . . . . . . 22
Company Pension Employee . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Company Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Company Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Company Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Covered Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Dissenters' Rights Condition . . . . . . . . . . . . . . . . . . . . . . . . 58
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Environmental Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ERISA Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Federal Reserve Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Government Regulators. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Hazardous Substance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Maximum Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Monarch. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Monarch Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Monarch Disclosure Letter. . . . . . . . . . . . . . . . . . . . . . . . . . 31
Monarch Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Monarch ERISA Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Monarch ERISA Affiliate Plan . . . . . . . . . . . . . . . . . . . . . . . . 38
Monarch Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Monarch Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Monarch Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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Monarch Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
OREO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Regulatory Agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Securities Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Significant Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SRO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
State Regulator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
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AGREEMENT AND PLAN OF MERGER, dated as of the 30th day of July, 1997
(this "Plan"), by and among Western Bancorp, a California corporation
("Western"), Western Bank, a California banking corporation ("Western Bank"),
and Santa ▇▇▇▇▇▇ Bank, a California banking corporation (the "Company").
RECITALS:
A. WESTERN. Western is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of California, with
its principal executive offices located in Newport Beach, California. As of the
date hereof, Western has (i) 100 million authorized shares of common stock, no
par value ("Western Common Stock"), of which no more than 7,514,155 shares were
outstanding as of the date hereof (including 444,044 shares to be issued upon
the completion of the exercise of certain options and warrants), (ii) 5 million
authorized shares of preferred stock, none of which were outstanding, and (iii)
no other class of capital stock authorized. Western is a bank holding company
duly registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") under the Bank Holding Company Act of 1956, as amended
(the "BHC Act").
B. WESTERN RIGHTS, ETC. Western does not have any shares of its
capital stock reserved for issuance, any outstanding option, call or commitment
relating to shares of its capital stock or any outstanding securities,
obligations or agreements convertible into or exchangeable for, or giving any
person any right (including, without limitation, preemptive rights) to subscribe
for or acquire from it, any shares of its capital stock (collectively, "Western
Rights"), except pursuant to the options, warrants, awards and other rights
described on Annex 1 (which includes details on the terms and conditions of any
such Western Rights, including the grantee, vesting periods and exercise prices
of any options and the exercise price of any warrants).
C. WESTERN BANK. Western Bank is a banking corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California, with its principal executive offices located in Los Angeles,
California. As of the date hereof, Western owns all of the issued and
outstanding common stock, no par value, of Western Bank ("Western Bank Common
Stock"), of which there were no shares to be issued upon the completion of the
exercise of options, warrants and awards. Western Bank is a bank licensed by
the California Commissioner of Financial Institutions (the "Commissioner").
D. WESTERN BANK RIGHTS, ETC. Western Bank does not have any shares
of its capital stock reserved for issuance, any outstanding option, call or
commitment relating to shares of its capital stock or any outstanding
securities, obligations or agreements convertible into or exchangeable for, or
giving any person any right (including, without limitation, preemptive rights)
to subscribe for or acquire from it, any shares of its capital stock.
E. THE COMPANY. The Company is a banking corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California, with its principal executive offices located in Santa Monica,
California. As of the date hereof, the Company has (i) 50,000,000 authorized
shares of common stock, par value $3.00 per share ("Company Common Stock"), of
which no more than 7,077,332 shares were outstanding as of the date hereof
(including 16,224 shares to be issued upon the completion of the exercise of
certain options, warrants and awards) and (ii) no other class of capital stock
authorized. The Company is a bank licensed by the Commissioner.
F. COMPANY RIGHTS, ETC. The Company does not have any shares of its
capital stock reserved for issuance, any outstanding option, call or commitment
relating to shares of its capital stock or any outstanding securities,
obligations or agreements convertible into or exchangeable for, or giving any
person any right (including, without limitation, preemptive rights) to subscribe
for or acquire from it, any shares of its capital stock (collectively, "Company
Rights"), except pursuant to the options, warrants, awards and other rights
described on Annex 2 (which includes details on the terms and conditions of any
Company Rights, including the grantee, vesting periods and exercise prices of
any options).
G. BOARD APPROVALS. The respective Boards of Directors of Western,
Western Bank and the Company have duly
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approved this Plan and have duly authorized its execution and delivery.
H. INTENTION OF THE PARTIES. Except under the circumstances
described in Section 1.3(c)(iii) of this Plan, it is the intention of the
parties to this Plan that the Merger (as hereinafter defined) for federal income
tax purposes shall qualify as a "reorganization" within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
In consideration of their mutual promises and obligations hereunder,
the parties hereto adopt and make this Plan and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I. THE MERGERS
SECTION 1.1. STRUCTURE OF THE MERGER. On the Effective Date (as
defined in Section 7.1), the Company will merge (the "Merger", which term shall
include the merger identified in Section 1.3(c)(iii)(B) unless the context
otherwise requires) with and into Western Bank, with Western Bank being the
surviving corporation (the "Surviving Corporation"), pursuant to the provisions
of, and with the effect provided in, the California General Corporation Law
("CGCL"). At the Effective Time (as defined in Section 7.1), the articles of
incorporation and by-laws of the Surviving Corporation shall be the articles of
incorporation and by-laws of Western Bank in effect immediately prior to the
Effective Time, except that the articles of incorporation shall provide that the
name of the Surviving Corporation shall be Santa ▇▇▇▇▇▇ Bank. At the Effective
Time, the directors and officers of the Surviving Corporation shall be the
directors and officers of Western Bank except that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be
elected to the board of directors and shall be named the Chairman, President and
Chief Executive Officer of the Surviving Corporation.
SECTION 1.2. EFFECT ON OUTSTANDING SHARES.
(a) (i) By virtue of the Merger, automatically and without any action
on the part of the holder thereof, each share of Company Common Stock issued and
outstanding at the Effective Time (other than (x) shares the holder of
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which, pursuant to any applicable law providing for dissenters' or appraisal
rights, is entitled to receive payment in accordance with the provisions of any
such law, such holder to have only the rights provided in any such law (the
"Dissenters' Shares"), and (y) shares held directly or indirectly by Western,
other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted) (the aggregate number of all such shares being
hereinafter referred to as the "Outstanding Company Share Number") shall become
and be converted into the right to receive, at the election of each holder
thereof, but subject to the election and allocation procedures of this Section
1.2(a), the other provisions of this Section 1.2 and Section 1.3, either:
(A) $28 in cash without interest (the "Cash Consideration"), or
(B) 0.875 shares of Western Common Stock (the "Conversion Number") (as
it may be increased as described in this Section 1.2(a), the "Stock
Consideration");
provided that, subject to Section 1.3(c)(iv), no more than 50% of the
outstanding shares of Company Common Stock shall be converted into the
right to receive Stock Consideration (such number of shares of Company
Common Stock, the "Stock Number"), and provided further that, at any time
prior to the Company's Meeting, Western, at its sole option, may increase
the Stock Consideration, and thereafter in the event that the condition set
forth in Section 5.1(g) is not fulfilled or waived, Western, at its sole
option, may increase the Stock Consideration to the extent necessary to
permit such condition to be fulfilled.
(b) As of the Effective Time, each share of Company Common Stock held
directly or indirectly by Western, other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted, shall be canceled
and retired and cease to exist, and no exchange or payment shall be made with
respect thereto. If Western effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction, after the date hereof and before the Effective Time, the Conversion
Number shall be appropriately adjusted.
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(c) No fractional shares of Western Common Stock shall be issued
pursuant hereto. In lieu of the issuance of any fractional share of Western
Common Stock pursuant to Section 1.2(a), a cash adjustment will be paid to
holders in respect of any fractional share of Western Common Stock that would
otherwise be issuable. The amount of such cash adjustment (the "Cash In Lieu")
shall be equal to such fractional proportion of the price of a share of Western
Common Stock as of the close of business on the day immediately prior to the
Effective Time (the "Value Date").
(d) The shares of Western Bank Common Stock issued and outstanding
immediately prior to the Effective Time shall remain outstanding and unchanged
after the Merger and shall thereafter constitute all of the issued and
outstanding shares of the capital stock of the Surviving Corporation.
SECTION 1.3. ELECTION PROCEDURES; ALLOCATION.
(a) Subject to allocation and proration in accordance with the provisions of
this Section 1.3, each record holder of shares of the Company Common Stock
(other than Dissenters' Shares and shares of Company Common Stock to be
canceled in accordance with Section 1.2(b)) immediately prior to the Election
Deadline (as defined below) will be entitled to elect to receive Cash
Consideration in respect of all or some of the shares of Company Common Stock
("Cash Election Shares") formerly held by such record holder. All such
elections (each, an "Election") shall be made on a form designed for that
purpose by Western and reasonably acceptable to the Company (an "Election
Form"). Any shares of Company Common Stock (other than Dissenters' Shares and
shares of Company Common Stock to be canceled in accordance with Section
1.2(b)) with respect to which the record holder thereof shall not, as of the
Election Deadline, have properly submitted to the Exchange Agent (as defined
below) a properly completed Election Form shall be deemed to be shares with
respect to which such holder has elected to receive the Stock Consideration
("Stock Election Shares"). A record holder acting in different capacities or
acting on behalf of other persons in any way shall be entitled to submit an
Election Form for each capacity in which such record holder so acts with
respect to each person for which it so acts.
(b) Not later than the 35th calendar day prior to the anticipated
Effective Date or such other date as the
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Parties may agree in writing (the "Mailing Date"), Western shall mail an
Election Form, together with appropriate transmittal materials, to each holder
of record of Company Common Stock immediately prior to the Mailing Date. To be
effective, an Election Form must be properly completed, signed and actually
received by the Exchange Agent not later than 5:00 p.m., California time, on
the 30th calendar day after the Mailing Date (or such other time and date as
Western and the Company may mutually agree)(the "Election Deadline"), and
accompanied by the certificates formerly representing all the shares of Company
Common Stock ("Certificates") as to which the Election is being made (or an
appropriate guarantee of delivery by an eligible organization). Such bank or
trust company as Western shall elect (which may be a subsidiary of Western)
shall act as exchange agent (the "Exchange Agent"). Western shall have
reasonable discretion, which it may delegate in whole or in part to the
Exchange Agent, to determine whether Election Forms have been properly
completed, signed and timely submitted or to disregard defects in Election
Forms; such decisions of Western (or of the Exchange Agent) shall be conclusive
and binding. Neither Western nor the Exchange Agent shall be under any
obligation to notify any person of any defect in an Election Form submitted to
the Exchange Agent. The Exchange Agent and Western shall also make all
computations contemplated by this Section 1.3, and all such computations shall
be conclusive and binding on the former holders of Company Common Stock absent
manifest error. Shares of Company Common Stock covered by an Election Form
which is not effective shall be treated as Stock Election Shares. Any Election
may be revoked or changed by the person submitting such Election Form to the
Exchange Agent by written notice to the Exchange Agent only if such notice is
actually received by the Exchange Agent on or prior to the Election Deadline.
(c) Within 5 days after the Election Deadline, unless the Effective
Time has not yet occurred, in which case as soon thereafter as practicable,
Western shall cause the Exchange Agent to effect the allocation among the
holders of Company Common Stock of rights to receive Stock Consideration or Cash
Consideration in the Merger in accordance with the Election Forms as follows:
(i) If the number of Stock Election Shares (on the basis of Election
Forms received as of the Election Deadline) is less than the Stock Number,
subject to
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Section 1.3(c)(iii) below, (A) each Stock Election Share shall be deemed
to be converted into the right to receive the Stock Consideration and
(B) each Cash Election Share shall be deemed to be converted into the right
to receive the Cash Consideration.
(ii) Subject to Section 1.3(c)(iv) below, if the number of Stock
Election Shares is greater than the Stock Number, then (A) each Cash
Election Share shall be deemed to be converted into the right to receive
Cash Consideration and (B) Stock Election Shares shall be deemed converted
into Cash Election Shares, on a pro-rata basis for each record holder of
Company Common Stock with respect to those shares, if any, of such record
holder that are Stock Election Shares, so that the number of Stock Election
Shares not so converted shall equal as closely as practicable the Stock
Number; each such Stock Election Share so converted into a Cash Election
Share shall be deemed to be converted into the right to receive the Cash
Consideration and each Stock Election Share not so converted shall be
deemed to be converted into the right to receive the Stock Consideration.
(iii) Notwithstanding the foregoing, if the aggregate amount of Cash
Consideration to be paid in the Merger according to the allocation
procedures set forth above plus (i) the amount of Cash in Lieu distributed
to former holders of Company Common Stock in the Merger and (ii) amounts
paid or payable with respect to any Dissenters' Shares (the "Cash Amount")
would exceed 60% of the sum of the Cash Amount and the aggregate value of
the Stock Consideration (determined by reference to the closing price per
share of Western Common Stock, as reported on the NASDAQ National Market,
on the Value Date) to be delivered in the Merger, and Western does not
elect to increase the Stock Consideration to permit the condition set forth
in Section 5.1(g) to be fulfilled, such condition shall be waived and each
share of Company Common Stock shall be deemed to be converted into the
right to receive the Cash Consideration. In such event, (A) the covenant
in Section 4.14 shall be deemed waived by all parties hereto, (B) the
Merger shall be effected by the merger of a DE NOVO wholly-owned Subsidiary
of Western into the Company, with the Company being the Surviving
Corporation for all purposes herein, (C) the Effective
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Time shall be not later than 10 business days after the Election Deadline
and (D) the agreement of merger to be executed and filed on the Effective
Date pursuant to Section 7.1 shall reflect the foregoing. Promptly after
such merger, the Surviving Corporation shall combine with Western Bank,
under the name Santa ▇▇▇▇▇▇ Bank.
(iv) At the sole discretion of Western, the number of Stock Election
Shares may be greater than the Stock Number.
SECTION 1.4. EXCHANGE PROCEDURES. (a) As of the Effective Time,
Western shall deposit, or shall cause to be deposited, with the Exchange Agent,
for the benefit of the holders of shares of Company Common Stock, for exchange
in accordance with Section 1.3 and this Section 1.4, the Cash Consideration, the
Stock Consideration and the Cash In Lieu (such Cash Consideration, Stock
Consideration and Cash in Lieu, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the "Exchange Fund") to
be paid pursuant to Sections 1.2 and 1.3 and deposited pursuant to this Section
1.4 in exchange for outstanding shares of Company Common Stock.
(b) The letter of transmittal which accompanies the Election Form
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent) shall be in a form and contain any other provisions as
Western may reasonably determine. Upon the proper surrender of a Certificate
to the Exchange Agent, together with a properly completed and duly executed
letter of transmittal, the holder of such Certificate shall be entitled to
receive in exchange therefor the Cash Consideration, Stock Consideration and/or
Cash in Lieu as provided herein and unpaid dividends and distributions, if any,
which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions hereof, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued
on the Cash Consideration or the Cash In Lieu and unpaid dividends and
distributions, if any, payable to holders of Certificates. In the event of a
transfer of ownership of any shares of Company Common Stock not registered in
the transfer records of the Company, a certificate representing the proper
number of shares of Western Common Stock and/or a
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check for the Cash Consideration or Cash In Lieu, may be issued to the
transferee if the Certificate representing such Company Common Stock is
presented to the Exchange Agent, accompanied by documents sufficient, in the
discretion of Western, (i) to evidence and effect such transfer and (ii) to
evidence that all applicable stock transfer taxes have been paid.
(c) Whenever a dividend or other distribution is declared by Western
on Western Common Stock, the record date for which is after the Effective Time,
the declaration shall include dividends or other distributions on all shares
issuable pursuant to this Plan; PROVIDED that no dividend or other distribution
declared or made on Western Common Stock shall be paid to the holder of any
Certificate with respect to the shares of Western Common Stock represented
thereby until the holder of such Certificate shall duly surrender such
Certificate in accordance with this Section 1.4. Following such surrender of
any such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Western Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions, having a record date after the Effective Time and a payment
date prior to surrender, payable with respect to such whole shares of Western
Common Stock and not yet paid and (ii) at the appropriate payment date, the
amount of dividends or other distributions, having a record date after the
Effective Time but prior to surrender, and a payment date subsequent to
surrender payable with respect to such whole shares of Western Common Stock.
(d) From and after the Effective Time, there shall be no transfers on
the stock transfer records of the Company of any shares of Company Common Stock
that were outstanding immediately prior to the Effective Time. If Certificates
are presented to Western or the Surviving Corporation after the Effective Time,
they shall be canceled and exchanged for the Stock Consideration, Cash
Consideration and/or Cash in Lieu as provided for in this Article I.
(e) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any Western Common Stock) that remains unclaimed by the
shareholders of the Company for six months after the Effective Time shall be
repaid by the Exchange Agent to Western. Any shareholders
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of the Company who have not theretofore complied with this Section 1.3 shall
thereafter look only to Western for payment of the Cash Consideration, Stock
Consideration, Cash In Lieu and any unpaid dividends and distributions on the
Western Common Stock deliverable in respect of each share of Company Common
Stock such stockholder holds as determined pursuant to this Plan, in each case,
without any interest thereon. If outstanding certificates for shares of
Company Common Stock are not surrendered or the payment for them not claimed
prior to the date on which such payments would otherwise escheat to or become
the property of any governmental unit or agency, the unclaimed items shall, to
the extent permitted by abandoned property and any other applicable law, become
the property of Western (and to the extent not in its possession shall be paid
over to it), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, none of Western,
Western Bank, the Exchange Agent or any other person shall be liable to any
former holder of Company Common Stock for any amount delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Western,
the posting by such person of a bond in such amount as Western may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Cash Consideration, the Stock Consideration and the
Cash In Lieu deliverable (and any unpaid dividends and distributions) in respect
thereof pursuant to this Plan.
SECTION 1.5. OPTIONS. At the Effective Time, each option granted by
the Company to purchase shares of Company Common Stock, which is outstanding and
unexercised immediately prior to the Effective Time, shall be adjusted so as to
entitle the grantee thereof to receive, in lieu of the share of Company Common
Stock that would otherwise have been issuable upon the exercise thereof, an
amount in cash computed by multiplying (i) the difference between (x) the Cash
Consideration and (y) the per share exercise price applicable to such option by
(ii) the number of such shares of Company Common Stock subject to such option.
The Company
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agrees to take or cause to be taken all action necessary under its
Stock Option Plan (the "Company Stock Option Plan") to provide for such
adjustment. As soon as practicable after the Effective Time (but in any event
prior to the seventh day after the Effective Time), Western will make the
payments required to be made to grantees of options under this Section 1.5.
ARTICLE II. CONDUCT PENDING THE MERGER
SECTION 2.1 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME. Except
as expressly provided in this Plan, during the period from the date of this Plan
to the Effective Time, each of Western, Western Bank and the Company shall, and
shall cause each of its respective Subsidiaries to, (i) conduct its business in
the usual, regular and ordinary course of business consistent with past
practice, (ii) use its reasonable best efforts to maintain and preserve intact
its business organization, properties, leases, employees and advantageous
business relationships and retain the services of its officers and key
employees, (iii) take no action which would adversely affect or delay the
ability of Western, Western Bank or the Company to obtain any necessary
approvals, consents or waivers of any governmental authority required for the
transactions contemplated hereby or to perform its covenants and agreements on a
timely basis under this Plan and (iv) take no action that is reasonably likely
to have a Material Adverse Effect (as defined in Section 8.1 hereof) on either
Western, Western Bank or the Company.
SECTION 2.2 FORBEARANCE. During the period from the date of this
Plan to the Effective Time, the Company shall not, except in the ordinary course
of business consistent with past practices and in conformity with all applicable
policies and procedures and except as listed in the Company Disclosure Letter
(as defined in Section 3.1 hereof), without the prior consent of Western (it
being understood that, except as otherwise specified herein, for purposes of
this Section 2.2, a consent shall be deemed given if, within 3 business days
after a request for any such consent is made by the Company in the manner
prescribed by Section 8.8 hereof, Western does not object to the action for
which the consent is requested):
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(a) incur any indebtedness for borrowed money (other than Federal
Funds borrowings) or assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other person;
(b) except as contemplated in Schedule 2.2(b) hereto, adjust, split,
combine or reclassify any capital stock; make, declare or pay any dividend or
make any other distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any securities or
obligations convertible into or exchangeable for any shares of its capital
stock, or grant any stock appreciation rights or grant, sell or issue to any
individual, corporation or other person any right or option to acquire, or
securities evidencing a right to convert into or acquire, any shares of its
capital stock, or issue any additional shares of capital stock except pursuant
to the exercise of stock options, warrants, awards and other rights outstanding
as of the date hereof as set forth on Annex 2 and on the terms in effect on the
date hereof;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties, leases or assets to any person, or cancel, release or assign any
indebtedness of any such person, except (i) pursuant to contracts or agreements
in force as of the date of this Plan or (ii) any such action or series of
related actions which result in a pre-tax loss of not more than $250,000;
(d) make any capital expenditures in amounts not exceeding $200,000
individually or $250,000 in the aggregate;
(e) (i) increase in any manner the compensation or fringe benefits of
any of its employees or directors, or create or institute, or make any payments
pursuant to, any severance plan or package, or pay any pension or retirement
allowance not required by any existing plan or agreement to any such employees
or directors, or become a party to, amend or commit itself to or fund or
otherwise establish any trust or account related to any Employee Plan (as
defined in Section 3.1(p) hereof), with or for the benefit of any employee,
other than (A) general increases in compensation for employees,(B) bonuses which
have been accrued on the 1997 financial statements or (C) any amendment required
by applicable law (provided that any such amendment shall provide the least
increase to cost permitted under such
-12-
applicable law), or (ii) voluntarily accelerate the vesting of any stock
options or other compensation or benefit;
(f) (i) in individual amounts not to exceed $250,000 or in
securities transactions as provided in (f)(ii) below, make any investment
either by contributions to capital, property transfers, or purchases of any
property or assets of any person, PROVIDED that the Company shall not make
any acquisition of business operations without Western's prior consent, or
(ii) other than purchases of direct obligations of the United States
of America or obligations of U.S. government agencies which are entitled to
the full faith and credit of the United States of America, in any case with
a remaining maturity at the time of purchase of three years or less,
purchase or acquire securities of any type; PROVIDED, HOWEVER, that, in the
case of investment securities, the Company may purchase investment
securities in an aggregate amount in excess of $250,000 only if, within one
business day after the Company requests that Western consent to the making
of any such purchase, Western has consented to the amount of such purchase
in excess of $250,000;
(g) enter into or terminate any contract or agreement, or make any
change in any of its leases or contracts, other than with respect to those
involving aggregate payments of less than, or the provision of goods or services
with a market value of less than, $250,000;
(h) settle any claim, action or proceeding involving any liability of
the Company for money damages in excess of $250,000 or material restrictions
upon the operations of the Company;
(i) in amounts less than $250,000, waive or release any material
right or collateral or cancel or compromise any extension of credit or other
debt or claim; PROVIDED, HOWEVER, that the Company may take any such action if,
within two business days after it requests in writing (which request shall
include information and analyses sufficient for Western to assess the proposed
action) that Western consent to the taking of such action, Western has approved
such request in writing or has not responded in writing to such request;
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(j) make, renegotiate, renew, increase, extend or purchase any loan,
lease (credit equivalent), advance, credit enhancement or other extension of
credit, or make any commitment in respect of any of the foregoing, except any
loans or advances (provided that the Company shall seek authorization for any
loan or advance in excess of $3,000,000) as to which the Company has a legally
binding obligation to make such loan or advance as of the date hereof and a
description of which has been provided by the Company in writing to Western
prior to the execution of this Plan;
(k) except as contemplated by Section 4.2 hereof, change its method
of accounting as in effect at December 31, 1996, except as required by changes
in generally accepted accounting principles as concurred in by the Company's
independent auditors;
(l) subject to the provisions of Section 6.1(f), engage in any
merger, consolidation or other similar transaction with, or acquire a
significant portion of the capital stock or assets of, any other corporate or
other entity except in connection with foreclosures and collections on secured
interests;
(m) amend its articles of incorporation or its by-laws; or
(n) agree to, or make any commitment to, take any of the actions
prohibited by this Section 2.2.
SECTION 2.3. COOPERATION. (a) Each of Western, Western Bank and the
Company shall cooperate with each other in completing the transactions
contemplated hereby and shall not take, cause to be taken or agree or make any
commitment to take any action: (i) that would cause any of the representations
or warranties of it that are set forth in Article III hereof not to be true and
correct, or (ii) that is inconsistent with or prohibited by Sections 2.1 or 2.2.
(b) Without limiting the generality of the foregoing, each of Western
and the Company shall have the right to have one of its representatives present
at all loan committee meetings or meetings of similar purpose of the other party
or the other party's Subsidiaries, and each party shall give notice to the other
party of any such meeting at least one business day prior to such meeting. In
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addition, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have the right to attend all meetings of the
board of directors of Western and Western Bank, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or his
designee shall have the right to attend all meetings of the Company's board of
directors, and each party shall give notice to the other party of any such
meeting at least one business day prior to such meeting.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to Western and Western Bank that, except as to
the matters disclosed in a letter of the Company delivered to Western and
Western Bank on or prior to the date hereof, which disclosures shall be deemed
to be made with respect to any applicable representation notwithstanding the
specific section references therein (the "Company Disclosure Letter"):
(a) RECITALS TRUE. The facts set forth in the Recitals of this Plan
with respect to the Company are true and correct.
(b) CAPITAL STOCK. All outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
(subject to applicable California Law) non-assessable and are not subject to any
preemptive rights.
(c) DUE ORGANIZATION AND QUALIFICATION. The Company is duly
organized, validly existing and in good standing under the laws of State of
California, is a member of the Bank Insurance Fund ("BIF") of the Federal
Deposit Insurance Corporation (the "FDIC") and all of its deposits are subject
to assessment by the BIF.
(d) CORPORATE AUTHORITY. The Company has the corporate power and
authority, and is duly qualified in all jurisdictions (except for such
qualifications the absence of which, in the aggregate, would not have a Material
Adverse Effect on the Company) where such qualification is required, to carry on
its business as it is now being conducted and to own all its properties and
assets, and it has all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now being conducted.
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(e) SUBSIDIARIES; SIGNIFICANT INVESTMENTS. The only Subsidiary of
the Company is SMB Development Company, an inactive California corporation in
good standing. The Company does not own any equity securities, any security
convertible or exchangeable into an equity security or any rights to acquire
any equity security, except as received in satisfaction of a debt previously
contracted in good faith.
(f) SHAREHOLDER APPROVALS.
(i) Subject to the receipt of required shareholder approval of the
principal terms of this Plan, this Plan and the transactions contemplated
herein have been duly authorized by all necessary corporate action of the
Company. In addition, the Company has received the oral opinion of
▇▇▇▇▇▇▇▇▇▇ Securities to the effect that the consideration to be received
by the shareholders of the Company in the Merger is fair to such
shareholders from a financial point of view and will receive a written
opinion to that effect, true and complete copies of which will be furnished
to Western. Subject to receipt of such shareholder approval, this Plan is
a valid and binding agreement of the Company enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(ii) The affirmative vote approving the principal terms of this Plan
by a majority of the outstanding shares of Company Common Stock entitled to
vote on this Plan is the only shareholder vote required by the Company for
approval of the Plan and consummation of the Merger and the other
transactions contemplated hereby.
(g) NO VIOLATIONS. The execution, delivery and performance of
this Plan by the Company do not, and the consummation of the transactions
contemplated hereby by the Company will not, constitute (i) a breach or
violation of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license to which the Company
(or any of its properties) is subject, or enable any person to enjoin the
Merger or the other
-16-
transactions contemplated hereby, (ii) a breach or violation of, or a default
under, the articles of incorporation or by-laws or similar organizational
documents of the Company or (iii) a breach or violation of, or a default
under (or an event which with due notice or lapse of time or both would
constitute a default under), or result in the termination of, accelerate the
performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties or
assets of the Company under, any of the terms, conditions or provisions of
any note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which the Company is a party, or to which its
properties or assets may be bound or affected; PROVIDED, HOWEVER, that this
clause (iii) shall not apply to any breach, violation or default of any such
agreement, instrument or obligation which involves payments to or by the
Company of an amount not exceeding $250,000 per year; and the consummation of
the transactions contemplated hereby will not require any approval, consent
or waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any
other party to any such agreement, indenture or instrument, other than (i)
the required approvals, consents and waivers of governmental authorities
referred to in Section 5.1(b) hereof, (ii) any such approval, consent or
waiver that already has been obtained, (iii) the FDIC, (iv) the Commissioner
and (v) any other approvals, consents or waivers the absence of which,
individually or in the aggregate, would not result in a Material Adverse
Effect on the Company or enable any person to enjoin the Merger.
(h) COMPANY REPORTS.
(i) As of their respective dates, neither the Company's Annual Report
on Form F-2 for the fiscal year ended December 31, 1996, nor any other
document filed by the Company subsequent to December 31, 1996 under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Securities Exchange Act"), each in the form (including
exhibits) filed with the FDIC (collectively, the "Company Reports"),
contained or will contain any untrue statement of a Material fact or
omitted or will omit to state a Material fact required to be stated therein
or necessary to make the statements made therein, in light of the
circumstances under which they were made, not
-17-
misleading. Each of the consolidated balance sheets contained or
incorporated by reference in the Company Reports (including in each case
any related notes and schedules) fairly presented in all Material
respects the financial position of the entity or entities to which it
relates as of its date and each of the consolidated statements of
income, consolidated statements of shareholders' equity and consolidated
statement of cash flows contained or incorporated by reference in the
Company Reports (including in each case any related notes and schedules)
fairly presented in all Material respects the results of operations,
shareholders' equity and cash flows, as the case may be, of the entity
or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal
year-end audit adjustments that are not Material in amount or effect),
in each case in accordance with GAAP during the periods involved, except
as may be noted therein.
(ii) The Company has timely filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, if any, that they were required to file since December 31, 1996
with (i) the Securities and Exchange Commission (the "SEC"), (ii) the FDIC,
(iii) the BIF, (iv) any state banking commission or other regulatory
authority (each, a "State Regulator") (such entities collectively, the
"Regulatory Agencies"), (v) the American Stock Exchange and (vi) any other
self-regulatory organization (an "SRO"), and all other Material reports and
statements required to be filed by them since December 31, 1996, including,
without limitation, any report or statement required to be filed pursuant
to the laws, rules or regulations of the United States, the FDIC, the BIF,
any State Regulator or any SRO, and have paid all fees and assessments due
and payable in connection therewith.
(i) ABSENCE OF UNDISCLOSED LIABILITIES AND CERTAIN CHANGES OR
EVENTS. Except as disclosed in the Company Reports, since December 31, 1996,
the Company has not incurred any Material liability, except in the ordinary
course of its business consistent with past practice. Since December 31,
1996, there has not been any change in the business, assets, financial
condition, properties, results of operations or prospects (other than changes
affecting
-18-
Southern California community banks in general) of the Company which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Material Adverse Effect on the Company (other than changes in (i) banking
laws or regulations, or interpretations thereof, that affect the banking
industry generally, (ii) the general level of interest rates or (iii) GAAP).
(j) GUARANTEES; SURETYSHIPS; CONTINGENT LIABILITIES. The Company
Disclosure Letter lists and briefly describes all guarantees, matters of
suretyship and similar contingent liabilities, other than loan commitments
and letters of credit issued in the ordinary course of business, of the
Company.
(k) TAXES. All federal, state, local and foreign tax returns
(including information returns) required to be filed by or on behalf of the
Company have been timely filed or requests for extensions have been timely
filed and any such extension shall have been granted and not have expired,
and all such filed returns are complete and accurate in all Material
respects. All taxes shown on such returns have been paid in full and
adequate provision has been made for any taxes for which returns have not yet
been filed (in accordance with GAAP) on the Company's balance sheets set
forth in the Company Reports. There is no pending audit examination,
assessment or proposed assessment of a deficiency, or refund litigation with
respect to any taxes of the Company. All taxes, interest, additions, and
penalties due with respect to completed and settled examinations or concluded
litigation relating to it have been paid in full or adequate provision has
been made for any such taxes (in accordance with generally accepted
accounting principles) on the Company's balance sheet as set forth in the
Company Reports. The Company has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any tax due that is
currently in effect.
No liens or other security interests have been imposed on any
assets of the Company in connection with any failure (or alleged failure) to
pay any tax. The Company has timely withheld, and paid over to the relevant
governmental authority or other appropriate payee, all taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other person.
The
-19-
Company is not a party to any tax allocation or sharing agreement, is not and
has not been a member of an affiliated group filing consolidated or combined
tax returns and otherwise has no liability for the taxes of any person (other
than the Company). For purposes of this paragraph (k), "taxes" includes all
federal, state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, license, excise, franchise,
employment, withholding or similar taxes imposed on the income, properties or
operations of the Company, together with any interest additions or penalties
with respect thereto and any interest in respect of such additions or
penalties.
(l) ABSENCE OF CLAIMS. As of the date hereof, there is no pending
litigation, controversy, claim, action or proceeding against the Company
before any court or governmental agency, and, to the best of the Company's
knowledge after reasonable inquiry, no such litigation, proceeding,
controversy, claim or action has been threatened or is contemplated. As of
the Effective Time and except as disclosed in the Company Disclosure Letter,
there is no pending litigation, controversy, claim, action or proceeding
against the Company before any court or governmental agency, which is
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company or to hinder or delay consummation of the
transactions contemplated hereby and, to the best of the Company's knowledge
after reasonable inquiry, no such litigation, proceeding, controversy, claim
or action has been threatened or is contemplated.
(m) ABSENCE OF REGULATORY ACTIONS. The Company is not a party to
any cease and desist order, written agreement or memorandum of understanding
with, nor a party to any commitment letter or similar undertaking to, nor is
the Company subject to any order or directive by, or a recipient of any
extraordinary supervisory letter from, nor has the Company adopted any board
resolutions at the request of, federal or state governmental authorities
charged with the supervision or regulation of depository institutions or
depositary institution holding companies or engaged in the insurance of bank
and/or savings and loan deposits ("Government Regulators") nor has it been
the recipient of any advice from any Government Regulator that such
Government Regulator is contemplating issuing or requesting (or is
considering the appropriateness of issuing or
-20-
requesting) any such order, directive, written agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
(n) AGREEMENTS.
(i) Except for this Plan (and agreements entered into in connection
with the transactions contemplated hereby or those agreements copies of
which have been previously furnished to Western) and arrangements made in
the ordinary course of business, the Company is not bound by any material
contract (as defined in Item 601(b)(10) of Regulation S-K) to be performed
after the date hereof that has not been filed with or incorporated by
reference in the Company Reports. Except as disclosed in the Company
Reports filed prior to the date of this Plan, the Company is not a party to
any oral or written (A) consulting agreement (other than data processing,
software programming and licensing contracts entered into in the ordinary
course of business) not terminable on 30 days' or less notice involving the
payment of more than $200,000 per annum, in the case of any such agreement
with an individual, or $250,000 per annum, in the case of any other such
agreement, (B) agreement with any executive officer or other key employee
of the Company the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company of the nature contemplated by this Plan and which provides for the
payment of in excess of $250,000, (C) agreement with respect to any
executive officer of the Company providing any term of employment or
compensation guarantee extending for a period longer than six months and
for the payment of in excess of $250,000 per annum, (D) agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Plan or the
value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Plan or (E) agreement
containing covenants that limit the ability of the Company to compete in
any line of business or with any person, or that involve any restriction on
the
-21-
geographic area in which, or method by which, the Company (including any
successor thereof) may carry on its business (other than as may be
required by law or any regulatory agency).
(ii) The Company is not in default under or in violation of any
provision of any note, bond, indenture, mortgage, deed of trust, loan
agreement or other agreement to which it is a party or by which it is bound
or to which any of its respective properties or assets is subject.
(o) LABOR MATTERS. The Company is not a party to, nor is it bound
by, any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor is the Company the
subject of any proceeding asserting that it has committed an unfair labor
practice or seeking to compel it to bargain with any labor organization as to
wages and conditions of employment, nor is there any strike, other labor dispute
or organizational effort involving the Company pending or threatened.
(p) EMPLOYEE BENEFIT PLANS. The Company Disclosure Letter contains a
complete list of all pension, retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing, deferred
compensation, consulting, bonus, group insurance, severance and other benefit
plans, contracts, agreements, policies and arrangements, including, but not
limited to, "employee benefit plans", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and all trust
agreements related thereto in respect to any present or former directors,
officers, or other employees of the Company (hereinafter referred to
collectively as the "Company Employee Plans"). (i) All of the Company Employee
Plans comply in all material respects with all applicable requirements of ERISA,
the Code and other applicable laws; the Company has not engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Company Employee Plan which could subject the Company to a
material tax or penalty under Section 4975 of the Code or Section 502(i) of
ERISA; and all contributions required to be made under the terms of any Company
Employee Plan have been timely made or have been reflected on the Company's
balance sheet; (ii) no liability to the Pension Benefit Guaranty Corporation
(the "PBGC") has
-22-
been or is expected by the Company to be incurred with respect to any Company
Employee Plan which is subject to Title IV of ERISA (a "Company Pension
Plan"), or with respect to any "single-employer plan" (as defined in Section
4001(a)(15) of ERISA) currently or formerly maintained by the Company or any
entity (a "Company ERISA Affiliate") which is considered one employer with
the Company under Section 4001 of ERISA or Section 414 of the Code (a
"Company ERISA Affiliate Plan"); and no proceedings have been instituted to
terminate any Company Pension Plan or Company ERISA Affiliate Plan and no
condition exists that presents a material risk of the institution of such
proceedings; (iii) no Company Pension Plan or Company ERISA Affiliate Plan
had an "accumulated funding deficiency" (as defined in Section 302 of ERISA
(whether or not waived)) as of the last day of the end of the most recent
plan year ending prior to the date hereof; the fair market value of the
assets of each Company Pension Plan and Company ERISA Affiliate Plan exceeds
the present value of the "benefit liabilities" (as defined in Section
4001(a)(16) of ERISA) under such Company Pension Plan or Company ERISA
Affiliate Plan as of the end of the most recent plan year with respect to the
respective Company Pension Plan or Company ERISA Affiliate Plan ending prior
to the date hereof, calculated on the basis of the actuarial assumptions used
in the most recent actuarial valuation for such Company Pension Plan or
Company ERISA Affiliate Plan prior to the date hereof, and there has been no
material change in the financial condition of any such Company Pension Plan
or Company ERISA Affiliate Plan since the last day of the most recent plan
year; and no notice of a "reportable event" (as defined in Section 4043 of
ERISA) for which the 30-day reporting requirement has not been waived has
been required to be filed for any Company Pension Plan or Company ERISA
Affiliate Plan within the 12-month period ending on the date hereof; (iv) the
Company has not provided and is not required to provide, security to any
Company Pension Plan or to any Company ERISA Affiliate Plan pursuant to
Section 401(a)(29) of the Code; (v) neither the Company nor any Company ERISA
Affiliate has contributed to any "multiemployer plan", as defined in Section
3(37) of ERISA, on or after September 26, 1980; (vi) each Company Employee
Plan which is an "employee pension benefit plan" (as defined in Section 3(2)
of ERISA) has received a favorable determination letter from the Internal
Revenue Service deeming such plan to be qualified (a "Qualified Plan"), under
Section 401(a) of the Code, or has requested such a determination letter
within the applicable remedial
-23-
amendment period under Section 401(b) of the Code; and the Company is not
aware of any circumstances likely to result in revocation of any such
favorable determination letter; (vii) each Qualified Plan which is an
"employee stock ownership plan" (as defined in Section 4975(e)(7) of the
Code) has satisfied all of the applicable requirements of Sections 409 and
4975(e)(7) of the Code and the regulations thereunder; all Company Employee
Plans covering foreign participants comply in all material respects with
applicable local law, and there are no material unfunded liabilities with
respect to any Company Employee Plan which covers foreign employees; (viii)
there is no pending or, to the Company's knowledge, threatened litigation,
administrative action or proceeding relating to any Company Employee Plan
other than claims for benefits for which the plan administrative procedures
have not been exhausted and "qualified domestic relations orders" as defined
in Section 414(p) of the Code; (ix) there has been no announcement or
commitment by the Company to create an additional Company Employee Plan, or
to amend a Company Employee Plan except for amendments required by applicable
law which do not increase the cost of such Company Employee Plan; and the
Company does not have any obligations for retiree health and life benefits
under any Company Employee Plan except as set forth in the Company Disclosure
Letter; (x) with respect to the Company, except as specifically identified in
the Company Disclosure Letter, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not result
in any payment or series of payments by the Company to any person which is an
"excess parachute payment" (as defined in Section 280G of the Code) under any
Company Employee Plan, increase or secure (by way of a trust or other
vehicle) any benefits payable under any Company Employee Plan, or accelerate
the time of payment or vesting of any such benefit, and (xi) with respect to
each Company Employee Plan, the Company has supplied to Western a true and
correct copy, if applicable, of (A) the two most recent annual reports on the
applicable form of the Form 5500 series filed with the Internal Revenue
Service (the "IRS"), (B) such Company Employee Plan, including amendments
thereto, (C) each trust agreement and insurance contract relating to such
Company Employee Plan, including amendments thereto, (D) the most recent
summary plan description for such Company Employee Plan, including amendments
thereto, if the Company Employee Plan is subject to Title I of ERISA, (E) the
most recent actuarial report or valuation if such Company Employee Plan is a
Company Pension Plan, (F) the
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most recent determination letter issued by the IRS if such Company Employee
Plan is a Qualified Plan and (G) the most recent financial statements and
auditor's report.
(q) REAL PROPERTY. (i) The Company Disclosure Letter contains a
complete and correct list of (A) all real property or premises owned on the
date hereof, in whole or in part by the Company and all indebtedness
secured by any encumbrance thereon, and (B) all real property or premises
leased in whole or in part by the Company and together with a list of all
applicable leases and the name of the lessor. None of such premises or
properties have been condemned or otherwise taken by any public authority
and no condemnation or taking is threatened or contemplated and none
thereof is subject to any claim, contract or law which might affect its use
or value for the purposes now made of it. None of the premises or
properties of the Company is subject to any current or potential interests
of third parties or other restrictions or limitations that would impair or
be inconsistent in any material respect with the current use of such
property by the Company.
(ii) Each of the leases referred to in the Company Disclosure Letter
is valid and existing and in full force and effect, and no party thereto is
in default and no notice of a claim of default by any party has been
delivered to the Company or is now pending, and there does not exist any
event that with notice or the passing of time, or both, would constitute a
default or excuse performance by any party thereto, provided that with
respect to matters relating to any party other than the Company the
foregoing representation is based on the knowledge of the Company.
(r) TITLE. The Company has good title to its properties and assets
(other than (i) property as to which it is lessee and (ii) real estate owned as
a result of foreclosure, transfer in lieu of foreclosure or other transfer in
satisfaction of a debtor's obligation previously contracted) except (1)
statutory liens not yet delinquent which are being contested in good faith by
appropriate proceedings, and liens for taxes not yet due, (2) pledges of assets
in the ordinary course of business to secure public deposits, (3) for those
assets and properties disposed of for fair value in the ordinary course of
business since the date of the Company's Annual Report on Form F-2 for the year
-25-
ended December 31, 1996 and (4) defects and irregularities of title and
encumbrances that do not materially impair the use thereof for the purposes
for which they are held.
(s) KNOWLEDGE AS TO CONDITIONS. As of the date hereof, the Company
knows of no reason why the approvals, consents and waivers of governmental
authorities referred to in Section 5.1(b) should not be obtained without the
imposition of any condition of the type referred to in the provisos thereto.
(t) COMPLIANCE WITH LAWS. Since December 31, 1994, the Company has
complied in all Material respects with all applicable laws except for any
noncompliance with any such laws which, individually or in the aggregate, would
not have a Material Adverse Effect on the Company or enable any Person to enjoin
the Merger. Except such as would not have a Material Adverse Effect on the
Company, the Company has all permits, licenses, certificates of authority,
orders and approvals of, and has made all filings, applications and
registrations with, federal, state, local and foreign governmental or regulatory
bodies that are required in order to permit it to carry on its business as it is
presently conducted. All such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the knowledge of the
Company, no suspension or cancellation of any of them is threatened.
(u) FEES. Other than in respect of financial advisory services
performed for the Company by ▇▇▇▇▇▇▇▇▇▇ Securities and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, in
amounts and pursuant to an agreement previously disclosed to Western, none of
the Company or any of its officers, directors, employees or agents, has employed
any broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions, or finder's fees, and no broker or finder has acted
directly or indirectly for the Company, in connection with the Plan or the
transactions contemplated hereby.
(v) ENVIRONMENTAL MATTERS. (i) the Company has complied in all
material respects at all times with all applicable Environmental Laws; (ii) none
of the properties (including buildings or any other structures) currently owned
or operated by the Company ("Company Properties") have been contaminated with,
or have had any release of, any Hazardous Substance (as defined below); (iii) to
the Company's knowledge, none of the properties formerly owned
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or operated by the Company have been contaminated with Hazardous Substances
during such period of ownership or operation; (iv) to the Company's
knowledge, the Company is not subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) the
Company has not received any notice, demand letter, claim or request for
information alleging that the Company may be in violation of or subject to
liability under any Environmental Law (as defined below); (vi) the Company is
not subject to any orders, decrees, injunctions or other agreements with any
governmental authority or any third party relating to Hazardous Substances or
any Environmental Law; (vii) there are no circumstances or conditions
involving the Company that could reasonably be expected to result in any
claims, liability, investigations, suits or costs or result in restrictions
on the ownership, use, or transfer of any Company Property pursuant to any
Environmental Law; (viii) none of the Company Properties contain any
underground storage tanks, asbestos-containing material, lead products, or
polychlorinated biphenyls; (ix) to the knowledge of the Company none of the
Company Properties have ever been operated in the past as a gas station,
automotive repair or supply business, metalworking operation, industrial
facility or as a drycleaner; (x) the Company has not engaged in any activity
involving the generation, use, handling or disposal of any Hazardous
Substances other than ordinary and routine office operations and maintenance;
(xi) the Company has not participated in the management of any borrower or
other third party, including entities in which it may hold a security,
fiduciary or other interest, that, to the Company's knowledge, engages in
activities involving Hazardous Substances to an extent that it could be
deemed an "owner" or "operator" of such entity under any Environmental Law;
and (xii) to the Company's knowledge, the Company has delivered to Western
copies of all environmental reports, studies, sampling data, permits,
government filings and other environmental information in its possession
relating to the Company or any of its current or former properties or
operations.
As used herein, the term "ENVIRONMENTAL LAW" means any federal, state
or local law, regulation, order, decree, permit, authorization, opinion, common
law or agency requirement relating to: (A) the protection or restoration of the
environment, health, safety, or natural resources, (B) the handling, use,
presence, disposal, release or
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threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
As used herein, the term "HAZARDOUS SUBSTANCE" means any substance in
any concentration that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is or may be
the subject of regulatory action by any government authority pursuant to any
Environmental Law.
(w) ALLOWANCE. The allowance for possible loan and lease losses
shown on the Company's unaudited balance sheet as of June 30, 1997 was, and the
allowance for possible loan losses shown on the balance sheets in Company
Reports for periods ending after the date of this Plan will be, adequate, as of
the date thereof, under generally accepted accounting principles applicable to
banks. The Company has disclosed to Western in writing prior to the date hereof
the amounts of all loans, leases, advances, credit enhancements, other
extensions of credit, commitments and interest-bearing assets of the Company
that as of June 30, 1997 have been classified as "Other Assets Specially
Mentioned," "Substandard," "Doubtful," "Loss," "Classified," "Criticized,"
"Credit Risk Assets" or words of similar import. The Other Real Estate Owned
("OREO") included in any non-performing assets of the Company is carried net of
reserves at the lower of cost or market value, less applicable selling costs,
based on independent appraisals consistent with applicable regulatory
requirements.
(x) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in
the Company's Quarterly Report on Form F-4 for the quarter ended June 30, 1997
or the Company's Annual Report on Form F-2 for the year ended December 31, 1996,
no officer or director of the Company, or any "associate" (as such term is
defined in Rule 12b-2 under the Securities Exchange Act) of any such officer or
director, has any Material interest in any Material contract or property (real
or personal), tangible or intangible, used in or pertaining to the business of
the Company.
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(y) INSURANCE. The Company is currently insured, and since
December 31, 1994, has been insured, for reasonable amounts with financially
sound and reputable insurance companies, against such risks as companies engaged
in a similar business would, in accordance with good business practice,
customarily be insured. All of the insurance policies and bonds maintained by
the Company are in full force and effect, the Company is not in default
thereunder and all Material claims thereunder have been filed in due and timely
fashion. Since December 31, 1994, no claim by the Company on or in respect of
an insurance policy or bond has been declined or refused by the relevant insurer
or insurers. In the best judgment of the Company's management, such insurance
coverage is adequate and will be available in the future under terms and
conditions substantially similar to those in effect on the date hereof. Between
the date hereof and the Effective Time, the Company will maintain the levels of
insurance coverage in effect on the date hereof and will submit all potential
claims existing prior to the Effective Time to its insurance carrier on or
before the Effective Time. The Company Disclosure Letter lists all insurance
policies maintained by or for the benefit of the Company or its directors,
officers, employees or agents, specifying the (i) type of policy, (ii) policy
limits and (iii) self insurance amounts.
(z) INVESTMENT SECURITIES. Except for pledges to secure public and
trust deposits and reverse repurchase agreements entered into in arm's-length
transactions pursuant to normal commercial terms and conditions and other
pledges required by law, none of the investments reflected in the consolidated
balance sheet of the Company included in the Company's Report on Form F-4 for
the quarter ended June 30, 1997, and none of the Material investments made by it
since December 31, 1996, is subject to any restriction (contractual, statutory
or otherwise) that would materially impair the ability of the entity holding
such investment freely to dispose of such investment at any time.
(aa) DERIVATIVES. The Company is not currently a party to any
interest rate swap, cap, floor, option agreement, other interest rate risk
management arrangement or agreement or derivative-type security or derivative
arrangement or agreement.
(bb) REGISTRATION OBLIGATIONS. The Company is not under any
obligation, contingent or otherwise, to register
-29-
any of its securities under the Securities Act of 1933, as amended (the
"Securities Act").
(cc) BOOKS AND RECORDS. The books and records of the Company have
been, and are being, maintained in accordance with applicable legal and
accounting requirements and reflect in all Material respects the substance of
events and transactions that should be included therein.
(dd) CORPORATE DOCUMENTS. The Company has delivered to Western true
and complete copies of its amended articles of incorporation and amended by-
laws.
(ee) COMPANY ACTION. The Board of Directors of the Company has
adopted resolutions recommending that the principal terms of this Plan be
approved by the shareholders of the Company and directing that this Plan be
submitted for consideration by the Company's shareholders at the Company's
Meeting (as defined below).
(ff) INDEMNIFICATION. The Company is not a party to any
indemnification agreement with any of its present or future directors, officers,
employees, individual agents or other individuals who serve or served in any
other capacity with any other enterprise at the request of the Company (a
"Covered Person"), and to the knowledge of the Company, there are no claims for
which any Covered Person would be entitled to indemnification under Section 4.6
hereof if such provisions were deemed to be in effect.
(gg) LOANS. Each loan reflected as an asset on the Company's
consolidated balance sheet as of June 30, 1997 and each balance sheet date
subsequent thereto (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) is the
legal, valid and binding obligation of the obligor named therein, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles, and (iii) to the knowledge
of the Company, will not be subject to any defenses which may be asserted
against the Company. All loans and extensions of credit that have been made by
the Company and that are subject to Sections 22(h), 23A and 23B of the Federal
Reserve Act comply therewith.
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(hh) FAIR LENDING; COMMUNITY REINVESTMENT ACT. As of the date
hereof, with the exception of routine investigation of consumer complaints,
the Company has not been advised that it is or may be in violation of the
Equal Credit Opportunity Act or the Fair Housing Act or any similar federal
or state statute. The Company received a CRA rating of "satisfactory" in its
most recent CRA examination.
(ii) TRUST BUSINESS. Except as set forth in the Company Disclosure
Letter or such violations which individually or in the aggregate would not give
rise to a Material Adverse Effect, to the knowledge of the Company (i) each of
the relationships between the Company and another Person which constitute part
of the business conducted by the Trust Department of the Company (whether the
Company acts or has acted as trustee, agent, fiscal agent, escrow agent,
custodian or in another similar capacity) (the "Trust Relationships") is
governed by a written agreement, contract, indenture, instrument of trust or
other similar document (the "Trust Instruments") and all of the Trust
Instruments that are presently in effect are in the possession of the Company
and have been made, or are, available to Western and no Trust Instrument has
been amended except by an instrument in writing; (ii) each Trust Relationship
has been conducted, operated and managed by the Company in accordance with the
terms of the governing Trust Instrument and applicable law.
(jj) NO OMISSION OF MATERIAL FACT. No representation or warranty by
the Company in this Plan, including the Annexes hereto, the disclosure letters
and schedules to be delivered herewith or the Proxy Statement filed in
connection with the Meeting, contains any untrue statement of Material fact, or
omits to state a Material fact necessary to make the statements or facts
contained herein or therein not misleading. None of the information regarding
the Company or the transactions contemplated hereby supplied or to be supplied
by the Company for inclusion in any documents or filings to be filed with any
regulatory authority in connection with the transactions contemplated hereby
will contain any untrue statement of Material fact, or omit to state a Material
fact necessary to make the statements or facts contained therein not misleading.
-31-
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF WESTERN. Western
represents and warrants to the Company that, except as to the matters disclosed
in a letter of Western delivered to the Company on or prior to the date hereof,
which disclosures shall be deemed to be made with respect to any applicable
representation notwithstanding the specific section references therein (the
"Western Disclosure Letter"):
(a) RECITALS TRUE. The facts set forth in the Recitals of this Plan
with respect to Western and Western Bank are true and correct.
(b) CAPITAL STOCK. All outstanding shares of capital stock of
Western and its Significant Subsidiaries (as defined in Rule 1-02 of
Regulation S-X) have been duly authorized and validly issued, are fully paid and
(subject to 12 U.S.C. Section 55 in the case of a national bank Subsidiary and
any similar state statute in the case of a Subsidiary that is a state-chartered
bank) non-assessable and are not subject to any preemptive rights.
(c) OMITTED.
(d) CORPORATE AUTHORITY. Each of Western and its Significant
Subsidiaries has the corporate power and authority, and is duly qualified in all
jurisdictions (except for such qualifications the absence of which, in the
aggregate, would not have a Material Adverse Effect on Western) where such
qualification is required, to carry on its business as it is now being conducted
and to own all its properties and assets, and it has all federal, state, local
and foreign governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now being conducted.
(e) SHAREHOLDER APPROVALS.
(i) Subject to the receipt of required shareholder approval of the
principal terms of this Plan, this Plan and the transactions contemplated
herein have been duly authorized by all necessary corporate action of
Western and Western Bank. Subject to receipt of such shareholder approval,
this Plan is and will be a valid and binding agreement of Western and
Western Bank enforceable against each of them in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent
-32-
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(ii) The affirmative vote approving the principal terms of this Plan
by a majority of the outstanding shares of Western Common Stock entitled to
vote on this Plan and the affirmative vote approving the principal terms of
this Plan by a majority of the outstanding shares of Western Bank Common
Stock entitled to vote on this plan are the only shareholder votes required
by Western and Western Bank for approval of this Plan and consummation of
the Merger and the other transactions contemplated hereby.
(f) NO VIOLATIONS. The execution, delivery and performance of
this Plan by Western and Western Bank do not, and the consummation of the
transactions contemplated hereby by Western and Western Bank will not,
constitute (i) a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license to
which Western or any of its Subsidiaries (or any of their respective
properties) is subject, which breach, violation or default would have a
Material Adverse Effect on Western or Western Bank, or enable any person to
enjoin the Merger or the other transactions contemplated hereby, (ii) a
breach or violation of, or a default under, the articles of incorporation or
by-laws or similar organizational documents of Western or any of its
Subsidiaries or (iii) a breach or violation of, or a default under (or an
event which with due notice or lapse of time or both would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security
interest, charge or other encumbrance upon any of the properties or assets of
Western or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, indenture, deed of trust, loan agreement or
other agreement, instrument or obligation to which Western or any of its
Subsidiaries is a party, or to which any of their respective properties or
assets may be bound or affected, PROVIDED, HOWEVER, that this clause (iii)
shall not apply to any breach, violation or default of any such agreement,
instrument or obligation which involves payments to or by Western or any of
its Subsidiaries of any amount not exceeding $250,000 per year; and the
consummation of the transactions contemplated hereby will not require any
-33-
approval, consent or waiver under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or the approval, consent or
waiver of any other party to any such agreement, indenture or instrument,
other than (i) the required approvals, consents and waivers of governmental
authorities referred to in Section 5.1(b) hereof, (ii) any such approval,
consent or waiver that already has been obtained, (iii) the FDIC, (iv) the
Commissioner and (v) any other approvals, consents or waivers the absence of
which, individually or in the aggregate, would not result in a Material
Adverse Effect on Western or enable any person to enjoin the Merger.
(g) WESTERN REPORTS.
(i) As of their respective dates, neither Western's Annual Report on
Form 10-KSB/A for the fiscal year ended December 31, 1996, nor any other
document filed by Western subsequent to December 31, 1996 under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act, each in
the form (including exhibits) filed with the SEC (collectively, the
"Western Reports"), contained or will contain any untrue statement of a
Material fact or omitted or will omit to state a Material fact required to
be stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
Each of the consolidated balance sheets or statements of condition
contained or incorporated by reference in Western Reports (including in
each case any related notes and schedules) fairly presented in all Material
respects the financial position of the entity or entities to which it
relates as of its date and each of the consolidated statements of income,
consolidated statements of changes in shareholders' equity and consolidated
statements of cash flows contained or incorporated by reference in Western
Reports (including in each case any related notes and schedules) fairly
presented in all Material respects the results of operations, shareholders'
equity and cash flows, as the case may be, of the entity or entities to
which it relates for the periods set forth therein (subject, in the case of
unaudited interim statements, to normal year-end audit adjustments that are
not Material in amount or effect), in each case in accordance with GAAP
during the periods involved, except as may be noted therein.
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(ii) Western and each of its Subsidiaries have each timely filed all
reports, registrations and statements, together with any amendments
required to be made with respect thereto, if any, that they were required
to file since December 31, 1996 with the Regulatory Agencies, the National
Association of Securities Dealers, Inc. and any other SRO, and all other
Material reports and statements required to be filed by them since
December 31, 1996, including, without limitation, any report or statement
required to be filed pursuant to the laws, rules or regulations of the
United States, the Federal Reserve Board, the FDIC, the BIF, the OCC, any
State Regulator or any SRO, and have paid all fees and assessments due and
payable in connection therewith.
(h) ABSENCE OF CERTAIN UNDISCLOSED LIABILITIES AND CERTAIN CHANGES
OR EVENTS. Except as disclosed in the Western Reports, since December 31,
1996, neither Western nor any of its Significant Subsidiaries has incurred
any Material liability, except in the ordinary course of its business
consistent with past practice. Since June 30, 1997, there has not been any
change in the business, assets, financial condition, properties, results of
operations or prospects (other than changes affecting Southern California
community banks in general) of Western or any of its Significant Subsidiaries
which, individually or in the aggregate, has had, or is reasonably likely to
have, a Material Adverse Effect on Western (other than changes in (i) banking
laws or regulations, or interpretations thereof, that affect the banking
industry generally, (ii) the general level of interest rates or (iii) GAAP).
(i) GUARANTEES; SURETYSHIPS; CONTINGENT LIABILITIES. The Western
Disclosure Letter lists and briefly describes all guarantees, matters of
suretyship and similar contingent liabilities, other than loan commitments
and letters of credit issued in the ordinary course of business, of Western
and its Subsidiaries.
(j) TAXES. All federal, state, local, and foreign tax returns
(including information returns) required to be filed by or on behalf of
Western or any of its Subsidiaries have been timely filed or requests for
extensions have been timely filed and any such extension shall have been
granted and not have expired, and all such filed returns are complete and
accurate in all Material
-35-
respects. All taxes shown on such returns have been paid in full and
adequate provision has been made for any taxes for which returns have not yet
been filed (in accordance with GAAP) on Western's balance sheets set forth in
Western Reports. There is no pending audit examination, assessment or
proposed assessment of a deficiency, or refund litigation with respect to any
taxes of Western or any of its Subsidiaries. All taxes, interest, additions,
and penalties due with respect to completed and settled examinations or
concluded litigation relating to it have been paid in full or adequate
provision has been made for any such taxes (in accordance with generally
accepted accounting principles) on Western's balance sheet as set forth in
the Western Reports. Neither Western nor any of its Subsidiaries has executed
an extension or waiver of any statute of limitations on the assessment or
collection of any tax due that is currently in effect.
No liens or other security interests have been imposed on any
assets of Western or any of its Subsidiaries in connection with any failure
(or alleged failure) to pay any tax. Western and each of its Subsidiaries
have timely withheld, and paid over to the relevant governmental authority or
other appropriate payee, all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other person. Neither Western nor any
Subsidiary is a party to any tax allocation or sharing agreement, is or has
been a member of an affiliated group filing consolidated or combined tax
returns (other than a group the common parent of which is or was Western) or
otherwise has any liability for the taxes of any person (other than Western
or any of its Subsidiaries). For purposes of this paragraph (j), "taxes"
includes all federal, state, local or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, license,
excise, franchise, employment, withholding or similar taxes imposed on the
income, properties or operations of Western or any of its Subsidiaries,
together with any interest additions or penalties with respect thereto and
any interest in respect of such additions or penalties.
(k) ABSENCE OF CLAIMS. As of the date hereof, there is no pending
litigation, controversy, claim, action or proceeding against Western or any
of its Subsidiaries before any court or governmental agency, and, to the best
of
-36-
Western's knowledge after reasonable inquiry, no such litigation, proceeding,
controversy, claim or action has been threatened or is contemplated. As of
the Effective Time and except as disclosed in the Western Disclosure Letter,
there is no pending litigation, controversy, claim, action or proceeding
against Western or any of its Subsidiaries before any court or governmental
agency, which is reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect on Western or to hinder or delay consummation of
the transactions contemplated hereby and, to the best of Western's knowledge
after reasonable inquiry, no such litigation, proceeding, controversy, claim
or action has been threatened or is contemplated.
(l) ABSENCE OF REGULATORY ACTIONS. Neither Western nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of, Government Regulators nor has it been
the recipient of any advice from any Government Regulator that such
Government Regulator is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar
undertaking.
(m) AGREEMENTS.
(i) Except for this Plan (and agreements entered into in connection
with the transactions contemplated hereby or those agreements copies of
which have been previously furnished to Company) and arrangements made in
the ordinary course of business, Western and its Subsidiaries are not bound
by any Material contract (as defined in Item 601(b)(10) of Regulation S-K)
to be performed after the date hereof that has not been filed with or
incorporated by reference in the Western Reports. Except as disclosed in
the Western Reports filed prior to the date of this Plan, neither Western
nor any of its Subsidiaries is a party to an oral or written (A) consulting
agreement (other than data processing, software programming and licensing
contracts entered into in the ordinary course of
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business) not terminable on 30 days' or less notice involving the
payment of more than $200,000 per annum, in the case of any such
agreement with an individual, or $250,000 per annum, in the case of any
other such agreement, (B) agreement with any executive officer or other
key employee of Western or any of its Subsidiaries the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Western or any of its Subsidiaries
of the nature contemplated by this Plan and which provides for the
payment of in excess of $250,000, (C) agreement with respect to any
executive officer of Western or any of its Subsidiaries providing any
term of employment or compensation guarantee extending for a period
longer than six months and for the payment of in excess of $250,000 per
annum, (D) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Plan or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Plan or (E) agreement containing
covenants that limit the ability of Western or any of its Subsidiaries
to compete in any line of business or with any person, or that involve
any restriction on the geographic area in which, or method by which,
Western (including any successor thereof) or any of its Subsidiaries may
carry on its business (other than as may be required by law or any
regulatory agency).
(ii) Neither Western nor any of its Subsidiaries is in default under
or in violation of any provision of any note, bond, indenture, mortgage,
deed of trust, loan agreement or other agreement to which it is a party or
by which it is bound or to which any of its respective properties or assets
is subject.
(n) LABOR MATTERS. Neither Western nor any of its
Subsidiaries is a party to, or is bound by, any collective bargaining
agreement, contract, or other agreement or understanding with a labor
union or labor organization, nor is Western or any of its Subsidiaries
the subject of any proceeding asserting that it has committed an unfair
labor practice or seeking to compel it or any such
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-
Subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike, other labor dispute
or organizational effort involving Western or any of its Subsidiaries
pending or threatened.
(o) EMPLOYEE BENEFIT PLANS. The Western Disclosure Letter
contains a complete list of all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit
sharing, deferred compensation, consulting, bonus, group insurance,
severance and other benefit plans, contracts, agreements, policies and
arrangements, including, but not limited to, "employee benefit plans",
as defined in Section 3(3) of ERISA and all trust agreements related
thereto in respect to any present or former directors, officers, or
other employees of Western or any of its Subsidiaries (hereinafter
referred to collectively as the "Western Employee Plans"). (i) All of
the Western Employee Plans comply in all material respects with all
applicable requirements of ERISA, the Code and other applicable laws;
neither Western nor any of its Subsidiaries has engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) with respect to any Western Employee Plan which could subject
Western or any Subsidiary to a material tax or penalty under Section
4975 of the Code or Section 502(i) of ERISA; and all contributions
required to be made under the terms of any Western Employee Plan have
been timely made or have been reflected on Western's balance sheet; (ii)
no liability to the PBGC has been or is expected by Western or any of
its Subsidiaries to be incurred with respect to any Western Employee
Plan which is subject to Title IV of ERISA (a "Western Pension Plan"),
or with respect to any "single-employer plan" (as defined in Section
4001(a)(15) of ERISA) currently or formerly maintained by Western or any
entity (a "Western ERISA Affiliate") which is considered one employer
with Western under Section 4001 of ERISA or Section 414 of the Code (an
"Western ERISA Affiliate Plan"); and no proceedings have been instituted
to terminate any Western Pension Plan or Western ERISA Affiliate Plan
and no condition exists that presents a material risk of the institution
of such proceedings; (iii) no Western Pension Plan or Western ERISA
Affiliate Plan had an "accumulated funding deficiency" (as defined in
Section 302 of ERISA (whether or not waived)) as of the last day of the
end of the most recent plan year ending prior to the date hereof; the
fair market value of the assets of each Western Pension Plan and Western
ERISA Affiliate Plan exceeds the present
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value of the "benefit liabilities" (as defined in Section 4001(a)(16) of
ERISA) under such Western Pension Plan or Western ERISA Affiliate Plan as of
the end of the most recent plan year with respect to the respective Western
Pension Plan or Western ERISA Affiliate Plan ending prior to the date hereof,
calculated on the basis of the actuarial assumptions used in the most recent
actuarial valuation for such Western Pension Plan or Western ERISA Affiliate
Plan prior to the date hereof, and there has been no material change in the
financial condition of any such Western Pension Plan or Western ERISA
Affiliate Plan since the last day of the most recent plan year; and no notice
of a "reportable event" (as defined in Section 4043 of ERISA) for which the
30-day reporting requirement has not been waived has been required to be
filed for any Western Pension Plan or Western ERISA Affiliate Plan within the
12-month period ending on the date hereof; (iv) neither Western nor any
Subsidiary of Western has provided or is required to provide, security to any
Western Pension Plan or to any Western ERISA Affiliate Plan pursuant to
Section 401(a)(29) of the Code; (v) neither Western, its Subsidiaries, nor
any Western ERISA Affiliate has contributed to any "multiemployer plan", as
defined in Section 3(37) of ERISA, on or after September 26, 1980; (vi) each
Employee Plan of Western or any of its Subsidiaries which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) has received a
favorable determination letter from the Internal Revenue Service deeming such
plan to be a Qualified Plan or has requested such a determination letter
within the applicable remedial amendment period under Section 401(b) of the
Code; and neither Western nor its Subsidiaries are aware of any circumstances
likely to result in revocation of any such favorable determination letter;
(vii) each Qualified Plan which is an "employee stock ownership plan" (as
defined in Section 4975(e)(7) of the Code) has satisfied all of the
applicable requirements of Sections 409 and 4975(e)(7) of the Code and the
regulations thereunder; all Western Employee Plans covering foreign
participants comply in all material respects with applicable local law, and
there are no material unfunded liabilities with respect to any Western
Employee Plan which covers foreign employees; (viii) there is no pending or,
to Western's knowledge, threatened litigation, administrative action or
proceeding relating to any Western Employee Plan; (ix) there has been no
announcement or commitment by Western or any Subsidiary of Western to create
an additional Western Employee Plan, or to amend a Western Employee Plan
except for amendments required
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by applicable law which do not increase the cost of such Western Employee
Plan; and Western and its Subsidiaries do not have any obligations for
retiree health and life benefits under any Western Employee Plan except as
set forth in the Western Disclosure Letter, and there are no such Western
Employee Plans that cannot be amended or terminated without incurring any
liability thereunder; (x) with respect to Western or any of its Subsidiaries,
except as specifically identified in the Western Disclosure Letter, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment or series of
payments by Western or any Subsidiary of Western to any person which is an
"excess parachute payment" (as defined in Section 280G of the Code) under any
Western Employee Plan, increase or secure (by way of a trust or other
vehicle) any benefits payable under any Western Employee Plan, or accelerate
the time of payment or vesting of any such benefit, and (xi) with respect to
each Western Employee Plan, Western has supplied to the Company a true and
correct copy, if applicable, of (A) the two most recent annual reports on the
applicable form of the Form 5500 series filed with the IRS, (B) such Western
Employee Plan, including amendments thereto, (C) each trust agreement and
insurance contract relating to such Western Employee Plan, including
amendments thereto, (D) the most recent summary plan description for such
Western Employee Plan, including amendments thereto, if the Western Employee
Plan is subject to Title I of ERISA, (E) the most recent actuarial report or
valuation if such Western Employee Plan is a Western Pension Plan, (F) the
most recent determination letter issued by the IRS if such Western Employee
Plan is a Qualified Plan and (G) the most recent financial statements and
auditor's report.
(p) REAL PROPERTY.
(i) The Western Disclosure Letter contains a complete and correct
list of (A) all real property or premises owned on the date hereof, in
whole or in part by Western or any of its Subsidiaries and all
indebtedness secured by any encumbrance thereon, and (B) all real
property or premises leased in whole or in part by Western or any of its
Subsidiaries, together with a list of all applicable leases and the name
of the lessor. None of such premises or properties have been condemned
or otherwise taken by any public authority and no condemnation or taking
is threatened
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or contemplated and none thereof is subject to any claim, contract or
law which might affect its use or value for the purposes now made of it.
None of the premises or properties of Western or any of its Subsidiaries
is subject to any current or potential interests of third parties or
other restrictions or limitations that would impair or be inconsistent
in any material respect with the current use of such property by Western
or any of its Subsidiaries.
(ii) Each of the leases referred to in the Western Disclosure
Letter is valid and existing and in full force and effect, and no party
thereto is in default and no notice of a claim of default by any party
has been delivered to Western or any of its Subsidiaries or is now
pending, and there does not exist any event that with notice or the
passing of time, or both, would constitute a default or excuse
performance by any party thereto, provided that with respect to matters
relating to any party other than Western the foregoing representation is
based on the knowledge of Western.
(q) TITLE. Each of Western and its Subsidiaries has good title to
its properties and assets (other than (i) property as to which it is lessee
and (ii) real estate owned as a result of foreclosure, transfer in lieu of
foreclosure or other transfer in satisfaction of a debtor's obligation
previously contracted) except (1) statutory liens not yet delinquent which
are being contested in good faith by appropriate proceedings, and liens for
taxes not yet due, (2) pledges of assets in the ordinary course of business
to secure public deposits, (3) for those assets and properties disposed of
for fair value in the ordinary course of business since the date of Western's
Annual Report on Form 10-KSB/A for the year ended December 31, 1996 and (4)
defects and irregularities of title and encumbrances that do not materially
impair the use thereof for the purposes for which they are held.
(r) KNOWLEDGE AS TO CONDITIONS. As of the date hereof, Western
knows of no reason why the approvals, consents and waivers of governmental
authorities referred to in Section 5.1(b) should not be obtained without the
imposition of any condition of the type referred to in the provisos thereto.
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(s) COMPLIANCE WITH LAWS. Since December 31, 1994, Western and
each of its Subsidiaries have complied in all Material respects with all
applicable laws, except for any noncompliance with any such laws which,
individually or in the aggregate, would not have a Material Adverse Effect on
Western or enable any Person to enjoin the Merger. Except as would not have
a Material Adverse Effect on Western, each of Western and its Subsidiaries
has all permits, licenses, certificates of authority, orders and approvals
of, and has made all filings, applications and registrations with, federal,
state, local and foreign governmental or regulatory bodies that are required
in order to permit it to carry on its business as it is presently conducted.
All such permits, licenses, certificates of authority, orders and approvals
are in full force and effect, and, to the knowledge of Western, no suspension
or cancellation of any of them is threatened.
(t) FEES. Other than in respect of financial advisory services
performed for Western by Belle Plaine Financial Partners, Inc. and/or other
qualified financial advisors, in amounts and pursuant to arrangements
previously disclosed to the Company, neither Western nor any of its
Subsidiaries, nor any of their respective officers, directors, employees or
agents, has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions, or finder's fees, and
no broker or finder has acted directly or indirectly for Western or any
Subsidiary of Western, in connection with the Plan or the transactions
contemplated hereby.
(u) ENVIRONMENTAL MATTERS. (i) Western and each Subsidiary has
complied in all material respects at all times with all applicable
Environmental Laws; (ii) none of the properties (including buildings or any
other structures) currently owned or operated by Western or any Subsidiary
("Western Properties") has been contaminated with, or has had any release of,
any Hazardous Substance; (iii) to Western's knowledge, none of the properties
formerly owned or operated by it or any Subsidiary has been contaminated with
Hazardous Substances during such period of ownership or operation; (iv) to
Western's knowledge, neither it nor any Subsidiary is subject to liability
for any Hazardous Substance disposal or contamination on any third party
property; (v) neither Western nor any Subsidiary has received any notice,
demand letter, claim or request for information alleging that Western or any
Subsidiary may be
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in violation of or subject to liability under any Environmental Law; (vi)
neither Western nor any of its Subsidiaries is subject to any orders,
decrees, injunctions or other agreements with any governmental authority or
any third party relating to Hazardous Substances or any Environmental Law;
(vii) there are no circumstances or conditions involving Western or any of
its Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, suits or costs or result in restrictions on the
ownership, use, or transfer of any Western Property pursuant to any
Environmental Law, (viii) none of the Western Properties contain any
underground storage tanks, asbestos-containing material, lead products, or
polychlorinated biphenyls; (ix) to the knowledge of Western none of the
Western Properties have ever been operated in the past as a gas station,
automotive repair or supply business, metalworking operation, industrial
facility or as a drycleaner; (x) neither Western nor any Subsidiary has
engaged in any activity involving the generation, use, handling or disposal
of any Hazardous Substances other than ordinary and routine office operations
and maintenance, (xi) neither Western nor any Subsidiary has participated in
the management of any borrower or other third party, including entities in
which it may hold a security, fiduciary or other interest, that, to Western's
knowledge, engages in activities involving Hazardous Substances to an extent
that it could be deemed an "owner" or "operator" of such entity under any
Environmental Law, and (xii) to Western's knowledge, it has delivered to the
Company copies of all environmental reports, studies, sampling data, permits,
government filings and other environmental information in its possession
relating to Western or its Subsidiaries or any of their current or former
properties or operations.
(v) ALLOWANCE. The allowance for possible loan and lease losses
shown on Western's unaudited balance sheet as of June 30, 1997 was, and the
allowance for possible loan losses shown on the balance sheets in Western
Reports for periods ending after the date of this Plan will be, adequate, as
of the date thereof, under generally accepted accounting principles
applicable to banks and bank holding companies. Western has disclosed to the
Company in writing prior to the date hereof the amounts of all loans, leases,
advances, credit enhancements, other extensions of credit, commitments and
interest-bearing assets of Western and its Subsidiaries that as of June 30,
1997 have been classified as "Other Assets Specially Mentioned,"
"Substandard,"
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"Doubtful," "Loss," "Classified," "Criticized," "Credit Risk Assets" or words
of similar import. The OREO included in any non-performing assets of Western
or any of its Subsidiaries is carried net of reserves at the lower of cost or
market value; less applicable selling costs, based on independent appraisals
consistent with applicable regulatory requirements.
(w) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in
Western's Quarterly Report on Form 10-QSB for the quarter ended March 31,
1997 or Western's Annual Report on Form 10-KSB/A for the year ended December
31, 1996, no officer or director of Western, or any "associate" (as such term
is defined in Rule 12b-2 under the Securities Exchange Act) of any such
officer or director, has any Material interest in any Material contract or
property (real or personal), tangible or intangible, used in or pertaining to
the business of Western or any of its Subsidiaries.
(x) INSURANCE. Western and its Subsidiaries are currently
insured, and since December 31, 1994, have been insured, for reasonable
amounts with financially sound and reputable insurance companies, against
such risks as companies engaged in a similar business would, in accordance
with good business practice, customarily be insured. All of the insurance
policies and bonds maintained by Western and its Subsidiaries are in full
force and effect, Western and its Subsidiaries are not in default thereunder
and all Material claims thereunder have been filed in due and timely fashion.
Since December 31, 1994, no claim by Western or any of its Subsidiaries on
or in respect of an insurance policy or bond has been declined or refused by
the relevant insurer or insurers. In the best judgment of Western's
management, such insurance coverage is adequate and will be available in the
future under terms and conditions substantially similar to those in effect on
the date hereof. Between the date hereof and the Effective Time, Western and
its Subsidiaries will maintain the levels of insurance coverage in effect on
the date hereof and will submit all potential claims existing prior to the
Effective Time to its insurance carrier on or before the Effective Time. The
Western Disclosure Letter lists all insurance policies maintained by or for
the benefit of Western, its Subsidiaries or its directors, officers,
employees or agents, specifying the (i) type of policy, (ii) policy limits
and (iii) self insurance amounts.
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(y) INVESTMENT SECURITIES. Except for pledges to secure public
and trust deposits and reverse repurchase agreements entered into in
arm's-length transactions pursuant to normal commercial terms and conditions
and other pledges required by law, none of the investments reflected in the
consolidated balance sheet of Western for the quarter ended June 30, 1997,
and none of the Material investments made by it or any of its Subsidiaries
since December 31, 1996, is subject to any restriction (contractual,
statutory or otherwise) that would materially impair the ability of the
entity holding such investment freely to dispose of such investment at any
time.
(z) DERIVATIVES. Neither Western nor any of its Subsidiaries is
currently a party to any interest rate swap, cap, floor, option agreement,
other interest rate risk management arrangement or agreement or
derivative-type security or derivative arrangement or agreement.
(aa) REGISTRATION OBLIGATIONS. Neither Western nor any of its
Subsidiaries is under any obligation, contingent or otherwise, to register
any of its securities under the Securities Act except as contemplated by this
Plan.
(bb) BOOKS AND RECORDS. The books and records of Western and its
Subsidiaries have been, and are being, maintained in accordance with
applicable legal and accounting requirements and reflect in all Material
respects the substance of events and transactions that should be included
therein.
(cc) CORPORATE DOCUMENTS. Western has delivered to the Company true
and complete copies of (i) its amended articles of incorporation and amended by-
laws and (ii) the articles of incorporation and by-laws of Western Bank.
(dd) COMPANY ACTION. The Board of Directors of Western has adopted
resolutions recommending that the principal terms of this Plan be approved by
the shareholders of Western and directing that this Plan be submitted for
consideration by Western's shareholders at Western's Meeting. Western, as
the sole shareholder of Western Bank, has approved the principal terms of
this Plan.
(ee) LOANS. Each loan reflected as an asset on Western's
consolidated balance sheet as of June 30, 1997 and
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each balance sheet date subsequent thereto (i) is evidenced by notes,
agreements or other evidences of indebtedness which are true, genuine and
what they purport to be, (ii) is the legal, valid and binding obligation of
the obligor named therein, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles, and (iii) to the knowledge of Western, will not be subject
to any defenses which may be asserted against Western's bank Subsidiaries.
All loans and extensions of credit that have been made by Western Bank or any
other bank Subsidiaries of Western and that are subject to Sections 22(h),
23A and 23B of the Federal Reserve Act comply therewith.
(ff) FAIR LENDING; COMMUNITY REINVESTMENT ACT. As of the date
hereof, with the exception of routine investigation of consumer complaints,
neither Western nor any of its Subsidiaries has been advised that it is or
may be in violation of the Equal Credit Opportunity Act or the Fair Housing
Act or any similar federal or state statute. Western Bank received a CRA
rating of "outstanding" in its most recent CRA examination. Each of
Western's bank Subsidiaries received a CRA rating of "satisfactory" or better
in its most recent CRA examination.
(gg) NO OMISSION OF MATERIAL FACT. No representation or warranty
by Western in this Plan, including the Annexes hereto, the disclosure letters
and the schedules to be delivered herewith or the Proxy Statement filed in
connection with the Meeting, contains any untrue statement of Material fact,
or omits to state a Material fact necessary to make the statements or facts
contained herein or therein not misleading. None of the information
regarding Western or any of its Subsidiaries or the transactions contemplated
hereby supplied or to be supplied by Western or any of its Subsidiaries for
inclusion in any documents or filings to be filed with any regulatory
authority in connection with the transactions contemplated hereby will
contain any untrue statement of Material fact, or omit to state a Material
fact necessary to make the statements or facts contained therein not
misleading.
(hh) WESTERN COMMON STOCK. The shares of Western Common Stock to
be issued pursuant to this Plan, when issued in accordance with the terms of
this Plan, will be duly authorized, validly issued, fully paid and
non-assessable.
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ARTICLE IV. COVENANTS
SECTION 4.1. ACQUISITION PROPOSALS. The Company agrees that none of
it or any of its officers and directors shall, and the Company shall direct and
use its reasonable best efforts to cause its employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it) not to, initiate, solicit or encourage, directly
or indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to shareholders of the Company) with
respect to a merger, consolidation or similar transaction, other than pursuant
to this Plan, involving, or any purchase of all or any significant portion of
the assets or any equity securities of, the Company (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") or, except to the
extent legally required for the discharge by the board of directors of its
fiduciary duties as advised in writing by such board's counsel, engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal. The Company will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and shall make all reasonable
efforts to enforce any confidentiality agreements to which it is a party. The
Company will take the necessary steps to inform the appropriate individuals or
entities referred to in the first sentence hereof of the obligations undertaken
in this Section 4.1. The Company will notify Western immediately if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with the Company.
SECTION 4.2. CERTAIN POLICIES OF THE COMPANY. At or before the
Effective Time, the Company shall make such accounting entries or adjustments as
Western shall request in order to implement its plans for the Company following
the Merger or to reflect merger-related expenses and costs; PROVIDED, HOWEVER,
that (a) the Company shall not be required to take such action more than two
days prior to the Effective Time, (b) no such adjustment shall require, based
-48-
upon consultation with counsel and accountants for the Company, any filing with
any governmental agency, or violate any law, rule or regulation applicable to
the Company, (c) no such adjustment shall require any changes in net income or
shareholders' equity that will be required to be contained in any financial
statement required to be filed by the Company under the rules of the FDIC if the
Company reasonably believes that all of the conditions to closing set forth in
Article V will not be either satisfied or waived; and FURTHER PROVIDED, that in
any event no accrual or reserve made by the Company pursuant to this Section 4.2
shall constitute or be deemed to be a breach or violation of or failure to
satisfy any representation, warranty, covenant, condition or other provision of
this Plan or otherwise be considered in determining whether any such breach,
violation or failure to satisfy shall have occurred. The recording of such
adjustments shall not be deemed to imply any misstatement of previously
furnished financial statements or information and shall not be construed as
concurrence of the Company's management with any such adjustments.
SECTION 4.3. EMPLOYEE BENEFITS. (a) Western, Western Bank and the
Company agree that, unless otherwise mutually determined or as set forth in
subsection (b) below, the Company Employee Plans in effect at the date of this
Plan (except stock plans (other than the stock bonus plan, which will remain in
effect for a period to be agreed upon by the parties), including without
limitation the Company's stock option plans and the stock award plan) will
remain in effect for a period of at least six months after the Effective Time
with respect to persons covered by such plans at the Effective Time. Western
is presently investigating, with a consultant's assistance, the types of
benefits which should be made available to its employees and those of its
Subsidiaries. Each person employed by the Company prior to the Effective Time
who remains an employee of the Surviving Corporation following the Effective
Time (each a "Continued Employee") will be eligible to participate on the same
basis as similarly situated employees of Western or Western Bank in existing
benefit plans of Western or Western Bank as well as such other and additional
benefit plans as shall be determined by the board of the Surviving Corporation
as a result of such investigation and study. All such participation shall be
subject to the terms of Western's Benefit Plans as may be in effect from time
to time. Western and Western Bank shall, solely for purposes of time
-49-
of service, vesting and eligibility to participate in Western's Benefit Plans,
recognize credit for each Continued Employee's term of service with the Company.
(b) Western and Western Bank will honor, to the extent set forth in
the Company Disclosure Letter, all employment and severance agreements of the
Company, in accordance with their terms.
SECTION 4.4. ACCESS AND INFORMATION. Upon reasonable notice, each
party hereto shall (and shall cause its Subsidiaries to) afford to the other
party and its representatives (including, without limitation, directors,
officers and employees of such party and its affiliates, and counsel,
accountants and other advisors retained by such party and its affiliates) such
access (including, without limitation, for the purpose of conducting
supplemental due diligence reviews) during normal business hours throughout the
period prior to the Effective Time to the books, records (including, without
limitation, loan and credit files, tax returns and work papers of independent
auditors), properties, personnel and to such other information as the requesting
party may reasonably request; PROVIDED, HOWEVER, that no investigation pursuant
to this Section 4.4 shall affect or be deemed to modify any representation or
warranty made herein. Each party agrees that it will not, and will cause its
representatives not to, use any information obtained pursuant to this
Section 4.4 for any purpose unrelated to the consummation of the transactions
contemplated by this Plan. Subject to the requirements of law, each party will
keep confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this Section 4.4 and in
accordance with the Confidentiality Agreement between the Company and Western in
effect prior to the date hereof (the "Confidentiality Agreement"). In the event
that this Plan is terminated or the transactions contemplated by this Plan shall
otherwise fail to be consummated, each party shall promptly cause all copies of
documents or extracts thereof containing information and data as to another
party hereto (or an affiliate of any party hereto) to be returned to the party
which furnished the same. Except as otherwise specifically provided herein, the
terms of the Confidentiality Agreement shall remain in full force and effect.
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SECTION 4.5. CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. Western,
Western Bank and the Company shall (a) as soon as practicable make any filings
and applications required to be filed in order to obtain all approvals, consents
and waivers of governmental authorities necessary or appropriate for the
consummation of the transactions contemplated hereby and use their reasonable
best efforts to cause the applications for the approvals described in Section
5.1(b) hereof to be initially filed on or before September 30, 1997; (b)
cooperate with one another (i) in promptly determining what filings are required
to be made or approvals, consents or waivers are required to be obtained under
any relevant federal, state or foreign law or regulation and (ii) in promptly
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such approvals, consents or waivers; and (c)
deliver to the other copies of the publicly available portions of all such
filings and applications promptly after they are filed.
SECTION 4.6. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and for a period of six years after the Effective Time, Western and
Western Bank agree to indemnify and hold harmless each director and officer of
the Company, determined as of the Effective Time (the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time (including with respect
to this Plan or any of the transactions contemplated hereby), whether asserted,
claimed or arising prior to, at or after the Effective Time, to the extent to
which such Indemnified Parties were entitled under California law and the
Company's articles of incorporation or by-laws in effect on the date hereof, and
Western shall also advance expenses as incurred to the extent permitted under
California law and the Company's articles of incorporation and by-laws.
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.6(a) hereof, upon learning of any such claim, action, suit, proceeding
or investigation, shall as promptly as possible notify Western thereof, but the
failure to so notify shall not relieve
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Western of any liability it may have to such Indemnified Party if such failure
does not materially prejudice Western. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) Western shall have the right to assume the defense thereof
and Western shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if
Western elects not to assume such defense, or counsel for the Indemnified
Parties advises that there are issues which raise conflicts of interest between
Western and the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Western shall pay the reasonable fees and expenses of
one such counsel for the Indemnified Parties in any jurisdiction promptly as
statements thereof are received unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest,
(ii) the Indemnified Parties will cooperate in the defense of any such matter
and (iii) Western shall not be liable for any settlement effected without its
prior written consent. Notwithstanding the foregoing, Western shall not have
any obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and nonappealable, that the indemnification of such
Indemnified Party in the manner contemplated hereby is not permitted or is
prohibited by applicable law.
(c) For a period of six years after the Effective Time, Western shall
use its reasonable best efforts to cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by the
Company (provided that Western may substitute therefor policies of comparable
coverage with respect to claims arising from facts or events which occurred
before the Effective Time); PROVIDED, HOWEVER, that in no event shall Western be
obligated to expend, in order to maintain or provide insurance coverage pursuant
to this Subsection 4.6(c), any amount per annum in excess of 200% of the amount
of the annual premiums paid as of the date hereof by the Company for such
insurance (the "Maximum Amount"). If the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, Western shall use all reasonable efforts to maintain the most
advantageous policies of directors' and officers'
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insurance obtainable for an annual premium equal to the Maximum Amount.
Notwithstanding the foregoing, prior to the Effective Time, Western may request
the Company to, and the Company shall, purchase insurance coverage, on such
terms and conditions as shall be acceptable to Western, extending for a period
of six years the Company's directors' and officers' liability insurance
coverage in effect as of the date hereof (covering past or future claims with
respect to periods before the Effective Time) and such coverage shall satisfy
Western's obligations under this Subsection (c).
(d) If Western 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, proper provision shall be made so that the successors and assigns of
Western shall assume the obligations set forth in this Section 4.6.
(e) The provisions of this Section 4.6 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
SECTION 4.7. ADDITIONAL AGREEMENTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take promptly, or cause to be taken promptly, all
actions and to do promptly, or cause to be done promptly, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Plan as soon as practicable,
including using efforts to obtain all necessary actions or non-actions,
extensions, waivers, consents and approvals from all applicable governmental
entities, effecting all necessary registrations, applications and filings
(including, without limitation, filings under any applicable state securities
laws) and obtaining any required contractual consents and regulatory approvals.
SECTION 4.8. PUBLICITY. The initial press release announcing this
Plan shall be a joint press release and thereafter Western and the Company shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the other or the
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transactions contemplated hereby and in making any filings with any
governmental entity or with any national securities exchange with respect
thereto.
SECTION 4.9. REGISTRATION STATEMENT. As soon as reasonably
practicable after the date hereof, Western and the Company shall jointly prepare
a registration statement, including a joint proxy statement in respect of the
Meetings (as defined herein) (the "Registration Statement"), for the purpose of
registering the Western Common Stock to be issued pursuant hereto, file the
Registration Statement with the SEC, respond to comments of the staff of the SEC
and promptly thereafter mail the Registration Statement to all holders of record
(as of the applicable record date) of shares of Company Common Stock and Western
Common Stock. The Company covenants that (a) all information supplied by it in
writing to Western expressly for use in the Registration Statement will be
accurate and complete in all Material respects and (b) none of the information
to be supplied by the Company will, in the case of the proxy statement to be
used by Western to solicit the approval of its shareholders as contemplated by
this Plan, when it is first mailed to Western's shareholders, contain any untrue
statement of a Material fact or omit to state any Material fact necessary in
order to make the statement made therein, in light of the circumstances under
which such statements are made, not misleading. Western covenants that (a) all
information supplied by it in writing to the Company expressly for use in the
Registration Statement will be accurate and complete in all Material respects
and (b) none of the information to be supplied by Western will, in the case of
the proxy statement to be used by the Company to solicit the approval of its
shareholders as contemplated by this Plan, when it is first mailed to the
Company's shareholders, contain any untrue statement of a Material fact or omit
to state any Material fact necessary in order to make the statement made
therein, in light of the circumstances under which such statements are made, not
misleading.
SECTION 4.10. SHAREHOLDERS' MEETINGS. Each of Western and the
Company shall take all action necessary, in accordance with applicable law and
its articles of incorporation and by-laws, to convene a meeting of the holders
of its common stock (each, a "Meeting") as mutually agreed for the purpose of
approving the principal terms of this Plan. Except to the extent legally
required for the discharge by such party's board of directors of its
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fiduciary duties as advised in writing by such board's counsel, such party's
board of directors shall recommend at its Meeting that the principal terms of
this Plan be approved by its shareholders.
SECTION 4.11. NOTIFICATION OF CERTAIN MATTERS. Each of Western and
the Company shall give prompt notice to the other of: (a) any notice of, or
other communication relating to, a default or event that, with notice or lapse
of time or both, would become a default, received by it or any of its
Subsidiaries subsequent to the date of this Plan and prior to the Effective
Time, under any contract Material to the financial condition, properties,
businesses or results of operations of such party taken as a whole to which such
party or any Subsidiary is a party or is subject; and (b) any Material adverse
change in the condition (financial or other), properties, assets, business,
results of operations or prospects of it and its Subsidiaries taken as a whole
or the occurrence of any event which, so far as reasonably can be foreseen at
the time of its occurrence, is reasonably likely to result in any such change.
Each of the Company and Western shall give prompt notice to the other party of
any notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Plan.
SECTION 4.12. NO ACQUISITIONS OF COMPANY COMMON STOCK. Prior to the
earlier of (i) immediately prior to the Effective Time and (ii) the termination
of this Plan in accordance with Article VI hereof, Western shall not and shall
cause its affiliates not to, directly or indirectly, acquire any shares of
Company Common Stock, other than (i) up to 5% of such shares acquired during the
period commencing on the first business day after the release of the press
release announcing this Plan and (ii) shares acquired in a fiduciary or agency
capacity or in satisfaction of a debt or debts previously contracted.
SECTION 4.13. SECURITIES ACT. (a) As soon as practicable after the
date of the Company's Meeting, the Company shall identify to Western all persons
who the Company believes to be affiliates of the Company as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act ("Affiliates").
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(b) The Company shall use its best efforts to obtain a written
agreement from each person identified as an Affiliate pursuant to clause
4.13(a) above who is an officer or director of the Company providing that
each such person will agree not to sell, pledge, transfer or otherwise
dispose of the shares of Western Common Stock to be received by such person
in the Merger except in compliance with the applicable provisions of the
Securities Act. The Company shall cause forms of such written agreement to
be delivered to each other person who the Company believes may be or become
an Affiliate of Western for purposes of enabling such persons to comply with
the exchange procedures set forth in Section 1.4.
SECTION 4.14. TAX-FREE REORGANIZATION TREATMENT. Except as
contemplated by Section 1.3(c)(iii), neither Western nor the Company shall
take or cause to be taken any action, whether before or after the Effective
Time, which would disqualify the Merger as a "reorganization" within the
meaning of Section 368 of the Code.
SECTION 4.15. SHAREHOLDER AGREEMENTS. Certain directors of the
Company, in their capacities as shareholders, in exchange for good and
valuable consideration, have executed and delivered to Western shareholder
agreements substantially in the form of Annex 3 hereto ("the Shareholder
Agreements").
SECTION 4.16. DIRECTOR AND OFFICER RESIGNATIONS. The Company
shall cause to be delivered to Western at the Effective Time the resignations
of the members of the board of directors of the Company and of such officers
as are agreed to by Western and the Company in advance of the Effective Time.
ARTICLE V. CONDITIONS TO CONSUMMATION
SECTION 5.1. CONDITIONS TO ALL PARTIES' OBLIGATIONS. The
respective obligations of Western, Western Bank and the Company to effect the
Merger shall be subject to the satisfaction or waiver by Western and the
Company prior to the Effective Time of the following conditions:
(a) The principal terms of this Plan shall have been approved by
the requisite vote of the respective shareholders of the Company and Western.
-▇▇-
(▇) ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ and the Company shall have procured the
approvals, consents or waivers with respect to the Plan, the Merger and the
other transactions contemplated hereby by the Federal Reserve Board, and all
applicable statutory waiting periods shall have expired; and the parties
shall have procured all other regulatory approvals, consents or waivers of
governmental authorities or other persons that, in the opinion of counsel for
Western and the Company, are necessary or appropriate for the consummation of
the Merger and the other transactions contemplated hereby; PROVIDED, HOWEVER,
that no approval, consent or waiver referred to in this Section 5.1(b) shall
be deemed to have been received if it shall include any condition or
requirement (other than conditions or requirements that have been imposed on
Western or Western Bank in connection with previous acquisitions announced
since 1995) that, individually or in the aggregate, (i) would result in a
Material Adverse Effect on Western or the Company or (ii) would reduce the
economic and business benefits of the transactions contemplated by the Plan
to Western or the Company in so significant and adverse a manner that the
party or parties so affected, in its or their judgment, would not have
entered into this Plan had such condition or requirement been known at the
date hereof.
(c) All other requirements prescribed by law which are necessary
to the consummation of the Merger and any transactions necessary to
consummate the Merger shall have been satisfied.
(d) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger or any transaction necessary to
consummate the Merger, and no litigation or proceeding shall be pending
against the Company or Western or any of its Subsidiaries brought by any
governmental agency seeking to prevent consummation of the Merger or any
transaction necessary to consummate the Merger.
(e) No statute, rule, regulation, order, injunction or decree
shall have been enacted, entered, promulgated, interpreted, applied or
enforced by any governmental authority which prohibits, restricts or makes
illegal consummation of the Merger or any other transaction contemplated by
this Plan.
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(f) The Registration Statement shall have become effective and no
stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(g) Except if the failure to obtain such opinions is due solely to
the circumstances described in Section 1.3(c)(iii), Western and Western Bank
shall have received an opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ and the Company shall
have received an opinion of Company Counsel, no later than thirty (30) days
from the date hereof, and confirmed immediately prior to the Effective Time,
substantially to the effect that the Merger will be a reorganization within
the meaning of Section 368(a) of the Code, and that Western, Western Bank and
the Company will each be a party to that reorganization. Each such opinion
may be based on, in addition to the review of such matters of law and fact as
counsel rendering the opinion considers appropriate, (i) representations made
at counsel's request by Western, Western Bank, the Company, shareholders of
Western or the Company, or any combination of such persons, (ii) certificates
provided at counsel's request by officers of Western, Western Bank or the
Company and other appropriate persons and (iii) assumptions set forth in the
opinion with the consent of Western (in the case of the opinion to be
delivered by ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇) or with the consent of the Company (in the
case of the opinion to be delivered by Company Counsel).
SECTION 5.2. CONDITIONS TO THE OBLIGATIONS OF WESTERN. The
obligations of Western and Western Bank to effect the Merger shall be subject
to the satisfaction or waiver by Western prior to the Effective Time of the
following additional conditions:
(a) Western shall have received from the Company's independent
certified public accountants a "cold comfort" letter or "specified
procedures" letter, dated (A) the date of the mailing of the Registration
Statement, and (B) shortly prior to the Effective Date, with respect to
certain financial information regarding the Company.
(b) Each of the representations and warranties of the Company
contained in this Plan shall have been true and correct on the date hereof
and shall be true and correct at the Effective Time (or on the date when made
in the case of
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any representation or warranty which specifically relates to an earlier date
or period); PROVIDED, HOWEVER, that for purposes of this Section 5.2(b) a
representation or warranty shall only fail to be true and correct at the
Effective Time if the failure of any such representation or warranty to be
true and correct has or constitutes, or is likely to have or constitute or
relates to, either individually or in the aggregate with other such
representations or warranties, a Material Adverse Effect on the Company; the
Company shall have performed, or shall have caused to be performed, in all
Material respects, each of its covenants and agreements contained in this
Plan required to be performed at or prior to the Effective Time; and Western
shall have received a certificate signed by the Chief Executive Officer and
the Chief Financial Officer of the Company, dated the Effective Date, as to
the foregoing to the best of their knowledge.
(c) Western shall have received the written resignation of each
director (in his/her capacity as director) of the Company, effective as of
the Effective Time, and such resignations of officers as may be agreed to by
Western and the Company pursuant to Section 4.16 hereof.
(d) The Company or Western shareholders voting against the
principal terms of this Plan or giving notice in writing to the Company or
Western, as the case may be, at or before the applicable Meeting that such
shareholder dissents from the principal terms of this Plan, in the aggregate,
shall not hold more than five percent of the Company Common Stock or Western
Common Stock, as the case may be (the condition set forth in this paragraph
(d) being referred to herein as the "Dissenters' Rights Condition");
PROVIDED, HOWEVER, that Western may, in its sole discretion, at anytime,
either before or after shareholder approval of the principal terms of this
Plan, waive the Dissenters' Rights Condition, either in whole or in part.
(e) Prior to solicitation of shareholder approval, Western shall
have received an opinion confirming the fairness of the terms of the Merger
to its shareholders from a financial point of view.
(f) Western shall have received a conformed copy of a certificate
of satisfaction of the Franchise Tax Board of the State of California that
all taxes imposed by law on the Company have been paid or secured, as filed
with the
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Secretary of State for the State of California pursuant to Section 1103 of
the California Corporations Code.
(g) As of December 31, 1997, (i) the Company Book Value shall not
be less than $77,900,000 and (ii) the Company's allowance for loan and lease
losses shall not be less than $7,992,000.
SECTION 5.3. CONDITIONS TO THE OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger shall be subject to the
satisfaction or waiver by the Company prior to the Effective Time of the
following additional conditions:
(a) The Company shall have received from Western's independent
certified public accountants a "cold comfort" letter or letters or "specified
procedures" letter or letters, dated (A) the date of the mailing of the
Registration Statement, and (B) shortly prior to the Effective Date, with
respect to certain financial information regarding Western.
(b) Each of the representations, warranties and covenants of
Western contained in this Plan shall have been true on the date hereof and
shall be true in all Material respects on the Effective Date as if made on
such date (or on the date when made in the case of any representation or
warranty which specifically relates to an earlier date or period), PROVIDED,
HOWEVER, that for purposes of this Section 5.3(b) a representation or
warranty shall only fail to be true and correct at the Effective Time if the
failure of any such representation or warranty to be true and correct has or
constitutes or relates to, or is likely to have or constitute or relate to,
either individually or in the aggregate with other such representations or
warranties, a Material Adverse Effect on Western; Western shall have
performed, or shall have caused to be performed, in all Material respects,
each of its covenants and agreements contained in this Plan required to be
performed at or prior to the Effective Time; and the Company shall have
received certificates signed by the Chief Executive Officer and the Chief
Financial Officer of Western, dated the Effective Date, as to the foregoing.
(c) The Company shall have received an opinion, dated the
Effective Date, from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, to the effect that the Western
Common Stock being issued pursuant
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to this plan will be duly authorized, validly issued, fully paid and
non-assessable.
(d) As of the Effective Time, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be a member
of the board of directors of Western and the Surviving Corporation and shall
be the Chairman, President and Chief Executive Officer of the Surviving
Corporation.
(e) Prior to the solicitation of shareholder approval and the
Effective Time, the Company shall have received an opinion confirming the
fairness of the terms of the Merger to its shareholders from a financial
point of view.
ARTICLE VI. TERMINATION
SECTION 6.1. TERMINATION. This Plan may be terminated, and the
Merger abandoned, prior to the Effective Date, either before or after its
approval by the shareholders of the Company and Western:
(a) by the mutual consent of Western and the Company, if the board
of directors of each so determines by vote of a majority of the members of
its entire board;
(b) by either of Western or the Company, by written notice to the
other, if its board of directors so determines by vote of a majority of the
members of its entire board, in the event of (i) the failure of the
shareholders of the Company to approve the principal terms of this Plan at
its Meeting, (ii) the failure of the shareholders of Western to approve the
principal terms of this Plan at its Meeting, or (iii) a Material breach by
the other party hereto of any representation, warranty, covenant or agreement
contained herein which is not cured or not curable within 30 days after
written notice of such breach is given to the party committing such breach by
the other party;
(c) by either of Western or the Company, by written notice to the
other, if either (i) any approval, consent or waiver of a governmental
authority required to permit consummation of the Merger or any transaction
necessary to consummate the Merger shall have been denied or (ii) any
governmental authority of competent jurisdiction
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shall have issued a final, unappealable order enjoining or otherwise
prohibiting consummation of the Merger or any transaction necessary to
consummate the Merger;
(d) by either of Western or the Company, by written notice to the
other, if its board of directors so determines by vote of a majority of the
members of its entire board, in the event that the Merger is not consummated
by February 28, 1998, unless the failure so to consummate by such time is due
to the breach of any representation, warranty or covenant contained in this
Plan by the party seeking to terminate;
(e) by Western, by written notice to the Company, if the Company
takes, causes to be taken or allows to be taken any action that, without
giving effect to the exception contained in Section 4.1 hereof regarding the
exercise by the Company's board of directors of its fiduciary duties, would
otherwise be prohibited under Section 4.1 hereof; or
(f) by the Company, by written notice to Western prior to the
approval by the shareholders of the Company of the principal terms of this
Plan, if the Company receives an Acquisition Proposal on terms and conditions
which the board of directors determines, after receiving the written advice
of its outside counsel, (i) that to proceed with the Merger will violate the
fiduciary duties of the board of directors to the Company's shareholders and
(ii) to accept such proposal; PROVIDED, HOWEVER, that the Company shall not
be entitled to terminate this Plan pursuant to this clause (f) unless it
shall have provided Western with written notice of such a possible
determination (which written notice will inform Western of the Material terms
and conditions of the proposal, including the identity of the proponent) two
business days prior to such determination.
SECTION 6.2. EFFECT OF TERMINATION. (a) In the event of the
termination of this Plan by Western or the Company, as provided above, this
Plan shall thereafter become void and, subject to the provisions of Section
6.2(b) and (c) and Section 8.2 hereof, there shall be no liability on the
part of any party hereto or their respective officers or directors, except
that any such termination shall be without prejudice to the rights of any
party hereto arising out of the willful breach by any other party of any
covenant or willful misrepresentation contained in this Plan.
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(b) The parties agree and acknowledge that it is impractical to
ascertain the precise amount of damage to the Company as a result of a
failure to consummate the Merger and the other transactions contemplated
hereby due to a termination of this Plan by the Company pursuant to clause
(iii) of Section 6.1(b) hereof. Accordingly, in the event of such
termination, Western shall pay to the Company $5 million plus all costs and
expenses incurred by the Company in connection with this Plan, up to $1
million, the parties agreeing that such amount will represent a reasonable
estimate of the minimum damage to the Company and not a penalty. The fee
payable pursuant to the foregoing sentence shall be payable by Western to the
Company by wire transfer to an account designated by the Company in writing,
on or before the seventh day after it becomes due. Payment of such amount
shall be in full satisfaction of damages to the Company arising from any
breach by Western of any of its representations, warranties, covenants or
agreements contained herein.
(c) The parties agree and acknowledge that it is impractical to
ascertain the precise amount of damage to Western and Western Bank as a
result of a failure to consummate the Merger and the other transactions
contemplated hereby due to a termination of this Plan by Western pursuant to
clause (iii) of Section 6.1(b) or Section 6.1(e) hereof or by the Company
pursuant to Section 6.1(f) hereof. Accordingly, in the event of such
termination pursuant to clause (iii) of Section 6.1(b), the Company shall pay
to Western $3 million, and in the event of such termination pursuant to
Section 6.1(e) or Section 6.1(f), the Company shall pay to Western $10
million, in either case plus all costs and expenses incurred by Western in
connection with this Plan, up to $1 million, the parties agreeing that such
amounts will represent a reasonable estimate of the minimum damage to Western
and Western Bank and not a penalty. The fee payable pursuant to the
foregoing sentence shall be payable by the Company to Western by wire
transfer to an account designated by Western in writing, on or before the
seventh day after it becomes due. Payment of such amount shall be in full
satisfaction of damages to Western and Western Bank arising from any breach
by the Company of any of its representations, warranties, covenants or
agreements contained herein.
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ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 7.1. EFFECTIVE DATE AND EFFECTIVE TIME. On such date as
Western selects after December 31, 1997, which shall, unless such 30 day
period ends prior to January 1, 1998, be within 30 days after the last to
occur of the expiration of all applicable waiting periods in connection with
approvals of governmental authorities, the receipt of all approvals of
governmental authorities and the satisfaction or waiver of all other
conditions to the consummation of the Merger, or on such earlier or later
date as may be agreed in writing by the parties, an agreement of merger and
related documents, in customary form, shall be executed in accordance with
all appropriate legal requirements and shall be filed as required by law, and
the Merger provided for herein shall become effective upon such filing or on
such date and such time as may be specified in such agreement of merger. The
date of such filing or such later effective date is herein called the
"Effective Date". The "Effective Time" of the Merger shall be the time of
such filing or as set forth in such agreement of merger.
ARTICLE VIII. OTHER MATTERS
SECTION 8.1. CERTAIN DEFINITIONS; INTERPRETATION. As used in this
Plan, the following terms shall have the meanings indicated:
"Company Book Value" means the shareholders' equity of the Company,
determined in accordance with GAAP.
"GAAP" means generally accepted accounting principles applicable to
bank holding companies, consistently applied.
"Material" means material to Western or the Company (as the case may
be) and their respective Subsidiaries, taken as a whole.
"Material Adverse Effect", with respect to a person, means any
condition, event, change or occurrence that is reasonably likely to have a
Material adverse effect upon (A) the condition (financial or other),
properties, assets, business, results of
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operations or prospects of such person and its Subsidiaries, taken as a
whole, or (B) the ability of such person to perform its obligations under,
and to consummate the transactions contemplated by, this Plan.
"Person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.
"Subsidiary", with respect to a person, means any other person
controlled by such person.
When a reference is made in this Plan to Sections or Annexes, such reference
shall be to a Section of, or Annex to, this Plan unless otherwise indicated.
The table of contents, index of defined terms and headings contained in this
Plan are for ease of reference only and shall not affect the meaning or
interpretation of this Plan. Whenever the words "include", "includes", or
"including" are used in this Plan, they shall be deemed followed by the words
"without limitation". Any singular term in this Plan shall be deemed to include
the plural, and any plural term the singular.
SECTION 8.2. SURVIVAL. Only those agreements and covenants of the
parties that are by their terms applicable in whole or in part after the
Effective Time shall survive the Effective Time. All other representations,
warranties, agreements and covenants shall be deemed to be conditions of the
Plan and shall not survive the Effective Time. If the Plan shall be terminated,
the agreements of the parties in Section 6.2, this Section 8.2, Section 8.6,
Section 8.7 and the last four sentences of Section 4.4 hereof shall survive such
termination.
SECTION 8.3. WAIVER. Prior to the Effective Time, any provision of
this Plan may be: (i) waived by the party benefitted by the provision; or
(ii) amended or modified at any time (including the structure of the
transaction) by an agreement in writing between the parties hereto approved by
their respective boards of directors.
SECTION 8.4. COUNTERPARTS. This Plan may be executed in
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
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SECTION 8.5. GOVERNING LAW. This Plan shall be governed by, and
interpreted in accordance with, the laws of the State of California.
SECTION 8.6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS PLAN OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.7. EXPENSES. Each party hereto will bear all expenses
incurred by it in connection with this Plan and the transactions contemplated
hereby.
SECTION 8.8. NOTICES. All notices, requests, acknowledgments and
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, telecopy, telegram or
telex (confirmed in writing) to such party at its address set forth below or
such other address as such party may specify by notice to the other party
hereto.
If to the Company, to:
Santa ▇▇▇▇▇▇ Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With copies to:
O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
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If to Western or Western Bank, to:
Western Bancorp
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With copies to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
SECTION 8.9. ENTIRE AGREEMENT; ETC. This Plan, together with the
Confidentiality Agreement and the Shareholder Agreements of even date herewith,
represents the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and supersedes any and all other oral or
written agreements heretofore made. All terms and provisions of the Plan shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Except as to Section 4.6 hereof, nothing in
this Plan is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Plan.
SECTION 8.10. ASSIGNMENT. This Plan may not be assigned by any party
hereto without the written consent of the other parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers as of the day and year first above
written.
WESTERN BANCORP
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
WESTERN BANK
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
SANTA ▇▇▇▇▇▇ BANK
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Executive Officer
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