EXHIBIT 99.2
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
WESTAMERICA BANCORPORATION,
WESTAMERICA BANK
AND
KERMAN STATE BANK
DATED AS OF FEBRUARY 25, 2002
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated as of February 25,
2002, is between WESTAMERICA BANCORPORATION, a California corporation ("WABC"),
WESTAMERICA BANK, a California banking corporation ("Westamerica"), and KERMAN
STATE BANK, a California banking association ("KSB").
RECITALS
A. The Boards of Directors of WABC, Westamerica and KSB deem it
advisable and in the best interests of WABC, Westamerica, KSB and their
respective shareholders that WABC, Westamerica and KSB enter into a business
combination whereby KSB shall merge with and into Westamerica (the "Merger").
B. This Agreement and the Merger Agreement, as defined herein, have been
approved by the Boards of Directors of WABC, Westamerica and KSB, and will be
submitted for approval of the shareholders of KSB at a special meeting of KSB's
shareholders.
C. The Merger is intended to qualify as a tax-free reorganization within
the meaning of the provisions of Section 368 of the Internal Revenue Code of
1986, as amended (the "IRC").
D. Pursuant to the Merger and subject to the terms and conditions
hereof, each share of KSB common stock (other than fractional shares or any
shares as to which dissenters' rights have been perfected) shall be converted
into that number of shares of WABC common stock determined in accordance with
the Final Exchange Ratio set forth in Section 2.1, below, subject to adjustment
as more fully set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements contained herein and in the Merger Agreement, the parties
hereto agree as follows:
1. THE MERGER.
1.1 EFFECTIVE DATE. Subject to the terms and conditions of this
Agreement, the Merger shall become effective upon the filing with the California
Secretary of State and the California Department of Financial Institutions (the
"DFI") of a duly executed Agreement of Merger substantially in the form attached
hereto as Exhibit A (the "Merger Agreement") and officers' certificates
prescribed by Section 1103 of the California General Corporation Law (the
"GCL"), or at such time thereafter as is provided in the Merger Agreement (the
"Effective Time"). The date on which the Effective Date occurs as specified in
the Merger Agreement shall be referred to herein as the "Effective Date."
1.2 EFFECT OF THE MERGER. Subject to the terms and conditions of this
Agreement and the Merger Agreement, on the Effective Date, KSB shall be merged
with and into Westamerica and Westamerica shall be the surviving corporation
(the "Surviving Corporation") in the Merger. All assets, rights, goodwill,
privileges, immunities, powers, franchises and interests of KSB and Westamerica
in and to every type of property (real, personal and mixed) and choses in
action, as they exist as of the Effective Date, including
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appointments, designations and nominations and all other rights and interests as
trustee, executor, administrator, registrar of stocks and bonds, guardian of
estate, assignee, receiver and in every other fiduciary capacity, shall pass and
be transferred to and vest in the Surviving Corporation by virtue of the Merger
on the Effective Date without any deed, conveyance or other transfer; the
separate existence of KSB shall cease and the corporate existence of Westamerica
as the Surviving Corporation shall continue unaffected and unimpaired by the
Merger; and the Surviving Corporation shall be deemed to be the same entity as
each of KSB and Westamerica and shall be subject to all of their duties and
liabilities of every kind and description. The Surviving Corporation shall be
responsible and liable for all the liabilities and obligations of each of
Westamerica and KSB; and any claim existing or action or proceeding pending by
or against Westamerica or KSB may be prosecuted as if the Merger had not taken
place, or the Surviving Corporation may be substituted in its place. Neither the
rights of creditors nor any liens upon the property of either Westamerica or KSB
shall be impaired by reason of the Merger.
2. CONVERSION AND CANCELLATION OF SHARES.
2.1 CONVERSION OF COMMON STOCK OF KSB.
(a) PRELIMINARY EXCHANGE RATIO. For purposes of determining the
conversion of KSB common stock into the merger consideration, the following
procedures and defined terms shall be employed:
"Unadjusted Aggregate Purchase Price" means
(i) if Performing Loans are at least $60,000,000, then 1.6
multiplied by Adjusted Equity; or
(ii) if Performing Loans are less than $60,000,000, then
the sum of:
(a) 1.6 multiplied by that portion of Adjusted
Equity equal to (x) Performing Loans, divided by
(y) 6.56, and
(b) 1.0 multiplied by the remainder of Adjusted
Equity.
"Adjusted Equity" means $9,861,000
(i) plus 60% of the amount by which KSB's allowance for
loan losses, determined under Westamerica's methodology
for determining the allowance, is or would be less than
$2,400,000, but only if Performing Loans are at least
$60,000,000, or
(ii) less 60% of the amount by which KSB's allowance for
loan losses, determined under Westamerica's methodology
for determining the allowance, is or would be greater than
$3,200,000, up to $3,900,000.
"GAAP" means generally accepted accounting principles.
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"Performing Loans" means the principal balance of the loans owned by
KSB other than any of the following:
(i) loans on nonaccrual status;
(ii) loans on which payments of principal or interest are
delinquent 90 days or more from their contractual payment
date; and
(iii) loans which are "troubled debt restructurings" as
defined in Statement of Financial Accounting Standards No.
15 ("SAS 15"): Accounting by Debtors and Creditors for
Troubled Debt Restructurings."
"Preliminary Exchange Ratio" means Unadjusted Per Share Purchase
Price divided by the Average Starting Price.
"Unadjusted Per Share Purchase Price" is Unadjusted Aggregate
Purchase Price divided by number outstanding KSB shares of common
stock determined on a fully diluted basis using the treasury method.
"Average Starting Price" means $39.77.
(b) SIGNIFICANT LIABILITY ADJUSTMENT; PRE-FINAL EXCHANGE RATIO. WABC
and KSB shall first determine the Preliminary Exchange Ratio. Then they shall
determine the amount of Significant Liabilities if any and determine the
Pre-Final Exchange Ratio.
"Pre-Final Exchange Ratio" means the Preliminary Exchange Ratio less
a fraction, of which (i) the numerator is Significant Liabilities
and (ii) the denominator is 1.6 multiplied by Adjusted Equity.
"Significant Liabilities" means those liabilities or expenses
(whether operating or capital in nature) in excess of $100,000 in
the aggregate, relating to those categories and events described in
the next sentence that have not been reflected as reductions to
KSB's consolidated book value pursuant to generally accepted
accounting principles as of June 30, 2001, except that the $100,000
threshold shall not apply to amounts described in clause (viii).
Significant Liabilities shall include the following categories or
events, provided that Significant Liabilities shall not include any
of the following to which WABC has consented in writing, which
consent shall not be unreasonably withheld: (i) new or extended
contractual obligations; (ii) new or extended leases of real or
personal property; (iii) acquisition of capital assets (or
commitments to do so) in excess of $25,000 in the aggregate; (iv)
contingent liabilities based upon threatened or pending litigation,
arbitrations or other proceedings or hazardous or toxic substances
and legal fees and costs (whether actual or estimated) related
thereto; (v) any expenses, fines, fees, penalties or similar
obligations, except those which arose in the Ordinary Course of
Business as defined in Section 3.2(h)(i); (vi) any new, expanded or
accelerated pension or other benefits including employment contracts
and severance
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payments, whether or not vested; (vii) any amount paid to investment
bankers, lawyers, accountants or other professionals in conjunction
with the transaction that exceeds $470,000 in the aggregate; and
(viii) the amount by which KSB's allowance for loan losses exceeds
$3,900,000, an amount that would equal the amount necessary to bring
KSB's allowance for loan losses into compliance with WABC's
methodology for determining the adequacy of such allowance (but only
to the extent KSB's allowance as so determined would exceed
$3,900,000), the amount of interest accrued on loans for which full
repayment of principal is not likely as of the day immediately
preceding the Effective Date and not previously reversed, and any
additional amount of write-down of other real estate owned or other
property acquired through foreclosure or satisfaction of debt
required to conform such property's valuation with WABC's valuation
methods for such types of property.
The amount of the Significant Liabilities in the case of the
arrangements described in (i), (ii), and (vi) above, shall equal (a)
any payment that could be made as of the Effective Date that would
terminate the arrangement without further liability or expense to
KSB or WABC or (b) if the arrangement does not provide for such a
payment, the present value of the amount of the remaining payments
payable pursuant to the arrangement after the Effective Date using a
discount rate equivalent to WABC's then current cost of funds. The
amount of Significant Liabilities in the case of (iii) above shall
equal the amount expended or required to be expended under binding
commitments for a capital asset, minus the amount for which the
capital asset could actually be sold on a liquidation basis.
(c) AVERAGE CLOSING PRICE ADJUSTMENT; FINAL EXCHANGE RATIO. If, as
of two business days preceding the Effective Date, the Average Closing Price of
WABC Common Stock is greater than $41.76, the Pre-Final Exchange Ratio shall be
adjusted by multiplying it by a fraction, of which (i) the numerator is $41.76
and (ii) the denominator is the Average Closing Price, with the result rounded
to four decimal places. If, as of two business days preceding the Effective
Date, the Average Closing Price of WABC Common Stock is less than $33.80, the
Pre-Final Exchange Ratio shall be adjusted by multiplying it by a fraction, of
which (i) the numerator is $33.80 and (ii) the denominator is the Average
Closing Price, with the result rounded to four decimal places.
"Average Closing Price" means average of the closing prices quoted
on the Nasdaq National Market as reported in The Wall Street Journal
on each of the 20 consecutive trading days prior to two business
days prior to the Effective Date, rounded to four decimal places,
whether or not trades occurred on those days
"Final Exchange Ratio" means the Pre-Final Exchange Ratio as
adjusted, if required, by the foregoing adjustment on account of the
Average Closing Price.
(d) CONVERSION. On the Effective Date, by virtue of the Merger and
without any action on the part of the holder of any common stock of KSB (a "KSB
Share" or "KSB Shares"), each outstanding KSB Share (other than
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fractional shares or any shares as to which dissenters' rights have been
perfected) shall be converted into a number of shares of the common stock,
without par value, of WABC ("WABC common stock" or "WABC Shares") equal to the
Final Exchange Ratio.
(e) CANCELLATION AND EXCHANGE OF KSB SHARES. Upon conversion of KSB
Shares into WABC Shares in accordance with the foregoing, all KSB Shares shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each certificate previously representing any such
shares shall thereafter represent the WABC Shares (and cash for fractional
shares) into which such KSB Shares have been converted. Certificates previously
representing KSB Shares (other than dissenting shares) shall be exchanged for
certificates representing whole shares of WABC common stock issued in
consideration therefor upon the surrender of such certificates in accordance
with Section 2.3.
(f) RIGHTS AS SHAREHOLDERS. From and after the Effective Date, the
holders of certificates formerly representing KSB Shares shall cease to have any
rights with respect thereto other than any dissenters' rights they have
perfected pursuant to Chapter 13 of the GCL.
2.2 FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of WABC common stock shall be issued to holders of KSB Shares.
In lieu thereof, each such holder entitled to a fraction of a share of WABC
common stock shall receive, at the time of surrender of the certificate or
certificates representing such holder's KSB Shares, an amount in cash equal to
the Average Closing Price multiplied by the fraction of a share of WABC common
stock to which such holder otherwise would be entitled. No such holder shall be
entitled to dividends, voting rights, interest on the value of, or any other
rights in respect of a fractional share. Fractional shares shall be determined
on an aggregate basis for each KSB shareholder and not on a per-share basis.
2.3 SURRENDER OF KSB SHARES.
(a) Prior to the Effective Date, WABC shall appoint Computershare
Investor Services, LLC, or its successor, or any other bank or trust company
(having capital of at least $50 million) mutually acceptable to KSB and WABC, as
exchange agent (the "Exchange Agent") for the purpose of exchanging certificates
representing the KSB Shares and at and after the Effective Date, WABC shall
issue and deliver to the Exchange Agent certificates representing the WABC
Shares, as shall be required to be delivered to holders of KSB Shares pursuant
to Section 2 of this Agreement. As soon as practicable after the Effective Date,
each holder of KSB Shares converted pursuant to Section 2.1, upon surrender to
the Exchange Agent of one or more certificates for such KSB Shares for
cancellation, will be entitled to receive a certificate representing the number
of WABC Shares determined in accordance with Section 2.1 and a payment in cash
with respect to fractional shares, if any, determined in accordance with Section
2.2. Each certificate representing WABC Shares will bear a notation
incorporating the Amended Rights Agreement (as that term is defined in Section
5(j) herein), by reference and certificates representing the WABC Shares will
evidence and entitle the holders thereof to certain rights as set forth in and
subject to the terms of the Amended Rights Agreement (the "Rights").
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Certificates issued for the WABC Shares shall be deemed to be certificates for
the Rights.
(b) No dividends or other distributions of any kind which are
declared payable to shareholders of record of the WABC Shares after the
Effective Date will be paid to persons entitled to receive such certificates for
WABC Shares until such persons surrender their certificates representing KSB
Shares. Upon surrender of such certificate representing KSB Shares, the holder
thereof shall be paid, without interest, any dividends or other distributions
with respect to the WABC Shares as to which the record date and payment date
occurred on or after the Effective Date and on or before the date of surrender.
(c) If any certificate for WABC Shares is to be issued in a name
other than that in which the certificate for KSB Shares surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer costs,
taxes or other expenses required by reason of the issuance of certificates for
such WABC Shares in a name other than the registered holder of the certificate
surrendered, or such persons shall establish to the satisfaction of WABC and the
Exchange Agent that such costs, taxes or other expenses have been paid or are
not applicable.
(d) All dividends or distributions, and any cash to be paid pursuant
to Section 2.2 in lieu of fractional shares, if held by the Exchange Agent for
payment or delivery to the holders of unsurrendered certificates representing
KSB Shares and unclaimed at the end of one year from the Effective Date, shall
(together with any interest earned thereon) at such time be paid or redelivered
by the Exchange Agent to WABC, and after such time any holder of a certificate
representing KSB Shares who has not surrendered such certificate to the Exchange
Agent shall, subject to applicable law, look as a general creditor only to WABC
for payment or delivery of such dividends or distributions or cash, as the case
may be.
2.4 NO FURTHER TRANSFERS OF KSB SHARES. At the Effective Date, the stock
transfer books of KSB shall be closed and no transfer of KSB Shares theretofore
outstanding shall thereafter be made.
2.5 ADJUSTMENTS. If, between the date of this Agreement and the
Effective Date, the outstanding shares of WABC common stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, recapitalization, split up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within such period, the number of WABC Shares to be issued and delivered in the
Merger in exchange for each outstanding KSB Share shall be correspondingly
adjusted.
2.6 TREATMENT OF STOCK OPTIONS. Each person holding one or more options
to purchase KSB Shares pursuant to the Kerman State Bank 1994 Stock Option Plan
(the "Option Plan") shall have the right, in his or her discretion, to:
(a) Exercise immediately prior to the Effective Date any options
granted under the Option Plan that were vested prior to the Effective Date. If
an optionee with respect to the Option Plan has not terminated his
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or her employment with KSB before the date of this Agreement, his or her options
that are not vested on that date shall become fully exercisable immediately
prior to the Effective Date following notice by KSB to the extent the terms of
the Option Plan provide for such acceleration; and/or
(b) Have any options that are not exercised converted into an option
to purchase shares of WABC common stock in the following manner:
(i) Following the Effective Date, shares of WABC common stock
shall be substituted under the options for KSB Shares based on the Final
Exchange Ratio in a form acceptable to WABC. Specifically, each option
shall be deemed to continue as an option to purchase the number of
shares of WABC common stock equal to the Final Exchange Ratio multiplied
by the number of KSB Shares previously covered by such option at an
option exercise price for each such share of WABC common stock equal to
the previous option exercise price for each KSB Share divided by the
Final Exchange Ratio. Except as noted below, each KSB stock option shall
otherwise continue on terms and conditions that are consistent with
those that were applicable on the Effective Date, including accelerated
vesting to the extent provided in the Option Plan; i.e., options for KSB
shares that became fully vested as a result of the Merger will be
converted into fully vested options for shares of WABC common stock.
(ii) KSB shall amend the Option Plan and obtain any required
shareholder approval of such Option Plan amendments and shall amend, as
necessary, any and all option agreements (including obtaining any
required participant consents) prior to the Effective Date to make them
consistent with this Section 2.6.
3. COVENANTS OF THE PARTIES.
3.1 COVENANTS OF WABC.
(a) RESERVATION, ISSUANCE AND REGISTRATION OF WABC COMMON STOCK.
WABC shall reserve and make available for issuance in connection with the Merger
and in accordance with the terms of this Agreement (i) the WABC Shares; and (ii)
the maximum number of shares of common stock of WABC to which the option holders
of KSB may be entitled pursuant to Section 2.6 above at or after the Effective
Date. All WABC Shares will, when issued and delivered pursuant to and in
accordance with the terms of this Agreement, be duly authorized, validly issued,
fully paid and nonassessable. WABC shall file and cause to be declared effective
pursuant to the Securities Act of 1933, as amended (the "1933 Act"), one or more
registration statements covering all such shares and shall cause all such shares
to be issued in compliance with the 1933 Act and in compliance with all
applicable state securities laws and regulations.
(b) GOVERNMENT APPROVALS. Prior to the Effective Date, WABC, with
the cooperation of KSB, shall use its best efforts in good faith to take or
cause to be taken as promptly as practicable all such steps as shall be
necessary to obtain (i) the prior approval of the Merger by the Board of
Governors of the Federal Reserve System (the "FRB") under the Bank Merger Act,
as amended, (ii) the DFI under the California Banking Law and (iii) all other
consents and approvals of government agencies as are required by law or
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otherwise, and shall do any and all acts deemed by WABC to be necessary or
appropriate in order to cause the Merger to be consummated on the terms provided
in this Agreement as promptly as practicable. All approvals referred to in
clauses (i), (ii) and (iii) of this Section 3.1(b) are hereinafter referred to
as the "Government Approvals."
(c) NOTIFICATION OF BREACH OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. WABC shall promptly (and in any event within two business days) give
written notice to KSB upon becoming aware of the occurrence or impending or
threatened occurrence of any event which would cause or constitute a breach of
any of the representations, warranties or covenants of WABC contained or
referred to in the Merger Agreement or this Agreement and shall use its best
efforts to prevent the same or remedy the same promptly.
(d) FINANCIAL STATEMENTS.
(i) WABC has delivered or shall make available to KSB prior to
the Effective Date true and correct copies of its consolidated
statements of income, changes in shareholders' equity and statements of
cash flows for the three month periods ended September 30, 2001, June
30, 2001, March 31, 2001, and any subsequent quarter ends, and for the
years ended December 31, 2001, 2000 and 1999, and consolidated balance
sheets at September 30, 2001, June 30, 2001, March 31, 2001, any
subsequent quarter ends, and at December 31, 2001, 2000 and 1999. Such
consolidated financial statements at and for the years ended December
31, 2001, 2000 and 1999 have been audited by KPMG LLP and its
predecessors, independent public accountants ("KPMG") and include an
opinion of such accounting firm to the effect that such financial
statements have been prepared in accordance with GAAP and present
fairly, in all material respects, the consolidated financial position,
results of operations and cash flow of WABC at the dates indicated and
for the periods then ending. The opinions of KPMG do not and shall not
contain any qualifications.
(ii) WABC has provided or shall provide to KSB at or prior to
the Effective Date copies of all financial statements and proxy
statements issued or to be issued to WABC shareholders and/or directors
after December 31, 2001, through the Effective Date.
(e) PRESS RELEASES. WABC shall not issue any press release or
written statement for general circulation relating to the Merger, this Agreement
or the Merger Agreement unless previously provided to KSB for review and
approval (which approval will not be unreasonably withheld or delayed) and shall
cooperate with KSB in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement or the
Merger; provided that WABC may, without the consent of KSB, make any disclosure
with regard to this Agreement or the Merger that it determines is required under
any applicable law or regulation.
(f) BUSINESS COMBINATIONS. WABC shall not accept any offer from any
third party regarding a Business Combination of WABC with any other entity
unless such offer is expressly conditioned upon the performance by WABC or its
successor in interest of its obligations under this Agreement. In the event WABC
fails to comply with the provisions of this Section 3.1(f), KSB shall be
entitled to terminate this Agreement without any liability to
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WABC or any agent thereof pursuant to Section 12(b), provided, however, that the
obligations and liabilities of WABC set forth in Section 12(e) hereof shall
continue in full force and effect. As used in this Agreement, "Business
Combination" shall mean any tender or exchange offer, proposal for a merger,
consolidation, or other takeover proposal involving any party hereto (except as
explicitly contemplated in this Agreement) or any offer or proposal to acquire
in any manner a substantial equity interest in, or a substantial portion of any
party hereto other than transactions contemplated hereunder.
(g) DIRECTOR AND OFFICER LIABILITY. Upon the Effective Date, any
former KSB officers who become officers of WABC (including any subsidiaries
thereof) shall be included in WABC's Director and Officer insurance policy.
Prior to the Effective Date, KSB may purchase tail insurance coverage under its
current policies of directors' and officers' liability insurance for a term not
to exceed three years from the Effective Time with respect to claims arising
from facts or events which occurred prior to the Effective Date; provided,
however, that the total premium payment for such insurance shall not exceed an
amount that is reasonably acceptable to WABC. Except as required by applicable
law, neither WABC nor Westamerica will have any further obligation hereunder
with respect to the indemnification of any person who now is or hereafter
becomes a director or executive officer of KSB for acts or events occurring
before the Effective Date.
3.2 COVENANTS OF KSB.
(a) APPROVAL BY KSB SHAREHOLDERS. KSB shall cause the Merger, this
Agreement and the Merger Agreement to be submitted promptly for the approval of
its shareholders at a special meeting to be called and held in accordance with
applicable laws. Subject to its continuing fiduciary duty to the shareholders of
KSB, the Board of Directors of KSB, in authorizing the execution and delivery of
this Agreement by KSB, shall unanimously recommend that this Agreement and the
Merger be approved. KSB shall use its best efforts to cause such meeting of its
shareholders to take place not later than 45 days after the Commission declares
the WABC Registration Statement effective. In connection with the call of such
meeting, KSB shall cause such proxy materials, with any amendments thereto that
may in the judgment of its counsel be necessary or desirable, to be mailed to
its shareholders (the proxy materials, together with any amendments or
supplements thereto, being herein referred to as the "Proxy Statement"). Subject
to its continuing fiduciary duty to the shareholders of KSB, the Board of
Directors of KSB shall at all times prior to and during such meeting of KSB
shareholders recommend that the transactions contemplated hereby, setting forth
each director's commitment to vote his or her shares of KSB stock in favor of
the transactions contemplated hereby, be adopted and approved and, subject to
such duty, use its best efforts to cause such adoption and approval. Within 15
business days after the time of execution and delivery of this Agreement,
members of the Board of Directors of KSB shall deliver to WABC undertakings in
the form attached hereto as Exhibit B confirming such directors' approval of the
transactions contemplated hereby, setting forth such directors' commitment to
vote his or her shares of KSB stock in favor of the transactions contemplated
hereby and setting forth such directors' commitment to use his or her best
efforts to cause the shareholders of KSB to adopt and approve the transactions
contemplated hereby, subject to their above-mentioned continuing fiduciary
duties to the shareholders of KSB and any
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regulatory constraints. Except with the prior approval of WABC, neither KSB nor
any member of its Board of Directors shall, at the KSB shareholders' meeting,
submit any other matters for approval of its shareholders.
(b) SHAREHOLDER LISTS AND OTHER INFORMATION. After execution hereof,
KSB shall from time to time make available to WABC, upon request, a list of its
shareholders and their addresses, a list showing all transfers of KSB common
stock and such other information as WABC shall reasonably request regarding both
the ownership and prior transfers of KSB common stock.
(c) GOVERNMENT APPROVALS. KSB will cooperate in all reasonable
respects with WABC and Westamerica in their undertaking to obtain the Government
Approvals and KSB further agree, subject to the continuing fiduciary duty of the
Board of Directors of KSB to the shareholders of KSB, to take such actions as
may be reasonably requested by WABC to cause the Merger to be consummated on the
terms provided in the Merger Agreement and this Agreement as promptly as is
practicable.
(d) NEW BRANCHES AND LEASES. KSB shall not create any new branches
or enter into any acquisitions or leases of real property, including new leases
and lease extensions, without the prior written approval of WABC.
(e) NOTIFICATION OF BREACH OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. KSB shall promptly (and in any event within two business days) give
written notice to WABC upon becoming aware of the occurrence or impending or
threatened occurrence of any event which would cause or constitute a breach of
any of the representations, warranties or covenants of KSB contained or referred
to in this Agreement and shall each use its best efforts to prevent the same or
remedy the same promptly.
(f) FINANCIAL STATEMENTS.
(i) KSB has delivered or shall deliver to WABC prior to the
Effective Date true and correct copies of its consolidated statements of
income for the three month periods ended September 30, 2001, June 30,
2001, March 31, 2001, and any subsequent quarter ends, and consolidated
statements of income, changes in shareholders' equity and statements of
cash flows for the fiscal years ended December 31, 2001, 2000, 1999,
1998, 1997 and 1996 and consolidated balance sheets at September 30,
2001, June 30, 2001, March 31, 2001, and any subsequent quarter ends and
at December 31, 2001, 2000, 1999, 1998, 1997 and 1996. Such consolidated
financial statements at December 31, 2001, 2000, 1999, 1998, 1997 and
1996 and for the fiscal years ended December 31, 2001, 2000, 1999, 1998,
1997 and 1996 have been or shall be audited by Xxxx-Xxxxx, LLP, and, in
each case as independent public accountants for KSB during the relevant
periods, and include or shall include an opinion of Xxxx Xxxxx to the
effect that such financial statements have been prepared in accordance
with GAAP and present fairly, in all material respects, the consolidated
financial position, results of operations and cash flows of KSB at the
dates indicated and for the periods then ending. The opinions of Xxxx
Xxxxx do not and shall not contain any qualifications.
(ii) KSB shall provide to WABC, at or prior to the Effective
Date, copies of all financial statements and proxy statements
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issued or to be issued to KSB's shareholders and/or directors after
December 31, 2001, and through the Effective Date.
(iii) KSB has delivered or shall deliver to WABC true and
complete copies of KSB's Annual Report to Shareholders for the years
ended December 31, 2001, 2000, 1999, 1998, 1997, and 1996, all proxy
statements and other written material furnished to KSB's shareholders
since December 31, 1995, and all other material reports, including call
reports, relating to KSB filed by KSB with the Federal Deposit Insurance
Corporation (the "FDIC"), the DFI, during 1996 through 2001 and in 2002
prior to the Effective Date. As of their respective dates, each of the
documents described in the preceding sentence complied or shall comply
in all material respects with all legal and regulatory requirements
applicable thereto.
(iv) To confirm satisfaction of the conditions in Section 7(o),
a reasonable period before Closing KSB shall provide to WABC a
certificate of its chief financial officer as to KSB's shareholders'
equity, loans, deposits, and allowance for loan losses and written
assurance of KSB's independent accountants under, or consistent with the
standards of, SAS 71 to the effect that the accountants are not aware
that the financial statements of KSB as of the most recent month end
preceding the Effective Time by at least 28 days (the "SAS 71 Date")
from which shareholders' equity is determined for purposes of Section
7(o) require any material modifications in order to comply with GAAP.
WABC shall be permitted reasonable review and inquiry with respect to
the calculation of shareholders' equity and the supporting certificate
and accountant's assurance.
(g) COMPENSATION. KSB shall not make or approve any increase in the
compensation payable or to become payable by KSB to any of its directors,
officers, employees or agents with annual salaries in excess of $40,000 at the
date hereof (including but not limited to compensation through any profit
sharing, pension, retirement, severance, incentive or other employee benefit
program or arrangement), nor shall any bonus payment or any agreement or
commitment to make a bonus payment be made, nor shall any stock option, warrant
or other right to acquire capital stock be granted, or employment agreement
(other than any such employment agreement that may arise by operation of law
upon the hiring of any new employee) or consulting agreement be entered into by
KSB with any such directors, officers, employees or agents unless WABC has given
its prior written consent, which shall not be unreasonably withheld. Nothing
herein shall prevent the payment to employees of KSB (with salaries of $40,000
or less at the date hereof) of regular salary increases, consistent with past
practices in connection with regular salary reviews, as heretofore disclosed to
WABC. Without the prior consent of WABC, which WABC shall not unreasonably
withhold, KSB shall not hire any new employee.
(h) CONDUCT OF BUSINESS IN THE ORDINARY COURSE. Prior to the
Effective Time:
(i) KSB shall conduct its business in the ordinary course as
heretofore conducted. For purposes of this Agreement, the "Ordinary
Course of Business" shall consist of the banking and related businesses
as presently conducted by KSB and permitted under the Federal Deposit
11
Insurance Act (the "FDI Act") and other applicable laws. Unless WABC has
given its previous written consent to any act or omission to the
contrary, KSB shall, through the Effective Date, cause its officers to:
(A) use their best efforts to preserve its business and
business organizations intact;
(B) use their best efforts to preserve the goodwill of
customers and others having business relations with KSB and take
no action that would impair the benefit to WABC of the goodwill
of KSB or the other benefits of the Merger;
(C) consult with WABC as to the making of any decisions or
the taking of any actions in matters other than in the Ordinary
Course of Business;
(D) maintain its properties in customary repair, working
order and condition (reasonable wear and tear excepted);
(E) comply with all laws, regulations and decrees
applicable to the conduct of its respective business;
(F) keep in force at not less than its present limits all
policies of insurance (including deposit insurance of the FDIC)
to the extent reasonably practicable in light of the prevailing
market conditions in the insurance industry;
(G) use its best efforts, subject to Section 3.2(g), to
keep available to WABC the services of its present officers and
employees (it being understood that KSB shall have the right to
terminate the employment of any officer or employee in accordance
with its established employment procedures);
(H) comply with all orders, agreements and memoranda of
understanding made by or with the FRB, the Federal Reserve Bank
of San Francisco (the "FRBSF"), the FDIC, the DFI or any other
regulatory authority of competent jurisdiction, and promptly (and
in any event within two business days) forward to WABC all
communications received from or sent by KSB to any such authority
that are not prohibited by such authority from being so disclosed
and inform WABC of any material restrictions imposed by any
governmental authority on the business of KSB;
(I) file in a timely manner (taking into account any
extensions duly obtained) all reports, tax returns and other
documents required to be filed with federal, state, local and
other authorities;
(J) conduct a Phase I environmental audit prior to
foreclosure on any property and provide the results of such audit
to and consult with WABC regarding the significance of the audit
prior to the foreclosure on any such property;
12
(K) not sell, lease, pledge, assign, encumber or otherwise
dispose of any of its respective assets except in the Ordinary
Course of Business, for adequate value, without recourse and
consistent with its customary practice;
(L) with respect to any extension of credit in excess of
$10,000, not waive or release any right or collateral or cancel
or compromise any debt or claim, except in the Ordinary Course of
Business;
(M) not make, renegotiate, renew, increase, extend or
purchase any loans, advances or loan commitments, in each case to
any of its respective officers, directors or any affiliated or
related persons of such directors or officers except in the
Ordinary Course of Business consistent with established loan
procedures and in compliance with FRB Regulation O and the
California Banking Law;
(N) not take any action to create, relocate or terminate
the operations of any banking office or branch, or to form any
new subsidiary or affiliated entity;
(O) not settle or otherwise take any action to release or
reduce any of its respective rights with respect to any
litigation involving a claim of more than $10,000 in which it is
a party; and
(P) consult with WABC on problem loan workout strategies,
and obtain WABC's concurrence on any loan loss in excess of
$25,000 or any writedown of other real estate owned; provided
that WABC's consent shall be deemed given unless it objects and
states the basis of its objection in writing, or verbally with
prompt written confirmation, within five business days after
receipt of written notice directed to authorized WABC personnel,
together with sufficient supporting information to allow WABC to
make an informed judgment, and WABC shall not unreasonably
withhold consent; provided, further, that any consent given by
WABC shall be binding only is given by authorized WABC personnel
identified on a list signed by WABC's President;
(ii) KSB shall not, without first having obtained the written
consent of WABC, cause the officers of KSB to:
(A) commit to any loan or extension of credit in excess of
$100,000, provided that WABC's consent shall be deemed given
unless it objects and states the basis of its objection in
writing, or verbally with prompt written confirmation, within two
business days after receipt of written notice directed to
authorized WABC personnel, together with sufficient supporting
information to allow WABC to make an informed judgment, and WABC
shall not unreasonably withhold its consent; provided, further,
that any consent given by WABC shall be binding only if given by
authorized WABC personnel identified on a list signed by WABC's
President;
13
(B) purchase any investment security with a maturity in
excess of one year, or sell any investment security in which a
gain is recognized;
(C) issue any certificate of deposit with a rate of
interest in excess of the rate paid on similar accounts of
comparable maturity by Westamerica plus 15 basis points, provided
that WABC shall not withhold its consent to a request for an
exception to this restriction if the request is based on a
reasonable business purpose consistent with existing operations
of KSB;
(D) commit to any new capital commitments or expenditures
in excess of $25,000 in the aggregate;
(E) commit to any new contract or extend any existing
contract (including, but not limited to, data processing or
servicing but excluding agreements to extend credit) that would
obligate KSB for an aggregate amount over time in excess of
$25,000;
(F) accelerate the vesting of pension or other benefits
except as contractually obligated as of the date hereof; or
(G) acquire, own, possess or have a collateral or
contingent interest or purchase option in any properties or other
assets which contain or have located within or thereon any
hazardous or toxic waste material or substance unless the
location of such hazardous or toxic waste material or other
substance or its use thereon conforms in all respects with all
federal, state and local laws, rules, regulations or other
provisions regulating the discharge of materials into the
environment.
(i) PRESS RELEASES. KSB shall not issue any press release or
written statement for general circulation relating to this Agreement or
the Merger unless previously provided to WABC for review and approval
(which approval will not be unreasonably withheld or delayed) and shall
cooperate with WABC in the development and distribution of all news
releases and other public information disclosures with respect to this
Agreement or the Merger; provided that KSB may, without the consent of
WABC, make any disclosure with regard to this Agreement or the Merger
that it determines is required under any applicable law or regulation.
(j) NO MERGER OR SOLICITATION.
(i) Subject to the continuing fiduciary duty of the Board of
Directors of KSB to the shareholders of KSB, prior to the Effective
Time, KSB shall not effect or agree to effect any Business Combination,
acquire or agree to acquire any of its own capital stock or the capital
stock (except in a fiduciary capacity) or assets (except in the Ordinary
Course of Business or except pursuant to its Simplified Employee Pension
plan as consistent with past practice) of any other
14
entity, or commence any proceedings for winding up and dissolution
affecting either of them.
(ii) Subject to the continuing fiduciary duty of the Board of
Directors of KSB to the shareholders of KSB, prior to the Effective
Date, neither KSB nor any officer, director or affiliate of KSB, nor any
investment banker, attorney, accountant or other agent, advisor or
representative retained by KSB shall (A) solicit or encourage, directly
or indirectly, any inquiries, discussions or proposals for, continue,
propose or enter into discussions or negotiations looking toward, or
enter into any agreement or understanding providing for, any Business
Combination; or (B) disclose, directly or indirectly, any nonpublic
information to any corporation, partnership, person or other entity or
group, other than federal or state bank or security regulatory
authorities, or, consultants, advisors, or agents of KSB who need to
know such information and who are subject to comparable confidentiality
provisions, concerning the business and properties of KSB or afford any
such party access to the properties, books or records of KSB or
otherwise assist or encourage any such party in connection with the
foregoing, or (C) furnish or cause to be furnished any information
concerning the business, financial condition, operations, properties or
prospects of KSB to another person having any actual or prospective role
with respect to any such transaction.
(iii) KSB shall notify WABC immediately of the details of any
indication of interest of any person, corporation, firm, association or
group to acquire by any means a controlling interest in KSB or engage in
any Business Combination with KSB.
(iv) In the event the Board of Directors of KSB receives a
bona fide offer for a Business Combination of KSB with another entity,
and reasonably determines, upon advice of counsel, that as a result of
such offer, any duty to act or to refrain from doing any act pursuant to
this Agreement is inconsistent with the continuing fiduciary duties of
said Board of Directors to the shareholders of KSB, such failure to act
or refrain from doing any act shall not constitute the failure of any
condition, breach of any covenant or otherwise constitute any breach of
this Agreement, provided, however, that any such failure to act or
refrain from doing any act shall entitle WABC to terminate this
Agreement pursuant to Section 12(b); and provided further, that the
obligations and liabilities of KSB set forth in Section 12(e) hereof
shall continue in full force and effect.
(k) EMPLOYEE BENEFIT PLANS. KSB agrees that any of its employee
benefit plans shall, at the request of WABC, be terminated, frozen, modified or
merged into the corresponding employee benefit plan of WABC immediately before,
on or after the Effective Date, as determined by WABC in its sole discretion and
to the extent permitted by such plan without violating the rights of employees.
(l) CHANGES IN CAPITAL STOCK. At or after the date hereof and at or
prior to the Effective Time, except with the prior written consent of WABC, KSB
shall not amend its Articles of Incorporation or Bylaws; make any change in its
authorized, issued or outstanding capital stock or any other equity security;
issue, sell, pledge, assign or otherwise encumber or dispose
15
of, or purchase, redeem or otherwise acquire, any of its stock or other equity
securities or enter into any agreement, call or commitment of any character so
to do; grant, issue, or accelerate of the vesting of any stock option relating
to, right to acquire, or security convertible into, shares of its capital stock
or other equity security; purchase, redeem, retire or otherwise acquire (other
than in a fiduciary capacity) any shares of, or any security convertible into,
its capital stock or other equity security, or agree to do any of the foregoing,
except that nothing herein shall prohibit the issuance of shares pursuant to the
Option Plan with respect to options outstanding at the date of this Agreement
(except as limited in Section 2.6).
(m) DIVIDENDS. KSB shall not declare, set aside, or pay any dividend
or other distribution in respect of its common stock (including, without
limitation, any stock dividend or distribution).
(n) ACCOUNTING METHODS. KSB shall not change its methods of
accounting in effect at December 31, 2000, except as required by changes in GAAP
as concurred in by its independent auditors or as required by this Agreement.
(o) AFFILIATES. At least 40 days prior to the Effective Date, KSB
shall deliver to WABC a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the shareholders of KSB, "affiliates" of
KSB for purposes of Rule 145 under the 1933 Act. KSB shall use all commercially
reasonable efforts to cause each person named in the letter delivered by it to
deliver to WABC prior to the Effective Date, a written "affiliates" agreement,
in substantially the form attached hereto as Exhibit C, providing that such
person shall dispose of the WABC Common Stock to be received by such person in
the Merger only in accordance with applicable law.
(p) ADDITIONAL AGREEMENTS. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of KSB, the
proper officers and directors of each party to this Agreement shall take all
such necessary or appropriate action.
(q) ACCESS TO PROPERTIES, BOOKS AND RECORDS; CONFIDENTIALITY. Prior
to the Effective Time, KSB shall give WABC and its counsel and accountants full
access, during normal business hours and upon reasonable request, to all of its
properties, books, contracts, commitments and records including, but not limited
to, the corporate, financial and operational records, papers, reports,
instructions, procedures, tax returns and filings, tax settlement letters,
material contracts or commitments, regulatory examinations and correspondence
and shall allow WABC to make copies of such materials (to the extent not legally
prohibited) and shall furnish WABC with all such information concerning its
affairs as WABC may reasonably request. KSB shall also use its best efforts to
cause Xxxx Xxxxx to make available to WABC, its accountants, counsel and other
agents, to the extent reasonably requested in connection with such review, Xxxx
Adams's work papers and documentation relating to its audits of the books and
records of KSB.
16
(r) NONCOMPETITION AGREEMENTS. KSB shall use its best efforts to
have each director of KSB execute a noncompetition agreement substantially in
the form attached hereto as Exhibit D.
(s) CLASSIFICATIONS AND LITIGATION DEVELOPMENTS. KSB agrees to
promptly (and in any event within two business days) advise WABC in writing of
the classification of any loan as substandard, doubtful or loss, the filing or
threatened filing of any and all legal actions or other proceedings or
investigations which if determined adversely to KSB are likely to have a
material adverse effect on its business, financial condition or, results of
operations of KSB taken as a whole, compliance with its obligations under this
Agreement or the satisfaction of any condition to closing under this Agreement,
and any significant developments arising in connection with said actions,
proceedings or investigations.
(t) ACCOUNTING ADJUSTMENT BEFORE CLOSING. KSB agrees to make such
accounting adjustments as WABC shall reasonably request immediately before
Closing to conform KSB's accounting to WABC's accounting and methodology for
determining its allowance for loan losses, provided any such adjustment shall
have no effect on the consideration paid to KSB shareholders with respect to the
Merger.
3.3 COVENANTS OF THE PARTIES.
(a) INFORMATION AND CONFIDENTIALITY. Each party shall use its best
efforts to cause its officers, directors, employees, auditors, agents, and
attorneys to cooperate with the other in the reasonable requests for information
by the other parties hereto. Each party shall treat as confidential all such
information in the same manner as each party treats similar confidential
information of its own, and if this Agreement is terminated, each party shall
continue to treat all such information as confidential and to cause its
employees to keep all such information confidential and shall return such
documents theretofore delivered by any other party as such other party shall
request, and shall use such information, or cause it to be used, solely for the
purposes of evaluating and completing the transactions contemplated hereby;
provided that each party may disclose any such information to the extent
required by federal or state securities laws or otherwise required by any
governmental agency or authority, or by GAAP. The foregoing confidentiality
obligations shall not apply in respect of any information publicly available or
to any information previously known to the party in question, the use of which
is not otherwise restricted.
(b) ASSET REVIEW.
(i) KSB shall continue to engage its internal asset review
examiners to identify potential losses with respect to loans and other
assets. KSB shall have reviewed all nonperforming assets and other
classified or criticized assets as of a date within three months
preceding the Effective Date. KSB shall promptly provide a copy of
reports of such reviews to WABC. All assets of KSB may be reviewed by
WABC as part of its ongoing due diligence and WABC may provide a report
thereon to KSB setting forth WABC's grading or other assessment thereof
(including accounting treatment and loss recognition).
17
(ii) KSB may accept and implement WABC's grading or other
assessments (including accounting treatment and loss recognition)
concerning loans or OREO. In case of any dispute between WABC and KSB
with respect to classification or grading of loans, the amount of
reserve appropriate for a classified loan or the adequacy of KSB's
allowance for loan losses in accordance with the terms of this
Agreement, WABC and KSB shall use their best efforts to resolve such
dispute. If they do not resolve the dispute, KSB and WABC shall refer
the matter for resolution by a mutually agreed third party experienced
in reviewing loans and loan portfolios (the "Independent Loan
Reviewer").
(iii) The Independent Loan Reviewer shall immediately review
and/or appraise said loan(s) or OREO utilizing GAAP, applicable
regulatory accounting principles ("RAP") and related standards as
enforced by the FRB. If the Independent Loan Reviewer believes it
necessary to retain an independent appraiser, WABC and KSB shall
mutually agree on a qualified third party experienced in appraising
properties of the kind in question (the "Independent Appraiser").
(iv) KSB agrees to recognize on its books and records all
additional loan provisions and loan losses and record all OREO at their
net realizable value (and record related OREO expenses) based on the
review/appraisal by the Independent Loan Reviewer or Independent
Appraiser no later than the last day of month in which the determination
is made. With respect to any OREO, based on all known information
available from time to time, if it appears that KSB's then current
independent appraisals may not be accurate or upon request of and at the
expense of WABC, KSB shall immediately obtain updated independent
appraisals by an Independent Appraiser and provide copies of all such
appraisals to WABC. Any new or additional write-downs or OREO expenses
shall be recorded immediately upon receiving any updated independent
appraisal. WABC and KSB agree to accept the views of the Independent
Loan Reviewer and Independent Appraiser with respect to loan grades,
loan provisions, collateral and OREO values and related matters under
this section. When this method results in a determination that a loan or
asset should have a reserve amount or an additional reserve amount
associated with it, the reserve shall be created by an addition to the
allowance for loan losses and not by a reallocation of amounts in the
existing allowance. The parties agree that adjustments made under this
section shall be deemed consistent with GAAP.
(v) WABC has conducted a review of certain of KSB's loans, and
WABC and KSB have reached a compromise on appropriate grades and
reserves with respect to those loans on a separate schedule.
Notwithstanding clauses (i) to (iv) above, the grading of and reserve
for those loans shall not be changed or subject to review by the
Independent Loan Reviewer in the absence of a material change in the
payment performance or prospects for continued payment of such loans. If
any such material change occurs, those loans shall be subject to review
in the same manner as all other loans.
18
(vi) Except as provided otherwise above, KSB and WABC shall each
pay one half of all fees and expenses of the Independent Loan Reviewer
and any Independent Appraiser.
4. REPRESENTATIONS AND WARRANTIES OF KSB.
KSB represents and warrants to WABC that, except as otherwise set forth
in a Disclosure Schedule (the "Disclosure Schedule") delivered by KSB to WABC at
the time this Agreement is signed:
(a) CORPORATE STATUS AND POWER TO ENTER INTO AGREEMENTS. KSB (i) is
a California banking corporation duly incorporated, validly existing and in good
standing under the laws of the State of California, (ii) subject to the approval
of this Agreement and the transactions contemplated hereby by the shareholders
of KSB, the FRB and the DFI, has all necessary corporate power to enter into
this Agreement and to carry out all of the terms and provisions hereof and
thereof to be carried out by it, and (iii) is in full compliance with any
agreements, understandings or orders of the FDIC and the DFI or any other
regulatory authority having jurisdiction over its business or any of its assets
or properties. Neither the scope of the business of KSB nor the location of its
properties requires it to be licensed to do business in any jurisdiction other
than the State of California. KSB's deposits are insured by the FDIC in the
manner and to the full extent provided by law.
(b) ARTICLES, BYLAWS, BOOKS AND RECORDS. The copies of the Articles
of Incorporation and Bylaws of KSB which shall be delivered to WABC promptly
after the date hereof are complete and accurate copies thereof as in effect on
the date hereof. The minute books of KSB which shall be made available to WABC
contain a complete and accurate record of all meetings of the Boards of Director
(and committees thereof) and shareholders. The corporate books and records
(including financial statements) of KSB fairly reflect the material transactions
to which KSB is a party or by which its properties are subject or bound, and
such books and records have been properly kept and maintained. The Articles of
Incorporation and Bylaws of KSB and all amendments thereto have been duly
approved by all requisite corporate action and by the appropriate regulatory
authority to the extent required by law.
(c) COMPLIANCE WITH LAWS, REGULATIONS AND DECREES. KSB (i) has the
corporate power to own or lease its properties and to conduct its business as
currently conducted, (ii) has complied with, and is not in default of, any laws,
regulations, ordinances, orders or decrees applicable to the conduct of its
business and the ownership of its properties, including but not limited to all
federal and state laws (including but not limited to the Bank Secrecy Act),
rules and regulations relating to the offer, sale or issuance of securities, and
the operation of a commercial bank, (iii) has not failed to file with the proper
federal, state, local or other authorities any material report or other document
required to be so filed, (iv) has all approvals, authorizations, consents,
licenses, clearances and orders of, and has currently effective all
registrations with, all governmental and regulatory authorities which are
necessary to the business and operations of it as now being conducted, (v) has
not received notification, formally or informally, from any agency or department
of any federal, state or local government or any regulatory agency or the staff
thereof (A) asserting that it is not in compliance with any of the statutes,
regulations or ordinances
19
which such government or regulatory authority enforces, or (B) threatening to
revoke any licenses, franchise, permit or governmental authorization.
(d) CAPITALIZATION. The authorized common stock of KSB consists of
3,200,000 shares of common stock, no par value, of which 1,427,507 shares are
duly authorized, validly issued, fully paid and nonassessable and currently
outstanding. Said stock has been issued in compliance with all applicable
securities laws. No other equity securities of KSB have been issued or are
outstanding. There are currently outstanding options to purchase 63,130 shares
of KSB common stock issued pursuant to the Option Plan. Of such options, 56,000
have an exercise price below $10.86, and the weighted average exercise price of
such options is $6.08 per share. Said options were granted and, upon issuance in
accordance with the terms of the outstanding options said shares shall be
issued, in compliance with all applicable securities laws. Otherwise, there are
no outstanding (i) options, agreements, calls or commitments of any character
which would obligate KSB to issue, sell, pledge, assign or otherwise encumber or
dispose of, or to purchase, redeem or otherwise acquire, any KSB common stock or
any other equity security of KSB, or (ii) warrants or options relating to,
rights to acquire, or debt or equity securities convertible into, shares of KSB
common stock or any other equity security of KSB.
(e) EQUITY INTERESTS. KSB does not own, directly or indirectly, any
equity interest in any bank, corporation, or other entity.
(f) FINANCIAL STATEMENTS, REGULATORY REPORTS. No financial statement
or other document provided or to be provided to WABC as required by Section
3.2(f) hereof, as of the date of such document, contained, or as to documents to
be delivered after the date hereof, will contain, any untrue statement of a
material fact, or, at the date thereof, omitted or will omit to state a material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which such statements were or will be made, not
misleading; provided, however, that information as of a later date included with
such financial statements or other documents provided or to be provide to WABC
shall be deemed to modify information supplied to WABC as of any earlier date.
KSB has filed all material documents and reports relating to KSB required to be
filed with the FDIC, the DFI, or any other governmental authority having
jurisdiction over its business or any of its assets or properties. All such
reports conform in all material respects with the requirements promulgated by
such regulatory agencies. All compliance or corrective action relating to KSB
required by governmental authorities and regulatory agencies having jurisdiction
over KSB have been taken. KSB is not subject to any order, agreement or written
directive with any regulatory authority with respect to its assets or business
except for matters of general application. KSB has paid all assessments made or
imposed by any governmental agency. KSB shall deliver to WABC copies of all
annual management letters and opinions, and shall make available to WABC for
inspection all reviews, correspondence and other documents in the files of KSB
prepared by Xxxx Xxxxx or any other certified public accountant engaged by KSB
and delivered to KSB since January 1, 1999. The consolidated financial records
of KSB have been, and are being and shall be, maintained in all material
respects in accordance with all applicable legal and accounting requirements
sufficient to insure that all transactions reflected therein are, in all
material respects, executed in accordance with management's general or specific
authorization and recorded in conformity with GAAP, or applicable RAP, at the
time in effect. The data processing
20
equipment, data transmission equipment, related peripheral equipment and
software used by KSB in the operation of its business to generate and retrieve
financial records are adequate for the current needs of KSB.
(g) TAX RETURNS.
(i) KSB has timely filed all federal, state, county, local and
foreign tax returns required to be filed by it, including, without
limitation, estimated tax, use tax, excise tax, real property and
personal property tax reports and returns, employer's withholding tax
returns, other withholding tax returns and Federal Unemployment Tax
Returns, and all other reports or other information required or
requested to be filed by it, and each such return, report or other
information was, when filed, complete and accurate in all material
respects. KSB has paid all taxes, fees and other governmental charges,
including any interest and penalties thereon, when they have become due,
except those that are being contested in good faith, which contested
matters have been disclosed in the Disclosure Schedule. KSB has not been
requested to give or has given any currently effective waivers extending
the statutory period of limitation applicable to any tax return required
to be filed by it for any period. There are no claims pending against
KSB for any alleged deficiency in the payment of any taxes, and KSB does
not know of any pending or threatened audits, investigations or claims
for unpaid taxes or relating to any liability in respect of any taxes.
There have been no events, including a change in ownership, that would
result in a reappraisal and establishment of a new base-year full value
for purposes of Article XIII. A of the California Constitution, of any
real property owned in whole or in part by KSB or to the best of KSB's
knowledge, of any real property leased by KSB.
(ii) KSB has not filed any consolidated federal income tax
return with an "affiliated group" (within the meaning of Section 1504 of
the Code) where KSB was not the common parent of the group. KSB is not
or has not been a party to any tax allocation agreement or arrangement
pursuant to which it has any contingent, successor, or outstanding
liability for the taxes of anyone other than KSB. KSB is not required to
include in income any adjustment pursuant to Section 481(a) of the Code,
no such adjustment has been proposed by the IRS and no pending request
for permission to change any accounting method has been submitted by
KSB. KSB has not filed a consent pursuant to Section 341 of the Code or
agreed to have Section 341(f)(2) of the Code apply.
(iii) KSB has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock
qualifying for Tax-free treatment under section 355 of the Code (x) in
two years prior to the date of this Agreement or (y) in a distribution
which could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the transactions contemplated by this Agreement.
(iv) KSB shall deliver to WABC copies of all its and its
subsidiaries' tax returns with respect to taxes payable to the United
States of America and the State of California for the fiscal years ended
December 31, 2001 (when available), 2000, 1999, 1998 and 1997.
21
(h) MATERIAL ADVERSE CHANGE. Since September 30, 2001, there has
been (i) no material adverse change in the business, assets, licenses, permits,
franchises, results of operations, financial condition or prospects of KSB as a
whole (whether or not in the Ordinary Course of Business), (ii) no change in any
of the assets, licenses, permits or franchises of KSB that has had or can
reasonably be expected to have a material adverse effect on any of the items
listed in clause (i) above, (iii) no damage, destruction, or other casualty loss
(whether or not covered by insurance) that has had or can reasonably be expected
to have a material adverse effect on any of the items listed in clause (i)
above, (iv) no amendment, modification, or termination of any existing, or
entering into of any new, contract, agreement, plan, lease, license, permit or
franchise that is material to the business, financial condition, assets,
liabilities, operations or prospects of KSB, taken as a whole, except in the
Ordinary Course of Business; (v) no disposition by KSB of one or more assets
that, individually or in the aggregate, are material to it, except sales of
assets in the Ordinary Course of Business.
(i) NO UNDISCLOSED LIABILITIES. Except for items for which reserves
have been established in the unaudited consolidated balance sheets of KSB as of
September 30, 2001, KSB has not incurred or discharged, and is not legally
obligated with respect to, any indebtedness, liability (including, without
limitation, a liability arising out of an indemnification, guarantee, hold
harmless or similar arrangement) or obligation (accrued or contingent, whether
due or to become due, and whether or not subordinated to the claims of its
general creditors), other than as a result of operations in the Ordinary Course
of Business after such date. No agreement pursuant to which any loans or other
assets have been or will be sold by KSB entitle the buyer of such loans or other
assets, unless there is material breach of a representation or covenant by the
seller, to cause KSB to repurchase such loan or other asset or the buyer to
pursue any other form of recourse against KSB. KSB has not knowingly made and
shall not make any representations or covenants in any such agreement that
contained or shall contain any untrue statement of a material fact or omitted or
shall omit to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which such
representations and/or covenants were made or shall be made, not misleading. No
cash, stock or other dividend or any other distribution with respect to the
stock of KSB has been declared, set aside or paid, nor have any shares of the
stock of KSB been purchased, redeemed or otherwise acquired, directly or
indirectly, by KSB since September 30, 2001.
(j) PROPERTIES AND LEASES.
(i) KSB has good and marketable title, free and clear of all
liens and encumbrances and the right of possession, subject to existing
leaseholds, to all real properties and good title to all other property
and assets, tangible and intangible, reflected in the KSB consolidated
balance sheet as of September 30, 2001 (except property held as lessee
under leases disclosed in the Disclosure Schedule and except personal
property sold or otherwise disposed of since September 30, 2001 in the
Ordinary Course of Business), except (a) liens for taxes or assessments
not delinquent, (b) liens, encumbrances and imperfections of title not
created or suffered to be created by KSB nor actually known to KSB; (c)
such other liens and encumbrances and imperfections of title as do not
materially and
22
adversely affect the value of such property as reflected in the KSB
consolidated balance sheet as of September 30, 2001, or as currently
shown on the books and records of KSB and which do not interfere with or
impair the present and continued use, or (d) exceptions disclosed in
title reports and preliminary title reports, copies of which shall be
provided to WABC. To the actual knowledge of KSB, all tangible
properties of KSB conform in all material respects with all applicable
ordinances, regulations and zoning laws. All tangible properties of KSB
are in a good state of maintenance and repair, normal wear and tear
excepted, and are adequate for the current business of KSB. No
properties of KSB, are the subject of any pending or, to KSB's actual
knowledge, threatened investigation, claim or proceeding relating to the
use, storage or disposal on such property of or contamination of such
property by any toxic or hazardous waste material or substance; nor, to
KSB's actual knowledge, are any properties in which KSB holds a
collateral or contingent interest or purchase option subject to any such
pending or threatened investigation, claim or proceeding.. To KSB's
actual knowledge, KSB does not own, possesses or have a collateral or
contingent interest or purchase option in any properties or other assets
which contain or have located within or thereon any hazardous or toxic
waste material or substance unless the location of such hazardous or
toxic waste material or other substance or its use thereon conforms in
all material respects with all federal, state and local laws, rules,
regulations or other provisions regulating the discharge of materials
into the environment. As to any asset not owned or leased by KSB, KSB
has not controlled, directed or participated in the operation or
management of any such asset or any facilities or enterprise conducted
thereon in such a manner as to cause KSB to be deemed by a court of
competent jurisdiction to be an owner or operator of such asset under
applicable environmental laws.
(ii) All properties held by KSB under leases are held under
valid, binding and enforceable leases (subject to applicable bankruptcy,
insolvency and civil laws affecting creditors' rights generally, and
subject, as to enforceability, to equitable principles of general
applicability), with such exceptions as are not material and do not
interfere with the conduct of the business of KSB, and KSB enjoy quiet
and peaceful possession of such leased property. KSB is not in default
in any respect under any material lease, agreement or obligation
regarding its properties to which it is a party or by which it is bound.
(iii) Except as disclosed in the Disclosure Schedule, none of
KSB's rights and obligations under the leases referred to in Section
4(j)(ii) above require the consent of any other party to the transaction
contemplated by this Agreement. Where required, KSB shall use
commercially reasonable efforts to obtain, prior to the Effective Date,
all consents to the transaction contemplated by this Agreement required
to be obtained under such leases.
(k) MATERIAL CONTRACTS. KSB is not a party to or bound by any
contract or other agreement made in the Ordinary Course of Business which
involves aggregate future payments by or to it of more than $25,000 and which is
made for a fixed period expiring more than one year from the date hereof, and
KSB is not a party to or bound by any agreement not made in the Ordinary Course
of Business which is to be performed at or after the date hereof.
23
Each of the contracts and agreements disclosed in the Disclosure Schedule
pursuant to this Section 4(k) is a legal and binding obligation (subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of general
applicability), and no breach or default (and no condition which, with notice or
passage of time, or both, could become a breach or default) exists with respect
thereto. No power of attorney or similar authorization given directly or
indirectly by KSB is currently outstanding.
(l) CLASSIFIED LOANS. There are no loans presently owned by KSB that
have been classified by any bank examiner, outside loan reviewer, accountant or
management as "Other Loans Especially Mentioned," "Substandard," "Doubtful," or
"Loss" or classified using categories with similar import and all loans or
portions thereof classified "Loss" have been charged off. Notwithstanding the
above, KSB shall not be under any obligation to disclose to WABC any such
classification by any bank examiner where such disclosure would violate any
obligation of confidentiality of KSB imposed by the FDIC, the DFI, or other
regulator. KSB regularly reviews and appropriately classifies loans in
accordance with all applicable legal and regulatory requirements and generally
accepted banking practices. All loans and investments of KSB are legal, valid
and binding obligations enforceable in accordance with their respective terms
and are not subject to any setoffs, counterclaims or disputes (subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of general
applicability), except as disclosed in the Disclosure Schedule or reserved for
in the unaudited consolidated balance sheet of KSB as of September 30, 2001, and
were duly authorized under and made in compliance with applicable federal and
state laws and regulations. KSB has no extensions of credit, investments,
guarantees, indemnification agreements or commitments for the same (including
without limitation commitments to issue letters of credit, to create
acceptances, or to repurchase securities, federal funds or other assets) other
than those documented on the books and records of KSB.
(m) RESTRICTIONS ON INVESTMENTS. Except for pledges to secure public
and trust deposits and repurchase agreements in the Ordinary Course of Business,
none of the investments reflected in the KSB consolidated balance sheet as of
September 30, 2001, and none of the investments made by KSB since September 30,
2001, are subject to any restriction, whether contractual or statutory, which
materially impairs the ability of KSB freely to dispose of such investment at
any time.
(n) EMPLOYMENT CONTRACTS AND BENEFITS.
(i) KSB shall deliver to WABC in the Disclosure Schedule an
accurate list setting forth all bonus, incentive compensation,
profit-sharing, pension, retirement, stock purchase, stock option,
deferred compensation, severance, hospitalization, medical, dental,
vision, group insurance, death benefits, disability and other fringe
benefit plans, trust agreements, arrangements and commitments of KSB
(including but not limited to such plans, agreements, arrangements and
commitments applicable to former employees or retired employees, or for
which such persons are eligible), if any, together with copies of all
such plans, agreements, arrangements and commitments that are
documented, any and all contracts of employment and has made available
to WABC any Board of Directors' minutes (or committee minutes)
24
authorizing, approving or guaranteeing such plans and contracts. There
are no agreements or understandings, either written or oral, between KSB
and any person which would result in the payment of any consideration as
a result of any of the transactions contemplated by this Agreement other
than as disclosed in the Disclosure Schedule.
(ii) Except as set forth in the Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will
not: (i) entitle any current or former KSB Employee to severance pay,
unemployment compensation or any similar payment; (ii) accelerate the
time of payment or vesting, or increase the amount of any compensation
due to, or in respect of, any current or former KSB Employee; (iii)
result in or satisfy a condition to the payment of compensation that
would, in combination with any other payment, result in an "excess
parachute payment" within the meaning of IRC section 280G(b); or (iv)
constitute or involve a prohibited transaction (as defined in ERISA
section 406 or IRC section 4975), constitute or involve a breach of
fiduciary responsibility within the meaning of ERISA section 502(l) or
otherwise violate Part 4 of Subtitle B of Title I of ERISA.
(iii) Each such plan listed in the Disclosure Schedule can be
amended, terminated or otherwise discontinued after the Effective Date,
without material liability to the WABC (other than ordinary
administration expenses and severance obligations disclosed in the
Disclosure Schedule);
(iv) With respect to each employee benefit plan (as defined in
Section 3(3) of ERISA) which is listed in the Disclosure Schedule and
which is subject to the reporting, disclosure and record retention
requirements set forth in the IRC and Part 1 of Subtitle B of Title I of
ERISA and the regulations thereunder, each of such requirements has been
fully met on a timely basis.
(v) With respect to each employee benefit plan (as defined in
Section 3(3) of ERISA) which is listed in the Disclosure Schedule and
which is subject to Part 4 of Subtitle B of Title I of ERISA, none of
the following now exists or has existed within the six-year period
ending on the date hereof:
(1) Any act or omission constituting a material violation
of Section 402 of ERISA;
(2) Any act or omission constituting a violation of
Section 403 of ERISA;
(3) Any act or omission by KSB or any of its subsidiaries,
or by any director, officer or employee thereof, constituting a
violation of Sections 404 and 405 of ERISA;
(4) To the knowledge of KSB or any of its subsidiaries,
any act or omission by any other person constituting a violation
of Sections 404 or 405 of ERISA;
25
(5) Any act or omission which constitutes a violation of
Sections 406 or 407 of ERISA and is not exempted by Section 408
of ERISA or which constitutes a violation of Section 4975(c) of
the IRC and is not exempted by Section 4975(d) of the IRC; or
(6) Any act or omission constituting a violation of
Sections 503, 510 or 511 of ERISA.
(vi) All contributions, premiums or other payments due from KSB
and its subsidiaries to (or under) any plan listed in the Disclosure
Schedule have been fully paid or adequately provided for on the audited
financial statements for the year ended December 31, 2000 and period
ended September 30, 2001. All accruals thereon (including, where
appropriate, proportional accruals for partial periods) have been made
in accordance with GAAP consistently applied on a reasonable basis.
(vii) Each plan listed in the Disclosure Schedule complies with
all applicable requirements of (A) the Age Discrimination in Employment
Act of 1967, as amended, and the regulations thereunder and (B) Title
VII of the Civil Rights Act of 1964, as amended, and the regulations
thereunder.
(viii) Each plan listed in the Disclosure Schedule complies with
all applicable requirements of (A) the health care continuation coverage
provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, and the regulations thereunder.
(ix) KSB shall disclose in the Disclosure Schedule the names of
each director, officer and employee of KSB.
(x) KSB has not, prior to the Effective Date, in any material
respect, violated any of the health care continuation requirements of
COBRA, the requirements of FMLA, the requirements of the Health
Insurance Portability and Accountability Act of 1996, the requirements
of the Women's Health and Cancer Rights Act of 1998, the requirements of
the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of state law
applicable to its Employees.
(xi) As of the date hereof, KSB and any entity with which KSB
could be considered a single employer under 29 U.S.C. section 2101(a)(1)
or under any relevant case law, has not incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act,
as it may be amended from time to time, and within the 90-day period
immediately following the date hereof, will not incur any such liability
or obligation if, during such 90-day period, only terminations of
employment in the normal course of operations occur.
(o) COMPLIANCE WITH ERISA. KSB has not, since its inception, either
maintained or contributed to an employee pension benefit plan, as defined in
Section 3(2) of ERISA, including multi-employer plans, other than the KSB
Simplified Employee Pension Plan (the "Plan"), a true and accurate
26
copy of which shall be provided to WABC. With respect to the Plan, as of the
Effective Time (i) the form of the Plan, to the best of KSB's knowledge, will in
all material respects be (and currently is) in compliance with all the
applicable requirements of Section 408 of the IRC; (ii) KSB shall not have
amended the Plan or administered the Plan in a manner inconsistent with such
requirements; (iii) no contributions have exceeded the limitations set forth in
Section 415 of the IRC; (iv) all required and necessary filings with the
Internal Revenue Service ("IRS"), Department of Labor and any other governmental
agencies with respect to the Plan for all periods ending at or prior to the
Effective Time will have been made on a timely basis by KSB and the plan
administrator; (v) there shall have been no material violation of Parts 1 and 4
of Subtitle B of Title I of ERISA or of Section 4975 of the IRC; and (vi) there
shall have been no action, claim or demand of any kind known to KSB brought or
threatened by any potential claimant or representative of such claimant under
the Plan or Trust where KSB may be either (A) liable directly on such action,
claim or demand, or (B) obligated to indemnify any person, group of persons or
entity with respect to such action, claim or demand, unless such action, claim
or demand is covered by adequate reserves reflected in KSB's June 30, 2001
financial statements or an insurer of KSB has agreed to defend against and pay
the amount of any resulting liability without reservation.
(p) COLLECTIVE BARGAINING AND EMPLOYMENT AGREEMENTS. Except as
provided in this Agreement or as disclosed in the Disclosure Schedule, KSB does
not have any union or collective bargaining or written employment agreements,
contracts or other agreements with any labor organization or with any member of
management, or any management or consultation agreement not terminable at will
by it without liability and no such contract or agreement has been requested by,
or is under discussion by management with, any group of employees, any member of
management or any other person. There are no material controversies pending
between KSB and any current or former employees, and to the best of its
respective knowledge, there are no efforts presently being made by any labor
union seeking to organize any of such employees.
(q) COMPENSATION OF OFFICERS AND EMPLOYEES. No officer or employee
of KSB is receiving aggregate direct remuneration at a rate exceeding $40,000
per annum. The consummation of the transactions contemplated by this Agreement
will not (either alone or upon the occurrence of any additional or further acts
or events) result in any payment (whether of severance pay or otherwise)
becoming due from KSB or WABC to any employee of KSB.
(r) LEGAL ACTIONS AND PROCEEDINGS. Except as disclosed in the
Disclosure Schedule, KSB is not a party to, or so far as KSB is aware,
threatened with, and to its knowledge, there is no reasonable basis for, any
legal action or other proceeding or investigation before any court, any
arbitrator of any kind or any government agency, KSB is not subject to any
potential adverse claim, the outcome of which could involve the payment or
receipt by KSB of any amount in excess of $25,000, unless an insurer of KSB has
agreed to defend against and pay the amount of any resulting liability without
reservation, or, if any such legal action, proceeding, investigation or claim
will not involve the payment by KSB of a monetary amount, which could materially
adversely affect KSB or its business or property or the transactions
contemplated hereby except as disclosed in the Disclosure Schedule. KSB has no
knowledge of any pending or threatened claims or
27
charges under the Community Reinvestment Act, before the Equal Employment
Opportunity Commission, the California Department of Fair Housing & Economic
Development, the California Unemployment Appeals Board, or any human relations
commission. There is no labor dispute, strike, slow-down or stoppage pending or,
to the best of the knowledge of KSB threatened against KSB.
(s) EXECUTION AND DELIVERY OF THE AGREEMENT.
(i) The execution and delivery of this Agreement has been duly
authorized by the Board of Directors of KSB and, when this Agreement and
the Merger have been duly approved by the affirmative vote of the
holders of a majority of the outstanding shares of KSB common stock at a
meeting of shareholders duly called and held, this Agreement and the
Merger will be duly and validly authorized by all necessary corporate
action on the part of KSB.
(ii) This Agreement has been duly executed and delivered by KSB
and (assuming due execution and delivery by WABC) constitutes the legal
and binding obligations of KSB (subject to applicable bankruptcy,
insolvency and civil laws affecting creditors' rights generally, and
subject, as to enforceability, to equitable principles of general
applicability).
(iii) The execution and delivery by KSB of this Agreement and
the consummation of the transactions herein (A) do not violate any
provision of the Articles of Incorporation or Bylaws of KSB , any
provision of federal or state law or any governmental rule or regulation
(assuming (1) receipt of the Government Approvals, (2) receipt of the
requisite KSB shareholder approval referred to in Section 4(s)(i)
hereof, (3) due registration of the WABC Shares under the 1933 Act, (4)
receipt of appropriate permits or approvals under state securities or
"blue sky" laws, and (5) accuracy of the representations of WABC set
forth herein), and (B) do not require any consent of any person under,
conflict with or result in a breach of, or accelerate the performance
required by any of the terms of, any material debt instrument, lease,
license, covenant, agreement or understanding to which KSB is a party or
by which it is bound or any order, ruling, decree, judgment, arbitration
award or stipulation to which KSB is subject, or constitute a default
thereunder or result in the creation of any lien, claim, security
interest, encumbrance, charge, restriction or right of any third party
of any kind whatsoever upon any of the properties or assets of KSB.
(t) RETENTION OF BROKER OR CONSULTANT. No broker, agent, finder,
consultant or other party (other than legal, compliance, loan auditors and
accounting advisors) has been retained by KSB or is entitled to be paid based
upon any agreements, arrangements or understandings made by KSB in connection
with any of the transactions contemplated by this Agreement, except that KSB has
engaged Xxxxx X. Xxxxx Company in connection with this Agreement and has
provided WABC with a true and complete copy of its engagement agreement with
Xxxxx X. Xxxxx Company.
(u) INSURANCE. KSB is and continuously since its inception has been,
insured with reputable insurers against all risks normally insured
28
against by banks, and all of the insurance policies and bonds maintained by KSB
are in full force and effect, neither is in default thereunder and all material
claims thereunder have been filed in due and timely fashion. In the best
judgment of the management of KSB, such insurance coverage is adequate for KSB.
Since December 31, 1999, there has not been any damage to, destruction of, or
loss of any assets of KSB not covered by insurance that could materially and
adversely affect the business, financial condition, properties, assets or
results of operations of KSB.
(v) LOAN LOSS ALLOWANCE. The allowance for loan losses in the KSB
consolidated balance sheets dated December 31, 2000 and September 30, 2001, each
subsequent period end prior to the Effective Date and as of the Effective Date
are or will be adequate in all material respects under the requirements of GAAP,
and all applicable state and federal laws and regulations to provide for
possible loan losses on outstanding loans, net of recoveries, but in no event
will the allowance as of the SAS 71 Date or later be less than $2,400,000 plus
any increases required and less any decreases permitted by Section 3.3(b);
provided, however, that the allowance may be less than $2,400,000 if it is
determined that such lower allowance would be adequate using WABC's methodology.
KSB has disclosed in the Disclosure Schedule, and will promptly (and in any
event within two business days) inform WABC of the amounts of all OREO, loans,
leases, other extensions of credit or commitments, or other interest-bearing
assets of KSB that have been classified as of the date hereof or hereafter by
any internal bank examiner or any bank regulatory agency as "Other Loans
Especially Mentioned", "Substandard", "Doubtful", "Loss", or words of similar
import in the case of loans (or that would have been so classified, in the case
of other assets, had they been loans). Notwithstanding the above, KSB shall be
under no obligation to disclose to WABC any such classification by any bank
regulatory agency where such disclosure would violate any obligation of
confidentiality of KSB imposed by such bank regulatory agency. KSB has furnished
and will continue to furnish to WABC true and accurate information concerning
the loan portfolio and other real estate owned ("OREO") of KSB, and no material
information with respect to the loan portfolio has been or will be withheld from
WABC.
(w) TRANSACTIONS WITH AFFILIATES. Except as may arise in the
Ordinary Course of Business, KSB has not extended credit, committed itself to
extend credit, or transferred any asset to or assumed or guaranteed any
liability of the employees or directors of KSB, or any spouse or child of any of
them, or to any of their "affiliates" or "associates" as such terms are defined
in Rule 405 under the 1933 Act. KSB has not entered into any other transactions
with the employees or directors of KSB or any spouse or child of any of them, or
any of their affiliates or associates, except as disclosed in the Disclosure
Schedule. All such transactions have been on terms no less favorable to KSB than
those which would prevail in an arm's-length transaction with an independent
third party.
(x) INFORMATION IN WABC REGISTRATION STATEMENT. The information
pertaining to KSB which has been or will be furnished to WABC for or on behalf
of KSB for inclusion in the WABC Registration Statement, the Prospectus or the
Proxy Statement (each as hereinafter defined), or in the applications to be
filed to obtain the Government Approvals (the "Applications"), does not and will
not contain any untrue statement of any material fact or omit or will omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the
29
circumstances under which they are made, not misleading; provided, however, that
information of a later date shall be deemed to modify information as of an
earlier date. All financial statements of KSB included in the Prospectus and
Proxy Statement will present fairly the financial condition and results of
operations of KSB at the dates and for the periods covered by such statements in
accordance with GAAP consistently applied throughout the periods covered by such
statements. KSB shall promptly (and in any event within two business days)
advise WABC in writing if prior to the Effective Time KSB shall obtain knowledge
of any facts that would make it necessary to amend the WABC Registration
Statement, the Proxy Statement or any Application, or to supplement the
Prospectus, in order to make the statements therein not misleading or to comply
with applicable law.
(y) ACCURACY OF REPRESENTATIONS AND WARRANTIES. No representation or
warranty by KSB, and no statement by KSB in any certificate, agreement, schedule
or other document furnished in connection with the transactions contemplated by
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary to make such
representation, warranty or statement not misleading to WABC; provided, however,
that information as of a later date shall automatically modify information as of
an earlier date.
(z) NO BROKERED DEPOSITS. KSB does not now have and shall not accept
prior to or have on the Effective Date any "brokered deposits" as such deposits
are defined by the FDIC.
5. REPRESENTATIONS AND WARRANTIES OF WABC AND WESTAMERICA.
WABC and Westamerica represent and warrant to KSB that:
(a) CORPORATE STATUS AND POWER TO ENTER INTO AGREEMENT. WABC (i) is
a corporation duly incorporated, validly existing and in good standing under
California law and is a registered bank holding company under the Bank Holding
Company Act, (ii) subject to the approval of this Agreement and the transactions
contemplated hereby by the FRB, has all necessary corporate power to enter into
this Agreement and to carry out all of the terms and provisions hereof and
thereof to be carried out by it. Westamerica holds a currently valid license
issued by the DFI to engage in the commercial banking business in California at
the offices in which such business is conducted. Neither WABC nor any of its
subsidiaries is subject to any order of the FRB, the FDIC, the DFI or any other
regulatory authority having jurisdiction over its or their business or any of
its or their assets or properties. Neither the scope of the business of WABC or
Westamerica nor the location of its properties requires it to be licensed to do
business in any jurisdiction other than the State of California. WABC is the
sole shareholder of Westamerica. Westamerica is a member of the Federal Reserve
System. Westamerica's deposits are insured by the FDIC in the manner and to the
full extent provided by law.
(b) CORPORATE STATUS AND POWER OF WABC AND WESTAMERICA. Prior to and
as of the Effective Time, WABC and Westamerica will be corporations duly
incorporated, validly existing and in good standing under the laws of the State
of California and will have the corporate power to enter into the Merger
Agreement and to carry out all of the terms and provisions thereof to be carried
out by each of them.
30
(c) ARTICLES, BYLAWS, BOOKS AND RECORDS. The copies of the Articles
of Incorporation and Bylaws of WABC to be delivered to KSB are complete and
accurate copies thereof as in effect on the date hereof. The corporate books and
records (including financial statements) of WABC fairly reflect the material
transactions to which WABC or any of its subsidiaries is a party or by which any
of their properties are subject or bound, and such books and records have been
properly kept and maintained. The Articles of Incorporation and Bylaws of WABC
and all amendments thereto have been duly approved by all requisite corporate
action and said Articles of Incorporation and all amendments thereto have been
duly filed with the California Secretary of State.
(d) COMPLIANCE WITH LAWS, REGULATIONS AND DECREES. WABC and each of
its subsidiaries (i) has the corporate power to own or lease its properties and
to conduct its business as currently conducted, (ii) has complied with, and is
not in default of any laws, regulations, ordinances, orders or decrees
applicable to the conduct of its business and the ownership of its properties,
including but not limited to all federal and state laws (including but not
limited to the Bank Secrecy Act), rules and regulations relating to the offer,
sale or issuance of securities, and the operation of its subsidiary commercial
banks, other than where such noncompliance or default is not likely to result in
a material limitation on the conduct of the business of WABC or its
subsidiaries, taken as a whole, or is not likely to otherwise have a material
adverse effect on WABC and its subsidiaries taken as a whole, (iii) has not
failed to file with the proper federal, state, local or other authorities any
material report or other document required to be so filed, (iv) has all material
approvals, authorizations, consents, licenses, clearances and orders of, and has
currently effective all registrations with, all governmental and regulatory
authorities which are necessary in all material respects to the respective
businesses and operations of WABC and its subsidiaries as they are now being
conducted, and (v) has received no notification, formally or informally, from
any agency or department of any federal, state or local government or any
regulatory agency or the staff thereof (A) asserting that WABC or its
subsidiaries are not in material compliance with any of the statutes,
regulations or ordinances which such governmental or regulatory authority
enforces, or (B) threatening to revoke any material licenses, franchise, permit
or governmental authorization of WABC or its subsidiaries.
(e) FINANCIAL STATEMENTS. No financial statement or other document
provided or to be provided to KSB as required by Section 3.1(d) hereof, as of
the date of such document, contained, or as to documents delivered after the
date hereof, will contain, any untrue statement of a material fact, or, at the
date thereof, omitted or will omit to state a material fact necessary in order
to make the statements contained therein, in light of the circumstances under
which such statements were or will be made, not misleading; provided, however,
that information as of a later date shall be deemed to modify information as of
any earlier date. Since 1999, WABC has filed all material documents and reports
relating to WABC or its subsidiaries required to be filed by it with the FDIC,
the FRB, the DFI or any other governmental authority having jurisdiction over
its business or any of its assets or properties. All such reports conform in all
material respects with the requirements promulgated by such regulatory agencies.
All compliance or corrective action relating to WABC or its subsidiaries
required by governmental authorities and regulatory agencies having jurisdiction
over WABC or its subsidiaries has been taken. WABC and its subsidiaries have
31
received no notification, formally or informally, from any agency or department
of any federal, state or local government or any regulatory agency or the staff
thereof (A) asserting that WABC or any of its subsidiaries are not in material
compliance with any of the statutes, regulations or ordinances which such
governmental or regulatory authority enforces, or (B) threatening to revoke any
license, franchise, permit or governmental authorization of WABC or any of its
subsidiaries. Neither WABC nor any of its subsidiaries is subject to any order,
agreement, or written directive with any regulatory authority with respect to
its assets or business except for matters of general application. WABC and its
subsidiaries have paid all assessments made or imposed by any governmental
agency. The financial records of WABC have been, and are being and shall be,
maintained in all material respects in accordance with all applicable legal and
accounting requirements sufficient to insure that all transactions reflected
therein are, in all material respects, executed in accordance with management's
general or specific authorization and recorded in conformity with GAAP at the
time in effect.
(f) MATERIAL ADVERSE CHANGE. There has been no material adverse
change in the financial condition, results of operation or assets of WABC or its
subsidiaries from the financial condition, results of operation or assets
indicated in the financial statements of WABC at September 30, 2001.
(g) EXECUTION AND DELIVERY OF THE AGREEMENT.
(i) The execution and delivery of this Agreement has been duly
and validly authorized by the Boards of Directors of WABC and
Westamerica and this Agreement will be duly and validly authorized by
all necessary corporate action on the part of WABC and Westamerica.
(ii) This Agreement has been duly executed and delivered by WABC
and Westamerica and (assuming due execution and delivery by KSB)
constitutes a legal and binding obligation of WABC and Westamerica
(subject to applicable bankruptcy, insolvency and civil laws affecting
creditors' rights generally, and subject, as to enforceability, to
equitable principles of general applicability).
(iii) The execution and delivery by WABC and Westamerica of this
Agreement and the consummation of the transactions herein contemplated
(A) do not and will not violate any provision of the Articles of
Incorporation or Bylaws of WABC or Westamerica, any provision of federal
or state law or any governmental rule or regulation (assuming (1)
receipt of the Government Approvals, (2) due registration of the WABC
Shares under the 1933 Act, (3) receipt of appropriate permits or
approvals under state securities or "blue sky" laws, and (4) accuracy of
the representations of KSB set forth herein, and (B) do not require any
consent of any person under, conflict with or result in a breach of, or
accelerate the performance required by any of the terms of, any material
debt instrument, lease, license, covenant, agreement or understanding to
which WABC or Westamerica is a party or by which it is bound or any
order, ruling, decree, judgment, arbitration award or stipulation to
which WABC or Westamerica is subject, or constitute a default thereunder
or result in the creation of any lien, claim, security interest,
encumbrance, charge, restriction
32
or right of any third party of any kind whatsoever upon any of the
properties or assets of WABC and Westamerica.
(h) INFORMATION IN WABC REGISTRATION STATEMENT. The information
pertaining to WABC and each of its subsidiaries which will appear in the WABC
Registration Statement, the Prospectus or the Proxy Statement, in the form filed
with the Commission, or in the Applications, will contain no untrue statement of
any material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading; provided, however, that
the information as of a later date shall be deemed to modify information as of
an earlier date. All financial statements of WABC included in the Prospectus or
the Proxy Statement will present fairly the consolidated financial condition and
results of operations of WABC and its consolidated subsidiaries at the dates and
for the periods covered by such statements in accordance with GAAP consistently
applied throughout the periods covered by such statements. WABC shall promptly
(and in any event within two business days) advise KSB in writing if prior to
the Effective Time WABC shall obtain knowledge of any facts that would make it
necessary to amend the WABC Registration Statement, the Proxy Statement or any
Application, or to supplement the Prospectus, in order to make the statements
therein not misleading or to comply with applicable law.
(i) ACCURACY OF REPRESENTATIONS AND WARRANTIES. No representation or
warranty by WABC or Westamerica and no statement by WABC or Westamerica in any
certificate, agreement, schedule or other document furnished in connection with
the transactions contemplated by this Agreement or the Merger Agreement contains
or will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary to make such representation, warranty or
statement not misleading to KSB; provided, however, that information as of a
later date shall be deemed to modify information as of an earlier date.
(j) EMPLOYEE BENEFITS.
(i) WABC shall deliver upon request to KSB an accurate list
setting forth all profit sharing, pension, retirement, stock purchase,
stock option, deferred compensation, severance, hospitalization, group
insurance, death benefits, disability and other fringe benefit plans,
trust agreements, arrangements and commitments of WABC, if any, together
with copies of plans that are documented.
(ii) Each employee benefit plan (as defined in Sections 3(3) of
ERISA) which is listed in subsection (j)(i) is in material compliance
with the requirements of ERISA.
(k) LEGAL ACTIONS AND PROCEEDINGS. Except as disclosed to KSB in
writing, neither WABC nor any of its subsidiaries is a party to, nor so far as
any of them is aware, threatened with, and to WABC's knowledge, there is no
reasonable basis for, any legal action or other proceeding or investigation
before any court, any arbitrator of any kind or any government agency, and
neither WABC nor any of its subsidiaries is subject to any potential adverse
claim, the outcome of which could involve the payment by WABC or its
subsidiaries of any amount in excess of $5,000,000 individually or in the
aggregate, unless an insurer of WABC has agreed to defend against
33
and pay the amount of any resulting liability without reservation, or, if any
such legal action, proceeding, investigation or claim will not involve the
payment by WABC or any of its subsidiaries of a monetary amount, which could
materially adversely affect WABC or its business or property or the transactions
contemplated hereby. Neither WABC nor any of its subsidiaries has any knowledge
of any pending or threatened claims or charges under the Community Reinvestment
Act, before the Equal Employment Opportunity Commission, the California
Department of Fair Housing & Economic Development, the California Unemployment
Appeals board, or any human relations commission. There is no labor dispute,
strike, slowdown or stoppage pending or, to the best of the knowledge of WABC,
threatened against WABC or any of its subsidiaries.
(l) SECURITIES LAW FILINGS. WABC has filed and will file all
documents required to be filed by it under the Securities Act of 1933, the
Securities Exchange Act of 1934, the Investment Company Act of 1940, the
Investment Advisors Act of 1940 and the Trust Indentures Act of 1939, all as
amended, and that as of their respective dates, none of these documents
contained as of the date of the Agreement or will contain any untrue statement
of material fact or omitted or will omit to state material any fact required to
be stated therein or necessary to make the statements therein in light of the
circumstances under which they were made or will be made not misleading.
(m) TAXES. WABC has timely filed all federal, state, county, local
and foreign tax returns required to be filed by it, and each such return, report
or other information was, when filed, complete and accurate in all material
respects. WABC has paid all taxes, fees and other governmental charges,
including any interest and penalties thereon, when they have become due, except
those that are being contested in good faith. WABC has not been requested to
give and has not given any currently effective waivers extending the statutory
period of limitation applicable to any tax return required to be filed by it for
any period. There are no claims pending against WABC for any alleged deficiency
in the payment of any taxes, and WABC does not know of any pending or threatened
audits, investigations or claims for unpaid taxes or relating to any liability
in respect of any taxes.
6. SECURITIES ACT OF 1933.
(a) PREPARATION AND FILING OF REGISTRATION STATEMENT. WABC shall
promptly prepare and file with the Commission (i) a registration statement on
the appropriate form (the "WABC Registration Statement") under and pursuant to
the provisions of the 1933 Act for the purpose of registering the WABC Shares
and, (ii) shall prepare and file, as soon as practicable, one or more
registration statements or amendments to existing registration statements under
the 1933 Act for the purpose of registering the maximum number of shares of
common stock of WABC to which the option holders of KSB may be entitled pursuant
to Section 2.6 above at or after the Effective Date. WABC and KSB shall promptly
prepare the Proxy Statement for the purpose of submitting this Agreement and the
Merger to the shareholders of KSB for approval. KSB shall cooperate in all
reasonable respects with regard to the preparation of the Proxy Statement. The
Proxy Statement in definitive form is expected to serve as the prospectus (the
"Prospectus") to be included in the WABC Registration Statement. WABC and KSB
shall each provide promptly to the other such information concerning its
business and financial condition and affairs as may be required or appropriate
for inclusion in the WABC
34
Registration Statement, the Prospectus or the Proxy Statement, and shall cause
its counsel and auditors to cooperate with the other's counsel and auditors in
the preparation of the WABC Registration Statement, the Prospectus and the Proxy
Statement.
(b) EFFECTIVENESS OF REGISTRATION STATEMENT. WABC and KSB shall use
their best efforts to have the WABC Registration Statement and any amendments or
supplements thereto declared effective by the Commission under the 1933 Act as
soon as practicable, and thereafter KSB shall distribute at its cost the Proxy
Statement to holders of its common stock in accordance with applicable laws and
its Articles of Incorporation and Bylaws. KSB shall not mail or otherwise
furnish the Proxy Statement to its shareholders unless and until WABC shall have
received a written assurance from Xxxx Xxxxx dated no more than two business
days prior to the effective date of the WABC Registration Statement as provided
in Section 3.2(f)(iv) of this Agreement.
(c) SALES AND RESALES OF COMMON STOCK. WABC shall not be required to
maintain the effectiveness of the WABC Registration Statement for the purpose of
sale or resale of the WABC Shares by any person.
(d) RULE 145. Securities representing WABC Shares issued to
affiliates of KSB (as determined by counsel to WABC) under Rule 145 of the rules
and regulations under the 1933 Act pursuant to the Merger Agreement may be
subject to stop transfer orders and may bear a restrictive legend in
substantially the following form:
The security represented by this instrument has been issued or
transferred to the registered holder as the result of a transaction
to which Rule 145 under the 1933 Act applies. The security
represented by this instrument may not be sold, hypothecated,
transferred or assigned, and the issuer shall not be required to
give effect to any attempted sale, hypothecation, transfer or
assignment, except (i) pursuant to a then current effective
registration under the 1933 Act, or (ii) in a transaction which, in
the opinion of counsel satisfactory to the issuer is not required to
be registered under the 1933 Act.
Should any opinion of counsel described in clause (ii) of the foregoing legend
indicate that the legend and any stop transfer order then in effect with respect
to the shares may be removed, WABC will upon request substitute unlegended
securities and remove any stop transfer orders.
7. CONDITIONS TO THE OBLIGATIONS OF WABC.
The obligations of WABC under this Agreement are, at its option, subject
to fulfillment at or prior to the Effective Date of each of the following
conditions; provided, however, that any one or more of such conditions, other
than those set forth in subsection (h) or (i) below, may be waived by the Board
of Directors of WABC at any time at or prior to the Effective Time:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of KSB in Section 4 hereof shall be true and correct in all
35
material respects on the date hereof and as of the Effective Date, with the same
effect as though such representations and warranties had been made on and as of
such date except as to any representation or warranty which specifically relates
to a specified date and not contain any material inaccuracies or omissions, the
circumstances as to which, either individually or in the aggregate have, or
reasonably could be expected to have, a material adverse effect on KSB.
(b) COMPLIANCE AND PERFORMANCE UNDER AGREEMENT. KSB shall have
performed and complied in all material respects with all terms of this Agreement
required to be performed or complied with by them at or prior to the Effective
Date. Each of the directors of KSB also shall have performed and complied in all
material respects with all of the terms and conditions of the undertaking
referred to in Section 3.2(a) above. KSB acknowledges that its failure to obtain
WABC's prior written approval for any material transaction pursuant to this
Agreement and not in the Ordinary Course of Business shall be within the scope
of this paragraph.
(c) MATERIAL ADVERSE CHANGE. No materially adverse change shall have
occurred since September 30, 2001, in the business, financial condition, results
of operations or prospects of KSB and KSB shall not be a party to or, so far as
KSB is aware, threatened with, and to KSB's knowledge there is no reasonable
basis for, any legal action or other proceeding before any court, any arbitrator
of any kind or any government agency if, in the reasonable judgment of WABC,
such legal action or proceeding could materially adversely affect KSB, or their
business, financial condition, results of operations or prospects taken as a
whole. Without limitation, the following shall constitute a materially adverse
change: (i) the existence of Significant Liabilities of $925,000 or more or (ii)
any material adverse difference between KSB's call report for the period ended
December 31, 2001, which has been provided to WABC, and KSB's audited financial
statements, including footnotes, for the year ended December 31, 2001, which
have not been prepared as of the date of this Agreement, unless such change has
been previously disclosed in writing to WABC before the date of this Agreement..
(d) APPROVAL OF AGREEMENT. This Agreement and the Merger shall have
been duly approved by the affirmative vote of the holders of a majority of the
outstanding shares of KSB common stock at the meeting of shareholders duly
called and held after distributing the Proxy Statement to all shareholders
entitled to vote at such meeting as required by Section 6 hereof.
(e) OFFICER'S CERTIFICATE. WABC shall have received a certificate,
dated the Effective Date, signed on behalf of KSB by its President and Chief
Executive Officer, and Chief Financial Officer to the effect that the conditions
in Sections 7(a)-(d) have been satisfied.
(f) OPINION OF COUNSEL. KSB shall have delivered to WABC such
documents as may reasonably be requested by WABC to evidence compliance by KSB
with the provisions of this Agreement including an opinion of its counsel in
substantially the form attached hereto as Exhibit E.
(g) ABSENCE OF LEGAL IMPEDIMENT. No legal impediment to the Merger
shall have arisen in the reasonable opinion of WABC and no litigation,
proceeding or investigation shall be pending or threatened before any court
36
or government agency relating to the transactions contemplated by this Agreement
which affords a material basis, in the reasonable opinion of WABC, for a
determination that it would be inadvisable or inexpedient to continue to carry
out the terms of, or to attempt to consummate the transactions contemplated by,
this Agreement.
(h) EFFECTIVENESS OF REGISTRATION STATEMENT. The WABC Registration
Statement and any amendments or supplements thereto shall have become effective
under the 1933 Act, no stop order suspending the effectiveness of such
Registration Statement shall be in effect and no proceedings for such purpose
shall have been initiated or threatened by or before the Commission. All state
securities and "blue sky" permits or approvals required to consummate the
transactions contemplated by this Agreement shall have been received and remain
in effect.
(i) GOVERNMENT APPROVALS. All Government Approvals shall be in
effect, and all conditions or requirements prescribed by law or by any
Government Approval shall have been satisfied; provided, however, that no
Government Approval shall be deemed to have been received if it shall require
the divestiture or cessation of any of the present businesses or operations
conducted by any of the parties hereto or shall impose any other condition or
requirement, which divestiture, cessation, condition or requirement WABC, in its
reasonable judgment, shall deem to be materially burdensome (in which case WABC
shall promptly notify KSB). For purposes of this Agreement no condition shall be
deemed to be "materially burdensome" if such condition does not materially
differ from conditions regularly imposed by the FRB or the DFI in orders
approving transactions of the type contemplated by this Agreement and compliance
with such condition would not (A) require the taking of any action inconsistent
with the manner in which WABC or KSB has conducted its business previously, (B)
have a material adverse effect upon the business, financial condition or results
of operations of WABC or KSB, or (C) preclude satisfaction of any of the
conditions to consummation of the transactions contemplated by this Agreement.
(j) TAX OPINION OR RULING. WABC and KSB shall have received either a
ruling from the IRS under federal income tax law and an equivalent ruling from
the California Franchise Tax board, or, to the extent such rulings have not been
received on or before the Effective Date, an opinion of WABC's counsel or
independent accountants, subject to assumptions and exceptions normally
included, in form and substance reasonably satisfactory to WABC and its counsel,
substantially to the effect that under federal income tax law and California
income and franchise tax law:
(i) The Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the IRC;
(ii) WABC and KSB will each be a party to such reorganization
within the meaning of Section 368(b) of the IRC;
(iii) The Merger will not result in any recognized gain or loss
to WABC or KSB.
(iv) Except for any cash received in lieu of any fractional
share, no gain or loss will be recognized by holders of KSB
37
Shares who receive WABC Shares in exchange for the KSB Shares which they
hold;
(v) The holding period of WABC Shares exchanged for KSB Shares
will include the holding period of the KSB Shares for which it is
exchanged, assuming the shares of KSB Shares are capital assets in the
hands of the holder thereof at the Effective Date; and
(vi) The basis of the WABC Shares received in the exchange will
be the same as the basis of the KSB Shares for which it was exchanged,
less any basis attributable to fractional shares for which cash is
received.
The issuance of such opinion shall be conditioned on the receipt of tax
representation letters from WABC and KSB, which letters shall be in such form
and substance as may reasonably be required by WABC's counsel. Each such tax
representation letter shall be dated on or before the date of such opinion and
shall not have been withdrawn or modified in any material respect as of the date
of such opinion.
(k) ACCOUNTANT'S ASSURANCE. WABC shall have received the written
assurance from Xxxx Xxxxx prepared pursuant to the provisions of Section
3.2(f)(iv).
(l) DISSENTING SHARES. The aggregate number of shares of KSB common
stock held by persons who have taken all of the steps required at or prior to
the intended closing to perfect their right (if any) to be paid the value of
such shares under the GCL ("Dissenting Shares") shall not exceed 9% of the
outstanding shares of KSB common stock.
(m) UNAUDITED FINANCIALS. Not later than five business days prior to
the Effective Date, KSB shall have furnished WABC a copy of its most recently
prepared unaudited year-to-date consolidated financial statements, including a
balance sheet and year-to-date statement of income, each prepared in accordance
with GAAP and the requirements of this Agreement. At least ten business days
prior to the Effective Date, all attorneys, accountants, investment bankers and
other advisors and agents for KSB shall have submitted to KSB (with a copy to
WABC) estimates of their fees and expenses for all services rendered in any
respect in connection with the transactions contemplated hereby to the extent
not already paid, and based on such estimates, KSB shall have prepared and
submitted to WABC a summary of such fees and expenses for the transaction which
shall be reflected in the foregoing financial statement. At the Effective Time,
(i) such advisors shall have submitted their final bills for such fees and
expenses to KSB for services rendered, with a copy to be delivered to WABC, and
based on such summary, KSB shall have prepared and submitted to WABC a final
calculation of such fees and expenses, (ii) KSB shall have accrued and paid the
amount of such fees and expenses as calculated above after WABC has been given
an opportunity to review all such bills and calculation of such fees and
expenses, and (iii) such advisors shall have released WABC from liability for
any fees and expenses.
(n) RULE 145 UNDERTAKING. No person who is deemed by counsel to WABC
to be an affiliate of KSB under Rule 145 of the regulations promulgated by the
Commission under the 1933 Act will offer, sell or transfer
38
any WABC Shares to be received pursuant to the Merger, except that each such
person may offer, sell or transfer such WABC shares:
(i) pursuant to a then-current effective registration under the
1933 Act; or
(ii) in a transaction which, in the opinion of counsel
satisfactory to WABC, is not required to be registered under the 1933
Act.
WABC shall have received at least 30 days prior to the Effective Date from each
person who, in the opinion of WABC's counsel, might be deemed to be an affiliate
of KSB or WABC under Rule 144 or 145, a signed undertaking substantially in the
form attached hereto as Exhibit C, that such person will sell or transfer such
shares only in compliance with the terms of the preceding paragraph of this
Section 7(n).
(o) SHAREHOLDERS' EQUITY. Shareholders' Equity of KSB as of the SAS
71 Date shall be not less than $10,161,000. "Shareholders' Equity" for purposes
of this Section 7(o) means shareholders' equity determined in accordance with
GAAP and as required by this Agreement, but reduced by an amount equal to all of
KSB's actual and anticipated merger-related expenses to the extent not
previously paid or accrued as contemplated by subsection (m) above.
(p) LOANS AND NONINTEREST-BEARING DEPOSITS. As of the SAS 71 Date
and as of the Effective Time, the outstanding principal balance of all of KSB's
Performing Loans shall equal or exceed $52,000,000. For the 30-day period ending
on the SAS 71 Date and the 30-day period ending three days before the Effective
Date, the average total balance of all noninterest-bearing deposit accounts
maintained with KSB shall equal or exceed $13,800,000.
(q) SIGNIFICANT LIABILITIES KSB's Significant Liabilities shall not
exceed $925,000.
(r) CLOSING DOCUMENTS. WABC shall have received such certificates
and other closing documents as counsel for WABC shall reasonably request.
(s) CONSENTS. KSB shall have received, or WABC shall have satisfied
itself that KSB will receive, all consents of other parties to and required by
material mortgages, notes, leases, franchises, agreements, licenses and permits
applicable to KSB, in each case in form and substance reasonably satisfactory to
WABC, and no such consent or license or permit shall have been withdrawn or
suspended.
(t) LOSSES IN INVESTMENT AND LOAN PORTFOLIOS. At and as of the
Effective Date, losses actually realized by KSB from the sale of securities held
in KSB's investment portfolios after September 30, 2001, and prior to the
Effective Date shall be reflected in the financial statements of KSB as of the
SAS 71 Date. Additionally, the aggregate amount of loans on the books of KSB
which are classified by any bank examiner, KSB or WABC or any loan review
consultant engaged by KSB or WABC for the purpose of examining loans
39
(using standard banking practice) as "Loss" shall have been charged off in the
financial statements of KSB as of the SAS 71 Date.
(u) SATISFACTION OF SPENDING OR OTHER COMMITMENTS. There shall have
been no failure by KSB to perform the obligations or satisfy the conditions set
forth in Sections 2.6, 3.2(d) and 3.2(h)(ii) of this Agreement and the
undertakings required from each KSB director pursuant to Section 3.2(a) shall
have been delivered within 15 business days after the execution and delivery of
this Agreement.
(v) COMPLIANCE EXAMINATIONS. Prior to the Effective Date, KSB shall
have taken all corrective action recommended by or resulting from its most
recent compliance examinations and any significant regulatory compliance
violations shall have been corrected by KSB prior to the Effective Date.
(w) OPINION OF LOAN REVIEW EXAMINER. KSB shall use its best efforts
to have delivered to WABC an opinion of its loan review examiner, which opinion
shall be acceptable to WABC and be to the effect that all loan losses in excess
of $25,000 have been identified with respect to loans and related assets on the
books of KSB and its subsidiaries. KSB shall also use its best efforts to have
said opinion dated as of a date no earlier than four months preceding the
Effective Date.
(x) REGULATORY EXAMINATION. Prior to the Effective Date, KSB shall
be in compliance with all requirements arising from its most recent safety and
soundness examination.
(y) NONCOMPETITION AGREEMENTS. Within 15 business days of the
execution of this Agreement, WABC shall have received executed noncompetition
agreements substantially in the form attached hereto as Exhibit D from each
director of KSB.
(z) RESIGNATION OF DIRECTORS. At least three days prior to Closing,
WABC shall have received a letter from each director of KSB tendering his or her
resignation from the Board of Directors effective at the Effective Time.
8. CONDITIONS TO THE OBLIGATIONS OF KSB.
The obligations of KSB under this Agreement are, at its option, subject
to the fulfillment at or prior to the Effective Time of each of the following
conditions provided, however, that any one or more of such conditions may be
waived by the Board of Directors of KSB at any time at or prior to the Effective
Time:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of WABC and Westamerica in Section 5 hereof shall be true and correct
in all material respects on the date hereof and as of the Effective Date with
the same effect as though such representations and warranties had been made on
and as of such date except as to any representation or warranty which
specifically related to an earlier date.
(b) COMPLIANCE AND PERFORMANCE UNDER AGREEMENT. WABC shall have
performed and complied in all material respects with all of the terms of
40
this Agreement required to be performed or complied with by them at or prior to
the Effective Time.
(c) MATERIAL ADVERSE CHANGE. No materially adverse change shall have
occurred since September 30, 2001, in the business, financial condition, results
of operations or properties of WABC and its subsidiaries taken as a whole, and
WABC shall not be engaged in, or a party to or so far as WABC is aware,
threatened with, and to WABC's knowledge no grounds shall exist for, any legal
action or other proceeding before any court, any arbitrator of any kind or any
government agency if, in the reasonable judgment of KSB, such legal action or
proceeding could materially adversely affect WABC or its business, financial
condition, results of operations or assets.
(d) OFFICER'S CERTIFICATE. KSB shall have received a certificate,
dated the Effective Date, signed on behalf of WABC by its Chief Financial
Officer, certifying to the fulfillment of the conditions stated in Sections
8(a)-(c) hereof.
(e) APPROVAL OF AGREEMENT. This Agreement and the Merger shall have
been duly approved by the affirmative vote of a majority of the outstanding
shares of KSB common stock at a meeting of shareholders duly called and held.
(f) OPINION OF COUNSEL. WABC shall have delivered to KSB such
documents as may reasonably be requested by KSB to evidence compliance by WABC
with the provisions of this Agreement including an opinion of its counsel in
substantially the form attached hereto as Exhibit F.
(g) EFFECTIVENESS OF REGISTRATION STATEMENT. The WABC Registration
Statement and any amendments or supplements thereto shall have become effective
under the 1933 Act. No stop order suspending the effectiveness of the WABC
Registration Statement shall be in effect and no proceedings for such purpose
shall have been initiated or threatened by or before the Commission. All state
securities and "blue sky" permits or approvals required to consummate the
transactions contemplated by this Agreement and the Merger Agreement shall have
been received and remain in effect.
(h) GOVERNMENT APPROVALS. The Government Approvals shall have been
received and shall be in effect, and all conditions or requirements prescribed
by law or by any such approval shall have been satisfied.
(i) TAX OPINION OR RULING. WABC and KSB shall have received the
opinions or tax rulings referred to in Section 7(j) hereof which opinions or
rulings shall meet the requirements of such Section.
(j) CLOSING DOCUMENTS. KSB shall have received such certificates and
other closing documents as counsel for KSB shall reasonably request.
(k) ABSENCE OF LEGAL IMPEDIMENT. No legal impediment to the Merger
shall have arisen in the reasonable opinion of KSB and no litigation, proceeding
or investigation shall be pending or threatened before any court
41
or government agency relating to the transactions contemplated by this Agreement
which affords a material basis, in the reasonable opinion of KSB, for a
determination that it would be inadvisable or inexpedient to continue to carry
out the terms of, or to attempt to consummate the transactions contemplated by
this Agreement.
(l) FAIRNESS OPINION. KSB shall have received a fairness opinion
commissioned by KSB's Board of Directors which shall provide that the terms of
the Merger, from a financial standpoint, are fair to the shareholders of KSB,
and such fairness opinion shall not have been revoked at any time prior to the
mailing of the Proxy Statement to KSB's shareholders.
(m) AGGREGATE MERGER CONSIDERATION. The aggregate consideration
payable to KSB shareholders, consisting of the Final Exchange Ratio multiplied
by the number of shares of KSB common stock determined on a fully diluted basis,
shall be not less than $12,500,000.
(n) ALLOWANCE FOR LOAN LOSSES. KSB's allowance for loan losses,
determined under WABC's methodology for determining the allowance, would not be
greater than $3,900,000 as of the Effective Time.
9. CLOSING.
(a) CLOSING DATE. The closing (the "Closing") shall, unless another
date, time or place is agreed to in writing by WABC and KSB, be held at the
offices of McCutchen, Doyle, Xxxxx & Enersen, Three Embarcadero Center, San
Francisco, California, on the Effective Date.
(b) DELIVERY OF DOCUMENTS. At the Closing, the opinions,
certificates and other documents required to be delivered by this Agreement
shall be delivered.
(c) FILINGS. At the Closing, WABC and KSB shall instruct their
respective representatives to make or confirm such filings as shall be required
in the opinion of counsel to WABC and KSB to give effect to the Merger.
10. [RESERVED].
11. EXPENSES.
Except as provided in Section 12, each party hereto agrees to pay,
without right of reimbursement from the other party and whether or not the
transactions contemplated by this Agreement or the Merger Agreement shall be
consummated, the costs incurred by such party incident to the performance of its
obligations under this Agreement and the Merger Agreement, including without
limitation, costs incident to the preparation of this Agreement, the WABC
Registration Statement, Prospectus and the Proxy Statement (including the
audited financial statements of the parties contained therein) and incident to
the consummation of the Merger and of the other transactions contemplated herein
and in the Merger Agreement, including the fees and disbursements of counsel,
accountants, consultants and financial advisers employed by such party in
connection therewith. Notwithstanding the foregoing, WABC shall be solely
responsible for all fees payable pursuant to
42
state "blue-sky" securities laws, fees related to obtaining a revenue ruling or
tax opinion and the fee required to be paid to the Commission to register the
WABC Shares. KSB shall bear its own costs of distributing the Proxy Statement
and other information relating to these transactions to its shareholders.
12. AMENDMENT; TERMINATION.
(a) AMENDMENT. This Agreement and the Merger Agreement may be
amended by WABC and KSB at any time prior to the Effective Time without the
approval of the shareholders of WABC and shareholders of KSB with respect to any
of their terms except the terms relating to the form or amount of consideration
to be delivered to the KSB shareholders in the Merger.
(b) TERMINATION. This Agreement and the Merger Agreement may be
terminated as follows:
(i) By the mutual consent of the Boards of Directors of both
WABC and KSB at any time prior to the consummation of the Merger.
(ii) By the Board of Directors of WABC on or after September 30,
2002, if (A) any of the conditions in Section 7 to which the obligations
of WABC are subject have not been fulfilled, or (B) such conditions have
been fulfilled or waived by WABC and KSB shall have failed to complete
the Merger.
(iii) By the Board of Directors of WABC if (A) WABC has become
aware of any facts or circumstances of which it was not aware on the
date hereof and which materially adversely affect KSB taken as a whole
or its properties, operations or financial condition, (B) a materially
adverse change shall have occurred since September 30, 2001, in the
business, financial condition taken as a whole, results of operations or
properties of KSB taken as a whole, (C) there has been failure or
prospective failure on the part of KSB to comply with its obligations
under this Agreement, or any failure or prospective failure to comply
with any of the conditions set forth in Section 7 hereof; or (D) KSB
fails to act or refrains from doing any act pursuant to Section
3.2(j)(iv).
(iv) By WABC if, after the date hereof, it shall become entitled
to terminate this Agreement in accordance with Section 3.2(j)(iv) or any
person (other than WABC or any subsidiary thereof) shall become the
beneficial owner of 20% or more of the then outstanding shares of KSB or
any person (other than WABC or a subsidiary thereof) shall have
commenced a bona fide tender offer or exchange offer to acquire at least
20% of the then outstanding shares of KSB.
(v) By the Board of Directors of WABC if it determines that it
would be inadvisable or inexpedient to continue to carry out the terms
of, or to attempt to consummate the transactions contemplated by this
Agreement, by reason of any material legal impediment to the Merger
having arisen, or any material pending or threatened litigation,
investigation or proceeding, including, but not limited to any of the
preceding that relate to the transactions contemplated by this
43
Agreement which affords a material basis, in the reasonable opinion of
such Board, for such determination.
(vi) By the Board of Directors of KSB on or after September 30,
2002, if (A) any of the conditions contained in Section 8 to which the
obligations of KSB are subject have not been fulfilled, or (B) such
conditions have been fulfilled or waived but WABC shall have failed to
complete the Merger; provided, however, that if WABC is engaged at the
time in litigation (including an administrative appeal procedure)
relating to an attempt to obtain one or more of the Governmental
approvals or if WABC shall be contesting in good faith any litigation
which seeks to prevent consummation of the transactions contemplated
hereby, such non-fulfillment shall not give KSB the right to terminate
this Agreement until the earlier of (A) fifteen (15) months after the
date of this Agreement and (B) sixty (60) days after the completion of
such litigation and of any further regulatory or judicial action
pursuant thereto, including any further action by a governmental agency
as a result of any judicial remand, order or directive or otherwise or
any waiting period with respect thereto.
(vii) By the Board of Directors of KSB if (A) it has become
aware of any facts or circumstances of which it was not aware on the
date hereof and which can or do materially adversely affect WABC or its
properties, operations or financial condition, (B) a materially adverse
change shall have occurred since September 30, 2001 in the business,
financial condition, results of operations or assets of WABC, (C) there
has been failure or prospective failure on the part of WABC to comply
with its obligations under this Agreement or any failure or prospective
failure to comply with any condition set forth in Section 8, or (D) if
WABC enters into an agreement to be acquired which does not provide for
the assumption of this Agreement as described in Section 3.1(f).
(c) NOTICE. The power of termination hereunder may be exercised by
WABC or KSB, as the case may be, only by giving written notice, signed on behalf
of such party by its Chairman of the Board or President, to the other party.
(d) BREACH OF OBLIGATIONS. If there has been a material breach by
either party in the performance of any of the obligations herein which shall not
have been cured within ten business days after written notice thereof has been
given to the defaulting party, the nondefaulting party shall have the right to
terminate this Agreement upon written notice to the other party. In any event,
the nondefaulting party shall have no obligation to consummate any transaction
or take any further steps toward such consummation contemplated hereunder until
such breach is cured.
(e) TERMINATION AND EXPENSES. Termination of this Agreement shall
not terminate or affect the obligations of the parties to pay expenses as
provided in Section 11, to maintain the confidentiality of the other party's
information pursuant to Section 3.3, or the provisions of this Section 12(e),
Section 12(f) or Sections 13(a), (d) or (e) or the second sentence of Section
13(b) below and shall not affect any agreement after such termination. If this
Agreement shall be terminated by WABC pursuant to Section 3.2(j)(iv) or Section
12(b)(iv), or if any of the events specified in Section 3.2(j)(iv) or 12(b)(iv)
occurs within twelve (12) months following
44
termination of this Agreement for any of the reasons stated in Section 12(b)
(provided that such termination for a reason stated in Section 12(b) results
from the actions of a third party or group that thereafter attempts to acquire
KSB), KSB shall pay to WABC, on demand, the sum of $1,500,000. If KSB terminates
this Agreement under Section 3.1(f), WABC shall pay to KSB, on demand, the sum
of $1,000,000. Except as provided in Section 3.2(j)(iv), KSB and WABC agree that
any termination of this Agreement shall not in any manner release or be
construed as releasing the non-terminating party or parties from any liability
or damage to the other party or parties arising out of, in connection with or
otherwise relating to, directly or indirectly, such parties' failure in
performance of any of its covenants or agreements hereunder.
(f) LIQUIDATED DAMAGES. If WABC terminates this Agreement as a
result of:
(i) failure to obtain, or revocation of, KSB's fairness
opinion described in Section 8(l); or
(ii) failure to obtain approval of KSB's shareholders; or
(iii) breach of a representation, warranty or obligation of KSB
under this Agreement, where such breach of representation,
warranty or obligation is caused in whole or in material part by
any action or inaction within the control of KSB or any of its
directors or officers,
or if KSB terminates the Agreement as a result of failure to obtain, or
revocation of, such fairness opinion, then KSB shall pay WABC a fee of $250,000.
If WABC becomes entitled to a fee under Section 12(e), the fee payable under
this Section shall be credited against the fee payable under Section 12(e).
If KSB terminates this Agreement as a result of a breach of a
representation, warranty or obligation of WABC or Westamerica under this
Agreement, where such breach of representation, warranty or obligation is caused
in whole or in material part by any action or inaction within the control of
WABC or Westamerica or any of its directors or officers, then WABC shall pay KSB
a fee of $250,000. If KSB becomes entitled to a fee under Section 12(e), the fee
payable under this Section 12(f) shall be credited against the fee payable under
Section 12(e).
The parties have determined that the occurrence of any of the events
or circumstances set forth above would cause a substantial damage and loss and
lost business opportunities to the other party and that the payments
contemplated above provide reasonable and fair compensation for such damage,
loss and lost business opportunities and are not intended to be and do not
constitute a penalty or forfeiture. Such payments will be made within 10
business days following a termination of the Agreement that gives rise to the
payment of such liquidated damages.
13. MISCELLANEOUS.
(a) NOTICES. Any notice or other communication required or permitted
under this Agreement shall be effective only if it is in writing
45
and delivered personally, or by overnight express or by facsimile or sent by
first class United States mail, postage prepaid, registered or certified mail,
addressed as follows:
To WABC: To KSB:
Xxxxx X. Xxxxx, President & C. Xxxxxx Xxxxxxx
Chief Executive Officer President & Chief Executive Officer
Westamerica Bancorporation Kerman State Bank
0000 Xxxxxxx Xxxxxxxxx X.X. Xxx 000
Xxxxxxxxx, XX 00000-0000 Xxxxxx, XX 00000
With a copy to: With a copy to:
McCutchen, Doyle, Xxxxx & Enersen, LLP Xxxxx Xxxxxxx LLP
Three Embarcadero Center Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000 Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx Attention: R. Xxxxx Xxxx
or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.
(b) BINDING AGREEMENT. This Agreement is binding upon and is for the
benefit of WABC, Westamerica and KSB and their respective successors and
permitted assigns. This Agreement is not made for the benefit of any person,
firm, corporation or association not a party hereto, and no other person, firm,
corporation or association shall acquire or have any right under or by virtue of
this Agreement. No party may assign this Agreement or any of its rights,
privileges, duties or obligations hereunder without the prior written consent of
the other party to this Agreement.
(c) NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No investigation
by WABC or KSB made before or after the date of this Agreement shall affect the
representations and warranties which are contained in this Agreement and such
representations and warranties shall survive such investigation, provided that,
except with respect to covenants and agreements to be performed in whole or in
part subsequent to the Effective Date (as to which the related representations
and warranties shall survive until their performance) which covenants and
agreements shall survive the Closing, the representations, warranties, covenants
and agreements of WABC and KSB contained in this Agreement shall not survive the
Closing.
(d) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
(e) ATTORNEYS' FEES. In any action at law or suit in equity in
relation to this Agreement, the prevailing party in such action or suit shall be
entitled to receive a reasonable sum for its attorneys' fees and all other
reasonable costs and expenses incurred in such action or suit.
(f) ENTIRE AGREEMENT; SEVERABILITY. This Agreement and the
documents, certificates, agreements, letters, schedules and exhibits attached or
required to be delivered pursuant hereto set forth the entire agreement
46
and understanding of the parties in respect of the transactions contemplated
hereby, and supersede all prior agreements, arrangements and understandings
relating to the subject matter hereof. Each provision of this Agreement shall be
interpreted in a manner to be effective and valid under applicable law, but if
any provision hereof shall be prohibited or ruled invalid under applicable law,
the validity, legality and enforceability of the remaining provisions shall not,
except as otherwise required by law, be affected or impaired as a result of such
prohibition or ruling. KPMG shall be the sole arbiter of any disagreement about
the application of GAAP to this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) SPECIFIC PERFORMANCE. The parties hereby acknowledge and agree
that the failure of either party to fulfill any of its covenants and agreements
hereunder, including the failure to take all such actions as are necessary on
its part to cause the consummation of the Merger, will cause irreparable injury
to the other for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereto hereby consent to the issuance of
injunctive relief by any court of competent jurisdiction to compel performance
of the obligations hereunder and to the granting by any such court of the remedy
of the specific performance by the non-performing party of their obligations
hereunder.
(i) WAIVERS. Prior to or at the Effective Time, each of WABC and KSB
shall have the right to waive any default in the performance of any term of this
Agreement by the other, to waive or extend the time for the compliance or
fulfillment by the other of any and all of the other's obligations under this
Agreement and to waive any or all of the conditions precedent to its obligations
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any law or applicable governmental regulation. No failure to
exercise and no delay in exercising any right, remedy or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy or power hereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy or power provided herein or by law or
in equity. The waiver by any party of the time for performance of any act or
condition hereunder does not constitute a waiver of the act or condition itself.
Any requests for waivers or waivers granted pursuant to this Section 13(i) shall
be in accordance with the provisions of Section 13(a) hereof.
47
IN WITNESS WHEREOF, WABC, Westamerica and KSB have each caused this
Agreement and Plan of Reorganization to be signed by its Chairman of the Board
or President and its corporate seal to be hereunto affixed and attested by the
signature of its Secretary all as of the day and year first above written.
ATTEST: WESTAMERICA BANCORPORATION
By: ________________________________ By: _______________________________
Secretary Chairman, President and Chief
Executive Officer
ATTEST: WESTAMERICA BANK
By: ________________________________ By: _______________________________
Secretary Chairman, President and Chief
Executive Officer
ATTEST: KERMAN STATE BANK
By: ________________________________ By: _______________________________
Secretary President and Chief Executive
Officer
By: _______________________________
Vice Chairman of the Board
48
TABLE OF CONTENTS
Page
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1. THE MERGER..........................................................................1
1.1 Effective Date...............................................................1
1.2 Effect of the Merger.........................................................1
2. CONVERSION AND CANCELLATION OF SHARES...............................................2
2.1 Conversion of Common Stock of KSB............................................2
2.2 Fractional Shares............................................................5
2.3 Surrender of KSB Shares......................................................5
2.4 No Further Transfers of KSB Shares...........................................6
2.5 Adjustments..................................................................6
2.6 Treatment of Stock Options...................................................6
3. COVENANTS OF THE PARTIES............................................................7
3.1 Covenants of WABC............................................................7
(a) Reservation, Issuance and Registration of WABC Common Stock...........7
(b) Government Approvals..................................................7
(c) Notification of Breach of Representations, Warranties and
Covenants.............................................................7
(d) Financial Statements..................................................8
(e) Press Releases........................................................8
(f) Business Combinations.................................................8
(g) Director and Officer Liability........................................9
3.2 Covenants of KSB.............................................................9
(a) Approval by KSB Shareholders..........................................9
(b) Shareholder Lists and Other Information...............................9
(c) Government Approvals.................................................10
(d) New Branches and Leases..............................................10
(e) Notification of Breach of Representations, Warranties and
Covenants............................................................10
(f) Financial Statements.................................................10
(g) Compensation.........................................................11
(h) Conduct of Business in the Ordinary Course...........................11
(i) Press Releases.......................................................14
(j) No Merger or Solicitation............................................14
(k) Employee Benefit Plans...............................................15
(l) Changes in Capital Stock.............................................15
(m) Dividends............................................................15
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TABLE OF CONTENTS
(continued)
Page
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(n) Accounting Methods...................................................15
(o) Affiliates...........................................................15
(p) Additional Agreements................................................16
(q) Access to Properties, Books and Records; Confidentiality.............16
(r) Noncompetition Agreements............................................16
(s) Classifications and Litigation Developments..........................16
(t) Accounting Adjustment before Closing.................................16
3.3 Covenants of the Parties....................................................16
(a) Information and Confidentiality......................................16
(b) Asset Review.........................................................17
4. REPRESENTATIONS AND WARRANTIES OF KSB..............................................18
(a) Corporate Status and Power to Enter Into Agreements..................18
(b) Articles, Bylaws, Books and Records..................................18
(c) Compliance With Laws, Regulations and Decrees........................19
(d) Capitalization.......................................................19
(e) Equity Interests.....................................................19
(f) Financial Statements, Regulatory Reports.............................19
(g) Tax Returns..........................................................20
(h) Material Adverse Change..............................................21
(i) No Undisclosed Liabilities...........................................21
(j) Properties and Leases................................................21
(k) Material Contracts...................................................22
(l) Classified Loans.....................................................23
(m) Restrictions on Investments..........................................23
(n) Employment Contracts and Benefits....................................23
(o) Compliance With ERISA................................................25
(p) Collective Bargaining and Employment Agreements......................26
(q) Compensation of Officers and Employees...............................26
(r) Legal Actions and Proceedings........................................26
(s) Execution and Delivery of the Agreement..............................26
(t) Retention of Broker or Consultant....................................27
(u) Insurance............................................................27
(v) Loan Loss Allowance..................................................28
(w) Transactions With Affiliates.........................................28
ii
TABLE OF CONTENTS
(continued)
Page
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(x) Information in WABC Registration Statement...........................28
(y) Accuracy of Representations and Warranties...........................29
(z) No Brokered Deposits.................................................29
5. REPRESENTATIONS AND WARRANTIES OF WABC and WESTAMERICA.............................29
(a) Corporate Status and Power to Enter Into Agreement...................29
(b) Corporate Status and Power of WABC and Westamerica...................29
(c) Certificate, Bylaws, Books and Records...............................29
(d) Compliance With Laws, Regulations and Decrees........................30
(e) Financial Statements.................................................30
(f) Material Adverse Change..............................................31
(g) Execution and Delivery of the Agreement..............................31
(h) Information in WABC Registration Statement...........................31
(i) Accuracy of Representations and Warranties...........................32
(j) Employee Benefits....................................................32
(k) Legal Actions and Proceedings........................................32
6. SECURITIES ACT OF 1933; SECURITIES EXCHANGE ACT OF 1934............................33
(a) Preparation and Filing of Registration Statement.....................33
(b) Effectiveness of Registration Statement..............................33
(c) Sales and Resales of Common Stock....................................33
(d) Rule 145.............................................................33
7. CONDITIONS TO THE OBLIGATIONS OF WABC..............................................34
(a) Representations and Warranties.......................................34
(b) Compliance and Performance Under Agreement...........................34
(c) Material Adverse Change..............................................34
(d) Approval of Agreement................................................34
(e) Officer's Certificate................................................35
(f) Opinion of Counsel...................................................35
(g) Absence of Legal Impediment..........................................35
(h) Effectiveness of Registration Statement..............................35
(i) Government Approvals.................................................35
(j) Tax Opinion or Ruling................................................35
(k) Accountant's Assurance...............................................36
(l) Dissenting Shares....................................................36
(m) Unaudited Financials.................................................36
(n) Rule 145 Undertaking.................................................36
iii
TABLE OF CONTENTS
(continued)
Page
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(o) Shareholders' Equity.................................................37
(p) Loans and Demand Deposits............................................37
(q) Closing Documents....................................................37
(r) Consents.............................................................37
(s) Losses in Investment and Loan Portfolios.............................37
(t) Satisfaction of Spending or Other Commitments........................38
(u) Compliance Examinations..............................................38
(v) Opinion of Loan Review Examiner......................................38
(w) Regulatory Examination...............................................38
(x) Noncompetition Agreements............................................38
(y) Resignation of Directors.............................................38
8. CONDITIONS TO THE OBLIGATIONS OF KSB...............................................38
(a) Representations and Warranties.......................................39
(b) Compliance and Performance Under Agreement...........................39
(c) Material Adverse Change..............................................39
(d) Officer's Certificate................................................39
(e) Approval of Agreement................................................39
(f) Opinion of Counsel...................................................39
(g) Effectiveness of Registration Statement..............................39
(h) Government Approvals.................................................39
(i) Tax Opinion or Ruling................................................40
(j) Closing Documents....................................................40
(k) Absence of Legal Impediment..........................................40
(l) Fairness Opinion.....................................................40
9. CLOSING............................................................................40
(a) Closing Date.........................................................40
(b) Delivery of Documents................................................40
(c) Filings..............................................................40
10. [RESERVED].........................................................................40
11. EXPENSES...........................................................................40
12. AMENDMENT; TERMINATION.............................................................41
(a) Amendment............................................................41
(b) Termination..........................................................41
(c) Notice...............................................................42
(d) Breach of Obligations................................................42
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TABLE OF CONTENTS
(continued)
Page
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(e) Termination and Expenses.............................................42
(f) Liquidated Damages...................................................43
13. MISCELLANEOUS......................................................................43
(a) Notices..............................................................43
(b) Binding Agreement....................................................44
(c) No Survival of Representations and Warranties........................44
(d) Governing Law........................................................44
(e) Attorneys' Fees......................................................44
(f) Entire Agreement; Severability.......................................44
(g) Counterparts.........................................................45
(h) Specific Performance.................................................45
(i) Waivers..............................................................45
v
