AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
MONARCH BANCORP
AND
WESTERN BANK
DATED: MARCH 21, 1996
TABLE OF CONTENTS
PAGE
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DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE MERGER AND RELATED MATTERS . . . . . . . . . . . . . . . . . 8
THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
REPRESENTATIONS AND WARRANTIES OF BANK . . . . . . . . . . . . . 11
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . 22
COVENANTS OF THE BANK PENDING EFFECTIVE TIME . . . . . . . . . . 29
COVENANTS OF THE COMPANY PENDING EFFECTIVE TIME. . . . . . . . . 40
MEETING OF SHAREHOLDERS AND FEDERAL SECURITIES LAWS. . . . . . . 45
CONDITIONS PRECEDENT TO THE CONTEMPLATED TRANSACTIONS. . . . . . 47
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BANK. . . . . . . . . 48
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY . . . . . 50
DISSENTING SHAREHOLDERS OF BANK. . . . . . . . . . . . . . . . . 52
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 54
EXHIBITS:
AGREEMENT OF MERGER. . . . . . . . . . . . . . . . . . . . . . . EXHIBIT A
STOCK OPTION REPURCHASE AND CANCELLATION AGREEMENT . . . . . . . EXHIBIT B
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBIT C
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (hereinafter referred to as
the "Agreement") is made and entered into as of March 21, 1996, by and between
WESTERN BANK (the "Bank"), a California banking corporation, and MONARCH BANCORP
(the "Company"), a California corporation.
R E C I T A L S
A. The Bank is a banking corporation duly organized and existing
under the laws of the State of California with its principal office in the City
of Los Angeles, County of Los Angeles, State of California. The Company is a
bank holding company duly organized and existing under the laws of the State of
California with its principal office in the City of Laguna Niguel, County of
Orange, State of California.
B. The parties desire to provide for the acquisition by the Company of
all of the outstanding shares of Bank Stock (as defined below) pursuant to the
Merger (as defined below), subject to the terms and conditions specified herein,
as follows:
(a) The Company will establish Monarch Merger Corporation (as
defined below) as a wholly-owned subsidiary;
(b) The Bank and Monarch Merger Corporation will enter into an
Agreement of Merger (as defined below) providing for the merger of Monarch
Merger Corporation and the Bank under the charter of the Bank; and
C. At the Effective Time (hereinafter defined below) of the Merger,
all of the issued and outstanding shares of the Bank's Common Stock, except for
shares of its Common Stock held by Dissenting Shareholders (as hereinafter
defined below), shall be converted into and exchanged for cash, at the Per Share
Price (as defined below) all upon the terms and subject to the conditions
hereinafter set forth.
Accordingly, to consummate the transactions set forth above and in
consideration of the mutual covenants, agreements, representations and
warranties contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms used in this Agreement shall have
the meanings set forth below unless the context otherwise requires:
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"Affiliate" means any Person (as defined below) that directly, or
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Person specified.
"Aggregate Book Value" shall mean shareholders equity as of December
31, 1995 as determined in accordance with generally accepted accounting
principles consistently applied, plus adjustments resulting from the exercise of
Bank options (as defined below).
"Aggregate Option Price" shall have the meaning given such term in
Section 2.8.
"Aggregate Purchase Price" shall have the meaning given such term in
Section 2.4.
"Agreement of Merger" shall mean the Agreement of Merger to be entered
into by and between Monarch Merger Corporation and the Bank (as defined below)
substantially in the form of EXHIBIT "A" hereto, but subject to any changes that
may be necessary to conform to any requirements of any Governmental Entity
having authority over the Merger.
"Alternative Transaction" shall have the meaning given such term in
Section 6.5.
"BHC Act" shall mean the Bank Holding Company Act of 1956, as amended.
"Bank" shall mean Western Bank.
"Bank Employment Agreements" shall mean any employment agreement,
severance agreement, "golden parachute" agreement or any other agreement which
provides for payments to employees of Bank upon termination of employment,
including termination after a change in control.
"Bank Filings" shall have the meaning given such term in Section 4.18.
"Bank Incentive Compensation Plan" shall mean the Western Bank Stock
Bonus Plan and Trust Agreement.
"Bank Options" shall mean options to purchase Bank Stock (as defined
below) pursuant to the Bank Stock Option Plan (as defined below).
"Bank Stock" shall mean the common stock, no par value, of Bank.
"Bank Stock Option Plan" shall mean the Western Bank 1987 Stock Option
Plan.
"Bank Financial Statements" shall have the meaning given such term in
Section 4.4.
"Business Day" shall mean any day other than a Saturday, Sunday or day
on which commercial banks in California are authorized or required to be closed.
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"Charter Documents" shall mean, with respect to any business
organization, any certificate or articles of incorporation or association,
any bylaws, any partnership agreement and any other similar documents that
regulate the basic organization of the business organization and its internal
relations.
"Closing" shall mean the consummation of the transactions contemplated
by this Agreement on the Closing Date (as defined below) at the head office of
the Company, 00000 Xxxx Xxxxxx Xxxxx, Xxxxxx Xxxxxx, Xxxxxxxxxx, or at such
other place as the Parties (as defined below) may agree upon.
"Closing Date" shall mean, unless the Parties (as defined below) agree
on another date, the first Friday as soon as possible following the
Determination Date, and in no case more than 30 days following the receipt of
the approvals and consents and expiration of the waiting periods specified in
Section 9.1 have occurred and/or have been obtained, the receipt of the
necessary cash capital by the Company in order to complete the transaction as
contemplated by this Agreement, and satisfaction of the remaining conditions to
the transaction as contemplated by this Agreement.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder.
"Company Option Cancellation Agreement" shall mean an agreement,
substantially in the form of EXHIBIT "B" hereto.
"Company Stock Option Plan" shall mean the Monarch Bancorp 1993 Stock
Option Plan.
"Company Financial Statements" shall have the meaning given such term
in Section 5.4.
"Company Stock" shall mean the common stock, no par value, of the
Company.
"Confidential Information" shall mean all information heretofore or
hereafter provided by the Bank to the Company or obtained from the Bank by the
Company, which is information related to the business, financial position or
operations of the Bank (such information to include, by way of example only and
not of limitation, client lists, pricing information, company manuals, internal
memoranda, strategic plans, budgets, forecasts, projections, computer models and
marketing plans). Notwithstanding the foregoing, "Confidential Information"
shall not include any information that (i) at the time of disclosure or
thereafter is generally available to and known by the public (other than as a
result of an improper disclosure directly or indirectly by the Company or any of
its officers, directors, employees or other representatives), (ii) was available
to the Company on a non-confidential basis from a source other than from the
Company, provided that such source learned the information independently and is
not and was not bound by a confidentiality agreement with respect to the
information, or the Board of Directors of the Bank is advised in writing by
outside legal counsel that in the exercise of the fiduciary obligations of the
Board of Directors such information is required to be disclosed, or
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(iii) has been independently acquired or developed by the Company without
violating any obligations under this Agreement.
"Consents" shall mean every consent, approval, absence of disapproval,
waiver or authorization from, or notice to, or registration or filing with, any
Person (as defined below).
"CRA" shall mean the Community Reinvestment Act.
"Deposit" shall mean any deposit as defined in Section 3(l) of the
Federal Deposit Insurance Act, as amended, to the date of this Agreement (12 USC
Section 1813(l)).
"Determination Date" shall mean the last day of the month preceding
the Effective Time of the Merger (as defined below), unless the Parties as
defined below mutually agree to another day.
"Directors' Agreement" shall mean an agreement, substantially in the
form of EXHIBIT "C" hereto, pursuant to which each signatory shall agree to vote
or cause to be voted all shares of Bank Stock with respect to which such Person
has voting power on the date hereof or hereafter acquires to approve the
Agreement and the transactions contemplated hereby and all requisite matters
related thereto.
"DPC Property" shall mean voting securities, other personal property
and real property acquired by foreclosure or otherwise, in the ordinary course
of collecting a debt previously contracted in good faith, retained with the
object of sale for a period not longer than one year, or any applicable
statutory holding period, and recorded in the holder's business records as such.
"Effective Time of the Merger" shall mean the date and time of the
filing of the Agreement of Merger with the Secretary of State (as defined
below).
"Encumbrance" shall mean any option, pledge, security interest, lien,
mechanic's lien, charge, encumbrance or restriction (whether on voting,
disposition or otherwise), whether imposed by agreement, understanding, law or
otherwise.
"Environmental Law" shall mean any federal, state, provincial or local
statute, law, ordinance, rule, regulation, order, consent, decree, judicial or
administrative decision or directive of the United States or other
jurisdiction whether now existing or as hereinafter promulgated, issued or
enacted relating to: (A) pollution or protection of the environment,
including natural resources; (B) exposure of persons, including employees, to
Hazardous Substances (as defined below) or other products, materials or
chemicals; (C) protection of the public health or welfare from the effects of
products, by-products, wastes, emissions, discharges or releases of chemical
or other substances from industrial or commercial activities; or (D)
regulation of the manufacture, use or introduction into commerce of
substances, including, without limitation, their manufacture, formulation,
packaging, labeling, distribution, transportation, handling, storage and
disposal. For the purposes of this definition the term "Environmental Law"
shall include, without limiting the foregoing, the following statutes, as
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amended from time to time: (1) the Clean Air Act, as amended, 42 U.S.C. Section
7401 ET SEQ.; (2) the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251 ET SEQ.; (3) the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. Section 6901 ET SEQ., (4) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (including the
Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C Section 2601 ET
SEQ.; (5) the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601
ET SEQ.; (6) the Occupational Safety and Health Act, as amended, 29 U.S.C.
Section 651; (7) the Emergency Planning and Community Right-To-Know Act of 1986,
42 U.S.C. Section 1101 ET SEQ.; (8) the Mine Safety and Health Act of 1977, as
amended, 30 U.S.C. Section 801 ET SEQ.; (9) the Safe Drinking Water Act, 42
U.S.C. Section 300f ET SEQ.; and (10) all comparable state and local laws, laws
of other jurisdictions or orders and regulations including, but not limited to,
the Xxxxxxxxx-Xxxxxxx- Xxxxxx Hazardous Substance Account Act, Cal. Health &
Safety Code Section 25300 ET SEQ.
"Equity Securities" shall mean the capital stock of Bank or any
options, rights, warrants or other rights to subscribe for or purchase, or any
plans, contracts or commitments that are exercisable in, such capital stock or
that provide for the issuance of, or grant the right to acquire, or are
convertible into, or exchangeable for, such capital stock.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and all regulations thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations thereunder.
"Exchange Agent" shall mean the financial institution appointed by the
Company, subject to the reasonable approval of the Bank, to effect the exchange
contemplated by Section 2.5.
"Executive Officer'' shall mean a natural person who participates or
has the authority to participate (other than in the capacity of a director) in
major policy making functions, whether or not such person has a title or is
serving with salary or other compensation.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FRB" shall mean the Board of Governors of the Federal Reserve System.
"Governmental Entity" shall mean any court or tribunal in any
jurisdiction or any United States federal, state, municipal, domestic, foreign
or other administrative agency, department, commission, board, bureau or other
regulatory or governmental authority or instrumentality.
"Hazardous Substances" shall mean (i) substances that are defined or
listed in, or otherwise classified pursuant to, or the use or disposal of which
are regulated by, any Environmental Law as "hazardous substances, " "hazardous
materials, " "hazardous wastes," toxic substances," or any other formulation
intended to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, or "EP toxicity;" (ii) oil, petroleum or petroleum
derived from substances
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and drilling fluids, produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or geothermal
resources; (iii) any flammable substances or explosives, any radioactive
materials, any hazardous wastes or substances, any toxic wastes or substances or
any other materials or pollutants which pose a hazard to any property or to
Persons on or about such property; and (iv) asbestos in any form or electrical
equipment which contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Material Adverse Change" shall mean such a change or event if its
impact causes or is reasonably expected to cause (i) a reduction in the Bank's
earnings in each of the Bank's next two fiscal years by more than $1,000,000,
(ii) a reduction in the Bank's CAMEL rating, (iii) a reduction in the Bank's CRA
rating to less than "2", or (iv) a reduction in shareholders' equity to less
than 90% of the Bank's shareholders' equity at December 31, 1995 as determined
in accordance with GAAP.
"Material Contract" shall have the meaning given such term in Section
4.12.
"Merger" shall mean the merger of the Monarch Merger Corporation with
and into the Bank.
"Monarch Bank" shall mean the wholly-owned California state-chartered
bank subsidiary of the Company.
"Monarch Bank Stock" shall mean the common stock, no par value, of
Monarch Bank.
"Monarch Merger Corporation" shall mean the interim California
corporation established by the Company solely for the purpose of effecting the
Merger.
"Monarch Merger Corporation Stock" shall mean the common stock, no par
value, of Monarch Merger Corporation.
"Party" shall mean either the Company or the Bank and "Parties" shall
mean both the Company and Bank.
"Per Share Price" shall mean $17.25 per share if the Closing Date
shall occur on or before September 30, 1996, and $17.50 per share if the Closing
Date shall occur after September 30, 1996 and on or before December 31, 1996.
"Perfected Dissenting Shares" shall mean shares of Bank Stock the
holders of which have satisfied the requirements of Section 1300 (as defined
below) and have not effectively withdrawn or lost their dissenters' rights under
Section 1300.
"Permit" shall mean any United States federal, foreign, state, local
or other license, permit, franchise, certificate of authority, order or approval
necessary or appropriate under any applicable Rule (as defined below).
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"Person" shall mean any natural persons corporation, trust,
association, unincorporated body, partnership, joint venture, Governmental
Entity, statutorily or regulatory sanctioned unit or any other person or
organization.
"Proxy Statement" shall have the meaning given such term in Section
6.8.
"Real Property" shall have the meaning given such term in subsection
(a) of Section 4.6.
"Representatives" shall have the meaning given such term in subsection
(a) of Section 6. 3.
"Rule" shall mean any statute or law or any judgment, decree,
injunction, order, regulation or rule of any Governmental Entity, including,
without limitation, those relating to disclosure, usury, equal credit
opportunity, equal employment, fair credit reporting and anticompetitive
activities.
"Secretary of State" shall mean the Secretary of State of the State of
California.
"Section 1300" shall mean Section 1300 ET SEQ. of the California
Corporations Code.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and all rules and regulations thereunder.
"Superintendent" shall mean the Superintendent of Banks of the State
of California.
"Surviving Bank" shall mean the bank surviving the Merger.
"Surviving Bank Stock" shall mean the common stock, no par value, of
the Surviving Bank.
"Tax Filings" shall have the meaning given such term in Section 4.8.
"The Company" shall mean Monarch Bancorp, a California corporation.
"The Company Stock" shall mean the common stock, no par value, of the
Company.
"The Company Financial Statements" shall have the meaning given such
term in Section 5.4.
"Third Party Consent" shall have the meaning given such term in
Sections 6.17 and 7.9.
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"To the knowledge" and "to the best knowledge" shall have the meanings
given such terms in Section 15.15.
ARTICLE II
THE MERGER AND RELATED MATTERS
2.1 THE MERGER. The Company agrees that it will use its best efforts,
with all necessary cooperation of Bank, to perfect the organization of Monarch
Merger Corporation in accordance with the California Corporations Code prior to
the Closing Date. The directors and officers of Monarch Merger Corporation, and
the Articles of Incorporation and Bylaws of Monarch Merger Corporation, shall be
determined by the Company. Subject to the provisions of this Agreement, the
Parties agree to request that the approval of the Merger to be issued by the
Superintendent, the FDIC and the FRB on or prior to the Closing Date shall
provide that the Merger shall become effective (the "Effective Time of the
Merger") as of the Closing Date. The Bank shall cause its officers to execute
the Agreement of Merger, as well as all other necessary documents, in order to
effect the Merger in accordance with the terms hereof as requested by the
Company. At the Effective Time of the Merger, the following transactions will
occur simultaneously:
(a) MERGER OF BANK AND MONARCH MERGER CORPORATION. Bank and
Monarch Merger Corporation shall be merged under the certificate of authority of
Bank.
(b) EFFECT ON BANK STOCK. Subject to Section 2.3, each share of
Bank Stock issued and outstanding immediately prior to the Effective Time of the
Merger shall, on and at the Effective Time of the Merger, pursuant to the
Agreement of Merger and without any further action on the part of Bank or the
holders of Bank Stock, be automatically cancelled and cease to be an issued and
outstanding share of Bank Stock, and shall be exchanged for and converted into
the right to receive the Per Share Price.
(c) EFFECT ON MONARCH MERGER CORPORATION STOCK. Each share of
Monarch Merger Corporation Stock issued and outstanding immediately prior to the
Effective Time of the Merger shall, on and at the Effective Time of the Merger,
pursuant to the Agreement of Merger and without any further action on the part
of Bank or the holder of the Monarch Merger Corporation Stock be converted into,
and shall for all purposes be deemed to represent, one share of Surviving Bank
Stock, and one certificate representing one share of the Surviving Bank Stock
will be issued to the Company.
2.2 EFFECT OF THE MERGER. At the Effective Time of the Merger, the
corporate existence of Monarch Merger Corporation and Bank shall be merged into
and continued in the Surviving Bank, and the Surviving Bank shall be deemed the
same corporation as each corporation participating in the Merger. All rights,
franchises, and interests of Monarch Merger Corporation and Bank in and to every
type of property (real, personal and mixed) and choses in action shall be
transferred to and vested in the Surviving Bank by virtue of the Merger without
any deed or other transfer and the Surviving Bank shall hold and enjoy all
rights of property, franchises and interests, in the same manner and to the same
extent as such rights,
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franchises and interests were held or enjoyed by any one of the consolidating
corporations at the Effective Time of the Merger.
2.3 DISSENTING SHAREHOLDERS. Any Perfected Dissenting Shares shall
not be converted into the right to receive the Per Share Price, but the holders
thereof shall be entitled only to such rights as are granted them by Section
1300. Each dissenting shareholder who is entitled to payment for his shares of
Bank Stock under Section 1300 shall receive such payment
in an amount as determined pursuant to Section 1300.
2.4 THE AGGREGATE PURCHASE PRICE AND PER SHARE PRICE. The Aggregate
Purchase Price shall be equal to the sum of (i) the product of the number of
shares outstanding on the Closing Date and the Per Share Price and (ii) the
Aggregate Option Price.
2.5 DELIVERY OF CASH. At the Closing, the Company will deliver to the
Exchange Agent an amount of cash equal to the Aggregate Purchase Price.
Delivery to such holders of the cash to which they are entitled will
subsequently be made by the Exchange Agent against delivery of share
certificates formerly evidencing Bank Stock (duly executed and in proper form
for transfer) to the Exchange Agent in accordance with this Section 2.5 and an
agreement to be entered into between the Company and the Exchange Agent.
2.6 NAME OF SURVIVING BANK. The name of the Surviving Bank shall be
"Western Bank."
2.7 DIRECTORS AND OFFICERS OF SURVIVING BANK. At the Effective Time
of the Merger, the directors of the Bank immediately prior to the Effective Time
of the Merger shall be the directors of the Surviving Bank until their
successors have been chosen and qualified in accordance with the Articles of
Incorporation and Bylaws of the Surviving Bank. The officers of the Bank at the
Effective Time of the Merger shall be the officers of the Surviving Bank until
they resign or are replaced or terminated by the Board of Directors of the
Surviving Bank or otherwise in accordance with the Surviving Bank's Charter
Documents.
2.8 STOCK OPTIONS. Immediately prior to the Effective Time of the
Merger, each holder of a Bank Option will be given the opportunity to, in whole
or in part, cancel such option and receive at the Closing an amount in cash
equal to the number of shares of Bank Stock covered by such option multiplied by
the number obtained by subtracting the exercise price of such option from the
Per Share Price in effect on the Closing Date (the total of sum of such payments
for all Bank Options so cancelled shall be defined as the "Aggregate Option
Price"). If the Company and each holder of a Bank Option should otherwise
agree, the Company shall assume at the Closing such option under its 1993 Stock
Option Plan so that the economic value of such Bank Options (as measured by the
number of shares of Bank Stock covered by such Bank Option multiplied by the Per
Share Price, minus the exercise price of such Bank Option) will be preserved and
shall also be entitled to the benefits of the Company Option Cancellation
Agreement. All remaining Bank Options which are entitled to participate in the
Aggregate Option Price but the holder of a Bank Option elects not to participate
in the Aggregate Option Price shall be cancelled immediately prior to the
Effective Time of the Merger.
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2.9 DIRECTORS' AGREEMENTS. Concurrently with the execution of this
Agreement, Bank shall cause each of its directors to enter into the Directors'
Agreement.
2.10 TRANSMITTAL LETTER. Immediately after the Effective Time of the
Merger, the Company shall instruct the Exchange Agent to mail appropriate
transmittal materials to the former stockholders of Bank stock, and the form of
such transmittal letter shall be subject to the reasonable approval of the Bank.
2.11 ASSIGNMENT RIGHTS OF THE COMPANY. If the Company determines in
good faith, and after consultation with the Bank, that it is unable to obtain
any and all necessary regulatory permits and approvals as provided in Section
9.1, the Company shall have the right without receiving approval from the Bank
to assign all of the Company rights hereunder to Castle Creek Partners, Fund I
or its affiliates or shareholder(s) ("CCP") if, but only if (i) CCP has
available cash or binding commitments from qualified buyers of an amount equal
to not less than 80% of the Aggregate Purchase Price within 60 days from the
date of this Agreement; (ii) CCP assumes all obligations of the Company under
this Agreement; and (iii) no presumptive disqualification exists with respect to
the receipt of any and all regulatory permits and approvals as provided in
Section 9.1. Notwithstanding the foregoing, any assignment by the Company of
its rights hereunder to CCP shall not relieve the Company of its obligations
under this Agreement if CCP does not perform its obligations.
ARTICLE III
THE CLOSING
3.1 CLOSING DATE. Consummation of the transactions contemplated by
this Agreement shall take place at the office of the Company, 00000 Xxxx Xxxxxx
Xxxxx, Xxxxxx Xxxxxx, Xxxxxxxxxx 00000, or such other location as may be agreed
upon by the parties, on the Closing Date. The Effective Time shall occur
following the last to occur of (i) the receipt of all approvals and consents
specified in this Agreement and the expiration of the applicable waiting periods
specified in Article IX, and (ii) satisfaction of the conditions precedent set
forth in Articles IX, X and XI or written waiver of such conditions as provided
herein (the "Closing Date", "Effective Time of the Merger" or "Effective Time").
3.2 EXECUTION OF AGREEMENT OF MERGER. Prior to the Closing Date, and
as soon as practicable after the organization of Monarch Merger Corporation, the
Agreement of Merger (as amended, if necessary, to conform to any requirements of
any Governmental Entity having authority over the Merger) shall be executed by
Bank and Monarch Merger Corporation. On the Closing Date, the Merger shall
become effective in accordance with the approvals granted by the Superintendent,
the FDIC and the FRB, and the Agreement of Merger, bearing the certification of
the Secretary of State, together with all requisite certificates shall be duly
filed in the office of the Superintendent after being filed with the California
Secretary of State with the approval of the Superintendent enclosed thereon, in
accordance with the California Corporations Code and Section 4880 ET SEQ. of the
California Financial Code.
3.3 DOCUMENTS TO BE DELIVERED. At the Closing the Parties shall
deliver, or cause to be delivered, such documents or certificates as may be
necessary in the reasonable opinion
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of counsel for any of the parties, to effectuate the transactions called for in
this Agreement. If, at any time after the Effective Time of the Merger, the
Company or its successors or assigns shall determine that any further
conveyance, assignment or other documents or any further action is necessary or
desirable to further effectuate the transactions set forth herein or
contemplated hereby, the officers and directors of the Parties hereto shall
execute and deliver, or cause to be executed and delivered, all such documents
as may be reasonably required to effectuate such transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BANK
Bank represents and warrants to the Company as follows:
4.1 ORGANIZATION AND GOOD STANDING. Bank is a California banking
corporation duly organized and validly existing in good standing under the laws
of the State of California and it has the corporate power and authority to carry
on its business as presently conducted, and is authorized to transact business
as a bank. Bank is not a member of the Federal Reserve System and its deposits
are insured by the Federal Deposit Insurance Corporation in the manner and to
the extent provided by law. The Bank has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as presently conducted. The nature of its operations and the
business transacted by it as of the date hereof make licensing and qualification
in any other state or jurisdiction unnecessary. The Bank has delivered to the
Company true and correct copies of its Articles of Incorporation and Bylaws, as
amended and in effect as of the date hereof.
4.2 CAPITALIZATION. The authorized capital stock of Bank consists of
10,000,000 shares of Common Stock, no par value, of which 3,543,156 shares are
outstanding on the date hereof, all validly issued, fully paid and nonassessable
(except for Section 662 of the California Financial Code). Except for stock
options covering 425,725 shares of Bank Common Stock granted pursuant to the
Bank Stock Option Plan, all of which options are currently exercisable, no
unissued shares of the Bank's Common Stock or any other securities of the Bank
are subject to any warrants, options, rights or commitments of any character,
kind or nature and Bank is not obligated to issue or repurchase any shares of
its Common Stock or any other security to or from any person except in
accordance with the terms of the Bank Stock Option Plan and Agreements pursuant
thereto, and true and correct copies, as amended and in effect as of the date
hereof have been delivered to the Company. Exhibit 4.2 sets forth the name of
each holder of a Bank stock option, the number of shares of Bank Common Stock
covered by each such holder's option, the date of grant of each such holder's
option, the exercise price per share, the vesting schedule for each such
holder's option and the expiration date of each such holder's option.
4.3 SUBSIDIARIES. Except for WBC Management Company, Inc., a
California corporation, which is inactive, Bank does not own, directly or
indirectly (except as pledgee pursuant to loans which are not in default), any
equity position or other voting interest in any corporation, partnership, joint
venture or other entity.
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4.4 FINANCIAL STATEMENTS. Bank has delivered to the Company copies
of the audited Statements of Financial Condition of the Bank as of December 31,
1994 and 1995; Statements of Earnings, Stockholders' Equity and Cash Flows for
each of the years ended December 31, 1994 and 1995, the related notes and
related opinions thereon of Ernst & Young, LLP certified public accountants,
with respect to such financial statements (the "Audited Bank Financial
Statements"). The Bank has furnished the Company with true and correct copies
of each management letter or other letter delivered to the Bank by Ernst &
Young, LLP in connection with the Financial Statements of the Bank or relating
to any review of the internal controls of the Bank by Xxxxx Xxxxxxxx and Xxxxx &
Xxxxx, LLP since January 1, 1993. The Audited Bank Financial Statements: (i)
present fairly the financial condition and results of operations of the Bank as
of and for the dates or periods covered thereby in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved; (ii) are based on the books and records of the Bank; (iii) contain and
reflect reserves for all material accrued liabilities and for all reasonably
anticipated losses, and set forth adequate reserves for loan losses and other
contingencies to the extent required by GAAP; and (iv) none of the Bank Audited
Financial Statements contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not misleading under GAAP.
4.5 BOOKS AND RECORDS.
(a) The minute books of the Bank which have been made available
to the Company contain (i) true, accurate and complete records of all meetings
and actions taken by the Board of Directors, Board committees and shareholders
of the Bank, and (ii) true and complete copies of its charter documents and
bylaws and all amendments thereto.
(b) The Bank has records which accurately and validly reflect,
in all material respects, its transactions and accounting controls sufficient to
insure that such transactions are (i) in all material respects, executed in
accordance with management's general or specific authorization, and (ii)
recorded in conformity with GAAP; such records, to the extent they contain
important information pertaining to the Bank which is not easily and readily
available elsewhere, have been duplicated, and such duplicates are stored safely
and securely pursuant to procedures and techniques reasonably adequate for
companies of the size of the Bank and in the businesses in which the Bank is
engaged; and the data processing equipment and software used by the Bank in the
operation of its businesses (including any disaster recovery facility) to
generate and retrieve such records are reasonably adequate for companies of the
size of the Bank and in the businesses in which the Bank is engaged.
4.6 PROPERTY AND ASSETS. (a) Exhibit 4.6(a) sets forth a general
description (including the character of the ownership of the Bank) of all real
property of the Bank, including fees, leaseholds and all other interest in real
property (including real property that is DPC Property) ("Real Property").
Except as set forth on Exhibit 4.6(a), (i) the Bank has good and marketable
title, free and clear of any encumbrance, lien or charge of any kind or nature
(except liens for taxes not yet due) to all of the property, real, mixed or
intangible, reflected on the Bank's Financial Statements as of December 31, 1994
and 1995, except as reflected therein or in the notes thereto (except property
sold or transferred or Encumbrances incurred in the ordinary course of business
since the date thereof except (a) Encumbrances in the aggregate
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which do not materially detract from the value, interfere with the use, or
restrict the sale, transfer or disposition, of such properties and assets or
otherwise materially and adversely affect the Bank; (b) any lien for taxes not
yet due; and (c) any Encumbrances arising under the document that created the
interest in the real property (other than Encumbrances arising as a result of
any breach or default of the Bank); (ii) all leasehold interests for real
property and any material personal property used by the Bank in its business are
held pursuant to lease agreements which are valid and enforceable, except as the
enforceability hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws of general application relating to or
affecting enforcement of creditors rights and the application of equitable
principles in any action, legal or equitable in accordance with their terms;
(iii) all such properties comply in all material respects with all applicable
private agreements, zoning requirements and other governmental laws and
regulations relating thereto and there are no condemnation proceedings pending
or, to the knowledge of the Bank, threatened with respect to such properties;
(iv) the Bank has valid title or other ownership rights under licenses to all
material intangible personal or intellectual property used by the Bank in its
business, free and clear of any claim, defense or right of any other person or
entity which is material to such property, subject only to rights of the
licensors pursuant to applicable license agreements, which rights do not
materially adversely interfere with the use of such property; and (v) all
material insurable properties owned or held by the Bank are adequately insured
in such amounts and against such risks insured as is customary with banks of
similar size. The Bank has furnished the Company with true and correct copies
of all leases included on Exhibit 4.6 delivered as of the date of the Agreement,
all title insurance policies relating to the Real Property and all documents
evidencing recordation of all recordable interest in the Real Property.
(b) CONDITION OF PROPERTIES. All tangible properties of the Bank that
are material to the business, financial condition, or results of operations of
the Bank are in a good state of maintenance and repair, except for ordinary wear
and tear, and are adequate for the conduct of the business of the Bank as
presently conducted. Except as set forth in Exhibit 4.6(b), (i) the execution
of this Agreement, the performance of the obligations of the Bank hereunder and
the consummation of the transactions contemplated herein, including the Merger,
does not conflict with and will not result in a breach or default under any
lease, agreement or contract described in Exhibit 4.6, or give any other party
thereto a right to terminate or modify any term thereof; (ii) the Bank has no
obligation to improve any Real Property; (iii) each lease and agreement under
which the Bank is a lessor is in full force and effect and is a valid and
legally binding obligation of the Bank, and, to the best knowledge of the Bank,
each other party thereto; and (iv) the Bank, and to the best knowledge of the
Bank, each other party to any such lease or agreement have performed in all
material respects all the obligations required to be performed by them to date
under such lease or agreement and are not in default in any material respect
under any such lease or agreement and there is no pending or, to the best
knowledge of the Bank, threatened proceeding, or proceeding which the Bank has
reason to believe may be threatened, with respect to such property or any such
lease.
4.7 LITIGATION PROCEEDINGS AND AGREEMENTS WITH BANK AUTHORITIES.
(a) The Bank is not engaged as a defendant in any legal or other
proceedings before any court, administrative agency or other governmental
authority except as is shown on Exhibit 4.7(a). Except as set forth on Exhibit
4.7(a), the Bank is not aware of any
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"threatened or pending litigation" (within the meaning of Paragraph 5 of the
American Bar Association Statement of Policy Regarding Lawyers' Responses to
Auditors' Requests for Information adopted December 8, 1975) against the Bank.
The Bank is not subject to any agreement, order, writ, injunction or decree of
any federal, state or local court, out of a proceeding involving the Bank or any
of its business or properties except as described in Exhibit 4.7(a). The Bank
has not been served with notice of, nor, to best of Bank's knowledge is it
currently under investigation with respect to, any violation of federal, state
or local law or administrative regulation. Except as set forth on Exhibit
4.7(a), there is no (i) outstanding judgment, order, writ, injunction or decree,
stipulation or award of any Governmental Entity or by arbitration, against, or
to the knowledge of the Bank, affecting the Bank or its assets or business that
(a) has had or may have a material adverse effect on the assets, liabilities,
business, financial condition or results of operations of the Bank, (b) requires
any payment by, or excuses a material obligation of a third party to made any
payment to, the Bank, or (c) has the effect of prohibiting any business practice
of, or the acquisition, retention or disposition of property by, the Bank; or
(ii) legal, administrative, arbitration, investigatory or other proceeding
pending or, to the best knowledge of the Bank that has been threatened, or which
the Bank has reason to believe may be threatened, against or affecting any
director, officer, employee, agent or representative of the Bank, in connection
with which any such person has or may have rights to be indemnified by the Bank.
(b) Except as set forth in Exhibit 4.7(a), the Bank is not a
party to, or otherwise subject to, any agreement or memorandum of understanding
with or order of any Governmental Entity charged with the supervision or
regulation of banks or engaged in the insurance of bank deposits, that restricts
the conduct of its business, or in any manner relates to its capital adequacy,
its credit or investment policies or its management.
4.8 TAXES AND ASSESSMENTS. The Bank has timely filed all federal
income and state franchise tax returns and all tax reports or returns which it
is required to file with applicable federal, state, county or local authorities
and agencies except (a) where the failure to make any such filing would not have
any materially adverse effect on the business, financial condition or results of
operations of the Bank taken as a whole, and (b) where the required filing date
has been lawfully extended, and the Bank has paid all taxes provided for and to
be due in such returns and reports ("Tax Filings"). The Bank's Tax Filings have
never been examined by a Governmental Entity. As of December 31, 1995, to the
extent required by GAAP, the Bank had paid, or set up adequate accruals for the
payment of, all taxes, penalties and assessments for which it is liable as of
such date, whether or not disputed, with respect to any and all United Sates
federal, foreign, state, local, environmental (including under any Environmental
Law) and other taxes for the periods covered by the financial statements of the
Bank and for all prior and subsequent periods. Except as set forth in Exhibit
4.8 the Bank has no knowledge of any deficiency proposed to be assessed against
it. The Bank has paid all assessments made by the FDIC and the Superintendent
required to be paid prior the date hereof. There is currently no federal or
state income tax audit or investigation in process or to the best knowledge of
the Bank any other pending investigation by any authorized body of the taxes
paid or to be paid by the Bank, and the Bank has not been informed that any such
audit or investigation is proposed.
4.9 COMPLIANCE WITH LAWS AND REGULATIONS.
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(a) Except as set forth in Exhibit 4.9, the Bank is not in
default under or in breach of any law, ordinance, rule, regulation, order,
judgment or decree applicable to it promulgated by any governmental agency
having authority over it, where such default or breach would have a material
adverse effect on the financial condition, results of operations, or business of
the Bank.
(b) The Bank has conducted in all material respects its
businesses in accordance with all applicable federal, foreign, state and local
laws, regulations and orders, including without limitation disclosure, usury,
equal credit opportunity, equal employment, fair credit reporting, antitrust,
licensing and other laws, regulations and orders, and the forms, procedures and
practices used by the Bank are in compliance with such laws, regulations, and
orders, except for such violations or noncompliance as will not have a material
adverse effect on the financial condition, results of operations, or business of
the Bank.
4.10 PERFORMANCE OF OBLIGATIONS. Except as set forth in Exhibit
4.10, the Bank has performed in all respects all of the obligations required to
be performed by it to date and is not in default under or in breach of any term
or provision of any covenant, contract, lease, indenture or any other agreement
to which the Bank is a party or is subject to or is otherwise bound, and no
event has occurred which, with the giving of notice or the passage of time or
both, would constitute such default or breach, where such default or breach
would have a material adverse effect on the financial condition, results of
operations, or business of the Bank, except for loans of the Bank in default on
the date of this Agreement. No party with whom the Bank has an agreement which
is material to the financial condition, results of operations or business of the
Bank is in default thereunder.
4.11 EMPLOYEES.
(a) Except as set forth in Exhibit 4.11(a), there are no
understandings for the employment of any officer or employee of the Bank which
are not terminable by the Bank without liability on not more than 30 days'
notice. Except as set forth in Exhibit 4.11(a), there are no material
controversies pending or threatened between the Bank and any of its employees.
Except as disclosed in the Bank Financial Statements, or in Exhibit 4.11(a), all
material sums due for employee compensation and benefits have been duly and
adequately paid or provided for, and all deferred compensation obligations are
fully funded. The Bank is not a party to any collective bargaining agreement
with respect to any of its employees or any labor organization to which its
employees or any of them belong. Except as set forth in Exhibit 4.11(a), no
director, officer or employee of the Bank is entitled to receive any payment of
any amount under any Bank Employment Agreement, severance plan or other benefit
plan as a result of the consummation of any transaction contemplated by this
Agreement; provided, however, the foregoing shall not prevent the Bank from
accruing and paying prior to the Determination Date compensation pursuant to the
Bank Incentive Compensation Plan.
(b) Except as may be disclosed in Exhibit 4.11(b), (i) the Bank
is and has been in material compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including, without limitation, any such laws respecting
employment discrimination and occupational safety and health requirements, and
in any unfair labor practice; (ii) there is no material unfair labor
- 15 -
practice complaint against Bank pending or, to the knowledge of Bank, threatened
before the National Labor Relations Board; (iii) there is no labor dispute,
strike, slowdown or stoppage actually pending or, to the knowledge of Bank,
threatened against or directly affecting the Bank; and (v) the Bank has not
experienced any material work stoppage or other material labor difficulty during
the past five years, except in each case which would not result in a Material
Adverse Change.
(c) Except as may be disclosed in Exhibit 4.11(c), the Bank does
not maintain, contribute to or participate in or has any material liability
under any employee benefit plans, as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any
nonqualified employee benefit plans or deferred compensation, bonus, stock or
incentive plans, or other employee benefit or fringe benefit programs for the
benefit of former or current employees of the Bank (the "Employee Plans"). No
present or former employee of Bank has been charged with breaching nor has
breached a fiduciary duty under any of the Employee Plans. The Bank does not
participate in, nor has it in the past five years participated in, nor has it
any present or future obligation or liability under, any multiemployer plan (as
defined at Section 3(37) of ERISA). Except as may be separately disclosed in
Exhibit 4.11(c), the Bank does not maintain, contribute to, or participate in,
any plan that provides health, major medical, disability or life insurance
benefits to former employees of the Bank.
(d) The Bank does not maintain, nor has it maintained for the
past ten years, any Employee Plans subject to Title IV of ERISA or Section 412
of the Code. No reportable event (as defined in Section 4043 of ERISA) has
occurred with respect to any Employee Plans as to which a notice would be
required to be filed with the Pension Benefit Guaranty Corporation. Except as
may be disclosed in Exhibit 4.11(d), no claim is pending, and the Bank has not
received notice of any threatened or imminent material claim with respect to any
Employee Plan (other than a routine claim for benefits for which plan
administrative review procedures have not been exhausted) for which the Bank
would be liable after December 31, 1995, except as will be reflected on the Bank
Financial Statements. After December 31, 1995, the Bank will not have any
liabilities for excise taxes under Sections 4971, 4975, 4976, 4977, 4979 or
4980B of the Internal Revenue Code of 1986, as amended (the "Code") or for a
fine under Section 502 of ERISA with respect to any Employee Plan. All Employee
Plans have in all material respects been operated, administered and maintained
in accordance with the terms thereof and in compliance with the requirements of
all applicable laws, including without limitation, ERISA and the Code.
4.12 CONTRACTS AND AGREEMENTS. Except as listed in Exhibit 4.12, the
Bank is not a party to any oral or written agreement, commitment, or obligation
(hereinafter referred to as an "Understanding" or "Material Contract") which
individually, or with all other similar Understandings relating to the same or
similar subject matter, falls within any of the following classifications:
(i) any Understanding dealing with advertising, brokerage,
licensing, dealership, representative or agency relationship;
- 16 -
(ii) any Understanding with any labor or collective bargaining
organization or association;
(iii) any mortgage, pledge, conditional sales contract, security
agreement, or any other similar Understanding with respect to any real or
personal property in an amount in excess of $25,000, under which the Bank is a
debtor or to which any of its property is subject;
(iv) any profit sharing, group insurance, bonus, deferred
compensation, stock option, severance pay, pension, retirement, or any other
similar Understanding which might provide benefits to the employees, officers or
directors of the Bank;
(v) any Understanding for the future purchase of materials,
supplies, services, merchandise or equipment, the price of which exceeds $25,000
and which will not be terminable without liability as to future purchases as of
the Effective Time; it being understood that materials, supplies, service,
merchandise or equipment shall not be deemed to include loans, repurchase or
reverse repurchase agreements, securities or other financial transactions
incurred by the Bank in the ordinary course of its banking business;
(vi) any Understanding for the sale of any of its assets, or for
the grant of any right to purchase any of its assets, properties or rights, or
which requires the consent of any third party to the transfer and assignment of
any of its assets, properties or rights; it being understood that the foregoing
shall not be deemed to include any Understanding for the sale of mortgage loans,
or repurchase or reverse repurchase agreements, securities or other financial
transactions incurred by the Bank in the ordinary course of its banking
business;
(vii) any guarantee, subordination or other similar or related
types of Understanding except where the Bank is a beneficiary;
(viii) any Understanding for the borrowing of any money by the
Bank (other than time savings or demand deposits) or for a line of credit to it;
(ix) any Understanding for any one capital expenditure or series
of related capital expenditures in excess of $25,000 individually or $100,000 in
the aggregate;
(x) any real property lease, whether as lessor or lessee; or any
personal property lease, whether as lessor or lessee, involving payments in
excess of $1,000 per month;
(xi) any Understanding to make or participate in a loan (not yet
fully disbursed or funded) to any borrower or related group of borrowers, which
undisbursed or unfunded amount would exceed $250,000 unsecured or secured;
(xii) any Understanding of any kind (other than contracts
relating to demand or time deposits or otherwise made in the ordinary course of
business) with any director or officer of the Bank or with any member of the
immediate family of any such director of officer or with any partnership,
corporations, associate or entity of which any such person is an Affiliate;
- 17 -
(xiii) any Understanding for insurance of any type described in
Section 4.13 below; or
(xiv) any Understanding, the purpose or effect of which could
encompass (a) merging with any person or bank or bank holding company other than
with the Company (b) the selling of any of its assets (except in the ordinary
course of business) or stock to any person, (c) recommending to any of its
shareholders that their Bank Common Stock be sold to any person or bank other
than the Company, or causing any other person to make such recommendations or
acquiescing in any such recommendations made by any other person, or (d) in any
other way transferring, directly or indirectly, control of the Bank;
Except as stated in Exhibit 4.12, true and correct copies of all
documents relating to the foregoing Understandings have been delivered by Bank
prior to the date hereof.
As used in this Section 4.12, "immediate family" of a person shall
mean his or her spouse, parents, children, and siblings.
4.13 INSURANCE. The Bank has and at all times within three years of
the date of this Agreement has had, in full force and effect policies of
insurance and bonds (including without limitation Bankers' blanket bond,
fidelity coverage, director and officer liability, fire, third party liability,
use and occupancy) with respect to its assets and business and against such
casualties and contingencies and of such amounts, types and forms which in the
judgment of the Bank are adequate or appropriate to cover its assets and
businesses as set forth in Exhibit 4.13. Set forth in Exhibit 4.13 is a
schedule of all policies of insurance (other than title or credit insurance)
carried and owned by the Bank, showing the name of the insurance or bonding
company, a summary of the coverage, the amounts, the deductible features, the
annual premiums and the expiration dates. If any such policy or bond is
changed, terminated or modified following the date of this Agreement, such
termination, change or modification shall be promptly disclosed to Bank in
writing. The Bank is not in default under any such policy of insurance or bond
such that it could be canceled, and all material claims thereunder have been
filed in a timely fashion. The Bank has filed claims with or given notice of
claim to its insurers or bonding companies with respect to all material matters
and occurrences for which it believes it has coverage.
4.14 BROKERS. Except as indicated in EXHIBIT 4.14, no agent, broker,
investment banker, person or firm acting on behalf or under authority of the
Bank (except for any payments for fairness opinions as required in Section 10.9)
is or will be entitled to any broker's or finder's fee or any other commission
or similar fee directly or indirectly in connection with any of the transactions
contemplated by this Agreement.
4.15 AUTHORIZATION. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Bank. Assuming due and proper
execution and delivery of this Agreement by the Company, this Agreement
constitutes a legal, valid and binding agreement of the Bank in accordance with
its respective terms, except as the enforceability hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of
general application relating to or affecting enforcement of creditors rights and
the application of
- 18 -
equitable principles in any action, legal or equitable, and by Section 8(b) 6(D)
of the Federal Deposit Insurance Act, 12 U.S.C. Section 1818(b)(6)(D). Subject
to obtaining the requisite approval of this Agreement by the shareholders of the
Bank, the Bank has full corporate power and authority to perform its obligations
under this Agreement and the transactions contemplated hereby.
4.16 NO CONFLICTS; DEFAULTS. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated herein,
including the Merger, and compliance by Bank with any provision hereof and
thereof will not (a) conflict with or result in a breach of, or default or loss
of any benefit under, any provision of its Charter Documents or, except as set
forth in Exhibit 4.16 any material agreement, instrument or obligation to which
it is a party or by which the property of Bank is bound or give any other party
to any such agreement, instrument or obligation the right to terminate or modify
any term thereof; (b) except for the prior approval of the FDIC and the
Superintendent and as set forth in Exhibit 4.16, require any Consents; or (c)
result in the creation or imposition of any Encumbrance on any of the properties
or assets of Bank; or (d) violate the Charter Documents or any Rules to which
Bank is subject.
4.17 CERTAIN ADVERSE CHANGES. Except as specifically required,
permitted or effected by this Agreement, and except as set forth on Exhibit
4.17, since December 31, 1995 there has not been, occurred or arisen any of the
following (whether or not in the ordinary course of business unless otherwise
indicated):
(a) Any materially adverse change in any of the assets,
liabilities, permits, methods of accounting or accounting practice, or manner of
conducting business, of Bank or any other event or development that has had or
may reasonably be expected to have a material adverse effect on the assets,
liabilities, Permits, business, financial condition, or results of operations of
Bank or which should be disclosed in order to make the Bank Financial Statements
not misleading.
(b) Any damage, destruction or other casualty loss (whether or
not covered by insurance) that has had or may reasonably be expected to have a
material adverse effect on the assets, liabilities, business, financial
condition, or results of operations of Bank or that may involve a loss of more
than $50,000 in excess of applicable insurance coverage; or
(c) Any amendment, modification or termination of any existing,
or entry into any new, Material Contract or Permit that has had or may
reasonably be expected to have a material adverse effect on the assets,
liabilities, business, financial condition, or results of operations of Bank;
(d) Any disposition by Bank of an asset the lack of which has had
or may reasonably be expected to have a material adverse effect on the business,
financial condition, or results of operations of Bank; or
(e) Any direct or indirect redemption, purchase or other
acquisition by Bank of any Equity Securities or any declaration, setting aside
or payment of any dividend or
- 19 -
other distribution on or in respect of Bank Stock whether consisting of money,
other personal property, real property or other things of value.
4.18 REPORTS AND FILINGS. Since January 1, 1994, Bank has filed all
reports, returns, registrations and statements (such reports and filings
referred to as "Bank Filings"), together with any amendments required to be
made with respect thereto, that were required to be filed with (a) the FDIC, (b)
the Superintendent and (c) any other applicable Governmental Entity, including
taxing authorities, except where the failure to file such reports, returns,
registrations and statements has not had and is not reasonably expected to have
a material adverse effect on the business, financial condition, or results of
operations of Bank. No administrative actions have been taken or orders issued
in connection with such Bank Filings. As of their respective dates, each of such
Bank Filings complied in all material respects with all Rules enforced or
promulgated by the Governmental Entity with which it was filed (or was amended
so as to be so promptly following discovery of any such noncompliance) Any
financial statement contained in any of such Bank Filings that was intended to
present the financial position of Bank fairly and was prepared in accordance
with generally accepted accounting principles or banking regulations
consistently applied, except as stated therein, during the periods involved.
Bank has furnished the Company with true and correct copies of all Bank Filings
filed by Bank since January 1, 1994.
4.19 INFORMATION REGARDING LOANS. The Bank has provided the Company
access to all of the information in its possession concerning its loans, and
such information was true and correct in all material respects as of the date
access was provided. Except as may be disclosed in Exhibit 4.19, (i) all loans
and discounts shown on the Bank Financial Statements at December 31, 1995 or
which were entered into after December 31, 1995, but before the Closing Date,
were and will be made in all material respects for good, valuable and adequate
consideration in the ordinary course of the business of Bank, in accordance in
all material respects with the Bank's lending practices, and are not subject to
any material known defenses, setoffs or counterclaims, including without
limitation any such as are afforded by usury or truth in lending laws, except as
may be provided by bankruptcy, insolvency or similar laws or by general
principles of equity; (ii) the notes or other evidences of indebtedness
evidencing such loans and all forms of pledges, mortgages and other collateral
documents and security agreements constituting the Bank's loan portfolio, taken
as a whole, are and will be, in all material respects, enforceable except as the
enforceability hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors rights and the application of
equitable principles; and (iii) the Bank has complied in all material respects,
and will prior to the Closing Date comply with all laws and regulations relating
to such loans, or to the extent there has not been such compliance, such failure
to comply will not materially interfere with the collection of any such loan.
All loans and loan commitments extended by Bank and any extensions, renewals or
continuations of such loans and loan commitments that are on the Bank's books
and since December 31, 1995 were made in accordance with customary lending
standards of Bank in the ordinary course of business. Such loans are evidenced
by documentation based upon customary and ordinary past practices of Bank.
Prior to the date hereof, Bank has provided the Company with a schedule which
sets forth a description (a) by type and classification, if any, of each loan,
lease other extension of credit and commitment to extend credit; (b) by type and
classification of all loans, leases, other extensions of credit and
- 20 -
commitments to extend credit that have been classified by its Bank examiners or
auditors (external or internal) as "Watch List," "Substandard," "Doubtful,"
"Loss" or any comparable classification; and (c) all consumer loans as to which
any payment of principal, interest or other amount is 90 days or more past due.
4.20 COMPLIANCE WITH CRA To the best knowledge of Bank, the Bank's
compliance under the CRA should not constitute grounds for either the denial by
any Governmental Entity of any application to consummate the transactions
contemplated by this Agreement or the imposition of a materially burdensome
condition in connection with the approval of any such application.
4.21 CERTAIN INTERESTS. Except as described in Exhibit 4.12(xii),
Exhibit 4.21 sets forth a description of each instance in which an officer or
director of Bank (a) has any material interest in any property, real or
personal, tangible or intangible, used by or in connection with the business of
Bank; (b) is indebted to Bank except for normal business expense advances; or
(c) is a creditor (other than as a Deposit holder) of Bank except for amounts
due under normal salary and related benefits or reimbursement of ordinary
business expenses. Except as set forth in Exhibit 4.21, all such arrangements
are arm's length transactions pursuant to normal commercial terms and
conditions.
4.22 BRANCHES. Exhibit 4.22 hereto sets forth the common name and
location of each office of the Bank, an indication of whether such office is a
branch, service center, or other place of business, whether such premises are
owned or leased, the basic terms of such leases, the common name and location of
each approved but unopened office, and a description of each application for
additional offices of the Bank, and the status of each such application. The
Bank has received appropriate and effective permits and governmental authority
where any permit, approval or notice was required by law or regulation prior to
the establishment and operation of each such office now in operation. Except
for the offices described on Exhibit 4.22, the Bank does not operate or conduct
business out of any other location and the Bank does not have any current
application for, and the Bank has not received permission to open, any other
branch or to operate out of any other location.
4.23 UNDISCLOSED LIABILITY. The Bank has no liabilities or
obligations, either accrued or contingent, which are in excess of Ten Thousand
Dollars ($10,000) individually or in the aggregate, which has not been:
(i) reflected or disclosed in the Bank Financial Statements;
(ii) incurred subsequent to December 31, 1995, in the ordinary
course of business; or
(iii) disclosed on Exhibit 4.23 or any other exhibit to this
Agreement.
To the best of the Bank's knowledge and the knowledge of their
officers and directors, after due investigation, there is no basis for the
assertion against the Bank of any liability, obligation or claim that is likely
to result in or cause any material adverse change in
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the business or financial condition of the Bank, taken as a whole, which is not
fairly reflected in the Financial Statements, or otherwise disclosed on Exhibit
4.23 hereto.
4.24 ACCURACY OF INFORMATION FURNISHED. Except as to any statements
or information which shall include projections or forecasts, none of the
statements or information made or contained in any of the covenants,
representations or warranties of the Bank set forth in this Agreement or in any
of the schedules, exhibits, lists, certificates or other documents furnished
herewith taken as a whole contains any untrue statement of a material fact
required to be stated herein or therein or necessary to make the statements or
information contained herein or therein, in light of the circumstances in which
they were made, not misleading. As to any such information or statements which
include projections or forecast, such information or statements are based upon
assumptions believed by the Bank to be reasonable.
4.25 ENVIRONMENTAL LAWS. Except as may be disclosed in Exhibit 4.25,
to the best of its knowledge (and without conducting any site investigation or
other analysis for the purpose of making this representation), neither the
conduct nor operation of Bank nor any condition of any property presently or
previously owned, leased or operated by any of them violates or violated
Environmental Laws in any respect material to the business of Bank taken as a
whole and no condition or event has occurred with respect to any of them or any
such property that, with notice or the passage of time, or both, would
constitute a violation material to the business of Bank taken as a whole of
Environmental Laws or obligate (or potentially obligate) Bank to remedy,
stabilize, neutralize or otherwise alter the environmental condition of any such
property where the aggregate cost of such actions would be material to Bank
taken as a whole. Except as may be disclosed in Exhibit 4.25, Bank has not
received any notice from any person or entity that Bank or the operation or
condition of any property ever owned, leased or operated by any of them are or
were in violation of any Environmental Laws or that Bank is responsible (or
potentially responsible) for remedying, or the cleanup of, any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any such property.
4.26 FDIC EXAMINATION. The FDIC has recently completed an
examination of the Bank as of December 31, 1995, and although the examination
report has not yet been issued, it is the understanding of the Bank from
discussions with the FDIC examiners that (i) the FDIC believes the Bank's
allowance for loan losses is adequate and that the FDIC required no material
adjustments, (ii) the Bank's CAMEL rating will not change and the Bank's
financial condition is deemed by the FDIC to be satisfactory.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as follows:
5.1 ORGANIZATION AND GOOD STANDING. The Company is duly organized
and validly existing in good standing under the laws of the State of California
and registered with the FRB to be a bank holding company and it has the
corporate power and authority to carry on its business as presently conducted.
Monarch Bank is a California banking corporation duly
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organized and validly existing in good standing under the laws of the State of
California and it has the corporate power and authority to carry on its business
as presently conducted, and is authorized to transact business as a bank.
Although Monarch Bank is currently not a member of the Federal Reserve System,
Monarch Bank anticipates filing in the near future an application to become a
member of the Federal Reserve System. Monarch Bank's deposits are insured by
the Federal Deposit Insurance Corporation in the manner and to the extent
provided by law. Each of the Company and Monarch Bank has all requisite
corporate power and authority to own, lease and operate their properties and
assets and to carry on its business as presently conducted. The nature of their
operations and the business transacted by them as of the date hereof make
licensing and qualification in any other state or jurisdiction unnecessary. The
Bank has received true and correct copies of the Articles of Incorporation and
Bylaws, as amended and in effect as of the date hereof, of the Company and
Monarch Bank, respectively.
5.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, no par value, of which 8,228,436
shares are outstanding on the date hereof, all validly issued, fully paid and
nonassessable, and 5,000,000 shares of Preferred Stock, none of which are
outstanding. Except for stock options covering 553,439 shares of Company Common
Stock granted pursuant to the Company Stock Option Plan, all of which options
are currently exercisable, no unissued shares of the Company's Common Stock or
any other securities of the Company are subject to any warrants, options, rights
or commitments of any character, kind or nature and the Company is not obligated
to issue or repurchase any shares of its Common Stock or any other security to
or from any person except in accordance with the terms of the Company Stock
Option Plan and Agreements pursuant thereto. Exhibit 5.2 sets forth the name of
each holder of a Company stock option, the number of shares of the Company
Common Stock covered by each such holder's option, the date of grant of each
such holder's option, the exercise price per share, the vesting schedule for
each such holder's option and the expiration date of each such holder's option.
The authorized capital stock of Monarch Bank consists of 1,000,000
shares of common stock, no par value, of which 391,743 shares are outstanding on
the date hereof, all validly issued, fully paid and nonassessable (except for
Section 662 of the California Financial Code). No unissued shares of Monarch
Bank's Common Stock or any other securities of Monarch Bank are subject to any
warrants, options, rights or commitments of any character, kind or nature and
Monarch Bank is not obligated to issue or repurchase any shares of its common
stock or any other security to or from any person.
5.3 SUBSIDIARIES. Except for Monarch Bank, the Company does not own,
directly or indirectly (except as pledgee pursuant to loans which are not in
default), any equity position or other voting interest in any corporation,
partnership, joint venture or other entity. Monarch Bank does not own, directly
or indirectly (except as pledgee pursuant to loans which are not in default),
any equity position or other voting interest in any corporation, partnership,
joint venture or other entity.
5.4 FINANCIAL STATEMENTS. The Company has delivered to the Bank
copies of the consolidated audited Statements of Financial Condition of the
Company as of December 31, 1994 and 1995; Statements of Earnings, Stockholders'
Equity and Cash Flows for each of the years ended December 31, 1994 and 1995,
the related notes and related opinions thereon of Dayton
- 23 -
& Associates certified public accountants, with respect to such financial
statements (the "Audited Company Financial Statements"). The Company has
furnished the Bank with true and correct copies of each management letter or
other letter delivered to the Company by Dayton & Associates in connection with
the Financial Statements of the Company or relating to any review of the
internal controls of the Company by Dayton & Associates since January 1, 1993.
The Audited Company Financial Statements: (i) present fairly the financial
condition and results of operations of the Company as of and for the dates or
periods covered thereby in accordance with generally accepted accounting
principles consistently applied throughout the periods involved; (ii) are based
on the books and records of the Company; (iii) contain and reflect reserves for
all material accrued liabilities and for all reasonably anticipated losses, and
set forth adequate reserves for loan losses and other contingencies to the
extent required by GAAP; and (iv) none of the Company Audited Financial
Statements contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein not
misleading under GAAP.
5.5 LITIGATION PROCEEDINGS AND AGREEMENTS WITH REGULATORY
AUTHORITIES.
(a) Neither the Company nor Monarch Bank is engaged as a
defendant in any legal or other proceedings before any court, administrative
agency or other governmental authority except as is shown on Exhibit 5.5(a).
Except as set forth on Exhibit 5.5(a), neither the Company nor Monarch Bank is
aware of any "threatened or pending litigation" (within the meaning of Paragraph
5 of the American Bar Association Statement of Policy Regarding Lawyers'
Responses to Auditors' Requests for Information adopted December 8, 1975)
against the Company or Monarch Bank. Neither the Company nor Monarch Bank is
subject to any agreement, order, writ, injunction or decree of any federal,
state or local court, out of a proceeding involving the Company or Monarch Bank
or any of their business or properties except as described in Exhibit 5.5(a).
Neither the Company nor Monarch Bank has been served with notice of, nor, to
best of the Company's or Monarch Bank's knowledge are they currently under
investigation with respect to, any violation of federal, state or local law or
administrative regulation. Except as set forth on Exhibit 5.5(a), there is no
(i) outstanding judgment, order, writ, injunction or decree, stipulation or
award of any Governmental Entity or by arbitration, against, or to the knowledge
of the Company or Monarch Bank, affecting the Company or Monarch Bank or its
assets or business that (a) has had or may have a material adverse effect on the
assets, liabilities, business, financial condition or results of operations of
the Company or Monarch Bank, (b) requires any payment by, or excuses a material
obligation of a third party to made any payment to, the Company or Monarch Bank,
or (c) has the effect of prohibiting any business practice of, or the
acquisition, retention or disposition of property by, the Company or Monarch
Bank; or (ii) legal, administrative, arbitration, investigatory or other
proceeding pending or, to the best knowledge of the Company or Monarch Bank that
has been threatened, or which the Company or Monarch Bank has reason to believe
may be threatened, against or affecting any director, officer, employee, agent
or representative of the Company or Monarch Bank, in connection with which any
such person has or may have rights to be indemnified by the Company or Monarch
Bank.
(b) Except as set forth in Exhibit 5.5(a), the Company or
Monarch Bank are not a party to, or otherwise subject to, any agreement or
memorandum of understanding with or order of any Governmental Entity charged
with the supervision or regulation of bank holding
- 24 -
companies or banks or engaged in the insurance of bank deposits, that restricts
the conduct of their business, or in any manner relates to its capital adequacy,
their credit or investment policies or its management.
5.6 PERFORMANCE OF OBLIGATIONS. Except as set forth in Exhibit 5.6,
each of the Company and Monarch Bank has performed in all respects all of
obligations required to be performed by it to date and is not in default under
or in breach of any term or provision of any covenant, contract, lease,
indenture or any other agreement to which either of them is a party or is
subject to or is otherwise bound, and no event has occurred which, with the
giving of notice or the passage of time or both, would constitute such default
or breach, where such default or breach would have a material adverse effect on
the financial condition, results of operations, or business of the Company or
Monarch Bank. No party with whom the Company has an agreement which is material
to the financial condition, results of operations or business of the Company or
Monarch Bank is in default thereunder.
5.7 BROKERS. Except as indicated in Exhibit 5.7, no agent, broker,
investment banker, person or firm acting on behalf or under authority of the
Company or Monarch Bank (except for any payments for fairness opinions as
required in Section 11.15) is or will be entitled to any broker's or finder's
fee or any other commission or similar fee directly or indirectly in connection
with any of the transactions contemplated by this Agreement.
5.8 INSURANCE. Monarch Bank has and at all times within three years
of the date of this Agreement has had, in full force and effect policies of
insurance and bonds (including without limitation Bankers' blanket bond,
fidelity coverage, director and officer liability, fire, third party liability,
use and occupancy) with respect to its assets and business and against such
casualties and contingencies and of such amounts, types and forms which in the
judgment of Monarch Bank are adequate or appropriate to cover its assets and
businesses as set forth in Exhibit 5.8. Set forth in Exhibit 5.8 is a schedule
of all policies of insurance (other than title or credit insurance) carried and
owned by Monarch Bank, showing the name of the insurance or bonding company, a
summary of the coverage, the amounts, the deductible features, the annual
premiums and the expiration dates. If any such policy or bond is changed,
terminated or modified following the date of this Agreement, such termination,
change or modification shall be promptly disclosed to Monarch Bank in writing.
Monarch Bank is not in default under any such policy of insurance or bond such
that it could be canceled, and all material claims thereunder have been filed in
a timely fashion. Monarch Bank has filed claims with or given notice of claim
to its insurers or bonding companies with respect to all material matters and
occurrences for which it believes it has coverage.
5.9 CERTAIN ADVERSE CHANGES. Except as specifically required,
permitted or effected by this Agreement, and except as set forth on Exhibit 5.9
since December 31, 1995 there has not been, occurred or arisen any of the
following (whether or not in the ordinary course of business unless otherwise
indicated):
(a) Any materially adverse change in any of the assets,
liabilities, permits, methods of accounting or accounting practice, or manner of
conducting business, of the Company or Monarch Bank or any other event or
development that has had or may reasonably be expected to have a material
adverse effect on the assets, liabilities, Permits, business,
- 25 -
financial condition, or results of operations of the Company or Monarch Bank or
which should be disclosed in order to make the Company Financial Statements not
misleading.
(b) Any damage, destruction or other casualty loss (whether or
not covered by insurance) that has had or may reasonably be expected to have a
material adverse effect on the assets, liabilities, business, financial
condition, or results of operations of the Company or Monarch Bank or that may
involve a loss of more than $50,000 in excess of applicable insurance coverage;
or
(c) Any amendment, modification or termination of any existing,
or entry into any new, Material Contract or Permit that has had or may
reasonably be expected to have a material adverse effect on the assets,
liabilities, business, financial condition, or results of operations of the
Company or Monarch Bank;
(d) Any disposition by the Company or Monarch Bank of an asset
the lack of which has had or may reasonably be expected to have a material
adverse effect on the business, financial condition, or results of operations of
the Company or Monarch Bank; or
(e) Any direct or indirect redemption, purchase or other
acquisition by the Company or Monarch Bank of any Equity Securities or any
declaration, setting aside or payment of any dividend or other distribution on
or in respect of the Company Stock or Monarch Bank Stock whether consisting of
money, other personal property, real property or other things of value.
5.10 COMPLIANCE WITH LAWS AND REGULATIONS.
(a) Except as set forth in Exhibit 5.10, neither the Company nor
Monarch Bancorp is in default under or in breach of any law, ordinance, rule,
regulation, order, judgment or decree applicable to it promulgated by any
governmental agency having authority over it, where such default or breach would
have a material adverse effect on its financial condition, results of
operations, or business.
(b) To the best of its knowledge, each of the Company and
Monarch Bank has conducted in all material respects its businesses in accordance
with all applicable federal, foreign, state and local laws, regulations and
orders, including without limitation disclosure, usury, equal credit
opportunity, equal employment, fair credit reporting, antitrust, licensing and
other laws, regulations and orders, and the forms, procedures and practices used
by the Company are in compliance with such laws, regulations, and orders, except
for such violations or noncompliance as will not have a material adverse effect
on the financial condition, results of operations, or business of the Company or
the Bank.
5.11 AUTHORIZATION. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company. Assuming due and proper
execution and delivery of this Agreement by the Bank this Agreement constitutes
a legal, valid and binding agreement of the Company in accordance with its
respective terms, except as the enforceability hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of
- 26 -
general application relating to or affecting enforcement of creditors rights and
the application of equitable principles in any action, legal or equitable.
Subject to obtaining requisite approval of this Agreement by the shareholders of
the Company, if required, the Company has full corporate power and authority to
perform its obligations under this Agreement and the transactions contemplated
hereby.
5.12 NO CONFLICTS; DEFAULTS. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated herein,
including the Merger, and compliance by the Company with any provision hereof
will not (a) conflict with or result in a breach of, or default or loss of any
benefit under, any provision of its Charter Documents or, except as set forth in
Exhibit 5.12 any material agreement, instrument or obligation to which it is a
party or by which the property of the Company is bound or give any other party
to any such agreement, instrument or obligation the right to terminate or modify
any term thereof; (b) except for the prior approval of the FRB, the FDIC and/or
the Superintendent and as set forth in Exhibit 5.12, require any Consents; (c)
result in the creation or imposition of any Encumbrance on any of the properties
or assets or the Company; or (d) violate the Charter Documents or any Rules to
which the Company is subject.
5.13 REPORTS AND FILINGS. Since January 1, 1994, the Company and
Monarch Bank have filed all reports, returns, registrations and statements (such
reports and filings referred to as "the Company Filings" or "Monarch Bank
Filings" as appropriate), together with any amendments required to be made with
respect thereto, that were required to be filed with (a) the FRB, (b) the
Superintendent and (c) any other applicable Governmental Entity, including
taxing authorities, except where the failure to file such reports, returns,
registrations and statements has not had and is not reasonably expected to have
a material adverse effect on the business, financial condition, or results of
operations of the Company and Monarch Bank. No administrative actions have been
taken or orders issued in connection with such the Company and Monarch Bank
Filings. As of their respective dates, each of such the Company Filings and
Monarch Bank filings complied in all material respects with all Rules enforced
or promulgated by the Governmental Entity with which it was filed (or was
amended so as to be so promptly following discovery of any such noncompliance).
Any financial statement contained in any of such the Company Filings or Monarch
Bank Filings that were intended to present the financial position of the Company
or Monarch Bank fairly and were prepared in accordance with generally accepted
accounting principles or banking regulations consistently applied, except as
stated therein, during the periods involved.
5.14 COMPLIANCE WITH CRA. To the best knowledge of the Company, the
Company's and Monarch Bank's compliance under the CRA and consumer compliance
requirements should not constitute grounds for either the denial by any
Governmental Entity of any application to consummate the transactions
contemplated by this Agreement or the imposition of a materially burdensome
condition in connection with the approval of any such application.
5.15 UNDISCLOSED LIABILITY. The Company and Monarch Bank have no
liabilities or obligations, either accrued or contingent, which are in excess of
Ten Thousand Dollars ($10,000) individually or in the aggregate, which has not
been:
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(i) reflected or disclosed in the Audited Company Financial
Statements;
(ii) incurred subsequent to December 31, 1995, in the ordinary
course of business; or
(iii) disclosed on Exhibit 5.15 or any other exhibit to this
Agreement.
To the best of the Company's knowledge and the knowledge of their
officers and directors, after due investigation, there is no basis for the
assertion against the Company or Monarch Bank of any liability, obligation or
claim that is likely to result in or cause any material adverse change in the
business or financial condition of the Company, taken as a whole, which is not
fairly reflected in the Financial Statements, or otherwise disclosed on Exhibit
5.15 hereto.
5.16 ACCURACY OF INFORMATION FURNISHED. Except as to any statements
or information which shall include projections or forecasts, none of the
statements or information made or contained in any of the covenants,
representations or warranties of the Company set forth in this Agreement or in
any of the schedules, exhibits, lists, certificates or other documents furnished
herewith taken as a whole contains any untrue statement of a material fact
required to be stated herein or therein or necessary to make the statements or
information contained herein or therein, in light of the circumstances in which
they were made, not misleading. As to any such information or statements which
include projections or forecast, such information or statements are based upon
assumptions believed by the Company to be reasonable.
5.17 AUTHORITY OF MONARCH MERGER CORPORATION. The execution and
delivery by Monarch Merger Corporation of the Agreement of Merger and, subject
to the requisite approval of the shareholder of Monarch Merger Corporation, the
consummation of the transactions completed thereby will be duly and validly
authorized by all necessary corporation action on the part of Monarch Merger
Corporation, and the Agreement of Merger will be upon execution by the parties
thereto a valid and binding obligation of Monarch Merger Corporation,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of creditors generally, by general equitable principles.
Except as set forth in Exhibit 5.17, neither the execution and delivery by
Monarch Merger Corporation of the Agreement of Merger, nor the consummation of
the transaction contemplated therein, nor compliance by Monarch Merger
Corporation with any of the provisions thereof will (a) conflict with or result
in a breach of any provision of its Charter Documents, (b) except for approval
by the shareholder of Monarch Merger Corporation and the prior approval of the
Superintendent or the FDIC, require any Consents; (c) result in the creation or
imposition of any Encumbrance on any of the properties or assets of Monarch
Merger Corporation; or (d) subject to obtaining the Consents referred to in
subsection (b) of this Section 5.17, and the expiration of any waiting period,
violate any Rules to which Monarch Merger Corporation is subject.
5.18 CAPITAL OF COMPANY, OFFERING AND COMMITMENTS. As of the date of
this Agreement, the Company does not have sufficient capital to consummate the
transactions contemplated by this Agreement. Within 60 days from the date of
this Agreement, the Company shall provide evidence reasonably satisfactory to
the Bank of either (a) an amount of cash and loans to fund at least 80% of the
Aggregate Purchase Price, or (b) commitments substantially
- 28 -
in the form attached as Exhibit 5.18 from qualified investors equal to at least
100% of the Aggregate Purchase Price. The Company intends to conduct a
Regulation D private placement offering in order to raise sufficient cash
capital, when combined with the Company's borrowings and other financing
sources, to carry out the transaction contemplated by this Agreement.
5.19 REGULATORY APPROVALS. To the best knowledge of the Company,
except as described in Section 5.19 of this Agreement, the Company has no reason
to believe that it would not receive all required approvals from any
Governmental Entity of any application to consummate the transactions
contemplated by this Agreement without the imposition of a materially burdensome
condition in connection with the approval of any such application.
ARTICLE VI
COVENANTS OF THE BANK PENDING EFFECTIVE TIME
The Bank covenants and agrees with the Company as follows:
6.1 BEST EFFORTS. The Bank shall use its best efforts to bring about
the satisfaction of the conditions specified in Articles IX and XI hereof.
6.2 CONDUCT OF BUSINESS. Unless the Company shall give its prior
consent, which consent will not be unreasonably withheld, or unless otherwise
indicated, until the Effective Time, the Bank will:
(i) conduct its affairs and business in the usual and ordinary
course, generally consistent with past practice, and in accordance with safe and
sound practices;
(ii) refrain from (a) creating, incurring, or suffering to exist,
any encumbrance or restriction of any kind against or in respect of any property
or right of the Bank except for such which are not material in amount or nature
to the financial condition or results of operations of the Bank, except for a
pledge or security interest given in connection with the acceptance of
government or public deposits; it being understood that the foregoing shall not
be deemed to preclude loans, repurchase or reverse repurchase agreements,
securities or other financial transactions incurred in the ordinary course of
the Bank's banking business, and (b) borrowing or agreeing to borrow any amount
of funds except in the ordinary course of business, or directly or indirectly
guaranteeing or agreeing to guarantee any obligations of others except for such
which are not material in amount or nature to the financial condition or results
of operations of the Bank;
(iii) refrain from making or becoming a party to any Material
Contract or material commitment, or renewing, extending, amending or modifying
any such contract or commitment except for loan and deposit transactions, in the
usual and ordinary course of business, consistent with past practice, and
refrain from making any loan or other extension of credit, or enter into any
commitment to make any loan or other extension of credit, to any Bank director,
officer or employee or 5% or more shareholder, except in accordance with
existing practice or policy;
- 29 -
(iv) refrain from making any capital expenditures, except for
ordinary repairs and replacements not exceeding $25,000 for any one item;
(v) refrain from paying or agreeing to pay any bonus, extra
compensation, pension or severance pay, under any pension plan or otherwise, or
increasing the rate of compensation paid by the Bank at December 31, 1995, to
any officer, director, agent, consultant, or employee except pursuant to the
Bank's Incentive Compensation Plan the amounts for which are not determined
until after completion of the Bank Audited Financial Statements, and any such
amounts shall be accrued and paid prior to the Determination Date; or agreeing
to enter into any employment agreements or hire any officer level staff where
such agreements or arrangements cannot be terminated without any liability upon
not more than 90 days notice;
(vi) maintain its assets and properties in good condition and
repair (ordinary wear and tear excepted) and refrain from selling or otherwise
disposing of any of its assets or properties, except in the usual and ordinary
course, consistent with prior customary practice, and in accordance with safe
and sound practices, and maintain the Bank's present branch operations unless
changed by mutual agreement;
(vii) refrain from declaring or paying any dividend on or making
any other distribution upon, or purchasing or redeeming, any shares of the Bank
Common Stock;
(viii) refrain from (a) issuing or selling or obligating itself
to issue or sell any shares of the Bank Common Stock or any other securities or
any warrants, rights or options to acquire Bank Common Stock or other
securities, except pursuant to previously outstanding stock options granted
pursuant to the Bank Stock Option Plan, (b) effecting a reclassification,
recapitalization, split-up, exchange of shares, readjustment or other similar
change in or to any capital stock or otherwise reorganize or recapitalize;
(ix) refrain from directly or indirectly redeeming, purchasing or
otherwise acquiring any Bank Stock or stock of any corporation or any interest
in any business enterprise except as it relates to a foreclosure in the usual
and ordinary course of its business;
(x) refrain from amending its Charter Documents except to the
extent as may be required or contemplated by this Agreement;
(xi) use its best efforts to preserve its business organization
intact and to retain its present officers and employees in a manner consistent
with the Bank's other obligations under this Agreement;
(xii) use its best efforts to preserve the goodwill of its
depositors, customers and those having business relations with it, refrain from
materially changing the make-up of the Bank's deposit structure, refrain from
amending, modifying, terminating or failing to renew or preserve its business
organization, material rights, franchises, Permits, and refrain from taking any
action which would jeopardize the continuance of the goodwill of its customers
where such action would have a material adverse effect on the financial
condition, or results of operations of the Bank in a manner consistent with the
Bank's other obligations under this Agreement;
- 30 -
(xiii) use its best efforts to maintain insurance and bond
coverage at least equal to that now in effect on all its properties and all
properties for which it is responsible and on its business operations, and carry
the same coverage for public liability, personal injury and property damage that
is now in effect, except if such insurance and coverage (a) is not available
except at extraordinary rates, or (b) is not available except under materially
different terms which are consistent with those in effect as of the date of this
Agreement;
(xiv) meet its material contractual obligations and not become in
default in any material respect on any thereof;
(xv) duly observe and conform to lawful requirements applicable
to its business in all material respects;
(xvi) duly and timely file all reports and returns required to be
filed with any federal, state or local Governmental Entity unless any extensions
have been duly granted by such authorities;
(xvii) refrain from commencing any proceeding to merge,
consolidate or liquidate or dissolve (except as contemplated by this Agreement)
or obligating itself to do so;
(xviii) maintain its books of account and records in the regular
manner substantially in accordance with all applicable statutory and regulatory
requirements applied on a consistent basis;
(xix) except for instituting actions against Bank borrowers to
collect loans in default, refrain from instituting, settling, or agreeing to any
material claim, action or proceeding before any court or governmental body
unless not instituting, settling or agreeing to any material claim, action or
proceeding would result in a Material Adverse Change to the Bank;
(xx) refrain from making its credit underwriting policies,
standards or practices applicable to all loans relating to the making of loans
and other extensions of credit, or commitments to make loans and other
extensions of credit, less stringent than those in effect on the date hereof.
Bank shall not grant or commit to grant, without receiving the Company's
Consent, (i) any loan or other extension of credit, including renewals, to an
existing customer of the Bank, if such loan or other extension of credit,
together with all other credit then outstanding to the same Person and all
Affiliates of such Person, would exceed $1,000,000 irrespective of any plans or
intentions to sell or participate all or a portion of such loans, on an
unsecured basis or secured by a lien on real estate, cash or readily marketable
collateral, as that term is used in section 1220 ET SEQ. of the California
Financial Code, (ii) any participation loans purchased or sold, (iii) any
renewals or other extensions of credit to any borrower whose loans or other
extensions of credit have been classified by any Governmental Entity; or (iv)
any loan or other extension of credit to any new customer of the Bank if such
loan or other extension of credit would exceed $500,000. In addition, Bank
shall not take any property into Other Real Estate Owned ("OREO"), or sell any
OREO property, without receiving the Company's Consent. Consent shall be deemed
granted if within two Business Days of written notice delivered to the Company's
designee in writing notice of objection is not received by Bank;
- 31 -
(xxi) refrain from making special or extraordinary material
payments to any Person other than as contemplated and as disclosed in this
Agreement as of the date hereof;
(xxii) except for transactions in accordance with safe and sound
banking practices, refrain from making any material investments, by purchase of
stock or securities, contributions to capital, property transfers, purchases of
any property or assets or otherwise, in any other individual, corporation or
other entity;
(xxiii) advise the Company promptly in writing of any Material
Adverse Change known to the Bank in the capital structure, financial condition,
results of operations or of any event or condition which with the passage of
time is reasonably likely to result in a Material Adverse Change to the Bank, or
of any other materially adverse change known to the Bank respecting the business
and operations of the Bank, or in the event the Bank determines that the Merger
will not be consummated because of any inability to meet the conditions to the
performance of the Company set forth in Article XI or of any matter which would
make the representations and warranties set forth in Article IV hereof not true
and correct in any material respect at the Closing.
(xxiv) promptly advise the Company in writing of any event or any
other transaction within the Bank's knowledge whereby any person or related
group of persons acquires, directly or indirectly, record or beneficial
ownership (as defined in Rule 13d3 promulgated by the Securities Exchange Act of
1934, as amended ("Exchange Act") or control of 5% or more of the outstanding
shares of Bank Common Stock prior to the record date fixed for the Bank
shareholders' meeting or any adjourned meeting thereof to approve the
transactions contemplated herein;
(xxv) charge-off all loans, receivables and other assets, or
portions thereof, deemed uncollectible in accordance with GAAP, applicable law
or regulation, or reasonably classified as "loss" or as directed by any
regulatory authority; and maintain the allowance for loan losses of the Bank at
a level which is the reasonable opinion of Bank management is adequate to
provide for all known and estimated credit losses on loans and leases
outstanding and other inherent risks in Bank's loan portfolio, but in no case
less than the level which is the reasonable opinion of Bank management is
adequate to provide for all known and reasonably expected losses on assets
outstanding in accordance with GAAP and applicable regulatory accounting
principles.
(xxvi) furnish to the Company, as soon as practicable, and in any
event within ten (10) days after it is prepared (except for the reports
submitted to the board of directors of the Bank, as described in clause (i)
below, which shall be furnished to the Company within ten (10) days after Bank's
Board of Directors has reviewed the report), (i) a copy of any report submitted
to the Board of Directors of the Bank and access to the working papers related
thereto and copies of other operating or financial reports prepared for
management of any of their businesses and access to the working papers thereto,
provided, however, that Bank need not furnish the Company communications of
Bank's legal counsel regarding Bank's rights against and obligations to the
Company or its affiliates under this Agreement, (ii) to the extent permitted by
law, copies of all reports, renewals, filings, certificates, statements and
other documents filed with or received from the FDIC and/or the Superintendent
or any other governmental or
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regulatory body, (iii) monthly unaudited average statements of condition and
statements of operations for Bank, and quarterly unaudited statements of
condition and statements of operations for Bank and statements of changes in
stockholders' equity for Bank, in each case prepared in a manner consistent with
past practice, and (iv) such other reports as the Company may reasonably request
relating to Bank. Each of the financial statements delivered pursuant to this
Section 6.2(xxvi), except as stated therein, shall be prepared in accordance
with Bank's normal practices;
(xxvii) consistent with the standards set forth in this
subsection 6.2 (xxvii), Bank agrees that through the Effective Time of the
Merger, as of their respective dates, (i) each of the Bank filings with any
regulatory agency will be true and complete in all material respects; and (ii)
each of the Bank filings with any regulatory agency will comply in all material
respects with all of the statutes, rules and regulations enforced or promulgated
by the governmental or regulatory authority with which it will be filed and none
will contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they will be made, not misleading.
Any financial statement contained in any of such Bank filings that is intended
to present the financial position of the entities or entity to which it relates
will be prepared in accordance with GAAP or applicable banking regulations
consistently applied, except as stated therein, during the periods involved;
(xxviii) maintain reserves for contingent liabilities in
accordance with GAAP;
(xxix) promptly notify the Company of the filing of any material
litigation, governmental or regulatory action, or similar proceeding or notice
of any claims against the Bank or any of its assets;
(xxx) conduct good faith settlement negotiations, and settle when
deemed prudent by the Parties, of all existing or threatened litigation as
specified in Exhibits 4.7(a) and 4.7(b), or for any new litigation filed or
threatened from the date hereof to the Closing Date;
(xxxi) except in the ordinary course of business, refrain from
cancelling or accelerating any material indebtedness owing to the Bank or any
claims which the Bank may possess or waive any material rights of substantial
value;
(xxxii) refrain from selling or otherwise disposing of any real
property or any material amount of any tangible or intangible personal property
other than properties acquired in foreclosure or otherwise in the ordinary
collection of indebtedness to the Bank;
(xxxiii) refrain from foreclosing upon or otherwise taking title
to or possession or control of any real property without first obtaining a phase
one environmental report thereon which indicates that the property is free of
pollutants, contaminants or hazardous or toxic waste materials; provided,
however, that the Bank shall not be required to obtain such a report with
respect to single family, non-agricultural residential property of one acre or
less to be foreclosed upon unless it has reason to believe that such property
might contain any such waste materials or otherwise might be contaminated;
- 33 -
(xxxiv) refrain from committing any act or failing to do any act
which will cause a breach of any agreement, contract or commitment and which
will have a material adverse effect on the Bank's business, financial condition,
or results of operations.
For purposes of this Section 6.2, the Company shall be deemed to have
given its consent to any action which is contrary to any specified covenant set
forth in this section if, within five (5) Business Days, or two (2) Business
Days for loans, after actual receipt by the Company of written notice from Bank
of Bank's intention to act contrary to any of the specified covenants set forth
in this section, Bank shall not have received written objection to any such
action from the Company.
6.3 ACCESS TO INFORMATION. (a) As long as the transaction
contemplated herein has not been terminated, the Bank will afford the Company,
its representatives, counsel, accountants, agents and employees including the
underwriter selected to assist in the issuance of the common stock contemplated
in Section 9.1(iii) and its counsel (collectively "Representatives"), access
during normal business hours to all of its business, operations, properties,
personnel books, files and records and will do everything reasonably necessary
to enable the Company and its Representatives, to make a complete examination of
the financial statements, books, records, loans and leases, operating reports,
audit reports, contracts and documents, and all other information with respect
to assets and properties of the Bank and the condition thereof, and to update
such examination at such intervals as the Company shall deem appropriate. Such
access shall include reasonable access by the Bank and its representatives to
auditors' work papers with respect to the business and properties of the Bank,
other than (i) books, records and documents covered by the attorney-client
privilege, or which are attorneys' work product, and (ii) books, records and
documents that the Bank is legally obligated to keep confidential. Such
examination shall be conducted in cooperation with the officers of the Bank and
in such a manner as to minimize, to the extent possible consistent with the
conducting of a comprehensive examination, any disruption of, or interference
with, the normal business operations of the Bank. No such examination, however,
shall constitute a waiver or relinquishment on the part of the Company to rely
upon the representations and warranties made by the Bank herein or pursuant
hereto; provided, that the Company shall disclose any fact or circumstance it
may discover which it believes renders any representation or warranty made by
the Bank hereunder incorrect in any respect. The Company will hold in strict
confidence all documents and information concerning the Bank so obtained (except
to the extent that such documents or information are a matter of public record
or require disclosure in the Proxy Statement or as may be necessary for the
accomplishment of the purposes of such examination) and, if the transactions
contemplated herein are not consummated, such confidence shall be maintained and
all such documents including all copies shall be returned to the Bank.
(b) As long as the transaction contemplated hereunder has not
been terminated, one Representative of the Company, selected by the Company in
its sole discretion, shall be invited by the Bank to attend all regular and
special Board of Directors' meetings of the Bank from the date hereof until the
Effective Time of the Merger; the Bank shall inform the Company of such Board
meeting at least two (2) days in advance of such meeting; provided, however,
that the attendance of such Representative shall not be permitted at any
meeting, or portion thereof, for the sole purpose of discussing the transactions
contemplated by this Agreement on the obligations of the Bank under this
Agreement.
- 34 -
In the event the Merger provided for hereby is not consummated for any
reason, the Company shall not, directly or indirectly: (i) utilize for its own
benefit any Confidential Information regarding the Bank (as hereinafter defined)
or (ii) disclose to any person any such Confidential Information, except as such
disclosure may be required in connection with this Agreement or by law.
6.4 FINANCIAL STATEMENTS. In the event the following have been
previously delivered prior to the date hereof, Bank will deliver to the Company
a copy of the audited Statements of Financial Condition of the Bank as of
December 31, 1995; Statements of Earnings, Stockholders' Equity and Cash Flows
for the year ended December 31, 1995, the related notes and related opinions
thereon of Xxxxx Xxxxxxxx certified public accountants, with respect to such
financial statements (the "1995 Audited Bank Financial Statements"). The Bank
will furnish the Company with a true and correct copy of the management letter
or other letter delivered to the Bank by Xxxxx Xxxxxxxx, in connection with the
1995 Audited Bank Financial Statements relating to any review of the internal
controls of the Bank by Xxxxx Xxxxxxxx. The 1995 Audited Financial Statements:
(i) present fairly the financial condition and results of operations of the Bank
as of and for the dates or periods covered thereby in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved; (ii) be based on the books and records of the Bank; (iii) contain and
reflect reserves for all material accrued liabilities and for all reasonably
anticipated losses, and set forth adequate reserves for loan losses and other
contingencies, to the extent required by GAAP; and (iv) none of the 1995 Bank
Audited Financial Statements will contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein not misleading under GAAP.
6.5 NO SOLICITATION.
(a) Bank shall not, and will cause each of its officers,
directors, employees, agents, legal and financial advisors and Affiliates not
to, directly or indirectly, make, solicit, encourage, initiate or, except as
permitted in this Section 6.5, enter into any agreement or agreement in
principle, or announce any intention to do any of the foregoing, concerning the
acquisition of Bank, or substantially all of the Bank's business and properties
or a majority of Bank's Equity Securities or debt securities, whether by
purchase, merger (other than by the Company), purchase of assets, tender offer
or otherwise (an "Alternative Transaction").
(b) Bank shall not, and will cause each of its officers,
directors, legal and financial advisors, agents and Affiliates not to, directly
or indirectly, participate in any negotiations or discussions regarding, or
furnish any information with respect to, or otherwise cooperate in any way in
connection with, or assist or participate in, facilitate or encourage, any
effort or attempt to effect or seek to effect, any Alternative Transaction with
or involving any Person other than the Company, unless Bank shall have received
an unsolicited written offer from a Person other than the Company to effect an
Alternative Transaction and the Board of Directors of Bank is advised in writing
by outside legal counsel that in the exercise of the fiduciary obligations of
the Board of Directors such information should be provided to or such
discussions or negotiations undertaken with the Person submitting such
unsolicited written offer.
- 35 -
(c) Bank will promptly communicate to the Company the receipt of
any proposal with respect to any Alternative Transaction, and will keep the
Company informed as to the status of any such proposal; PROVIDED, HOWEVER, that
Bank shall not be required to disclose any matters which, in the written opinion
of outside legal counsel, may not be disclosed in the exercise of the fiduciary
obligations of the Board of Directors.
6.6 CERTAIN LOANS AND OTHER EXTENSIONS OF CREDIT. The Bank will
promptly inform the Company of the amounts and categories of any loans, leases
or other extensions of credit that have been criticized special mention or
classified by any bank regulatory authority or deemed by the Bank to require
special attention pursuant to its internal policies (collectively "Classified
Credits"). In addition, the Bank will furnish to the Company, as soon as
practicable, and in any event within seven days after receipt by the Bank's
Board of Directors, schedules including the following: (a) Classified Credits;
(b) nonaccrual credits; (c) accrual exception credits that are delinquent 90 or
more days and have not been placed on nonaccrual status; (d) participating loans
and leases, stating, with respect to each, whether it is purchased or sold, the
loan or lease type, and the originating unit; (e) loans or leases (including any
commitments) by the Bank to any director, officer or shareholder holding 5% or
more of the capital stock of such party; (f) letters of credit; (g) loans or
leases charged-off during the previous month; (h) loans or leases written down
during the previous month; and (i) other real estate or assets owned, stating
with respect to each its type.
6.7 BREACHES. Bank shall, in event it becomes aware of the impending
or threatened occurrence of any event or condition which would cause or
constitute a breach (or would have caused or constituted a breach had such event
occurred or been known prior to the date hereof) of any of its representations
or agreements contained or referred to herein, give prompt written notice
thereof to the Company and, without limiting the Company's rights under
paragraph 14.1(a)(ii), the Bank shall use its best efforts to prevent or
promptly remedy the same.
6.8 SHAREHOLDER APPROVAL. As soon as practicable, Bank shall prepare
the Proxy Statement and take all action necessary in accordance with applicable
Rules and its Charter Documents to submit to its shareholders for approval, and
Bank shall use its best efforts to obtain shareholder approval by May 31, 1996,
or as soon thereafter as is reasonably possible, of the Agreement and the other
transactions contemplated hereby. In connection with such submission, subject
to its fiduciary obligations specified in Section 6.5(b) the Board of Directors
shall recommend shareholder approval of all the matters referred to in this
Section 6.8 and Bank shall use its best efforts to obtain such shareholder
approval.
6.9 COMPLIANCE WITH RULES. The Bank shall comply with the
requirements of all applicable Rules, the noncompliance with which would
materially and adversely affect the assets, liabilities, business, financial
condition, results of operations or prospects of Bank.
6.10 TERMINATION OF THE BANK'S EMPLOYEE STOCK OPTION PLAN AND
AGREEMENTS. The Bank will take all steps necessary to cause the Bank Stock
Option Plan to be terminated as of or prior to the Effective Time of the Merger,
will grant no additional options under said plan prior to the Effective Time of
the Merger, and, except for any presently outstanding options which are not
exercised in accordance with the terms and provisions of the Bank Stock Option
Plan and will be assumed under the Company's 1993 Stock Option Plan, will use
its best efforts
- 36 -
to cause any options outstanding thereunder (irrespective of their exercise
price and whether or not then presently exercisable or fully vested) to be
canceled as of or prior to the Effective Time of the Merger together with a
release of all claims against the Bank or the Surviving Bank related to such
options against payment of the Aggregate Option Price.
6.11 OFFICERS AND EMPLOYEES. Within ninety (90) days following the
date of this Agreement, the Company agrees to complete interviews with each
officer and employee of Bank. Within a twenty (20) day period following the
completion of the interviews, the Company shall provide a list of such officers
and employees that the Company desires the Bank to retain following the Merger.
Officers and employees of the Bank not on such list will be terminated by the
Bank prior to the Effective Time of the Merger, and Bank will use its reasonable
best efforts to obtain appropriate releases, the form of which has been approved
by the Company, from such officers and employees. In addition, each officer and
employee of the Bank that is on the list as described in the previous sentence
will be required to indicate in writing to the Company that such officers and
employees will agree to the Bank's employment policies, procedures and Handbook,
acknowledge his or her at-will employment status while employed by the Bank, and
acknowledge his or her salary or compensation and title while employed by the
Bank, and acknowledge the limitation on vesting for employee benefits, in the
form attached as EXHIBIT 6.11(a). The Bank also will terminate all Bank
Employment Agreements specified in EXHIBIT 4.11(a) prior to the Effective Time
of the Merger, without any liability to the Bank and/or the Company, except the
Company and the Bank will enter into employment contracts for Xx. Xxxx X. Xxxxx,
Xx. and Xx. Xxxxxx X. Xxxxxxx under the terms and condition as specified in
Exhibit 6.11(b).
6.12 TERMINATION OF CONTRACTS AND ACCRUAL OF LIABILITIES. Upon
determination by the Company, the Bank shall obtain the termination of any
contracts, commitments or Understanding as defined in Section 4.12(vi), and pay
any termination fees, for the future purchase of materials, supplies, services,
merchandise or equipment, the price of which exceeds $1,000 prior to the
Determination Date. Before the end of the month prior to the Closing Date, the
Bank shall have paid, or set-up adequate accruals for the payment of, all
material expenses that the Bank shall be liable for up to the Closing Date,
including, but not limited to, all accounting, attorney fees and data processing
costs and related costs in connection with this Agreement.
6.13 EXECUTION OF AGREEMENT OF MERGER. As soon as possible after
organization of Monarch Merger Corporation, subject to receipt of any and all
necessary approvals and permits by any Governmental Entity, the Bank shall
execute the Agreement of Merger, the Agreement of Merger and any and all related
documents.
6.14 ACCOUNTANTS. Promptly upon request of the Company, the Bank
will ask its accountants to permit the Company or its representatives to review
and examine the work papers relating to the Bank's audited financial statements
for the years ended December 31, 1993, 1994 and 1995, and the pending audit for
the year ended December 31, 1995, and the Bank will permit such accountants to
discuss with the Company any matter relating to the audits of the Bank. In
addition, the Bank will make available to the Company copies of each management
letter or other letter delivered to the Bank by its accountants in connection
with such financial statements or relating to any review by its accountants of
the internal controls of
- 37 -
the party since January 1, 1992, unless previously provided to the Company and
the Bank has instructed its accountants to make available for inspection by the
Company or its representatives all reports and working papers produced or
developed by its accountants in connection with their examination of such
financial statements, as well as all such reports and working papers for any
periods for which any tax of the party has not been finally determined or barred
by applicable statutes of limitation.
6.15 CORPORATE ACTION. The parties shall each take or cause to be
taken all necessary corporate action required to carry out the transactions
contemplated in this Agreement.
6.16 REGULATORY APPROVALS. Promptly following execution of this
Agreement, the parties hereto shall prepare, submit and file, or cause to be
prepared, submitted and filed, all applications for approvals and consents as
may be required of any of them, respectively, by applicable law and regulations
with respect to the transactions contemplated by this Agreement, including
without limitation any and all applications required to be filed with the
California State Banking Department, the FRB, the FDIC and such other
Governmental Entity as the Company or the Bank may reasonably believe necessary.
Each party shall cooperate with the other in the preparation of all of such
applications and will furnish promptly upon request all documents, information,
financial statements or other materials as may be required in order to complete
such applications. Each party shall afford the other a reasonable opportunity
to review all such applications (except confidential portions thereof) and all
amendments and supplements thereto before filing. The Company and the Bank each
covenant and agree that any and all information furnished by it to the other for
inclusion in such applications will not contain any untrue statement of a
material fact and will not omit to state any material fact required to be stated
therein or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
6.17 NECESSARY CONSENTS. In addition to the regulatory approvals
referred to in Section 6.16, the parties hereto shall each apply for and
diligently seek to obtain all other third party consents or approvals which may
be necessary for the consummation of the Merger, including, without limitation,
the written consent of any lessors of real and personal property which property
cannot be assigned without the written consent of the other such lessors.
6.18 FURTHER ASSURANCES. The parties agree that from time to time,
whether prior to, at or after the Effective Time of the Merger, they will
execute and deliver such further instruments of conveyance and transfer and take
such other action as may reasonably be expected to consummate the transactions
contemplated hereby. The Company and the Bank each agrees to take such further
action as may reasonably be requested by the other in order to consummate the
transactions contemplated by this Agreement and that are not inconsistent with
the other provisions hereof.
6.19 BANK EMPLOYEE BENEFITS. Except as set forth in Exhibit 6.19,
the Bank shall cause all employee benefits and benefit programs of the Bank to
be terminated except as otherwise provided by applicable labor laws as of the
Effective Time of the Merger.
6.20 ENVIRONMENTAL REPORTS. Except as otherwise agreed to in writing
by the Company, Bank shall provide of the Company, as soon as reasonably
practical, but not later than
- 38 -
45 days after the date hereof, a report of a phase one environmental
investigation on all property owned, leased or operated by Bank as of the date
hereof (other than space in retail and similar establishments leased by the Bank
for automatic teller machines) and within ten days after the acquisition or
lease of any real property acquired or leased by Bank after the date hereof
(other than space in retail and similar establishments leased or operated by the
Bank for automatic teller machines), except as otherwise provided in Section
6.2(xxxiii). If required by the phase one investigation in the Company's
reasonable opinion, Bank shall provide to the Company a report of a phase two
investigation on properties requiring such additional study. The Company shall
have 15 business days from the receipt of any such phase two investigation
report to notify Bank of any objection to the contents of such report. Should
the cost of taking all remedial and corrective actions and measures (i) required
by applicable law, or (ii) recommended or suggested by such report or reports
or prudent in light of serious life, health or safety concerns, in the
aggregate, exceed the sum of Two Hundred Thousand Dollars ($200,000) as
reasonably estimated by an environmental expert retained for such purpose by the
Company and reasonably acceptable to the Bank, or if the cost of such actions
and measures cannot be so reasonably estimated by such expert to be $200,000 or
less with any reasonable degree of certainty, the Company shall have the right
to terminate the Agreement pursuant to Article IV, Section 14.1(d) hereof, for a
period of 10 business days following receipt of such estimate or indication that
the cost of such actions and measures.
6.21 NO CONFLICTS; DEFAULTS. The execution, delivery and performance
of the Agreement of Merger and the consummation of the transactions
contemplated therein, and compliance by Bank with any provision thereof will not
(a) conflict with or result in a breach of, or default or loss of any benefit
under, any provision of its Charter Documents or, except as set forth in Exhibit
6.21 any material agreement, instrument or obligation to which the Surviving
Bank will become a party or by which the property of the Surviving Bank will
become bound or give any other party to any such agreement, instrument or
obligation the right to terminate or modify any term thereof; (b) except for the
prior approval of the FDIC and the Superintendent and as set forth in Exhibit
6.21, require any Consents; or (c) result in the creation or imposition of any
Encumbrance on any of the properties or assets of the Surviving Bank; or (d)
violate the Charter Documents or any Rules to which the Surviving Bank is
subject.
6.22 STOCK OFFERING. The Bank will assist the Company in connection
with the preparation of the offering materials for the issuance of the Company
Common Stock contemplated by this Agreement, and such assistance will include,
but not necessarily be limited to, the preparation or provision, as appropriate,
of information concerning the business, properties and personnel of the Bank
needed in connection with the issuance of the Company Common Stock and the
closing of the private placement offering. Such information to be supplied by
Bank will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
intentionally misleading.
- 39 -
ARTICLE VII
COVENANTS OF THE COMPANY PENDING EFFECTIVE TIME
7.1 BEST EFFORTS. The Company shall use its best efforts to bring
about the satisfaction of the conditions specified in Articles IX and X hereof.
7.2 CONDUCT OF BUSINESS. Unless the Bank shall give its prior
consent, which consent will not be unreasonably withheld, until the Effective
Time, or unless otherwise indicated the Company will and will cause Monarch Bank
to:
(i) conduct its affairs and business in the usual and ordinary
course, generally consistent with past practice, and in accordance with safe and
sound practices;
(ii) refrain from amending its Charter Documents except to the
extent as may be required or contemplated by this Agreement;
(iii) use its best efforts to preserve its business organization
intact and to retain its present officers and employees in a manner consistent
with the Company's other obligations under this Agreement;
(iv) use its best efforts to preserve the goodwill of Monarch
Bank's depositors, customers and those having business relations with the
Company or Monarch Bank, refrain from amending, modifying, terminating or
failing to renew or preserve its business organization, material rights,
franchises, Permits, and refrain from taking any action which would jeopardize
the continuance of the goodwill of its customers where such action would have,
taken as a whole, a material adverse effect on the financial condition, or
results of operations of the Company in a manner consistent with the Company's
other obligations under this Agreement;
(v) duly and timely file all reports and returns required to be
filed with any federal, state or local governmental authority unless any
extensions have been duly granted by such authorities;
(vi) maintain its books of account and records in the regular
manner substantially in accordance with all applicable statutory and regulatory
requirements applied on a consistent basis;
(vii) advise the Bank promptly in writing of any material adverse
change known to the Company in the capital structure, financial condition,
results of operations, or of any event or condition which with the passage of
time is reasonably likely to result in a material adverse change in the capital
structure, financial condition or results of operations of the Company or
Monarch Bank, or in the event the Company determines that the Merger will not be
consummated because of any inability to meet the conditions to the performance
of the Bank set forth in Article X or of any matter which would make the
representations and warranties set forth in Article V hereof not true and
correct in any material respect at the Closing;
- 40 -
(viii) the Company agrees that through the Effective Time of the
Merger, as of their respective dates, (i) each of the filings with any
regulatory agency will be true and complete in all material respects; and (ii)
each of the filings with any regulatory agency will comply in all material
respects with all of the statutes, rules and regulations enforced or promulgated
by the governmental or regulatory authority with which it will be filed and none
will contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they will be made, not misleading.
Any financial statement contained in any of such filings that is intended to
present the financial position of the entities or entity to which it relates
will fairly present the financial position of such entities or entity and will
be prepared in accordance with GAAP or applicable banking regulations
consistently applied, except as stated therein, during the periods involved;
For purposes of this Section 7.2, the Bank shall be deemed to
have given its consent to any action which is contrary to any specified covenant
set forth in this section if, within five (5) Business Days, or two (2) Business
Days for loans, after actual receipt by the Bank of written notice from the
Company of the Company's intention to act contrary to any of the specified
covenants set forth in this section, the Bank shall not have delivered to the
Company written objection to any such action.
7.3 ACCESS TO INFORMATION. The Company will afford, and will cause
Monarch Bank to afford, the Bank, its representatives, counsel, accountants,
agents and employees (collectively "Representatives"), access during normal
business hours to all of their business, operations, properties, books, files
and records and will do everything reasonably necessary to enable the Bank and
its Representatives to make a complete examination of the financial statements,
books, records, loans and leases, operating reports, audit reports, contracts
and documents, and all other information with respect to assets and properties
of the Company and Monarch Bank and the condition thereof, and to update such
examination at such intervals as the Bank shall deem appropriate. Such access
shall include reasonable access by the Bank or its representatives to auditors'
work papers with respect to the business and properties of the Company and
Monarch Bank, other than (i) books, records and documents covered by the
attorney-client privilege, or which are attorneys' work product, and (ii) books,
records and documents that the Company or Monarch Bank is legally obligated to
keep confidential. Such examination shall be conducted in cooperation with the
officers of the Company and in such a manner as to minimize, to the extent
possible consistent with the conducting of a comprehensive examination, any
disruption of, or interference with, the normal business operations of the
Company and Monarch Bank. No such examination, however, shall constitute a
waiver or relinquishment on the part of the Bank to rely upon the
representations and warranties made by the Company herein or pursuant hereto;
provided, that the Bank shall disclose any fact or circumstance it may discover
which it believes renders any representation or warranty made by the Company
hereunder incorrect in any respect. The Bank will hold in strict confidence all
documents and information concerning the Company so obtained (except to the
extent that such documents or information are a matter of public record or
require disclosure in the Proxy Statement or as may be necessary for the
accomplishment of the purposes of such examination) and, if the transactions
contemplated herein are not consummated, such confidence shall be maintained and
all such documents including all copies shall be returned to the Company.
- 41 -
In the event the Merger provided for hereby is not consummated for any
reason, the Bank shall not, directly or indirectly: (i) utilize for its own
benefit any Confidential Information regarding the Company or Monarch Bank (as
hereinafter defined) or (ii) disclose to any person any such Confidential
Information.
7.4 BREACHES. The Company shall, in event it becomes aware of the
impending or threatened occurrence of any event or condition which would cause
or constitute a breach (or would have caused or constituted a breach had such
event occurred or been known prior to the date hereof) of any of its
representations or agreements contained or referred to herein, given prompt
written notice thereof to Bank and, without limiting Bank's rights under
paragraph 14.1(a)(ii), the Company shall use its best efforts to prevent or
promptly remedy the same.
7.5 COMPLIANCE WITH RULES. The Company shall comply with the
requirements of all applicable Rules, the noncompliance with which would
materially and adversely affect the assets, liabilities, business, financial
condition, or results of operations of the Company taken as a whole. The
Company shall also comply with all securities statutes, rules and regulations,
whether federal or state, in connection with the private placement offering.
Except for information supplied by the Bank pursuant to Section 6.22, the
information contained in the private placement memorandum shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
7.6 CORPORATE ACTION. The Company shall take or cause to be taken
all necessary corporate action required to carry out the transactions
contemplated in this Agreement and the Agreement of Merger, including without
limitation, all necessary action required to organize and fund Monarch Merger
Corporation to cause it to be free of all debt at the Effective Time of the
Merger and the approval of the Agreement of Merger.
7.7 REGULATORY APPROVALS. Promptly following execution of this
Agreement, the parties hereto shall prepare, submit and file, or cause to be
prepared, submitted and filed, all applications for approvals and consents as
may be required of any of them, respectively, by applicable law and regulations
with respect to the transactions contemplated by this Agreement, including
without limitation any and all applications required to be filed with the
Superintendent, the FDIC, the FRB and such other Governmental Entity as the
Company or the Bank may reasonably believe necessary. Each party shall
cooperate with the other in the preparation of all of such applications and will
furnish promptly upon request all documents, information, financial statements
or other materials as may be required in order to complete such applications.
Each party shall afford the other a reasonable opportunity to review all such
applications (except confidential portions thereof) and all amendments and
supplements thereto before filing. The Company and the Bank each covenant and
agree that any and all information furnished by one party to the other for
inclusion in such applications will not contain any untrue statement of a
material fact and will not omit to state any material fact required to be stated
therein or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
7.8 NECESSARY CONSENTS. In addition to the regulatory approvals
referred to in Section 7.7, the parties hereto shall each apply for and
diligently seek to obtain all other third
- 42 -
party consents or approvals which may be necessary for the consummation of the
Merger, including, without limitation, the written consent of any lessors of
real and personal property which property cannot be assigned without the written
consent of the other such lessors.
7.9 FURTHER ASSURANCES. The parties agree that from time to time,
whether prior to, at or after the Effective Time of the Merger, they will
execute and deliver such further instruments of conveyance and transfer and take
such other action as may reasonably be expected to consummate the transactions
contemplated hereby. The Company and the Bank each agree to take such further
action as may reasonably be requested by the other in order to consummate the
transactions contemplated by this Agreement and that are not inconsistent with
the other provisions hereof.
7.10 EMPLOYEE BENEFITS. The Company shall, with respect to each
person who becomes an employee of the Company or any existing subsidiary of the
Company or remains an employee of the Bank, following the Closing Date (each a
"Continued Employee"), provide the benefits described in this Section 7.10.
Subject to the right of subsequent amendment, modification or termination in the
Company's sole discretion, each Continued Employee shall be entitled, as a new
employee of the Company, to participate in such employee benefit plans, as
defined in Section 3(3) of ERISA, or any non-qualified employee benefit plans or
deferred compensation, stock option, bonus or incentive plans, or other employee
benefit or fringe benefit programs that may be in effect generally for employees
of the Company (the "Company Plans"), if and as a Continued Employee shall be
eligible and, if required, selected for participation therein under the terms
thereof. All such participation shall be subject to the terms of such plans as
may be in effect from time to time and this Section 7.10 is not intended to give
Continued Employees any rights or privileges superior to those of other
employees of the Company. The Company may terminate or modify all Employee
Plans and the Company's obligation under this Section 7.10 shall not be deemed
or construed so as to provide duplication of similar benefits but, subject to
that qualification, the Company shall, for purposes of vesting and any age or
period of service requirements for commencement of participation with respect to
any the Company Plans in which Continued Employees may participate, credit each
Continued Employee with his or her term of service with the Bank.
7.12 INDEMNIFICATION AND INSURANCE.
(a) The Company will cause the Bank to maintain in effect
policies of directors' and officers' liability insurance (with such coverage,
terms and conditions as are no less advantageous than the insurance presently
maintained by the Company with respect to its officers and directors) with
respect to all matters arising from facts or events which occurred before the
Effective Time of the Merger for which the Bank would have had an obligation to
indemnify its directors and officers. The Company will also indemnify the
continuing officers and directors of the Bank to the extent authorized by the
Articles of Incorporation and Bylaws of the Company.
(b) If the Company or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall not be
the continuing or surviving corporation or entity of such Merger or merger or
(ii) shall transfer all or substantially all of its
- 43 -
properties and assets to any individual, corporation or other entity, then and
in each such case, the Company shall take no action to impair the rights
provided in this Section 7.12.
7.13 EXECUTION OF AGREEMENT OF MERGER. As soon as practicable after
the organization of Monarch Merger Corporation, the Company shall cause Monarch
Merger Corporation to execute the Agreement of Merger.
7.14 STOCK OFFERING. Within 60 days from the date of this Agreement,
the Company shall provide evidence reasonably satisfactory to the Bank of either
(a) an amount of cash and loans to fund at least 80% of the Aggregate Purchase
Price, or (b) commitments in the form attached as Exhibit 5.10 from qualified
investors equal to at least 100% of the Aggregate Purchase Price. The Company
intends to conduct a Regulation D private placement offering in order to raise
sufficient cash capital, when combined with the Company's borrowings and other
financing sources, to carry out the transaction contemplated by this Agreement.
7.15 AUTHORIZATION. The execution and delivery of the Agreement of
Merger and the consummation of the transactions contemplated thereby will have
been duly authorized by the Board of Directors of Monarch Merger Corporation.
The Agreement of Merger will constitute a legal, valid and binding agreement of
Monarch Merger Corporation in accordance with its respective terms, except as
the enforceability hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors rights and the application of
equitable principles in any action, legal or equitable. Monarch Merger
Corporation will have full corporate power and authority to perform its
obligations under the Agreement of Merger and the transactions contemplated
thereby.
7.16 NO CONFLICTS; DEFAULTS. The execution, delivery and performance
of the Agreement of Merger and the consummation of the transactions
contemplated therein, and compliance Monarch Merger Corporation with any
provision thereof will not (a) conflict with or result in a breach of, or
default or loss of any benefit under, any provision of its Charter Documents or,
except as set forth in Exhibit 7.16 any material agreement, instrument or
obligation to which Monarch Merger Corporation will become a party or by which
the property of the Monarch Merger Corporation will become bound or give any
other party to any such agreement, instrument or obligation the right to
terminate or modify any term thereof; (b) except for the prior approval of the
FDIC, the FRB and the Superintendent and as set forth in Exhibit 7.16, require
any Consents; or (c) result in the creation or imposition of any Encumbrance on
any of the properties or assets of the Monarch Merger Corporation; or (d)
violate the Charter Documents or any Rules to which the Monarch Merger
Corporation is subject.
7.17 ACCURACY OF INFORMATION FURNISHED. Except as to any statements
or information which shall include projections or forecasts, none of the
statements or information made or contained in any of the covenants,
representations or warranties of the Company set forth in this Agreement or in
any of the schedules, exhibits, lists, certificates or other documents furnished
herewith contains any untrue statement of a material fact required to be stated
herein or therein or necessary to make the statements or information contained
herein or therein, in light of the circumstances in which they were made, not
misleading. As to any such information or statements which include projections
or forecast, such information or statements are based
- 44 -
upon assumptions believed by the Company to be reasonable. The Company shall
further amend or supplement the schedule as of the Closing Date if necessary to
reflect any additional changes in the status of the Company.
ARTICLE VIII
MEETING OF SHAREHOLDERS AND FEDERAL SECURITIES LAWS
The parties covenant and agree as follows:
8.1 SHAREHOLDER MEETING. The Bank will, by May 31, 1996, or as soon
thereafter as is reasonably possible, cause either (i) a meeting of its
shareholders (hereinafter referred to as the "Bank Meeting") to be duly called
and held upon requisite notice, or (ii) to obtain the required written consents
in accordance with the California Corporations Code for the purpose of:
(i) authorizing and approving this Agreement and the transactions
contemplated herein; and
(ii) conducting such other business as its Board of Directors
deems advisable and proper in connection therewith;
The Bank, through its Board of Directors, will recommend that its
shareholders approve the transactions contemplated hereby, and it will use its
best efforts to obtain the affirmative votes of the holders of the largest
possible percentage of its outstanding Common Stock, so long as it is consistent
with its fiduciary obligation to do so.
8.2 FEDERAL SECURITIES LAWS. In obtaining the consent of its
shareholders of the matters described in Section 8.1 hereof, the Bank and its
respective officers, directors and controlling shareholders, in all respects,
comply with Sections 10 and 14 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the rules and regulations of the SEC promulgated under
the 1934 Act applicable to commercial banks which are not reporting companies,
other applicable provisions of the United States Code, the rules and regulations
of the Superintendent and the securities laws of all states in which
shareholders of the parties reside.
Without in any way limiting the generality of the foregoing, the Bank
agrees that the Notice of Meeting, Proxy Statement submitted in connection
therewith, Form of Proxy and other solicitation materials that will be used in
soliciting the aforesaid shareholder approvals and authorizations:
(i) will be filed with, and not be used before the same are
cleared for use by, the Superintendent, and other agencies having jurisdiction
over the Bank and this transaction the securities administrators of all states
in which their respective shareholders reside;
- 45 -
(ii) will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, except that neither party warrants
the accuracy or completeness of any information contained therein which is
furnished to it by the other relating to the business, assets, properties,
financial condition or management of the other or any corporation or person
affiliated or contractually obligated to become affiliated therewith, whether by
merger, acquisition or of assets or otherwise.
(iii) The Bank, with cooperation from the Company if required,
will use its best effort to obtain clearance by all appropriate regulatory
authorities for the use of their Notice of Meeting, Proxy Statement, Form of
Proxy and other solicitation materials. Each party will consult and cooperate
with the other in the preparation of all such proxy solicitation material for
the aforesaid Meeting and the Bank agrees not to transmit any proxy materials
without the prior consent of the Company and its counsel.
(iv) The Company and Bank shall each pay their own expenses in
connection with the preparation and filing, including attorney fees, of the
Notice of Meeting, Proxy Statement, form of Proxy and other solicitation
materials.
8.3 MAILING OF PROXY STATEMENT. The Bank and the Company each
covenant and agree that they will use their best efforts and shall cooperate
with each other in the preparation, filing and mailing of the Proxy Statement as
soon as it reasonably practicable and is permitted under applicable law; it
being the intention of the Bank to include its December 31, 1995 financial
statements and information in the financial disclosures contained in the Proxy
Statement.
8.4 MATERIALS TO BE FURNISHED PRIOR TO MAILING DATES.
On or prior to the Bank Mailing Date, the Bank (a) shall use its best
efforts to cause Xxxxxxxxxx Securities or such other firm that shall be selected
by the Bank in its discretion, subject to the reasonable approval of the
Company, to deliver to the Company a copy of any letter to the Board of
Directors of Bank, dated as of a date not more than five days prior to such
Mailing Date, in form and substance satisfactory to the Company to the effect
set forth in Section 10.4 hereof, and (b) shall have received a letter by a date
not more than five days prior to such Mailing Date, to the effect that the
consideration to be received by the shareholders of the Bank in the Merger is
fair from a financial point of view, and (c) shall have received a letter by a
date not more than five days prior to the Bank Mailing Date, of the valuation of
dissenters rights shares as described in Section 1300.
8.5 REGULATORY APPROVALS. The Bank and the Company each agree to use
their best efforts to provide promptly such information and reasonable
assistance as may be requested by the other party to this Agreement and to take
promptly such other actions as shall be necessary or appropriate in order to
consummate the transactions contemplated hereby. Without limiting the
foregoing, the Bank and the Company will each (a) prepare, submit and file, or
cause to be prepared, submitted and filed, all applications for all
authorizations, consents, orders and approvals of federal, state, local and
other governmental regulatory bodies and officials necessary under applicable
law for the performance of its obligations pursuant to this Agreement
- 46 -
and the consummation of the transactions contemplated hereby, (b) use their best
efforts to obtain all such authorizations, consents, orders and approvals as
expeditiously as possible in accordance with the terms of this Agreement, and
(c) cooperate fully with each of the other parties to this Agreement in promptly
seeking to obtain such authorizations, consents, orders and approvals, including
without limitation, in each case, the approval of the FDIC and the
Superintendent. The Bank and the Company each agree to promptly provide the
other with copies of all applications referred to in clause (a) above and copies
of all written communications, letters, reports or other documents delivered to
or received from any regulatory authorities, and copies of all memoranda
relating to discussions with such authorities, if any, with respect to the
Merger, except that the Company and the Bank shall not be required to provide
the Bank with any of the foregoing documents submitted or received on a
confidential basis or which incorporate confidential information relating to
other financial institutions.
ARTICLE IX
CONDITIONS PRECEDENT TO THE CONTEMPLATED TRANSACTIONS
The obligations of the parties to consummate the transactions as
provided for herein are subject to the fulfillment, at or prior to the Effective
Time, of the conditions that:
9.1 PERMITS AND APPROVALS. Appropriate permits or approvals from the
FDIC, the Superintendent, the FRB and/or any other governmental agencies which
are necessary to carry out the transactions contemplated in this Agreement,
shall have been received, the United States Department of Justice shall not have
taken any adverse action within the period allowed under 12 U.S.C. Section
1828(c)(6), and all other statutory or regulatory requirements for the valid
completion of the transactions contemplated hereby shall have been satisfied by
December 31, 1996. Said permits and approvals shall include, but shall not be
limited to, the following:
(i) prior written approval from the Superintendent pursuant to
the California Financial Code and the Federal Deposit Insurance Corporation
pursuant to 12 U.S.C. Section 1828(c)(2) and the FRB pursuant to the BHC Act;
(ii) to the extent required by applicable Rule, all Consents of
any Governmental Entity, including, without limitation, those of the FRB, the
FDIC and the Superintendent, shall have been obtained, granted or waived for
organization of Monarch Merger Corporation and the Merger, and all applicable
waiting periods under all rules shall have expired.
(iii) all approvals and/or permits necessary for the Private
Placement Offering described in Section 5.18 and any other necessary regulatory
approvals and the issuance of approvals or assurances from the FDIC, the
Superintendent, the FRB and any other necessary Governmental Entity having
authority over the Merger that the approval of the Merger will be forthcoming
that are satisfactory to the Company, that would allow the Company to commence
the marketing of the private placement offering by the Company to complete the
Merger as described in this Agreement.
- 47 -
9.2 ABSENCE OF LITIGATION. On the Closing Date and at the Effective
Time: (i) there shall be no action pending before any court of competent
jurisdiction in which any injunction is sought by any governmental authority
against the transactions contemplated hereby; and (ii) there shall be in effect
no order, writ, injunction or decree of any court or governmental authority
prohibiting the consummation of any of the transactions contemplated hereby.
9.3 SHAREHOLDER APPROVAL. The Agreement, the Merger, and the other
transactions contemplated hereby, shall have been approved by the holders of at
least a majority of the issued and outstanding shares of Bank's Stock entitled
to vote, and the requisite approval of the shareholder of Monarch Merger
Corporation, by May 31, 1996, or as soon thereafter as is reasonably possible.
Any and all other action required by the shareholders of the Bank or the Company
to authorize or effect the transactions called for herein shall have been duly
and validly taken.
9.4 STOCK OFFERING. The Company shall close the private placement of
its securities described in Section 5.18 by December 31, 1996, and combined with
loans to the Company, dividends from Western Bank, and any other necessary
financing source will provide for sufficient cash capital to carry out the
transaction contemplated hereby.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BANK
All of the obligations of the Bank to consummate the transactions
contemplated herein shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions, or their waiver by resolution of the
Board of Directors of the Bank:
10.1 LEGAL OPINION. The Bank shall have received the opinion of
Xxxxxx & Xxxxxx, acting as counsel for the Company, dated as of the Closing
Date, in substantially the form of EXHIBIT 10.1.
10.2 CERTIFICATE OF NO DEFAULT. All covenants, terms and conditions
of this Agreement to be complied with and performed by the Company at or before
the Closing Date shall have been complied with and performed in all material
respects and the representations and warranties of the Company contained in
Article V hereof shall have been true and correct in all material respects as of
the Effective Time, with the same effect as though such representations and
warranties had been made on and as of the Effective Time, except as otherwise
specified in, or permitted or contemplated by, this Agreement. The Company
shall have delivered certificates dated the Closing Date, signed by its
President and Chief Financial Officer, certifying the fulfillment of this
condition.
10.3 CLOSING DOCUMENTS. The Company shall have delivered to the Bank
all items required by the Bank pursuant to Section 3.3, all of which documents
shall be properly executed and, if required by the Bank, acknowledged before a
notary.
10.4 EFFECTIVE PROXY STATEMENT. The Proxy Statement shall have been
approved or otherwise become effective and no stop order suspending the
effectiveness thereof shall be
- 48 -
in effect and no proceedings therefor shall be pending or threatened by any
regulatory agency at the Closing Date.
10.5 REGULATORY APPROVALS AND RELATED CONDITIONS. Any and all
governmental and regulatory approvals and consents referred to in Section 9.1
and any other section of this Agreement shall have been granted without the
imposition of conditions, or with conditions subject to the approval of the
Company and the Bank, that are or would have become applicable to the Company or
the Surviving Bank, and that the Company reasonably and in good faith concludes
would materially adversely affect the financial condition or operations of the
Company or the Surviving Bank, or otherwise would be materially burdensome;
provided, however, that conditions or requirements which are imposed on
purchasers or acquired institutions by Governmental Entities in comparable
transactions shall not be deemed to be a basis for excuse of performance under
this Agreement. All actions necessary to authorize the execution, delivery and
performance of the Agreement by the Company and consummation of the Merger by
the Company and Monarch Merger Corporation shall have been duly and validly
taken by the Board of Directors of the Company and the Monarch Merger
Corporation.
10.6 THIRD PARTY CONSENTS. The Company shall have obtained all
consents of other parties to their material mortgages, notes, leases,
franchises, agreements, licenses and permits as may be necessary to permit the
transactions contemplated herein to be consummated, without default,
acceleration, breach or loss of rights or benefits thereunder.
10.7 ABSENCE OF CERTAIN CHANGES. As of the Closing Date there shall
not exist any of the following:
(i) any change(s) in the financial condition or results of
operation of the Company or Monarch Bank since December 31, 1995 which
individually is or in the aggregate are materially adverse to the Company; or
(ii) any damage, destruction, loss or event materially and
adversely affecting the properties, business or prospects of the Company on a
consolidated basis.
10.8 VALIDITY OF TRANSACTIONS. The validity of all transactions
herein contemplated, as well as the form and substance of all opinions,
certificates, instruments of transfer and other documents to be delivered to the
Bank hereunder, shall be subject to the approval, to be reasonably exercised, of
counsel for the Bank.
10.9 FAIRNESS OPINION. Prior to solicitation of shareholder
approval, Bank shall have received an opinion pursuant to Section 8.4 confirming
the fairness of the terms of the Merger from a financial perspective, and such
opinion shall not have been withdrawn prior to the Effective Time of the Merger.
- 49 -
ARTICLE XI
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF THE COMPANY
All of the obligations of the Company to consummate the transactions
contemplated herein shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions, or their waiver by resolution of the
Board of Directors of the Company, as appropriate:
11.1 LEGAL OPINION. The Company shall have received the opinion of
Manatt, Xxxxxx & Xxxxxxxx, LLP, acting as counsel for the Bank, dated as of the
Closing Date, in substantially the form of EXHIBIT 11.1.
11.2 CERTIFICATE OF NO DEFAULT. All covenants, terms and conditions
of this Agreement to be complied with and performed by the Bank at or before the
Closing Date shall have been complied with and performed in all material
respects and the representations and warranties of the Bank contained in Article
IV hereof shall have been true and correct in all material respects as of the
Effective Time, with the same effect as though such representations and
warranties had been made on and as of the Effective Time, except as otherwise
specified in, or permitted or contemplated by, this Agreement. The Bank shall
have delivered to the Company a certificate, dated the Closing Date, signed by
the President and Chief Financial Officer of the Bank, certifying the
fulfillment of this condition.
11.3 CLOSING DOCUMENTS. The Bank shall have delivered to the Company
all items required by the Company pursuant to Section 3.4, all of which
documents shall be properly executed and, if required by the Company,
acknowledged before a notary.
11.4 EFFECTIVE PROXY STATEMENT. The Proxy Statement shall have
become effective and no stop order suspending the effectiveness thereof shall be
in effect and no proceedings therefor shall be pending or threatened by the SEC,
FDIC, the Superintendent, the FRB or any blue sky authority at the Closing Date.
11.5 BANK SHAREHOLDERS AGAINST MERGER. Bank shareholders voting
against the Merger or Bank shareholders giving notice in writing to the Bank at
or before the Bank's meeting that such shareholder dissents from the Merger, on
a combined basis, shall hold not more than five (5) percent of the outstanding
shares of the Bank.
11.6 REGULATORY APPROVALS AND RELATED CONDITIONS. Any and all
governmental and regulatory approvals and consents referred to in Section 9.1
and any other section of this Agreement shall have been granted without the
imposition of conditions, or with conditions subject to the approval of the
Company, that are or would have become applicable to the Company or the
Surviving Bank and that the Company reasonably and in good faith concludes would
materially adversely affect the financial condition or operations of the Company
or the Surviving Bank, or otherwise would be materially burdensome; provided,
however, that conditions or requirements which are imposed on purchasers or
acquired institutions by
- 50 -
Governmental Entities in comparable transactions shall not be deemed to be a
basis for excuse of performance under this Agreement.
11.7 THIRD PARTY CONSENTS. The Company shall have obtained all
consents of other parties to the Bank's material mortgages, notes, leases,
franchises, agreements, licenses and permits as may be necessary to permit the
transactions contemplated herein to be consummated, without default,
acceleration, breach or loss of rights or benefits thereunder.
11.8 ABSENCE OF CERTAIN CHANGES. As of the Effective Time of the
Merger there shall not exist any of the following: (i) any change(s) in the
consolidated financial condition, or results of operation of the Bank since
December 31, 1995, which individually is or in the aggregate are materially
adverse to the Bank; (ii) any damage, destruction, loss or event materially and
adversely affecting the properties, business or prospects of the Bank; or (iii)
any material adverse change in the deposit structure of the Bank from the date
of this Agreement to the Closing Date.
11.9 TERMINATION OF BANK STOCK OPTION PLAN; OFFICERS AND EMPLOYEES.
The Bank shall have caused the Bank's Stock Option Plan, and used its best
efforts to cause the cancellation of any outstanding unexercised Stock Option
Agreements not assumed by the Company's 1993 Stock Option Plan, to be terminated
as of or prior to the Effective Time of the Merger and shall have obtained the
consents or agreements specified in, and otherwise shall have complied with the
terms of, Section 6.10. Pursuant to California Law and its employment policies
and practices, the Bank shall have complied with Section 6.11 of this Agreement
as of the Effective Time of the Merger. The Bank will also terminate all
officers and employees not on the list contained in Section 6.11 and the
employment agreements specified in Exhibit 4.11(a) prior to the Effective Time,
without any liability to the Bank and/or the Company. The Company shall have
received evidence satisfactory to it that all directors of the Bank have
tendered their resignations, to be effective immediately after the Effective
Time of the Merger.
11.10 DIRECTOR AGREEMENTS. Pursuant to Section 2.9, concurrently
with the execution of this Agreement, each director of the Bank shall enter into
separate agreements with the Company in the form attached hereto as EXHIBIT "C".
11.11 TERMINATION OF CONTRACTS. The Bank shall have terminated all
contracts, commitments or understandings as defined in Section 4.12(v) for the
future purchase of materials, supplies, services, merchandise or equipment, the
price of which exceeds $1,000, and any expense incurred in connection with such
terminations shall have been charged in full to the Bank prior the last day of
the month preceding the Closing Date which have been designated by the Company
and agreed to by the Bank. Before the Determination Date prior to the Closing
Date, the Bank shall have paid, or set-up adequate accruals for the payment of
all material expenses that the Bank shall be liable for up to the Closing Date,
including, but not limited to, all accounting and attorney fees in connection
with this Agreement.
11.12 VALIDITY OF TRANSACTIONS. The validity of all transactions
herein contemplated, as well as the form and substance of all opinions,
certificates, instruments of transfer and other documents to be delivered to the
Company hereunder, shall be subject to the approval, to be reasonably exercised,
of counsel for the Company.
- 51 -
11.13 EMPLOYEE BENEFIT PLANS. The Company shall have received
satisfactory evidence that (i) all of the Bank's employee benefit plans,
programs and arrangements, have been terminated on terms and conditions
satisfactory to the Company, and (ii) all benefits payable under such plans,
programs and arrangements have been paid.
11.14 FAIRNESS OPINION. Prior to commencement of the marketing of
the stock offering described in Sections 9.1(iii) and 9.4, the Company shall
have received an opinion concerning the fairness of the terms of the Merger to
the shareholders of the Company from a financial point of view.
11.15 STOCK OFFERING. The Bank shall have provided such information
as deemed necessary by the Company in connection with the sale of stock
including but not limited to, certificates of its officers and directors
attesting to, among other things, the truthfulness and correctness of the
representations contained in this Agreement, opinions of legal counsel and
comfort letters from the Bank's accountants.
11.16 PROFESSIONAL FEES. The Bank's costs and expenses in connection
with the transaction contemplated by this Agreement, including investment
banker, accounting, attorney and any other costs and expenses, shall not exceed
the amount that would be reasonable and customary for a transaction as described
in this Agreement. In addition, the accounting and attorney fees and expenses,
and related costs and expenses thereto, of the Bank shall not exceed $200,000.
ARTICLE XII
DISSENTING SHAREHOLDERS OF BANK
Any Bank shareholder who lawfully dissents shall be entitled to
receive cash for the fair market value of his shares determined in accordance
with Section 1300.
ARTICLE XIII
EXPENSES
13.1 EXPENSES. All fees and out-of-pocket expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
ARTICLE XIV
TERMINATION
14.1 TERMINATION OF THIS AGREEMENT.
(a) Notwithstanding that this Agreement and the Agreement of Merger
may have already been approved by shareholders of one or both of the constituent
entities to the
- 52 -
transactions contemplated by this Agreement, this Agreement may be terminated
prior to the Effective Time of the Merger:
(i) by mutual agreement of the parties, in writing;
(ii) by (A) the Company immediately upon the expiration of 30
days from the date that the Company has given notice to the Bank of a material
breach or default by the Bank in the performance of any covenant, agreement,
representation, warranty, duty or obligation hereunder or (B) the Bank
immediately upon the expiration of 30 days from the date that the Bank has given
notice to the Company of a breach or default by the Company in the performance
of any covenant, agreement, representation, warranty, (other than with respect
to Sections 5.18 and 7.14 with respect to which termination shall be effective
immediately unless otherwise agreed) duty or obligation hereunder except for
Sections 7.14; provided, however, that no such termination shall be effective
other than with respect to Sections 5.18 and 7.14, (which termination shall be
effective immediately unless otherwise agreed) if, within such 30 day period,
the breaching or defaulting party shall have substantially corrected and cured
the grounds for the termination as set forth in said notice of termination;
(iii) by the Company or the Bank if any governmental or
regulatory authority denies or refuses to grant the approvals, consents or
authorizations required to be obtained, or if any governmental or regulatory
authority approves the transaction covered and contemplated by this Agreement
upon conditions not reasonably acceptable to the Company, in order to consummate
the transactions covered and contemplated by this Agreement. If any regulatory
application filed pursuant to this Agreement hereof should be finally denied or
disapproved by the respective regulatory authority, then this Agreement
thereupon shall be deemed terminated and canceled; provided, however, that a
request for additional information or undertaking by the Company, as a condition
for approval, shall not be deemed to be a denial or disapproval so long as the
Company diligently provides the requested information or undertaking. In the
event an application is denied pending an appeal, petition for review, or
similar such act on the part of the Company (hereinafter referred to as the
"appeal") then the application will be deemed denied unless the Company prepares
and timely files such appeal and continues the appellate process for purposes of
obtaining the necessary approval.
(iv) by the Company or the Bank if (A) the Board of Directors of
the Bank approves a transaction (or the Bank executes a letter of intent or
other agreement) pursuant to which any person or entity or related group of
persons or entities acquires, directly or indirectly, record or beneficial
ownership (as defined in Rule 13d3 promulgated by the SEC pursuant to the
Exchange Act) or control of 10% or more of the outstanding shares of the Bank
Common Stock or other securities of the Bank; (B) any person or entity or
related group of persons or entities seeks to acquire 10% or more of the
outstanding shares of the Bank Common Stock by tender offer or otherwise, and
the Board of Directors of the Bank does not advise the Bank's shareholders that
the Board does not support such tender offer or acquisition and that it supports
the Merger; (C) if the Bank violates its covenant pursuant to Section 6.2
(xxiii) and (xxiv); or (D) the Merger does not receive the requisite approval of
the Bank's shareholders.
(b) Notwithstanding that this Agreement and the Agreement of Merger
may have already been approved by shareholders of one or both of the constituent
corporations to the
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Merger, this Agreement shall be terminated prior to the Effective Time of the
Merger if any conditions specified in Articles IX, X or XI have not been
satisfied or waived in writing by the party authorized to waive such conditions
unless mutually extended by the parties hereto.
(c) REGULATORY ENFORCEMENT MATTERS. In the event that Bank or the
Company or any of their respective subsidiaries shall, after the date of this
Agreement, become a party or subject to any new or amended written agreement,
memorandum of understanding, cease and desist order, imposition of civil money
penalties or other regulatory enforcement action or proceeding with any federal
or state agency charged with the supervision or regulation of banks or bank
holding companies which is material to Bank or the Company and their respective
subsidiaries taken as a whole, then either the Company or the Bank may terminate
this Agreement.
(d) (Reserved)
(e) Notwithstanding anything to the contrary contained herein:
(i) If this Agreement is terminated by the Bank before the
Closing Date pursuant to Sections 14.1(a)(ii)(B), (not including Sections 5.18
or 7.14) hereof, the Company shall pay to the Bank, as reasonable and full
liquidated damages and reasonable compensation for the loss sustained thereby
and not as a penalty or forfeiture, the direct expenses incurred by the Bank in
connection with the transaction contemplated by this Agreement, within ten (10)
business days of such termination; and
(ii) If this Agreement is terminated by the Company before the
Closing Date pursuant to Sections 14.1(a)(ii)(A) hereof, Bank shall pay to the
Company, as reasonable and full liquidated damages and reasonable compensation
for the loss sustained thereby, and not as a penalty or forfeiture, the direct
expenses incurred by the Company in connection with the transaction contemplated
by this Agreement, within ten (10) business days of such termination.
(iii) If this Agreement is terminated by the Company before the
Closing pursuant to Section 14.1(a)(iv) hereof, the Bank will pay to the
Company, as reasonable and full liquidated damages and reasonable compensation
for the loss sustained thereby, and not as a penalty or forfeiture, an amount
equal to the product of (x) the difference between (A) the amount received by
the Bank and its shareholders in the alternative transaction and (B) the
Aggregate Purchase Price, and (y) .20, plus the direct and reasonable expenses
incurred by the Company in connection with this transaction up to a maximum of
$300,000, within ten (10) business days of such termination.
ARTICLE XV
GENERAL PROVISIONS
15.1 CONFIDENTIALITY. All Confidential Information disclosed
heretofore or hereafter by any Party to this Agreement to any other Party to
this Agreement shall be kept confidential by such other Party and shall not be
used by such other Party otherwise than as herein contemplated, except to the
extent that (a) it is necessary or appropriate to disclose to the
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jurisdiction over Bank or the Company or as may otherwise be required by Rule
(any disclosure of Confidential Information to a Governmental Entity shall be
accompanied by a request that such Governmental Entity preserve the
confidentiality of such Confidential Information); or (b) to the extent such
duty as to confidentiality is waived by the other Party. Such obligation as to
confidentiality and non-use shall survive the termination of this Agreement
pursuant to Article 10. In the event of such termination and on request of
another Party, each Party shall use all reasonable efforts to (y) return to the
other Parties all documents (and reproductions thereof) received form such other
Parties that contain Confidential Information (and, in the case of
reproductions, all such reproductions made by the receiving Party); and (z)
destroy the originals and all copies of any analyses, computations, studies or
other documents prepared for the internal use of such Party that include
Confidential Information, unless otherwise advised by counsel in connection with
any controversy under the Agreement.
15.2 PUBLICITY. The Parties shall coordinate all publicity relating
to the transactions contemplated by this Agreement, and no Party shall issue any
press release, publicity statement, shareholder communication or other public
notice relating to this Agreement or any of the transactions contemplated hereby
without obtaining the prior consent of the Parties except to the extent that
independent legal counsel to the Parties, as the case may be, shall deliver a
written opinion to the Parties that a particular action is required by
applicable Rules.
15.3 INDEMNIFICATION.
(a) The Bank agrees to defend, indemnify and hold harmless the
Company, its officers and directors, attorneys, and each person who controls the
Company within the meaning of the Securities Act from and against any costs,
damages, liability and expenses of any nature, insofar as such costs, damages,
liabilities and expenses arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Proxy Statement,
the Company's Private Placement Memorandum or any amendments or supplements
thereto, or arise out of or are based solely upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading based upon information
with respect to the Bank furnished to the Company by or on behalf of the Bank
specifically for use therein; provided, however, that the Bank shall not be
liable in any such case to the extent that any such cost, damage, liability or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Proxy Statement, the
Company's Private Placement Memorandum or amendments or supplements thereto, in
reliance upon and in conformity with information with respect to the Company
furnished to the Bank by or on behalf of the Company specifically for use
therein.
(b) The Company agrees to defend indemnify and hold harmless the
Bank, its officers and directors, its attorneys, accountants and each person who
controls the Bank within the meaning of the Securities Act from and against any
costs, damages, liabilities and expenses of any nature, insofar as any such
costs, damages, liabilities or expenses arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact provided
contained in the Proxy Statement, the Company's Private Placement Memorandum or
any amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make
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statements therein not misleading based solely upon information with respect to
the Company and its subsidiaries furnished to the Bank by or on behalf of the
Company and its subsidiaries specifically for use therein; provided, however,
that the Company will not be liable in any such case to the extent that any such
cost, damage, liability or expenses arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Proxy Statement, the Company's Private Placement Memorandum or amendments or
supplements thereto, in reliance upon and in conformity with information with
respect to the Bank furnished to the Company by or on behalf of the Bank
specifically for use therein.
(c) Promptly after receipt by any party to be indemnified
pursuant to this section ("Indemnified Party") of notice of (i) any claim or
(ii) the commencement of any action or proceeding, Indemnified Party will give
the other party "(Indemnifying Party") written notice of such claim or the
commencement of such action or proceeding. Indemnifying Party shall have the
right, at its option, to compromise or defend, by its own counsel, any such
matter involving Indemnified Party's asserted liability, at the expense of the
Indemnifying Party. In the event that Indemnifying Party shall undertake to
compromise or defend any such asserted liability, it shall promptly notify
Indemnified Party of its intention to do so, and Indemnified Party agrees to
cooperate fully with Indemnifying Party and its counsel in the compromise of, or
defense against, any such asserted liability. In any event, Indemnifying Party
shall have the right to participate in the defense of such asserted liability.
In any event Indemnifying Party shall have the right to participate in the
defense of such asserted liability.
15.4 NOTICES. All notices, demands or other communications hereunder
shall be in writing and be made by (a) hand delivery; (b) overnight mail; (c)
United States mail, first class, certified or registered, postage prepaid; or
(d) facsimile transmission, and shall be deemed to have been duly given (i) on
the date of service if delivered by hand or facsimile transmission (provided
that telecopied notices are also mailed by United States mail, first class,
certified or registered, postage prepaid); (ii) on the next day if delivered by
overnight mail or delivery service; or (iii) 72 hours after mailing if mailed by
United States mail, first-class, certified or registered, postage prepaid, and
properly addressed as follows:
(a) If to the Bank:
Xxxx X. Xxxxx, Xx., Chairman of the Board
Western Bank
0000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: 310/477-8611
With copies to:
Manatt, Xxxxxx & Xxxxxxxx, LLP
00000 Xxxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxx, Esq.
Telecopier No.: 310/312-4224
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(b) If to the Company:
Mr. E. Xxxx Xxxxxxx, President
Monarch Bancorp
00000 Xxxx Xxxxxx Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxx 00000
Telecopier No.: 714/495-3135
With copies to:
Xxxxx X. Xxxxxx, Esquire
Xxxxxx & Xxxxxx
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telecopier No.: 714/851-1732
The persons or addresses to which mailings or deliveries shall be made may
change from time to time by notice given pursuant to the provisions of this
Section 15.4.
15.5 SUCCESSORS AND ASSIGNS. Subject to Section 7.12 and 15.3, all
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective transferees, successors and
assigns; provided, however, that, except as otherwise contemplated herein, this
Agreement and all rights, privileges, duties and obligations of the parties
hereto may not be assigned or delegated by any party hereto without the prior
written consent of the other party to this Agreement and any purported
assignment in violation of this Section 15.5 shall be null and void.
15.6 THIRD PARTY BENEFICIARIES. Except as provided in Section 7.12,
each party hereto intends that this Agreement shall not benefit, or create any
right or cause of action in or on behalf of, any person other than the parties
hereto. As used in this Agreement, the term "party" or "parties" shall refer
only to the Company, the Bank, the Surviving Bank or any of them.
15.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
15.8 GOVERNING LAW. This Agreement is made and entered into in the
State of California and the laws of the State of California shall govern the
validity and interpretation hereof and the performance of the parties hereto of
their respective duties and obligations hereunder.
15.9 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
15.10 WAIVER AND MODIFICATION. No waiver of any term, provision or
condition of this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such term, provision or
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condition of this Agreement. This Agreement, the Agreement of Merger and the
Agreement of Merger, when executed and delivered, may be modified or amended by
action of the Board of Directors of the Company and the Bank without action by
their respective shareholders to the extent permitted by law. This Agreement
may be modified or amended only by an instrument of equal formality signed by
the parties of their duly authorized agents.
15.11 ATTORNEYS' FEES. In the event either of the parties to this
Agreement brings an action or suit against the other party by reason of any
breach of any covenant, agreement, representation, warranty or other provision
hereof, or any breach of any duty or obligation created hereunder by such other
party, the prevailing party, as determined by the court or other body having
jurisdiction, shall be entitled to have and recover of and from the losing
party, as determined by the court or other body have jurisdiction, all
reasonable costs and expenses incurred or sustained by such prevailing party in
connection with such suit or action, including, without limitation, legal fees
and court costs (whether or not taxable as such).
15.12 ENTIRE AGREEMENT. The making, execution and delivery of this
Agreement by the parties hereto have not been induced by any representations,
statements, warranties or agreements other than those herein expressed. This
Agreement embodies the entire understanding of the parties and there are no
further or other agreements or understandings, written or oral, in effect
between the parties relating to the subject matter hereof, unless expressly
referred to by reference herein.
15.13 SEVERABILITY. Whenever possible, each provision of this
Agreement and every related document shall be interpreted in such manner as to
be valid under applicable law. However, if any provision of any of the
foregoing shall be invalid or prohibited under said applicable law, it shall be
construed, interpreted and limited to effectuate its purpose to the maximum
legally permissible extent. If it cannot be so construed and interpreted so as
to be valid under such law, such provision shall be ineffective to the extent of
such invalidity or prohibition without invalidating the remainder of such
provision or the remaining provisions of this Agreement, and this Agreement
shall be construed to the maximum extent possible to carry out its terms without
such invalid or unenforceable provision or portion thereof.
15.14 EFFECT OF DISCLOSURE. Any list, statement, document, writing
or other information set forth in, referenced to or attached to any schedule or
exhibit delivered pursuant to any provision of this Agreement shall be deemed to
constitute disclosure for purposes of any other schedule or exhibit required to
be delivered pursuant to any other provision of this Agreement.
15.15 KNOWLEDGE. Whenever any statement herein or in any schedule,
exhibit, certificate or other documents delivered to any party pursuant to this
Agreement is made "to the knowledge" or "to the best knowledge" of any party or
other person, such party or other person, who shall be an officer of a party,
shall make such statement only after conducting an investigation which such
person determines in good faith to be reasonable under the circumstances of the
subject matter thereof, and each such statement shall constitute a
representation that such investigation has been conducted.
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15.16 TERMINATION OF REPRESENTATION, WARRANTIES AND COVENANTS. The
representations, warranties and covenants of each party contained herein or in
any certificate or other writing delivered by such party pursuant hereto or in
connection herewith shall not survive the Merger other than those provided for
in Sections 13.1, 14.1(e), 15.1, 15.3, 15.11 and 15.12 which shall survive a
termination.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
MONARCH BANCORP
By: /s/ Xxxx Xxxx
-----------------------------------------
Xxxx Xxxx, Chairman of the Board
By: /s/ E. Xxxx Xxxxxxx
-----------------------------------------
E. Xxxx Xxxxxxx, President and Chief
Executive Officer
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxx, Secretary
WESTERN BANK
By: /s/ Xxxx X. Xxxxx, Xx.
-----------------------------------------
Xxxx X. Xxxxx, Xx.
Chairman of the Board and Chief
Executive Officer
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxxx
President and Chief Operating Officer
By: /s/ Xxxxx X. XxXxxxxx
-----------------------------------------
Xxxxx X. XxXxxxxx
Secretary
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