Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 8, 2003
AMONG
VINEYARD NATIONAL BANCORP,
VINEYARD BANK
AND
SOUTHLAND BUSINESS BANK
iv
TABLE OF CONTENTS
PAGE
----
Article I CERTAIN DEFINITIONS................................................................................... 1
1.01 Certain Definitions........................................................................... 1
Article II THE MERGER........................................................................................... 7
2.01 The Merger.................................................................................... 7
2.02 Effective Date and Effective Time; Closing.................................................... 8
Article III CONSIDERATION; EXCHANGE PROCEDURES.................................................................. 8
3.01 Conversion of Shares.......................................................................... 8
3.02 Exchange Procedures........................................................................... 9
3.03 Rights as Shareholders; Stock Transfers....................................................... 11
3.04 No Fractional Shares.......................................................................... 11
3.05 Dissenting Shares............................................................................. 11
3.06 Anti-Dilution Provisions...................................................................... 12
3.07 Withholding Rights............................................................................ 12
3.08 Southland Bank Options........................................................................ 12
Article IV ACTIONS PENDING ACQUISITION.......................................................................... 12
4.01 Forbearances of Southland Bank................................................................ 12
4.02 Forbearances of Parent........................................................................ 15
Article V REPRESENTATIONS AND WARRANTIES........................................................................ 15
5.01 Disclosure Schedules.......................................................................... 15
5.02 Standard...................................................................................... 16
5.03 Representations and Warranties of Southland Bank.............................................. 16
5.04 Representations and Warranties of Parent and Vineyard Bank.................................... 28
Article VI COVENANTS............................................................................................ 32
6.01 Reasonable Best Efforts....................................................................... 32
6.02 Shareholder Approval.......................................................................... 32
6.03 Registration Statement........................................................................ 33
6.04 Regulatory Filings............................................................................ 34
6.05 Press Releases................................................................................ 34
6.06 Access; Information........................................................................... 34
6.07 Affiliates.................................................................................... 36
6.08 Acquisition Proposals......................................................................... 36
6.09 Certain Policies.............................................................................. 36
6.10 Nasdaq Listing................................................................................ 37
6.11 Benefit Plans................................................................................. 37
6.12 Vineyard Bank Advisory Board.................................................................. 38
6.13 Notification of Certain Matters............................................................... 38
Article VII CONDITIONS TO CONSUMMATION OF THE MERGER............................................................ 38
7.01 Conditions to Each Party's Obligation to Effect the Merger.................................... 38
7.02 Conditions to Obligation of Southland Bank.................................................... 39
7.03 Conditions to Obligations of Parent and Vineyard Bank......................................... 39
Article VIII TERMINATION........................................................................................ 40
i
TABLE OF CONTENTS
(CONTINUED)
8.01 Termination................................................................................... 40
8.02 Effect of Termination and Abandonment......................................................... 42
Article IX MISCELLANEOUS........................................................................................ 43
9.01 Survival...................................................................................... 43
9.02 Waiver; Amendment............................................................................. 43
9.03 Counterparts.................................................................................. 44
9.04 Governing Law................................................................................. 44
9.05 Expenses...................................................................................... 44
9.06 Notices....................................................................................... 44
9.07 Entire Understanding; No Third Party Beneficiaries............................................ 45
9.08 Severability.................................................................................. 45
9.09 Enforcement of the Agreement.................................................................. 45
9.10 Interpretation................................................................................ 45
9.11 Assignment.................................................................................... 46
9.12 Alternative Structure......................................................................... 46
ANNEX A AGREEMENT OF MERGER....................................................................... A-1
ANNEX B FORM OF SHAREHOLDER AGREEMENT............................................................. B-1
ANNEX C FORM OF AFFILIATE LETTER.................................................................. C-1
ii
AGREEMENT AND PLAN OF MERGER, dated as of April 8, 2003 (this
"Agreement"), among Vineyard National Bancorp ("Parent"), Vineyard Bank
("Vineyard Bank") and Southland Business Bank ("Southland Bank").
RECITALS
A. Southland Bank. Southland Bank is a
California-chartered commercial bank, having its principal place of business in
Irwindale, California.
B. Parent. Parent is a California corporation, having
its principal place of business in Rancho Cucamonga, California.
C. Vineyard Bank. Vineyard Bank is a
California-chartered commercial bank, having its principal place of business in
Rancho Cucamonga, California.
D. Intention of the Parties. It is the intention of the
parties to this Agreement that the Merger provided for herein be treated as a
"reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
E. Board Action. The respective Boards of Directors of
each of Parent, Vineyard Bank and Southland Bank have determined that it is in
the best interests of their respective companies and their stockholders to
consummate the Merger provided for herein.
F. Shareholder Agreements. As a material inducement to
Parent and Vineyard Bank to enter into this Agreement, and simultaneously with
the execution of this Agreement, each Shareholder (as defined herein) is
entering into an agreement, in the form of Annex B hereto (collectively, the
"Shareholder Agreements") pursuant to which they have agreed, among other
things, to vote their shares of Southland Bank Common Stock (as defined herein)
in favor of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements contained herein
the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS. THE FOLLOWING TERMS ARE USED IN THIS
AGREEMENT WITH THE MEANINGS SET FORTH BELOW:
"Acquisition Proposal" has the meaning set forth in Section 6.08.
"Affiliate Letter" has the meaning set forth in Section 6.07.
"Agreement" means this Agreement, as amended or modified from time to time in
accordance with Section 9.02, together with the Agreement of Merger.
1
"Agreement of Merger" means the Agreement of Merger attached hereto as Annex A,
as amended or modified from time to time in accordance with its provisions.
"Aggregate Cash Consideration" has the meaning set forth in Section
3.01(b)(2)(ii).
"Average Share Price" has the meaning set forth in Section 3.01(b)(2)(i).
"Bank Insurance Fund" means the Bank Insurance Fund maintained by the FDIC.
"Bank Secrecy Act" means the Bank Secrecy Act of 1970, as amended.
"Benefit Plans" has the meaning set forth in Section 5.03(m).
"Business Day" means Monday through Friday of each week, except a legal holiday
recognized as such by the U.S. Government or any day on which banking
institutions in the State of California are authorized or obligated to close.
"Capital Change" has the meaning set forth in Section 3.06.
"Certificate" means any certificate which immediately prior to the Effective
Time represented shares of Southland Bank Common Stock.
"Closing" and "Closing Date" have the meanings set forth in Section 2.02(b).
"Code" has the meaning set forth in the recitals to this Agreement.
"Community Reinvestment Act" means the Community Reinvestment Act of 1977, as
amended.
"Department" means the California Department of Financial Institutions.
"DOL" has the meaning set forth in Section 5.03(m)(i).
"Derivatives Contract" has the meaning set forth in Section 5.03(q).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenting Shares" has the meaning set forth in Section 3.05.
2
"Effective Date" has the meaning set forth in Section 2.02(a).
"Effective Time" has the meaning set forth in Section 2.02(a).
"Employees" has the meaning set forth in Section 5.03(m).
"Environmental Laws" has the meaning set forth in Section 5.03(o).
"Equal Credit Opportunity Act" means the Equal Credit Opportunity Act, as
amended.
"Equity Investment" means (i) an Equity Security; and (ii) an ownership interest
in any company or other entity, any membership interest that includes a voting
right in any company or other entity, any interest in real estate; and any
investment or transaction which in substance falls into any of these categories
even though it may be structured as some other form of investment or
transaction.
"Equity Security" means any stock (other than adjustable-rate preferred stock,
money market (auction rate) preferred stock or other instrument determined by
the FDIC to have the character of debt securities), certificate of interest or
participation in any profit-sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share, investment
contract, or voting-trust certificate; any security convertible into such a
security; any security carrying any warrant or right to subscribe to or purchase
any such security; and any certificate of interest or participation in,
temporary or interim certificate for, or receipt for any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m)(iii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.
3
"Exchange Agent" has the meaning set forth in Section 3.02(a).
"Exchange Ratio" has the meaning set forth in Section 3.01(b)(1)(i), subject to
adjustment pursuant to Sections 3.06 and 8.01(i).
"Fair Housing Act" means the Fair Housing Act, as amended.
"FCSC" means the Financial Code of the State of California.
"FDIC" means the Federal Deposit Insurance Corporation.
"GAAP" means accounting principles generally accepted in the United States of
America.
"GCLC" means the General Corporation Law of the State of California.
"Governmental Authority" means any federal, state or local court, administrative
agency or commission or other governmental authority or instrumentality.
"Hazardous Substance" has the meaning set forth in Section 5.03(o).
"Insurance Policies" has the meaning set forth in Section 5.03(w).
"IRS" has the meaning set forth in Section 5.03(m)(i).
"Liens" means any charge, mortgage, pledge, security interest, restriction,
claim, lien or encumbrance.
"Loans" has the meaning set forth in Section 4.01(r).
"Material Adverse Effect" means, with respect to Parent or Southland Bank any
effect that (i) is material and adverse to the financial position, results of
operations or business of Parent and its Subsidiaries taken as a whole or
Southland Bank, as the case may be, or (ii) would materially impair the ability
of any of Parent and its Subsidiaries or Southland Bank to perform their
respective obligations under this Agreement or otherwise materially impede the
consummation
4
of the Transaction; provided, however, that Material Adverse Effect shall not be
deemed to include the impact of (a) changes in banking and similar laws of
general applicability or interpretations thereof by Governmental Authorities,
(b) changes in GAAP or regulatory accounting requirements applicable to banks
and their holding companies generally, (c) changes in general economic
conditions affecting banks and their holding companies generally, (d) any
modifications or changes to valuation policies and practices, or expenses
incurred, in connection with the Transaction or restructuring charges taken in
connection with the Transaction, in each case in accordance with GAAP, and (e)
with respect to Southland Bank, the effects of any action or omission taken with
the prior consent of Parent or as otherwise contemplated by the Agreement.
"Material Contracts" has the meaning set forth in Section 5.03(k)(i).
"Merger" has the meaning set forth in Section 2.01(a).
"Merger Consideration" means the number of whole shares of Parent Common Stock,
plus cash, if applicable, in lieu of any fractional share interest, and the
amount of cash, if applicable, into which shares of Southland Bank Common Stock
shall be converted pursuant to the provisions of Article III.
"Nasdaq" means The Nasdaq Stock Market, Inc.'s National Market or such other
securities exchange on which the Parent Common Stock may be listed.
"National Labor Relations Act" means the National Labor Relations Act, as
amended.
"OREO" means other real estate owned.
"Parent" has the meaning set forth in the preamble to this Agreement.
"Parent Benefit Plans" has the meaning set forth in Section 6.11(a).
5
"Parent Board" means the Board of Directors of the Parent.
"Parent Common Stock" means the common stock, no par value per share, of Parent.
"Parent Preferred Stock" means the preferred stock, no par value per share, of
Parent.
"Parent Regulatory Authorities" has the meaning set forth in Section 5.04(k).
"Pension Plan" has the meaning set forth in Section 5.03(m)(ii).
"Person" means any individual, bank, corporation, partnership, association,
joint-stock company, business trust, limited liability company or unincorporated
organization.
"Per Share Cash Consideration" has the meaning set forth in Section
3.01(b)(1)(ii).
"Per Share Stock Consideration" has the meaning set forth in Section
3.01(b)(1)(i).
"Previously Disclosed" by a party shall mean information set forth in a section
of its Disclosure Schedule corresponding to the section of this Agreement where
such term is used.
"Proxy Statement" has the meaning set forth in Section 6.03(a).
"Registration Statement" has the meaning set forth in Section 6.03(a).
"Rights" means, with respect to any Person, warrants, options, rights,
convertible securities and other arrangements or commitments which obligate the
Person to issue or dispose of any of its capital stock or other ownership
interests.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
"Securities Documents" has the meaning set forth in Section 5.04(g).
"Shareholder Agreements" has the meaning set forth in the recitals to this
Agreement.
6
"Shareholders" means each director and executive officer of Southland Bank.
"Southland Bank" has the meaning set forth in the preamble to this Agreement.
"Southland Bank Affiliates" has the meaning set forth in Section 6.07.
"Southland Bank Articles" means the Articles of Incorporation of Southland Bank,
as amended.
"Southland Bank Board" means the Board of Directors of Southland Bank.
"Southland Bank Bylaws" means the Bylaws of Southland Bank, as amended.
"Southland Bank Common Stock" means the common stock, no par value per share, of
Southland Bank.
"Southland Bank Financial Statements" shall mean (i) the balance sheets
(including related notes and schedules, if any) of Southland Bank as of December
31, 2002 and 2001 and the statements of operations, changes in stockholders'
equity and cash flows (including related notes and schedules, if any) of
Southland Bank for each of the two years ended December 31, 2002 and 2001, and
(ii) the balance sheets of Southland Bank (including related notes and
schedules, if any) and the statements of operations, changes in stockholders'
equity and cash flows (including related notes and schedules, if any) of
Southland Bank with respect to the monthly, quarterly and annual periods ending
subsequent to December 31, 2002.
"Southland Bank Group" means any "affiliated group" (as defined in Section
1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) that includes Southland Bank or any predecessor of or any
successor to Southland Bank (or to another such predecessor or successor).
"Southland Bank Loan Property" has the meaning set forth in Section 5.03(o)(i).
"Southland Bank Meeting" has the meaning set forth in Section 6.02.
7
"Southland Bank Options" means the options to acquire Southland Bank Common
Stock issued under the Southland Bank Stock Option Plan.
"Southland Bank Preferred Stock" means the preferred stock, no par value per
share, of Southland Bank.
"Southland Bank Regulatory Authorities" has the meaning set forth in Section
5.03(i).
"Southland Bank Stock Option Plan" means the Southland Bank 2000 Stock Option
Plan.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to those
terms in Rule l-02 of Regulation S-X of the SEC.
"Superior Proposal" has the meaning set forth in Section 6.08.
"Surviving Corporation" has the meaning set forth in Section 2.01(a).
"Tax" and "Taxes" mean all federal, state, local or foreign income, gross
income, gains, gross receipts, sales, use, ad valorem, goods and services,
capital, production, transfer, franchise, windfall profits, license,
withholding, payroll, employment, disability, employer health, excise,
estimated, severance, stamp, occupation, property, environmental, custom duties,
unemployment or other taxes of any kind whatsoever, together with any interest,
additions or penalties thereto and any interest in respect of such interest and
penalties.
"Tax Returns" means any return, declaration or other report (including
elections, declarations, schedules, estimates and information returns) with
respect to any Taxes.
"Termination Fee" has the meaning set forth in Section 8.02(c).
"Transaction" means the Merger and any other transaction contemplated by this
Agreement.
"Vineyard Bank" has the meaning set forth in the preamble to this Agreement.
8
"Vineyard Bank Articles" means the Articles of Incorporation of Vineyard Bank,
as amended.
"Vineyard Bank Board" means the Board of Directors of Vineyard Bank.
"Vineyard Bank Bylaws" means the Bylaws of Vineyard Bank, as amended.
ARTICLE II
THE MERGER
2.01 The Merger
(a) The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time, Southland Bank shall merge with and
into Vineyard Bank in accordance with the applicable provisions of the GCLC
and the FCSC (the "Merger"), the separate corporate existence of Southland
Bank shall cease and Vineyard Bank shall survive and continue to exist as a
California-chartered commercial bank (Vineyard Bank, as the surviving
corporation in the Merger, sometimes being referred to herein as the
"Surviving Corporation").
(b) Name. The name of the Surviving Corporation shall be
"Vineyard Bank."
(c) Articles and Bylaws. The articles of incorporation
and bylaws of Vineyard Bank immediately after the Merger shall be the Vineyard
Bank Articles and the Vineyard Bank Bylaws as in effect immediately prior to
the Merger.
(d) Directors and Executive Officers of the Surviving
Corporation. The directors of the Surviving Corporation immediately after the
Merger shall be the directors of Vineyard Bank immediately prior to the
Merger. The executive officers of the Surviving Corporation immediately after
the Merger shall be the executive officers of Vineyard Bank immediately prior
to the Merger, each of whom shall serve until such time as their successors
shall be duly elected and qualified.
(e) Authorized Capital Stock. The authorized capital
stock of the Surviving Corporation upon consummation of the Merger shall be as
set forth in the Vineyard Bank Articles immediately prior to the Merger.
(f) Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in accordance with the GCLC and the
FCSC. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the property, rights, privileges, powers and
franchises of Southland Bank shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of
Southland Bank shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
9
(g) Additional Actions. If, at any time after the
Effective Time, the Surviving Corporation shall consider that any further
assignments or assurances in law or any other acts are necessary or desirable
to (i) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Southland Bank acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement, Southland Bank, and
its proper officers and directors, shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of
such rights, properties or assets in the Surviving Corporation and otherwise
to carry out the purposes of this Agreement, and the proper officers and
directors of the Surviving Corporation are fully authorized in the name of the
Surviving Corporation or otherwise to take any and all such action.
2.02 Effective Date and Effective Time; Closing.
(a) Subject to the satisfaction or waiver of the
conditions set forth in Article VII (other than those conditions that by their
nature are to be satisfied at the consummation of the Merger, but subject to the
fulfillment or waiver of those conditions), the parties shall cause the
Agreement of Merger to be filed with the Secretary of State of the State of
California and the Department pursuant to the GCLC and the FCSC on (i) a date
selected by Parent after such satisfaction or waiver which is no later than the
later of (A) five Business Days after such satisfaction or waiver or (B) the
first month end following such satisfaction or waiver, or (ii) such other date
to which the parties may mutually agree in writing. The Merger provided for
herein shall become effective upon such filings or on such date as may be
specified therein. The date of such filings or such later effective date is
herein called the "Effective Date." The "Effective Time" of the Merger shall be
the time of such filings or as set forth in such filings.
(b) A closing (the "Closing") shall take place
immediately prior to the Effective Time at 10:00 a.m., Pacific Time, at the
principal offices of Parent in Rancho Cucamonga, California, or at such other
place, at such other time, or on such other date as the parties may mutually
agree upon (such date, the "Closing Date"). At the Closing, there shall be
delivered to Parent and Southland Bank the opinions, certificates and other
documents required to be delivered under Article VII hereof.
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of a holder of shares of Southland
Bank Common Stock:
(a) Each share of Parent Common Stock and Vineyard Bank
Common Stock that is issued and outstanding immediately prior to the Effective
Time shall remain issued and outstanding and shall be unchanged by the Merger.
10
(b) (1) Subject to Sections 3.05, 3.06 and 8.01(i), each
share of Southland Bank Common Stock issued and outstanding immediately prior
to the Effective Time shall be converted into, and shall be canceled in
exchange for, the right to receive:
(i) the number of shares of Parent Common
Stock which is equal to (the "Exchange Rate") (A) if the Average Share
Price of the Parent Common Stock is equal to or greater than $17.78 and
equal to or less than $20.00, the quotient (rounded to the nearest one
one hundred-thousandth) determined by dividing (x) $6.06169 by (y) the
Average Share Price of the Parent Common Stock, (B) if the Average
Share Price of the Parent Common Stock is less than $17.78, .34097
shares or (C) if the Average Share Price of the Parent Common Stock is
greater than $20.00, .30308 shares (the "Per Share Stock
Consideration"), and
(ii) if the Average Share Price of the Parent
Common Stock is less than $17.78, a cash amount equal to the difference
between (A) $6.06169 and (B) the product of (x) the Average Share Price
of the Parent Common Stock and (y) .34097 (the "Per Share Cash
Consideration").
(2) For purposes of this Agreement, (i) the "Average
Share Price" of the Parent Common Stock shall mean the weighted average (based
on the number of shares traded) of the closing sales price of a share of Parent
Common Stock, as reported on Nasdaq (as reported by an authoritative source),
for the 20 Business Day period ending with the close of business on the fifth
Business Day preceding the Effective Time, and (ii) the "Aggregate Cash
Consideration" shall mean the product of the number of shares of Southland Bank
Common Stock outstanding at the Effective Time times the Per Share Cash
Consideration.
3.02 Exchange Procedures.
(a) At or after the Effective Time, each holder of a
Certificate or Certificates, upon surrender of the same to an agent, duly
appointed by Parent (the "Exchange Agent"), shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of
whole shares of Parent Common Stock and cash, if applicable, into which the
shares of Southland Bank Common Stock theretofore represented by the
Certificate or Certificates so surrendered shall have been converted as
provided in Article III hereof. Not later than five Business Days after the
Effective Time, the Exchange Agent shall mail to each holder of record of an
outstanding Certificate which is to be exchanged for Parent Common Stock as
provided in Article III hereof a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to such
Certificate shall pass, only upon delivery of such Certificate to the Exchange
Agent) advising such holder of the terms of the exchange effected by the
Merger and of the procedure for surrendering to the Exchange Agent such
Certificate in exchange for a certificate or certificates evidencing Parent
Common Stock and any cash, if applicable.
(b) At the Effective Time, for the benefit of the
holders of Certificates, (i) Parent shall deliver to the Exchange Agent
certificates evidencing the number of shares of Parent Common Stock issuable
and (ii) Parent shall deliver, or cause Vineyard Bank to
11
deliver, to the Exchange Agent, the Aggregate Cash Consideration payable
pursuant to this Article III in exchange for Certificates representing
outstanding shares of Southland Bank Common Stock. The Exchange Agent shall
not be entitled to vote or exercise any rights of ownership with respect to
the shares of Parent Common Stock held by it from time to time hereunder,
except that it shall receive and hold all dividends or other distributions
paid or distributed with respect to such shares for the account of the persons
entitled thereto.
(c) Each outstanding Certificate which prior to the
Effective Time represented Southland Bank Common Stock and which is not
surrendered to the Exchange Agent in accordance with the procedures provided
for herein shall, except as otherwise herein provided, until duly surrendered
to the Exchange Agent be deemed to evidence ownership of the number of shares
of Parent Common Stock and the right to receive the amount of cash, if
applicable, into which such Southland Bank Common Stock shall have been
converted. After the Effective Time, there shall be no further transfer on the
records of Southland Bank of Certificates representing shares of Southland
Bank Common Stock and if such Certificates are presented to Southland Bank for
transfer, they shall be cancelled against delivery of certificates for Parent
Common Stock and cash, if applicable, as hereinabove provided. No dividends
which have been declared will be remitted to any person entitled to receive
shares of Parent Common Stock pursuant hereto until such person surrenders the
Certificate or Certificates representing Southland Bank Common Stock, at which
time such dividends shall be remitted to such person, without interest.
(d) The Exchange Agent and Parent, as the case may be,
shall not be obligated to deliver cash, if applicable, and a certificate or
certificates representing shares of Parent Common Stock to which a holder of
Southland Bank Common Stock would otherwise be entitled as a result of the
Merger, until such holder surrenders the Certificate or Certificates
representing the shares of Southland Bank Common Stock for exchange as
provided in this Section 3.02, or, in default thereof, an appropriate
affidavit of loss and indemnity agreement and/or a bond in an amount as may be
reasonably required in each case by Parent. If any certificates evidencing
shares of Parent Common Stock are to be issued in a name other than that in
which the Certificate evidencing Southland Bank Common Stock surrendered in
exchange therefore is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed or
accompanied by an executed form of assignment separate from the Certificate
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by
reason of the issuance of a certificate for shares of Parent Common Stock in
any name other than that of the registered holder of the Certificate
surrendered or otherwise establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(e) Any portion of the shares of Parent Common Stock and
cash delivered to the Exchange Agent by Parent pursuant to Section 3.02(b)
that remains unclaimed by the stockholders of Southland Bank for six months
after the Effective Time (as well as any proceeds from any investment thereof)
shall be delivered by the Exchange Agent to Parent. Any stockholders of
Southland Bank who have not theretofore complied with Section 3.02 shall
thereafter look only to Parent for the consideration
12
deliverable in respect of each share of Southland Bank Common Stock such
shareholder holds as determined pursuant to this Agreement without any
interest thereon. If outstanding Certificates for shares of Southland Bank
Common Stock are not surrendered or the payment for them is not claimed prior
to the date on which such shares of Parent Common Stock or cash would
otherwise escheat to or become the property of any governmental unit or
agency, the unclaimed items shall, to the extent permitted by abandoned
property and any other applicable law, become the property of Parent (and to
the extent not in its possession shall be delivered to it), free and clear of
all claims or interest of any person previously entitled to such property.
Neither the Exchange Agent nor any party to this Agreement shall be liable to
any holder of stock represented by any Certificate for any consideration paid
to a public official pursuant to applicable abandoned property, escheat or
similar laws. Parent and the Exchange Agent shall be entitled to rely upon the
stock transfer books of Southland Bank to establish the identity of those
persons entitled to receive the consideration specified in this Agreement,
which books shall be conclusive with respect thereto. In the event of a
dispute with respect to ownership of stock represented by any Certificate,
Parent and the Exchange Agent shall be entitled to deposit any consideration
represented thereby in escrow with an independent third party and thereafter
be relieved with respect to any claims thereto.
(f) Notwithstanding anything in this Agreement to the
contrary, Certificates surrendered for exchange by any Southland Bank
Affiliate shall not be exchanged for certificates representing shares of
Parent Common Stock to which such Southland Bank Affiliate may be entitled
pursuant to the terms of this Agreement until Parent has received a written
agreement from such person as specified in Section 6.07.
3.03 Rights as Shareholders; Stock Transfers. At the Effective Time,
holders of Southland Bank Common Stock shall cease to be, and shall have no
rights as, stockholders of Southland Bank other than to receive the
consideration provided under this Article III. After the Effective Time, there
shall be no transfers on the stock transfer books of Southland Bank or the
Surviving Corporation of shares of Southland Bank Common Stock.
3.04 No Fractional Shares. Notwithstanding any other provision of
this Agreement, neither certificates nor scrip for fractional shares of Parent
Common Stock shall be issued in the Merger. Each holder of Southland Bank Common
Stock who otherwise would have been entitled to a fraction of a share of Parent
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive in lieu thereof cash (without interest) in an amount
determined by multiplying the fractional share interest to which such holder
would otherwise be entitled by the Average Share Price of the Parent Common
Stock, rounded to the nearest whole cent. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share.
3.05 Dissenting Shares. Each outstanding share of Southland Bank
Common Stock the holder of which has perfected his right to dissent pursuant to
Chapter 13 of the GCLC and has not effectively withdrawn or lost such right as
of the Effective Time (the "Dissenting Shares") shall not be converted into or
represent a right to receive shares of Parent Common Stock and cash, if
applicable, hereunder, and the holder thereof shall be entitled only to such
rights as are granted by the GCLC. Southland Bank shall give Parent
13
prompt notice upon receipt by Southland Bank of any such written demands for
payment of the fair value of such shares of Southland Bank Common Stock and of
withdrawals of such demands and any other instruments provided pursuant to the
GCLC. If any holder of Dissenting Shares shall have effectively withdrawn or
lost the right to dissent (through failure to perfect or otherwise), the
Dissenting Shares held by such holder shall be converted on a share by share
basis into the right to receive Parent Common Stock and cash, if applicable, in
accordance with the applicable provisions of this Agreement. Any payments made
in respect of Dissenting Shares shall be made by the Surviving Corporation.
3.06 Anti-Dilution Provisions. If, between the date hereof and the
Effective Time, the shares of Parent Common Stock shall be changed into a
different number or class of shares by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares or readjustment, or
a stock dividend thereon shall be declared with a record date within said period
(a "Capital Change"), the Exchange Ratio shall be adjusted accordingly.
3.07 Withholding Rights. Parent (through the Exchange Agent, if
applicable) shall be entitled to deduct and withhold from any amounts otherwise
payable pursuant to this Agreement to any holder of shares of Southland Bank
Common Stock such amounts as Parent is required under the Code or any state,
local or foreign tax law or regulation thereunder to deduct and withhold with
respect to the making of such payment. Any amounts so withheld shall be treated
for all purposes of this Agreement as having been paid to the holder of
Southland Bank Common Stock in respect of which such deduction and withholding
was made by Parent.
3.08 Southland Bank Options. At the Effective Time, each Southland
Bank Option which is then outstanding, whether or not exercisable, shall be
terminated and each holder of a Southland Bank Option shall enter into an
agreement with Southland Bank, the form of which shall be acceptable to Parent,
agreeing to the termination of such Southland Bank Stock Option.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 Forbearances of Southland Bank. From the date hereof until the
Effective Time, except as expressly contemplated or permitted by this Agreement
or as Previously Disclosed, without the prior written consent of Parent,
Southland Bank will not:
(a) Ordinary Course. Conduct its business other than in
the ordinary and usual course consistent with past practice or fail to use
reasonable best efforts to preserve its business organization, keep available
the present services of its employees and preserve for itself and Parent the
goodwill of the customers of Southland Bank and others with whom business
relations exist.
(b) Capital Stock. Other than pursuant to Rights set
forth on Schedule 4.01(b) of Southland Bank's Disclosure Schedule and
outstanding on the date hereof, (i) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any
14
additional shares of stock or any Rights or (ii) permit any additional shares
of stock to become subject to grants of employee or director stock options or
other Rights.
(c) Dividends; Etc. (i) make, declare, pay or set aside
for payment any dividend on or in respect of, or declare or make any
distribution on any shares of Southland Bank Stock or (ii) directly or
indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise
acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Except as
set forth in Schedule 4.01(d) of Southland Bank's Disclosure Schedule, enter
into or amend or renew any employment, consulting, severance or similar
agreements or arrangements with any director, officer or employee of Southland
Bank or grant any salary or wage increase or increase any employee benefit
(including incentive or bonus payments), except (i) for normal individual
increases in compensation to employees in the ordinary course of business
consistent with past practice, provided that no such increase shall result in
an annual adjustment of more than 5%, (ii) for other changes that are required
by applicable law and (iii) to satisfy contractual obligations existing as of
the date hereof and set forth in Schedule 4.01(d) of Southland Bank's
Disclosure Schedule.
(e) Hiring. Hire any person as an employee of Southland
Bank or promote any employee, except (i) to satisfy contractual obligations
existing as of the date hereof and set forth on Schedule 4.01(e) of Southland
Bank's Disclosure Schedule and (ii) persons hired to fill any vacancies
arising after the date hereof and whose employment is terminable at the will
of Southland Bank, other than any person to be hired who would have a base
salary, including any guaranteed bonus or any similar bonus, considered on an
annual basis of more than $40,000, which consent shall be deemed to have been
received to the extent Southland Bank has provided written notice of a
proposed hire hereunder, which Parent has not objected to within five Business
Days of receipt of such written notice.
(f) Benefit Plans. Enter into, establish, adopt or
amend, or make any contributions to (except (i) as may be required by
applicable law or (ii) to satisfy contractual obligations existing as of the
date hereof and set forth on Schedule 4.01(f) of Southland Bank's Disclosure
Schedule), any pension, retirement, stock option, stock purchase, savings,
profit sharing, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement (or similar arrangement) related thereto, in respect of
any director, officer or employee of Southland Bank or take any action to
accelerate the vesting or exercisability of stock options, restricted stock or
other compensation or benefits payable thereunder.
(g) Dispositions. Sell, transfer, mortgage, encumber or
otherwise dispose of or discontinue any of its assets, deposits, business or
properties except in the ordinary course of business consistent with past
practice and in a transaction that, together with all other such transactions,
is not material to Southland Bank, which consent shall be deemed to have been
received to the extent Southland Bank has provided written notice of a
proposed disposition hereunder, which Parent has not objected to within five
Business Days of receipt of such written notice.
15
(h) Acquisitions. Acquire (other than by way of
foreclosures or acquisitions of control in a bona fide fiduciary capacity or
in satisfaction of debts previously contracted in good faith, in each case in
the ordinary and usual course of business consistent with past practice) all
or any portion of the assets, business, deposits or properties of any other
entity.
(i) Capital Expenditures. Make any capital expenditures
other than capital expenditures in the ordinary course of business consistent
with past practice in amounts not exceeding $10,000 individually or $50,000 in
the aggregate.
(j) Governing Documents. Amend the Southland Bank
Articles or the Southland Bank Bylaws.
(k) Accounting Methods. Implement or adopt any change in
its accounting principles, practices or methods, other than as may be required
by changes in laws or regulations or GAAP.
(l) Contracts. Except in the ordinary course of business
consistent with past practice or as otherwise permitted under this Section
4.01, enter into or terminate any Material Contract or amend or modify in any
material respect any of its existing Material Contracts.
(m) Claims. Enter into any settlement or similar
agreement with respect to any action, suit, proceeding, order or investigation
to which Southland Bank is or becomes a party after the date of this
Agreement, which settlement, agreement or action involves payment by Southland
Bank of an amount which exceeds $10,000 and/or would impose any material
restriction on the business of Southland Bank or create precedent for claims
that are reasonably likely to be material to Southland Bank.
(n) Banking Operations. Enter into any new material line
of business; change its material lending, investment, underwriting, risk and
asset liability management and other material banking and operating policies,
except as required by applicable law, regulation or policies imposed by any
Governmental Authority; or file any application or make any contract with
respect to branching or site location or branching or site relocation.
(o) Derivatives Contracts. Enter into any Derivatives
Contract.
(p) Indebtedness. Incur any indebtedness for borrowed
money (other than deposits, federal funds purchased, cash management accounts,
Federal Reserve Bank borrowings that mature within one year and securities
sold under agreements to repurchase that mature within one year, in each case
in the ordinary course of business consistent with past practice) or assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other Person, other than in the ordinary course of business
consistent with past practice.
(q) Investment Securities. Acquire (other than by way of
foreclosures or acquisitions in a bona fide fiduciary capacity or in
satisfaction of debts previously
16
contracted in good faith, in each case in the ordinary course of business
consistent with past practice) any debt security or Equity Investment.
(r) Loans. Make, renew or otherwise modify any loan,
loan commitment, letter of credit or other extension of credit (collectively,
"Loans") other than in the ordinary course of business consistent with past
practice, provided that any Loan that is originated, renewed or modified
cannot have a principal balance in excess of $50,000 without Parent's written
consent, which consent shall be deemed to have been received to the extent
Southland Bank has provided written notice of a proposed loan or loans which
Parent has not objected to within three Business Days of receipt of such
written notice.
(s) Investments in Real Estate. Make any investment or
commitment to invest in real estate or in any real estate development project
(other than by way of foreclosure or acquisitions in a bona fide fiduciary
capacity or in satisfaction of a debt previously contracted in good faith, in
each case in the ordinary course of business consistent with past practice).
(t) Adverse Actions. (i) Take any action that would, or
is reasonably likely to, prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or (ii) take
any action that is intended or is reasonably likely to result in (x) any of
its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (y) any of the conditions to the Merger set forth in Article
VII not being satisfied or (z) a material violation of any provision of this
Agreement except as may be required by applicable law or regulation.
(u) Commitments. Enter into any contract with respect to,
or otherwise agree or commit to do, any of the foregoing.
4.02 Forbearances of Parent. From the date hereof until the Effective
Time, except as expressly contemplated or permitted by this Agreement, without
the prior written consent of Southland Bank, Parent will not, and will cause
each of its Subsidiaries not to:
(a) Conduct of Business. Conduct its business other than
in the ordinary and usual course consistent with past practice, except to the
extent such deviations from past practice would not result in a delay or the
inability of Parent or Vineyard Bank to obtain the approval of any
Governmental Authority required for consummation of the Merger and the other
transactions contemplated by this Agreement.
(b) Adverse Actions. (i) Take any action that would, or
is reasonably likely to, prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or (ii) take
any action that is intended or is reasonably likely to result in (x) any of
its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (y) any of the conditions to the Merger set forth in Article
VII not being satisfied or (z) a material violation of any provision of this
Agreement, except as may be required by applicable law or regulation.
17
(c) Dividends. (i) Make, declare, pay or set aside for
payment any extraordinary cash dividends on the Parent Common Stock (which do
not include the declaration and payment of regular quarterly cash dividends)
which do not allow for the stockholders of Southland Bank to receive such
extraordinary dividends or (ii) directly or indirectly adjust, split, combine,
redeem, reclassify, purchase or otherwise acquire, any shares of Parent Common
Stock during the 20 Business Day period referenced in Section 3.01(b)(2)
hereof.
(d) Commitments. Enter into any contract with respect
to, or otherwise agree or commit to do, any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, Parent has
delivered to Southland Bank a schedule and Southland Bank has delivered to
Parent a schedule (respectively, its "Disclosure Schedule") setting forth, among
other things, items the disclosure of which is necessary or appropriate either
in response to an express disclosure requirement contained in a provision hereof
or as an exception to one or more representations or warranties contained in
Section 5.03 or 5.04 or to one or more of its covenants contained in Article IV;
provided, however, that (a) no such item is required to be set forth in a
Disclosure Schedule as an exception to a representation or warranty if its
absence would not be reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standard established by
Section 5.02 and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material exception or fact, event or
circumstance or that, absent such inclusion in the Disclosure Schedule, such
item is or would be reasonably likely to result in a Material Adverse Effect.
5.02 Standard. No representation or warranty of Southland Bank on the
one hand or Parent and Vineyard Bank on the other hand contained in Sections
5.03 or 5.04, respectively, shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 or 5.04, has had or is reasonably likely to have a
Material Adverse Effect on the party making such representation or warranty.
5.03 Representations and Warranties of Southland Bank. Subject to
Sections 5.01 and 5.02, Southland Bank hereby represents and warrants to Parent:
(a) Organization, Standing and Authority. Southland Bank
is duly organized, validly existing and in good standing as a
California-chartered commercial bank under the laws of the State of
California. Southland Bank is duly qualified to do business and is in good
standing in each jurisdiction where its ownership or leasing of property or
assets or the conduct of its business requires it to be so qualified.
Southland
18
Bank has in effect all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and
to carry on its business as now conducted. The deposit accounts of Southland
Bank are insured by the Bank Insurance Fund in the manner and to the maximum
extent provided by applicable law, and Southland Bank has paid all deposit
insurance premiums and assessments required by applicable laws and
regulations.
(b) Southland Bank Capital Stock. The authorized capital
stock of Southland Bank consists solely of 10,000,000 shares of Southland Bank
Common Stock, of which 527,906 shares are issued and outstanding as of the
date hereof, and 10,000,000 shares of Southland Bank Preferred Stock, of which
no shares were issued and outstanding as of the date hereof. As of the date
hereof, no shares of Southland Bank Common Stock were held in treasury by
Southland Bank or otherwise directly or indirectly owned by Southland Bank.
The outstanding shares of Southland Bank Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable, and none
of the outstanding shares of Southland Bank Common Stock have been issued in
violation of the preemptive rights of any Person. Section 4.01(b) of Southland
Bank's Disclosure Schedule sets forth for each Southland Bank Stock Option,
the name of the grantee, the date of the grant, the type of grant, the status
of the option grant as qualified or non-qualified under Section 422 of the
Code, the number of shares of Southland Bank Common Stock subject to each
option, the number of shares of Southland Bank Common Stock subject to options
that are currently exercisable and the exercise price per share. Except as set
forth in the preceding sentence, there are no shares of Southland Bank Common
Stock reserved for issuance, Southland Bank does not have any Rights issued or
outstanding with respect to Southland Bank Common Stock and Southland Bank
does not have any commitment to authorize, issue or sell any Southland Bank
Common Stock or Rights.
(c) No Subsidiaries.
(i) Southland Bank does not own
beneficially, directly or indirectly, any Subsidiary.
(ii) Except for securities and other
interests held in a fiduciary capacity and beneficially owned by third
parties or taken in consideration of debts previously contracted,
Southland Bank does not own beneficially, directly or indirectly, any
equity securities or similar interests of any Person or any interest in
a partnership or joint venture of any kind.
(d) Corporate Power. Southland Bank has the corporate
power and authority to carry on its business as it is now being conducted and
to own all its properties and assets; and Southland Bank has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the Transaction, subject to receipt of all
necessary approvals of Governmental Authorities and the approval of Southland
Bank's stockholders of this Agreement.
(e) Corporate Authority. Subject to the approval of this
Agreement by the holders of the outstanding Southland Bank Common Stock, this
Agreement and the
19
Transaction have been authorized by all necessary corporate action of
Southland Bank and the Southland Bank Board on or prior to the date hereof.
Southland Bank has duly executed and delivered this Agreement and, assuming
due authorization, execution and delivery by Parent and Vineyard Bank, as
applicable, this Agreement is a valid and legally binding obligation of
Southland Bank, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or
waivers by, or filings or registrations with, any Governmental
Authority or with any third party are required to be made or obtained
by Southland Bank in connection with the execution, delivery or
performance by Southland Bank of this Agreement or to consummate the
Transaction, except as Previously Disclosed and except for (A) filings
of applications or notices with, and approvals or waivers by, the FDIC
and the Department, as required, (B) filings with the SEC and state
securities authorities, as applicable, in connection with the
submission of this Agreement for the approval of the holders of
Southland Bank Common Stock and the issuance of Parent Common Stock in
the Merger, (C) the filing of the Agreement of Merger with the
Secretary of State of the State of California and the Department
pursuant to the GCLC and the FCSC and (D) the approval of this
Agreement by the holders of the outstanding shares of Southland Bank
Common Stock. As of the date hereof, Southland Bank is not aware of any
reason why the approvals set forth above and referred to in Section
7.01(b) will not be received in a timely manner and without the
imposition of a condition, restriction or requirement of the type
described in Section 7.01(b).
(ii) Subject to receipt, or the
making, of the consents, approvals, waivers and filings referred to in
the preceding paragraph and the expiration of related waiting periods,
the execution, delivery and performance of this Agreement by Southland
Bank and the consummation of the Transaction do not and will not (A)
constitute a breach or violation of, or a default under, or give rise
to any Lien, any acceleration of remedies or any right of termination
under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument
of Southland Bank or to which Southland Bank or any of its properties
is subject or bound, (B) constitute a breach or violation of, or a
default under, the Southland Bank Articles or the Southland Bank Bylaws
or (C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or license,
agreement, indenture or instrument.
(g) Financial Statements; Undisclosed Liabilities.
(i) Southland Bank has previously
delivered or made available to Parent accurate and complete copies of
(i) the balance sheets of Southland Bank as of December 31, 2002 and
2001 and the statements of operations,
20
changes in stockholders' equity and cash flows for each of the years
ended December 31, 2002 and 2001, which are accompanied by the audit
report of Xxxxxxxxxx & Xxxxxxxxx, LLP. The Southland Bank Financial
Statements referred to herein, as well as the Southland Bank Financial
Statements to be delivered pursuant to Section 6.06(c) hereof, fairly
present or will fairly present, as the case may be, the financial
condition of Southland Bank as of the respective dates set forth
therein, and the consolidated results of operations, changes in
stockholders' equity and cash flows of Southland Bank for the
respective periods or as of the respective dates set forth therein.
(ii) The Southland Bank Financial
Statements have been or will be, as the case may be, prepared in
accordance with GAAP consistently applied during the periods involved,
except as stated therein, and except the unaudited Southland Bank
Financial Statements may not include all footnote disclosures required
by GAAP. The audits of Southland Bank have been conducted in accordance
with generally accepted auditing standards.
(iii) Except as Previously Disclosed,
since December 31, 2002, Southland Bank has not incurred any liability
other than in the ordinary course of business consistent with past
practice (excluding the incurrence of expenses related to this
Agreement and the Transaction).
(iv) Since December 31, 2002, (A)
Southland Bank has conducted its businesses in the ordinary and usual
course consistent with past practice (excluding the incurrence of
expenses related to this Agreement and the Transaction), (B) except as
Previously Disclosed, Southland Bank has not taken nor permitted any of
the actions set forth in Section 4.01 hereof between December 31, 2002
and the date hereof and (C) no event has occurred or circumstance
arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of this Section
5.03 or otherwise), is reasonably likely to have a Material Adverse
Effect with respect to Southland Bank.
(v) No agreement pursuant to which
any loans or other assets have been or shall be sold by Southland Bank
entitled the buyer of such loans or other assets, unless there is
material breach of a representation or covenant by Southland Bank, to
cause Southland Bank to repurchase such loan or other asset or the
buyer to pursue any other form of recourse against Southland Bank.
Since December 31, 1999, no cash, stock or other dividend or any other
distribution with respect to the Southland Bank Common Stock has been
declared, set aside or paid. No shares of Southland Bank Common Stock
have been purchased, redeemed or otherwise acquired, directly or
indirectly, by Southland Bank since December 31, 2002, and no
agreements have been made to do the foregoing.
(h) Litigation. No litigation, claim or other proceeding
before any court or governmental agency is pending against Southland Bank and,
to Southland Bank's knowledge, no such litigation, claim or other proceeding
has been threatened and there are no facts which could reasonably give rise to
such litigation, claim or other proceeding. Except as Previously Disclosed,
Southland Bank is not a party to any order, judgment or
21
decree which has or could reasonably be expected to have a Material Adverse
Effect with respect to Southland Bank.
(i) Regulatory Matters.
(i) Southland Bank has duly filed
with the appropriate regulatory authorities in correct form the
monthly, quarterly and annual reports required to be filed under
applicable laws and regulations and such reports were in all material
respects complete and accurate and in compliance with the requirements
of applicable laws and regulations, and Southland Bank has previously
delivered or made available to Parent accurate and complete copies of
all such reports. In connection with the most recent examination of
Southland Bank by the appropriate regulatory authorities, Southland
Bank was not required to correct or change any action, procedure or
proceeding which Southland Bank believes in good faith has not been now
corrected or changed, other than corrections or changes which, if not
made, either individually or in the aggregate, would not have a
Material Adverse Effect on Southland Bank. The most recent regulatory
rating give to Southland Bank as to compliance with the Community
Reinvestment Act is "satisfactory." To the knowledge of Southland Bank,
since its last regulatory examination of Community Reinvestment Act
compliance, Southland Bank has not received any complaints as to
Community Reinvestment Act compliance.
(ii) Except as Previously Disclosed,
neither Southland Bank nor any of its properties is a party to or is
subject to any order, decree, agreement, memorandum of understanding or
similar arrangement with, or a commitment letter or similar submission
to, or extraordinary supervisory letter from, any federal or state
governmental agency or authority charged with the supervision or
regulation of financial institutions or issuers of securities or
engaged in the insurance of deposits or the supervision or regulation
of it (collectively, the "Southland Bank Regulatory Authorities").
Southland Bank has paid all assessments made or imposed by any
Southland Bank Regulatory Authority.
(iii) Except as Previously Disclosed,
Southland Bank has not been advised by, nor does it have any knowledge
of facts which could give rise to an advisory notice by, any Southland
Bank Regulatory Authority that such Southland Bank Regulatory Authority
is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter, supervisory
letter or similar submission.
(j) Compliance With Laws. Southland Bank:
(i) except as Previously Disclosed,
is in material compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting
such businesses, including, without limitation, the Equal Credit
Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
22
the Home Mortgage Disclosure Act, the Bank Secrecy Act and all other
applicable fair lending laws and other laws relating to discriminatory
business practices;
(ii) has all permits, licenses,
authorizations, orders and approvals of, and has made all filings,
applications and registrations with, all Governmental Authorities that
are required in order to permit it to own or lease its properties and
to conduct its business as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full
force and effect and, to Southland Bank's knowledge, no suspension or
cancellation of any of them is threatened; and
(iii) has received no notification or
communication from any Governmental Authority (A) asserting that
Southland Bank is not in compliance with any of the statutes,
regulations or ordinances which such Governmental Authority enforces or
(B) threatening to revoke any license, franchise, permit or
governmental authorization (nor, to Southland Bank's knowledge, do any
grounds for any of the foregoing exist).
(k) Material Contracts; Defaults.
(i) Except as Previously Disclosed,
Southland Bank is not a party to, bound by or subject to any agreement,
contract, arrangement, commitment or understanding (whether written or
oral) (i) with respect to the employment of any directors, officers,
employees or consultants, (ii) which would entitle any present or
former director, officer, employee or agent of Southland Bank to
indemnification from Southland Bank, (iii) which is a material contract
(as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be
performed after the date of this Agreement, (iv) which is a consulting
agreement (including data processing, software programming and
licensing contracts) not terminable on 60 days or less notice and
involving the payment of more than $50,000 per annum or (v) which
materially restricts the conduct of any business by Southland Bank
(collectively, "Material Contracts"). Southland Bank has Previously
Disclosed and made available to Parent true and correct copies of each
such document.
(ii) Southland Bank is not in
material default under any contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is
a party, by which its assets, business, or operations may be bound or
affected, or under which it or its assets, business, or operations
receives benefits, and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a
default. No power of attorney or similar authorization given directly
or indirectly by Southland Bank is currently outstanding.
(l) No Brokers. No action has been taken by Southland
Bank that would give rise to any valid claim against any party hereto for a
brokerage commission, finder's fee or other like payment with respect to the
Transaction.
23
(m) Employee Benefit Plans.
(i) All benefit and compensation
plans, contracts, policies or arrangements covering current or former
employees of Southland Bank (the "Employees") and current or former
directors of Southland Bank including, but not limited to, "employee
benefit plans" within the meaning of Section 3(3) of ERISA, and
deferred compensation, stock option, stock purchase, stock appreciation
rights, stock based, incentive and bonus plans (the "Benefit Plans"),
are Previously Disclosed in the Disclosure Schedule. True and complete
copies of (A) all Benefit Plans including, but not limited to, any
trust instruments and insurance contracts forming a part of any Benefit
Plans and all amendments thereto; (B) the most recent annual report
(Form 5500), together with all schedules, as required, filed with the
Internal Revenue Service ("IRS") or Department of Labor (the "DOL"), as
applicable, and any financial statements and opinions required by
Section 103(e)(3) of ERISA with respect to each Benefit Plan; (C) for
each Benefit Plan which is a "top-hat" plan, a copy of filings with the
DOL; (D) the most recent determination letter issued by the IRS for
each Benefit Plan; (E) the most recent summary plan description and any
modifications for each Benefit Plan; (F) the most recent actuarial
report, if any relating to each Benefit Plan, and (G) the most recent
actuarial valuation, study or estimate of any retiree medical and life
insurance benefits plan or supplemental retirement benefits plan, have
been provided or made available to Parent.
(ii) Each Benefit Plan has been
administered to date in all material respects in accordance with the
applicable provisions of ERISA, the Code and applicable law and with
the terms and provisions of all documents, contracts or agreements
pursuant to which such Benefit Plan is maintained. Each Benefit Plan
which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (a "Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service, and Southland
Bank is not aware of any circumstances likely to result in revocation
of any such favorable determination letter or the loss of the
qualification of such Pension Plan under Section 401(a) of the Code.
Southland Bank has not received any correspondence or written or verbal
notice from the IRS, DOL, any other governmental agency, any
participant in or beneficiary of, a Benefit Plan, or any agent
representing any of the foregoing that brings into question the
qualification of any such Benefit Plan. There is no material pending
or, to Southland Bank's knowledge, threatened litigation relating to
the Benefit Plans. Southland Bank has not engaged in a transaction with
respect to any Benefit Plan or Pension Plan that, assuming the taxable
period of such transaction expired as of the date hereof, could subject
Southland Bank to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA in an amount which would be
material. There are no matters pending before the IRS, DOL or other
governmental agency with respect to any Benefit Plan.
(iii) No liability under Subtitle C or
D of Title IV of ERISA has been or is expected to be incurred by
Southland Bank with respect to any ongoing, frozen or terminated
"single-employer plan," within the meaning of
24
Section 4001(a)(15) of ERISA, currently or formerly maintained by it or
the single-employer plan of any entity which is considered one employer
with Southland Bank under Section 4001 of ERISA or Section 414 of the
Code (an "ERISA Affiliate"). Southland Bank has not incurred, and does
not expect to incur, any withdrawal liability with respect to a
multiemployer plan under Subtitle E of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plan or by any ERISA Affiliate
within the l2-month period ending on the date hereof or will be
required to be filed in connection with the Transaction.
(iv) All contributions required to be
made under the terms of any Benefit Plan have been timely made or have
been reflected on the Southland Bank Financial Statements. Neither any
Pension Plan nor any single-employer plan of an ERISA Affiliate has an
"accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding waiver. Southland Bank has not
provided, and is not required to provide, security to any Pension Plan
or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(v) Southland Bank has no
obligations for retiree health and life benefits under any Benefit
Plan, other than coverage as may be required under Section 4980B of the
Code or Part 6 of Title I of ERISA, or under the continuation of
coverage provisions of the laws of any state or locality. Southland
Bank may amend or terminate any such Benefit Plan at any time without
incurring any liability thereunder. No event or condition exists with
respect to a Benefit Plan that could subject Southland Bank to a
material tax under Section 4980B of the Code.
(vi) None of the execution of this
Agreement, shareholder approval of this Agreement or consummation of
the Transaction will (A) except as Previously Disclosed, entitle any
employees of Southland Bank to severance pay or any increase in
severance pay upon any termination of employment after the date hereof,
(B) accelerate the time of payment or vesting or trigger any payment or
funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Benefit Plans, (C) result
in any breach or violation of, or a default under, any of the Benefit
Plans or (D) result in any payment that would be a "parachute payment"
to a "disqualified individual" as those terms are defined in Section
280G of the Code, without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the
future.
(vii) All required reports and
descriptions (including but not limited to Form 5500 annual reports and
required attachments, Forms 1099-R, summary annual reports, Forms
PBGC-1 and summary plan descriptions) have been filed or distributed
appropriately with respect to each Benefit Plan. All
25
required tax filings with respect to each Benefit Plan have been made,
and any taxes due in connection with such filings have been paid.
(n) Labor Matters. Southland Bank is not a party to and
is not bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
Southland Bank the subject of a proceeding asserting that it has committed an
unfair labor practice (within the meaning of the National Labor Relations Act)
or seeking to compel Southland Bank to bargain with any labor organization as
to wages or conditions of employment, nor is there any strike or other labor
dispute involving it pending or, to Southland Bank's knowledge, threatened,
nor is Southland Bank aware of any activity involving its employees seeking to
certify a collective bargaining unit or engaging in other organizational
activity.
(o) Environmental Matters.
(i) Southland Bank is in compliance
with applicable Environmental Laws; (ii) to Southland Bank's knowledge,
no real property (including buildings or other structures) currently or
formerly owned or operated by Southland Bank, or any property in which
Southland Bank has held a security interest, Lien or a fiduciary or
management role ("Southland Bank Loan Property"), has been contaminated
with, or has had any release of, any Hazardous Substance except in
compliance with Environmental Laws; (iii) Southland Bank could not be
deemed the owner or operator of, nor has it participated in the
management regarding Hazardous Substances of, any Southland Bank Loan
Property which has been contaminated with, or has had any release of,
any Hazardous Substance except in compliance with Environmental Laws;
(iv) Southland Bank has no liability for any Hazardous Substance
disposal or contamination on any third party property; (v) Southland
Bank has not received any notice, demand letter, claim or request for
information alleging any violation of, or liability under, any
Environmental Law; (vi) Southland Bank is not subject to any order,
decree, injunction or other agreement with any Governmental Authority
or any third party relating to any Environmental Law; (vii) to
Southland Bank's knowledge, there are no circumstances or conditions
(including the presence of asbestos, underground storage tanks, lead
products, polychlorinated biphenyls, prior manufacturing operations,
dry-cleaning, or automotive services) involving Southland Bank, any
currently or formerly owned or operated property, or any Southland Bank
Loan Property, that could reasonably be expected to result in any
claims, liability or investigations against Southland Bank, result in
any restrictions on the ownership, use, or transfer of any property
pursuant to any Environmental Law, or adversely affect the value of any
Southland Bank Loan Property; and (viii) Southland Bank has Previously
Disclosed and made available to Parent copies of all environmental
reports or studies, sampling data, correspondence and filings in its
possession or reasonably available to it relating to Southland Bank and
any currently or formerly owned or operated property.
(ii) As used herein, the term
"Environmental Laws" means any federal, state or local law, regulation,
order, decree, permit, authorization, opinion or agency requirement
relating to: (A) the protection or restoration of the
26
environment, health, safety, or natural resources, (B) the handling,
use, presence, disposal, release or threatened release of any Hazardous
Substance or (C) wetlands, indoor air, pollution, contamination or any
injury or threat of injury to persons or property in connection with
any Hazardous Substance; and the term "Hazardous Substance" means any
substance that is: (A) listed, classified or regulated pursuant to any
Environmental Law, (B) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon or (C) any
other substance which is the subject of regulatory action by any
Governmental Authority in connection with any Environmental Law.
(p) Tax Matters.
(i) (A) All Tax Returns that are
required to be filed on or before the Effective Date (taking into
account any extensions of time within which to file which have not
expired) by or with respect to the Southland Bank Group have been or
will be timely filed on or before the Effective Date, (B) all such Tax
Returns are or will be true and complete in all material respects, (C)
all Taxes shown to be due on the Tax Returns referred to in clause (A)
have been or will be timely paid in full, (D) the Tax Returns referred
to in clause (A) have been examined by the IRS or the appropriate Tax
authority or the period for assessment of the Taxes in respect of which
such Tax Returns were required to be filed has expired, (E) all
deficiencies asserted or assessments made as a result of examinations
conducted by any taxing authority have been paid in full, (F) no
material issues that have been raised by the relevant taxing authority
in connection with the examination of any of the Tax Returns referred
to in clause (A) are currently pending and (G) no member of the
Southland Bank Group has waived any statutes of limitation with respect
to any Taxes of Southland Bank.
(ii) Southland Bank has made
available to Parent true and correct copies of the United States
federal income Tax Returns filed by Southland Bank for each of the
three most recent fiscal years for which such returns have been filed.
(iii) Southland Bank has no liability
with respect to income, franchise or similar Taxes that accrued on or
before the end of the most recent period covered by the Southland Bank
Financial Statements prior to the date hereof in excess of the amounts
accrued or subject to a reserve with respect thereto that are reflected
in the Southland Bank Financial Statements prior to the date hereof.
(iv) Southland Bank is not a party to
any Tax allocation or sharing agreement, is not nor has it been a
member of an affiliated group filing consolidated or combined Tax
Returns (other than a group the common parent of which is or was
Southland Bank) and does not otherwise has any liability for the Taxes
of any Person (other than Southland Bank).
27
(v) No closing agreements, private
letter rulings, technical advice memoranda or similar agreements or
rulings have been entered into or issued by any taxing authority with
respect to Southland Bank.
(vi) Southland Bank does not maintain
any compensation plans, programs or arrangements the payments under
which would not reasonably be expected to be deductible as a result of
the limitations under Section 162(m) of the Code and the regulations
issued thereunder.
(vii) As of the date hereof, Southland
Bank has no reason to believe that any conditions exist that might
prevent or impede the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
(viii) (A) No Tax is required to be
withheld pursuant to Section 1445 of the Code as a result of the
Transaction and (B) all Taxes that Southland Bank is or was required by
law to withhold or collect have been duly withheld or collected and, to
the extent required by applicable law, have been paid to the proper
Governmental Authority or other Person.
(q) Risk Management Instruments. Southland Bank is not
a party and has not agreed to enter into an exchange traded or
over-the-counter equity, interest rate, foreign exchange or other swap,
forward, future, option, cap, floor or collar or any other contract that is
not included on its balance sheet and is a derivatives contract (including
various combinations thereof) (each, a "Derivatives Contract") nor does
Southland Bank own securities that (i) are referred to generically as
"structured notes," "high risk mortgage derivatives," "capped floating rate
notes" or "capped floating rate mortgage derivatives" or (ii) are likely to
have changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes.
(r) Loans; Nonperforming and Classified Assets.
(i) Each Loan on the books and
records of Southland Bank was made and has been serviced in all
material respects in accordance with customary lending standards in the
ordinary course of business, is evidenced in all material respects by
appropriate and sufficient documentation and, to the knowledge of
Southland Bank, constitutes the legal, valid and binding obligation of
the obligor named therein, subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditor's rights or by
general equity principles.
(ii) Southland Bank has Previously
Disclosed as to Southland Bank as of the latest practicable date: (A)
any written or, to Southland Bank's knowledge, oral Loan under the
terms of which the obligor is 60 or more days delinquent in payment of
principal or interest, or to Southland Bank's knowledge, in default of
any other material provision thereof; (B) each Loan which has been
classified as "substandard," "doubtful," "loss" or "special mention"
(or words of similar import) by Southland Bank or an applicable
regulatory authority
28
(it being understood that no representation is being made that the FDIC
or the Department would agree with the loan classifications established
by Southland Bank); (C) a listing of the OREO acquired by foreclosure
or by deed-in-lieu thereof, including the book value thereof; and (D)
each Loan with any director, executive officer or five percent or
greater shareholder of Southland Bank, or to the best knowledge of
Southland Bank, any Person controlling, controlled by or under common
control with any of the foregoing.
(s) Properties. All real and personal property owned by
Southland Bank or presently used by it in its business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on its
business in the ordinary course of business consistent with its past
practices. Southland Bank has good and marketable title free and clear of all
Liens to all of the material properties and assets, real and personal,
reflected on the balance sheet of Southland Bank as of December 31, 2002 or
acquired after such date, other than properties sold by Southland Bank in the
ordinary course of business, except (i) Liens for current taxes and
assessments not yet due or payable (ii) pledges to secure deposits and other
Liens incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not
material in character, amount or extent and (iv) as reflected on the balance
sheet of Southland Bank as of December 31, 2002. All real and personal
property which is material to Southland Bank's business and leased or licensed
by Southland Bank is held pursuant to leases or licenses which are valid and
enforceable in accordance with their respective terms and such leases will not
terminate or lapse prior to the Effective Time.
(t) Intellectual Property. Southland Bank owns or
possesses valid and binding licenses and other rights to use without payment
of any material amount all material patents, copyrights, trade secrets, trade
names, service marks and trademarks used in its businesses, all of which have
been Previously Disclosed by Southland Bank, and Southland Bank has not
received any notice of conflict with respect thereto that asserts the right of
others. Southland Bank has performed in all material respects all the
obligations required to be performed by it and is not in default under any
contract, agreement, arrangement or commitment relating to any of the
foregoing.
(u) Fiduciary Accounts. Southland Bank has properly
administered all accounts for which it acts as a fiduciary, including but not
limited to accounts for which it serves as a trustee, agent, custodian,
personal representative, guardian, conservator or investment advisor, in
accordance with the terms of the governing documents and applicable laws and
regulations. Neither Southland Bank, nor any of its directors, officers or
employees, has committed any breach of trust with respect to any fiduciary
account and the records for each such fiduciary account are true and correct
and accurately reflect the assets of such fiduciary account.
(v) Books and Records. The books and records of
Southland Bank are being maintained in material compliance with applicable
legal and accounting requirements, and such books and records accurately
reflect in all material respects all dealings and transactions in respect of
the business, assets, liabilities and affairs of Southland Bank.
29
(w) Insurance. Southland Bank has Previously Disclosed
all of the material insurance policies, binders, or bonds currently maintained
by Southland Bank ("Insurance Policies"). Southland Bank is insured with
reputable insurers against such risks and in such amounts as the management of
Southland Bank reasonably has determined to be prudent in accordance with
industry practices. Except as Previously Disclosed, all the Insurance Policies
are in full force and effect; Southland Bank is not in material default
thereunder; and all claims thereunder have been filed in due and timely
fashion.
(x) Allowance For Loan Losses. Southland Bank's
allowance for loan losses is, and shall be as of the Effective Date, in
compliance with Southland Bank's existing methodology for determining the
adequacy of its allowance for loan losses as well as the standards established
by applicable Governmental Authorities and the Financial Accounting Standards
Board and is and shall be adequate under all such standards.
(y) Transactions With Affiliates. All "covered
transactions" between Southland Bank and an "affiliate" within the meaning of
Sections 23A and 23B of the Federal Reserve Act have been in compliance with
such provisions.
(z) Required Vote; Antitakeover Provisions.
(i) The affirmative vote of the
holders of a majority of the issued and outstanding shares of Southland
Bank is necessary to approve this Agreement and the Transaction on
behalf of Southland Bank. No other vote of the stockholders of
Southland Bank is required by law, the Southland Bank Articles, the
Southland Bank Bylaws or otherwise to approve this Agreement and the
Transaction.
(ii) No "control share acquisition,"
"business combination moratorium," "fair price" or other form of
antitakeover statute or regulation is applicable to this Agreement or
the Transaction.
(aa) Fairness Opinion. The Southland Bank Board has
received the written opinion of The Xxxxxxx Group, to the effect that as of
the date hereof the Merger Consideration is fair to the holders of Southland
Bank Common Stock from a financial point of view.
(bb) Transactions in Securities.
(i) All offers and sales of Southland
Bank Common Stock by Southland Bank were at all relevant times exempt
from or complied with the registration requirements of the Securities
Act.
(ii) Neither Southland Bank nor, to
Southland Bank's knowledge, (a) any director or executive officer of
Southland Bank, (b) any person related to any such director or officer
by blood, marriage or adoption and residing in the same household and
(c) any person who has been knowingly provided material nonpublic
information by any one or more of these persons, has purchased or sold,
or caused to be purchased or sold, any shares of Southland Bank Common
30
Stock or other securities issued by Southland Bank (i) during any
period when Southland Bank was in possession of material nonpublic
information or (ii) in violation of any applicable provision of the
Exchange Act.
(cc) Disclosure. The representations and warranties
contained in this Section 5.03, when considered as a whole, do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements and information contained in this
Section 5.03 not misleading.
5.04 Representations and Warranties of Parent and Vineyard
Bank. Subject to Sections 5.01 and 5.02, Parent and Vineyard Bank hereby
represent and warrant to Southland Bank as follows:
(a) Organization, Standing and Authority. Parent is duly
organized, validly existing and in good standing under the laws of the State
of California. Parent is duly qualified to do business and is in good standing
in each jurisdiction where its ownership or leasing of property or assets or
the conduct of its business requires it to be so qualified. Parent has in
effect all federal, state, local and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry on its
business as it is now conducted.
(b) Parent Stock.
(i) As of the date hereof, the
authorized capital stock of Parent consists solely of 15,000,000 shares
of Parent Common Stock, of which 2,827,318 shares were issued and
outstanding as of the date hereof, and 10,000,000 shares of Parent
Preferred Stock, of which 50 shares were issued and outstanding as of
the date hereof. The outstanding shares of Parent Common Stock have
been duly authorized and validly issued and are fully paid and
non-assessable, and none of the shares of Parent Common Stock have been
issued in violation of the preemptive rights of any Person. As of the
date hereof, except as Previously Disclosed, there are no Rights
authorized, issued or outstanding with respect to the capital stock of
Parent, except for shares of Parent Common Stock issuable pursuant to
the Parent Benefits Plans and by virtue of this Agreement.
(ii) The shares of Parent Common Stock
to be issued in exchange for shares of Southland Bank Common Stock in
the Merger, when issued in accordance with the terms of this Agreement,
will be duly authorized, validly issued, fully paid and nonassessable
and the issuance thereof is not subject to any preemptive right.
31
(c) Vineyard Bank.
(i) Vineyard Bank has been duly
organized and is validly existing in good standing under the laws of
the State of California and is duly qualified to do business and is in
good standing in the jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified.
Vineyard Bank is duly licensed by the FDIC and the Department and its
deposits are insured by the FDIC in the manner and to the maximum
extent provided by law.
(ii) As of the date hereof, (A) Parent
owns, directly or indirectly, all the issued and outstanding equity
securities of Vineyard Bank, (B) no equity securities of Vineyard Bank
are or may become required to be issued (other than to Parent) by
reason of any Right or otherwise, (C) there are no contracts,
commitments, understandings or arrangements by which Vineyard Bank is
or may be bound to sell or otherwise transfer any of its equity
securities (other than to Parent or any of its wholly-owned
Subsidiaries) and (D) there are no contracts, commitments,
understandings, or arrangements relating to Parent's right to vote or
to dispose of such securities.
(d) Corporate Power. Each of Parent and Vineyard Bank has
the corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets. Each of Parent and
Vineyard Bank has the corporate power and authority to execute, deliver and
perform its respective obligations under this Agreement and to consummate the
Transaction, subject to the receipt of all necessary approvals of Governmental
Authorities.
(e) Corporate Authority. This Agreement and the
Transaction have been authorized by all necessary corporate action of Parent,
the Parent Board, Vineyard Bank and the Vineyard Bank Board, as applicable.
This Agreement has been duly executed and delivered by Parent and Vineyard
Bank, as applicable, and, assuming due authorization, execution and delivery
by Southland Bank, this Agreement is a valid and legally binding agreement of
Parent and Vineyard Bank enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or
waivers by, or filings or registrations with, any Governmental
Authority or with any third party are required to be made or obtained
by Parent or any of its Subsidiaries in connection with the execution,
delivery or performance by Parent and Vineyard Bank, as applicable, of
this Agreement or to consummate the Transaction, except for (A) filings
of applications or notices with, and approvals or waivers by, the FDIC
and the Department, as required, (B) filings with the SEC and state
securities authorities, as applicable, in connection with the
submission of this Agreement for the approval of the holders of
Southland Bank Common Stock and the issuance of
32
Parent Common Stock in the Merger, (C) the approval of the listing on
Nasdaq of the Parent Common Stock to be issued in the Merger and (D)
the filing of Agreement of Merger with the Secretary of State of the
State of California and the Department pursuant to the GCLC and the
FCSC. As of the date hereof, Parent is not aware of any reason why the
approvals set forth above and referred to in Section 7.01(b) will not
be received in a timely manner and without the imposition of a
condition, restriction or requirement of the type described in Section
7.01(b).
(ii) Subject to receipt, or the
making, of the consents, approvals, waivers and filings referred to in
the preceding paragraph and expiration of the related waiting periods,
the execution, delivery and performance of this Agreement by Parent and
Vineyard Bank, as applicable, and the consummation of the Transaction
do not and will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of remedies
or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of Parent or of any of its Subsidiaries or to
which Parent or any of its Subsidiaries or properties is subject or
bound, (B) constitute a breach or violation of, or a default under, the
articles of incorporation or bylaws (or similar governing documents) of
Parent or any of its Subsidiaries or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports and Securities Documents; Material
Adverse Effect.
(i) Parent's Annual Report on Form
10-K for the year ended December 31, 2002 and all other reports,
registration statements, definitive proxy statements or information
statements filed or to be filed by it subsequent to December 31, 2002
under the Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act in the form filed or to be filed (collectively,
Parent's "Securities Documents") with the SEC, as of the date filed or
to be filed, (A) complied or will comply in all material respects as to
form with the applicable requirements under the Securities Act or the
Exchange Act, as the case may be and (B) did not and will not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, except that information as of a later date shall be
deemed to modify information as of an earlier date; and each of the
consolidated balance sheets contained in or incorporated by reference
into any such Securities Document (including the related notes and
schedules thereto) fairly presents, or will fairly present, the
consolidated financial position of Parent and its Subsidiaries as of
its date, and each of the consolidated statements of income and changes
in stockholders' equity and cash flows or equivalent statements in such
Securities Documents (including any related notes and schedules
thereto) fairly presents, or will fairly present, the consolidated
results of operations, changes in stockholders' equity and cash flows,
as the case may be, of Parent and its Subsidiaries for the
33
periods to which they relate, in each case in accordance with GAAP
consistently applied during the periods involved, except in each case
as may be noted therein.
(ii) Since December 31, 2002, no event
has occurred or circumstance arisen that, individually or taken
together with all other facts, circumstances and events (described in
any paragraph of this Section 5.04 or otherwise), is reasonably likely
to have a Material Adverse Effect with respect to Parent.
(h) Litigation. No litigation, claim or other proceeding
before any court or governmental agency is pending against Parent or its
Subsidiaries and, to Parent's knowledge, no such litigation, claim or other
proceeding has been threatened and there are no facts which could reasonably
give rise to such litigation, claim or other proceeding. Neither Parent nor
any of its Subsidiaries is a party to any order, judgment or decree which has
or could reasonably be expected to have a Material Adverse Effect with respect
to Parent.
(i) No Brokers. No action has been taken by Parent or its
Subsidiaries that would give rise to any valid claim against any party hereto
for a brokerage commission, finder's fee or other like payment with respect to
the Transaction.
(j) Tax Matters. As of the date hereof, Parent does not
have any reason to believe that any conditions exist that might prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(k) Regulatory Matters.
(i) Neither Parent nor any of its
Subsidiaries nor any of any of their respective properties is a party
to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or
similar submission to, or extraordinary supervisory letter from, any
federal or state governmental agency or authority charged with the
supervision or regulation of financial institutions or issuers of
securities or engaged in the insurance of deposits or the supervision
or regulation of it (collectively, the "Parent Regulatory
Authorities"). Parent and its Subsidiaries have paid all assessments
made or imposed by any Parent Regulatory Authority.
(ii) Neither Parent nor any its
Subsidiaries has been advised by, and does not have any knowledge of
facts which could give rise to an advisory notice by, any Parent
Regulatory Authority that such Parent Regulatory Authority is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter, supervisory
letter or similar submission.
(l) Compliance With Laws. Each of Parent and its
Subsidiaries:
(i) is in material compliance with
all applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments,
34
orders or decrees applicable thereto or to the employees conducting
such businesses, including, without limitation, the Equal Credit
Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act, the Bank Secrecy Act and all other
applicable fair lending laws and other laws relating to discriminatory
business practices;
(ii) has all permits, licenses,
authorizations, orders and approvals of, and has made all filings,
applications and registrations with, all Governmental Authorities that
are required in order to permit them to own or lease their properties
and to conduct their businesses as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to Parent's knowledge, no suspension or
cancellation of any of them is threatened; and
(iii) has received, since December 31,
1999, no notification or communication from any Governmental Authority
(A) asserting that Parent or any of its Subsidiaries is not in
compliance with any of the statutes, regulations or ordinances which
such Governmental Authority enforces or (B) threatening to revoke any
license, franchise, permit or governmental authorization (nor, to
Parent's knowledge, do any grounds for any of the foregoing exist).
(m) Financial Ability. On the Effective Date and through
the date of payment of the Aggregate Cash Consideration by Parent, Parent or
Vineyard Bank will have all funds necessary to consummate the Merger and pay
the Aggregate Cash Consideration to holders of Southland Bank Common Stock
pursuant to Sections 3.01 and 3.02 hereof. Each of Parent and Vineyard Bank
is, and immediately following completion of the Transaction will be, in
compliance with all capital requirements applicable to it.
(n) Disclosure. The representations and warranties
contained in this Section 5.04, when considered as a whole, do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements and information contained in this
Section 5.04 not misleading.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions
of this Agreement, each of Southland Bank, Parent and Vineyard Bank agrees to
use its reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Transaction as promptly as practicable and otherwise to enable consummation
of the Transaction, including the satisfaction of the conditions set forth in
Article VII hereof, and shall cooperate fully with the other party hereto to
that end.
35
6.02 Shareholder Approval. Southland Bank agrees to take, in
accordance with applicable law and the Southland Bank Articles and the Southland
Bank Bylaws, all action necessary to convene as soon as reasonably practicable a
special meeting of its stockholders to consider and vote upon the approval of
this Agreement and any other matters required to be approved by Southland Bank's
stockholders for consummation of the Transaction (including any adjournment or
postponement, the "Southland Bank Meeting"). Except with the prior approval of
Parent, no other matters shall be submitted for the approval of the Southland
Bank stockholders at the Southland Bank Meeting. The Southland Bank Board shall
at all times prior to and during such meeting recommend such approval and shall
take all reasonable lawful action to solicit such approval by its stockholders;
provided that nothing in this Agreement shall prevent the Southland Bank Board
from withholding, withdrawing, amending or modifying its recommendation if the
Southland Bank Board determines, after consultation with its outside counsel,
that such action is legally required in order for the directors to comply with
their fiduciary duties to the Southland Bank stockholders under applicable law;
provided, further, that Section 6.08 shall govern the withholding, withdrawing,
amending or modifying of such recommendation in the circumstances described
therein.
6.03 Registration Statement.
(a) Parent agrees to prepare a registration statement on
Form S-4 or other applicable form (the "Registration Statement") to be filed
by Parent with the SEC in connection with the issuance of Parent Common Stock
in the Merger (including the proxy statement and prospectus and other proxy
solicitation materials of Southland Bank constituting a part thereof (the
"Proxy Statement") and all related documents). Southland Bank shall prepare
and furnish such information relating to it and its directors, officers and
stockholders as may be reasonably required in connection with the above
referenced documents based on its knowledge of and access to the information
required for said documents, and Southland Bank, and its legal, financial and
accounting advisors, shall have the right to review in advance such
Registration Statement prior to its filing. Southland Bank agrees to cooperate
with Parent and Parent's counsel and accountants in requesting and obtaining
appropriate opinions, consents and letters from its financial advisor and
independent auditor in connection with the Registration Statement and the
Proxy Statement. Provided that Southland Bank has cooperated as described
above, Parent agrees to file, or cause to be filed, the Registration Statement
and the Proxy Statement with the SEC as promptly as reasonably practicable.
Each of Southland Bank and Parent agrees to use its reasonable best efforts to
cause the Registration Statement to be declared effective under the Securities
Act as promptly as reasonably practicable after the filing thereof. Parent
also agrees to use its reasonable best efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement. After the Registration Statement
is declared effective under the Securities Act, Southland Bank shall promptly
mail at its expense the Proxy Statement to its stockholders.
(b) Each of Southland Bank and Parent agrees that none of
the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Registration Statement shall, at the
time the Registration Statement and each amendment or supplement thereto, if
any, becomes effective under the Securities Act,
36
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 and (ii) the Proxy Statement and any amendment or supplement
thereto shall, at the date(s) of mailing to stockholders and at the time of
the Southland Bank Meeting, 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. Each of Southland Bank and Parent
further agrees that if such party shall become aware prior to the Effective
Date of any information furnished by such party that would cause any of the
statements in the Registration Statement or the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, to
promptly inform the other parties thereof and to take the necessary steps to
correct the Registration Statement or the Proxy Statement.
(c) Parent agrees to advise Southland Bank, promptly
after Parent receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been filed,
of the issuance of any stop order or the suspension of the qualification of
Parent Common Stock for offering or sale in any jurisdiction, of the
initiation or, to the extent Parent is aware thereof, threat of any proceeding
for any such purpose, or of any request by the SEC for the amendment or
supplement of the Registration Statement or for additional information.
6.04 Regulatory Filings.
(a) Each of Parent, Vineyard Bank and Southland Bank
shall cooperate and use their respective reasonable best efforts to prepare
all documentation, to effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary to consummate the Transaction; and any initial filings with
Governmental Authorities shall be made by Parent as soon as reasonably
practicable after the execution hereof. Each of Parent and Southland Bank
shall have the right to review in advance, and to the extent practicable each
shall consult with the other, in each case subject to applicable laws relating
to the exchange of information, with respect to all written information
submitted to any third party or any Governmental Authority in connection with
the Transaction. In exercising the foregoing right, each of such parties
agrees to act reasonably and as promptly as practicable. Each party hereto
agrees that it shall consult with the other parties hereto with respect to the
obtaining of all permits, consents, approvals, waivers and authorizations of
all third parties and Governmental Authorities necessary or advisable to
consummate the Transaction, and each party shall keep the other parties
apprised of the status of material matters relating to completion of the
Transaction.
(b) Each party agrees, upon request, to furnish the other
parties with all information concerning itself, its Subsidiaries (if
applicable), directors, officers and stockholders and such other matters as
may be reasonably necessary or advisable in connection with any filing, notice
or application made by or on behalf of such other parties or any of their
Subsidiaries (if applicable) to any third party or Governmental Authority.
37
6.05 Press Releases. Southland Bank and Parent shall consult with
each other before issuing any press release with respect to the Transaction or
this Agreement and shall not issue any such press release or make any such
public statements without the prior consent of the other party, which shall not
be unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party (but after such consultation, to the extent
practicable under the circumstances), issue such press release or make such
public statements as may upon the advice of outside counsel be required by law
or the rules or regulations of Nasdaq. Southland Bank and Parent shall cooperate
to develop all public announcement materials and make appropriate management
available at presentations related to the Transaction as reasonably requested by
the other party.
6.06 Access; Information.
(a) Southland Bank agrees that upon reasonable notice and
subject to applicable laws relating to the exchange of information, it shall
afford Parent and Parent's officers, employees, counsel, accountants and other
authorized representatives such access during normal business hours throughout
the period prior to the Effective Time to the books, records (including,
without limitation, Tax Returns and work papers of independent auditors),
properties and personnel of Southland Bank and to such other information
relating to Southland Bank as Parent may reasonably request and, during such
period, it shall furnish promptly to Parent all information concerning the
business, properties and personnel of Southland Bank as Parent may reasonably
request.
(b) Parent agrees that upon reasonable notice and subject
to applicable laws relating to the exchange of information, it shall afford
Southland Bank and its authorized representatives such access to Parent's
personnel as Southland Bank may reasonably request.
(c) During the period from the date of this Agreement to
the Effective Time, Southland Bank shall, upon the request of Parent, cause
one or more of its designated representative to confer on a monthly or more
frequent basis with representatives of Southland Bank regarding its financial
condition, operations and business and matters relating to the completion of
the Transaction. On a weekly basis, Southland Bank shall provide to Parent
summary loan write-ups describing each loan originated by Southland Bank. As
soon as reasonably available, but in no event more than 45 days after the end
of each calendar quarter ending after the date of this Agreement (other than
the last quarter of each fiscal year ending December 31), Southland Bank will
deliver to Parent its balance sheet and statement of operations, without
related notes, for such quarter prepared in accordance with GAAP and, as soon
as reasonably available, but in no event more than 90 days after the end of
each fiscal year, Southland Bank will deliver to Parent its balance sheet and
statements of operations, changes in stockholders' equity and cash flows for
such year prepared in accordance with GAAP. Within 25 days after the end of
each month, Southland Bank will deliver to Parent a balance sheet and
statement of operations, without related notes, for such month prepared in
accordance with GAAP.
(d) Each party agrees that it will not, and will cause
its representatives not to, use any information obtained pursuant to this
Section 6.06 (as well as any other
38
information obtained prior to the date hereof in connection with the entering
into of this Agreement) for any purpose unrelated to the consummation of the
Transaction. Subject to the requirements of law, each party shall keep
confidential, and shall cause its representatives to keep confidential, all
information and documents obtained pursuant to this Section 6.06 (as well as
any other information obtained prior to the date hereof in connection with the
entering into of this Agreement) unless such information (i) was already known
to such party, (ii) becomes available to such party from other sources not
known by such party to be bound by a confidentiality obligation, (iii) is
disclosed with the prior written approval of the party to which such
information pertains or (iv) is or becomes readily ascertainable from publicly
available sources. In the event that this Agreement is terminated or the
Transaction shall otherwise fail to be consummated, each party shall promptly
cause all copies of documents or extracts thereof containing information and
data as to another party hereto to be returned to the party which furnished
the same. No investigation by any party of the business and affairs of any
other party shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Agreement, or the conditions to any
party's obligation to consummate the Transaction.
6.07 Affiliates. Southland Bank shall use its reasonable best
efforts to identify those persons who may be deemed to be "affiliates" of
Southland Bank within the meaning of Rule 145 promulgated by the SEC under the
Securities Act (the "Company Affiliates") and to cause each person so identified
to deliver to Parent as soon as practicable, and in any event prior to the date
of the Southland Bank Meeting, a written agreement to comply with the
requirements of Rule 145 under the Securities Act in connection with the sale or
other transfer of Parent Common Stock received in the Merger, which agreement
shall be in the form attached hereto as Annex C (the "Affiliate Letter").
6.08 Acquisition Proposals. Southland Bank agrees that it shall not,
and that it shall direct and use its reasonable best efforts to cause its
directors, officers, employees, agents and representatives not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries
or the making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving Southland Bank,
or any purchase of all or substantially all of the assets of Southland Bank or
more than 10% of the outstanding equity securities of Southland Bank (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal").
Southland Bank further agrees that it shall not, and that it shall direct and
use its reasonable best efforts to cause its directors, officers, employees,
agents and representatives not to, directly or indirectly, engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any Person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prevent Southland Bank or the Southland Bank Board from (A) complying with its
disclosure obligations under federal or state law; (B) providing information in
response to a request therefor by a Person who has made an unsolicited bona fide
written Acquisition Proposal if the Southland Bank Board receives from the
Person so requesting such information an executed confidentiality agreement; (C)
engaging in any negotiations or discussions with any Person who has made an
unsolicited bona fide written Acquisition Proposal or (D) recommending such an
Acquisition Proposal to the stockholders of Southland Bank, if and
39
only to the extent that, in each such case referred to in clause (B), (C) or (D)
above, (i) the Southland Bank Board determines in good faith (after consultation
with outside legal counsel) that such action would be required in order for its
directors to comply with their respective fiduciary duties under applicable law
and (ii) the Southland Bank Board determines in good faith (after consultation
with its financial advisor) that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposal and the Person making the proposal and
would, if consummated, result in a transaction more favorable to Southland
Bank's stockholders from a financial point of view than the Merger. An
Acquisition Proposal which is received and considered by the Southland Bank in
compliance with this Section 6.08 and which meets the requirements set forth in
clause (D) of the preceding sentence is herein referred to as a "Superior
Proposal." Southland Bank agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposals. Southland Bank
agrees that it will notify Parent if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such discussions or
negotiations are sought to be initiated or continued with, Southland Bank or any
of its representatives.
6.09 Certain Policies. Prior to the Effective Date, Southland Bank
shall, consistent with GAAP, the rules and regulations of the SEC and applicable
banking laws and regulations, modify or change its loan, OREO, accrual, reserve,
tax, litigation and real estate valuation policies and practices (including loan
classifications and levels of reserves) so as to be applied on a basis that is
consistent with that of Parent; provided, however, that no such modifications or
changes need be made prior to the satisfaction of the conditions set forth in
Section 7.01(b); and further provided that in any event, no accrual or reserve
made by Southland Bank pursuant to this Section 6.09 shall constitute or be
deemed to be a breach, violation of or failure to satisfy any representation,
warranty, covenant, agreement, condition or other provision of this Agreement or
otherwise be considered in determining whether any such breach, violation or
failure to satisfy shall have occurred. The recording of any such adjustments
shall not be deemed to imply any misstatement of previously furnished financial
statements or information and shall not be construed as concurrence of Southland
Bank or its management with any such adjustments.
6.10 Nasdaq Listing. Parent agrees to use its reasonable best
efforts to list, prior to the Effective Date, on the Nasdaq the shares of
Parent Common Stock to be issued in connection with the Merger.
6.11 Benefit Plans.
(a) As soon as administratively practicable after the
Effective Time, Parent shall take all reasonable action so that employees of
Southland Bank shall be entitled to participate in each employee benefit plan,
program or arrangement of Parent of general applicability (the "Parent Benefit
Plans") to the same extent as similarly-situated employees of Parent and its
Subsidiaries (it being understood that inclusion of the employees of Southland
Bank in the Parent Benefit Plans may occur at different times with respect to
different plans), provided, however, that nothing contained herein shall
require Parent or any of its Subsidiaries to make any grants to any former
employee of
40
Southland Bank under any discretionary equity compensation plan of Parent.
Parent shall cause each Parent Benefit Plan in which employees of Southland
Bank are eligible to participate to recognize, for purposes of determining
eligibility to participate in, the vesting of benefits and for all other
purposes (but not for accrual of pension benefits) under the Parent Benefit
Plans, the service of such employees with Southland Bank to the same extent as
such service was credited for such purpose by Southland Bank, provided,
however, that such service shall not be recognized to the extent that such
recognition would result in a duplication of benefits. Nothing herein shall
limit the ability of Parent to amend or terminate any of Southland Bank's
Benefit Plans in accordance with their terms at any time.
(b) At and following the Effective Time, Parent shall
honor, and the Surviving Corporation shall continue to be obligated to
perform, in accordance with their terms, subject to applicable regulatory
requirements, all benefit obligations to, and contractual rights of, current
and former employees of Southland Bank existing as of the Effective Date, as
well as all employment, severance, deferred compensation, split dollar,
supplemental retirement or "change-in-control" agreements, plans or policies
of Southland Bank which are Previously Disclosed. The severance or termination
payments which are payable pursuant to such agreements, plans or policies of
Southland Bank (which have been quantified in reasonable detail) have been
Previously Disclosed.
(c) At such time as employees of Southland Bank become
eligible to participate in a medical, dental or health plan of Parent or its
Subsidiaries, Parent shall cause each such plan to (i) waive any preexisting
condition limitations to the extent such conditions covered under the
applicable medical, health or dental plans of Parent, (ii) provide full credit
for under such plans any deductibles, co-payment and out-of-pocket expenses
incurred by the employees and their beneficiaries during the portion of the
calendar year prior to such participation and (iii) waive any waiting period
limitation or evidence of insurability requirement which would otherwise be
applicable to such employee on or after the Effective Time to the extent such
employee had satisfied any similar limitation or requirement under an
analogous Plan prior to the Effective Time.
6.12 Vineyard Bank Advisory Board. Parent agrees to cause Vineyard
Bank to take all action necessary to appoint or elect, as of the Effective Time,
all non-employee directors of Southland Bank as of the date hereof to an
advisory board of directors of Vineyard Bank. Such directors shall be eligible
to receive compensation for services in their capacity as such in accordance
with the policies of Vineyard Bank in effect from time to time.
6.13 Notification of Certain Matters. Each of Southland Bank and
Parent shall give prompt notice to the other of any fact, event or circumstance
known to it that (i) is reasonably likely, individually or taken together with
all other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (ii) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
41
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of the parties hereto to consummate the Merger is
subject to the fulfillment or, to the extent permitted by applicable law,
written waiver by the parties hereto prior to the Closing Date of each of the
following conditions:
(a) Shareholder Approval. This Agreement shall have been
duly approved by the requisite vote of the holders of outstanding shares of
Southland Bank Common Stock.
(b) Regulatory Approvals. All regulatory approvals
required to consummate the Transaction shall have been obtained and shall
remain in full force and effect and all statutory waiting periods in respect
thereof shall have expired and no such approvals shall contain any conditions,
restrictions or requirements which the Parent Board reasonably determines in
good faith would, individually or in the aggregate, materially reduce the
benefits of the Transaction to such a degree that Parent would not have
entered into this Agreement had such conditions, restrictions or requirements
been known at the date hereof.
(c) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and prohibits
consummation of the Transaction.
(d) Registration Statement. The Registration Statement
shall have become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been initiated by the
SEC and not withdrawn.
(e) Listing. The shares of Parent Common Stock to be
issued in the Merger shall have been approved for listing on the Nasdaq.
(f) Tax Opinion. Each of Parent and Southland Bank shall
have received the written opinion of Xxxxxx Xxxx & Xxxxxx LLP, in form and
substance reasonably satisfactory to both Southland Bank and Parent, dated as
of the Effective Date, substantially to the effect that, on the basis of the
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the Merger
will be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinion, such counsel
may require and rely upon representations and covenants, including those
contained in certificates of officers of Parent, Southland Bank and others,
reasonably satisfactory in form and substance to such counsel.
7.02 Conditions to Obligation of Southland Bank. The obligation of
Southland Bank to consummate the Merger is also subject to the fulfillment or
written waiver by Southland Bank prior to the Closing Date of each of the
following conditions:
42
(a) Representations and Warranties. The representations
and warranties of Parent and Vineyard Bank set forth in this Agreement,
subject in all cases to the standard set forth in Section 5.02, shall be true
and correct as of the date of this Agreement and as of the Effective Date as
though made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Agreement or some
other date shall be true and correct as of such date), and Southland Bank
shall have received a certificate, dated the Effective Date, signed on behalf
of Parent and Vineyard Bank by the Chief Executive Officer and the Chief
Financial Officer of both Parent and Vineyard Bank to such effect.
(b) Performance of Obligations of Parent and Vineyard
Bank. Parent and Vineyard Bank shall have performed in all material respects
all obligations required to be performed by them under this Agreement at or
prior to the Effective Time, and Southland Bank shall have received a
certificate, dated the Effective Date, signed on behalf of Parent and Vineyard
Bank by the Chief Executive Officer and the Chief Financial Officer of both
Parent and Vineyard Bank to such effect.
(c) Other Actions. Parent and Vineyard Bank shall have
furnished Southland Bank with such certificates of its respective officers or
others and such other documents to evidence fulfillment of the conditions set
forth in Sections 7.01 and 7.02 as Southland Bank may reasonably request.
7.03 Conditions to Obligations of Parent and Vineyard Bank. The
obligations of Parent and Vineyard Bank to consummate the Merger are also
subject to the fulfillment or written waiver by Parent prior to the Closing Date
of each of the following conditions:
(a) Representations and Warranties. The representations
and warranties of Southland Bank set forth in this Agreement, subject in all
cases to the standard set forth in Section 5.02, shall be true and correct as
of the date of this Agreement and as of the Effective Date as though made on
and as of the Effective Date (except that representations and warranties that
by their terms speak as of the date of this Agreement or some other date shall
be true and correct as of such date), and Parent shall have received a
certificate, dated the Effective Date, signed on behalf of Southland Bank by
the Chief Executive Officer and the Chief Financial Officer of Southland Bank
to such effect.
(b) Performance of Obligations of Parent and Vineyard
Bank. Southland Bank shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Effective Time, and Parent shall have received a certificate, dated the
Effective Date, signed on behalf of Southland Bank by the Chief Executive
Officer and the Chief Financial Officer of Southland Bank to such effect.
(c) Shareholder Agreements. Shareholder Agreements,
substantially in the form attached as Annex B hereto, shall have been executed
and delivered by each director and executive officer of Southland Bank in
connection with Southland Bank's execution and delivery of this Agreement.
43
(d) Dissenting Shares. Dissenting Shares shall not
represent 10% or more of the outstanding shares of Southland Bank Common
Stock.
(e) Southland Bank Options. Each holder of Southland Bank
Options shall have entered into an agreement, the form of which shall be
acceptable to Parent, agreeing to the termination of such Southland Bank
Options.
(f) Other Actions. Southland Bank shall have furnished
Parent with such certificates of its officers or others and such other
documents to evidence fulfillment of the conditions set forth in Sections 7.01
and 7.03 as Parent may reasonably request.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the
Transaction may be abandoned:
(a) Mutual Consent. At any time prior to the Effective
Time, by the mutual consent of Parent, Vineyard Bank and Southland Bank if the
Board of Directors of each so determines by vote of a majority of the members
of its entire Board.
(b) Breach. At any time prior to the Effective Time, by
Parent and Vineyard Bank on the one hand or Southland Bank on the other hand,
if their Board of Directors so determines by vote of a majority of the members
of their entire Board, in the event of: (i) a breach by Parent and Vineyard
Bank on the one hand or Southland Bank on the other hand, as the case may be,
of any representation or warranty contained herein (subject to the standard
set forth in Section 5.02), which breach cannot be or has not been cured
within 30 days after the giving of written notice to the breaching party or
parties of such breach; or (ii) a breach by Parent and Vineyard Bank on the
one hand or Southland Bank on the other hand, as the case may be, of any of
the covenants or agreements contained herein, which breach cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching party or parties of such breach, which breach (whether under (i) or
(ii)) would be reasonably expected, individually or in the aggregate with
other breaches, to result in a Material Adverse Effect with respect to Parent
or Southland Bank, as the case may be.
(c) Delay. At any time prior to the Effective Time, by
Parent and Vineyard Bank on the one hand or Southland Bank on the other hand,
if their Board of Directors so determines by vote of a majority of the members
of their entire Board, in the event that the Transaction is not consummated by
September 1, 2003, except to the extent that the failure of the Merger then to
be consummated arises out of or results from the knowing action or inaction of
(i) the party seeking to terminate pursuant to this Section 8.01(c) or (ii)
any of the Shareholders (if Southland Bank is the party seeking to terminate),
which action or inaction is in violation of its obligations under this
Agreement or, in the case of the Shareholders, his, her or its obligations
under the relevant Shareholder Agreement.
44
(d) No Regulatory Approval. By Parent and Vineyard Bank
on the one hand or Southland Bank on the other hand, if their Board of
Directors so determines by a vote of a majority of the members of their entire
Board, in the event the approval of any Governmental Authority required for
consummation of the Merger and the other transactions contemplated by this
Agreement shall have been denied by final nonappealable action of such
Governmental Authority or an application therefor shall have been permanently
withdrawn at the request of a Governmental Authority.
(e) No Shareholder Approval. By either Parent and
Vineyard Bank on the one hand or Southland Bank on the other hand, if any
approval of the stockholders of Southland Bank contemplated by this Agreement
shall not have been obtained by reason of the failure to obtain the required
vote at the Southland Bank Meeting.
(f) Failure to Recommend. At any time prior to Southland
Bank Meeting, by Parent and Vineyard Bank if (i) Southland Bank shall have
breached Section 6.08, (ii) the Southland Bank Board shall have failed to make
its recommendation referred to in Section 6.02, withdrawn such recommendation
or modified or changed such recommendation in a manner adverse in any respect
to the interests of Parent and Vineyard Bank or (iii) Southland Bank shall
have materially breached its obligations under Section 6.02 by failing to
call, give notice of, convene and hold the Southland Bank Meeting in
accordance with Section 6.02.
(g) Certain Tender or Exchange Offers. By Parent if a
tender offer or exchange offer for 20% or more of the outstanding shares of
Southland Bank Common Stock is commenced (other than by Parent or a Subsidiary
thereof), and the Southland Bank Board recommends that the stockholders of
Southland Bank tender their shares in such tender or exchange offer or
otherwise fails to recommend that such stockholders reject such tender offer
or exchange offer within the ten-Business Day period specified in Rule
14e-2(a) under the Exchange Act.
(h) Superior Proposal. At any time prior to the Southland
Bank Meeting, by Southland Bank in order to concurrently enter into an
acquisition agreement or similar agreement (each, an "Acquisition Agreement")
with respect to a Superior Proposal which has been received and considered by
Southland Bank and the Southland Bank Board in compliance with Section 6.08
hereof, provided, however, that this Agreement may be terminated by Southland
Bank pursuant to this Section 8.01(h) only after the fifth Business Day
following Southland Bank's provision of written notice to Parent advising
Parent that the Southland Bank Board is prepared to accept a Superior
Proposal, and only if, during such five-Business Day period, Parent does not,
in its sole discretion, make an offer to Southland Bank that the Southland
Bank Board determines in good faith, after consultation with its financial and
legal advisors, is at least as favorable as the Superior Proposal.
(i) Decrease in Average Share Price. By Parent and
Vineyard Bank, if the Average Share Price of the Parent Common Stock shall be
less than $10.00, provided that Parent and Vineyard Bank shall have the
option, in their sole discretion, of not terminating this Agreement and, in
lieu of such termination, adjusting the Merger Consideration to $6.0617 per
share to be paid solely in cash. Parent and Vineyard Bank
45
shall give Southland Bank prompt written notice of such a determination
whereupon no termination of this Agreement shall have occurred pursuant to
this Section 8.01(i), and this Agreement shall remain in effect in accordance
with its terms (except as the Merger Consideration shall be revised as set
forth above).
8.02 Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VIII, no party to this
Agreement shall have any liability or further obligation to any other party
hereunder except as set forth in this Section 8.02 and Section 9.01.
(b) If this Agreement is terminated by either Parent or
Southland Bank due to a breach of a representation, warranty, covenant or
undertaking, the party committing such breach shall be liable for $100,000 to
the other party, plus the expenses of the other party (up to $50,000), without
prejudice to any other rights or remedies as may be available to the
non-breaching party, including without limitation any rights under Section
8.02(c) below.
(c) In recognition of the efforts, expenses and other
opportunities foregone by Parent while structuring and pursuing the Merger,
the parties hereto agree that Southland Bank shall pay Parent the sum of
$320,000 (the "Termination Fee") if this Agreement is terminated as follows:
(i) if this Agreement is terminated
by Parent pursuant to Section 8.01(f) or (g) or by Southland Bank
pursuant to Section 8.01(h), in either of which case payment shall be
made to Parent concurrently with the termination of this Agreement; or
(ii) if (x) this Agreement is
terminated by (A) Parent pursuant to Section 8.01(b), (B) by either
Parent or Southland Bank pursuant to Section 8.01(c) or (C) by either
Parent or Southland Bank pursuant to Section 8.01(e), and in the case
of any termination pursuant to clause (A), (B) or (C), an Acquisition
Proposal shall have been publicly announced or otherwise communicated
or made known to the senior management of Southland Bank or the
Southland Bank Board (or any Person shall have publicly announced,
communicated or made known an intention, whether or not conditional, to
make an Acquisition Proposal) at any time after the date of this
Agreement and prior to the taking of the vote of the stockholders of
Southland Bank contemplated by this Agreement at the Southland Bank
Meeting, in the case of clause (C), or the date of termination, in the
case of clause (A) or (B), and (y) within 12 months after such
termination Southland Bank enters into an agreement with respect to an
Acquisition Proposal or consummates a transaction which is the subject
of an Acquisition Proposal, then Southland Bank shall pay to Parent the
Termination Fee on the date of execution of such agreement or
consummation of a transaction which is the subject of an Acquisition
Proposal, provided that if the date of execution of such agreement is
after 9 months but within 12 months after such termination of this
Agreement, the Termination Fee shall be payable by Southland Bank to
Parent
46
only upon consummation of a transaction which is the subject of an
Acquisition Proposal, regardless whether such consummation occurs
within 12 months after termination of this Agreement.
(iii) Any amount that becomes payable
pursuant to this Section 8.02(c) shall be paid by wire transfer of
immediately available funds to an account designated by Parent.
(d) Southland Bank and Parent agree that the agreement
contained in paragraph (c) of this Section 8.02 is an integral part of the
transactions contemplated by this Agreement, that without such agreement
Parent would not have entered into this Agreement and that such amounts do not
constitute a penalty or liquidated damages in the event of a breach of this
Agreement by Southland Bank. If Southland Bank fails to pay Parent the amounts
due under paragraph (c) above within the time periods specified therein,
Southland Bank shall pay the costs and expenses (including reasonable legal
fees and expenses) incurred by Parent in connection with any action in which
Parent prevails, including the filing of any lawsuit, taken to collect payment
of such amounts, together with interest on the amount of any such unpaid
amounts at the prime lending rate prevailing during such period as published
in The Wall Street Journal, calculated on a daily basis from the date such
amounts were required to be paid until the date of actual payment.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and
covenants contained in this Agreement shall survive the Effective Time (other
than agreements or covenants contained herein that by their express terms are to
be performed after the Effective Time) or the termination of this Agreement if
this Agreement is terminated prior to the Effective Time (other than Sections
6.06(d), 6.11, 8.02 and, excepting Section 9.12 hereof, this Article IX, which
shall survive any such termination). Notwithstanding anything in the foregoing
to the contrary, no representations, warranties, agreements and covenants
contained in this Agreement shall be deemed to be terminated or extinguished so
as to deprive a party hereto or any of its affiliates of any defense at law or
in equity which otherwise would be available against the claims of any Person,
including without limitation any shareholder or former shareholder.
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of
this Agreement may be (i) waived, by the party benefited by the provision or
(ii) amended or modified at any time, by an agreement in writing among the
parties hereto executed in the same manner as this Agreement, except that after
the Southland Bank Meeting no amendment shall be made which by law requires
further approval by the stockholders of Southland Bank without obtaining such
approval.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
47
9.04 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of California applicable
to contracts made and to be performed entirely within such State.
9.05 Expenses. Each party hereto will bear all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby,
including fees and expenses of its own financial consultants, accountants and
counsel and, in the case of Parent, the registration fee to be paid to the SEC
in connection with the Registration Statement, except that expenses of printing
the Proxy Statement shall be shared equally between Southland Bank and Parent,
and provided further that nothing contained herein shall limit either party's
rights to recover any liabilities or damages arising out of the other party's
willful breach of any provision of this Agreement.
9.06 Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to Southland Bank to:
Southland Business Bank
00000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx,
Interim President and Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
Xxxx Xxxxxx Xxxxxxx & Associates
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
If to Parent or Vineyard Bank to:
Vineyard National Bancorp
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, President
and Chief Executive Officer
Fax: (000) 000-0000
48
With a copy to:
Xxxxxx Xxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxx, Esq.
Fax: (000) 000-0000
9.07 Entire Understanding; No Third Party Beneficiaries. This
Agreement and the Shareholder Agreements represent the entire understanding of
the parties hereto and thereto with reference to the Transaction, and this
Agreement and the Shareholder Agreements supersede any and all other oral or
written agreements heretofore made. Nothing in this Agreement, expressed or
implied, is intended to confer upon any Person, other than the parties hereto or
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
9.08 Severability. Except to the extent that application of this
Section 9.08 would have a Material Adverse Effect on Southland Bank or Parent,
any term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable. In all such cases, the parties shall use their reasonable best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the original purposes and intents of this Agreement.
9.09 Enforcement of the Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
9.10 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." Whenever the words "as of the date
hereof" are used in this Agreement, they shall be deemed to mean the day and
year first above written (April 8, 2003).
49
9.11 Assignment. No party may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
9.12 Alternative Structure. Notwithstanding any provision of this
Agreement to the contrary, Parent may at any time modify the structure of the
acquisition of Southland Bank set forth herein, subject to the prior written
consent of Southland Bank, which consent shall not be unreasonably withheld or
delayed, provided that (i) the Merger Consideration to be paid to the holders
of Southland Bank Common Stock is not thereby changed in kind or reduced in
amount as a result of such modification, (ii) such modification will not
adversely affect the tax treatment to Southland Bank's stockholders as a result
of receiving the Merger Consideration and (iii) such modification will not
materially delay or jeopardize receipt of any required approvals of
Governmental Authorities.
[Signature Page to Follow]
50
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in counterparts by their duly authorized officers, all
as of the day and year first above written.
VINEYARD NATIONAL BANCORP
By: ________________________________________
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
By: ________________________________________
Name: Xxxxxxx X. Xxxxx
Title: Secretary
VINEYARD BANK
By: ________________________________________
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
By: ________________________________________
Name: Xxxxxxx X. Xxxxx
Title: Secretary
SOUTHLAND BUSINESS BANK
By: ________________________________________
Name: Xxxxxxx Xxxxxxx
Title: Interim President and Chief Executive
Officer
By: ________________________________________
Name: Xxxxxxx Xxxxxxxx
Title: Secretary
51
ANNEX A
AGREEMENT OF MERGER
Agreement of Merger, dated as of April 8, 2003, by and between
Vineyard Bank ("Vineyard Bank") and Southland Business Bank ("Southland Bank").
WITNESSETH:
WHEREAS, Southland Bank is a California-chartered commercial
bank having its principal place of business in Irwindale, California; and
WHEREAS, Vineyard Bank is a California-chartered commercial
bank and a wholly-owned subsidiary of Vineyard National Bancorp ("Parent"),
which has its principal place of business in Rancho Cucamonga, California; and
WHEREAS, Parent, Vineyard Bank and Southland Bank have entered
into an Agreement and Plan of Merger, dated as of April 8, 2003 (the
"Agreement"), pursuant to which Southland Bank will merge with and into Vineyard
Bank (the "Merger"); and
WHEREAS, Vineyard Bank and Southland Bank desire to merge on
the terms and conditions herein provided.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the parties hereto, intending
to be legally bound hereby, agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined
herein shall have the meanings specified in the Agreement.
2. THE MERGER. Subject to the terms and conditions of this
Agreement of Merger, at the Effective Time, Southland Bank shall merge with and
into Vineyard Bank (the "Merger") under the laws of the State of California.
Vineyard Bank shall be the surviving bank of the Merger (the "Surviving Bank").
3. ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws of Vineyard Bank in effect immediately prior to the
Effective Time shall be the Articles of Incorporation and Bylaws of the
Surviving Bank, until altered, amended or repealed in accordance with their
terms and applicable law.
4. NAME; OFFICES. The name of the Surviving Bank shall be
"Vineyard Bank." The main office of the Surviving Bank shall be the main office
of Vineyard Bank immediately prior to the Effective Time. All branch offices of
Vineyard Bank and Southland Bank which were in lawful operation immediately
prior to the Effective Time shall be the branch offices of the Surviving Bank
upon consummation of the Merger, subject to the opening or closing of any
offices which may be authorized by Vineyard Bank or Southland Bank and
applicable regulatory authorities after the date hereof.
A-1
5. DIRECTORS AND EXECUTIVE OFFICERS. The directors and executive
officers of the Surviving Bank immediately after the Merger shall be the
directors and executive officers of Vineyard Bank immediately prior to the
Merger.
6. EFFECTS OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the GCLC and the FCSC. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of Southland Bank shall vest
in the Surviving Bank, and all debts, liabilities, obligations, restrictions,
disabilities and duties of Southland Bank shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Bank.
7. EFFECT ON SHARES OF STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of a holder of shares of Southland
Bank Common Stock:
(a) Each share of Parent Common Stock and Vineyard Bank
Common Stock that is issued and outstanding immediately prior to the Effective
Time shall remain issued and outstanding and shall be unchanged by the Merger.
(b) (1) Subject to Sections 3.05, 3.06 and 8.01(i)
of the Agreement each share of Southland Bank Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted into, and
shall be canceled in exchange for, the right to receive:
(i) the number of shares of Parent
Common Stock which is equal to (the "Exchange Rate") (A) if the Average Share
Price of the Parent Common Stock is equal to or greater than $17.78 and equal to
or less than $20.00, the quotient (rounded to the nearest one ten-thousandth)
determined by dividing (x) $6.06169 by (y) the Average Share Price of the Parent
Common Stock, (B) if the Average Share Price of the Parent Common Stock is less
than $17.78, .34097 shares or (C) if the Average Share Price of the Parent
Common Stock is greater than $20.00, .30308 shares (the "Per Share Stock
Consideration"), and
(ii) if the Average Share Price of the
Parent Common Stock is less than $17.78, a cash amount equal to the difference
between (A) $6.06169 and (B) the product of (x) the Average Share Price of the
Parent Common Stock and (y) .34097 (the "Per Share Cash Consideration").
(2) For purposes of this Agreement, (i) the
"Average Share Price" of the Parent Common Stock shall mean the weighted average
(based on the number of shares traded) of the closing sales price of a share of
Parent Common Stock, as reported on Nasdaq (as reported by an authoritative
source), for the 20 Business Day period ending with the close of business on the
fifth Business Day preceding the Effective Time, and (ii) the "Aggregate Cash
Consideration" shall amount to the product of the number of shares of Southland
Bank Common Stock outstanding at the Effective Time times the Per Share Cash
Consideration.
8. NO FRACTIONAL SHARES. Notwithstanding any other provision of
the Agreement or this Agreement of Merger, neither certificates nor scrip for
fractional shares of Parent Common Stock shall be issued in the Merger. Each
holder of Southland Bank Common Stock who
A-2
otherwise would have been entitled to a fraction of a share of Parent Common
Stock (after taking into account all Certificates delivered by such holder)
shall receive in lieu thereof cash (without interest) in an amount determined by
multiplying the fractional share interest to which such holder would otherwise
be entitled by the Average Share Price of the Parent Common Stock, rounded to
the nearest whole cent. No such holder shall be entitled to dividends, voting
rights or any other rights in respect of any fractional share.
9. DISSENTING SHARES. Holders of Southland Bank Common Stock
shall be entitled to dissenters' rights as provided in the Agreement.
10. COUNTERPARTS. This Agreement of Merger may be executed in one
or more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one agreement.
11. GOVERNING LAW. This Agreement of Merger shall be governed in
all respects, including, but not limited to, validity, interpretation, effect
and performance, by the laws of the State of California.
12. AMENDMENT. Subject to applicable law, this Agreement of Merger
may be amended, modified or supplemented only by written agreement of Vineyard
Bank and Southland Bank at any time prior to the Effective Time.
13. WAIVER. Any of the terms or conditions of this Agreement of
Merger may be waived at any time by whichever of the parties hereto is, or the
stockholders of which are, entitled to the benefit thereof by action taken by
the Board of Directors of such waiving party.
14. ASSIGNMENT. This Agreement of Merger may not be assigned by
any party hereto without the prior written consent of the other party.
15. TERMINATION. This Agreement of Merger shall terminate upon the
termination of the Agreement in accordance with its terms.
16. CONDITIONS PRECEDENT. The obligations of the parties under
this Agreement of Merger shall be subject to the satisfaction or waiver at or
prior to the Closing of all of the conditions to the Merger set forth herein and
in the Agreement.
17. EFFECTIVENESS OF MERGER. The Merger shall be effective at the
date and time and in the manner specified in the Agreement.
A-3
IN WITNESS WHEREOF, each of Vineyard Bank and Southland Bank has caused
this Agreement of Merger to be executed on its behalf by its duly authorized
officers.
VINEYARD BANK
By: _________________________________________
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
By: _________________________________________
Name: Xxxxxxx X. Xxxxx
Title: Secretary
SOUTHLAND BUSINESS BANK
By: _________________________________________
Name: Xxxxxxx Xxxxxxx
Title: Interim President and Chief Executive
Officer
By: _________________________________________
Name: Xxxxxxx Xxxxxxxx
Title: Secretary
A-4
ANNEX B
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (the "Agreement"), dated as of April 8, 2003,
among __________________, a shareholder ("Shareholder") of Southland Business
Bank, a California-chartered commercial bank ("Southland Bank"), Vineyard Bank,
a California-chartered commercial bank ("Vineyard Bank"), and Vineyard National
Bancorp, a California corporation ("Parent"). All terms used herein and not
defined herein shall have the meanings assigned thereto in the Merger Agreement
(defined below).
WHEREAS, Parent, Vineyard Bank and Southland Bank are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), pursuant to which Southland Bank will merge with and into Vineyard
Bank on the terms and conditions set forth therein (the "Merger") and, in
connection therewith, outstanding shares of Southland Bank Common Stock will be
converted into shares of Parent Common Stock and cash in the manner set forth
therein; and
WHEREAS, Shareholder owns the shares of Southland Bank Common Stock
identified on Exhibit I hereto (such shares, together with all shares of
Southland Bank Common Stock subsequently acquired by Shareholder during the term
of this Agreement, being referred to as the "Shares"); and
WHEREAS, in order to induce Parent and Vineyard Bank to enter into the
Merger Agreement, Shareholder, solely in such Shareholder's capacity as a
shareholder of Southland Bank and not in any other capacity, has agreed to enter
into and perform this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. Agreement to Vote Shares. Shareholder agrees that at any
meeting of the stockholders of Southland Bank, or in connection with any written
consent of the stockholders of Southland Bank, Shareholder shall:
(i) appear at each such meeting or otherwise cause the Shares to
be counted as present thereat for purposes of calculating a quorum; and
(ii) vote (or cause to be voted), in person or by proxy, or deliver
a written consent (or cause a consent to be delivered) covering, all the Shares
(whether acquired heretofore or hereafter) that are beneficially owned by
Shareholder or as to which Shareholder has, directly or indirectly, the right to
vote or direct the voting, (x) in favor of adoption and approval of the Merger
Agreement and the Merger; (y) against any action or agreement that would result
in a breach of any covenant, representation or warranty or any other obligation
or agreement of Southland Bank contained in the Merger Agreement or of
Shareholder contained in this Agreement; and (z) against any Acquisition
Proposal or any other action, agreement or transaction that is intended, or
could reasonably be expected, to materially impede, interfere or be inconsistent
with, delay, postpone, discourage or materially and adversely affect
consummation of the Merger or this Agreement.
B-1
2. No Transfers. Prior to the Southland Bank Meeting, Shareholder
agrees not to, directly or indirectly, sell transfer, pledge, assign or
otherwise dispose of, or enter into any contract option, commitment or other
arrangement or understanding with respect to the sale, transfer, pledge,
assignment or other disposition of, any of the Shares. In the case of any
transfer by operation of law, this Agreement shall be binding upon and inure to
the transferee(s). Any transfer or other disposition in violation of the terms
of this Section 2 shall be null and void.
3. Representations and Warranties of Shareholder. Shareholder
represents and warrants to and agrees with Parent and Vineyard Bank as follows:
A. Capacity. Shareholder has all requisite capacity and authority
to enter into and perform his, her or its obligations under this Agreement.
B. Binding Agreement. This Agreement constitutes the valid and
legally binding obligation of Shareholder, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
C. Non-Contravention. The execution and delivery of this
Agreement by Shareholder does not, and the performance by Shareholder of his,
her or its obligations hereunder and the consummation by Shareholder of the
transactions contemplated hereby will not, violate or conflict with, or
constitute a default under, any agreement, instrument, contract or other
obligation or any order, arbitration award, judgment or decree to which
Shareholder is a party or by which Shareholder is bound, or any statute, rule or
regulation to which Shareholder is subject or, in the event that Shareholder is
a corporation, partnership, trust or other entity, any charter, bylaw or other
organizational document of Shareholder.
D. Ownership of Shares. Shareholder has good title to all of the
Shares as of the date hereof, and, except as set forth on Exhibit I hereto, the
Shares are so owned free and clear of any liens, security interests, charges or
other encumbrances.
4. Specific Performance and Remedies. Shareholder acknowledges
that it will be impossible to measure in money the damage to Parent and Vineyard
Bank if Shareholder fails to comply with the obligations imposed by this
Agreement and that, in the event of any such failure, Parent and Vineyard Bank
will not have an adequate remedy at law or in equity. Accordingly, Shareholder
agrees that injunctive relief or other equitable remedy, in addition to remedies
at law or in damages, is the appropriate remedy for any such failure and will
not oppose the granting of such relief on the basis that Parent and Vineyard
Bank may have an adequate remedy at law. Shareholder agrees that Shareholder
will not seek, and agrees to waive any requirement for, the securing or posting
of a bond in connection with Parent's or Vineyard Bank's seeking or obtaining
such equitable relief. In addition, after discussing the matter with
Shareholder, Parent and Vineyard Bank shall have the right to inform any third
party that Parent and Vineyard Bank reasonably believe to be, or to be
contemplating, participating with Shareholder or receiving from Shareholder
assistance in violation of this Agreement, of the terms of this Agreement and of
the rights of Parent and Vineyard Bank hereunder, and that participation by any
such persons with Shareholder in activities in violation of Shareholder's
B-2
agreement with Parent and Vineyard Bank set forth in this Agreement may give
rise to claims by Parent and Vineyard Bank against such third party.
5. Term of Agreement; Termination.
A. The term of this Agreement shall commence on the date hereof.
B. This Agreement shall terminate upon the date, if any, of
termination of the Merger Agreement in accordance with its terms. Upon such
termination, no party shall have any further obligations or liabilities
hereunder; provided, however, such termination shall not relieve any party from
liability for any willful breach of this Agreement prior to such termination.
C. If the Merger Agreement is not terminated in accordance with
its terms, this Agreement (except for the provisions of Sections 3 and 8, which
shall survive the Effective Time) shall terminate upon the Effective Time. Upon
such termination, no party shall have any further obligations or liabilities
under this Agreement; provided, however, such termination shall not relieve any
party from liability for any willful breach of such Section prior to such
termination.
6. Entire Agreement. This Agreement supersedes all prior
agreements, written or oral, among the parties hereto with respect to the
subject matter hereof and contains the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not be amended,
supplemented or modified, and no provisions hereof may be modified or waived,
except by an instrument in writing signed by each party hereto. No waiver of any
provisions hereof by any party shall be deemed a waiver of any other provisions
hereof by any such party, nor shall any such waiver be deemed a continuing
waiver of any provision hereof by such party.
7. Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission and on the next business day when sent by a
reputable overnight courier service to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
If to Parent or Vineyard Bank:
Vineyard National Bancorp
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, President
and Chief Executive Officer
Fax: (000) 000-0000
B-3
With a copy to:
Xxxxxx Xxxx & Xxxxxx LLP
Tysons Corner
0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxx, Esq.
Fax: (000) 000-0000
If to Shareholder:
_______________________
_______________________
_______________________
With a copy to:
Xxxx Xxxxxx Xxxxxxx & Associates
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
8. Miscellaneous.
A. Severability. If any provision of this Agreement or the
application of such provision to any person or circumstances shall be held
invalid or unenforceable by a court of competent jurisdiction, such provision or
application shall be unenforceable only to the extent of such invalidity or
unenforceability, and the remainder of the provision held invalid or
unenforceable and the application of such provision to persons or circumstances,
other than the party as to which it is held invalid, and the remainder of this
Agreement, shall not be affected.
B. Capacity. The covenants contained herein shall apply to
Shareholder solely in his or her capacity as a shareholder of Southland Bank,
and no covenant contained herein shall apply to Shareholder in his or her
capacity as a director, officer or employee of Southland Bank or in any other
capacity. Nothing contained in this Agreement shall be deemed to apply to, or
limit in any manner, the obligations of the Shareholder to comply with his or
her fiduciary duties as a director, officer or employee of Southland Bank.
C. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
D. Headings. All Section headings herein are for convenience of
reference only and are not part of this Agreement, and no construction or
reference shall be derived therefrom.
B-4
E. Choice of Law. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the laws of
the State of California, without reference to its conflicts of law principles.
9. Attorney's Fees. The prevailing party or parties in any
litigation, arbitration, mediation, bankruptcy, insolvency or other proceeding
("Proceeding") relating to the enforcement or interpretation of this Agreement
may recover from the unsuccessful party or parties all fees and disbursements of
counsel (including expert witness and other consultants' fees and costs)
relating to or arising out of (a) the Proceeding (whether or not the Proceeding
proceeds to judgment), and (b) any post-judgment or post-award proceeding
including, without limitation, one to enforce or collect any judgment or award
resulting from the Proceeding. All such judgments and awards shall contain a
specific provision for the recovery of all such subsequently incurred costs,
expenses, and fees and disbursements of counsel.
B-5
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
VINEYARD NATIONAL BANCORP
By: ________________________________________
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
VINEYARD BANK
By: ________________________________________
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
SHAREHOLDER
_____________________________________________
(Signature)
B-6
EXHIBIT I
SHAREHOLDER AGREEMENT
Shares of
Southland Bank
Common Stock
Beneficially Owned
(exclusive of
unexercised stock Options on Southland Bank
Name of Shareholder options) Common Stock
------------------- ------------------ -------------------------
X-0
XXXXX X
Xxxxx 0, 0000
Xxxxxxxx National Bancorp
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
I have been advised that I may be deemed to be, but do not
admit that I am, an "affiliate" of Southland Business Bank, a
California-chartered commercial bank ("Southland Bank"), as that term is defined
in Rule 144 and used in Rule 145 promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"). I understand that pursuant to the terms of the Agreement and
Plan of Merger, dated as of April 8, 2003 (the "Agreement"), among Vineyard
National Bancorp, a California corporation ("Parent"), Vineyard Bank, a
California-chartered commercial bank ("Vineyard Bank"), and Southland Bank,
Southland Bank plans to merge with and into Vineyard Bank (the "Merger").
I further understand that as a result of the Merger, I may
receive shares of common stock, no par value per share, of Parent ("Parent
Common Stock") in exchange for shares of common stock, no par value per share,
of Southland Bank ("Southland Bank Common Stock").
I have carefully read this letter and reviewed the Agreement
and discussed their requirements and other applicable limitations upon my
ability to sell, transfer, or otherwise dispose of Parent Common Stock, to the
extent I felt necessary, with my counsel or counsel for Southland Bank.
I represent, warrant and covenant with and to Parent that in
the event I receive any shares of Parent Common Stock as a result of the Merger:
1. I shall not make any sale, transfer, or other disposition of
such shares of Parent Common Stock unless (i) such sale, transfer or other
disposition has been registered under the Securities Act, (ii) such sale,
transfer or other disposition is made in conformity with the provisions of Rule
145 under the Securities Act (as such rule may be amended from time to time), or
(iii) in the opinion of counsel in form and substance reasonably satisfactory to
Parent, or under a "no-action" letter obtained by me from the staff of the SEC,
such sale, transfer or other disposition will not violate the registration
requirements of, or is otherwise exempt from registration under, the Securities
Act.
2. I understand that Parent is under no obligation to register
the sale, transfer or other disposition of shares of Parent Common Stock by me
or on my behalf under the Securities Act or to take any other action necessary
in order to make compliance with an exemption from such registration available.
3. I understand that stop transfer instructions will be given to
Parent's transfer agent with respect to shares of Parent Common Stock issued to
me as a result of the Merger and that there will be placed on the certificates
for such shares, or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued as a
result of the merger of Southland Business Bank with
and into Vineyard Bank, a wholly owned subsidiary of
Vineyard National Bancorp, on _______, 2003, in a
transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The shares
represented by this certificate may be transferred
only in accordance with the terms of a letter
agreement between the registered holder hereof and
Vineyard National Bancorp, a copy of which agreement
is on file at the principal offices of Vineyard
National Bancorp."
4. I understand that, unless transfer by me of the Parent Common
Stock issued to me as a result of the Merger has been registered under the
Securities Act or such transfer is made in conformity with the provisions of
Rule 145(d) under the Securities Act, Parent reserves the right, in its sole
discretion, to place the following legend on the certificates issued to my
transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were
acquired from [SHAREHOLDER] who, in turn, received
such shares as a result of the merger of Southland
Business Bank with and into Vineyard Bank, a wholly
owned subsidiary of Vineyard National Bancorp, on
______, 2003, in a transaction to which Rule 145
under the Securities Act of 1933 applies. The shares
have been acquired by the holder not with a view to,
or for resale in connection with, any distribution
thereof within the meaning of the Securities Act of
1933 and may not be offered, sold, pledged or
otherwise transferred except in accordance with an
exemption from the registration requirements of the
Securities Act of 1933."
It is understood and agreed that the legends set forth in
paragraphs (3) and (4) above shall be removed by delivery of substitute
certificates without such legends if I shall have delivered to Parent (i) a copy
of a "no action" letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Parent, to the effect that such
legend is not required for purposes of the Securities Act, or (ii) evidence or
representations satisfactory to Parent that Parent Common Stock represented by
such certificates is being or has been sold in conformity with the provisions of
Rule 145(d).
I further understand and agree that the provisions of Rule 145
shall apply to all shares of Parent Common Stock that my spouse, any relative of
mine, or any relative of my spouse, any one of whom has the same home as me,
receives as a result of the Merger and I further represent, warrant and covenant
with and to Parent that I will have, and will cause each of such persons to
have, all shares of Southland Bank Common Stock owned (other than shares held
through tax qualified retirement or benefit plans) by me or such persons
registered in my
name or the name of such persons, as applicable, prior to the effective date of
the Merger and not in the name of any bank, broker or dealer, nominee or
clearing house.
By acceptance hereof, Parent agrees, for a period of two years
after the Effective Time (as defined in the Agreement) that, so long as it is
obligated to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, it will use its reasonable best efforts to
timely file such reports so that the public information requirements of Rule
144(c) promulgated under the Securities Act are satisfied and the resale
provisions of Rule 145(d)(1) and (2) are therefore available to me in the event
I desire to transfer any Parent Common Stock issued to me in the Merger.
Very truly yours,
By: ________________________________
Name:
Acknowledged this 8th day of April 2003.
Vineyard National Bancorp
By: ______________________________________
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
