EXHIBIT 10.21
Stock Purchase Agreement Dated August 17, 1995,
By and Among City National Bank, First Los Angeles Bank,
San Paolo U.S. Holding Company and
San Paolo Bank Holding S.P.A.
Confidential information omitted
pursuant to Rule 24b-2
STOCK PURCHASE AGREEMENT
by and among
CITY NATIONAL BANK
FIRST LOS ANGELES BANK
SAN PAOLO U.S. HOLDING COMPANY
SAN PAOLO BANK HOLDING S.P.A.
August 17, 1995
TABLE OF CONTENTS
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Page
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ARTICLE I
Purchase and Sale.................................... 2
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1.1 Agreement of Purchase and Sale..................................... 2
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1.2 Closing............................................................ 8
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1.3 Bank Merger........................................................ 9
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ARTICLE II
Conduct Pending the Merger.............................. 9
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2.1 Conduct of the Bank's Business Prior to the Closing Date........... 9
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2.2 Forbearance by the Selling Entities and the Bank................... 10
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2.3 Timeliness of CNB's Consent........................................ 15
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2.4 Conduct by CNB Prior to the Closing Date........................... 15
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ARTICLE III
Representations and Warranties............................. 15
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3.1 Representations and Warranties of Selling Entities and the Bank.... 15
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(a) Recitals True.............................................. 15
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(b) Capital Stock.............................................. 16
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(c) Authority.................................................. 16
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(d) Subsidiaries............................................... 16
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(e) Approvals.................................................. 17
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(f) No Violations.............................................. 17
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(g) Financial Statements....................................... 18
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(h) Absence of Certain Changes or Events....................... 18
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(i) Taxes...................................................... 19
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(j) Absence of Claims; Litigation.............................. 20
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(k) Regulatory Actions......................................... 21
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(l) Certain Agreements......................................... 21
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(m) Labor Matters.............................................. 22
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(n) Employee Benefit Plans..................................... 22
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(o) Insider Loans; Other Transactions.......................... 25
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(p) Title to Assets............................................ 25
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(q) Knowledge as to Conditions................................. 26
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(r) Compliance with Laws....................................... 26
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(s) Fees....................................................... 27
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(t) Environmental.............................................. 27
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(u) Allowance for Possible Loan Losses......................... 31
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(v) Performance of Obligations................................. 31
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(w) Insurance.................................................. 32
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(x) Listing of Loans........................................... 32
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(y) Derivative Transactions.................................... 32
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(z) Trust Administration....................................... 33
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3.2 Representations and Warranties of CNB.............................. 33
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(a) Recitals True.............................................. 33
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(b) Authority.................................................. 33
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(c) Approvals.................................................. 34
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(i)
(d) No Violations............................................... 34
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(e) Financial Statements........................................ 35
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(f) Absence of Certain Changes or Events........................ 36
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(g) Absence of Claims........................................... 36
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(h) Regulatory Actions.......................................... 36
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(i) Knowledge as to Conditions.................................. 37
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(j) Compliance with Laws........................................ 37
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(k) Fees........................................................ 37
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ARTICLE IV
Covenants.................................. 38
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4.1 Acquisition Proposals............................................... 38
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4.2 Employee Benefits................................................... 38
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4.3 Access and Information.............................................. 39
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4.4 Certain Filings, Consents and Arrangements.......................... 42
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4.5 Additional Agreements............................................... 43
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4.6 Publicity........................................................... 43
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4.7 Notification of Certain Matters..................................... 43
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4.8 Pre-Closing Adjustments............................................. 44
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4.9 Director Resignations............................................... 45
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4.10 Human Resources Issues.............................................. 45
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4.11 Assistance with Third-Party Agreements.............................. 45
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4.12 Notices and Communications.......................................... 47
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4.13 Insurance Policies Assignment....................................... 48
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4.14 Designated Portfolio................................................ 49
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4.15 Repurchase of Certain Loans......................................... 50
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4.16 Option to Purchase Additional Loans................................. 51
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4.17 Tax Matters......................................................... 51
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(a) Selling Entities' Responsibilities............................ 51
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(b) CNB's Responsibilities........................................ 53
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(c) Taxes for Short Taxable Year.................................. 54
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(d) Review of Tax Returns and Other Filings....................... 54
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(e) Contest Provisions............................................ 55
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(f) Termination of Tax Allocation Agreements...................... 56
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(g) Information to be Provided by CNB............................. 56
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(h) Certain Elections............................................. 56
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(i) Efforts to Obtain Certain Documents........................... 57
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(j) Cooperation after Closing..................................... 57
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(k) Transfer Taxes................................................ 58
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(l) Miscellaneous................................................. 59
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4.18 1995 Audit.......................................................... 59
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4.19 Pre-Closing Intercompany Transactions............................... 59
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ARTICLE V
Conditions to Consummation............................ 60
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5.1 Conditions to Each Party's Obligations.............................. 60
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5.2 Conditions to Obligations of CNB.................................... 61
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5.3 Conditions To Obligations of the Selling Entities and the Bank...... 63
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(ii)
ARTICLE VI
Termination........................................... 64
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6.1 Termination.......................................................... 64
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6.2 Effect of Termination................................................ 65
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ARTICLE VII
Other Matters........................................ 65
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7.1 Certain Definitions; Interpretations................................. 65
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7.2 Survival of Representations, Warranties and Covenants................ 67
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7.3 Indemnification...................................................... 68
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(a) The Selling Entities' Indemnification......................... 68
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(b) CNB's Indemnification......................................... 71
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(c) Indemnification Procedures.................................... 71
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(d) Adjustment to Purchase Price.................................. 76
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(e) Exclusive Remedy.............................................. 76
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7.4 Waiver............................................................... 76
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7.5 Counterparts......................................................... 76
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7.6 Governing Law; Venue................................................. 76
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7.7 Expenses............................................................. 77
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7.8 Notices.............................................................. 77
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7.9 Entire Agreement..................................................... 78
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7.10 Binding Effect; Assignment........................................... 78
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7.11 Severability......................................................... 78
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7.12 No Third Party Beneficiaries......................................... 78
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(iii)
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, DATED AS OF the 17th day of August, 1995
("the Agreement"), by and among CITY NATIONAL BANK ("CNB"), a national banking
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association, SAN PAOLO U.S. HOLDING COMPANY, a Delaware corporation (the
"Seller"), SAN PAOLO BANK HOLDING S.P.A., a corporation organized under the laws
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of Italy ("San Paolo"), and FIRST LOS ANGELES BANK, a California-chartered
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commercial Bank ("Bank") (the Seller and San Paolo, being collectively referred
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to herein as the "Selling Entities"), entered into with reference to the
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following:
A. The Bank is a commercial bank organized and existing under the laws
of the State of California and subject to regulation and supervision by the
Superintendent of Banks of the State of California (the "Superintendent") and
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the Federal Deposit Insurance Corporation ("FDIC"). The customer deposit
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accounts of Bank are insured by the Bank Insurance Fund (the "BIF") of the FDIC.
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All of the issued and outstanding stock of Bank is owned by Seller and all of
the issued and outstanding stock of Seller is owned by San Paolo.
B. CNB is a wholly owned subsidiary of City National Corporation, a
Delaware corporation ("CNC"). The customer deposit accounts of CNB are insured
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by the BIF of the FDIC and CNB is subject to regulation and supervision by the
Office of the Comptroller of the Currency (the "OCC").
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C. CNB desires to acquire Bank through the purchase of all of the
issued and outstanding stock of Bank on the terms and subject to the conditions
set forth in this Agreement and the Selling Entities desire that such stock be
sold on such terms and subject
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to such conditions. CNB then intends to merge Bank into CNB pursuant to
applicable provisions of Federal law and the regulations of the OCC.
D. Subject to any specific provisions of this Agreement, it is the
intent of the parties that CNB by reason of this Agreement shall not (until
consummation of the transactions contemplated hereby) control, and shall not be
deemed to control Bank, directly or indirectly, and shall not exercise or be
deemed to exercise, directly or indirectly, a controlling influence over the
management or policies of the Bank.
E. The board of directors of CNB has approved the acquisition of stock
of Bank (the "Acquisition") and the transactions contemplated by this Agreement,
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and has authorized the execution and delivery of this Agreement at a board
meeting, duly noticed and held on August 16, 1995. The boards of directors of
each of the Seller and San Paolo have authorized the execution and delivery of
this Agreement at meetings duly noticed and held on July 28, 1995, and the board
of directors of Bank has approved the transactions contemplated by this
Agreement and authorized the execution and delivery of this Agreement at a
meeting duly noticed and held on July 28, 1995. Now, therefore, in
consideration of the premises and the mutual agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
Purchase and Sale
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1.1 Agreement of Purchase and Sale.
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(a) On the terms and subject to the conditions set forth in this
Agreement, CNB agrees to purchase, and the Seller agrees to sell and cause
to be sold to CNB, all of the shares of Bank Common Stock (as defined in
Section 3.1(b)) held by Seller (the "Shares"), which Shares shall
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constitute all of the issued and outstanding shares of Bank Common Stock.
The purchase price for the Shares (the "Purchase Price")
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shall be $85,000,000.00, adjusted by adding the amount of the Bank's pre-
tax income, determined in accordance with generally accepted accounting
principles, consistently applied ("GAAP"), less income taxes on such income
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calculated at 42.15%, for the period from January 1, 1996 (if the Closing
has not yet occurred by that date) until the Closing Date (provided that in
lieu of making such adjustment to the Purchase Price the Seller may elect
to cause the Bank to declare and pay a dividend in such amount to Seller on
or before the Closing Date), and further adjusted by subtracting the sum of
(i) the amount by which [confidential information omitted and filed
separately] exceeds the Bank's tangible net worth at Closing, determined in
accordance with GAAP; and (ii) the dollar amount which, if added to the
Bank's allowance for loan and lease losses ("ALLL") at Closing, would cause
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the ALLL to equal [confidential information omitted and filed separately];
provided, however, that the foregoing adjustments to the Purchase Price
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shall be calculated (W) without regard to the actions taken or required by
Sections 4.8 and 4.14, (X) after giving effect to the loan sales described
in Sections 4.13(b), 4.15, 4.16 and 1.1(d)(iii), (Y) if CNB has withheld
its consent to a bona fide settlement offer from an obligor pursuant to
Section 2.2(u) that Bank represents it was willing to accept, after giving
effect to such settlement as if it had occurred on such terms as were
presented to CNB and (Z) if Bank has sold those loans identified in the
Disclosure Schedule for net proceeds in excess of $3,750,000 (but less than
$4,500,000), after adding to the ALLL (solely for the purpose of the
calculation of the Purchase Price) the difference between $4,500,000 and
the amount of such net proceeds. For purposes of the preceding sentence,
"tangible net worth" shall mean the shareholders' equity of the Bank, minus
goodwill of the Bank, and
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minus any deferred tax asset of the Bank, as set forth on the Closing
Balance Sheet (as defined in Section 1.1(c)) and "aggregate loans" shall
mean the Bank's total outstanding loans, less participations sold, less
unearned income on consumer installment loans, less deferred loan
origination fees and costs, provided that aggregate loans shall be
calculated on a basis consistent with the Bank's Audited Financials.
(b) No later than five business days before the Closing Date, Seller
shall provide to CNB a written estimate of the Purchase Price based upon
the best available information at that time and which, absent manifest
error, shall be payable by CNB by wire transfer in immediately available
funds at the Closing (as defined in Section 1.2) against delivery of the
stock certificates representing the Shares, duly endorsed for transfer to
CNB or accompanied by stock powers separate from the certificates that are
appropriate for such purpose. Seller shall instruct CNB concerning the
account to which the estimated Purchase Price shall be paid and shall
provide appropriate wire instructions therefor at least two business days
prior to the Closing.
(c) No later than 20 days following the Closing Date, the Seller
shall provide to CNB the unaudited balance sheet (the "Closing Balance
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Sheet") of the Bank, prepared in accordance with GAAP, and the written
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calculation of the Purchase Price ("Purchase Price Reconciliation"), each
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as of the Closing Date. Within 20 days thereafter, CNB shall indicate to
Seller in writing whether it agrees or disagrees with the Closing Balance
Sheet or the Purchase Price Reconciliation, or any portion thereof. If CNB
indicates its disagreement during such period, CNB and the Seller shall
have until 60 days following the Closing Date to resolve such disagreement.
On
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the 61st day following the Closing Date, the parties shall either (i) have
agreed upon the adjustments, if any, to the Closing Balance Sheet and the
Purchase Price Reconciliation and shall, on a mutually agreeable date no
later than five days thereafter, cause the appropriate party to promptly
pay the other party the amount necessary to result in full payment of the
actual Purchase Price, as so calculated, or (ii) submit all remaining items
of disagreement to binding arbitration in accordance with Section 1.1(d)
hereof. Notwithstanding any other provision of this Section 1.1, any matter
that can be resolved pursuant to Section 4.3(c) shall be resolved in the
manner described therein, and the amounts, or adjustments, as the case may
be, determined under such Section 4.3(c) shall be conclusive for the
purposes of determining the correct amounts included within the Closing
Balance Sheet and the Purchase Price Reconciliation and for determining the
Purchase Price.
(d) (i) In the event the parties hereto are unable to reach
agreement with respect to (A) the Closing Balance Sheet or the
Purchase Price Reconciliation or (B) any disputed Credit Matter (as
defined in Section 4.3(c)), then Deloitte & Touche LLP shall be
retained no later than 65 days following the Closing Date to review
the matter under dispute and to determine the Purchase Price
Reconciliation. If Deloitte & Touche LLP shall be unable or
unwilling to accept such retention, and the parties hereto are
unable to agree on another nationally recognized independent
accounting firm to make such determination, CNB and Seller shall
each nominate a nationally recognized independent accounting firm
that does not regularly work for such party and is willing to accept
such retention, and one of such two nominated accounting firms shall
be selected by a flip of a coin with the flip being made by a lawyer
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for CNB in the presence of a lawyer for Seller, with Seller's lawyer
designating which firm will be chosen if "heads" results or "tails"
results. Deloitte & Touche LLP or such other independent accounting
firm shall be selected no later than 70 days following the Closing
Date and shall be referred to herein as the "Arbitrator."
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(ii) With respect to a dispute as to the Closing Balance Sheet
and the Purchase Price Reconciliation contemplated by subsection
1.1(c), CNB and Seller shall each present the Arbitrator, no later
than three (3) days after the Arbitrator has accepted its
appointment, with its proposed Closing Balance Sheet and Purchase
Price Reconciliation in writing and the Arbitrator shall select one
of the two such proposals (the Arbitrator shall not have the
discretion to change either proposal or otherwise compromise between
the two proposals, provided, that the Arbitrator will be bound to
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accept each determination made by the Arbitrator with respect to a
Credit Matter included within the Closing Balance Sheet and Purchase
Price Reconciliation pursuant to Section 1.1(d)(iii)). In selecting
a proposal as to the Closing Balance Sheet and the Purchase Price
Reconciliation, the Arbitrator shall select the proposal that most
accurately reflects the accounting practices utilized by the Bank in
the preparation of the Audited Financial Statements, so long as such
practices are in accordance with GAAP or regulatory accounting
practices ("RAP").
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(iii) With respect to a dispute as to a Credit Matter, CNB and
Seller shall each present the Arbitrator with a written proposal set
forth on a loan-by-loan basis and the Arbitrator shall select one of
the two such written proposals on a loan-by-loan basis (the
Arbitrator shall not with respect to a specific loan
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have the discretion to change either proposal or otherwise
compromise between the two proposals). In selecting a proposal as to
a specific loan, the Arbitrator shall select the proposal that most
accurately reflects the Bank's credit standards, policies and
procedures as in effect on June 30, 1995, as modified, if necessary,
to become or remain in accordance with GAAP or RAP or in conformity
with the recommendations of the Bank's regulators. Notwithstanding
any other provision of this Agreement, if the Arbitrator makes its
determination as to a Credit Matter in favor of CNB, then Seller
shall have the option, to be exercised no later than 3 days after
notification of the Arbitrator's determination, to purchase the loan
(and accrued interest) that was the subject of the disputed Credit
Matter from Bank (or CNB, if after the Bank Merger) at its gross
book value at the Closing Date, plus accrued interest, minus the
amount of reserves associated with such loan as determined by Bank
immediately prior to the Closing (without regard to adjustments made
pursuant to Section 4.8 hereof or in response to a dispute
arbitrated pursuant to this Section 1.1(d)).
(iv) CNB and Seller shall be afforded the opportunity to present
to the Arbitrator any material or information relating to the
matters in dispute. The Arbitrator shall render its decision as
soon as possible, but not later than 30 days after the Arbitrator
was appointed. The Arbitrator's decision shall be in writing and
counterpart copies thereof shall be delivered to each of the
disputing parties. CNB and Seller shall each bear and pay one-half
of the fees and disbursements of the Arbitrator in connection with
its analysis. The determination by the Arbitrator shall be final and
binding on the parties hereto.
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CNB and Seller shall make such adjustments to the Purchase Price, as
determined by the Arbitrator, no later than 3 days following
notification of the Arbitrator's decision.
(e) The payment(s) required to adjust the estimated Purchase Price
paid at the Closing Date to the final Purchase Price payable hereunder
shall include interest on the amount of such additional payment from and
including the Closing Date to, but not including, the date of such
additional payment at the Federal Funds Rate. "Federal Funds Rate" shall
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mean, for any day, the weighted average of the rates on overnight Federal
funds transaction with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding business day by
the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a business day, the average of the rates quoted to the
Seller or CNB, as the case may be, on such day for such transactions by
three Federal funds brokers of recognized standing selected by it. The
Federal Funds Rate for Saturdays, Sundays and any other day on which the
Federal Reserve Bank of New York is closed shall be the Federal Funds Rate
as in effect for the next preceding day for which the Federal Funds Rate
shall have been determined.
1.2 Closing. The respective deliveries of consideration, stock
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certificates and other documents and the taking of all other remaining actions
necessary to complete the purchase and sale transaction provided for in this
Agreement (the "Closing") shall take place on such date (the "Closing Date") as
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CNB and Seller agree; provided, that in the absence of an agreement by CNB and
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Seller to the contrary, the Closing Date shall be December 31, 1995 or, if
later, the earliest Friday following the date all of the conditions to Closing
set forth in Section 5.1(b) have been satisfied or waived. CNB shall provide at
least fourteen
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(14) days prior notice to Seller of such later Closing Date. The Closing shall
be held at the offices of CNB located at 000 Xxxxx Xxxxxxx Xxxxx, Xxxxxxx Xxxxx,
Xxxxxxxxxx, or at such other place as the parties hereto shall agree. All
deliveries of documents, payment of consideration and other actions necessary in
connection with or to complete the Closing shall be deemed to be taken and
effected simultaneously as part of one single transaction, and none of the
foregoing shall be deemed completed unless and until all are completed.
1.3 Bank Merger. Immediately following the purchase of the Bank Common
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Stock by CNB, the Bank shall be merged with and into CNB pursuant to applicable
law (the "Bank Merger"). The Selling Entities and the Bank shall cooperate with
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CNB in all reasonable respects in accomplishing the Bank Merger.
ARTICLE II
Conduct Pending the Merger
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2.1 Conduct of the Bank's Business Prior to the Closing Date. Except as
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expressly provided in this Agreement, during the period from the date of this
Agreement to the Closing Date, the Bank shall, and the Selling Entities shall
cause the Bank to, (a) conduct its business in the usual, regular and ordinary
course, consistent with past practices and consistent with prudent banking
practices; (b) use its reasonable best efforts to maintain and preserve intact
its business organization, employees and advantageous customer relationships, to
continue to develop such customer relationships and to retain the services of
its officers and key employees; (c) maintain and keep its properties in as good
repair and condition as at present except for obsolete properties and for
deterioration due to ordinary wear and tear or damage due to casualty; (d)
maintain in full force and effect insurance comparable in amount and scope of
coverage to that now maintained by it; (e) perform in all material respects all
of its material obligations under material contracts, leases and documents
relating to and
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affecting its assets, properties and business except such obligations as
it may in good faith reasonably dispute; (f) charge off all loans receivable and
other assets, or portions thereof, deemed uncollectible in accordance with GAAP
and with RAP, applicable law or regulation, or any classified as "loss" or as
directed by its regulators; (g) substantially comply with and perform all
material obligations and duties imposed upon it by all material Federal and
state laws, and material rules, regulations and orders imposed by Federal, state
and local governmental authorities; and (h) take no action which would
materially adversely affect or delay the ability of the Selling Entities, the
Bank or CNB to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated hereby or to
perform its covenants or agreements on a timely basis under this Agreement.
2.2 Forbearance by the Selling Entities and the Bank. During the period
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from the date of this Agreement to the Closing, except as set forth on the
Disclosure Schedule, the Bank shall not, and the Selling Entities shall not
permit the Bank, without the prior written consent of CNB, which consent shall
not be unreasonably withheld, to:
(a) incur any indebtedness for borrowed money or assume, guaranty,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity (except
for short-term borrowings not in excess of the longer of thirty days or
until December 31, 1995, in amounts no greater than $50,000,000 and made at
prevailing market rates and terms and except for deposits);
(b) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend or make any other distribution on any capital
stock (other than as contemplated by Section 1.1) or, directly or
indirectly, redeem, purchase or otherwise acquire any shares of its capital
stock or any securities or obligations convertible into
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or exchangeable for any shares of its capital stock, or grant any stock
appreciation rights or grant any individual, corporation or other entity
any right to acquire any shares of its capital stock; or issue any
additional shares of capital stock;
(c) except as set forth in the Disclosure Schedule, sell, transfer,
mortgage, encumber or otherwise dispose of any of its properties or assets
(other than pursuant to subsection (n) of this Section 2.2) with a book
value of $1,000,000 or more, to any individual, corporation or other
entity, or cancel, release or assign any indebtedness of any such person or
any claim held by any such person, except pursuant to contracts or
agreements in full force and effect at the date of this Agreement;
(d) except as permitted under subsection (j) of this Section 2.2,
make any material investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any properties
or assets of any other individual, corporation or other entity, other than
contributions by Seller or San Paolo to the capital of the Bank;
(e) enter into, renew or terminate any material contract or
agreement, or make any material change in any of its material leases or
contracts, other than (i) deposit agreements or loan agreements or (ii) in
the ordinary course of business consistent with past practice with respect
to contracts, agreements or leases terminable on not more than 90 days
notice or involving payment or payments of not more than $50,000 per annum;
(f) increase in any manner the compensation (including, without
limitation, bonuses) or fringe benefits of any of its employees, former
employees or retirees or pay any pension or retirement allowance not
required by any existing plan or agreement to any such employees, former
employees or retirees, or become a party
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to, amend or commit to any pension, retirement, retention, severance (other
than in accordance with Section 4.2), deferred compensation, profit sharing
or welfare benefit plan or agreement or employment agreement with or for
the benefit of any employee, former employee or retiree other than annual
salary and bonus increases made in the ordinary course of business not
exceeding 3 1/2% in the aggregate (based upon June 30, 1995 salary figures)
or 5% for any employee (except as required by applicable Federal or
California law), or voluntarily accelerate the vesting of any employee
benefits;
(g) settle any claim, action or proceeding involving any liability
of the Bank for material monetary damages (except to the extent fully
reserved against on the Bank's books and records) or enter into any
settlement agreement containing material obligations of the Bank;
(h) hire additional officers or employees (except that the Bank may
hire non-officer employees to fill vacancies in existing positions);
(i) sell any securities for a gain;
(j) purchase any securities other than United States Treasury
securities or United States Government Agency securities, which in either
case have maturities of three years or less;
(k) engage in trading with respect to any of its securities;
(l) amend its Articles of Incorporation or Bylaws, or change in any
material way its material policies and procedures or make any material
changes to its tax or financial accounting policies (except as to changes
to its tax or financial accounting policies as may be required by GAAP or
RAP);
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(m) introduce any new service or products (other than products or
services relating to the Community Reinvestment Act (or other similar law
or regulation), unless such products or services could not legally be
discontinued by CNB following the Closing Date), institute any new
advertising campaign, open or apply to open any new branch or facility, or,
in general, change in any material respects its products and services from
those in effect at the date of this Agreement;
(n) sell any "other real estate" ("ORE") or similarly held
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properties other than at a cash price of at least 80% of the book value of
such property at June 30, 1995; provided, however, that in the event an
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appraisal conforming to applicable banking regulations is delivered with
respect to such property after June 30, 1995, such sale must be made at a
cash price of at least 85% or more of the value of such property determined
pursuant to the then most recent such appraisal;
(o) (i) renew, extend the maturity of, or materially alter any of
the material terms of, any loan or forbearance agreement for a period of
greater than six months, or (ii) make, acquire a participation in, or
reacquire an interest in a participation sold of, any loan or forbearance
agreement, without regard to the term thereof, which, in the case of (i) or
(ii), when aggregated with all other loans or extensions of credit to, or
forbearance agreements with, such borrower and its related interests,
result in total obligations in excess of $2,500,000 or, which amount taken
alone exceeds the amounts shown on Schedule 2.2(o) hereto for such type of
loan; provided, however, if any such loan is rated substandard or below,
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the amount that may be renewed, extended, reacquired or for which a
material term may be altered shall not exceed the lower of the amount shown
on Schedule 2.2(o) for such type of loan or $500,000;
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(p) make, acquire a participation in, or reacquire an interest in a
participation sold of, any loan that is not in compliance with the Bank's
normal credit underwriting standards, policies and procedures as in effect
on June 30, 1995, as modified, if necessary, to become or remain in
accordance with GAAP or RAP or in conformity with the recommendations of
the Bank's regulations; or renew, extend the maturity of, or alter any of
the material terms of any such loan for a period of greater than six
months;
(q) reallocate or reduce any material accrual or reserve, including,
without limitation, any contingency reserve, litigation reserve, tax
reserve, or the ALLL, by reversal or booking a negative provision, or
generally change the methodology by which such accounts have been handled
in past periods, provided, the Bank may take such actions if required to do
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so by GAAP or RAP;
(r) other than pursuant to a customer request, terminate or suggest
to a title, escrow or mortgage company customer, or to any major customer,
the termination of any deposit relationship without first consulting with a
designated CNB representative as to whether such relationship should be
retained;
(s) take any action that would result in a violation of any of the
covenants made herein by the Selling Entities or the Bank or would result
in any representations or warranties of the Selling Entities or the Bank
becoming untrue;
(t) consummate a foreclosure proceeding with respect to non-
residential raw land or industrial properties, unless (i) a Phase I
environmental report has been obtained and (ii) CNB consents in writing,
which consent shall not be unreasonably withheld;
14
(u) settle any charged-off loan with a contractual balance of
$500,000 or more, unless CNB's consent is obtained; or
(v) agree to, or make any commitment to, take any of the actions
prohibited by this Section 2.2.
2.3 Timeliness of CNB's Consent. For purposes of Section 2.2, any
---------------------------
consent required from CNB, unless earlier given or denied, shall be deemed to
have been given three business days after the time the Bank shall have requested
such consent in writing, unless during such three-day period CNB shall have
requested further information in writing reasonably necessary to allow the
decision to be made, in which case such consent, unless earlier given or denied,
shall be deemed to have been given three business days after the time the
requested information has been furnished.
2.4 Conduct by CNB Prior to the Closing Date. During the period from the
----------------------------------------
date of this Agreement to the Closing Date, CNB shall take no action which would
materially adversely affect or delay the ability of CNB, the Selling Entities or
the Bank to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated hereby or to
perform its covenants or agreements on a timely basis under this Agreement.
ARTICLE III
Representations and Warranties
------------------------------
3.1 Representations and Warranties of Selling Entities and the Bank.
---------------------------------------------------------------
The Selling Entities and the Bank represent and warrant to CNB that, except as
set forth in the Disclosure Schedule;
(a) Recitals True. The information set forth in the recitals of
-------------
this Agreement with respect to Selling Entities and the Bank is true and
correct.
15
(b) Capital Stock. The Bank is authorized to issue 2,000,000 shares
-------------
of common stock, no par value (the "Bank Common Stock"), and is not
-----------------
authorized to issue any other class or series of capital stock, or any
other securities giving the holder thereof the right to vote on any matters
on which stockholders of the Bank can vote. As of the date hereof,
1,667,488 shares of Bank Common Stock are issued and outstanding, all of
which shares are owned by Seller free and clear of any liens or
encumbrances. All outstanding shares of capital stock of the Bank are duly
authorized, validly issued and outstanding, fully paid and, subject to
(S)662 of the California Financial Code, nonassessable, and are subject to
no preemptive rights.
(c) Authority. The Bank has the power and authority, and is duly
---------
qualified in all jurisdictions where such qualification is required (except
for such qualifications the absence of which, individually or in the
aggregate, would not have a Material Adverse Effect on the Bank), to carry
on its business as it is now being conducted and to own all of its material
properties and assets. The Bank has all Federal, state, local and foreign
governmental authorizations necessary for it to own or lease its properties
and assets and to carry on its business as it is now being conducted,
except for such powers and authorizations the absence of which, either
individually or in the aggregate, would not have a Material Adverse Effect
on the Bank.
(d) Subsidiaries. The Bank has no subsidiaries, other than First
------------
Los Angeles Asset Management Corporation, a wholly-owned subsidiary of Bank
that has no material assets or liabilities and that will be dissolved prior
to December 31, 1995. Except as set forth in the preceding sentence, the
Bank does not own, directly or indirectly, any equity portion or voting
interest in any corporation, partnership or other entity.
16
(e) Approvals. The execution by the Bank and each of the Selling
---------
Entities of this Agreement has been authorized by all necessary corporate
action, including, but not limited to, a vote by each of their respective
boards of directors and, in the case of the Bank and Seller, by votes or
written consents of their respective sole shareholders. Subject to receipt
of required approvals, consents or waivers of governmental entities
referred to in Section 4.4, this Agreement is a valid and binding agreement
of each of the Bank and the Selling Entities, enforceable against each in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfers, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equitable principles.
(f) No Violations. The execution, delivery and performance of this
-------------
Agreement by the Selling Entities and the Bank does not, and the
consummation of the transactions contemplated hereby will not, constitute
(i) a breach or violation of, or a default under any applicable law, rule
or regulation or any material judgment, decree, order, governmental permit
or license, or material indenture, agreement or instrument of the Selling
Entities or the Bank, or to which any of them (or any of their respective
properties) is subject, which breach, violation or default would have a
Material Adverse Effect on the Bank or would materially hinder or delay
transactions contemplated hereby, or (ii) a breach or violation of, or a
default under, the Articles of Incorporation or Bylaws of any of them; and
the consummation of the transactions contemplated hereby will not require
any approval, consent or waiver under any such law, any rule, regulation,
judgment, decree, order, governmental permit or license or the approval,
consent or waiver of any other party to any such agreement, indenture or
instrument, other than (1) the required approvals, consents and waivers of
17
governmental authorities referred to in Section 4.4 and (2) any other
approvals, consents or waivers the absence of which, individually or in the
aggregate, would not result in a Material Adverse Effect on the Bank or
would not materially hinder or delay the transactions contemplated hereby.
(g) Financial Statements. The Bank's audited financial statements
--------------------
as of December 31, 1994 and for the fiscal year then ended (the "Audited
-------
Financials"), accompanied by the audit report of Xxxxxx Xxxxxxxx LLP, the
----------
Bank's independent certified public accountants, and the Bank's unaudited
balance sheet as of June 30, 1995 and the related statement of operations
for the six month period then ended (the "June 30 Financials") have been
------------------
provided to CNB. The Audited Financials and the June 30 Financials
(including any related notes and schedules) fairly present the financial
position, the results of operations, retained earnings and cash flows, as
the case may be, of the Bank as of the date thereof or for the periods set
forth therein, in each case in accordance with GAAP applicable to banks
during the periods involved, except as permitted in the case of unaudited
statements (which do not include cash flow statements or notes), and
subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount. The books and records of the Bank
are accurate in all material respects.
(h) Absence of Certain Changes or Events. Except as set forth in
------------------------------------
the June 30 Financials, since December 31, 1994, there have not been (i)
any changes in the business, assets, financial condition or results of
operations of the Bank that, individually or in the aggregate, have had a
Material Adverse Effect on the Bank; (ii) any amendment to the Articles of
Incorporation or Bylaws of the Bank; (iii) any declaration, setting aside
or payment of any dividend or any other distribution in
18
respect of the capital stock of the Bank, other than as contemplated by
Section 1.1; or (iv) any change by the Bank in accounting principles or
methods or tax methods, except as required or permitted by, the Financial
Accounting Standards Board or by any governmental entities having
jurisdiction over the Bank with respect to financial statements filed by
it.
(i) Taxes. The Bank has or will have timely filed all material Tax
-----
Returns required to have been filed prior to the Closing (taking into
account valid extensions). To the knowledge of the Selling Entities and
the Bank, all such Tax Returns are correct and complete in all material
respects. Seller and the Bank have delivered or made available to CNB true
and complete copies of all such Tax Returns for 1991, 1992 and 1993 and,
when available, will deliver to CNB true and complete copies of such Tax
Returns for 1994. The Disclosure Schedule sets forth those California Tax
Returns that have been audited since 1982, those Federal Tax Returns that
have been audited since 1987, those Tax Returns that currently are the
subject of audit, and those Tax Returns for which the statute of
limitations for the assessment of Taxes has not run. All Taxes (including,
but not limited to, any interest, penalty or addition thereto) due, or
required to be withheld and paid over as of the date hereof as shown on
such returns, by Seller or the Bank, have been timely paid. Neither Seller
nor the Bank has requested any extension of time within which to file a
return or report that has not since been timely filed. Except as set forth
in the Disclosure Schedule, no deficiency in any Taxes, assessments or
governmental charges have been proposed, asserted or assessed against
Seller or the Bank that has not been settled and paid. Except as set forth
in the Disclosure Schedule, no waiver of time to assess any Taxes is in
effect and no request for such waiver is pending. The Disclosure Schedule
19
identifies the amount and expiration dates for all net operating loss
carryforwards and gross timing differences of the Bank as of December 31,
1994. None of Seller, Bank, Seller and Bank as a group, or Seller's Group,
have undergone an ownership change within the meaning of Section 382 of the
Internal Revenue Code of 1986, as amended (the "Code"). To the knowledge of
----
the Selling Entities, the Bank has no liability for Taxes, including
employment taxes, of any person (other the Bank) under Treasury Regulation
(S)1.1502-6, as a transferee or successor, or otherwise. The Bank has not
made, nor is it obligated to make, nor is it a party to any agreement that
could reasonably be expected to obligate it to make, any payments that are
not deductible pursuant to Code Section 280G. Seller is not a dealer within
the meaning of Code Section 475 and the applicable Treasury Regulations.
(j) Absence of Claims; Litigation. No litigation, proceeding or
-----------------------------
controversy before any court or governmental agency is pending against the
Bank which is reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect on the Bank or to materially hinder or delay
consummation of the transactions contemplated hereby, and, to its
knowledge, no such litigation, proceeding, controversy, claim or action has
been threatened. The Bank is not in default with respect to any material
judgment, order, writ, injunction, decree, or award of any court,
arbitrator or governmental agency or instrumentality. The Disclosure
Schedule contains a complete listing of litigation pending or, to the
knowledge of the Selling Entities or the Bank, threatened, against the
Bank, as of June 30, 1995, to which the Bank is a party and which names the
Bank as a defendant or cross-defendant and the amount reserved for
litigation matters in the aggregate.
20
The litigation reserves as reflected in the June 30 Financials are adequate
in accordance with GAAP.
(k) Regulatory Actions. The Bank has executed a stipulation and
------------------
consent to a Cease and Desist Order ("Order") issued by the FDIC on or
-----
about October 3, 1994, is a party to a memorandum of understanding ("MOU")
---
with the FDIC dated as of June 6, 1995 and is subject to an order
("California Order") issued by the State of California Banking Department
------------------
on or about December 21, 1994. Copies of the Order, the MOU and the
California Order have been previously provided to CNB. The Bank is not a
party to any other cease and desist order, written agreement, memorandum of
understanding or any similar regulatory action or order with any Federal or
state governmental authorities, nor is the Bank a recipient of any
extraordinary supervisory letter from, nor has it adopted any board
resolution at the request of any of its regulators, nor has the Bank been
advised that any such issuance or request is contemplated. As of the date
hereof, to the knowledge of the Bank and the Selling Entities, the Bank is
not the subject of a referral to either the United States Department of
Justice or the Department of Housing and Urban Development for alleged
violations of the Fair Lending Acts. Except as set forth in the Order, the
MOU and the California Order described earlier in this subsection, to the
knowledge of the Selling Entities and Buyer, each material violation,
criticism, or exception by any governmental authority with respect to any
examinations of the Bank has been resolved or is in the process of
resolution.
(l) Certain Agreements. The Bank is not a party to an oral or
------------------
written (i) consultant agreement, not terminable on 90 days' or less notice
and involving the payment of more than $50,000 per annum, (ii) agreement
with any executive officer
21
or other key employee of the Bank, the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a
transaction involving the Bank of the nature contemplated by this
Agreement, (iii) agreement with or with respect to any executive officer of
the Bank providing any term of employment or compensation guarantee
extending for a period longer than six months, or (iv) agreement or plan,
any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement. CNB has been provided with a
complete and accurate listing of the names and current annual salary rates
of all persons employed by the Bank, showing for each such person the
amounts paid or payable as salary, bonus payments and any indirect
compensation for the year ended December 31, 1994, the names of all of the
Bank's directors and officers and the names of all persons, if any, holding
tax or other powers of attorney for the Bank.
(m) Labor Matters. The Bank is not a party to nor is it bound by
-------------
any collective bargaining agreement, contract, or other agreement or
understanding with a labor organization, nor is the Bank the subject of any
proceeding asserting the Bank has committed an unfair labor practice or
seeking to compel the Bank to bargain with any labor organization as to
wages and conditions of employment, nor is there any strike or labor
dispute involving the Bank pending or threatened. The Bank considers its
employee relations to be satisfactory.
(n) Employee Benefit Plans. A list of all Employee Plans (as
----------------------
hereinafter defined) is set forth in the Disclosure Schedule. The Bank has
delivered or made
22
available to CNB true and complete copies of the following documents, as
they may have been amended to the date hereof, embodying or relating to
Employee Plans: Each of the Employee Plans, including all amendments
thereto, any related trust agreements, insurance policies or any funding
agreements; the most recent determination letter from the Internal Revenue
Service ("IRS") with respect to each of the Employee Plans; the actuarial
---
evaluation, if any, for the most recent plan year prepared for each of the
Employee Plans; the current summary plan description of each of the
Employee Plans; and the most recent annual return/report on IRS Forms 5500,
5500-C or 5500-R for each of the Employee Plans for which such report was
prepared.
Except as set forth in the Disclosure Schedule:
(i) the written terms of each of the Employee Plans and, if
controlled by Bank or any of the Selling Entities, any related trust
agreement, group annuity contract, insurance policy or other
agreement, have been administered in substantial compliance with the
applicable requirements of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") and the Code;
-----
(ii) each of the Employee Plans for which the Bank has claimed a
deduction under Code Section 404, as if such Employee Plan were
qualified under Code Section 401(a), has received a favorable
determination letter from the IRS as to the tax qualification of
such Employee Plan, and to the knowledge of the Bank such favorable
determination has not been modified, revoked or limited by failure
to satisfy any condition thereof or by a subsequent amendment to, or
failure to amend, such Employee Plan;
23
(iii) to the knowledge of the Bank, neither it nor any other
"disqualified person" or "party in interest" (as defined in Code
Section 4975 and Section 3(14) of ERISA, respectively) with respect
to an Employee Plan has engaged in any "prohibited transaction" (as
defined in Code Section 4975 or Section 406 or 407 of ERISA) that
could reasonably be expected to subject the Bank to any material
tax, penalty or liability under Code Section 4975 or Title I of
ERISA;
(iv) no Employee Plan is a Multiple Employer Plan within the
meaning of Code Section 413 or a Multiemployer Plan within the
meaning of Section 3(37) of ERISA;
(v) the Bank has not incurred and does not have knowledge of any
pending material tax, penalty or liability under Code Section 4972
with respect to any Employee Plan;
(vi) continuation health care coverage requirements and notice
requirements under Code Section 4980B and Sections 601 through 608
of ERISA have been satisfied in all material respects with respect
to all current or prior employees of the Bank and any "qualified
beneficiary" of any such employees (within the meaning of Code
Section 4980B(g)); and
(vii) no Employee Plan provides for retiree medical benefits.
For purposes hereof, the term "Employee Plan" means any "employee
benefit plan" (as defined in (S)3(3) of ERISA) as well as any other
material written or formal plan or contract involving direct or indirect
compensation under which the Bank has any present or future obligations or
liability on behalf of its employees or former employees or their
dependents or beneficiaries, including, but not limited to, each
24
retirement, employee stock ownership, cash or deferred, each other deferred
or incentive compensation, bonus, stock option, employee stock purchase,
"phantom" stock or stock appreciation right plan, each other program
providing payment or reimbursement for or of medical, dental or visual
care, counselling, or vacation, sick, disability or severance pay and each
other "fringe benefit" plan or arrangement.
(o) Insider Loans; Other Transactions. The Bank has previously
---------------------------------
provided CNB with a listing, current as of June 30, 1995, of all extensions
of credit made to the Selling Entities' or the Bank's executive officers
and directors and their related interests (all as defined under Federal
Reserve Board Regulation "O"), all of which have been made in compliance
with Regulation O, which listing is true, correct and complete in all
material respects. The Bank does not owe any amount to, or have any
contract or lease with or commitment to, any of the present executive
officers or directors of the Selling Entities or the Bank (other than for
compensation for current services not yet due and payable, and
reimbursement of expenses arising in the ordinary course of business).
(p) Title to Assets. The Bank has good and marketable title to all
---------------
of its material properties and assets (other than (i) property as to which
it is lessee and (ii) real estate owned as a result of foreclosure,
transfer in lieu of foreclosure or other transfer in satisfaction of a
debtor's obligation previously contracted), including, without limitation,
all personal and intangible properties reflected in the Audited Financials
or the June 30 Financials, or acquired subsequently thereto, subject to no
liens, mortgages, security interests, encumbrances or charges of any kind
except (1) as noted in the Audited Financials or the June 30 Financials or
as set forth in the Disclosure Schedule, (2) statutory liens not yet
delinquent which are being contested
25
in good faith by appropriate proceedings, and liens for Taxes not yet due,
(3) defects and irregularities in title and encumbrances which do not
materially impair the use thereof for the purpose for which they are
intended, (4) pledges of assets in the ordinary course of business to
secure public deposits, (5) for those assets and properties disposed of for
fair value in the ordinary course of business since the date of the Audited
Financials or the June 30 Financials, and (6) any other liens, mortgages,
security interests, encumbrances or charges of any kind, which individually
do not exceed $50,000 in amount. Without limiting the above, the Bank owns
or possesses valid and binding licenses and other rights to itself use
without payment all material patents, copyrights, trade secrets, trade
names, service marks, logos and trademarks used in its business, and the
Bank has not received any notice of conflicts with respect thereto that
asserts the rights of others.
(q) Knowledge as to Conditions. As of the date hereof, the Selling
--------------------------
Entities and the Bank know of no reason why the approvals, consents and
waivers of governmental authorities referred to in Section 5.1(b) should
not be obtained without the imposition of any condition of the type
referred to in the provisos thereto.
(r) Compliance with Laws. The Bank is not in material violation in
--------------------
respect of any material Federal, state or local laws, rules, regulations or
orders applicable to it or by which its properties may be bound. Without
limiting the scope of the previous sentence, Bank is not in material
violation of Regulations B, D, E, Z or DD adopted by the Board of Governors
of the Federal Reserve System (the "FRB"); and the Equal Credit Act (15
---
U.S.C. (S)1691, et seq.), the Fair Housing Act (420 U.S.C. (S)3601, et
------- --
seq.), the Bank Secrecy Act (31 U.S.C. (S)5322, et seq.), the Home Mortgage
---- -------
Disclosure Act (12 U.S.C. 2801, et seq.) (collectively, the Fair
-------
26
Lending Acts), and those provisions of the United States Code providing
penalties for the laundering of monetary instruments (18 U.S.C. (S)1956) or
engaging in monetary transactions in property derived from specified
unlawful activity (18 U.S.C. (S)1957) shall be deemed to be material laws.
(s) Fees. Other than financial advisory services performed for
----
Seller by Salomon Brothers Inc, neither the Selling Entities nor the Bank,
nor any of their respective officers, directors, employees or agents, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees in connection
with this Agreement or the transactions contemplated hereby. The fees of
Salomon Brothers Inc referred to in the preceding sentence shall be for the
account of Seller.
(t) Environmental.
-------------
(i) To the knowledge of the Selling Entities and the Bank, all
of the properties and operations of the Bank are in compliance in
all material respects with all material Environmental Laws (as
defined below) applicable to such properties and operations. The
Bank's environmental practices with respect to real estate secured
loans have been substantially in compliance with industry standards
since July 1994.
(ii) To the knowledge of the Selling Entities and the Bank, the
Bank has obtained all material permits, licenses, and authorizations
which are required for the Bank's operations under Environmental
Laws.
(iii) To the knowledge of the Selling Entities and the Bank, no
Hazardous Substances (as defined below) exist on, about, or within
or have been used, generated, stored, transported, disposed of on,
or released from,
27
any of the Bank's properties except in accordance in all material
respects with Environmental Laws. Neither the Selling Entities nor
the Bank has any actual knowledge as of the date of this Agreement
that any prior owners, occupants or operators of any such property
or any other property in which Bank has a security interest, ever
deposited, disposed of, or allowed to be deposited or disposed of,
in, on, or under or handled or processed on, or released, emitted or
discharged from, such properties any Hazardous Materials except in
accordance in all material respects with Environmental Laws, or that
any prior or present owners, occupants or operators of any
properties in which the Bank holds a security interest, mortgage or
other lien or interest, deposited or disposed of, in, on or under or
handled and/or processed on, or released, emitted or discharged
from, such properties any Hazardous Material except in accordance in
all material respects with Environmental Laws. The use which the
Bank has made, makes and intends to make of its properties will not
result in the use, generation, storage, transportation,
accumulation, disposal or release of any Hazardous Substance on, in,
or from any of such properties except in accordance in all material
respects with applicable Environmental Laws.
(iv) There is no action, suit, proceeding, investigation, or
inquiry before any court, administrative agency or other
governmental authority pending, or, to the knowledge of the Selling
Entities and the Bank, threatened against the Bank relating in any
way to any material violation of any Environmental Law. To the
knowledge of the Selling Entities and the Bank, the Bank has no
material liability for remedial action with respect to a
28
violation of an Environmental Law. The Selling Entities and the Bank
have not received any written requests for information relating to
any material violations of any Environmental Law from any
governmental authority with respect to the condition, use, or
operation of any of the Bank's properties nor has any of them
received any notice from any governmental authority or any written
notice from any other person with respect to any material violation
of or material liability for any remedial action under any
Environmental Law.
(v) As used in this Section, the term "Environmental Law" means
-----------------
any and all Federal, state and local laws, regulations, and
requirements pertaining to health, safety and the environment,
including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act of 1980, 42 U.S.C. (S)9601,
et seq. ("CERCLA"), the Resource Conservation and Recovery Act of
------
1975, 42 U.S.C. (S)6901, et seq. ("RCRA"), the Occupational Safety
----
and Health Act, 29 U.S.C. (S)651, et seq. (as it relates to the use
of, or exposure to, Hazardous Substances), the Clean Air Act, 42
U.S.C. (S)7401, et seq., the Clean Xxxxx Xxx, 00 X.X.X. (X)0000, et
seq., the Toxic Substance Control Act, 15 U.S.C. (S)2601, et seq.,
the Xxxxxxxxx-Xxxxxxx-Xxxxxx Hazardous Substance Account Act, as
amended, Chapter 6.8 of the California Health and Safety Xxxx,
(X)00000, et seq., and the Hazardous Waste Control Law, Chapter 6.5
of the California Health and Safety Xxxx, (X)00000, et seq. (the
-------
latter two statutes being referred to herein as the State Acts), and
any and all regulations promulgated thereunder, and all similar
laws, regulations, and requirements of any governmental authority,
agency having jurisdiction over the environmental activities of the
Bank or of
29
its properties, as such laws, regulations, and requirements may be
in effect on the date hereof.
(vi) As used in this section, the term "properties" shall
----------
include: all real estate property owned or leased by the Bank; and
any other property as to which the Bank could be deemed an "owner"
or "operator" under any applicable Environmental Law.
(vii) As used in this section, the term "Hazardous Substance"
-------------------
shall mean any "hazardous waste" as defined by CERCLA and the State
Acts, as such acts are in effect on the date hereof, and any and all
regulations promulgated thereunder; (1) any "hazardous substance" as
such term is defined by CERCLA; (2) any "regulated substance" as
defined by the State Acts; (3) asbestos requiring abatement, removal
or encapsulation pursuant to the requirements of governmental
authorities; (4) polychlorinated biphenyls; (5) petroleum products;
(6) "hazardous chemicals" or "extremely hazardous substances" in
quantities sufficient to require reporting, registration,
notification and/or optional treatment or handling under the
Emergency Planning and Community Right to Know Act of 1986; (7) any
"hazardous chemical" in levels that would result in exposure greater
than is allowed by permissible exposure limits established pursuant
to the Occupational Safety and Health Act of 1970; (8) any substance
that requires reporting, registration, notification, removal,
abatement and/or special treatment, storage, handling or disposal,
under (S)(S)6, 7 and 8 of the Toxic Substance Control Act (15 U.S.C.
(S)2601); (9) any toxic or hazardous chemical described in 29 C.F.R.
1910.1000-1047 in levels that would result in exposure greater than
those
30
allowed by the permissible exposure limits pursuant to such
regulations; and (10) any (A) "hazardous waste", (B) "solid waste"
capable of causing a "release or threatened release" that present an
"imminent and substantial endangerment" to the public health and
safety of the environment, (C) "solid waste" that is capable of
causing a "hazardous substance incident" (D) "solid waste" with
respect to which special requirements are imposed by applicable
governmental authorities upon the generation, transportation thereof
as such terms are defined and used within the meaning of the States
Acts or (E) any "pollutant" or "toxic pollutant" as such term is
defined in the Federal Clean Water Act, 33 U.S.C. (S)(S)1251-1376,
as amended, by Public Law 100-4, February 4,1987, and the
regulations promulgated thereunder, including 40 C.F.R. (S)(S)122.1
and 122.26.
(u) Allowance for Possible Loan Losses. The Bank's ALLL is and will
----------------------------------
be as of the Closing Date adequate in accordance with GAAP and RAP.
(v) Performance of Obligations. The Bank has performed in all
--------------------------
material respects all of the obligations required to be performed by it to
date hereunder, and is not in default under, or in breach of, any term or
provision of any material contract, lease, indenture or any other material
agreement to which the Bank is a party, is subject or is otherwise bound
and no event has occurred that, with the giving of notice or the passage of
time, or both, would constitute such default or breach, in each case which
would be material to its operations. The Disclosure Schedule contains a
list of all contracts to which the Bank is a party, except for contracts
terminable without penalty on not more than 90 days' notice or involving
the payment of not more than $50,000 per annum, deposit agreements and loan
agreements.
31
(w) Insurance. The Bank has in effect policies of insurance with
---------
respect to its assets and business against such casualties and
contingencies and in such types and forms as in the judgment of the Bank's
management are appropriate for its business, operations, properties and
assets. Other than policies of title insurance, the Bank shall make
available to CNB within ten (10) days of the date of this Agreement, copies
of all policies of insurance and bonds carried and owned by the Bank as of
the date hereof, which copies are complete and accurate in all material
respects, and which are listed in the Disclosure Schedule. The Bank is not
in default under any such policy of insurance or bond such that it is
reasonably likely to be cancelled. No notice of cancellation or material
amendments has been received with respect to existing material policies and
no coverage thereunder with respect to any material claims is being
disputed.
(x) Listing of Loans. Copies, in writing and on discs, have been
----------------
made available to CNB of the Bank's detailed listing of all loans and notes
receivable as of June 30, 1995, including participations, with the
outstanding principal balance of each such loan and note receivable, and
the past due status of any loan or note receivable, and such copies reflect
correctly the detail of trial balance totals of the Bank in all material
respects as of the date of such reports.
(y) Derivative Transactions. The Bank is not a party to a
-----------------------
transaction in or involving forwards, futures, options on futures, swaps or
other derivative instruments in an amount individually or in the aggregate
greater than $500,000 notional amount. No contract or agreement relating
thereto, were it to be a loan held by the Bank, would be a classified
asset.
32
(z) Trust Administration. The Bank does not presently exercise
--------------------
trust powers, including, but not limited to, trust administration, and has
not exercised such trust powers for a period of at least 5 years prior to
the date hereof. The term "trusts" as used in this subsection 3.1(z)
includes (i) any and all common law or other trusts between an individual,
corporation or other entities and the Bank, as trustee or co-trustee,
including, without limitation, pension or other qualified or nonqualified
employee benefit plans, compensation, testamentary, inter vivos, and
charitable trust indentures; (ii) any and all decedents' estates where the
Bank is serving or has served as a co-executor or sole executor, personal
representative or administrator, administrator xx xxxxx non, administrator
xx xxxxx non with will annexed, or in any similar fiduciary capacity; (iii)
any and all guardianships, conservatorships or similar positions where the
Bank is serving or has served as a co-grantor or a sole grantor or a
conservator or a co-conservator of the estate, or any similar fiduciary
capacity, and (iv) any and all agency and/or custodial accounts and/or
similar arrangements, including plan administrator for employee benefit
accounts, under which the Bank is serving or has served as an agent or
custodian for the owner or other party establishing the account with or
without investment authority.
3.2 Representations and Warranties of CNB. CNB represents and warrants
-------------------------------------
to the Selling Entities that:
(a) Recitals True. The information set forth in the recitals of
-------------
this Agreement with respect to CNB are true and correct.
(b) Authority. CNB has the power and authority, and is duly
---------
qualified in all jurisdictions where such qualification is required (except
for such qualifications the absence of which, individually or in the
aggregate, would not have a Material
33
Adverse Effect on CNB), to carry on its business as it is now being
conducted and to own all of its material properties and assets. CNB has all
Federal, state, local and foreign governmental authorizations necessary for
it to own or lease its properties and assets and to carry on its business
as it is now being conducted, except for such powers and authorizations the
absence of which, either individually or in the aggregate, would not have a
Material Adverse Effect on CNB.
(c) Approvals. The execution by CNB of this Agreement has been
---------
authorized by all necessary corporate actions of CNB, including, but not
limited to, a vote by its board of directors. No vote, consent or approval
of the shareholder of CNB or the shareholders of CNC is required to
authorize this Agreement or the consummation of the transactions
contemplated hereby. Subject to receipt of the required approvals,
consents or waivers of governmental authorities referred to in Section 4.4,
this Agreement is a valid and binding agreement of CNB enforceable against
CNB in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditor's rights and to general
equity principles.
(d) No Violations. The execution, delivery and performance of this
-------------
Agreement by CNB does not, and consummation of the transactions
contemplated hereby will not, constitute (i) a breach or violation of, or a
default under, any applicable law, rule or regulation or any material
judgment, decree, order, governmental permit or license, or material
indenture, agreement or instrument of CNC or CNB, or to which CNC or CNB
(or its property) is subject, which breach, violation or default would have
a Material Adverse Effect on CNB or would materially hinder or delay the
transactions contemplated hereby or (ii) a breach or
34
violation of or a default under, the Articles of Association or Bylaws of
CNB; and the consummation of the transactions contemplated hereby will not
require any approval, consent or waiver under any such law, rule,
regulation, judgment, decree, order, governmental permit or license or the
approval, consent or waiver of any other party to any such agreement,
indenture or instrument, other than (1) the required approvals, consents
and waivers of governmental authorities referred to in Section 4.4, and (2)
any other approvals, consents or waivers, the absence of which,
individually or in the aggregate, would not result in a Material Adverse
Effect on CNB or would not materially hinder or delay the transactions
contemplated hereby.
(e) Financial Statements. CNC's audited financial statements as of
--------------------
December 31, 1994 and for the fiscal year then ended (the "CNC Audited
-----------
Financials"), accompanied by the audit report of KPMG Peat Marwick LLP,
----------
CNC's independent certified public accountants, and CNC's unaudited balance
sheet as of June 30, 1995 and the related statement of income for the six
month period then ended (the "CNC June 30 Financials") have been provided
----------------------
to the Bank and the Selling Entities. The CNC Audited Financials and the
CNC June 30 Financials (including any related notes and schedules) fairly
present the financial position, the results of operations, retained
earnings and cash flows, as the case may be, of CNC as of the date thereof
or for the periods set forth therein, in each case in accordance with GAAP
applicable to banks during the periods involved, except as permitted in the
case of unaudited statements (which do not include cash flow statements or
notes), and subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount. The books and records of CNC
are accurate in all material respects.
35
(f) Absence of Certain Changes or Events. Except as set forth in
------------------------------------
the CNC June 30 Financials, since December 31, 1994, there have not been
any changes in the business, assets, financial condition or results of
operations of CNB that, individually or in the aggregate, have had a
Material Adverse Effect on CNB.
(g) Absence of Claims. No litigation, proceeding or controversy
-----------------
before any court or governmental agency is pending against CNB which is
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on CNB or to materially hinder or delay consummation of the
transactions contemplated hereby, and, to its knowledge, no such
litigation, proceeding, controversy, claim or action has been threatened.
CNB is not in default with respect to any material judgment, order, writ,
injunction, decree, or award of any court, arbitrator or governmental
agency or instrumentality. The litigation reserves on CNB's books are
adequate in accordance with GAAP.
(h) Regulatory Actions. CNB is not a party to any cease and desist
------------------
order, written agreement, memorandum of understanding or any similar
regulatory action or order with any Federal or state governmental
authorities, nor is CNB a recipient of any extraordinary supervisory letter
from, nor has it adopted any board resolution at the request of any of its
regulators, nor has CNB been advised that any such issuance or request is
contemplated. As of the date hereof, CNB is not the subject of a referral
to either the United States Department of Justice or the Department of
Housing and Urban Development for alleged violations of the Fair Lending
Acts. To the knowledge of CNB, each material violation, criticism, or
exception by any governmental authority with respect to any examinations of
CNB has been resolved or is in the process of resolution.
36
(i) Knowledge as to Conditions. CNB knows of no reason why the
--------------------------
approvals, consents and waivers of governmental authorities referred to in
Section 5.1(b) should not be obtained without the imposition of any
condition of the type referred to in the provisos thereto.
(j) Compliance with Laws. CNB is not in material violation in any
--------------------
respect of any material Federal, state or local laws, rules, regulations or
orders applicable to it or by which its properties may be bound. Without
limiting the scope of the previous sentence, CNB is not in material
violation of Regulations B, D, E, Z or DD adopted by the FRB; and the Equal
Credit Act (15 U.S.C. (S)1691, et seq.), the Fair Housing Act (420 U.S.C.
-------
(S)3601, et seq.), the Bank Secrecy Act (31 U.S.C. (S)5322, et seq.), the
------- -------
Home Mortgage Disclosure Act (12 U.S.C. 2801, et seq.) (collectively, the
-------
Fair Lending Acts), and those provisions of the United States Code
providing penalties for the laundering of monetary instruments (18 U.S.C.
(S)1956) or engaging in monetary transactions in property derived from
specified unlawful activity (18 U.S.C. (S)1957) shall be deemed to be
material laws.
(k) Fees. Other than financial advisory services performed for CNB
----
by CS First Boston Corporation, neither CNB, nor any of its officers,
directors, employees or agents, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees in connection with this Agreement or the
transactions contemplated hereby. The fees of CS First Boston Corporation
referred to in the preceding sentence shall be for the account of CNB.
37
ARTICLE IV
Covenants
---------
4.1 Acquisition Proposals. The Selling Entities and the Bank agree that
---------------------
neither they nor any of their respective officers and directors shall, and each
of them shall direct and use their best efforts to cause their employees, agents
and representatives (including, without limitation, any investment banker,
attorney or accountant retained by them) not to, initiate or solicit any
inquiries or the making of any proposal or offer with respect to, a merger,
consolidation or similar transaction involving, or any purchase of all or
substantially all of the assets or any equity securities of, the Bank (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal") or
--------------------
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. The Selling Entities and the Bank will promptly cease and cause to be
terminated any existing discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Selling Entities and the
Bank shall promptly notify CNB of any offer or inquiry that any of them receives
from any third party.
4.2 Employee Benefits.
-----------------
(a) All employees of the Bank continuing in the employ of CNB shall
be entitled to participate in stock plans, bonus plans and all other
benefit plans of CNB or CNC on the same basis as other similarly situated
employees of CNB. Each of these employees will be credited for
eligibility, participation, vesting and accrual purposes (provided that no
more than 1,080 hours of sick leave may be carried over into CNB's sick
leave program), with such employees respective years of past service
38
with the Bank (or other prior service so credited by the Bank) as though
they had been employees of CNB.
(b) The Bank has furnished to CNB its severance policies applicable
to its employees (other than as set forth in the Disclosure Schedule) and a
schedule indicating the amount that would be due as a severance payment to
each such employee if he or she is not offered continued employment in an
equivalent or substantially similar position by CNB following the Closing
Date. To the extent CNB fails to offer an employee identified on such
schedule continued employment in an equivalent or substantially similar
position following the Closing Date, CNB shall be responsible for paying
the severance payments due such employee as set forth on such schedule.
(c) CNB agrees to honor in accordance with their terms any existing
individual employment, severance, deferred compensation and similar
agreements between the Bank and any current or former officer, director,
employee or consultant of the Bank, provided such agreement is listed on
the Disclosure Schedule and a complete copy of such agreement has been
provided to CNB prior to the date hereof. Notwithstanding any other
provision of this Agreement, no employee shall receive duplicative benefits
by reason of these Sections 4.2(b) and 4.2(c) hereof.
4.3 Access and Information.
----------------------
(a) Upon reasonable notice, the Bank shall afford to CNB and its
representatives (including, without limitation, directors, officers, and
employees, and their affiliates, and counsel, accountants and other
professionals retained) such reasonable access during normal business hours
throughout the period prior to the Closing to the books, records
(including, without limitation, Tax Returns and work
39
papers of independent auditors), properties, policies, files, personnel and
to such other information as such persons may reasonably request, permit
such persons to inspect and make copies of all stock records, minute books,
books of account, contracts, commitments and other records, furnish to CNB
such counterpart originals or certified or other copies of such documents
or such information with respect to its businesses and affairs as CNB may
reasonably request and that the Bank may provide without violation or
applicable law or regulation or jeopardy to any attorney-client or similar
privilege to which the Bank may be entitled as against third parties other
than CNC or CNB. Without limiting the foregoing, the Bank shall promptly
provide CNB (i) monthly unaudited balance sheets and operating statements,
loan delinquency reports, investment reports and such other reports and
materials as are normally prepared and provided to the Board of Directors
or senior management of the Bank and (ii) each month and on the date that
is five days prior to the Closing Date, a list of loans for which a Notice
of Default has been filed or for which discussions have commenced that have
a reasonable possibility of leading to a deed in lieu of foreclosure by the
obligor thereunder. The Bank shall provide CNB with as much information
concerning any exit interview or similar meetings held in connection with
any regulatory examinations of the Bank and with respect to the examination
findings and results as the Bank can provide without violation of law.
(b) In addition to the access discussed in subsection (a) above, the
Selling Entities and the Bank agree that CNB will have the opportunity to
conduct a complete due diligence review of the Bank's operations and assets
during the period between execution of this Agreement and the Closing, with
such access as is necessary and useful for such review to the Bank's
facilities, records, employees and
40
representatives. Among other purposes, this review will enable CNB to
determine the appropriate adjustments, if any, called for by Section 1.1
hereof.
(c) CNB shall have the opportunity to complete a full credit review,
and to indicate to the Bank what changes CNB believes are appropriate with
respect to classification of loans, charge-offs of loans, and additions to
the ALLL ("Credit Matters") (each in accordance with the Bank's credit
--------------
standards, policies and procedures as in effect on June 30, 1995, as
modified, if necessary, to become or remain in accordance with GAAP or RAP
or in conformity with the recommendations of the Bank's regulators). CNB
shall provide to the Bank in writing no later than twenty (20) days prior
to the Closing Date a list of loans for which there is a dispute with
respect to Credit Matters. CNB may not dispute any Credit Matter pursuant
to this Section 4.3(c) that has not been submitted to the Bank in
accordance with the preceding sentence, other than disputes arising from
events occurring after the date of review by CNB but not later than the
Closing Date. CNB and the Bank will utilize best efforts to reach a good
faith agreement as to the changes to be made to the Bank's books with
respect to any disputed Credit Matters. Should CNB and the Bank be unable
to reach agreement despite such efforts, then the Credit Matters subject to
dispute will be submitted to binding arbitration in accordance with Section
1.1(d) hereof, whether prior to or following the Closing Date.
(d) Neither party shall, and each shall cause its representatives
not to, use any information obtained pursuant to this Section 4.3 for any
purpose unrelated to the consummation of the transactions contemplated by
this Agreement. Subject to the requirements of law, each party shall keep
confidential, and shall cause its representatives to keep confidential, all
information, documents and trade secrets
41
obtained pursuant to this Section 4.3 unless such information (i) becomes
or has become available to such party from other sources not known by such
party to be bound by a confidentiality obligation, (ii) is disclosed with
the prior written approval of the party to which such information pertains
or (iii) is or becomes readily ascertainable from published information or
trade sources. In the event that this Agreement is terminated or the
transactions contemplated by this Agreement 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 that furnished the same. Without limiting the
foregoing, CNB shall not use any of the information obtained pursuant to
this Section 4.3 (including, without limitation, customer lists) to contact
any of the Bank's existing customers unless the Closing has occurred.
4.4 Certain Filings, Consents and Arrangements. CNB, the Selling
------------------------------------------
Entities and the Bank shall (a) promptly make any filings and applications
required to be filed in order to obtain all approvals, consents and waivers of
the OCC, the FRB, the Bank of Italy, the Superintendent and any other
governmental authorities necessary or appropriate for the consummation of the
transactions contemplated hereby, (b) cooperate with one another (i) in promptly
determining what filings are required to be made or approvals, consents or
waivers are required to be obtained under any relevant Federal, state or foreign
law or regulation, (ii) in providing the other a reasonable opportunity to
review and comment upon the publicly available portions of such filings, and
(iii) in promptly making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such approvals, consents
or waivers and (c) deliver to the other copies of publicly available portions of
all such filings and applications promptly after they are filed.
42
4.5 Additional Agreements. Subject to the terms and conditions herein
---------------------
provided, each of the parties hereto agrees to use all reasonable best efforts
to take promptly, or cause to be taken promptly, all actions and to do promptly
or cause to be done promptly, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable,
including using reasonable best efforts to obtain all necessary actions or
nonactions, extensions, waivers, consents and approvals from all applicable
governmental entities, affecting all necessary registrations, applications and
filings and obtaining any required contractual consents (including consent to
assignment of leases where required) and regulatory approvals.
4.6 Publicity. The initial press release announcing this Agreement
---------
shall be a joint press release and thereafter CNB, the Selling Entities and the
Bank shall consult with each other in issuing any press releases or otherwise
making public statements with respect to the transactions contemplated hereby
and in making any filings with any governmental entity or with any national
securities exchange with respect thereto. If any party hereto, on the advice of
counsel, determines that a disclosure is required by law, it may make such
disclosure without the consent of the other parties, but only after affording
the other parties a reasonable opportunity to review and comment upon the
disclosure.
4.7 Notification of Certain Matters. The Bank shall give CNB, and CNB
-------------------------------
shall give the Bank, prompt notice of: (a) any material change in its business,
operations, or prospects, (b) any complaints, investigations or hearings (or
communications indicating that same may be contemplated) of any governmental
agency or regulatory authority, (c) the institution or the threat of material
litigation, or (d) any event or condition that constitutes a breach of this
Agreement, or that might be reasonably expected to cause its representations
43
or warranties set forth herein not to be true and correct in all material
respects as of the Closing Date.
4.8 Pre-Closing Adjustments. At or before the Closing, Seller shall
-----------------------
cause the Bank to make and the Bank shall make, such accounting entries or
adjustments, including charge-offs of loans, as CNB shall direct in order to
implement its plans for the Bank following the Closing or to reflect expenses
and costs related to the Bank Merger; provided, however, that (a) Seller and the
-------- -------
Bank shall not be required to take such actions more than two days prior to the
Closing Date, and (b) based upon consultation with counsel and accountants for
Seller and the Bank, no such adjustment shall (i) require any filing with any
governmental agency, (ii) violate any law, rule or regulation applicable to
Seller or the Bank, or (iii) otherwise materially disadvantage Seller or the
Bank if the Acquisition were not consummated, unless, in the case of (iii), CNB
agrees in writing that all of its conditions to Closing set forth in Article V
have been satisfied or waived; and further provided that in any event, no
------- --------
accrual or reserve made by the Bank pursuant to this Section 4.8, or any
litigation or regulatory proceeding arising out of any such accrual or reserve,
shall constitute or be deemed to be a breach, violation of or failure to satisfy
any representation, warranty, covenant, 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 such
adjustments shall not be deemed to imply any misstatement of previously
furnished financial statements or information, shall not be construed as
concurrence of Seller's or the Bank's management with any such adjustments, and
shall not affect the Purchase Price.
44
4.9 Director Resignations. Seller and the Bank shall use reasonable
---------------------
efforts to cause to be delivered to CNB at the Closing, the resignations of the
members of the Board of Directors of the Bank.
4.10 Human Resources Issues. Seller and the Bank agree to cooperate with
----------------------
CNB with respect to any formal meetings or interviews with one or more employees
called or arranged by the Bank and held for the purpose of discussing the
transactions contemplated by this Agreement or their effect on such employees,
with CNB given the opportunity to participate in such meetings or interviews.
This section is not intended to apply to casual conversations about the
transaction or informal meetings initiated by employees, or to prohibit
discussion in general, but rather to allow CNB a role in the formal presentation
of the transaction to employees, and an opportunity to participate in the
significant, formal meetings at which the transaction is explained and
discussed.
4.11 Assistance with Third-Party Agreements.
--------------------------------------
(a) Prior to the Closing, Seller and the Bank shall cooperate with
and use all reasonable efforts to assist CNB in (a) gaining access to all
of the Bank's third-party vendors and the landlords of all of the Bank's
leased properties, promptly after the date of this Agreement, (b) obtaining
the cooperation of such third parties in a smooth transition in accordance
with CNB's timetable at or after the Closing, provided that nothing herein
shall require CNB, Bank or any of the Selling Entities to pay fees or other
consideration, to any such third party in order to obtain such cooperation.
(b) Without limiting Section 4.11(a), Seller and the Bank shall use
all reasonable efforts to provide data processing and other processing
support, including support from outside contractors, to assist CNB in
performing all tasks reasonably
45
required to result in a successful conversion of the Bank's data and other
files and records to CNB's production environment, when requested by CNB
and sufficient to ensure that a successful conversion can occur at such
time as CNB requests at or after the Closing Date. Among other things,
Seller and the Bank shall:
(i) cooperate with CNB to establish a mutually agreeable project
plan to effectuate the conversion;
(ii) use their reasonable efforts to have the Bank's outside
contractors continue to support both the conversion effort and the
Bank's needs until the conversion can be established;
(iii) provide, or use its reasonable efforts to obtain from any
outside contractors, all data or other files and layouts requested
by CNB for use in planning the conversion, as soon as possible;
(iv) provide reasonable access to personnel at corporate
headquarters, data and other processing centers, all branches and,
with the consent of outside contractors, at outside contractors, to
enable the conversion effort to be completed on schedule; and
(v) to the extent reasonably practicable and not adverse to the
interests of the Seller or the Bank, give notice of termination of
the contracts of outside data processing and other contractors or
other third-party vendors when directed to do so by CNB, provided
that such notice can be and is conditioned upon the completion of
the transactions contemplated hereby. Seller and the Bank shall be
required to take any action required by this Section 4.11(b)(v) if
(A) CNB provides an undertaking to the Seller and the Bank in form
and substance reasonable satisfactory to Seller and the Bank to
46
the effect that CNB shall, in the event that the Acquisition is not
consummated, indemnify the Seller and the Bank against all losses,
claims, damages and liabilities resulting from such action, and (B)
CNB provides arrangements through a third-party provider reasonably
acceptable to the Seller and the Bank, which will provide service
levels and cost levels reasonably comparable to those service levels
and cost levels that would otherwise be available to the Bank.
(c) CNB shall promptly reimburse the Bank for all fees and expenses
of third parties incurred by the Bank in connection with the taking of any
action pursuant to this Section 4.11. CNB agrees that all actions taken
pursuant to this Section 4.11 shall be taken in a manner intended to
minimize disruption to the customary business activities of the Bank.
4.12 Notices and Communications. The Bank shall, if requested to do so
--------------------------
by CNB following receipt of all approvals of governmental authorities to the
transactions contemplated by this Agreement, but prior to the expiration of any
statutory waiting periods, if it receives a statement by CNB in writing that to
its knowledge there are no conditions to Closing set forth in Article V that
have not been, or cannot be, satisfied prior to Closing, (a) cooperate with CNB
by sending necessary or appropriate customer notifications and communications as
drafted by CNB to advise such customers of the impending transaction and of
CNB's plans for the Bank following the Closing, and (b) take or cause to be
taken at the direction of and as agent for CNB, all actions necessary to comply
with the provisions of the Worker Adjustment And Retraining Notification Act, as
amended (12 X.X.X (X)0000, et seq.), with respect to all employees of the Bank
covered by such act who are to be terminated by CNB
47
within sixty days following the effective time, including the issuance of
notices to such employees.
4.13 Insurance Policies Assignment.
-----------------------------
(a) Seller and the Bank agree to make commercially reasonable
efforts to obtain consent to partial or complete assignments of any
insurance policies of the Bank if requested to do so by CNB to the extent
necessary to maintain the benefits to CNB of such policies as they apply to
the Bank and its affairs. Seller and the Bank shall also inform CNB no
later than the Closing Date of any material unfiled insurance claims of
which they have knowledge and for which they believe coverage exists.
(b) CNB and the Bank agree that, immediately following the execution
of this Agreement (subject to regulatory requirements, if any), but in any
case prior to the Closing, the Bank will assign to Seller (or any designee
of Seller) any and all rights that it may have relating to any and all
loans and other credit extended to the parties identified in the Disclosure
Schedule and Seller shall purchase for cash from the Bank any such loan or
loans that remain outstanding prior to the Closing at gross book value
(including accrued but unpaid interest) minus the amount of reserves
associated with such loan or loans; such assigned rights shall include, but
are not limited to, all rights of the Bank as the lender on, and
holder/owner of, the aforementioned loans, as an unpaid creditor and as an
insured under all applicable insurance policies, including but not limited
to The Financial Institution Bond, the Comprehensive General Liability
Policy and any and all title insurance policies; the Selling Entities shall
indemnify CNB against any net liability for Taxes, reduction in tax basis
of assets or any other tax attribute of the Bank (provided, that in the
event
48
of a reduction in the tax basis of the assets or any other tax attribute of
the Bank, CNB shall only be permitted indemnification for such amounts in
the period during which such reduced basis or attributes of the Bank would
have provided tax benefit to CNB) resulting from such transfer and
assignment or recognition of taxable income prior to or subsequent to such
transfer and assignment. To the extent that tax benefits transferred from
the Seller's Group to the Bank under Section 4.19 exceed $1.9 million, the
excess will be applied to reduce the amount of indemnification under this
section.
(c) The Bank, the Selling Entities and CNB shall cooperate to
determine the most appropriate methodology to provide "tail" insurance
coverage to CNB for a period of three years following the Closing with
respect to all insurable claims made against the Bank for events occurring
prior to the Closing; provided, however, that the Selling Entities shall
-----------------
not be required to obtain such coverage if it otherwise exists, without
additional expense, under the Bank's, CNB's or CNC's existing insurance
policies; and provided, further, that if the required coverage can be
-----------------
obtained at less expense under CNB's or CNC's existing insurance policies
than by the Selling Entities purchasing "tail" coverage, the Selling
Entities shall have the option of reimbursing CNB or CNC for such
additional expense rather than purchasing separate coverage.
4.14 Designated Portfolio. Immediately prior to the Closing, Seller, or
--------------------
another entity designated by Seller, shall purchase for cash from the Bank, at
gross book value (plus accrued but unpaid interest), less applicable reserves
("net book value"), a portfolio of loans identified on Schedule A hereto (the
--------------
"Schedule A Loans"), or other loans of the Bank from Schedule B hereto (the
----------------
"Schedule B Loans") as provided for herein, but shall in no event
----------------
49
include the loans specified in Section 4.15. The following procedures shall
apply to this required purchase:
(a) If the gross book value of the Schedule A Loans on the Closing
Date is greater than $40,000,000, the Seller or its designee shall purchase
the Schedule A loans at their net book value; or
(b) If the gross book value of the Schedule A Loans on the Closing
Date is less than $40,000,000, Seller or its designee shall purchase the
Schedule A Loans at their net book value (plus accrued but unpaid
interest), and shall also purchase from the Bank at their net book value
(plus accrued but unpaid interest) Schedule B Loans in an amount such that
the aggregate gross book value of the Schedule A Loans and Schedule B Loans
purchased equals approximately, but does not exceed, $40,000,000; provided,
--------
however, that the total number of lending relationships (as opposed to
-------
loans) represented by the Schedule A Loans and the Schedule B Loans
purchased shall not exceed fifteen relationships.
(c) If any Schedule A Loan is sold prior to the Closing, as part of
the bulk sale currently contemplated by Bank and described in the
Disclosure Schedule or in an individual sale of the loans described in the
Disclosure Schedule, CNB may require Bank to replace such Schedule A Loan
or Loans with one or more Schedule B Loans of an approximately equal gross
book value selected by CNB.
4.15 Repurchase of Certain Loans. The Bank, CNB and the Selling Entities
---------------------------
agree that, immediately prior to the Closing, either San Paolo, its principal
subsidiary bank, or another entity reasonably acceptable to CNB, will repurchase
a participation interest in the Bank's loans to the parties described in the
Disclosure Schedule at gross book value (plus accrued but unpaid interest), such
that the Bank shall have a pro rata, pari passu $20,000,000
-------- ---- -----
50
principal amount interest in such loans and San Paolo or its designee shall have
a pro rata, pari passu interest in all amounts of such loans above $20,000,000
-------- ---- -----
principal amount.
4.16 Option to Purchase Additional Loans. Seller shall have the option
-----------------------------------
to purchase for cash from the Bank, prior to the final calculation of the
Purchase Price Reconciliation, up to $40,000,000 in gross book value of the
loans identified on Schedule C hereto, at gross book value, plus unamortized
premium on SBA loans, plus accrued but unpaid interest, minus the amount of
reserves associated with such loans as determined by Bank immediately prior to
the Closing (without regard to the adjustments made pursuant to Section 4.8
hereof or in response to a dispute arbitrated pursuant to Section 1.1(d)
hereof).
4.17 Tax Matters.
-----------
(a) Selling Entities' Responsibilities.
----------------------------------
(i) Each of the Selling Entities, jointly and severally, shall
be liable for, and shall defend, indemnify and hold harmless CNB and
its officers, partners, employees, attorneys and agents from, any
and all Taxes of any kind or character, including, without
limitation,
(A) any obligation to contribute to the payment of a tax
determined on a consolidated, combined or unitary basis with
respect to a group of corporations that includes or included the
Bank and Taxes resulting from the Bank ceasing to be a member of
the Seller's Group;
(B) any deferred income triggered into income by Treasury
Regulation (S)1.1502-13 and Treasury Regulation (S)1.1502-14 and
any excess loss accounts taken into income under Treasury
Regulation (S)1.1502-19 (or any similar state, local or foreign
provision);
51
(C) Taxes due to any foreign jurisdiction (including Luxembourg
and Italy) on account of the transactions contemplated by this
Agreement and any transaction conducted with any foreign entity
or involving any foreign jurisdiction, including any required
withholding (not otherwise exempted by treaty) of amounts
remitted to foreign entities; and
(D) liability to California taxing authorities for Taxes
attributable to a successful challenge, recharacterization or
reassessment of the Bank's California income Tax Return filing
position that the Bank was nonunitary with respect to any other
person,
that are (1) imposed on Seller's Group (other than the Bank) for any
taxable year or (2) imposed on the Bank, or for which the Bank may
otherwise be liable, for any taxable year or period that ends on or
before the Closing Date and, with respect to any taxable year or
period beginning before and ending after the Closing Date, the
portion of such taxable year ending on and including the Closing
Date. The indemnification obligation provided hereunder shall
include indemnification for costs and expenses, including reasonable
attorney's fees and expenses and other costs and expenses associated
with defense of a claim or incurred in obtaining indemnification
hereunder, whether or not they are incurred in a formal proceeding.
Seller shall be entitled to any refund of Taxes of the Bank received
after Closing for such periods. Notwithstanding the foregoing,
Seller shall not be liable for, and shall have no obligation to
indemnify CNB hereunder for, any Taxes to the extent that (i) such
Taxes arise from events or actions occurring on the
52
Closing Date after the Closing (including the Bank Merger), other
than those events or actions that are deemed to occur after the
Closing, under the consolidated return Treasury Regulations or
otherwise, that actually occur prior to, or simultaneously with,
the Closing or as part of the Acquisition, (ii) such Taxes arise
from an adjustment to an item of income, loss, deduction or credit
claimed for a pre-Closing period that gives rise to an offsetting
adjustment and reduction in Taxes for a post-Closing period
(considering, inter alia, in determining the amount of such
----- ----
reduction, interest that may be due and changes in tax rates), or
(iii) such Taxes, together with the Taxes for which indemnification
is provided pursuant to Section 7.3, are not in excess of the amount
of accrued and unpaid Taxes set forth on the Closing Balance Sheet.
(ii) Seller shall file or cause to be filed when due (A) all
consolidated, combined or unitary Tax Returns that are required to
be filed by or with respect to the Bank for taxable years or periods
ending on or before the Closing Date and (B) all other Tax Returns
that are required to be filed by or with respect to the Bank that
are due on or prior to the Closing Date, and Seller shall pay any
Taxes due in respect of (A) or (B) above. Seller will take no
position on such returns (unless required by law) that would
adversely affect the Bank after the Closing Date.
(b) CNB's Responsibilities.
----------------------
(i) CNB shall be liable for all Taxes of the Bank for any
taxable year or period that begins after the Closing Date and, with
respect to any taxable year or period beginning before and ending
after the Closing Date, the portion of such taxable year beginning
after the Closing Date, and CNB shall
53
indemnify Seller for any Taxes imposed on Seller's Group or Seller
to the extent that such Taxes arise from the events or actions
described in clause (i) of the last sentence of Section 4.17(a)(i).
(ii) CNB shall file or cause to be filed when due all Tax
Returns that are required to be filed by or with respect to the
Bank, other than the consolidated, combined or unitary Tax Returns
referred to in Section 4.17(a)(ii)(A) above, that are due after the
Closing Date, and CNB shall pay any Taxes due in respect of the Tax
Returns described above, subject to reimbursement by Seller for
Taxes Seller is liable for under Section 4.17(a)(i).
(c) Taxes for Short Taxable Year. Whenever it is necessary to
----------------------------
determine the liability hereunder for Taxes of the Bank for a portion of a
taxable year or period that begins before and ends after the Closing Date,
the determination of the Taxes of the Bank for the portion of the year or
period ending on, and the portion of the year or period beginning after,
the Closing Date shall be determined by assuming that the Bank had a
taxable year or period which ended at the close of the Closing Date and
that the Bank closed its books at that time, except that exemptions,
allowances or deductions that are calculated on an annual basis, such as
the deduction for depreciation, shall be apportioned pro rata on a daily
basis.
(d) Review of Tax Returns and Other Filings. To the extent that one
---------------------------------------
party (the "nonfiling party") would be liable under this Section 4.17 for
Taxes payable with respect to Tax Returns or other filings filed by another
party (the "other party"), the other party shall allow the nonfiling party
adequate opportunity to review and comment on such Tax Returns or other
filings and shall not file such Tax Returns or other filings without the
consent of the nonfiling party; provided, such nonfiling party
--------
54
agrees that it is liable for such Taxes hereunder and, provided further,
----------------
that such consent shall not be unreasonably withheld.
(e) Contest Provisions. CNB and the Seller shall promptly notify
------------------
each other in writing upon receipt by either of them, or any of their
affiliates, or the Bank, of notice of any pending or threatened federal,
state, local or foreign tax audits or assessments which may materially
affect the tax liabilities of the Bank for which Seller would be required
to indemnify CNB pursuant to this Agreement.
Seller shall have the sole right to represent the Bank's
interests in any tax audit or administrative or court proceeding relating
to taxable periods ending on or before the Closing Date, and to employ
counsel of its choice, at its expense. Notwithstanding the foregoing,
Seller (A) shall consult with CNB with respect to the resolution of any
issue that would affect CNB or the Bank in any way and to any extent, in
the taxable periods subject to such proceeding or any other taxable periods
(including, but not limited to, any resolution that would result in the
imposition of income tax deficiencies, the reduction of asset basis or cost
adjustments, the lengthening of any amortization or depreciation periods,
the denial of amortization or depreciation deductions, or the reduction of
loss or credit carryforwards to the Bank or CNB), and (B) shall not settle
any such issue or file any amended return relating to such issue, without
the consent of CNB, which consent shall not be unreasonably withheld.
Seller shall be entitled to participate at its expense in the
defense of any claim for Taxes for a period described in Section 4.17(c)
for the portion of the year or period ending on the Closing Date that is
the subject of indemnification by Seller hereunder. Neither CNB nor the
Bank may agree to settle any such claim for Taxes
55
for the portion of the year or period ending on the Closing Date that is
the subject of indemnification by Seller hereunder without the prior
written consent of Seller, which consent shall not be unreasonably
withheld. Seller shall not settle any such claim, or take any other action
with respect to such claim, without the consent of CNB, which shall not be
unreasonably withheld.
(f) Termination of Tax Allocation Agreements. Any tax allocation or
----------------------------------------
sharing agreement or arrangement, whether or not written, that may have
been entered into by Seller or any member of Seller's Group and the Bank
shall be terminated as to the Bank as of the Closing Date, and no payments
which are owed by or to the Bank pursuant thereto shall be made thereunder,
except to the extent such obligation or receivable is reflected on the
final Closing Date Balance Sheet, in which case it shall be paid.
(g) Information to be Provided by CNB. With respect to the taxable
---------------------------------
year of Seller ending in 1995 and the period in 1996, if any, prior to the
Closing Date, CNB shall promptly cause the Bank to prepare and provide to
Seller a package of tax information materials (the "Tax Package"), which
-----------
shall be completed in accordance with past practice including past practice
as to providing the information, schedules and work papers and as to the
method of computation of separate taxable income or other relevant measure
of income of the Bank. CNB shall cause the Tax Package for the portion of
the taxable period ending on the Closing Date to be delivered to Seller
within one hundred twenty (120) days after the Closing Date.
(h) Certain Elections. Seller and CNB agree that neither shall make
-----------------
or cause CNB to be bound by any Code Section 338 or 338(h)(10) election, or
any similar election under state, local or foreign jurisdiction tax law.
Seller shall not
56
make any election under Treasury Regulation (S)1.1502-20 (or any successor
or equivalent state, local or foreign provision), the effect of which would
cause any portion of the Bank's net operating loss to be reattributable to
Seller. No other election shall be made, or action taken, the effect of
which would reduce, impair or eliminate any tax basis in the assets of the
Bank, or any of the Bank's net operating losses, which exist at the Closing
Date.
(i) Efforts to Obtain Certain Documents. Seller agrees, upon
-----------------------------------
request, to use its reasonable best efforts to obtain any certificate or
other document from any governmental authority or any other person as may
be necessary to mitigate, reduce or eliminate any tax that could be imposed
on the Bank (including, but not limited to, with respect to the
transactions contemplated by this Agreement).
(j) Cooperation after Closing. After the Closing Date, Seller and
-------------------------
CNB shall:
(i) assist (and cause their respective affiliates to assist) the
other party in preparing any Tax Returns or reports which such other
party is responsible for preparing and filing in accordance with
this Section 4.17;
(ii) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns of the Bank;
(iii) make available to the other and to any taxing authority
as reasonably requested all information, records, and documents
relating to Taxes of the Bank;
(iv) provide timely notice to the other in writing of any
pending or threatened tax audits or assessments of the Bank for
taxable periods for which the other may have a liability under this
Agreement;
57
(v) furnish the other with copies of all correspondence received
from any taxing authority in connection with any tax audit or
information request with respect to any such taxable period;
(vi) retain and (upon the other party's request) provide records
and information that are reasonably relevant to any audit,
litigation or other proceeding or to tax matters pertinent to the
Bank relating to any taxable year or period beginning before the
Closing Date until the expiration of the statute of limitations (and
any extensions thereof) of the respective taxable periods and give
the other party reasonable written notice prior to transferring,
destroying or discarding any such records and information; provided,
--------
if CNB so requests, after receiving notice that such records are to
be destroyed or discarded, Seller shall allow CNB to take possession
of such books and records; and, provided further, that CNB shall not
-------- -------
be required to give such notice to Seller after the expiration of
the statute of limitations (and any extensions thereof known to CNB)
of the respective tax period to which such books and records relate;
(vii) provide, upon request, all information that may be
required for reporting pursuant to Section 6043 of the Code and the
regulations thereunder; and
(viii) abide by all record retention agreements entered into
with any taxing authority.
(k) Transfer Taxes. All transfer, documentary, sales, use, stamp,
--------------
registration and other such Taxes and fees (including penalties and
interest) incurred in connection with the transactions contemplated by this
Agreement shall be paid by Seller when due, and Seller will, at its
expense, file all necessary Tax Returns or
58
other forms for such Taxes and other documentation with respect to all such
matters. If required by applicable law, CNB will join in the execution of
any such returns or documentation. Notwithstanding the foregoing, all such
Taxes and fees incurred in connection with the Bank Merger shall be paid by
CNB.
(l) Miscellaneous. Any payment by Buyer or Seller under this
-------------
Section 4.17 will be an adjustment to the Purchase Price. Except as
otherwise contemplated by this Section 4.17, the provisions of Section 7.3
shall apply to any claim for indemnification hereunder.
4.18 1995 Audit. Seller, the Bank and CNB agree that it is their
----------
expectation that the Closing of the transactions contemplated by this Agreement
will occur at a time such that it will not be necessary for there to be an audit
of the financial statements of the Bank as a separate entity as of December 31,
1995 and for the year then ended. Seller and the Bank agree to consult with CNB
prior to authorizing any material preliminary audit work to be performed and, to
the extent consistent with the Bank's regulatory obligations, to delay the
initiation of any such work until such time as it appears probable that the
Closing will not occur within the time frame contemplated and that a separate
audit of the Bank for the 1995 fiscal year will be necessary.
4.19 Pre-Closing Intercompany Transactions. The Bank, Seller and the
-------------------------------------
Seller's Group shall allow CNB and its representatives to review at CNB's
expense all books, records, Tax Returns and any other items and information
relating to the Seller's Group's and the Bank's intercompany transactions,
within the meaning of Treasury Regulation (S)1.1502-13, taking place in the
Seller's Group's 1992, 1993, and 1994 taxable years, and the period beginning
after the 1994 taxable year and ending on the Closing Date. After review of
such intercompany transactions, CNB, the Seller, and the Selling Entities, agree
to take all
59
actions necessary before and after the Closing (including, but not limited to,
amending the Seller's Group's Tax Returns, and having an appropriate officer
sign and file such amended Tax Returns, and adjusting the amount of the Bank's
and the Seller's Group's deferred intercompany losses) to more properly reflect
the taxable losses incurred by the Bank and the Seller's Group with respect to
the assets and other items involved in such intercompany transactions (taking
into account the appropriate fair market value of the assets and other items
involved in such intercompany transactions).
ARTICLE V
Conditions to Consummation
--------------------------
5.1 Conditions to Each Party's Obligations. The respective obligations
--------------------------------------
of CNB on the one hand, and of the Selling Entities and the Bank, on the other
hand, to close the transaction contemplated by this Agreement shall be subject
to the satisfaction or waiver prior to the Closing of the following conditions:
(a) The Agreement and the transactions contemplated hereby shall
have been approved by the Selling Entities and the Bank in accordance with
applicable law.
(b) CNB shall have procured, as necessary, the required approval,
consent or waiver with respect to the Agreement and the transactions
contemplated hereby by the OCC, the FRB and San Paolo shall have procured,
as necessary, the required approval, consent or waiver with respect to the
Agreement and the transactions contemplated hereby by the Bank of Italy,
and, in all such cases, all applicable statutory waiting periods shall have
expired; and the parties shall have procured all other regulatory
approvals, consents or waivers of governmental authorities or other persons
that are necessary or appropriate to the consummation of the transactions
contemplated by the Agreement; provided, however, that no approval, consent
-------- -------
or
60
waiver referred to in this Section 5.1(b) shall be deemed to have been
received if it shall include any condition or requirement that would be
materially burdensome on CNB (on a combined basis giving effect to the Bank
Merger and the other transactions contemplated by this Agreement) and
provided, further, that a condition or requirement imposed on the basis of
-------- -------
CNB's compliance with regulatory capital requirements generally applicable
shall not be deemed to be materially burdensome.
(c) All other requirements prescribed by law which are necessary to
the consummation of the transactions contemplated by this Agreement shall
have been satisfied.
(d) No party hereto shall be subject to any order, decree or
injunction or a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Bank Merger or any other transactions
contemplated by this Agreement.
(e) No statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any governmental
authority which prohibits, restricts or makes illegal consummation of the
Bank Merger or any other transactions contemplated by this Agreement.
5.2 Conditions to Obligations of CNB. The obligations of CNB to close
--------------------------------
the transactions contemplated by this Agreement shall be subject to the
satisfaction or waiver prior to the Closing Date of the following additional
conditions:
(a) Each of the representations and warranties of the Selling
Entities and the Bank contained in this Agreement shall, in all material
respects, be true at the Closing Date as if made on such date (or on the
date when made in the case of any representation or warranty which relates
to an earlier date), provided, however, that
-------- -------
61
solely for the purposes of this Section 5.2(a) to ascertain whether CNB is
obligated to close the transactions contemplated by this Agreement, a
representation or warranty shall only fail to be true on the Closing Date
if it has not been waived and if the failure of any such representation or
warranty to be true has or constitutes, individually or in the aggregate
with other representations or warranties that are untrue, a Material
Adverse Effect on the Bank. The Disclosure Schedule shall be updated and
made current to such dates as close to the Closing Date as is reasonable
for each type of disclosure and as are agreed upon by the parties hereto no
later than thirty (30) days prior to the Closing Date. The Selling Entities
and the Bank shall have performed, in all material respects, each of their
covenants and agreements contained in this Agreement and CNB shall have
received a certificate signed by the Chief Executive Officer and the Chief
Financial Officer of each of Seller and of the Bank, at the Closing Date,
to the foregoing effect.
(b) No litigation or proceeding shall be pending against Seller or
the Bank brought by any governmental agency seeking to prevent consummation
of the transactions contemplated hereby.
(c) CNB shall have received the opinions of Xxxxxxxx and Xxxxxxxx,
special counsel to Seller and the Bank, and of counsel reasonably
acceptable to CNB with respect to San Paolo, each in form and substance
reasonably satisfactory to CNB, to the effect that this Agreement has been
duly authorized, executed and delivered by the San Paolo, Seller and the
Bank, as appropriate, and constitutes the valid and legally binding
obligation of each of them enforceable in accordance with its terms,
subject to customary exceptions.
62
(d) There shall not have been any change in the business,
properties, assets or operations of the Bank since the date of this
Agreement which would have a Material Adverse Effect on the Bank.
5.3 Conditions To Obligations of the Selling Entities and the Bank. The
--------------------------------------------------------------
obligations of the Selling Entities and the Bank hereunder shall be subject to
the satisfaction or waiver prior to the Closing Date of the following additional
conditions:
(a) Each of the representations, warranties and covenants of CNB
contained in this Agreement shall, in all material respects, be true at the
Closing Date as if made on such date (or on the date when made in the case
of any representation or warranty which specifically relates to an earlier
date); CNB shall have performed, in all material respects, each of its
covenants and agreements contained in this Agreement; and Seller and the
Bank shall have received certificates signed by the Chief Financial Officer
or other authorized senior officers of CNB at the Closing Date, to the
foregoing effect.
(b) No litigation or proceeding shall be pending against CNB or any
of their subsidiaries brought by any governmental agency seeking to prevent
consummation of the transactions contemplated thereby.
(c) Seller shall have received the opinion of Xxxxxxx X. Xxxxxxx,
Xx., General Counsel to CNB, in form and substance reasonably satisfactory
to Seller, to the effect that this Agreement has been duly authorized,
executed and delivered by CNB and constitutes the valid and legally binding
obligation of CNB enforceable in accordance with its terms, subject to
customary exceptions.
63
ARTICLE VI
Termination
-----------
6.1 Termination. This Agreement may be terminated, and the Acquisition
-----------
abandoned, prior to the Closing Date:
(a) by the mutual agreement of the Selling Entities, the Bank and
CNB, if the board of the directors, or duly authorized committee thereof,
or duly authorized officers, of each so determines;
(b) by CNB or Seller in the event of a material breach by the other
party hereto of any representation, warranty, covenant or agreement
contained herein, which is not cured within 30 days after written notice of
such breach is given to the party committing such breach by the other
party; provided, however, that solely for purposes of this Section 6.1(b) a
-------- -------
breach by Seller of a representation or warranty contained herein shall be
deemed to be a material breach only if such breach has not been waived and
if the failure of any such representation or warranty to be true has or
constitutes, individually or in the aggregate with other representations or
warranties that are untrue, a Material Adverse Effect on the Bank;
(c) by CNB or the Seller by written notice to the other party if
either (i) any approval, consent or waiver of a governmental authority
required to permit consummation of the transactions contemplated hereby
shall have been denied or (ii) any governmental authority of competent
jurisdiction shall have issued a final, non-appealable order enjoining or
otherwise prohibiting consummation of the transactions contemplated by this
Agreement;
(d) by CNB or the Seller in the event that the Acquisition is not
consummated by April 30, 1996, unless the failure to so consummate by such
time is
64
due to the breach of any representation, warranty or covenant contained in
this Agreement by the party seeking to terminate;
(e) by CNB if there shall have been a Material Adverse Effect with
respect to the Bank.
6.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement by either CNB or the Seller, as provided above, this Agreement shall
thereafter become void and there shall be no liability on the part of any party
hereto or their respective officers or directors, except that any such
termination shall be without prejudice to the rights of any party hereto arising
out of the willful breach by any party of any covenant or willful
misrepresentation contained in this Agreement.
ARTICLE VII
Other Matters
-------------
7.1 Certain Definitions; Interpretations. As used in this Agreement,
------------------------------------
the following terms shall have the meanings indicated:
"actual knowledge" shall mean facts and other information which any senior
vice president or superior officer or the controller of a party actually knows.
"Adverse Consequences" shall mean any and all losses, liabilities, damage
to property, liens, encumbrances, damages, judgments, demands, suits, claims,
assessments, charges, fines, penalties, environmental cleanup liability, costs
and expenses, including reasonable attorney's fees and expenses and other costs
and expenses associated with defense of a claim or incurred in obtaining
indemnification hereunder, whether or not in a formal proceeding.
"control" shall have the meaning ascribed thereto in Section 2(a) of the
Bank Holding Company Act of 1956, as amended.
65
"knowledge" or "best knowledge" (except with respect to the term "actual
knowledge" as used in Section 3.1(t)(iii)) shall mean facts and other
information which any senior vice president or superior officer or the
controller of a party knows as a result of the performance of his or her duties,
or that a senior executive officer of a bank or bank holding company similar to
such party reasonably should know in the normal course of his or her duties, and
includes such diligent inquiry as is reasonable under the circumstances.
"material" means material to CNB or the Bank (as the case may be) and its
respective subsidiaries, taken as a whole.
"Material Adverse Effect", with respect to a person, means a material
adverse effect upon (A) business, operations, financial condition or results of
operations of such person and its subsidiaries, taken as a whole, or (B) the
ability of such person to timely perform its obligations under, and to timely
consummate the transactions contemplated by, this Agreement.
"person" includes an individual, corporation, partnership, association,
trust or unincorporated organization.
"Seller's Group" shall mean any "affiliated group" (as defined in Code
Section 1504(a) without regard to the limitations contained in Code Section
1504(b)) that includes the Seller or any predecessor of or successor to Seller
(or another such predecessor or successor).
"subsidiary", with respect to a person, means any other person the stock or
equity of which is more than 50% owned by such person.
"Taxes" shall mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital
66
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other taxes, or assessments in the nature of taxes, of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
The table of contents and headings contained in this Agreement offer ease
of reference only and shall not effect the meaning or interpretation of this
Agreement. Whenever the words "include", "includes", or "including" are used in
this Agreement, they shall be deemed followed by the words "without limitation".
Any singular term in this Agreement shall be deemed to include the plural, and
any plural term, the singular.
7.2 Survival of Representations, Warranties and Covenants. The
-----------------------------------------------------
representations, warranties and covenants of the parties hereto shall survive
the Closing for a period of one year from and after the Closing Date, provided
that (a) the representations and warranties, covenants and indemnification
obligations of the Selling Entities with respect to litigation and environmental
matters (Sections 3.1(j), 3.1(t) and 7.3(a)(i)(A) (as it applies to Sections
3.1(j) and 3.1(t)) and Sections 7.3(a)(i)(B) and (C) only) shall survive the
Closing for a period of three years, (b) the covenants and indemnification
obligations related to Taxes (Sections 4.17 and 7.3(a)(i)(A) (as it applies to
obligations, but not representations or warranties) and 7.3(a)(i)(D) only) shall
survive the Closing until all applicable statute of limitations periods shall
have run, (c) the representations and warranties set forth in Section 3.1(i)
shall not survive the Closing, and (d) the representations and warranties set
forth in Section 3.1(g),
67
solely as such representations and warranties pertain to Taxes, shall not
survive the Closing. No claim may be made for damages asserted to arise out of
any claimed breaches or inaccuracies of the representations, warranties and
covenants made by any of the Selling Entities herein unless such claim is
asserted prior to the termination of the respective periods of survival stated
in the preceding sentence.
7.3 Indemnification.
---------------
(a) The Selling Entities' Indemnification.
-------------------------------------
(i) Each of the Selling Entities, jointly and severally, shall
defend, indemnify and hold harmless CNB and its officers, partners,
employees, attorneys and agents from any and all Adverse
Consequences of any kind or character arising out of, in connection
with, or resulting from:
(A) the breach by any of the Selling Entities or the Bank of
any of its respective obligations or representations and warranties
under this Agreement;
(B) any Adverse Consequences to CNB resulting from litigation
or claims against the Bank filed prior to the Closing Date or within
three years thereafter related to matters that occurred prior to the
Closing; provided, however, that the Bank's litigation reserve as
-----------------
set forth in the Closing Balance Sheet (plus such amount, if any,
actually received by Bank or CNB from those matters specifically
described in the Disclosure Schedule for which complete information
was provided to CNB prior to the date hereof) shall first be
utilized in the event of any such Adverse Consequences, and the
indemnification obligation of the Selling Entities shall only apply
to Adverse Consequences above that amount;
68
(C) any Adverse Consequences to CNB resulting from
environmental hazards, risks or matters, to the extent required to
be addressed by applicable Environmental Laws, discovered by CNB
within three years from the Closing Date related to any of the
Bank's properties (as defined in Section 3.1(t)(vi)), provided such
environmental hazards, risks or matters result from the condition of
such property prior to the Closing Date; and
(D) any Adverse Consequences to CNB for:
(1) any ownership change within the meaning of Code Section 382
undergone by the Seller, the Bank, the Seller and the Bank as a
group, or the Seller's Group, prior to the Closing Date. The
Adverse Consequences CNB is indemnified for under this
subsection shall specifically include, but shall not be limited
to, those arising out of, in connection with, or resulting from
the failure or inability to make an election to apportion all of
the Seller's Group's annual consolidated
Code Section 382 limitation from such prior ownership change (if
there has been any such ownership change) to the Bank under
Proposed Regulation (S)1.1502-95(c) and (e) (or any state,
local, foreign or successor provision); and
(2) any failure of Seller to fulfill its responsibilities and
satisfy its obligations as specified in Section 4.17; provided,
--------
that the indemnification obligation of the Selling Entities
under this Section 7.3(a)(i)(D) shall only apply to the extent
that such Adverse Consequences and the Taxes indemnified
pursuant to Section 4.17,
69
together, exceed the amount of accrued but unpaid taxes as set
forth on the Closing Balance Sheet.
(ii) Notwithstanding the provisions of Section 7.3(a)(i), CNB
shall not be entitled to assert rights of indemnification under
subsections 7.3(a)(i)(A), (B) and (C) until [confidential
information omitted and filed separately] (the "Threshold Amount"),
----------------
it being understood that all such Adverse Consequences shall
accumulate until such time as the aggregate amount thereof exceeds
the Threshold Amount, whereupon CNB shall be entitled to
indemnification hereunder for all Adverse Consequences that have
occurred in excess of the Threshold Amount.
(iii) Notwithstanding the provisions of Section 7.3(a)(i),
CNB's rights of indemnification under subsection [confidential
information omitted and filed separately] and CNB's rights of
indemnification under subsections [confidential information omitted
and filed separately].
(iv) The amount of any indemnification shall be the principal
amount of the obligation, plus any interest payable by CNB in
respect of such obligation, plus interest from the date CNB makes or
made payment to the date when reimbursed by the Selling Entities, at
the Federal Funds Rate during such period. Any indemnification
payment shall be reduced by the amount of any tax benefits actually
realized by CNB with respect to the matters that are the subject of
the claim.
70
(b) CNB's Indemnification.
---------------------
(i) CNB shall defend, indemnify and hold harmless the Selling
Entities and their officers, partners, employees, attorneys and
agents from any and all Adverse Consequences of any kind or
character arising out of, in connection with, or resulting from the
ownership, possession, operation, use or maintenance of the Bank
after the Closing Date, or the breach by CNB of any of its
obligations or representations and warranties hereunder.
(ii) The amount of any indemnification shall be the principal
amount of the obligation, plus any interest payable by the Selling
Entities in respect of such obligation, plus interest from the date
one of the Selling Entities makes or made payment to the date when
reimbursed by CNB, at the Federal Funds Rate during such period.
Any indemnification payment shall be reduced by the amount of any
tax benefits actually realized by the Selling Entities with respect
to the matters that are the subject of the claim.
(c) Indemnification Procedures. Except as otherwise provided in
--------------------------
Section 4.17(e), all claims for indemnification under this Agreement will
be asserted and resolved as provided in this Section 7.3(c).
(i) A party claiming indemnification under this Agreement (an
"Indemnified Party") will promptly (A) notify the party from whom
------------------
indemnification is sought (the "Indemnifying Party") of any third-
------------------
party claim or claims ("Third-Party Claim") asserted against the
-----------------
Indemnified Party which could give rise to a right of
indemnification under this Agreement and (B) transmit to the
Indemnifying Party a written notice ("Claim Notice") describing in
------------
reasonable detail the nature of the Third-Party Claim, a copy of
71
all papers served with respect to such claim (if any), an estimate
of the amount of Adverse Consequences attributable to the Third-
Party Claim, if reasonably possible, and the basis of the
Indemnified Party's request for indemnification under this
Agreement.
Within thirty (30) days after receipt of any Claim Notice or
such lesser period as may be required in order to comply with any
applicable law or to respond to any complaint or pleading (the
"Election Period"), the Indemnifying Party will notify the
----------------
Indemnified Party whether the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Agreement
with respect to such Third-Party Claim and whether the Indemnifying
Party desires, at the sole cost and expense of the Indemnifying
Party, to defend the Indemnified Party against such Third-Party
Claim.
(ii) If the Indemnifying Party notifies the Indemnified Party
within the Election Period that the Indemnifying Party does not
dispute its potential liability to the Indemnified Party under this
Agreement and that the Indemnifying Party elects to assume the
defense of the Third-Party Claim, then the Indemnifying Party will
have the right to defend, at its sole cost and expense, such Third-
Party Claim by all appropriate proceedings, which proceedings will
be prosecuted diligently by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party in
accordance with this Section 7.3(c). The Indemnifying Party will
have full control of such defense and proceedings, including any
compromise or settlement thereof and the Indemnified Party shall
provide its cooperation to the Indemnifying Party; provided,
however, that if an adverse result is likely to, in the Indemnified
72
Party's reasonable opinion, subject the Indemnified Party to
material exposure to future Adverse Consequences, the Indemnifying
Party and the Indemnified Party (at its own expense) shall jointly
control such defense and proceedings, including any compromise or
settlement thereof. The Indemnified Party is hereby authorized, at
the sole cost and expense of the Indemnifying Party (but only if the
Indemnified Party is actually entitled to indemnification hereunder
or if the Indemnifying Party assumes the defense with respect to the
Third-Party Claim), to file, during the Election Period, any motion,
answer or other pleadings which the Indemnified Party deems
necessary or appropriate to protect its interests or those of the
Indemnifying Party and which are not unnecessarily prejudicial to
the Indemnifying Party. If requested by the Indemnifying Party, the
Indemnified Party will, at the sole cost and expense of the
Indemnifying Party, cooperate with the Indemnifying Party and its
counsel in contesting any Third-Party Claim which the Indemnifying
Party elects to contest, including the making of any related
counterclaim against the person asserting the Third-Party Claim or
any cross-complaint against any person. The Indemnified Party may
participate in, but not control (except as permitted above), any
defense or settlement of any Third-Party Claim controlled by the
Indemnifying Party pursuant to this Section 7.3(c) and, except as
permitted above, will bear its own costs and expenses with respect
to such participation. Notwithstanding anything in this Section
7.3(c) to the contrary, the Indemnifying Party will not, without the
written consent of the Indemnified Party (which consent will not be
unreasonably withheld or delayed), settle or compromise any action,
suit or proceeding or consent to the entry of any
73
judgment if such settlement or compromise is likely to, in the
Indemnified Party's reasonable opinion, subject the Indemnified
Party to material exposure to future Adverse Consequences.
(iii) If the Indemnifying Party fails to notify the Indemnified
Party within the Election Period that the Indemnifying Party elects
to defend the Indemnified Party, or if the Indemnifying Party elects
to defend the Indemnified Party but fails to diligently and promptly
defend or settle the Third-Party Claim, then the Indemnified Party
will have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third-Party Claim by all appropriate
proceedings, which proceedings will be promptly and vigorously
prosecuted by the Indemnified Party to a final conclusion or
settled. The Indemnified Party will have full control of such
defense and proceedings; provided, however, that the Indemnified
Party may not, without the Indemnifying Party's consent (which
consent will not be unreasonably withheld or delayed), settle or
compromise any action, suit or proceeding or consent to the entry of
any judgment. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the
effect that the Indemnifying Party disputes its potential liability
to the Indemnified Party under this Agreement and if such dispute is
resolved in favor of the Indemnifying Party pursuant to the
procedures set forth herein, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this Section 7.3(c) or of the Indemnifying
Party's participation therein at the Indemnified Party's request and
the Indemnified Party will reimburse the Indemnifying Party in full
for all
74
costs and expenses of such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this Section 7.3(c),
and the Indemnifying Party will bear its own costs and expenses with
respect to such participation.
(iv) If, from time to time, an Indemnified Party should have any
claim against an Indemnifying Party hereunder which does not involve
a Third-Party Claim, or should have knowledge of facts which could
give rise to such a claim, the Indemnified Party will transmit to
the Indemnifying Party a written notice (the "Indemnity Notice")
----------------
describing in reasonable detail the nature of the claim, an estimate
of the amount of Adverse Consequences attributable to such claim and
the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the
Indemnified Party within sixty (60) days from its receipt of the
Indemnity Notice that the Indemnifying Party disputes such claim,
the claim specified by the Indemnified Party in the Indemnity Notice
will be deemed a liability of the Indemnifying Party hereunder.
(v) Except as specified below, payments of all amounts owing by
the Indemnifying Party pursuant to this Agreement will be made
within ten (10) days after the latest of (A) the effective date of
the settlement of the Third-Party Claim, (B) the date an
adjudication of such Third-Party Claim becomes final and
nonappealable or (C) the date a final decision regarding the
Indemnifying Party's liability to the Indemnified Party under this
Agreement is rendered. Payments of all amounts owing by the
Indemnifying Party pursuant to Section 7.3(c)(iv) will be made
within ten (10) days after the later of (1) the
75
expiration of the sixty (60) day Indemnity Notice period or (2) the
date a final decision on the Indemnifying Party's liability to the
Indemnified Party under this Agreement is rendered pursuant to the
procedures set forth herein.
(d) Adjustment to Purchase Price. All indemnification payments
----------------------------
under this Section 7.3 shall be deemed to be adjustments to the Purchase
Price.
(e) Exclusive Remedy. This Section 7.3 sets forth the exclusive
----------------
post-Closing remedy of the parties hereto in respect of matters covered by
this Section 7.3, except as otherwise expressly contemplated by this
Agreement, including Sections 4.13(b) and 4.17.
7.4 Waiver. Prior to the Closing, any provision of this Agreement may
------
be (a) waived by the party benefited by the provision or by both parties or (b)
amended or modified at any time (including the structure of the transaction) by
an agreement in writing between the parties hereto approved by their respective
boards of directors.
7.5 Counterparts. This Agreement may be executed in counterparts each
------------
of which shall be deemed to constitute an original, but all of which together
shall constitute one and the same instrument.
7.6 Governing Law; Venue. This Agreement shall be governed by, and
--------------------
interpreted in accordance with, the laws of the State of California (however,
not to the exclusion of any applicable Federal law), without regard to
California statutes or judicial decisions regarding choice of law questions.
Any dispute hereunder shall be heard in the United States District Court for the
Central District of California. The parties hereto agree to exclusive venue and
personal jurisdiction in such Court, unless for any reason the Federal Court
should lack jurisdiction over the action, in which case exclusive venue and
jurisdiction shall be in the state courts in Los Angeles County, California.
The prevailing party shall be
76
entitled to recover all reasonable costs and expenses, including attorneys'
fees, incurred in connection with such suit.
7.7 Expenses. Each party hereto will bear all expenses incurred by it
--------
in connection with this Agreement and the transactions contemplated hereby.
7.8 Notices. All notices, requests, acknowledgements and other
-------
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, telecopy or registered mail (upon
receipt) to such party at its address set forth below or to such other address
as such party may specify by notice to the other party hereto. If to the
Selling Entities or the Bank, to:
Istituto Bancario San Paolo di Torino, S.P.A.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx
with a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Attention: H. Xxxxxx Xxxxx, Esq.
If to CNB, to:
City National Bank
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xx. Xxxxx X. Xxxxx
77
with a copy to:
City National Bank
400 North Roxbury Drive, Fifth Floor
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xx. Xxxxxxx X. Xxxxxxx, Xx.
7.9 Entire Agreement. Other than as set forth in that certain letter
----------------
dated the date hereof from the Chief Financial Officer of CNB to the Chairman of
the Bank and that certain letter dated August 16, 1995 from the Chief Financial
Officer of CNB to the President of the Bank, this Agreement represents the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made. Nothing in this Agreement is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
7.10 Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and shall inure to the benefit of the parties hereto and their respective
successors and assigns;
provided, however, this Agreement may not be assigned by any party hereto
--------
without the written consent of the other parties.
7.11 Severability. If any provision of this Agreement or the application
------------
of any such provision to any person or circumstance shall be held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof.
7.12 No Third Party Beneficiaries. This Agreement is made solely for the
----------------------------
benefit of the parties to this Agreement and their respective successors and
permitted assigns, and no other person or entity shall have or acquire any right
by virtue of this Agreement.
78
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
CITY NATIONAL BANK SAN PAOLO U.S. HOLDING COMPANY
By /s/ Xxxx Xxxxxxxxx By /s/ Xxxxxxx Xxxxxxxxx
---------------------------------- ---------------------------------
Xxxx Xxxxxxxxx Xxxxxxx Xxxxxxxxx
Chairman of the Board and
Chief Executive Officer Title
------------------------------
FIRST LOS ANGELES BANK SAN PAOLO BANK HOLDING S.P.A.
By /s/ Xxxxx Xxxxxxx By /s/ Xxxxxx Xxxxxxx
----------------------------------- ---------------------------------
Xxxxx Xxxxxxx Xxxxxx Xxxxxxx
President and Chief
Executive Officer Title
------------------------------
By /s/ Xxxxxxxx Xxxxxxx
---------------------------------
Xxxxxxxx Xxxxxxx
Title
------------------------------
CREDIT ADMINISTRATION
COMMERCIAL AND REAL ESTATE LOAN APPLICATIONS
SCHEDULE "A"
June 30, 1995
[confidential information omitted and filed separately]
CREDIT ADMINISTRATION
COMMERCIAL AND REAL ESTATE LOAN APPLICATIONS
SCHEDULE "B"
June 30, 1995
[confidential information omitted and filed separately]
CREDIT ADMINISTRATION
COMMERCIAL AND REAL ESTATE LOAN APPLICATIONS
SCHEDULE "C"
June 30, 1995
[confidential information omitted and filed separately]
Schedule 2.2(o)
[confidential information omitted and filed separately]
DISCLOSURE SCHEDULE
TO
STOCK PURCHASE AGREEMENT
by and among
CITY NATIONAL BANK
FIRST LOS ANGELES BANK
SAN PAOLO U.S. HOLDING COMAPNY
SAN PAOLO BANK HOLDING S.P.A.
TABLE OF CONTENTS
-----------------
Page No(s)
----------
SCHEDULE 1 SALES/ENCUMBRANCES (2.2(c) & 4.14(c)) 1-3
SCHEDULE 2 SALES/ENCUMBRANCES (2.2(c)) 4-5
SCHEDULE 3 SALES/ENCUMBRANCES (2.2(c)) 6-7
SCHEDULE 4 SALES/ENCUMBRANCES (2.2(c)) 8-25
SCHEDULE 5 LEASES AND CONTRACTS (3.1(v)) 26-28
SCHEDULE 6 LOSS CARRYFORWARDS (3.1(i)) 29
SCHEDULE 7 INTERNAL REVENUE SERVICE (3.1(i)) 30
SCHEDULE 8 EXAMINATIONS AND WAIVERS (3.1(i)) 31
SCHEDULE 9 DEFERRED TAX ASSETS (3.1(i)) 32-34
SCHEDULE 10 EXAMINATION STATUS AND STATUTES
OF LIMITATION FOR ASSESSMENTS (31.(i)) 35-36
SCHEDULE 11 LITIGATION (3.1(j) & 7.3(a)(i)(B)) 37-39
SCHEDULE 12 EMPLOYEE BENEFIT PLANS (3.1(n)) 40
SCHEDULE 13 ENCUMBRANCES (3.1(p)) 41-43
SCHEDULE 14 INSURANCE AND BOND POLICIES (3.1(w)) 44-56
SCHEDULE 15 DERIVATIVE TRANSACTIONS IN EXCESS
OF $500,000 (3.1(y)) 57-58
SCHEDULE 16 ANTICIPATED CRA PRODUCTS (2.2(m)) 59
SCHEDULE 17 [confidential information omitted and filed separately]
LOANS (1.1(a)(Z)) 59-A
SCHEDULE 18 [confidential information omitted and filed separately]
LOANS (4.14(c)) 59-B
TABLE OF CONTENTS
-----------------
Page No(s)
----------
SCHEDULE 19 SCHEDULE OF EXECUTIVE OFFICER/KEY
EMPLOYEE AGREEMENTS (3.1(l) & 4.2(c)) 60
SCHEDULE 20 SCHEDULE OF TRUST ADMINSTRATION (3.1(z)) 61
SCHEDULE 21 ASSIGNMENTS (4.13(b)) 62
SCHEDULE 22 PARTICIPATION REPURCHASES (4.15) 63
SCHEDULE 23 SEVERANCE POLICIES (4.2(b)) 63-A
SCHEDULE 1
----------
SALES/ENCUMBRANCES
Schedule 1, which pertains to (S)(S) 2.2(c) and 4.14(c), is comprised of the
attached two-page list, which identifies all assets expected to be sold through
the Cantor Xxxxxxxxxx bulk loan sale.
LEM:lb:xxx/lb Page 1 of 63
5557S1.FLA
[confidential information omitted and filed separately]
SCHEDULE 2
----------
SALES/ENCUMBRANCES
Schedule 2, which pertains to (S) 2.2(c), is comprised of the attached one-page
list, which identifies other assets of First Los Angeles Bank which may be sold.
LEM:lb:xxx Page 4 of 63
5557S2.FLA
[confidential information omitted and filed separately]
SCHEDULE 3
----------
SALES/ENCUMBRANCES
Schedule 3, which pertains to (S) 2.2(c), is comprised of the attached one-page
list, which identifies the loans which First Los Angeles Bank intends to
participate out, as to portions or the whole thereof.
LEM:lb:xxx Page 6 of 63
5557S2.FLA
[confidential information omitted and filed separately]
SCHEDULE 4
----------
SALES/ENCUMBRANCES
Schedule 4, which pertains to (S) 2.2(c), is comprised of the attached
seventeen-page list, which identifies all the mortgages currently encumbered as
they are pledged by First Los Angeles Bank to secure a borrowing line with the
Federal Home Loan Bank.
LEM:lb:xxx Page 8 of 63
5557S2.FLA
[confidential information omitted and filed separately]
SCHEDULE 5
----------
LEASES AND CONTRACTS ((S)3.1(v))*
[confidential information omitted and filed separately]
* Schedule 5, including the following page of leases, is the
list of contracts contemplated by the last sentence of (S)3.1(v).
LEM:lb:xxx Page 27 of 63
5557S2.FLA
[confidential information omitted and filed separately]
SCHEDULE 6
----------
LOSS CARRYFORWARDS*
[confidential information omitted and filed separately]
* Schedule 6, which pertains to (S)3.1(i), identifying amounts and
expiration dates for all net operating loss carryforwards and gross timing
differences of the Bank as of December 31, 1994.
LEM:lb:xxx Page 29 of 63
5557S2.FLA
SCHEDULE 7
----------
INTENTIONALLY OMITTED
LEM:lb:xxx Page 30 of 63
5557S2.FLA
SCHEDULE 8 ((S)3.1(i))*
----------
EXAMINATIONS AND WAIVERS
[confidential information omitted and filed separately]
* Schedule 8, in conjunction with Schedule 10, which pertain to
(S) 3.1(i), contain all statutes of limitation, waivers (and
pending requests for waivers) of time to assess taxes, all
outstanding tax extensions and audits as of June 30, 1995, as
provided to First Los Angeles Bank by Xxxxxx Xxxxxxxx.
LEM:lb:xxx Page 31 of 63
5557S2.FLA
SCHEDULE 9
----------
Schedule 9, which pertains to (S) 3.1(i), is comprised of the attached one-
page summary of deferred tax assets as of December 31, 1994, as provided by
Xxxxxx Xxxxxxxx.
LEM:lb:xxx:sk Page 32 of 63
5557S2.FLA
[confidential information omitted and filed separately]
SCHEDULE 10
-----------
Schedule 10, which pertains to (S) 3.1(i), is comprised of the attached one-page
summary, as provided by Xxxxxx Xxxxxxxx.
LEM:lb:xxx Page 35 of 63
5557S2.FLA
[confidential information omitted and filed separately]
SCHEDULE 11
-----------
LITIGATION (31.(j) and 7.3(a)(1)(B))*
Case No. Date Filed Case Name
------------------------------------------------------------
BC0J6169 (LASC) 9/22/92 Xxxx and Xxxxx Xxxxxxx, et al.
v. Eastern Enterprises, Inc. dba the
Princeton Group, First Los Angeles
Bank, et al.
BC116227 (LASC) 5/12/95 Xxxxx X. Xxxxxx, et al. x. Xxxx
Ahankoob, et al. - and Complaint in
Intervention of EAFC
BC116178 (LASC) 11/14/94 Koke Ahankoob, et al. v. First Los
Angeles Bank, et al.
LC029885 (LASC) 12/9/94 Xxxxxxx v. 7 Days Escrow
LC030107 (LASC) 12/29/94 Xxx Xxxx Elishmerani v. 7 Days
Escrow, et al.
Threatened Threatened Anticipated additiona 7 Days Escrow
claims
C031424 (LASC) 3/30/95 Encino Escrow Exchange, Inc., et al. v.
First Los Angeles Bank
SC0037968 8/7/95 Xxxxxx X. Xxxxxxxx, et al. v. First Los
Angeles Bank and Xxxx X. Xxxxxxxxxxx
Threatened Threatened Other possible lawsuits relating to the
conduct of Xxxx Xxxxxxxxxxx
262982 (Riv. SC) 3/21/95 Xxxxx Xxxxxxxxx v. First Los Angeles
Bank
LA 94-28439-LF Adv. Proc. In Re Xxxxx Xxxxxxx NcNall
3/24/95 --------------------------
adv. proc. R. Xxxx Xxxxxxx v. First Los
Angeles Bank, Authentic Collectibles,
Inc. and Xxxx Xxxx
LA94-28439-LF Counter-claim In Re Xxxxx Xxxxxxx XxXxxx a
8/1/95 --------------------------
counterclaim in adv. proc., filed by Xxxx
Xxxx v. First Los Angeles Bank, et al.
1
Case No. Date Filed Case Name
-------------------------------------------------------------
BC129494 (LASC) Cross- First Los Angeles Bank v. Xxxx
Complaint Mitidiere, et al. (Cross-Complaint - Xxxx
7/13/95 Mitidiere v. First Los Angeles Bank)
BC118376 (LASC) Cross- First los Angeles Bank x. Xxxxxx
Complaint Lesansky and Xxxxx Xxxxxxxx (Cross-
2/24/95 Complaint - Xxxxxx X. Xxxxxxxx v. First
Los Angeles Bank)
95C00748 (LAMC) Cross First Los Angeles Bank x. Xxxxx
Complaint Mossanen (Cross-Complaint - Xxxxx
5/2/95 Mossanen v. First Los Angeles Bank)
Threatened Threatened Onocifero Xxxxx
SC021772 (LASC 1/26/93 Xxxxxxx Xxxxx v. Site Properties, et al.
Threatened Threatened Xxxx Xxx and Xx Xx Xxxx (First Los
Angeles Bank is not a party to present
litigation, entitled LASC BC022565,
Tripple Power Zipper Corp. v. Xxxx X.
Xxx, et al.; Xxxx X. Xxx, et al. v. Xx Xx
xxxx, et al.)
SC024799 (LASC) 6/29/93 Xxxxxx Xxxxxx v. Xxxx X. Xxxxx, et al.
95T02079 (LAMC) 6/13/95 State Bar of California v. First Los
Angeles Bank (Xxxxxx X. Xxxxxx)
Threatened Threatened Greenblatts' Liquor & Deli
SC035475 (LASC) 3/7/95 Scanam, Inc. v. First Los Angeles Bank
94X07333 (LAMC) 12/29/94 Amtech Reliable Elevator Co. v. Xxxxx
Xxxxxx and First Los Angeles Bank
BC 112932 (LASC) 9/21/94 First Los Angeles Bank v. 816 So.
(Xxxxx- Xxxxxxxx (Cross-Complaint - 816 So.
Complaint Figueroa et al. v. First Los Angeles
11/23/94) Bank et al.)
2 Page 38 of 63
Case No. Date Filed Case Name
---------------------------------------------
Threatened Threatened The Incline Trust
Settled Settled Estate of Xxxxxxx
BC126276 (LASC) 5/2/95 Xxxx Ukra v. Southern California Title
Company, etc., First Los Angeles Bank,
etc., San Paolo Asset Management, Inc.
Threatened Threatened Escrow Holders of Accounts at Southern
California Title Company and Romar
Financial Services
Threatened Threatened Xxxxxxxx Xxxxxx
Threatened Threatened GEO Petroleum
Threatened Threatened Wilshire LaPeer Co.
PC010210Z 7/28/93 Xxxxxxx Ltd. No. 1 v. St. Xxxxxx Xxxxx,
(Cross-Complaint-St. Xxxxxx Xxxxx v.
Uni-Arc, Inc., et al.)
Dismissed Dismissed Preferred Financial Corporation v.
First Los Angeles Bank, et al.
Settled Settled Xxxxxxx
679679 (OCSC) 1/24/92 Xxxxxx X. Xxxxxxx and Xxxxxxx X.
Xxxxx et al. v. MDFC Loan Corp., et al.
BC 096445 (LASC) 1/7/94 Xxxx x. Xxxxxxx, et al.
BC 125109 4/3/95 Xxxx v. First Los Angeles Bank
Releases obtained Releases Union Land Title v. First Los Angeles
obtained Bank
[confidential information omitted and filed separately]
* Schedule 11 contains the lists contemplated by the third sentence of
3.1(j) and by 7.3(a)(i)(B). The list above relates to 3.1(j) and the list
below relates to 7.3(a)(i)(B).
In re Grand Rizal; First Los Angeles Bank x. Xxxxxx & Xxxxxxx.
----------- ------------------------- ----------------
LEM:js:pem/sp Page 39 of 63
5557S11.FLA
3
SCHEDULE 12
-----------
EMPLOYEE BENEFIT PLANS*
Xxxxxx Permanente Group Medical Service Agreement
Reliance Standard Life Plan
Reliance Standard AD&D Plan
Great West Life Medical/Life Plan/25 Plan
401(K) Trust Agreement
401(K) Record Keeper Plan
Xxxx Xxxxxx LTD Plan
EAP Plan
Enrollment Forms
Deferred Compensation Plan
List of Employees and Salaries
Benefit Consulting Letter
401(K) SPD and Prospectus Forms
FLAB Severance Plan
*Schedule 12, pertaining to (S)3.1(n), includes all First Los
Angeles Bank Employee Plans.
LEM:lb:xxx/lb Page 40 of 63
5557S12.FLA
SCHEDULE 13
-----------
ENCUMBRANCES ((S)3.1(p))
Schedule 13, which pertains to (S) 3.1(p), is comprised of the attached two-page
list plus the list described in Schedule 4, which identifies the properties or
assets of First Los Angeles Bank which are subject to a lien, mortgage, security
interest, encumbrance or charge.
LEM:lb:xxx/lb Page 41 of 63
5557S13.FLA
[confidential information omitted and filed separately]
SCHEDULE 14
-----------
INSURANCE AND BOND POLICIES
Schedule 14, which pertains to (S) 3.1(w), is comprised of the attached twelve-
page list, which identifies all of First Los Angeles Bank's policies of
insurance and bonds, carried or owned, other than policies of title insurance,
currently in effect.
LEM:lb:xxx/lb Page 44 of 63
5557S14.FLA
[confidential information omitted and filed separately]
SCHEDULE 15
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DERIVATIVE TRANSACTIONS IN EXCESS OF $500,000
Schedule 15, which pertains to (S)3.1(y), is comprised of the attached one-page
list, which summarizes and identifies those derivative transactions/agreements
in an amount individually or in the aggregate greater than $500,000.
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5557S15.FLA
[confidential information omitted and filed separately]
SCHEDULE 16
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ANTICIPATED CRA PRODUCTS ((S)2.2(m))*
Free Checking accounts for senior citizens.
Working capital lines for small contractors in joint venture with Pacific Coast
Regional. Maximum Pool of $1,500,000, 90% guaranteed by State funds.
Secured credit card program with Bank of South Dakota.
*This Schedule lists all CRA Products of First Los Angeles Bank
proposed to be introduced.
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5557SR.FLA
SCHEDULE 17
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[confidential information omitted and filed separately] LOANS ((S)1.1(a)(Z))
[confidential information omitted and filed separately]
SNR:sk Page 59-A of 63
5557S17.FLA
SCHEDULE 18
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[confidential information omitted and filed separately] LOANS ((S)4.14(c))
[confidential information omitted and filed separately]
SNR:sk Page 59-B of 63
5557S17.FLA
SCHEDULE 19
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SCHEDULE OF EXECUTIVE OFFICER/
KEY EMPLOYEE AGREEMENTS ((S)(S) 3.1(l) and 4.2(c))*
[confidential information omitted and filed separately]
*This Schedule lists agreements contemplated by (S)3.1(l) and
4.2(c)).
[confidential information omitted and filed separately]
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5557SD.FLA
SCHEDULE 20
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SCHEDULE OF
TRUST ADMINISTRATION ((S)3.1(z))
--------------------
First Los Angeles Bank has an escrow department, and to the extent that an
escrow can be considered a trust, this relationship is hereby disclosed.
However, First Los Angeles Bank does not consider its escrow department to
provide trust services.
LEM:lb:xxx/lb Page 61 of 63
5557STA.FLA
SCHEDULE 21
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ASSIGNMENTS ((S)4.13(b))
[confidential information omitted and filed separately]
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5557ASN.FLA
SCHEDULE 22
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PARTICIPATION REPURCHASES ((S)4.15)
[confidential information omitted and filed separately]
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5557PR.FLA
SCHEDULE 23
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SEVERANCE POLICIES
[confidential information omitted and filed separately]
LEM:sp Page 63-A of 63
5557SP.FLA
