As filed with the Securities and Exchange Commission on June 3,July 15, 2011
Registration No. 333-173511
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 12
to
Form S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
NARA BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware | 6021 | 95-4170121 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (IRS Employer Identification Number) |
3731 Wilshire Boulevard, Suite 1000
Los Angeles, California 90010
(213) 639-1700
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Alvin D. Kang
President and Chief Executive Officer
Nara Bancorp, Inc.
3731 Wilshire Boulevard, Suite 1000
Los Angeles, California 90010
(213) 639-1700
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
James R. Walther Mayer Brown LLP 350 South Grand Avenue, 25th Floor Los Angeles, California 90071 (213) 229-9500 | Lisa K. Pai Executive Vice President and General Counsel Center Financial Corporation 3435 Wilshire Blvd, Suite 700 Los Angeles, California 90010 (213) 251-2222 | Hillel T. Cohn Morrison & Foerster LLP 555 West Fifth Street, Suite 3500 Los Angeles, California 90013 (213) 892-5200 |
Approximate Date of Commencement of Proposed Sale to the Public: As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). (Check one):
Large accelerated filer ¨ | Accelerated filer x | Non-accelerated filer ¨ | Smaller reporting company ¨ | |||
(Do not check if a smaller reporting company) |
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ¨
Exchange Act Rule 14d-1(d) (Cross Border Third-Party Tender Offer) ¨
Information in this document is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY, SUBJECT TO COMPLETION, DATED JUNE 3,JULY 15, 2011
PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT
To Our Stockholders:
The boards of directors of Nara Bancorp, Inc. and Center Financial Corporation have approved an agreement to merge our two companies. Before we can complete the merger, we must obtain the approval of the stockholders of Nara Bancorp and of Center Financial Corporation. We are sending you this document to ask for your vote to adopt the merger agreement, including approval of the terms of the merger, at the respective annual stockholder meetings of Nara Bancorp and Center Financial Corporation, which will be held on [—] [—], 2011.
The proposed merger will create the largest and, we believe, strongest Korean-American bank in the United States. The combined company will have approximately $5.3 billion in assets, branches in major Korean-American communities across the United States, and a strong capital base to support further growth. We believe that the stockholders of both Nara Bancorp and of Center Financial Corporation will benefit from the increased earnings power of the combined company and our improved ability to generate profitable growth and higher returns going forward.
In the proposed merger, Center Financial Corporation will merge into Nara Bancorp, and Center Financial Corporation stockholders will receive 0.7804 of a share of Nara Bancorp common stock, subject to adjustment, for each share of Center Financial Corporation common stock they own. To reflect the combination of our two companies, we will adopt a name selected by the directors of both companies for our operations after the merger.
The exchange ratio in the merger will not be adjusted to reflect stock price changes between now and the closing. Based on the closing price of Nara Bancorp’s common stock on December 8, 2010, the day prior to the public announcement of the merger, the exchange ratio represented a value of $7.16 per share of Center Financial Corporation common stock. The closing price of Center Financial Corporation’s common stock on that date was $6.65. Using the closing price of Nara Bancorp’s common stock on [—] [—], 2011, the exchange ratio represented a value of $[—]$ per share. Based on the 0.7804 exchange ratio and the number of shares of Center Financial Corporation common stock outstanding or reserved for issuance under outstanding stock options and warrants on the record date for the stockholder meetings, Nara Bancorp expects that up to approximately [—] shares of its common stock will become issuable to Center Financial Corporation stockholders and holders of such options and warrants as a result of the merger. Nara Bancorp will also issue 55,000 shares of a new class of preferred stock to the United States Treasury Department in exchange for the preferred stock of Center Financial Corporation currently held by the Treasury Department.
You should obtain current market quotations for both Nara Bancorp and Center Financial Corporation common stock. Nara Bancorp common stock is listed on the Nasdaq Global Select Market under the symbol “NARA.” Center Financial Corporation common stock is listed on the Nasdaq Global Select Market under the symbol “CLFC.”
The merger is intended to be tax-free to Center Financial Corporation stockholders, other than with respect to any cash paid in lieu of issuing fractional shares of Nara Bancorp common stock to them.
At our respective annual meetings, in addition to the merger, we will ask our stockholders to elect directors and vote on the other proposals described in the respective annual meeting notices that follow this letter, including approval of an increase in the authorized number of shares of Nara Bancorp common stock from 100,000,000 to 150,000,000 shares. The accompanying disclosure document describes the annual meetings, the merger and the related merger agreements, and includes other important information about the proposals that will be presented for action at the annual meetings.Please read the entire document carefully, including the section entitled “Risk Factors” beginning on Page 18.19.
Your vote is very important. Whether or not you plan to attend your meeting, please take the time to submit your proxy in accordance with the voting instructions contained in this document. If you do not vote, it will have the same effect as voting against the merger.
Each of our boards of directors unanimously recommends that the stockholders of Nara Bancorp and Center Financial Corporation vote “FOR” the merger. We strongly support this combination and believe it to be in the best interests of the stockholders of both companies.
Ki Suh Park | Jin Chul Jhung | |||
Chairman of the Board | Chairman of the Board | |||
Nara Bancorp, Inc. | Center Financial Corporation |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, the issuance of the Nara Bancorp common stock in connection with the merger or the other transactions described in this joint proxy statement/prospectus, or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.
The securities to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
This joint proxy statement/prospectus is dated [—] [—], 2011 and is first being mailed to stockholders of Nara Bancorp and Center Financial Corporation on or about [—] [—], 2011.
NARA BANCORP, INC.
Notice of Annual Meeting of Stockholders
To Be Held [—] [—], 2011
To the Stockholders of Nara Bancorp, Inc.:
The annual meeting of stockholders of Nara Bancorp, Inc. will be held at [ place ], [ address ],the Oxford Palace Hotel, 745 South Oxford Avenue, Los Angeles, California 90005 on [ day ], [—], [—], 2011 at [ time —] Los Angeles time. At the annual meeting, you will be asked to consider and vote on the following matters:
1. Adoption and approval of the Agreement and Plan of Merger, dated December 9, 2010, as amended, providing for the merger of Center Financial Corporation with and into Nara Bancorp, Inc. as described in this document.
2. Election of directors of Nara Bancorp, Inc.
3. Approval of an amendment to the certificate of incorporation of Nara Bancorp, Inc. to increase the authorized number of shares of common stock to 150,000,000 shares.
4. Ratification of the selection of Crowe Horwath LLP as our independent registered public accounting firm for the year ending December 31, 2011.
5. Approval, on an advisory and nonbinding basis, of the compensation paid to our “named executive officers” as described in this document.
6. Adjournment of the meeting if necessary or appropriate in the judgment of our board of directors to solicit additional proxies or votes in favor of the above proposals that are to be presented at the meeting.
7. Such other matters, if any, as may be properly presented for consideration and action at the annual meeting.
The Board of Directors recommends that you vote in favor of the merger, the nominees, the increase in the number of authorized shares of common stock and the other proposals described in this document.
Only stockholders of record at the close of business on [—] [—], 2011 are entitled to notice of and to vote at the annual meeting.
Whether or not you plan to attend the annual meeting, please sign, date and return the enclosed proxy card in the postage paid envelope provided, or cast your vote by telephone or Internet by following the instructions on your proxy card, as soon as you can.The vote of every stockholder is important and we appreciate your cooperation in returning your executed proxy promptly.
Your proxy, or your telephone or Internet vote, is revocable and will not affect your right to vote in person if you attend the annual meeting. If your shares are registered in your name and you attend the meeting, you may simply revoke your previously submitted proxy and vote your shares at that time. If your shares are held by a broker or other nominee holder, and are not registered in your name, you will need additional documentation from your broker or other record holder to vote your shares personally at the meeting. Please indicate on the proxy card whether or not you expect to attend.
We appreciate your continuing support and look forward to seeing you at the annual meeting.
By Order of the Board of Directors |
Juliet Stone Secretary |
DATED: [—] [—], 2011
Important Notice Regarding the Availability of Proxy Materials for the
2011 Annual Meeting of Stockholders
This document and Nara Bancorp’s 2010 Annual Report to Stockholders are available electronically at
http://www.RRDEZProxy.com/2011/NaraBankEZProxy.
CENTER FINANCIAL CORPORATION
Notice of Annual Meeting of Stockholders
To Be Held [—] [—], 2011
To the Stockholders of Center Financial Corporation:
The annual meeting of stockholders of Center Financial Corporation will be held at [ place ], [ address ],2222 West Olympic Boulevard, Los Angeles, California 90006 on [ day ], [—], [—], 2011 at [ time —] Los Angeles time. At the annual meeting, you will be asked to consider and vote on the following matters:
1. Adoption and approval of the Agreement and Plan of Merger, dated December 9, 2010, as amended, providing for the merger of Center Financial Corporation with and into Nara Bancorp, Inc. as described in this document.
2. Election of directors of Center Financial Corporation.
3. Ratification of the selection of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2011.
4. Approval, on an advisory and nonbinding basis, of the compensation paid to our “named executive officers” as described in this document.
5. Adjournment of the meeting if necessary or appropriate in the judgment of our board of directors to solicit additional proxies or votes in favor of the above proposals that are to be presented at the meeting.
6. Such other matters, if any, as may be properly presented for consideration and action at the annual meeting.
The Board of Directors recommends that you vote in favor of the merger, the director nominees and each of the other proposals described in this document.
Only stockholders of record at the close of business on [—] [—], 2011 are entitled to notice of and to vote at the annual meeting.
Whether or not you plan to attend the annual meeting, please sign, date and return the enclosed proxy card in the postage paid envelope provided, or cast your vote by telephone or Internet by following the instructions on your proxy card, as soon as you can.The vote of every stockholder is important and we appreciate your cooperation in returning your executed proxy promptly.
Your proxy, or your telephone or Internet vote, is revocable and will not affect your right to vote in person if you attend the annual meeting. If your shares are registered in your name and you attend the meeting, you may simply revoke your previously submitted proxy and vote your shares at that time. If your shares are held by a broker or other nominee holder, and not registered in your name, you will need additional documentation from your broker or other record holder to vote your shares personally at the meeting. Please indicate on the proxy card whether or not you expect to attend.
We appreciate your continuing support and look forward to seeing you at the annual meeting.
By Order of the Board of Directors |
Lisa Kim Pai Secretary |
DATED: [—] [—], 2011
Important Notice Regarding the Availability of Proxy Materials for the
2011 Annual Meeting of Stockholders
This document and Center Financial Corporation’s 2010 Annual Report to Stockholders are available electronically at
http://investor.centerbank.com.
WHERE YOU CAN FIND MORE INFORMATION
This document incorporates important business and financial information about Nara and Center by reference to other documents that are not included in or delivered with this document. See “Documents Incorporated by Reference” on page [—] for a description of these documents. You can obtain copies of the documents incorporated herein by reference through the Securities and Exchange Commission website athttp://www.sec.gov. You can also obtain copies of these documents, without charge, by requesting them in writing, by e-mail or by telephone at the appropriate address below:
Nara Bancorp, Inc. 3731 Wilshire Boulevard, Suite 1000 Los Angeles, California 90010 Attention: Legal Department Telephone: (213) 639-1700 Email: cc-90-Legal@narabank.com | Center Financial Corporation 3435 Wilshire Boulevard, Suite 700 Los Angeles, California 90010 Attention: Investor Relations Department Telephone: (213) 251-2222 Email: angiey@centerbank.com |
If you would like to request any documents, you should make your request by [—]should be sent in time to be received no later than seven days before the annual meetings, or [—], 2011, in order to receive themthe documents before the annual meetings.
We have not authorized anyone to give any information or make any representation about the merger or our companies that is different from, or in addition to, that contained in this document or in any of the materials that Nara or Center have incorporated into this document by reference. Neither the delivery of this document to stockholders nor any distribution of Nara stock in the merger or otherwise pursuant to this document shall, under any circumstances, create any implication that there has been no change in the information set forth or incorporated into this document by reference or in our affairs since the date of this document.
The information contained in this document with respect to Nara was provided solely by Nara and the information contained in this document with respect to Center was provided solely by Center.
This document does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this document, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction.
Page | ||||
1 | ||||
1 | ||||
Effect of the Merger; What Center Stockholders Will Receive in the Merger | ||||
Certain Forward-Looking Information Exchanged by Nara and Center | 39 | |||
Nara’s Reasons for the Merger; Recommendation of the Merger by the Nara Board of Directors | ||||
Center’s Reasons for the Merger; Recommendation of the Merger by the Center Board of Directors | ||||
Delisting and Deregistration of Center Stock After the Merger | ||||
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
ELECTION OF DIRECTORS AND OTHER PROPOSALS TO BE CONSIDERED AT THE NARA ANNUAL MEETING | ||||
i
TABLE OF CONTENTS
Page | ||||
131 | ||||
Security Ownership of Certain Beneficial Owners and Management | ||||
Nara Proposal 4: Ratification of Appointment of Independent Audit Firm | ||||
OTHER PROPOSALS TO BE CONSIDERED AT THE CENTER ANNUAL MEETING | ||||
Security Ownership of Certain Beneficial Owners and Management | ||||
Center Proposal 3: Ratification of Appointment of Accountants | ||||
ANNEX A-1 | A-1-1 | |||||
ANNEX A-2 | A-2-1 | |||||
ANNEX A-3 | A-3-1 | |||||
ANNEX B | B-1 | |||||
ANNEX C | C-1 | |||||
ANNEX D | Sections 1300-1313 of the California Corporation Code (Dissenters’ Rights) | D-1 | ||||
ANNEX E | E-1 | |||||
ANNEX F | F-1 |
ii
This summary highlights selected information contained in this document. It may not contain all of the information that is important to you in deciding how to vote on the merger or the other matters that will be voted on at the Nara or Center annual meeting. You should carefully read this entire document and the other documents referred to in this document for a more complete understanding of the merger described herein and the other matters that will be considered and voted on at the annual meetings. In addition, we incorporate important business and financial information about Nara and Center by reference into this document. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page [—] of this document.
Unless otherwise indicated in this document or the context otherwise requires: references to “Nara” are to Nara Bancorp, Inc., including its subsidiary, Nara Bank; references to “Center” are to Center Financial Corporation, including its subsidiary, Center Bank; and “we,” “our” or “us” refer to both Nara and Center.
Center Will Merge With and Into Nara (see page [—])
Subject to the terms and conditions of the merger agreement described in this document, and in accordance with Delaware and California law, Center will merge with and into Nara. Nara therefore will be the surviving corporation for legal purposes and its certificate of incorporation will be the certificate of incorporation of the combined company. The name of the combined company will be jointly selected by Nara and Center to reflect the combination of the businesses, boards of directors and management of the two companies. We refer in this document to Nara in its capacity as the legal surviving corporation as the “combined company.” Nara’s bylaws, which will be amended to provide for agreed-upon corporate governance matters described under “The Merger—Amendments to Bylaws” beginning on page [—], will be the bylaws of the combined company.
Concurrently with the merger of Nara and Center, Nara’s banking subsidiary, Nara Bank, will merge with and into Center’s bank subsidiary, Center Bank. Center Bank therefore will be the surviving bank for legal purposes, but its name will be changed to reflect the combined company’s name and the nationwide combination of the Nara and Center banking businesses.
In this document we sometimes refer to the merger of our bank subsidiaries as the “bank merger” and we refer to the merger of Nara and Center as the “merger” or the “holding company merger.”
Center Common Stockholders Will Receive 0.7804 of a Share of Nara Common Stock, Subject to Adjustment, for Each Share of Center Common Stock; Nara Stockholders Will Retain Their Shares (see page [—])
The merger agreement provides that Center common stockholders will receive 0.7804 of a share of Nara common stock for each share of Center common stock they own, subject to adjustment only in certain limited circumstances. It is a condition to completion of the merger that the shares of Nara common stock issued in the merger shall be listed for trading on the Nasdaq Global Select Market, which is the stock exchange on which both Nara’s common stock and Center’s common stock are currently listed for trading. Prior to the completion of the merger, Nara’s common stock and Center’s common stock will continue to be listed on the Nasdaq Global Select Market.
Upon completion of the merger, current Nara stockholders and current Center stockholders will own 55% and 45%, respectively, of the combined company, not including the shares of Nara common stock issued in a common stock offering Nara expects to make prior to the merger for the benefit of the combined company. Shares issued in the anticipated offering will reduce the percentage ownership interests of the respective stockholders proportionately. Upon completion of the merger, the Center common stock currently listed on the Nasdaq Global Select Market will cease to be listed and will be removed from registration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Assuming the number of shares of Center common stock outstanding at the time of the merger equaled the number of shares outstanding on December 8, 2010 and that the value of Nara common stock at the time of the merger equaled $9.17 per share, the closing price as of December 8, 2010, the aggregate purchase price for those Center shares would be $285.7 million. As noted below, however, the total value of the Nara common stock issued to Center stockholders upon completion of the merger will fluctuate based on the share price of the Nara common stock and the number of shares of Center common stock and options outstanding on the date of the merger.
Merger Exchange Ratio Will Not Be Adjusted in Response to Changes in Our Stock Prices (see page [—])
The exchange ratio in the merger agreement will not change to reflect changes in the market prices of Nara or Center common stock, although the exchange ratio may be changed to reflect certain changes in the respective numbers of shares of Nara or Center stock outstanding or subject to outstanding options, warrants or other purchase rights issued after the date of the merger agreement. In addition, neither Nara nor Center has the right to terminate the merger agreement in response to changes in either company’s stock price.Accordingly, the market value of the Nara common stock that Center stockholders receive in the merger may vary significantly from its current value.
The table below shows the closing prices of Nara and Center common stock, which trade on the Nasdaq Global Select Market under the symbols “NARA” and “CLFC,” respectively, and the pro forma equivalent per share value of Center common stock at the close of the regular trading session on December 8, 2010, the last trading day before our public announcement of the merger, and [—] [—], 2011, the most recent trading day for which that information was available prior to the mailingcompletion of this document.
Closing Prices Per Share of Nara and Center Common Stock
Date | Nara Closing Price | Center Closing Price | Center Pro Forma Equivalent Value Per Share(1) | Nara Closing Price | Center Closing Price | Center Pro Forma Equivalent Value Per Share(1) | ||||||||||||||||||
December 8, 2010 | $ | 9.17 | $ | 6.65 | $ | 7.16 | $ | 9.17 | $ | 6.65 | $ | 7.16 | ||||||||||||
[—] [—], 2011 | ||||||||||||||||||||||||
, 2011 | $ | $ | $ |
(1) | The pro forma equivalent value per share of Center common stock is calculated by multiplying the Nara closing price by the exchange ratio of 0.7804. |
During the period between December 8, 2010 and [—] [—], 2011, the Center pro forma equivalent value per share, based on daily closing prices of Nara common stock, has ranged from a low of $[—]$ to a high of $[—]$ per share.
The following table sets forth, for the periods indicated, the high and low sale prices per share of Nara common stock and Center common stock as reported by the Nasdaq Global Select Market. You may obtain current market quotations for the shares of both companies from a newspaper, the Internet or your stock broker.
High and Low Closing Prices Per Share of Nara and Center Common Stock
Nara Common Stock | Center Common Stock | Nara Common Stock | Center Common Stock | |||||||||||||||||||||||||||||
Calendar Quarter | High | Low | High | Low | High | Low | High | Low | ||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||||||
First Quarter | $ | 9.95 | $ | 2.05 | $ | 6.50 | $ | 2.22 | $ | 9.95 | $ | 2.05 | $ | 6.50 | $ | 2.22 | ||||||||||||||||
Second Quarter | 5.50 | 2.80 | 3.71 | 2.52 | 5.50 | 2.80 | 3.71 | 2.52 | ||||||||||||||||||||||||
Third Quarter | 9.16 | 4.49 | 4.90 | 2.18 | 9.16 | 4.49 | 4.90 | 2.18 | ||||||||||||||||||||||||
Fourth Quarter | 12.23 | 6.21 | 5.42 | 4.74 | 12.23 | 6.21 | 5.42 | 4.74 | ||||||||||||||||||||||||
2010 | ||||||||||||||||||||||||||||||||
First Quarter | 11.78 | 8.33 | 5.39 | 4.64 | 11.78 | 8.33 | 5.39 | 4.64 | ||||||||||||||||||||||||
Second Quarter | 10.24 | 7.34 | 7.05 | 4.89 | 10.24 | 7.34 | 7.05 | 4.89 | ||||||||||||||||||||||||
Third Quarter | 8.43 | 5.96 | 5.50 | 4.56 | 8.43 | 5.96 | 5.50 | 4.56 | ||||||||||||||||||||||||
Fourth Quarter | 9.86 | 6.98 | 7.58 | 4.74 | 9.86 | 6.98 | 7.58 | 4.74 | ||||||||||||||||||||||||
2011 | ||||||||||||||||||||||||||||||||
First Quarter | 10.48 | 9.18 | 7.99 | 7.10 | 10.48 | 9.18 | 7.99 | 7.10 | ||||||||||||||||||||||||
Second Quarter (through [—] [—], 2011) | ||||||||||||||||||||||||||||||||
Second Quarter | 9.84 | 7.05 | 7.44 | 5.54 | ||||||||||||||||||||||||||||
Third Quarter (through , 2011) |
Merger Generally Tax-Free to Stockholders (see page [—])
The merger has been structured to qualify as a reorganization for federal income tax purposes, and it is a condition to our respective obligations to complete the merger that Nara and Center each receive a legal opinion from its legal counsel to the effect that the merger will so qualify. If the merger qualifies as a reorganization for federal income tax purposes, holders of Center common stock generally will not recognize any gain or loss for federal income tax purposes on the exchange of their Center common stock for Nara common stock in the merger, except for any gain or loss that may result from their receipt of cash in lieu of fractional shares of Nara common stock otherwise issuable to them. Holders of Nara stock, who will retain their Nara stock without change, will also not recognize any gain or loss for federal income tax purposes.
The discussion of federal income tax effects of the merger included in this document is only a general summary. The federal income tax consequences of the merger to you will depend upon your own situation. In addition, you may be subject to state, local or foreign tax laws, none of which is discussed in this document. You should therefore consult with your own tax advisor for a complete understanding of the tax consequences of the merger to you.
Our Boards of Directors Recommend that Nara Stockholders and Center Stockholders Approve the Merger (see pages [—] and [—])
Nara Stockholders. The Nara board of directors has determined that the merger agreement is advisable and in the best interests of Nara and its stockholders and unanimously recommends that Nara stockholders vote “FOR” adoption and approval of the merger agreement.
Center Stockholders. The Center board of directors has determined that the merger agreement is advisable and in the best interests of Center and its stockholders and unanimously recommends that Center stockholders vote “FOR” adoption and approval of the merger agreement.
Factors Considered by Our Boards of Directors. In determining whether to approve the merger, our boards of directors each consulted with our respective senior managements and legal and financial advisors and considered the respective strategic, financial and other considerations referred to under “The Merger—Nara’s Reasons for the Merger; Recommendation of the Merger by the Nara Board of Directors” beginning on page [—] and “The Merger—Center’s Reasons for the Merger; Recommendation of the Merger by the Center Board of Directors” beginning on page [—].
We Have Received Opinions From Our Financial Advisors that the Merger Exchange Ratio is Fair (see page [—])
Opinion of Nara’s Financial Advisor. In connection with the Nara board of directors’ consideration of the merger agreement, Nara’s financial advisor, Keefe, Bruyette & Woods, Inc., or KBW, provided its opinion to the Nara board dated as of December 9, 2010 that, as of that date, and subject to and based on the qualifications and assumptions set forth in its opinion, the exchange ratio stated in the merger agreement was fair to Nara from a financial point of view. The full text of KBW’s opinion is attached as Annex B to this document. Nara stockholders should read that opinion and the description of KBW’s opinion contained in this document in their entirety. The opinion of KBW does not reflect any developments that may have occurred or may occur after the date of its opinion and prior to the completion of the merger. Nara does not expect that it will request an updated opinion from KBW.
Nara has agreed to pay a total fee of $1.5 million to KBW in consideration of its services as financial advisor. Nara paid $250,000 to KBW upon signing of the merger agreement in December 2010 and will pay $1,250,000 to KBW upon completion of the merger. In addition, KBW has been granted a right of first refusal to act as co-lead manager, with Center’s financial advisor, for Nara’s anticipated offering of common stock in connection with the merger.
Opinion of Center’s Financial Advisor. In connection with the Center board of directors’ consideration of the merger agreement, Center’s financial advisor, D.A. Davidson & Co., or DADCo, provided its opinion to the Center board of directors dated as of December 8, 2010 that, based upon and subject to the considerations set forth in the opinion and based upon such other matters as DADCo considered relevant, the exchange ratio was fair, from a financial point of view to the stockholders of Center as of the date of the opinion. The full text of DADCo’s opinion is attached as Annex C to this document. Center stockholders should read that opinion and the description of DADCo’s opinion contained in this document in their entirety. The opinion of DADCo will not reflect any developments that may have occurred or may occur after the date of its opinion and prior to the completion of the merger. Center does not expect that it will request an updated opinion from DADCo.
Center has agreed to pay a total fee of $1.5 million to DADCo in consideration of its services as financial advisor. Center paid $250,000 to DADCo upon signing of the merger agreement in December 2010 and will pay $1,250,000 to DADCo upon completion of the merger. In addition, DADCo has been granted the right of first refusal mentioned above to act as co-lead manager, with KBW, for Nara’s anticipated offering of common stock in connection with the merger.
Center Stockholders Will Have Dissenters’ Appraisal Rights Only Under Certain Circumstances (see page [—])
Under California law, which is the law under which Center is incorporated, the common stockholders of Center will not be entitled to dissenters’ appraisal rights in connection with the merger unless Center stockholders who submit a written demand for appraisal of their shares hold, in the aggregate, shares constituting 5% or more of the outstanding shares of Center common stock. Notwithstanding the foregoing, the holders of any Center shares that are subject to a restriction on transfer imposed by Center or by any law or regulation and the
holder of Center’s Series A Preferred Stock will have dissenters’ rights of appraisal, irrespective of the percentage of holders that dissent from the merger. Stockholders who exercise their dissenters’ appraisal rights by complying with the applicable statutory procedures required by California law will be entitled to receive payment in cash for the fair value of their shares as determined in a judicial proceeding. A condition to Nara’s obligation to complete the merger is that the holders of less than 6% of Center’s outstanding common stock give notice of the exercise of dissenters’ rights.
Nara stockholders will not be entitled to exercise dissenters’ appraisal rights under Delaware law, which is the law under which Nara is incorporated.
Interests of Our Directors and Executive Officers in the Merger (see page [—])
Directors and executive officers of Nara and Center have interests in the merger that are different from, or are in addition to, the interests of the stockholders of Nara and Center. These interests include:
the agreed-upon appointments of directors and members of senior management of Nara and Center to board positions and senior management positions at the combined company after the merger that are described in this document; and
rights of Center executive officers and directors to continued indemnification and liability insurance coverage by Nara after the merger for acts or omissions occurring prior to the merger.
Certain of the directors of Nara and Center will receive compensation in the form of cash payments or grants of shares of restricted stock as compensation for their work in negotiating the terms of the merger and in preparations for and implementation of the integration of Nara and Center upon completion of the merger. These compensation arrangements were first proposed after the merger agreement had been entered into and were not discussed or contemplated in the negotiation of the merger agreement.
Treatment of Center TARP Preferred Stock and Warrant in the Merger (see page [—])
The merger agreement provides that Center’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, which Center issued to the United States Treasury Department pursuant to the Troubled Asset Relief Program, or TARP, will be converted into Nara Fixed Rate Cumulative Perpetual Preferred Stock, Series B, which will be a new series of preferred stock that will be designated by Nara prior to the completion of the merger and will have substantially the same rights, preferences, privileges and voting powers as Center’s Series A Preferred Stock. The warrant to purchase Center common stock which Center issued to the Treasury Department in connection with Center’s sale of its Series A Preferred Stock to the Treasury Department, and which currently covers 432,390 shares of Center common stock, will automatically convert in accordance with its terms upon completion of the merger into a warrant to purchase Nara common stock on the same terms, subject to appropriate adjustments to reflect the exchange ratio. As a result of such adjustment and assuming an exchange ratio of 0.7804, the warrant will, upon completion of the merger, entitle the holder of the warrant to purchase 337,437 shares of Nara common stock at a price of $12.22 per share.
Treatment of Stock Options and Other Equity-Based Awards (see page [—])
Nara will assume all employee stock options and other equity-based awards under Center’s equity-based compensation plans, in accordance with their terms, upon completion of the merger. As of June 1,30, 2011, stock options for the purchase of a total of 583,344 shares of Center common stock and 78,66277,462 shares of Center common stock subject to certain restrictions on transfer and possible forfeiture for specified vesting periods were outstanding under Center’s equity-based compensation plans. The merger will not affect the terms of any stock options or performance units of Nara issued under Nara’s equity-based compensation plans.
Directors and Management Following the Merger; Bylaw Amendment (see page [—])
Following the merger, the board of directors of the combined company will have 14 members, consisting of the seven current members of the Nara board of directors and the seven current members of the Center board of directors, or replacement directors selected by Nara or Center if any of their current directors become unable to serve on the board of the combined company. Ki Suh Park, the current Chairman of the Board of Nara, will
become Chairman of the Board of the combined company. Chang Hwi Kim, a current director of Center, will become Vice Chairman of the Board of the combined company. Kevin S. Kim, a current director of Center, will become Chairman of the Board of the combined company’s bank subsidiary resulting from the bank merger and Scott Whang, a current director of Nara, will become Vice Chairman of the Board of the combined bank.
Following the merger, Alvin Kang, the current Chief Executive Officer of Nara, will be the Chief Executive Officer of the combined company. In addition, the parties have agreed that the members of senior management from each company will serve in senior management positions of the combined company following the merger, as further described in “The Merger—Board of Directors and Management After the Merger” beginning on page [—]. Mr. Kang and certain other members of the senior management of Nara, and the chief executive officer and chief financial officer of Center, have served in their current positions for less than three years. See “The Merger—The Parties” beginning on page [—].
Nara and Center have also agreed to follow certain corporate governance procedures during an integration period of one to two years (as determined by the board of directors of the combined company) after the merger, including the establishment of a consolidation committee of the combined company’s board of directors, special board voting requirements for certain decisions, the composition of committees of the board of directors of the combined company and procedures for filling director vacancies. These procedures will be set forth in an amendment to Nara’s bylaws that will become effective as of the completion of the merger. The adoption of the bylaw amendment by Nara is a condition to Nara’s and Center’s respective obligations to complete the merger. The form of the bylaw amendments is set forth in an exhibit to the merger agreement and is attached as Annex E to this document.
Regulatory Approvals We Must Obtain for the Merger (see page [—])
To complete the merger and the bank merger, we must obtain the approval of the California Department of Financial Institutions (the “DFI”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). Applications were filed with the DFI and the FDIC on May 19, 2011. It is anticipated that Nara will file an application with the Federal Reserve Bank of San Francisco (the “FRBSF”) at a later date to be determined by Center and Nara based on their ongoing discussions with the FRBSF. We do not expect to receive the required regulatory approvals prior to our stockholders meetings at which the merger will be voted on. See “Regulatory Approvals” beginning on page [—] for a description of the regulatory approvals that must be obtained in connection with the merger.
Although Nara and Center have each reported profits in recent quarters, both companies have had significant quarterly losses in recent years and have been subjects of informal regulatory action, consisting of memoranda of understanding with bank regulatory authorities in the case of Center and the adoption of board of directors resolutions at the request of bank regulatory authorities in the case of Nara. To obtain regulatory approval of the merger, we must provide adequate information to the regulatory authorities that demonstrates, among other considerations, that we have satisfactorily addressed the issues raised by the bank regulatory authorities. We anticipate that this will result in a longer than normal regulatory approval process and do not expect to complete the merger before the fourth quarter of 2011.
Expected TimingCenter Financial Corporation
3435 Wilshire Blvd, Suite 700
Los Angeles, California 90010
(213) 251-2222
Hillel T. Cohn
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, California 90013
(213) 892-5200
Approximate Date of Commencement of Proposed Sale to the Public:As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). (Check one):
Large accelerated filer ¨ | Accelerated filer x | Non-accelerated filer ¨ | Smaller reporting company ¨ | |||
(Do not check if a smaller reporting company) |
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ¨
Exchange Act Rule 14d-1(d) (Cross Border Third-Party Tender Offer) ¨
Information in this document is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY, SUBJECT TO COMPLETION, DATED JULY 15, 2011
PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT
To Our Stockholders:
The boards of directors of Nara Bancorp, Inc. and Center Financial Corporation have approved an agreement to merge our two companies. Before we can complete the merger, we must obtain the approval of the stockholders of Nara Bancorp and of Center Financial Corporation. We are sending you this document to ask for your vote to adopt the merger agreement, including approval of the terms of the merger, at the respective annual stockholder meetings of Nara Bancorp and Center Financial Corporation, which will be held on [—], 2011.
The proposed merger will create the largest and, we believe, strongest Korean-American bank in the United States. The combined company will have approximately $5.3 billion in assets, branches in major Korean-American communities across the United States, and a strong capital base to support further growth. We believe that the stockholders of both Nara Bancorp and Center Financial Corporation will benefit from the increased earnings power of the combined company and our improved ability to generate profitable growth and higher returns going forward.
In the proposed merger, Center Financial Corporation will merge into Nara Bancorp, and Center Financial Corporation stockholders will receive 0.7804 of a share of Nara Bancorp common stock, subject to adjustment, for each share of Center Financial Corporation common stock they own. To reflect the combination of our two companies, we will adopt a name selected by the directors of both companies for our operations after the merger.
The exchange ratio in the merger will not be adjusted to reflect stock price changes between now and the closing. Based on the closing price of Nara Bancorp’s common stock on December 8, 2010, the day prior to the public announcement of the merger, the exchange ratio represented a value of $7.16 per share of Center Financial Corporation common stock. The closing price of Center Financial Corporation’s common stock on that date was $6.65. Using the closing price of Nara Bancorp’s common stock on , 2011, the exchange ratio represented a value of $ per share. Based on the 0.7804 exchange ratio and the number of shares of Center Financial Corporation common stock outstanding or reserved for issuance under outstanding stock options and warrants on the record date for the stockholder meetings, Nara Bancorp expects that up to approximately [—] shares of its common stock will become issuable to Center Financial Corporation stockholders and holders of such options and warrants as a result of the merger. Nara Bancorp will also issue 55,000 shares of a new class of preferred stock to the United States Treasury Department in exchange for the preferred stock of Center Financial Corporation currently held by the Treasury Department.
You should obtain current market quotations for both Nara Bancorp and Center Financial Corporation common stock. Nara Bancorp common stock is listed on the Nasdaq Global Select Market under the symbol “NARA.” Center Financial Corporation common stock is listed on the Nasdaq Global Select Market under the symbol “CLFC.”
The merger is intended to be tax-free to Center Financial Corporation stockholders, other than with respect to any cash paid in lieu of issuing fractional shares of Nara Bancorp common stock to them.
At our respective annual meetings, in addition to the merger, we will ask our stockholders to elect directors and vote on the other proposals described in the respective annual meeting notices that follow this letter, including approval of an increase in the authorized number of shares of Nara Bancorp common stock from 100,000,000 to 150,000,000 shares. The accompanying disclosure document describes the annual meetings, the merger and the related merger agreements, and includes other important information about the proposals that will be presented for action at the annual meetings.Please read the entire document carefully, including the section entitled “Risk Factors” beginning on Page 19.
Your vote is very important. Whether or not you plan to attend your meeting, please take the time to submit your proxy in accordance with the voting instructions contained in this document. If you do not vote, it will have the same effect as voting against the merger.
Each of our boards of directors unanimously recommends that the stockholders of Nara Bancorp and Center Financial Corporation vote “FOR” the merger. We strongly support this combination and believe it to be in the best interests of the stockholders of both companies.
Ki Suh Park | Jin Chul Jhung | |||
Chairman of the
| Chairman of the | |||
Nara Bancorp, Inc. |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, the issuance of the Nara Bancorp common stock in connection with the merger or the other transactions described in this joint proxy statement/prospectus, or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.
The securities to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
This joint proxy statement/prospectus is dated , 2011 and is first being mailed to stockholders of Nara Bancorp and Center Financial Corporation on or about , 2011.
NARA BANCORP, INC.
Notice of Annual Meeting of Stockholders
To Be Held [—], 2011
To the Stockholders of Nara Bancorp, Inc.:
The annual meeting of stockholders of Nara Bancorp, Inc. will be held at the Oxford Palace Hotel, 745 South Oxford Avenue, Los Angeles, California 90005 on [—], [—], 2011 at [—] Los Angeles time. At the annual meeting, you will be asked to consider and vote on the following matters:
1. Adoption and approval of the Agreement and Plan of Merger, dated December 9, 2010, as amended, providing for the merger of Center Financial Corporation with and into Nara Bancorp, Inc. as described in this document.
2. Election of directors of Nara Bancorp, Inc.
3. Approval of an amendment to the certificate of incorporation of Nara Bancorp, Inc. to increase the authorized number of shares of common stock to 150,000,000 shares.
4. Ratification of the selection of Crowe Horwath LLP as our independent registered public accounting firm for the year ending December 31, 2011.
5. Approval, on an advisory and nonbinding basis, of the compensation paid to our “named executive officers” as described in this document.
6. Adjournment of the meeting if necessary or appropriate in the judgment of our board of directors to solicit additional proxies or votes in favor of the above proposals that are to be presented at the meeting.
7. Such other matters, if any, as may be properly presented for consideration and action at the annual meeting.
The Board of Directors recommends that you vote in favor of the merger, the nominees, the increase in the number of authorized shares of common stock and the other proposals described in this document.
Only stockholders of record at the close of business on [—], 2011 are entitled to notice of and to vote at the annual meeting.
Whether or not you plan to attend the annual meeting, please sign, date and return the enclosed proxy card in the postage paid envelope provided, or cast your vote by telephone or Internet by following the instructions on your proxy card, as soon as you can.The vote of every stockholder is important and we appreciate your cooperation in returning your executed proxy promptly.
Your proxy, or your telephone or Internet vote, is revocable and will not affect your right to vote in person if you attend the annual meeting. If your shares are registered in your name and you attend the meeting, you may simply revoke your previously submitted proxy and vote your shares at that time. If your shares are held by a broker or other nominee holder, and are not registered in your name, you will need additional documentation from your broker or other record holder to vote your shares personally at the meeting. Please indicate on the proxy card whether or not you expect to attend.
We appreciate your continuing support and look forward to seeing you at the annual meeting.
By Order of the |
Juliet Stone
|
DATED: , 2011
Important Notice Regarding the Availability of Proxy Materials for the
2011 Annual Meeting of Stockholders
This document and Nara Bancorp’s 2010 Annual Report to Stockholders are available electronically at
http://www.RRDEZProxy.com/2011/NaraBankEZProxy.
CENTER FINANCIAL CORPORATION
Notice of Annual Meeting of Stockholders
To Be Held [—], 2011
To the Stockholders of Center Financial Corporation:
The annual meeting of stockholders of Center Financial Corporation will be held at 2222 West Olympic Boulevard, Los Angeles, California 90006 on [—], [—], 2011 at [—] Los Angeles time. At the annual meeting, you will be asked to consider and vote on the following matters:
1. Adoption and approval of the Agreement and Plan of Merger, dated December 9, 2010, as amended, providing for the merger of Center Financial Corporation with and into Nara Bancorp, Inc. as described in this document.
2. Election of directors of Center Financial Corporation.
3. Ratification of the selection of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2011.
4. Approval, on an advisory and nonbinding basis, of the compensation paid to our “named executive officers” as described in this document.
5. Adjournment of the meeting if necessary or appropriate in the judgment of our board of directors to solicit additional proxies or votes in favor of the above proposals that are to be presented at the meeting.
6. Such other matters, if any, as may be properly presented for consideration and action at the annual meeting.
The Board of Directors recommends that you vote in favor of the merger, the director nominees and each of the other proposals described in this document.
Only stockholders of record at the close of business on [—], 2011 are entitled to notice of and to vote at the annual meeting.
Whether or not you plan to attend the annual meeting, please sign, date and return the enclosed proxy card in the postage paid envelope provided, or cast your vote by telephone or Internet by following the instructions on your proxy card, as soon as you can.The vote of every stockholder is important and we appreciate your cooperation in returning your executed proxy promptly.
Your proxy, or your telephone or Internet vote, is revocable and will not affect your right to vote in person if you attend the annual meeting. If your shares are registered in your name and you attend the meeting, you may simply revoke your previously submitted proxy and vote your shares at that time. If your shares are held by a broker or other nominee holder, and not registered in your name, you will need additional documentation from your broker or other record holder to vote your shares personally at the meeting. Please indicate on the proxy card whether or not you expect to attend.
We appreciate your continuing support and look forward to seeing you at the annual meeting.
the merger agreement must be adopted and approved by the common stockholders of Nara and by the outstanding shares of each class of stock of Center;
the Nara common stock to be issued in connection with the merger must be approved for listing on the Nasdaq Global Select Market;
we must obtain all necessary regulatory approvals
By Order of the |
Lisa Kim Pai
|
DATED: , 2011
Important Notice Regarding the Availability of Proxy Materials for the
2011 Annual Meeting of Stockholders
This document and Center Financial Corporation’s 2010 Annual Report to Stockholders are available electronically at
http://investor.centerbank.com.
WHERE YOU CAN FIND MORE INFORMATION
This document incorporates important business and financial information about Nara and Center by reference to other documents that are not included in or delivered with this document. See “Documents Incorporated by Reference” on page [—] for a description of these documents. You can obtain copies of the documents incorporated herein by reference through the Securities and Exchange Commission website athttp://www.sec.gov. You can also obtain copies of these documents, without charge, by requesting them in writing, by e-mail or by telephone at the appropriate address below:
adoption and approval of the merger agreement;
election of directors;
approval of an amendment to Nara’s certificate of incorporation to increase the number of authorized shares of common stock to 150,000,000.
ratification of the appointment of Crowe Horwath LLP as Nara’s independent registered public accounting firm for 2011;
approval, on an advisory and nonbinding basis, of specified executive compensation;
adjournment of the meeting, if necessary or appropriate, to solicit additional proxies or votes in favor of the matters to be presented at the annual meeting; and
any other matters that may be properly presented at the meeting.
You may vote at the Nara annual meeting if you owned shares of Nara common stock at the close of business on [—] [—], 2011. On that date, [—] shares of Nara common stock were outstanding, [—]% of which were owned and entitled to be voted by Nara directors and executive officers and their affiliates. We currently expect that Nara’s directors and executive officers will vote their shares in favor of the merger, although none of them has entered into any agreement obligating them to do so.
The affirmative vote of a majority of the shares of Nara common stock outstanding on the record date will be required to adopt and approve the merger agreement. See “Nara Annual Meeting” beginning on page [—] for information regarding voting at the Nara annual meeting and the percentages of votes that will be required for approval of the other proposals that will be presented at the meeting.
Center Annual Meeting (see page [—])
The Center annual meeting will be held at the [ place ], [ address ], Los Angeles, on [—] [—], 2011, starting at [ time ] Los Angeles time. At the Center annual meeting, Center’s stockholders will be asked to vote on the following matters:
adoption and approval of the merger agreement;
election of directors;
ratification of the appointment of KPMG LLP as Center’s independent registered public accounting firm for 2011;
approval, on an advisory and nonbinding basis, of specified executive compensation;
adjournment of the meeting, if necessary or appropriate, to solicit additional proxies or votes in favor of the matters to be presented at the annual meeting; and
any other matters that may be properly presented at the meeting.
You may vote at the Center annual meeting if you owned shares of Center common stock or Center preferred stock at the close of business on [—] [—], 2011. On that date, [—] shares of Center common stock were outstanding, [—]% of which were owned and entitled to be voted by Center directors and executive officers and their affiliates. We currently expect that Center’s directors and executive officers will vote their shares in favor of the merger, although none of them has entered into any agreement obligating them to do so. On [—] [—], 2011, 55,000 shares of Center preferred stock were outstanding, all of which were issued to the United States Treasury Department in December 2008 as part of Center’s participation in the Treasury Department’s Capital Purchase Program under the TARP.
The affirmative vote of a majority of the shares of Center common stock outstanding on the record date and the affirmative vote of a majority of the shares of Center preferred stock outstanding on the record date will be required to adopt and approve the merger agreement. See “Center Annual Meeting” beginning on page [—] for information regarding voting at the Center annual meeting and the percentages of votes that will be required to approve the proposals that will be presented at the meeting.
INFORMATION ABOUT NARA AND CENTER
Nara Bancorp, Inc. 3731 Wilshire Boulevard, Suite 1000 Los Angeles, California 90010 Attention: Legal Department Telephone: (213) 639-1700
| Center Financial Corporation 3435 Wilshire Boulevard, Suite 700 Los Angeles, Attention: Investor Relations Department Telephone: (213) 251-2222 Email: angiey@centerbank.com |
If you would like to request any documents, your request should be sent in time to be received no later than seven days before the annual meetings, or [—], 2011, in order to receive the documents before the annual meetings.
We have not authorized anyone to give any information or make any representation about the merger or our companies that is different from, or in addition to, that contained in this document or in any of the materials that Nara or Center have incorporated into this document by reference. Neither the delivery of this document to stockholders nor any distribution of Nara stock in the merger or otherwise pursuant to this document shall, under any circumstances, create any implication that there has been no change in the information set forth or incorporated into this document by reference or in our affairs since the date of this document.
The information contained in this document with respect to Nara was provided solely by Nara and the information contained in this document with respect to Center was provided solely by Center.
This document does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this document, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction.
i
TABLE OF CONTENTS
ANNEX A-1 | A-1-1 | |||||
ANNEX A-2 | A-2-1 | |||||
ANNEX A-3 | A-3-1 | |||||
ANNEX B | B-1 | |||||
ANNEX C | C-1 | |||||
ANNEX D | Sections 1300-1313 of the California Corporation Code (Dissenters’ Rights) | D-1 | ||||
ANNEX E | E-1 | |||||
ANNEX F | F-1 |
ii
This summary highlights selected information contained in this document. It may not contain all of the information that is important to you in deciding how to vote on the merger or the other matters that will be voted on at the Nara or Center annual meeting. You should carefully read this entire document and the other documents referred to in this document for a more complete understanding of the merger described herein and the other matters that will be considered and voted on at the annual meetings. In addition, we incorporate important business and financial information about Nara and Center by reference into this document. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page [—] of this document.
Unless otherwise indicated in this document or the context otherwise requires: references to “Nara” are to Nara Bancorp, Inc., including its subsidiary, Nara Bank; references to “Center” are to Center Financial Corporation, including its subsidiary, Center Bank; and “we,” “our” or “us” refer to both Nara and Center.
Center Will Merge With and Into Nara (see page [—])
Subject to the terms and conditions of the merger agreement described in this document, and in accordance with Delaware and California law, Center will merge with and into Nara. Nara therefore will be the surviving corporation for legal purposes and its certificate of incorporation will be the certificate of incorporation of the combined company. The name of the combined company will be jointly selected by Nara and Center to reflect the combination of the businesses, boards of directors and management of the two companies. We refer in this document to Nara in its capacity as the legal surviving corporation as the “combined company.” Nara’s bylaws, which will be amended to provide for agreed-upon corporate governance matters described under “The Merger—Amendments to Bylaws” beginning on page [—], will be the bylaws of the combined company.
Concurrently with the merger of Nara and Center, Nara’s banking subsidiary, Nara Bank, will merge with and into Center’s bank subsidiary, Center Bank. Center Bank therefore will be the surviving bank for legal purposes, but its name will be changed to reflect the combined company’s name and the nationwide combination of the Nara and Center banking businesses.
In this document we sometimes refer to the merger of our bank subsidiaries as the “bank merger” and we refer to the merger of Nara and Center as the “merger” or the “holding company merger.”
Center Common Stockholders Will Receive 0.7804 of a Share of Nara Common Stock, Subject to Adjustment, for Each Share of Center Common Stock; Nara Stockholders Will Retain Their Shares (see page [—])
The merger agreement provides that Center common stockholders will receive 0.7804 of a share of Nara common stock for each share of Center common stock they own, subject to adjustment only in certain limited circumstances. It is a condition to completion of the merger that the shares of Nara common stock issued in the merger shall be listed for trading on the Nasdaq Global Select Market, which is the stock exchange on which both Nara’s common stock and Center’s common stock are currently listed for trading. Prior to the completion of the merger, Nara’s common stock and Center’s common stock will continue to be listed on the Nasdaq Global Select Market.
Upon completion of the merger, current Nara stockholders and current Center stockholders will own 55% and 45%, respectively, of the combined company, not including the shares of Nara common stock issued in a common stock offering Nara expects to make prior to the merger for the benefit of the combined company. Shares issued in the anticipated offering will reduce the percentage ownership interests of the respective stockholders proportionately. Upon completion of the merger, the Center common stock currently listed on the Nasdaq Global Select Market will cease to be listed and will be removed from registration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Assuming the number of shares of Center common stock outstanding at the time of the merger equaled the number of shares outstanding on December 8, 2010 and that the value of Nara common stock at the time of the merger equaled $9.17 per share, the closing price as of December 8, 2010, the aggregate purchase price for those Center shares would be $285.7 million. As noted below, however, the total value of the Nara common stock issued to Center stockholders upon completion of the merger will fluctuate based on the share price of the Nara common stock and the number of shares of Center common stock and options outstanding on the date of the merger.
Merger Exchange Ratio Will Not Be Adjusted in Response to Changes in Our Stock Prices (see page [—])
The exchange ratio in the merger agreement will not change to reflect changes in the market prices of Nara or Center common stock, although the exchange ratio may be changed to reflect certain changes in the respective numbers of shares of Nara or Center stock outstanding or subject to outstanding options, warrants or other purchase rights issued after the date of the merger agreement. In addition, neither Nara nor Center has the right to terminate the merger agreement in response to changes in either company’s stock price.Accordingly, the market value of the Nara common stock that Center stockholders receive in the merger may vary significantly from its current value.
The table below shows the closing prices of Nara and Center common stock, which trade on the Nasdaq Global Select Market under the symbols “NARA” and “CLFC,” respectively, and the pro forma equivalent per share value of Center common stock at the close of the regular trading session on December 8, 2010, the last trading day before our public announcement of the merger, and , 2011, the most recent trading day for which that information was available prior to the completion of this document.
Closing Prices Per Share of Nara and Center Common Stock
Date | Nara Closing Price | Center Closing Price | Center Pro Forma Equivalent Value Per Share(1) | |||||||||
December 8, 2010 | $ | 9.17 | $ | 6.65 | $ | 7.16 | ||||||
, 2011 | $ | $ | $ |
(1) | The pro forma equivalent value per share of Center common stock is |
During the period between December 8, 2010 and , 2011, the Center pro forma equivalent value per share, based on daily closing prices of Nara common stock, has ranged from a low of $ to a high of $ per share.
The following table sets forth, for the periods indicated, the high and low sale prices per share of Nara common stock and Center common stock as reported by the Nasdaq Global Select Market. You may obtain current market quotations for the shares of both companies from a newspaper, the Internet or your stock broker.
High and Low Closing Prices Per Share of Nara and Center Common Stock
Nara Common Stock | Center Common Stock | |||||||||||||||
Calendar Quarter | High | Low | High | Low | ||||||||||||
2009 | ||||||||||||||||
First Quarter | $ | 9.95 | $ | 2.05 | $ | 6.50 | $ | 2.22 | ||||||||
Second Quarter | 5.50 | 2.80 | 3.71 | 2.52 | ||||||||||||
Third Quarter | 9.16 | 4.49 | 4.90 | 2.18 | ||||||||||||
Fourth Quarter | 12.23 | 6.21 | 5.42 | 4.74 | ||||||||||||
2010 | ||||||||||||||||
First Quarter | 11.78 | 8.33 | 5.39 | 4.64 | ||||||||||||
Second Quarter | 10.24 | 7.34 | 7.05 | 4.89 | ||||||||||||
Third Quarter | 8.43 | 5.96 | 5.50 | 4.56 | ||||||||||||
Fourth Quarter | 9.86 | 6.98 | 7.58 | 4.74 | ||||||||||||
2011 | ||||||||||||||||
First Quarter | 10.48 | 9.18 | 7.99 | 7.10 | ||||||||||||
Second Quarter | 9.84 | 7.05 | 7.44 | 5.54 | ||||||||||||
Third Quarter (through , 2011) |
Merger Generally Tax-Free to Stockholders (see page [—])
The merger has been structured to qualify as a reorganization for federal income tax purposes, and it is a condition to our respective obligations to complete the merger that Nara and Center each receive a legal opinion from its legal counsel to the effect that the merger will so qualify. If the merger qualifies as a reorganization for federal income tax purposes, holders of Center common stock generally will not recognize any gain or loss for federal income tax purposes on the exchange of their Center common stock for Nara common stock in the merger, except for any gain or loss that may result from their receipt of cash in lieu of fractional shares of Nara common stock otherwise issuable to them. Holders of Nara stock, who will retain their Nara stock without change, will also not recognize any gain or loss for federal income tax purposes.
The discussion of federal income tax effects of the merger included in this document is only a general summary. The federal income tax consequences of the merger to you will depend upon your own situation. In addition, you may be subject to state, local or foreign tax laws, none of which is discussed in this document. You should therefore consult with your own tax advisor for a complete understanding of the tax consequences of the merger to you.
Our Boards of Directors Recommend that Nara Stockholders and Center Stockholders Approve the Merger (see pages [—] and [—])
Nara Stockholders. The Nara board of directors has determined that the merger agreement is advisable and in the best interests of Nara and its stockholders and unanimously recommends that Nara stockholders vote “FOR” adoption and approval of the merger agreement.
Center Stockholders. The Center board of directors has determined that the merger agreement is advisable and in the best interests of Center and its stockholders and unanimously recommends that Center stockholders vote “FOR” adoption and approval of the merger agreement.
Factors Considered by Our Boards of Directors. In determining whether to approve the merger, our boards of directors each consulted with our respective senior managements and legal and financial advisors and considered the respective strategic, financial and other considerations referred to under “The Merger—Nara’s Reasons for the Merger; Recommendation of the Merger by the Nara Board of Directors” beginning on page [—] and “The Merger—Center’s Reasons for the Merger; Recommendation of the Merger by the Center Board of Directors” beginning on page [—].
We Have Received Opinions From Our Financial Advisors that the Merger Exchange Ratio is Fair (see page [—])
Opinion of Nara’s Financial Advisor. In connection with the Nara board of directors’ consideration of the merger agreement, Nara’s financial advisor, Keefe, Bruyette & Woods, Inc., or KBW, provided its opinion to the Nara board dated as of December 9, 2010 that, as of that date, and subject to and based on the qualifications and assumptions set forth in its opinion, the exchange ratio stated in the merger agreement was fair to Nara from a financial point of view. The full text of KBW’s opinion is attached as Annex B to this document. Nara stockholders should read that opinion and the description of KBW’s opinion contained in this document in their entirety. The opinion of KBW does not reflect any developments that may have occurred or may occur after the date of its opinion and prior to the completion of the merger. Nara does not expect that it will request an updated opinion from KBW.
Nara has agreed to pay a total fee of $1.5 million to KBW in consideration of its services as financial advisor. Nara paid $250,000 to KBW upon signing of the merger agreement in December 2010 and will pay $1,250,000 to KBW upon completion of the merger. In addition, KBW has been granted a right of first refusal to act as co-lead manager, with Center’s financial advisor, for Nara’s anticipated offering of common stock in connection with the merger.
Opinion of Center’s Financial Advisor. In connection with the Center board of directors’ consideration of the merger agreement, Center’s financial advisor, D.A. Davidson & Co., or DADCo, provided its opinion to the Center board of directors dated as of December 8, 2010 that, based upon and subject to the considerations set forth in the opinion and based upon such other matters as DADCo considered relevant, the exchange ratio was fair, from a financial point of view to the stockholders of Center as of the date of the opinion. The full text of DADCo’s opinion is attached as Annex C to this document. Center stockholders should read that opinion and the description of DADCo’s opinion contained in this document in their entirety. The opinion of DADCo will not reflect any developments that may have occurred or may occur after the date of its opinion and prior to the completion of the merger. Center does not expect that it will request an updated opinion from DADCo.
Center has agreed to pay a total fee of $1.5 million to DADCo in consideration of its services as financial advisor. Center paid $250,000 to DADCo upon signing of the merger agreement in December 2010 and will pay $1,250,000 to DADCo upon completion of the merger. In addition, DADCo has been granted the right of first refusal mentioned above to act as co-lead manager, with KBW, for Nara’s anticipated offering of common stock in connection with the merger.
Center Stockholders Will Have Dissenters’ Appraisal Rights Only Under Certain Circumstances (see page [—])
Under California law, which is the law under which Center is incorporated, the common stockholders of Center will not be entitled to dissenters’ appraisal rights in connection with the merger unless Center stockholders who submit a written demand for appraisal of their shares hold, in the aggregate, shares constituting 5% or more of the outstanding shares of Center common stock. Notwithstanding the foregoing, the holders of any Center shares that are subject to a restriction on transfer imposed by Center or by any law or regulation and the
holder of Center’s Series A Preferred Stock will have dissenters’ rights of appraisal, irrespective of the percentage of holders that dissent from the merger. Stockholders who exercise their dissenters’ appraisal rights by complying with the applicable statutory procedures required by California law will be entitled to receive payment in cash for the fair value of their shares as determined in a judicial proceeding. A condition to Nara’s obligation to complete the merger is that the holders of less than 6% of Center’s outstanding common stock give notice of the exercise of dissenters’ rights.
Nara stockholders will not be entitled to exercise dissenters’ appraisal rights under Delaware law, which is the law under which Nara is incorporated.
Interests of Our Directors and Executive Officers in the Merger (see page [—])
Directors and executive officers of Nara and Center have interests in the merger that are different from, or are in addition to, the interests of the stockholders of Nara and Center. These interests include:
the agreed-upon appointments of directors and members of senior management of Nara and Center to board positions and senior management positions at the combined company after the merger that are described in this document; and
rights of Center executive officers and directors to continued indemnification and liability insurance coverage by Nara after the merger for acts or omissions occurring prior to the merger.
Certain of the directors of Nara and Center will receive compensation in the form of cash payments or grants of shares of restricted stock as compensation for their work in negotiating the terms of the merger and in preparations for and implementation of the integration of Nara and Center upon completion of the merger. These compensation arrangements were first proposed after the merger agreement had been entered into and were not discussed or contemplated in the negotiation of the merger agreement.
Treatment of Center TARP Preferred Stock and Warrant in the Merger (see page [—])
The merger agreement provides that Center’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, which Center issued to the United States Treasury Department pursuant to the Troubled Asset Relief Program, or TARP, will be converted into Nara Fixed Rate Cumulative Perpetual Preferred Stock, Series B, which will be a new series of preferred stock that will be designated by Nara prior to the completion of the merger and will have substantially the same rights, preferences, privileges and voting powers as Center’s Series A Preferred Stock. The warrant to purchase Center common stock which Center issued to the Treasury Department in connection with Center’s sale of its Series A Preferred Stock to the Treasury Department, and which currently covers 432,390 shares of Center common stock, will automatically convert in accordance with its terms upon completion of the merger into a warrant to purchase Nara common stock on the same terms, subject to appropriate adjustments to reflect the exchange ratio. As a result of such adjustment and assuming an exchange ratio of 0.7804, the warrant will, upon completion of the merger, entitle the holder of the warrant to purchase 337,437 shares of Nara common stock at a price of $12.22 per share.
Treatment of Stock Options and Other Equity-Based Awards (see page [—])
Nara will assume all employee stock options and other equity-based awards under Center’s equity-based compensation plans, in accordance with their terms, upon completion of the merger. As of June 30, 2011, stock options for the purchase of a total of 583,344 shares of Center common stock and 77,462 shares of Center common stock subject to certain restrictions on transfer and possible forfeiture for specified vesting periods were outstanding under Center’s equity-based compensation plans. The merger will not affect the terms of any stock options or performance units of Nara issued under Nara’s equity-based compensation plans.
Directors and Management Following the Merger; Bylaw Amendment (see page [—])
Following the merger, the board of directors of the combined company will have 14 members, consisting of the seven current members of the Nara board of directors and the seven current members of the Center board of directors, or replacement directors selected by Nara or Center if any of their current directors become unable to serve on the board of the combined company. Ki Suh Park, the current Chairman of the Board of Nara, will become Chairman of the Board of the combined company. Chang Hwi Kim, a current director of Center, will become Vice Chairman of the Board of the combined company. Kevin S. Kim, a current director of Center, will become Chairman of the Board of the combined company’s bank subsidiary resulting from the bank merger and Scott Whang, a current director of Nara, will become Vice Chairman of the Board of the combined bank.
Following the merger, Alvin Kang, the current Chief Executive Officer of Nara, will be the Chief Executive Officer of the combined company. In addition, the parties have agreed that the members of senior management from each company will serve in senior management positions of the combined company following the merger, as further described in “The Merger—Board of Directors and Management After the Merger” beginning on page [—]. Mr. Kang and certain other members of the senior management of Nara, and the chief executive officer and chief financial officer of Center, have served in their current positions for less than three years. See “The Merger—The Parties” beginning on page [—].
Nara and Center have also agreed to follow certain corporate governance procedures during an integration period of one to two years (as determined by the board of directors of the combined company) after the merger, including the establishment of a consolidation committee of the combined company’s board of directors, special board voting requirements for certain decisions, the composition of committees of the board of directors of the combined company and procedures for filling director vacancies. These procedures will be set forth in an amendment to Nara’s bylaws that will become effective as of the completion of the merger. The adoption of the bylaw amendment by Nara is a condition to Nara’s and Center’s respective obligations to complete the merger. The form of the bylaw amendments is set forth in an exhibit to the merger agreement and is attached as Annex E to this document.
Regulatory Approvals We Must Obtain for the Merger (see page [—])
To complete the merger and the bank merger, we must obtain the approval of the California Department of Financial Institutions (the “DFI”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). Applications were filed with the DFI and the FDIC on May 19, 2011. It is anticipated that Nara will file an application with the Federal Reserve Bank of San Francisco (the “FRBSF”) at a later date to be determined by Center and Nara based on their ongoing discussions with the FRBSF. We do not expect to receive the required regulatory approvals prior to our stockholders meetings at which the merger will be voted on. See “Regulatory Approvals” beginning on page [—] for a description of the regulatory approvals that must be obtained in connection with the merger.
Although Nara and Center have each reported profits in recent quarters, both companies have had significant quarterly losses in recent years and have been subjects of informal regulatory action, consisting of memoranda of understanding with bank regulatory authorities in the case of Center and the adoption of board of directors resolutions at the request of bank regulatory authorities in the case of Nara. To obtain regulatory approval of the merger, we must provide adequate information to the regulatory authorities that demonstrates, among other considerations, that we have satisfactorily addressed the issues raised by the bank regulatory authorities. We anticipate that this will result in a longer than normal regulatory approval process and do not expect to complete the merger before the fourth quarter of 2011.
Federal Reserve System having a network of 23 branch offices, of which 16 are located in the Los Angeles, Orange County, Oakland and Silicon Valley (Santa Clara County) areas of California and 7 are located in the New York metropolitan area and New Jersey, together with one loan production office located in Dallas, Texas. At December 31, 2010, Nara had consolidated assets of $2.96 billion, total loans of $2.15 billion, total deposits of $2.18 billion and total stockholders’ equity of $358.6 million.
Nara had net losses of $7.2 million and $5.7 million in 2010 and 2009, respectively, and net income of $6.8 million in the first quarter of 2011. The boards of directors of Nara and Nara Bank each adopted resolutions at the request of the DFI and the FRBSF in December 2009 pursuant to which the respective boards of directors undertook to submit written plans to the DFI and the FRBSF for reducing of Nara Bank’s risk profile, to take certain actions intended to improve Nara Bank’s lending and loan review procedures and other aspects of the business operations of Nara and Nara Bank, and not to declare dividends or change senior executive officers or directors without prior notice to and non-objection of the DFI and the FRBSF. Nara believes that it and Nara Bank have complied with the requirements of the resolutions and that they are in substantial compliance to date with the requirements of modified board resolutions adopted by them in December 2010 at the request of the DFI and the FRBSF. The requirements of the modified board resolutions require submission of a board governance and oversight plan, a liquidity and funds management plan and updated capital and strategic plans with budgets, on-going asset quality improvement reporting and the requirement of prior approval for the payment of dividends or interest payments on trust preferred securities. Completion of the merger will not necessarily result in termination of these dividend approval or other requirements in the near term. For further information, see “The Merger—The Parties—Nara” beginning on page [—]. Nara’s principal executive offices are located 3731 Wilshire Boulevard, Suite 1000, Los Angeles, 90010, and its telephone number is (213) 639-1700.
Center Financial Corporation
3435 Wilshire Blvd, Suite 700
Los Angeles, California 90010
(213) 251-2222
Hillel T. Cohn
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, California 90013
(213) 892-5200
Approximate Date of Commencement of Proposed Sale to the Public:As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). (Check one):
Large accelerated filer ¨ | Accelerated filer x | Non-accelerated filer ¨ | Smaller reporting company ¨ | |||
(Do not check if a smaller reporting company) |
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ¨
Exchange Act Rule 14d-1(d) (Cross Border Third-Party Tender Offer) ¨
Information in this document is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY, SUBJECT TO COMPLETION, DATED JULY 15, 2011
PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT
To Our Stockholders:
The boards of directors of Nara Bancorp, Inc. and Center Financial Corporation have approved an agreement to merge our two companies. Before we can complete the merger, we must obtain the approval of the stockholders of Nara Bancorp and of Center Financial Corporation. We are sending you this document to ask for your vote to adopt the merger agreement, including approval of the terms of the merger, at the respective annual stockholder meetings of Nara Bancorp and Center Financial Corporation, which will be held on [—], 2011.
The proposed merger will create the largest and, we believe, strongest Korean-American bank in the United States. The combined company will have approximately $5.3 billion in assets, branches in major Korean-American communities across the United States, and a strong capital base to support further growth. We believe that the stockholders of both Nara Bancorp and Center Financial Corporation will benefit from the increased earnings power of the combined company and our improved ability to generate profitable growth and higher returns going forward.
In the proposed merger, Center Financial Corporation will merge into Nara Bancorp, and Center Financial Corporation stockholders will receive 0.7804 of a share of Nara Bancorp common stock, subject to adjustment, for each share of Center Financial Corporation common stock they own. To reflect the combination of our two companies, we will adopt a name selected by the directors of both companies for our operations after the merger.
The exchange ratio in the merger will not be adjusted to reflect stock price changes between now and the closing. Based on the closing price of Nara Bancorp’s common stock on December 8, 2010, the day prior to the public announcement of the merger, the exchange ratio represented a value of $7.16 per share of Center Financial Corporation common stock. The closing price of Center Financial Corporation’s common stock on that date was $6.65. Using the closing price of Nara Bancorp’s common stock on , 2011, the exchange ratio represented a value of $ per share. Based on the 0.7804 exchange ratio and the number of shares of Center Financial Corporation common stock outstanding or reserved for issuance under outstanding stock options and warrants on the record date for the stockholder meetings, Nara Bancorp expects that up to approximately [—] shares of its common stock will become issuable to Center Financial Corporation stockholders and holders of such options and warrants as a result of the merger. Nara Bancorp will also issue 55,000 shares of a new class of preferred stock to the United States Treasury Department in exchange for the preferred stock of Center Financial Corporation currently held by the Treasury Department.
You should obtain current market quotations for both Nara Bancorp and Center Financial Corporation common stock. Nara Bancorp common stock is listed on the Nasdaq Global Select Market under the symbol “NARA.” Center Financial Corporation common stock is listed on the Nasdaq Global Select Market under the symbol “CLFC.”
The merger is intended to be tax-free to Center Financial Corporation stockholders, other than with respect to any cash paid in lieu of issuing fractional shares of Nara Bancorp common stock to them.
At our respective annual meetings, in addition to the merger, we will ask our stockholders to elect directors and vote on the other proposals described in the respective annual meeting notices that follow this letter, including approval of an increase in the authorized number of shares of Nara Bancorp common stock from 100,000,000 to 150,000,000 shares. The accompanying disclosure document describes the annual meetings, the merger and the related merger agreements, and includes other important information about the proposals that will be presented for action at the annual meetings.Please read the entire document carefully, including the section entitled “Risk Factors” beginning on Page 19.
Your vote is very important. Whether or not you plan to attend your meeting, please take the time to submit your proxy in accordance with the voting instructions contained in this document. If you do not vote, it will have the same effect as voting against the merger.
Each of our boards of directors unanimously recommends that the stockholders of Nara Bancorp and Center Financial Corporation vote “FOR” the merger. We strongly support this combination and believe it to be in the best interests of the stockholders of both companies.
Ki Suh Park | Jin Chul Jhung | |||
Chairman of the Board | Chairman of the Board | |||
Nara Bancorp, Inc. | Center Financial Corporation |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, the issuance of the Nara Bancorp common stock in connection with the merger or the other transactions described in this joint proxy statement/prospectus, or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.
The securities to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
This joint proxy statement/prospectus is dated , 2011 and is first being mailed to stockholders of Nara Bancorp and Center Financial Corporation on or about , 2011.
NARA BANCORP, INC.
Notice of Annual Meeting of Stockholders
To Be Held [—], 2011
To the Stockholders of Nara Bancorp, Inc.:
The annual meeting of stockholders of Nara Bancorp, Inc. will be held at the Oxford Palace Hotel, 745 South Oxford Avenue, Los Angeles, California 90005 on [—], [—], 2011 at [—] Los Angeles time. At the annual meeting, you will be asked to consider and vote on the following matters:
1. Adoption and approval of the Agreement and Plan of Merger, dated December 9, 2010, as amended, providing for the merger of Center Financial Corporation with and into Nara Bancorp, Inc. as described in this document.
2. Election of directors of Nara Bancorp, Inc.
3. Approval of an amendment to the certificate of incorporation of Nara Bancorp, Inc. to increase the authorized number of shares of common stock to 150,000,000 shares.
4. Ratification of the selection of Crowe Horwath LLP as our independent registered public accounting firm for the year ending December 31, 2011.
5. Approval, on an advisory and nonbinding basis, of the compensation paid to our “named executive officers” as described in this document.
6. Adjournment of the meeting if necessary or appropriate in the judgment of our board of directors to solicit additional proxies or votes in favor of the above proposals that are to be presented at the meeting.
7. Such other matters, if any, as may be properly presented for consideration and action at the annual meeting.
The Board of Directors recommends that you vote in favor of the merger, the nominees, the increase in the number of authorized shares of common stock and the other proposals described in this document.
Only stockholders of record at the close of business on [—], 2011 are entitled to notice of and to vote at the annual meeting.
Whether or not you plan to attend the annual meeting, please sign, date and return the enclosed proxy card in the postage paid envelope provided, or cast your vote by telephone or Internet by following the instructions on your proxy card, as soon as you can.The vote of every stockholder is important and we appreciate your cooperation in returning your executed proxy promptly.
Your proxy, or your telephone or Internet vote, is revocable and will not affect your right to vote in person if you attend the annual meeting. If your shares are registered in your name and you attend the meeting, you may simply revoke your previously submitted proxy and vote your shares at that time. If your shares are held by a broker or other nominee holder, and are not registered in your name, you will need additional documentation from your broker or other record holder to vote your shares personally at the meeting. Please indicate on the proxy card whether or not you expect to attend.
We appreciate your continuing support and look forward to seeing you at the annual meeting.
By Order of the Board of Directors |
Juliet Stone Secretary |
DATED: , 2011
Important Notice Regarding the Availability of Proxy Materials for the
2011 Annual Meeting of Stockholders
This document and Nara Bancorp’s 2010 Annual Report to Stockholders are available electronically at
http://www.RRDEZProxy.com/2011/NaraBankEZProxy.
CENTER FINANCIAL CORPORATION
Notice of Annual Meeting of Stockholders
To Be Held [—], 2011
To the Stockholders of Center Financial Corporation:
The annual meeting of stockholders of Center Financial Corporation will be held at 2222 West Olympic Boulevard, Los Angeles, California 90006 on [—], [—], 2011 at [—] Los Angeles time. At the annual meeting, you will be asked to consider and vote on the following matters:
1. Adoption and approval of the Agreement and Plan of Merger, dated December 9, 2010, as amended, providing for the merger of Center Financial Corporation with and into Nara Bancorp, Inc. as described in this document.
2. Election of directors of Center Financial Corporation.
3. Ratification of the selection of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2011.
4. Approval, on an advisory and nonbinding basis, of the compensation paid to our “named executive officers” as described in this document.
5. Adjournment of the meeting if necessary or appropriate in the judgment of our board of directors to solicit additional proxies or votes in favor of the above proposals that are to be presented at the meeting.
6. Such other matters, if any, as may be properly presented for consideration and action at the annual meeting.
The Board of Directors recommends that you vote in favor of the merger, the director nominees and each of the other proposals described in this document.
Only stockholders of record at the close of business on [—], 2011 are entitled to notice of and to vote at the annual meeting.
Whether or not you plan to attend the annual meeting, please sign, date and return the enclosed proxy card in the postage paid envelope provided, or cast your vote by telephone or Internet by following the instructions on your proxy card, as soon as you can.The vote of every stockholder is important and we appreciate your cooperation in returning your executed proxy promptly.
Your proxy, or your telephone or Internet vote, is revocable and will not affect your right to vote in person if you attend the annual meeting. If your shares are registered in your name and you attend the meeting, you may simply revoke your previously submitted proxy and vote your shares at that time. If your shares are held by a broker or other nominee holder, and not registered in your name, you will need additional documentation from your broker or other record holder to vote your shares personally at the meeting. Please indicate on the proxy card whether or not you expect to attend.
We appreciate your continuing support and look forward to seeing you at the annual meeting.
By Order of the Board of Directors |
Lisa Kim Pai Secretary |
DATED: , 2011
Important Notice Regarding the Availability of Proxy Materials for the
2011 Annual Meeting of Stockholders
This document and Center Financial Corporation’s 2010 Annual Report to Stockholders are available electronically at
http://investor.centerbank.com.
WHERE YOU CAN FIND MORE INFORMATION
This document incorporates important business and financial information about Nara and Center by reference to other documents that are not included in or delivered with this document. See “Documents Incorporated by Reference” on page [—] for a description of these documents. You can obtain copies of the documents incorporated herein by reference through the Securities and Exchange Commission website athttp://www.sec.gov. You can also obtain copies of these documents, without charge, by requesting them in writing, by e-mail or by telephone at the appropriate address below:
Nara Bancorp, Inc. 3731 Wilshire Boulevard, Suite 1000 Los Angeles, California 90010 Attention: Legal Department Telephone: (213) 639-1700 Email: cc-90-Legal@narabank.com | Center Financial Corporation 3435 Wilshire Boulevard, Suite 700 Los Angeles, California 90010 Attention: Investor Relations Department Telephone: (213) 251-2222 Email: angiey@centerbank.com |
If you would like to request any documents, your request should be sent in time to be received no later than seven days before the annual meetings, or [—], 2011, in order to receive the documents before the annual meetings.
We have not authorized anyone to give any information or make any representation about the merger or our companies that is different from, or in addition to, that contained in this document or in any of the materials that Nara or Center have incorporated into this document by reference. Neither the delivery of this document to stockholders nor any distribution of Nara stock in the merger or otherwise pursuant to this document shall, under any circumstances, create any implication that there has been no change in the information set forth or incorporated into this document by reference or in our affairs since the date of this document.
The information contained in this document with respect to Nara was provided solely by Nara and the information contained in this document with respect to Center was provided solely by Center.
This document does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this document, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction.
Page | ||||
1 | ||||
1 | ||||
9 | ||||
10 | ||||
12 | ||||
18 | ||||
19 | ||||
22 | ||||
23 | ||||
26 | ||||
29 | ||||
29 | ||||
29 | ||||
29 | ||||
33 | ||||
33 | ||||
39 | ||||
40 | ||||
43 | ||||
48 | ||||
Interests of | 62 | |||
| 65 | |||
United States Federal Income Tax Consequences of the | 66 | |||
69 | ||||
69 | ||||
70 | ||||
70 | ||||
71 | ||||
71 | ||||
Delisting and Deregistration of Center Stock After the Merger | 74 | |||
74 | ||||
75 | ||||
85 | ||||
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 89 | |||
97 | ||||
103 | ||||
ELECTION OF DIRECTORS AND OTHER PROPOSALS TO BE CONSIDERED AT THE NARA ANNUAL MEETING | 107 | |||
107 | ||||
115 | ||||
116 | ||||
117 | ||||
117 | ||||
120 | ||||
120 | ||||
128 | ||||
129 | ||||
130 |
i
TABLE OF CONTENTS
ANNEX A-1 | A-1-1 | |||||
ANNEX A-2 | Amendment No. 1 to | A-2-1 | ||||
ANNEX A-3 | A-3-1 | |||||
ANNEX B | B-1 | |||||
ANNEX C | C-1 | |||||
ANNEX D | Sections 1300-1313 of the California Corporation Code (Dissenters’ Rights) | D-1 | ||||
ANNEX E | E-1 | |||||
ANNEX F | F-1 |
ii
This summary highlights selected information contained in this document. It may not contain all of the information that is important to you in deciding how to vote on the merger or the other matters that will be voted on at the Nara or Center annual meeting. You should carefully read this entire document and the other documents referred to in this document for a more complete understanding of the merger described herein and the other matters that will be considered and voted on at the annual meetings. In addition, we incorporate important business and financial information about Nara and Center by reference into this document. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page [—] of this document.
Unless otherwise indicated in this document or the context otherwise requires: references to “Nara” are to Nara Bancorp, Inc., including its subsidiary, Nara Bank; references to “Center” are to Center Financial Corporation, including its subsidiary, Center Bank; and “we,” “our” or “us” refer to both Nara and Center.
Center Will Merge With and Into Nara (see page [—])
Subject to the terms and conditions of the merger agreement described in this document, and in accordance with Delaware and California law, Center will merge with and into Nara. Nara therefore will be the surviving corporation for legal purposes and its certificate of incorporation will be the certificate of incorporation of the combined company. The name of the combined company will be jointly selected by Nara and Center to reflect the combination of the businesses, boards of directors and management of the two companies. We refer in this document to Nara in its capacity as the legal surviving corporation as the “combined company.” Nara’s bylaws, which will be amended to provide for agreed-upon corporate governance matters described under “The Merger—Amendments to Bylaws” beginning on page [—], will be the bylaws of the combined company.
Concurrently with the merger of Nara and Center, Nara’s banking subsidiary, Nara Bank, will merge with and into Center’s bank subsidiary, Center Bank. Center Bank therefore will be the surviving bank for legal purposes, but its name will be changed to reflect the combined company’s name and the nationwide combination of the Nara and Center banking businesses.
In this document we sometimes refer to the merger of our bank subsidiaries as the “bank merger” and we refer to the merger of Nara and Center as the “merger” or the “holding company merger.”
Center Common Stockholders Will Receive 0.7804 of a Share of Nara Common Stock, Subject to Adjustment, for Each Share of Center Common Stock; Nara Stockholders Will Retain Their Shares (see page [—])
The merger agreement provides that Center common stockholders will receive 0.7804 of a share of Nara common stock for each share of Center common stock they own, subject to adjustment only in certain limited circumstances. It is a condition to completion of the merger that the shares of Nara common stock issued in the merger shall be listed for trading on the Nasdaq Global Select Market, which is the stock exchange on which both Nara’s common stock and Center’s common stock are currently listed for trading. Prior to the completion of the merger, Nara’s common stock and Center’s common stock will continue to be listed on the Nasdaq Global Select Market.
Upon completion of the merger, current Nara stockholders and current Center stockholders will own 55% and 45%, respectively, of the combined company, not including the shares of Nara common stock issued in a common stock offering Nara expects to make prior to the merger for the benefit of the combined company. Shares issued in the anticipated offering will reduce the percentage ownership interests of the respective stockholders proportionately. Upon completion of the merger, the Center common stock currently listed on the Nasdaq Global Select Market will cease to be listed and will be removed from registration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Assuming the number of shares of Center common stock outstanding at the time of the merger equaled the number of shares outstanding on December 8, 2010 and that the value of Nara common stock at the time of the merger equaled $9.17 per share, the closing price as of December 8, 2010, the aggregate purchase price for those Center shares would be $285.7 million. As noted below, however, the total value of the Nara common stock issued to Center stockholders upon completion of the merger will fluctuate based on the share price of the Nara common stock and the number of shares of Center common stock and options outstanding on the date of the merger.
Merger Exchange Ratio Will Not Be Adjusted in Response to Changes in Our Stock Prices (see page [—])
The exchange ratio in the merger agreement will not change to reflect changes in the market prices of Nara or Center common stock, although the exchange ratio may be changed to reflect certain changes in the respective numbers of shares of Nara or Center stock outstanding or subject to outstanding options, warrants or other purchase rights issued after the date of the merger agreement. In addition, neither Nara nor Center has the right to terminate the merger agreement in response to changes in either company’s stock price.Accordingly, the market value of the Nara common stock that Center stockholders receive in the merger may vary significantly from its current value.
The table below shows the closing prices of Nara and Center common stock, which trade on the Nasdaq Global Select Market under the symbols “NARA” and “CLFC,” respectively, and the pro forma equivalent per share value of Center common stock at the close of the regular trading session on December 8, 2010, the last trading day before our public announcement of the merger, and , 2011, the most recent trading day for which that information was available prior to the completion of this document.
Closing Prices Per Share of Nara and Center Common Stock
Date | Nara Closing Price | Center Closing Price | Center Pro Forma Equivalent Value Per Share(1) | |||||||||
December 8, 2010 | $ | 9.17 | $ | 6.65 | $ | 7.16 | ||||||
, 2011 | $ | $ | $ |
(1) | The pro forma equivalent value per share of Center common stock is calculated by multiplying the Nara closing price by the exchange ratio of
|
During the period between December 8, 2010 and , 2011, the Center pro forma equivalent value per share, based on daily closing prices of Nara common stock, has ranged from a low of $ to a high of $ per share.
The following table sets forth, for the periods indicated, the high and low sale prices per share of Nara common stock and Center common stock as reported by the Nasdaq Global Select Market. You may obtain current market quotations for the shares of both companies from a newspaper, the Internet or your stock broker.
High and Low Closing Prices Per Share of Nara and Center Common Stock
Nara Common Stock | Center Common Stock | |||||||||||||||
Calendar Quarter | High | Low | High | Low | ||||||||||||
2009 | ||||||||||||||||
First Quarter | $ | 9.95 | $ | 2.05 | $ | 6.50 | $ | 2.22 | ||||||||
Second Quarter | 5.50 | 2.80 | 3.71 | 2.52 | ||||||||||||
Third Quarter | 9.16 | 4.49 | 4.90 | 2.18 | ||||||||||||
Fourth Quarter | 12.23 | 6.21 | 5.42 | 4.74 | ||||||||||||
2010 | ||||||||||||||||
First Quarter | 11.78 | 8.33 | 5.39 | 4.64 | ||||||||||||
Second Quarter | 10.24 | 7.34 | 7.05 | 4.89 | ||||||||||||
Third Quarter | 8.43 | 5.96 | 5.50 | 4.56 | ||||||||||||
Fourth Quarter | 9.86 | 6.98 | 7.58 | 4.74 | ||||||||||||
2011 | ||||||||||||||||
First Quarter | 10.48 | 9.18 | 7.99 | 7.10 | ||||||||||||
Second Quarter | 9.84 | 7.05 | 7.44 | 5.54 | ||||||||||||
Third Quarter (through , 2011) |
Merger Generally Tax-Free to Stockholders (see page [—])
The merger has been structured to qualify as a reorganization for federal income tax purposes, and it is a condition to our respective obligations to complete the merger that Nara and Center each receive a legal opinion from its legal counsel to the effect that the merger will so qualify. If the merger qualifies as a reorganization for federal income tax purposes, holders of Center common stock generally will not recognize any gain or loss for federal income tax purposes on the exchange of their Center common stock for Nara common stock in the merger, except for any gain or loss that may result from their receipt of cash in lieu of fractional shares of Nara common stock otherwise issuable to them. Holders of Nara stock, who will retain their Nara stock without change, will also not recognize any gain or loss for federal income tax purposes.
The discussion of federal income tax effects of the merger included in this document is only a general summary. The federal income tax consequences of the merger to you will depend upon your own situation. In addition, you may be subject to state, local or foreign tax laws, none of which is discussed in this document. You should therefore consult with your own tax advisor for a complete understanding of the tax consequences of the merger to you.
Our Boards of Directors Recommend that Nara Stockholders and Center Stockholders Approve the Merger (see pages [—] and [—])
Nara Stockholders. The Nara board of directors has determined that the merger agreement is advisable and in the best interests of Nara and its stockholders and unanimously recommends that Nara stockholders vote “FOR” adoption and approval of the merger agreement.
Center Stockholders. The Center board of directors has determined that the merger agreement is advisable and in the best interests of Center and its stockholders and unanimously recommends that Center stockholders vote “FOR” adoption and approval of the merger agreement.
Factors Considered by Our Boards of Directors. In determining whether to approve the merger, our boards of directors each consulted with our respective senior managements and legal and financial advisors and considered the respective strategic, financial and other considerations referred to under “The Merger—Nara’s Reasons for the Merger; Recommendation of the Merger by the Nara Board of Directors” beginning on page [—] and “The Merger—Center’s Reasons for the Merger; Recommendation of the Merger by the Center Board of Directors” beginning on page [—].
We Have Received Opinions From Our Financial Advisors that the Merger Exchange Ratio is Fair (see page [—])
Opinion of Nara’s Financial Advisor. In connection with the Nara board of directors’ consideration of the merger agreement, Nara’s financial advisor, Keefe, Bruyette & Woods, Inc., or KBW, provided its opinion to the Nara board dated as of December 9, 2010 that, as of that date, and subject to and based on the qualifications and assumptions set forth in its opinion, the exchange ratio stated in the merger agreement was fair to Nara from a financial point of view. The full text of KBW’s opinion is attached as Annex B to this document. Nara stockholders should read that opinion and the description of KBW’s opinion contained in this document in their entirety. The opinion of KBW does not reflect any developments that may have occurred or may occur after the date of its opinion and prior to the completion of the merger. Nara does not expect that it will request an updated opinion from KBW.
Nara has agreed to pay a total fee of $1.5 million to KBW in consideration of its services as financial advisor. Nara paid $250,000 to KBW upon signing of the merger agreement in December 2010 and will pay $1,250,000 to KBW upon completion of the merger. In addition, KBW has been granted a right of first refusal to act as co-lead manager, with Center’s financial advisor, for Nara’s anticipated offering of common stock in connection with the merger.
Opinion of Center’s Financial Advisor. In connection with the Center board of directors’ consideration of the merger agreement, Center’s financial advisor, D.A. Davidson & Co., or DADCo, provided its opinion to the Center board of directors dated as of December 8, 2010 that, based upon and subject to the considerations set forth in the opinion and based upon such other matters as DADCo considered relevant, the exchange ratio was fair, from a financial point of view to the stockholders of Center as of the date of the opinion. The full text of DADCo’s opinion is attached as Annex C to this document. Center stockholders should read that opinion and the description of DADCo’s opinion contained in this document in their entirety. The opinion of DADCo will not reflect any developments that may have occurred or may occur after the date of its opinion and prior to the completion of the merger. Center does not expect that it will request an updated opinion from DADCo.
Center has agreed to pay a total fee of $1.5 million to DADCo in consideration of its services as financial advisor. Center paid $250,000 to DADCo upon signing of the merger agreement in December 2010 and will pay $1,250,000 to DADCo upon completion of the merger. In addition, DADCo has been granted the right of first refusal mentioned above to act as co-lead manager, with KBW, for Nara’s anticipated offering of common stock in connection with the merger.
Center Stockholders Will Have Dissenters’ Appraisal Rights Only Under Certain Circumstances (see page [—])
Under California law, which is the law under which Center is incorporated, the common stockholders of Center will not be entitled to dissenters’ appraisal rights in connection with the merger unless Center stockholders who submit a written demand for appraisal of their shares hold, in the aggregate, shares constituting 5% or more of the outstanding shares of Center common stock. Notwithstanding the foregoing, the holders of any Center shares that are subject to a restriction on transfer imposed by Center or by any law or regulation and the
holder of Center’s Series A Preferred Stock will have dissenters’ rights of appraisal, irrespective of the percentage of holders that dissent from the merger. Stockholders who exercise their dissenters’ appraisal rights by complying with the applicable statutory procedures required by California law will be entitled to receive payment in cash for the fair value of their shares as determined in a judicial proceeding. A condition to Nara’s obligation to complete the merger is that the holders of less than 6% of Center’s outstanding common stock give notice of the exercise of dissenters’ rights.
Nara stockholders will not be entitled to exercise dissenters’ appraisal rights under Delaware law, which is the law under which Nara is incorporated.
Interests of Our Directors and Executive Officers in the Merger (see page [—])
Directors and executive officers of Nara and Center have interests in the merger that are different from, or are in addition to, the interests of the stockholders of Nara and Center. These interests include:
the agreed-upon appointments of directors and members of senior management of Nara and Center to board positions and senior management positions at the combined company after the merger that are described in this document; and
rights of Center executive officers and directors to continued indemnification and liability insurance coverage by Nara after the merger for acts or omissions occurring prior to the merger.
Certain of the directors of Nara and Center will receive compensation in the form of cash payments or grants of shares of restricted stock as compensation for their work in negotiating the terms of the merger and in preparations for and implementation of the integration of Nara and Center upon completion of the merger. These compensation arrangements were first proposed after the merger agreement had been entered into and were not discussed or contemplated in the negotiation of the merger agreement.
Treatment of Center TARP Preferred Stock and Warrant in the Merger (see page [—])
The merger agreement provides that Center’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, which Center issued to the United States Treasury Department pursuant to the Troubled Asset Relief Program, or TARP, will be converted into Nara Fixed Rate Cumulative Perpetual Preferred Stock, Series B, which will be a new series of preferred stock that will be designated by Nara prior to the completion of the merger and will have substantially the same rights, preferences, privileges and voting powers as Center’s Series A Preferred Stock. The warrant to purchase Center common stock which Center issued to the Treasury Department in connection with Center’s sale of its Series A Preferred Stock to the Treasury Department, and which currently covers 432,390 shares of Center common stock, will automatically convert in accordance with its terms upon completion of the merger into a warrant to purchase Nara common stock on the same terms, subject to appropriate adjustments to reflect the exchange ratio. As a result of such adjustment and assuming an exchange ratio of 0.7804, the warrant will, upon completion of the merger, entitle the holder of the warrant to purchase 337,437 shares of Nara common stock at a price of $12.22 per share.
Treatment of Stock Options and Other Equity-Based Awards (see page [—])
Nara will assume all employee stock options and other equity-based awards under Center’s equity-based compensation plans, in accordance with their terms, upon completion of the merger. As of June 30, 2011, stock options for the purchase of a total of 583,344 shares of Center common stock and 77,462 shares of Center common stock subject to certain restrictions on transfer and possible forfeiture for specified vesting periods were outstanding under Center’s equity-based compensation plans. The merger will not affect the terms of any stock options or performance units of Nara issued under Nara’s equity-based compensation plans.
Directors and Management Following the Merger; Bylaw Amendment (see page [—])
Following the merger, the board of directors of the combined company will have 14 members, consisting of the seven current members of the Nara board of directors and the seven current members of the Center board of directors, or replacement directors selected by Nara or Center if any of their current directors become unable to serve on the board of the combined company. Ki Suh Park, the current Chairman of the Board of Nara, will become Chairman of the Board of the combined company. Chang Hwi Kim, a current director of Center, will become Vice Chairman of the Board of the combined company. Kevin S. Kim, a current director of Center, will become Chairman of the Board of the combined company’s bank subsidiary resulting from the bank merger and Scott Whang, a current director of Nara, will become Vice Chairman of the Board of the combined bank.
Following the merger, Alvin Kang, the current Chief Executive Officer of Nara, will be the Chief Executive Officer of the combined company. In addition, the parties have agreed that the members of senior management from each company will serve in senior management positions of the combined company following the merger, as further described in “The Merger—Board of Directors and Management After the Merger” beginning on page [—]. Mr. Kang and certain other members of the senior management of Nara, and the chief executive officer and chief financial officer of Center, have served in their current positions for less than three years. See “The Merger—The Parties” beginning on page [—].
Nara and Center have also agreed to follow certain corporate governance procedures during an integration period of one to two years (as determined by the board of directors of the combined company) after the merger, including the establishment of a consolidation committee of the combined company’s board of directors, special board voting requirements for certain decisions, the composition of committees of the board of directors of the combined company and procedures for filling director vacancies. These procedures will be set forth in an amendment to Nara’s bylaws that will become effective as of the completion of the merger. The adoption of the bylaw amendment by Nara is a condition to Nara’s and Center’s respective obligations to complete the merger. The form of the bylaw amendments is set forth in an exhibit to the merger agreement and is attached as Annex E to this document.
Regulatory Approvals We Must Obtain for the Merger (see page [—])
To complete the merger and the bank merger, we must obtain the approval of the California Department of Financial Institutions (the “DFI”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). Applications were filed with the DFI and the FDIC on May 19, 2011. It is anticipated that Nara will file an application with the Federal Reserve Bank of San Francisco (the “FRBSF”) at a later date to be determined by Center and Nara based on their ongoing discussions with the FRBSF. We do not expect to receive the required regulatory approvals prior to our stockholders meetings at which the merger will be voted on. See “Regulatory Approvals” beginning on page [—] for a description of the regulatory approvals that must be obtained in connection with the merger.
Although Nara and Center have each reported profits in recent quarters, both companies have had significant quarterly losses in recent years and have been subjects of informal regulatory action, consisting of memoranda of understanding with bank regulatory authorities in the case of Center and the adoption of board of directors resolutions at the request of bank regulatory authorities in the case of Nara. To obtain regulatory approval of the merger, we must provide adequate information to the regulatory authorities that demonstrates, among other considerations, that we have satisfactorily addressed the issues raised by the bank regulatory authorities. We anticipate that this will result in a longer than normal regulatory approval process and do not expect to complete the merger before the fourth quarter of 2011.
Expected Timing of the Merger
We expect to complete the merger in the fourth quarter of 2011 if we receive stockholder and regulatory approvals for the merger. The merger agreement provides that it may be terminated by either Nara or Center if the merger has not been consummated by November 30, 2011. The merger agreement may also be extended one or more times beyond November 30, 2011 to any date selected by mutual agreement of Nara and Center.
Contemplated Capital Transaction (see page [—])
Nara and Center anticipate raising capital for the general corporate purposes of the combined company through a public offering of Nara’s common stock to be made at or prior to the completion of the merger. In addition, it is likely that one or more of the merger approvals being sought from the DFI, the FDIC and the Federal Reserve Board will be conditioned upon raising capital for the combined company, although no specific amount of required capital has been specified to date by any of the bank regulatory authorities. In determining the actual amount of the contemplated offering, Nara and Center will consider a variety of factors, including any specific capital requirements that may be stated by the bank regulatory authorities, market conditions, estimates of the accounting adjustments that will be made to the assets and liabilities of Center to record the merger under the acquisition method of accounting and potential uses of such capital, which may include retirement of the TARP preferred stock and common stock purchase warrants previously issued by both companies that will remain outstanding following the merger. The retirement of the outstanding TARP preferred stock and warrants, however, would require regulatory approvals which have not been requested in connection with the merger and it has not been decided whether such retirement will be undertaken in the near term after the merger.
Conditions to Completion of the Merger (see page [—])
We may not complete the merger unless the following conditions are satisfied or, where legally permitted, waived:
the merger agreement must be adopted and approved by the common stockholders of Nara and by the outstanding shares of each class of stock of Center;
the Nara common stock to be issued in connection with the merger must be approved for listing on the Nasdaq Global Select Market;
we must obtain all necessary regulatory approvals of the merger and the bank merger from governmental authorities, and none of the approvals may contain a condition or restriction that would have a material adverse effect on the combined company after the merger;
the FDIC must have consented to the transfer, as a result of the merger, of loss-sharing agreements it entered into in connection with Center’s purchase and assumption of assets and liabilities of Innovative Bank, a California state chartered bank placed in receivership in April 2010 (such consent was obtained on May 20, 2011);
the registration statement of which this document is a part must have been declared effective by the Securities and Exchange Commission and not be subject to a stop order or proceedings seeking a stop order;
no restraining order, injunction or other legal restraint or prohibition to completion of the merger may be in effect and no action by a government entity with respect to such an injunction may be pending;
our respective representations and warranties in the merger agreement must be true and correct, subject to exceptions that would not have a material adverse effect on Nara or Center, as the case may be, or on the combined company following the completion of the merger;
we must each be in compliance in all material respects with our respective covenants in the merger agreement;
we must each receive an opinion of our respective tax counsel that the merger will be treated as a tax-free reorganization;
Nara’s bylaws must have been amended to provide for the agreed-upon structure of the board of directors and other corporate governance arrangements after the merger, as specified in the merger agreement;
a material adverse effect (as defined in the merger agreement) shall not have been suffered by Nara or Center; and
the holders of less than 6% of the outstanding shares of Center common stock shall have exercised, or continue to have the right to exercise, dissenters’ appraisal rights.
Termination of the Merger Agreement; Fees Payable (see page [—])
We may jointly agree to terminate the merger agreement at any time, whether before or after stockholder adoption and approval of the merger agreement. Either of us may also terminate the merger agreement, whether before or after adoption and approval of the merger agreement, if:
a governmental authority that must grant a material regulatory approval of the merger denies such approval or a governmental authority permanently restrains or prohibits the merger and, in either case, that denial or action is final and nonappealable, except that this termination right is not available to a party whose failure to comply with the merger agreement resulted in those actions by a governmental authority;
the merger is not completed on or before November 30, 2011 (which date may be further extended by the mutual agreement of both parties), except that this termination right is not available to a party whose failure to comply with the merger agreement resulted in the failure to complete the merger by that date;
the other party’s board of directors fails to recommend or adversely changes its recommendation to vote in favor of the merger or takes any other action inconsistent with such recommendation, or the other party breaches its obligation to hold its stockholders meeting to vote on adoption and approval of the merger agreement or fails to comply with its agreement not to solicit other acquisition proposals;
the other party is in breach of its representations, warranties, covenants or agreements set forth in the merger agreement and the breach would excuse the terminating party’s obligation to complete the merger if the breach continued to exist on the closing date and the breach is either not curable or is not cured within 60 days after notice of the breach is delivered by the other party;
the stockholders of either party do not approve the merger at their respective meetings; or
the other party has suffered a material adverse effect since the date of the merger agreement.
In addition, Nara may terminate the merger agreement if the holders of 6% or more of Center’s outstanding common stock shall have exercised appraisal, dissenters’ or similar rights.
The merger agreement provides that, in circumstances described more fully beginning on page [—] involving a change in recommendation in favor of the merger agreement or failure to hold a stockholders’ meeting to vote on the merger or a third party acquisition proposal, either of us may be required to pay a termination fee to the other of up to $10 million. The termination fees could discourage other companies from seeking to acquire or merge with either Nara or Center prior to completion of the merger.
Litigation Relating to the Merger (see page [—])
On May 2, 2011, a purported class action was filed in the Los Angeles County Superior Court against Center, Center’s directors and Nara alleging that Center’s directors breached their fiduciary duties in connection with their approval of the proposed merger with Nara and that the Center directors breached their fiduciary duties to Center stockholders in connection with the disclosures made regarding the proposed merger in a preliminary form of this document that was filed with the Securities and Exchange Commission. The complaint alleges that Nara aided and abetted the alleged breaches of fiduciary duty by the Center directors. The complaint seeks compensatory or rescissionary damages in an unspecified amount and other unspecified relief.
Nara Annual Meeting (see page [—])
The Nara annual meeting will be held at the Oxford Palace Hotel, 745 South Oxford Avenue, Los Angeles, California 90005, on [—], 2011, starting at [—] Los Angeles time. At the Nara annual meeting, Nara’s common stockholders will be asked to vote on the following matters:
adoption and approval of the merger agreement;
election of directors;
approval of an amendment to Nara’s certificate of incorporation to increase the number of authorized shares of common stock to 150,000,000.
ratification of the appointment of Crowe Horwath LLP as Nara’s independent registered public accounting firm for 2011;
approval, on an advisory and nonbinding basis, of specified executive compensation;
adjournment of the meeting, if necessary or appropriate, to solicit additional proxies or votes in favor of the matters to be presented at the annual meeting; and
any other matters that may be properly presented at the meeting.
You may vote at the Nara annual meeting if you owned shares of Nara common stock at the close of business on [—], 2011. On that date, [—] shares of Nara common stock were outstanding, [—]% of which were owned and entitled to be voted by Nara directors and executive officers and their affiliates. We currently expect that Nara’s directors and executive officers will vote their shares in favor of the merger, although none of them has entered into any agreement obligating them to do so.
The affirmative vote of a majority of the shares of Nara common stock outstanding on the record date will be required to adopt and approve the merger agreement. See “Nara Annual Meeting” beginning on page [—] for information regarding voting at the Nara annual meeting and the votes that will be required for approval of the other proposals that will be presented at the meeting.
Center Annual Meeting (see page [—])
The Center annual meeting will be held at 2222 West Olympic Boulevard, Los Angeles, California 90006, on [—], 2011, starting at [—] Los Angeles time. At the Center annual meeting, Center’s stockholders will be asked to vote on the following matters:
adoption and approval of the merger agreement;
election of directors;
ratification of the appointment of KPMG LLP as Center’s independent registered public accounting firm for 2011;
approval, on an advisory and nonbinding basis, of specified executive compensation;
adjournment of the meeting, if necessary or appropriate, to solicit additional proxies or votes in favor of the matters to be presented at the annual meeting; and
any other matters that may be properly presented at the meeting.
You may vote at the Center annual meeting if you owned shares of Center common stock or Center preferred stock at the close of business on [—], 2011. On that date, [—] shares of Center common stock were outstanding, [—]% of which were owned and entitled to be voted by Center directors and executive officers and their affiliates. We currently expect that Center’s directors and executive officers will vote their shares in favor of the merger, although none of them has entered into any agreement obligating them to do so. On [—], 2011, 55,000 shares of Center preferred stock were outstanding, all of which were issued to the United States Treasury Department in December 2008 as part of Center’s participation in the Treasury Department’s Capital Purchase Program under the TARP.
The affirmative vote of a majority of the shares of Center common stock outstanding on the record date and the affirmative vote of a majority of the shares of Center preferred stock outstanding on the record date will be required to adopt and approve the merger agreement. The United States Treasury Department, as the holder of all of the outstanding shares of Center’s preferred stock, is entitled to one vote per share of preferred stock held as of the record date in voting on the merger proposal, but is not entitled to vote on any of the other proposals at the Center annual stockholders meeting. See “Center Annual Meeting” beginning on page [—] for additional information regarding voting at the Center annual meeting and the votes that will be required for approval of the other proposals that will be presented at the meeting.
INFORMATION ABOUT NARA AND CENTER
Nara Bancorp, Inc.
3731 Wilshire Boulevard,
Suite 1000
Los Angeles, California 90010
(213) 639-1700
Nara is a bank holding company headquartered in Los Angeles, California. Its principal subsidiary, Nara Bank, is a California state chartered and FDIC-insured bank that offers commercial banking loan and deposit products, focusing primarily on small and medium-sized businesses and on individuals in Korean-American markets in California, the New York City metropolitan area and New Jersey. Nara Bank is a member bank of the Federal Reserve System having a network of 23 branch offices, of which 16 are located in the Los Angeles, Orange County, Oakland and Silicon Valley (Santa Clara County) areas of California and 7 are located in the New York metropolitan area and New Jersey, together with one loan production office located in Dallas, Texas. At December 31, 2010, Nara had consolidated assets of $2.96 billion, total loans of $2.15 billion, total deposits of $2.18 billion and total stockholders’ equity of $358.6 million.
Nara had net losses of $7.2 million and $5.7 million in 2010 and 2009, respectively, and net income of $6.8 million in the first quarter of 2011. The net income in the first quarter of 2011 was primarily due to a substantial reduction in our loan loss provision from $25.4 million for the three months ended March 31, 2010 to $5.3 million for the three months ended March 31, 2011. The $5.3 million loan loss provision was allocated among three operating segments as follows: banking operations ($0.2 million), trade finance services $2.0 million and
Small Business Administration $3.4 million. The reversal of loan loss provision for our banking operations was primarily due to the decreases in historical loss rates for commercial business loans as a result of decreased charge-offs. As a result, despite an increase in overall commercial business loans for the banking operations operating segment, lower factors for both general reserves and qualitative adjustments for commercial business loans decreased our allowance requirements.
The boards of directors of Nara and Nara Bank each adopted resolutions at the request of the DFI and the FRBSF in December 2009 pursuant to which the respective boards of directors undertook to submit written plans to the DFI and the FRBSF for reducing of Nara Bank’s risk profile, to take certain actions intended to improve Nara Bank’s lending and loan review procedures and other aspects of the business operations of Nara and Nara Bank, and not to declare dividends or change senior executive officers or directors without prior notice to and non-objection of the DFI and the FRBSF. Nara believes that it and Nara Bank have complied with the requirements of the resolutions and that they are in substantial compliance to date with the requirements of modified board resolutions adopted by them in December 2010 at the request of the DFI and the FRBSF. The requirements of the modified board resolutions require submission of a board governance and oversight plan, a liquidity and funds management plan and updated capital and strategic plans with budgets, on-going asset quality improvement reporting and the requirement of prior approval for the payment of dividends or interest payments on trust preferred securities. Completion of the merger will not necessarily result in termination of these dividend approval or other requirements in the near term. For further information, see “The Merger—The Parties—Nara” beginning on page [—]. Nara’s principal executive offices are located 3731 Wilshire Boulevard, Suite 1000, Los Angeles, 90010, and its telephone number is (213) 639-1700.
Center Financial Corporation
3435 Wilshire Boulevard,
Suite 700
Los Angeles, California 90010
(213) 251-2222
Center is a bank holding company headquartered in Los Angeles, California. Its principal subsidiary, Center Bank, is a California state chartered and FDIC-insured bank that offers commercial banking loan and deposit products, focusing primarily on small to medium-sized businesses and individuals located in the Korean-American markets in California and in Chicago, Illinois and Seattle, Washington. Center Bank currently operates a network of 22 branch offices, 16 of which are located in Southern California. Center Bank also operates three branch offices in Northern California, which it acquired through an FDIC-assisted acquisition in April 2010, and two branch offices and a loan production office in Seattle, Washington, a branch office in Chicago, Illinois and a loan production office in Denver, Colorado. At December 31, 2010, Center had consolidated assets of $2.27 billion, total loans of $1.59 billion, total deposits of $1.77 billion and total stockholders’ equity of $274.0 million. Center had consolidated net income of $22.7 million for the year ended December 31, 2010, compared to a consolidated net loss of $42.5 million for the year ended December 31, 2009 and net income of $4.9 million in the first quarter of 2011. Center’s principal executive offices are located at 3435 Wilshire Boulevard, Suite 700, Los Angeles, California 90010, and its telephone number is (213) 251-2222.
On December 28, 2010, Center Bank entered into an informal administrative agreement, or memorandum of understanding (“MOU”), with the FDIC and the DFI, pursuant to which Center Bank agreed to take various actions and comply with certain requirements to facilitate improvement in its financial condition. This MOU superseded a prior one entered into in 2009 and carried forward some but not all of the provisions of the prior MOU. Among other provisions, Center Bank agreed to (a) develop and implement strategic plans to restore profitability; (b) maintain a leverage capital ratio of not less than 9% and a total risk-based capital ratio of not less than 13%; (c) refrain from paying dividends without prior written regulatory approval; (d) reduce the
combined total of classified assets to not more than 40% of tier 1 capital plus the allowance for loan and lease losses; (e) notify the FDIC and the DFI prior to appointing any new director or senior executive officer; and (f) refrain from establishing any new offices without prior regulatory approval.
On December 9, 2009, Center entered into an MOU with the FRBSF, pursuant to which Center agreed, among other things, to (a) implement a capital plan addressing specified items; (b) submit annual cash flow projections to the FRBSF; (c) refrain from paying cash dividends, receiving cash dividends from Center Bank, increasing or guaranteeing debt, redeeming or repurchasing its stock, or issuing any additional trust preferred securities, without prior FRBSF approval.
The MOUs will remain in effect until modified or terminated by the respective bank regulatory agencies. Center does not expect the actions called for by the MOUs to change its business strategy in any material respect, although they may limit or delay plans to expand. Management believes that Center Bank and Center are currently in substantial compliance with the terms of the MOUs. In this regard, Center successfully raised a total of $86.3 million in private placements of common and preferred stock in the fourth quarter of 2009 and has maintained profitable operations for five consecutive quarters through March 31, 2011. As a result, Center Bank’s leverage capital ratio of 12.50% and total risk-based capital ratio of 18.53%, as of December 31, 2010, were well in excess of the required ratios under the MOU. In addition, Center Bank has reduced classified assets as a percentage of tier 1 capital plus the allowance for loan and lease losses as of December 31, 2010 to less than 40%, as required under the MOU. For further information, see “The Merger—The Parties—Center” beginning on page [—].
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following tables present selected historical financial information of Nara, selected historical financial information of Center and selected unaudited pro forma combined condensed consolidated financial information reflecting the merger. This information is intended to aid you in understanding the financial aspects of the merger. The historical financial information shows the actual financial condition and results of operations of Nara and Center for the years indicated. As more completely described below, the pro forma unaudited combined condensed consolidated financial information is intended to illustrate certain financial effects of the proposed merger and does not indicate or reflect the actual financial condition or results of operations of Nara, Center or the combined company as of any date or for any period.
Selected Historical Financial Information of Nara
The selected historical financial information of Nara has been derived from and should be read in conjunction with the historical consolidated financial statements and related notes of Nara filed by it with the Securities and Exchange Commission. See “Documents Incorporated by Reference” beginning on page [—].
(Unaudited) As of or for the Three Months Ended March 31, | As of or for the Year Ended December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
(in thousands, except per share and ratio data) | ||||||||||||||||||||||||
Income Statement Information | ||||||||||||||||||||||||
Net interest income | $ | 28,883 | $ | 108,384 | $ | 92,346 | $ | 96,221 | $ | 97,205 | $ | 94,615 | ||||||||||||
Provision for loan losses | 5,262 | 84,630 | 61,023 | 48,825 | 7,530 | 3,754 | ||||||||||||||||||
Income (loss) before income tax expense (benefit) | 11,436 | (15,139 | ) | (11,922 | ) | 4,380 | 55,798 | 56,203 | ||||||||||||||||
Net income (loss) | 6,746 | (7,239 | ) | (5,723 | ) | 2,755 | 33,199 | 33,806 | ||||||||||||||||
Net income (loss) available to common stockholders | 5,671 | (11,530 | ) | (9,999 | ) | 2,281 | 33,199 | 33,806 | ||||||||||||||||
Performance Ratios | ||||||||||||||||||||||||
Return on average assets | 0.92 | % | (0.24 | )% | (0.19 | )% | 0.11 | % | 1.50 | % | 1.75 | % | ||||||||||||
Return on average equity | 7.43 | % | (1.99 | )% | (1.88 | )% | 1.15 | % | 16.21 | % | 20.34 | % | ||||||||||||
Net interest spread | 3.75 | % | 3.35 | % | 2.64 | % | 3.22 | % | 3.41 | % | 3.96 | % | ||||||||||||
Net interest margin | 4.13 | % | 3.75 | % | 3.15 | % | 3.96 | % | 4.60 | % | 5.14 | % | ||||||||||||
Average stockholder’s equity to average assets | 12.37 | % | 12.11 | % | 10.03 | % | 9.38 | % | 9.24 | % | 8.59 | % | ||||||||||||
Efficiency ratio | 50.00 | % | 47.70 | % | 55.69 | % | 51.73 | % | 47.13 | % | 47.35 | % | ||||||||||||
Per Common Share Information | ||||||||||||||||||||||||
Earnings (loss) Basic | $ | 0.15 | $ | (0.30 | ) | $ | (0.35 | ) | $ | 0.09 | $ | 1.27 | $ | 1.31 | ||||||||||
Earnings (loss) Diluted | 0.15 | (0.30 | ) | (0.35 | ) | 0.09 | 1.25 | 1.28 | ||||||||||||||||
Book value (period end, excluding preferred stock and warrants) | $ | 7.83 | $ | 7.69 | $ | 7.99 | $ | 8.49 | $ | 8.48 | $ | 7.15 | ||||||||||||
Tangible book value (period end)(1) | 7.75 | 7.61 | 7.90 | 8.33 | 8.31 | 6.95 | ||||||||||||||||||
Cash dividends per common share | — | — | — | 0.11 | 0.11 | 0.11 | ||||||||||||||||||
Number of common shares outstanding (period end)(2) | 37,993,327 | 37,983,027 | 37,824,007 | 26,246,560 | 26,193,560 | 26,107,560 | ||||||||||||||||||
Balance Sheet Information (period end) | ||||||||||||||||||||||||
Gross loans, net of deferred loan fees(3) | $ | 2,139,933 | $ | 2,134,061 | $ | 2,208,943 | $ | 2,098,443 | $ | 2,008,729 | $ | 1,714,865 | ||||||||||||
Total assets | 2,926,143 | 2,963,296 | 3,227,957 | 2,672,054 | 2,423,410 | 2,046,985 | ||||||||||||||||||
Deposits | 2,176,098 | 2,176,114 | 2,434,190 | 1,938,603 | 1,833,346 | 1,712,235 | ||||||||||||||||||
Long-term debt(4) | 39,268 | 39,268 | 39,268 | 39,268 | 39,268 | 39,268 | ||||||||||||||||||
Common stockholders’ equity | 297,512 | 291,977 | 302,329 | 222,851 | 222,180 | 186,627 | ||||||||||||||||||
Capital Ratios(5) | ||||||||||||||||||||||||
Tier 1 risk-based | 16.47 | % | 16.42 | % | 16.73 | % | 14.32 | % | 11.84 | % | 12.17 | % | ||||||||||||
Total risk-based | 17.74 | % | 17.69 | % | 17.99 | % | 15.58 | % | 12.78 | % | 13.22 | % | ||||||||||||
Leverage | 12.92 | % | 12.61 | % | 12.36 | % | 12.61 | % | 10.77 | % | 11.19 | % | ||||||||||||
Market Capitalization | $ | 365,495,806 | $ | 374,512,646 | $ | 428,924,239 | $ | 258,003,685 | $ | 305,680,152 | $ | 546,172,498 | ||||||||||||
Market Price Per Share of Common Stock(6) | ||||||||||||||||||||||||
High | $ | 10.48 | $ | 11.78 | $ | 12.23 | $ | 14.92 | $ | 21.19 | $ | 21.40 | ||||||||||||
Low | 9.18 | 5.96 | 2.05 | 7.38 | 10.86 | 15.55 |
(1) | Tangible book value is a non-GAAP financial measure that represents common equity less goodwill and other intangible assets, net, divided by the total number of common shares outstanding. |
(2) | The increase in the number of common shares outstanding at the end of 2009 compared to the prior year is attributable to a public offering of shares of common stock that took place in 2009. |
(3) | Excludes loans held for sale. |
(4) | Includes junior subordinated deferrable interest debentures held by trusts that issued guaranteed preferred beneficial interests. |
(5) | For Nara on a consolidated basis. |
(6) | Closing prices. Nara’s common stock is listed and traded on the Nasdaq Global Select Market. |
Selected Historical Financial Information of Center
The selected historical financial information of Center has been derived from and should be read in conjunction with the historical consolidated financial statements and related notes of Center filed by it with the Securities and Exchange Commission. See “Documents Incorporated by Reference” beginning on page [—].
(Unaudited) As of or for the Three Months Ended March 31, | As of or for the Year Ended December 31, | |||||||||||||||||||||||
2011 | 2010(1) | 2009 | 2008(1) | 2007 | 2006 | |||||||||||||||||||
(in thousands, except per share and ratio data) | ||||||||||||||||||||||||
Income Statement Information | ||||||||||||||||||||||||
Net interest income | $ | 16,669 | $ | 67,938 | $ | 61,227 | $ | 74,600 | $ | 76,255 | $ | 71,410 | ||||||||||||
Provision for loan losses | 6,000 | 22,010 | 77,472 | 26,178 | 6,494 | 5,666 | ||||||||||||||||||
Income (loss) before income tax expense (benefit) | 5,390 | 23,999 | (48,336 | ) | (1,427 | ) | 35,589 | 42,643 | ||||||||||||||||
Net income (loss) | 4,885 | 22,683 | (2) | (42,502 | ) | 220 | 21,943 | 26,158 | ||||||||||||||||
Net income (loss) available to common stockholders | 4,135 | (9,313 | )(3) | (45,456 | ) | 65 | 21,943 | 26,158 | ||||||||||||||||
Performance Ratios | ||||||||||||||||||||||||
Return on average assets | 0.86 | % | 1.01 | % | (1.96 | )% | 0.01 | % | 1.14 | % | 1.53 | % | ||||||||||||
Return on average equity | 7.17 | % | 8.57 | % | (20.29 | )% | 0.13 | % | 14.33 | % | 20.66 | % | ||||||||||||
Net interest spread | 3.22 | % | 2.92 | % | 2.51 | % | 3.01 | % | 3.06 | % | 3.36 | % | ||||||||||||
Net interest margin | 3.49 | % | 3.33 | % | 3.03 | % | 3.80 | % | 4.23 | % | 4.53 | % | ||||||||||||
Average stockholder’s equity to average assets | 12.02 | % | 11.76 | % | 9.66 | % | 8.05 | % | 7.93 | % | 7.40 | % | ||||||||||||
Efficiency ratio | 53.26 | % | 51.07 | % | 61.26 | % | 69.09 | % | 53.13 | % | 48.41 | % | ||||||||||||
Per Common Share Information | ||||||||||||||||||||||||
Earnings (loss) Basic | $ | 0.10 | (2) | $ | (0.26 | )(3) | $ | (2.66 | ) | $ | 0.00 | $ | 1.32 | $ | 1.58 | |||||||||
Earnings (loss) Diluted | 0.10 | (0.26 | ) | (2.66 | ) | 0.00 | 1.31 | 1.57 | ||||||||||||||||
Book value (period end, excluding preferred stock and warrants) | $ | 5.62 | $ | 5.50 | $ | 6.54 | $ | 9.50 | $ | 9.62 | $ | 8.46 | ||||||||||||
Tangible book value (period end)(4) | 5.61 | 5.49 | 6.54 | 9.42 | 9.53 | 8.37 | ||||||||||||||||||
Cash dividends per common share | — | — | — | 0.20 | 0.19 | 0.16 | ||||||||||||||||||
Number of common shares outstanding (period end)(5) | 39,908,514 | 39,914,686 | 20,160,726 | 16,789,080 | 16,366,791 | 16,632,601 | ||||||||||||||||||
Balance Sheet Information (period end) | ||||||||||||||||||||||||
Gross loans, net of deferred loan fees(6) | $ | 1,492,895 | $ | 1,584,986 | $ | 1,514,367 | $ | 1,707,648 | $ | 1,768,620 | $ | 1,536,078 | ||||||||||||
Total assets | 2,260,118 | 2,270,279 | 2,192,800 | 2,056,609 | 2,080,663 | 1,843,312 | ||||||||||||||||||
Deposits | 1,779,606 | 1,770,994 | 1,747,671 | 1,603,519 | 1,577,674 | 1,429,399 | ||||||||||||||||||
Long-term debt(7) | 18,557 | 18,557 | 18,557 | 18,557 | 18,557 | 18,557 | ||||||||||||||||||
Common stockholders’ equity | 224,409 | 219,579 | 131,862 | 159,557 | 157,453 | 140,734 | ||||||||||||||||||
Capital Ratios(8) | ||||||||||||||||||||||||
Tier 1 risk-based | 19.14 | % | 17.60 | % | 16.50 | % | 12.58 | % | 9.31 | % | 9.45 | % | ||||||||||||
Total risk-based | 20.42 | % | 18.87 | % | 17.77 | % | 13.84 | % | 10.42 | % | 10.54 | % | ||||||||||||
Leverage | 12.85 | % | 12.74 | % | 12.40 | % | 11.28 | % | 8.49 | % | 8.62 | % | ||||||||||||
Market Capitalization | $ | 292,928,493 | $ | 302,553,320 | $ | 92,739,340 | $ | 103,588,624 | $ | 201,638,865 | $ | 398,683,446 | ||||||||||||
Market Price Per Share of Common Stock(9) | ||||||||||||||||||||||||
High | $ | 7.99 | $ | 7.58 | $ | 6.50 | $ | 14.62 | $ | 24.05 | $ | 25.82 | ||||||||||||
Low | 7.10 | 4.56 | 2.18 | 5.72 | 11.31 | 21.39 |
(1) | Center previously reported on internal control deficiencies as of and for the year ended December 31, 2008 and as of and for the quarter ended March 31, 2010. Such deficiencies have been fully remediated. For further information, see “The Merger—The Parties— |
1 | All offices held apply to
|
2 | Except as |
3 | Consists of option shares which are vested or will vest within 60 days of June 30, 2011 pursuant to the
|
This percentage is based on the |
5 | Year first elected or appointed a director of Center Bank. |
6 | Includes 84,073 shares held by |
7 | Includes 192,980 shares held by two charitable remainder trusts of |
8 | Includes 18,364 shares owned by Chang Hwi Kim’s adult children, as to which shares Mr. Kim has sole voting and investment power pursuant to an agreement with the record owners of the shares. |
9 | 40,000 of these shares are pledged. |
10 | Sang Hoon Kim served as Chairman and Chief Executive Officer of Tmecca.com, an on-line provider of professional books and magazines, from 2001 until he retired from this position in April 2006. |
11 | Includes 271,418 shares held by a trust of which Sang Hoon Kim is a trustee, and 6,812 shares held by other relatives of Mr. Kim, as to all of which shares Mr. Kim has shared voting and investment power pursuant to agreements with the record owners of the shares. Also includes 274,524 shares held by Mr. Kim’s wife as separate property, all of which are pledged, as to which shares Mr. Kim has shared voting and investment power. Mr. Kim also owns 388,972 shares directly. |
* | Less than 1% |
Name, Address and Offices Held with Company1 Principal Occupation for the Past Five Years Chung Hyun Lee Director Retired President, NuArt International, Inc. (Cosmetics Importing)12 (1985 )5 Richard S. Cupp President and President and Chief Executive Officer, Center Bank and Center Financial Corporation13 Lisa Kim Pai Executive Vice President, General Counsel, Corporate Secretary and Chief Risk Officer Executive Vice President and General Counsel, Center Bank and Center Financial Corporation15 Jason K. Kim Senior Vice President Senior Vice President and Chief Credit Officer, Center Bank Sook Kyong Goo Senior Vice President Senior Vice President and Chief Operations Officer, Center Bank17 Directors and Executive Officers as a Group (11 persons) Director
Since Common Stock
Beneficially Owned on
June 30, 2011 Age Number
of Shares2 Vested
Option
Shares3 Percentage
of Shares
Outstanding4 69 2000 273,056 30,000 *
Chief Executive Officer 71 n/a 3,979 14 — * 51 n/a 16,200 40,000 *
and Chief Credit Officer,
Center Bank 44 n/a 86,518 16 55,400 *
and Chief Operations Officer, Center Bank 57 n/a 5,390 24,000 * 4,284,112 316,066 11.53 %
12 | Mr. Lee retired from this position in October 2010. |
13 | Mr. Cupp was appointed President and Chief Executive officer on January 6, 2011, to serve until the earlier of December 31, 2011 or the close of the pending merger with Nara Bancorp. Previously, he served as principal of Richard S. Cupp, Inc. Strategic and Management Consulting, specializing in community bank turnarounds and restructurings and advising private equity investors, from March 2009 to January 2011; as President and Chief Executive Officer of County Bank and of Capital Corp of the West (“CCOW”) in Merced, California from August 2008 to February 2009; and as founding President and Chief Executive Officer of 1st Century Bank in Los Angeles from 2002 to 2007. Mr. Cupp also served as a director of CCOW from August 2008 to April 2009, and of 1st Century Bank from 2002 to 2007. CCOW filed for bankruptcy protection in April 2009 after its banking subsidiary, County Bank, was closed by banking regulators in February 2009. Mr. Cupp was appointed Chief Executive Officer of CCOW and County Bank in order to specifically address the significant capital, liquidity and regulatory issues faced by those institutions. He has 48 years of experience in commercial banking. Previously held positions include key executive roles in large regional banks, CEO roles in numerous California mid-sized community and independent banks, and advisory and consulting engagements with boards and banks throughout the west. |
14 | Represents shares subject to a restricted stock award which will vest if |
15 | Prior to assuming these positions in February 2007, Ms. Pai served in private legal practice with Kim Pai & Associates in Pasadena, California since November 2006; and as acting General Counsel And Corporate Secretary of Nara Bancorp in Los Angeles from June 2005 to October 2006. |
16 | Includes 14,708 shares subject to a restricted stock award which will vest 50% on February 10, 2012 and 50% on February 10, 2013, subject to receipt of satisfactory annual performance reviews each year. Such shares will continue to be subject to restrictions on transfer even when fully vested as long as the
|
17 | Prior to assuming these positions in August 2007, Mrs. Goo served as Senior Vice President and Chief Operations Officer of |
* | Less than
|
General
The Board of Directors believes that it is important to encourage the highest level of corporate ethics and responsibility and has fully implemented the corporate governance requirements of the Nasdaq Stock Market and the Securities and Exchange Commission.
Code of Ethics
We have adopted a Code of Ethics and Business Conduct (the “Code of Ethics”) which applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. The Code of Ethics requires that our directors, officers and employees avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in the Company’s best interests. Under the terms of the Code of Ethics, directors, officers and employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Ethics. The Code of Ethics may be found on our web site,http://www.centerbank.com under “Investor Relations—Corporate Governance.” We intend to post notice of any waiver from, or amendment to, any provision of our Code of Ethics on this web site.
Procedures for Reporting Concerns about Accounting, Internal Accounting Controls or Auditing Matters
As a mechanism to encourage compliance with the Code of Ethics, we have established procedures for (i) receiving, retaining and addressing complaints received regarding accounting, internal accounting controls or auditing matters; (ii) allowing employees to anonymously report any problems they may detect with respect to such matters; and (iii) reporting any suspected violations of the Code or of law. The Code of Ethics also prohibits the Company from retaliating against any director, officer or employee who makes a good faith report of a suspected violation of the Code or of law (even if the report is mistaken), or against anyone who assists in the investigation of a reported violation.
Director Independence
General. The overwhelming majority of the members of our Board of Directors have historically been independent, and our Audit, Compensation, and Nomination and Governance Committees are comprised solely of independent directors in accordance with applicable Securities and Exchange Commission and the Nasdaq Stock Market requirements. The Board has determined that all of its current directors are “independent” as that term is defined by the Nasdaq Stock Market rules.
Executive Sessions. The independent directors meet regularly in executive session without any members of management present.
Director Attendance
Board and Committee Meeting Attendance. During the fiscal year ended December 31, 2010, the Board of Directors of the Company held a total of 14 meetings. Each director attended at least 75% of the aggregate of (1) the total number of such Board meetings and (2) the total number of meetings held by all committees of the Board on which such director served during 2010.
Director Attendance at Annual Meetings of Stockholders. The Board believes it is important for all directors to attend the annual meeting of stockholders in order to show their support for the Company and to provide an opportunity for stockholders to communicate any concerns to them. Our policy is that all directors are expected to attend each annual meeting of stockholders unless personal or family illness or other compelling personal or business circumstances prevent attendance. All of our directors attended our annual meeting of stockholders in 2010.
Stockholder Communications with Board of Directors
Stockholders may communicate with the Board of Directors or with any individual director by mailing a communication to the Company’s principal executive offices addressed to the Board of Directors or to the individual director, to the attention of the Company’s Corporate Secretary. The letter should indicate that the author is a stockholder, and whether he or she owns his or her shares in street name. Depending on the subject matter, management of the Company will: (i) forward the communication to the director or directors to whom it is addressed; (ii) handle the inquiry directly or delegate it to appropriate employees, such as where the communication is a request for information, a stock related matter, or a matter related to ordinary course matters in the conduct of the Company’s business; or (iii) not forward the communication where it is primarily commercial or political in nature, or where it relates to an improper, frivolous or irrelevant topic. Communications which are not forwarded will be retained until the next Board meeting, where they will be made available to all directors.
Director Nomination Procedures, Qualifications and Related Matters
Procedure for Consideration of Director Nominees. Prior to making any recommendations to the Board concerning the nomination of directors for each year’s annual meeting, the Governance Committee shall (i) evaluate the performance, attendance records of, and any loans or other transactions between the Company or Center Bank and each of the current Board members proposed for reelection, and on that basis consider the appropriateness of such members standing for reelection; (ii) review the composition and size of the Board in order to ensure that the Board is comprised of members reflecting the proper expertise, skills, attributes and personal and professional backgrounds for service as directors of the Company; (iii) consider the need to augment the Board for any specific purpose; (iv) review and consider any additional requests from outside parties to serve as directors; (v) if a new nominee is needed, determine the specific skills and experience desired in a new director; and (vi) in such case, identify potential nominees who have such skills and experience, determine whether the potential nominees are stockholders of the Company, investigate the potential nominee’s background, develop personal knowledge about the candidate, develop a consensus of the directors with respect to which potential nominee would be best suited for the position, determine whether the candidate is interested, and vote on the recommendation.
The Governance Committee shall consider recommendations from directors, officers and employees of the Company and Center Bank, as well as persons recommended by stockholders of the Company, and shall evaluate persons recommended by directors, officers or employees in the same manner as those recommended by stockholders in selecting Board nominees.
Director Qualifications. In considering possible candidates for election as a director, the Governance Committee shall be guided by the principle that each director should: (i) be an individual of the highest ethical character and integrity; (ii) have substantial experience which is of particular relevance to the Company; (iii) have the ability and willingness to devote sufficient time to the affairs of the Company; (iv) have a meaningful financial stake in the Company so as to assure that every director’s interests are aligned with those of the stockholders; (v) be knowledgeable about the business activities and market areas in which the Company and its subsidiaries engage; (vi) have a general appreciation regarding major issues facing public companies of a size and operational scope similar to the Company, including contemporary governance concerns, regulatory obligations of a public issuer, strategic business planning, competition in a global economy, and basic concepts of corporate accounting and finance; (vii) have an excellent personal and professional reputation in and commitment to one or more communities in which the Company does business; (viii) have an inquiring mind, a willingness to ask hard questions, and the ability to work constructively with others; (ix) have the ability and desire to exercise independent thinking when considering matters brought before the Board, and not be unduly influenced by the opinions of others; (x) have no conflict of interest that would interfere with his or her performance as a director; (xi) have the capacity and desire to represent the best interests of the stockholders as a whole and not primarily a specific interest group or constituency; (xii) serve or have served as chief executive
officer or in another position of active leadership with a business or professional interest located within the geographic area served by the Company and its subsidiaries; and (xiii) live or work within 100 miles of an existing or proposed office of Center Bank.
In considering the desirability of any particular candidate as a potential director, the Governance Committee shall also consider the contributions that a candidate can be expected to make to the collective functioning of the Board based upon the totality of the candidate’s credentials, experience and expertise, the composition of the Board at the time, and other relevant circumstances, including the fit of the individual’s skills and personality with those of other directors and potential directors in building a Board that is effective, collegial and responsive to the needs of the Company.
While the Board and the Governance Committee believe that every director should possess as many of the foregoing attributes as possible, the Governance Committee has not recommended, and the Board has not established, any specific group of such attributes to be considered “minimum qualifications” for serving as a director.
Additional Information Concerning Board Diversity, Qualifications and Experience. As currently comprised, the Board of Directors is a group of individuals who are drawn from various market sectors and industry groups with a presence in the Company’s niche markets. The Board considers diversity as one of many factors in evaluating the composition of the Board but has no set policy in this regard. Board members are individuals with knowledge and experience who serve and represent the communities we serve. Current board representation provides backgrounds in accounting, banking, internet marketing, retail and wholesale, transportation/trucking, importing, and home entertainment. The expertise of these individuals covers accounting and financial reporting, corporate management, strategic planning, business acquisitions, marketing, international operations, retail and small business operations. What follows is a brief description of the particular experience, attributes and qualifications of each member of the Company’s Board of Directors that led to the conclusion that these individuals should serve as directors of the Company.
Jin Chul Jhung
Mr. Jhung was selected as a nominee to serve as a Director and Chairman of Center Financial Corporation and Center Bank because the Board believes Mr. Jhung adds a wealth of knowledge and foresight gained from his extensive business experience, as well as his active leadership roles at numerous Korean-American business and international trade associations. Underscoring his recognition as a Korean-American community leader, Mr. Jhung was recently presented with a highly coveted merit award by the President of the Republic of Korea.
Chung Hyun Lee
Mr. Lee was selected as a nominee to serve as a Director of Center Financial Corporation and Center Bank because the Board believes Mr. Lee provides invaluable continuity and historical perspective as one of the founding Directors of Center Bank, for which he served as Chairman for more than ten years. Mr. Lee is a well recognized leader and remains active in supporting the continued growth and prosperity of the greater Korean-American community.
David Z. Hong
Mr. Hong was selected as a nominee to serve as a Director of Center Financial Corporation and Center Bank because the Board believes Mr. Hong’s 40-year history operating his own public accounting practice adds considerable depth to its Audit Committee and insight to the challenges confronting Korean-American entrepreneurs. As a founding Directors of Center Bank, Mr. Hong strengthens the continuity and historical perspective of the Board’s membership.
Sang Hoon Kim
Mr. Kim was selected as a nominee to serve as a Director of Center Financial Corporation and Center Bank because the Board believes Mr. Kim’s long tenure establishing various businesses in international trade, apparel and publications industries enhances the Board’s understanding of the Bank’s core commercial customers. A founding Director of Center Bank, Mr. Kim remains active in the Korean-American community and maintains an extensive network of business relationships.
Chang Hwi Kim
Mr. Kim was selected as a nominee to serve as a Director of Center Financial Corporation and Center Bank because the Board believes Mr. Kim’s experience heading the U.S. operations of a Korean conglomerate, in addition to his business experience in the U.S., adds a greater understanding of global business trends impacting the Bank’s core business customer base. Mr. Kim’s 22-year tenure as a Director of Center Bank enhances the continuity and historical perspective of the Board’s membership.
Peter Y.S. Kim
Mr. Kim was selected as a nominee to serve as a Director of Center Financial Corporation and Center Bank because the Board believes Mr. Kim’s extensive experience in the transportation, logistics and warehousing sectors provides the Board with significant insight to global trade volumes and trends and the potential impact to the business communities in the Bank’s markets. Mr. Kim is highly regarded in the Korean-American community and is recognized as an active sponsor promoting education.
Kevin S. Kim
Mr. Kim was selected as a nominee to serve as a Director of Center Financial Corporation and Center Bank because the Board believes Mr. Kim’s educational and professional experience as a certified public accountant and attorney makes him an excellent candidate to lead the Audit Committee as Chairman. Since joining the Board in 2008, Mr. Kim has made significant contributions, most recently as the lead negotiator in the pending merger of equals with Nara Bancorp.
Consideration of Stockholder Recommendations. In considering any additional requests from outside parties to serve as directors, including parties recommended by stockholders, the Governance Committee shall follow the same principles outlined above, and shall request of any potential nominee such information, including a completed Directors’ and Officers’ Questionnaire of the same type completed by each of our existing directors and executive officers each year in connection with the preparation of our proxy materials, as the Governance Committee deems necessary to enable it to properly evaluate such person’s qualifications and to be aware of any information concerning such person which might require disclosure to stockholders pursuant to the Securities and Exchange Commission rules concerning proxy statements.
A stockholder wishing to submit recommendations for director candidates for election at an annual meeting of stockholders must do so in writing by December 15th of the previous calendar year, and must include the following in the written recommendation: (i) a statement that the writer is a stockholder and is proposing a candidate for consideration; (ii) the name and contact information for the candidate; (iii) a statement of the candidate’s business and educational experience; (iv) information regarding the candidate’s qualifications to be a director; (v) the number of shares of the Company’s stock owned either beneficially or of record by the candidate and the length of time such shares have been so owned; (vi) the written consent of the candidate to serve as a director if nominated and elected; (vii) information regarding any relationship or understanding between the proposing stockholder and the candidate; (viii) a statement that the proposed candidate has agreed to furnish to us all information (including a completed Directors’ and Officers’ Questionnaire as described above) as we deem necessary to evaluate such candidate’s qualifications to serve as a director; and (ix) as to the stockholder giving the notice (a) the name and address of the stockholder and (b) the number of shares of the Company’s stock which are owned beneficially or of record by the stockholder.
Nominations by Stockholders. The procedures for nominating directors (as opposed to making recommendations pursuant to the above procedure), other than by the Company, are set forth in our Bylaws, which provide in pertinent part as follows:
“Nominations for election of members of the Board of Directors may be made by the Board of Directors or by any shareholder entitled to vote for the election of directors. Notice of intention to make any nominations by a shareholder shall be made in writing and shall be delivered or mailed to and received by the Secretary of the Corporation not less than one hundred twenty (120) calendar days in advance of the date corresponding to that on which the Corporation’s proxy statement was released to the shareholders in connection with the previous year’s annual meeting of shareholders; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year’s proxy statement, notice by the shareholder must be received by the Secretary of the Corporation not later than the close of business on the later of (i) one hundred and twenty (120) days prior to such annual meeting; or (ii) seven (7) days after the date the notice of such meeting is sent to shareholders pursuant to Section 2.2(d) of these Bylaws…. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the number of shares of voting stock of the Corporation owned by each proposed nominee; (d) the name and residence address of the notifying shareholder and the beneficial owner, if any, on whose behalf the nomination is made; and (e) the number of shares of voting stock of the Corporation owned beneficially and of record by the notifying shareholder and such beneficial owner.”
If the merger is consummated, there will be no Center annual meeting of stockholders next year. In that case, the procedures that must be followed for nominating directors for the combined company will be the Nara procedures described under “Nara Proposal 2: Election of Directors—Nomination and Governance Committee” beginning on page 114. In case the merger is not consummated, for our 2012 Annual Meeting of Stockholders, written notice of intention to make any nominations must be received no later than , 2012
Board Leadership Structure. We are focused on corporate governance practices, and independent Board oversight is valued as an essential component of strong corporate performance to enhance stockholder value. Our commitment to independent oversight is demonstrated by the fact that all of our current directors are independent. In addition, all of the members of the Board’s Audit Committee, Compensation Committee, and Governance Committee, are independent.
Center Financial Corporation currently has an independent Chairman separate from the Chief Executive Officer, and our corporate governance guidelines specify that these two positions should be kept separate except in unusual circumstances. Such circumstances have not occurred in the Company’s history. The Board believes it is important to maintain flexibility in its leadership structure, but firmly supports having an independent director in a board leadership position. If for any reason it were necessary for the Chairman to also hold the office of Chief Executive Officer temporarily, the Board would appoint an independent lead director to serve in an independent leadership position during this time. Having an independent Chairman or lead director enables non-management directors to raise issues and concerns for Board consideration without immediately involving management. The Chairman provides independent leadership of the Board and also serves as a liaison between the Board and senior management. The Board has determined that the current structure, an independent Chair, separate from the Chief Executive Officer, is the most appropriate structure at this time, while ensuring that, at all times, there will be an independent director in a Board leadership position.
Board Role in Risk Oversight. Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including credit risk, interest rate risk, liquidity risk, financial reporting risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management of risks the Company faces, while the board, as a whole and through its committees, particularly the Audit and Compensation Committees, has responsibility for the oversight of risk management and consideration of the Company’s entire risk profile. The Board considers the most significant risks facing the Company and the Company’s general risk management strategy, to ensure that risks undertaken by the Company are consistent
with the Board’s objectives. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.
The Compensation Committee is involved in the risk management process primarily through the conduct of semi-annual compensation-related risk assessments. The Audit Committee is responsible for overseeing the Company’s financial reporting risk, oversees the entire audit function and evaluates the effectiveness of internal and external audit efforts. It receives reports from management regularly regarding the Company’s assessment of risks and the adequacy and effectiveness of internal control systems. The Audit Committee reports regularly to the full Board.
To accomplish the Board’s overall risk management strategy, the Board works closely, and meets frequently and as necessary, with senior management to discuss strategy and risks facing the Company. The Chief Risk Officer presents quarterly reports on Enterprise Risk Management to the Board concerning potential risk or control issues involving management. The quarterly reports consist of a summary of quarterly risk assessment in each risk area, including credit risk, market risk (including liquidity and interest rate risk) and operational risk (including compliance and legal risk). Senior management attends appropriate portions of the Board meetings and is available to address any questions or concerns raised by the Board on risk management and any other matters. The Chairman of the Board and other independent directors work together to provide strong, independent oversight of the Company’s management and affairs directly and through its standing committees and, when necessary, special meetings of independent directors. While we believe that this division of responsibility is the most effective approach for addressing the risks facing our Company, we will continue to re-examine our Board leadership structure on a regular basis, recognizing that different structures may be appropriate in different situations faced by the Company.
Management Succession Plan for CEO
The Board appointed the Company’s current President and CEO, Richard S. Cupp, on January 6, 2011 to succeed the prior President and CEO, who was terminated on that date. Mr. Cupp has agreed to serve until the earlier of December 31, 2011, or the close of the pending merger with Nara. If the merger is not consummated before December 31, 2011, and the merger agreement has not been terminated, the Board plans to request Mr. Cupp to extend his term until the close of the merger. If the merger agreement is terminated, the Board plans immediately to form a CEO Search Committee and commence a nationwide search. The Board would also request Mr. Cupp to continue in his position for an interim period to provide sufficient time to complete the search. If Mr. Cupp were not available under any of the circumstances described above beyond his original commitment, then, during the search for a permanent successor, the Board plans to take one of three possible alternative actions: (i) promote an existing senior executive officer to serve as interim President and CEO (ii) appoint an external candidate to serve as interim President and CEO; or (iii) consistent with the Company’s Management Succession Plan previously adopted as part of the Company’s Business Resumption Plan, establish an Office of the President, consisting of a team of executives to perform the duties of President and CEO.
Audit Committee
General. The Board of Directors has, among others, a standing Audit Committee, of which director Kevin S. Kim is Chairman and all other non-employee directors (which is currently all directors) are members. All of the members of the Audit Committee are “independent” as defined by the rules of the Nasdaq Stock Market and the Securities and Exchange Commission, and no member of the Audit Committee, other than in his capacity as a member of the Board of Directors or the Audit Committee, may accept any consulting, advisory or other compensatory fee from the Company. Each Audit Committee member also meets the Nasdaq Stock Market’s financial knowledge requirements and has substantial experience as the chief executive officer or equivalent of his respective business or profession. Two members of the Audit Committee have the requisite financial sophistication required for at least one member of the Audit Committee under the rules of the Nasdaq Stock Market. The Board of Directors has determined that Kevin S. Kim is an “audit committee financial expert” as defined under the Securities and Exchange Commission’s rules.
During the fiscal year ended December 31, 2010, the Audit Committee held a total of twelve meetings. The purpose of the Audit Committee is to monitor the quality and integrity of the Company’s accounting, auditing, internal control and financial reporting practices. The Committee selects the Company’s independent accountants, reviews the independence and performance of the independent accountants, and makes certain that the independent accountants have the necessary freedom and independence to freely examine all of the Company’s records. Further, the Audit Committee pre-approves all audit and permissible non-audit services to be performed by the independent accountants, with certain de minimis exceptions. Prior to the public release of annual and quarterly financial information, the Committee discusses with management and the independent accountants the results of the independent accountants’ audit or limited review procedures associated with this information. The Committee oversees internal audit activities, including reviewing the internal audit plan, discussing various internal audit issues with management, reviewing and concurring in the appointment or replacement of the director of the internal audits, and confirming and assuring the objectivity of internal audits. The Audit Committee also has ultimate responsibility for determining matters of interpretation with respect to the audit and accounting related portions of our Code of Ethics, and for making all final decisions concerning any disciplinary actions relating to those portions of the Code.
Audit Committee Charter. The Board of Directors has adopted an Audit Committee charter, which outlines the purpose of the Audit Committee, delineates the membership requirements and addresses the key responsibilities of the Committee. The charter may be found on our web site,http://www.centerbank.com under “Investor Relations—Corporate Governance.”
Audit Committee Report. Our Audit Committee has reviewed and discussed with management our audited consolidated financial statements as of and for the year ended December 31, 2010. The committee has discussed with our independent public accountants, which are responsible for expressing an opinion on the conformity of our audited consolidated financial statements with generally accepted accounting principles, the matters required to be discussed by Statement on Auditing Standards No. 114, including their judgments as to the quality of our financial reporting. The committee has received from the independent public accountants written disclosures and a letter as required by the Independence Standards Board, Standard No. 1, as amended, and discussed with the independent public accountants the firm’s independence from management and the Company. In considering the independence of our independent public accountants, the committee took into consideration the amount and nature of the fees paid the firm for non-audit services, as described on page [—] below. The Audit Committee also reviewed management’s report on its assessment of the effectiveness of the Company’s internal control over financial reporting and the independent registered public accounting firm’s report on the effectiveness of the Company’s internal control over financial reporting.
In reliance on the review and discussions described above, the Committee recommends to the Board of Directors that the year-end audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2010 for filing with the Securities and Exchange Commission.
Submitted by: | ||
Kevin S. Kim, Chairman | ||
David Z. Hong | Peter Y. S. Kim | |
Jin Chul Jhung | Sang Hoon Kim | |
Chang Hwi Kim | Chung Hyun Lee |
Nomination and Governance Committee
General. The Board has a standing Nomination and Governance Committee (the “Governance Committee”) of which director Sang Hoon Kim is Chairman and all other non-employee directors (which is currently all directors) are members. The Governance Committee met four times during 2010. All of the members of the Governance Committee are “independent” directors under the Nasdaq Stock Market rules. The primary purposes of this committee are to (i) identify qualified candidates for director, evaluate the incumbent directors whose
terms expire at each upcoming annual meeting, and recommend to the Board the director nominees for each annual meeting of stockholders; (ii) determine desired Board member skills and attributes and annually review and update the criteria for evaluating candidates for directors; (iii) annually evaluate the size and composition of the Board and each committee in light of the operating requirements of the Company and existing corporate governance trends; (iv) conduct searches as needed for prospective directors with the desired skills and attributes, and conduct reviews as appropriate into the background and qualifications of director candidates; (v) consider bona fide candidates recommended by stockholders for nomination for election to the Board in accordance with the policies and procedures set forth in the Governance Committee’s charter; (vi) retain and compensate third party search firms to assist in identifying or evaluating potential nominees to the Board, if necessary; (vii) assess and report annually to the Board concerning the effectiveness and performance of the Board and Board committees as well as the effectiveness of the relationship between the Board and management, and identify areas in which the Board or management believes the Board could improve; (viii) monitor the orientation and continuing education program for directors; (ix) annually review and assess the adequacy of the Company’s Corporate Governance Guidelines in light of applicable legal and regulatory requirements; (x) annually review and assess the adequacy of the Company’s Code of Ethics; (xi) have ultimate responsibility for determining matters of interpretation with respect to the non-audit related portions of the Code of Ethics and for making all final decisions concerning any disciplinary actions relating to those portions of the Code; and (xii) periodically review the Company’s succession plans and make recommendations to the Board of Directors with respect to management and director succession.
We do not pay fees to any third party to identify or evaluate or assist in identifying or evaluating potential nominees. The Board and the Governance Committee have adopted specific policies and procedures concerning the director nomination process, in accordance with which the Governance Committee considers various matters and criteria and on that basis recommends the proposed slate of nominees to the full Board. The specific procedures and criteria which the Governance Committee follows and considers in making its decisions concerning recommended nominations for directors are described above under “Corporate Governance—Director Nomination Procedures, Qualifications and Related Matters.”
Committee Charter. The Board of Directors has adopted a Nomination and Governance Committee charter, which outlines the purpose of the Governance Committee, delineates the membership requirements and addresses the key responsibilities of the Committee. The charter may be found on our web site,http://www.centerbank.com under “Investor Relations—Corporate Governance.”
Compensation Committee
The Board also has a standing Personnel and Compensation Committee (the “Compensation Committee”), of which director Chang Hwi Kim is Chairman and all other non-employee directors (which is currently all directors) are members. The Compensation Committee met nine times during 2010. All of the members of the Compensation Committee are “independent” directors under the Nasdaq Stock Market rules. The primary functions of this committee are to (i) establish, implement and continually monitor adherence with the Company’s compensation philosophy; (ii) review and approve the corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluate the Chief Executive Officer’s performance in light of these goals and objectives, and determine and approve any discretionary elements of the Chief Executive Officer’s compensation based on this evaluation; (iii) annually approve the compensation arrangements for “senior officers” (i.e., executive officers and other officers with the title of Executive Vice President or above) and approve or modify the Chief Executive Officer’s recommendations concerning annual bonuses, salary increases and any other compensation for such officers; (iv) review and approve the selection, retention and/or termination of any such officers; (v) monitor compensation trends, solicit independent advice where appropriate, and ensure that executive compensation plans are sufficient to attract and retain high quality executives; (vi) annually review the compensation paid to non-employee directors and make recommendations to the Board regarding such compensation, provided that no member of the Committee may act to fix his or her own compensation except for uniform compensation paid to directors for their services as a director; (vii) review
executive officer compensation for compliance with applicable laws and regulations; (viii) during the period of the Company’s participation in the U.S. Treasury Department’s Capital Purchase Program (see discussion in “Compensation Discussion and Analysis”), taking necessary actions to comply with any applicable compensation-related restrictions and requirements related to the Capital Purchase Program, including, without limitation, conducting, in consultation with the Company’s senior risk officers, the required semi-annual review of the Company’s incentive compensation arrangements for “senior executive officers” (generally the same as the Company’s Named Executive Officers) and other employees and making reasonable efforts to ensure that such arrangements do not encourage such officers or employees to take unnecessary or excessive risks that threaten the value of the Company; (ix) consider and make recommendations to the Board of Directors concerning the Company’s equity-based compensation plans, including any proposed new plans or changes to existing plans; (x) to the extent authorized by the Board, administer and implement such plans, including but not limited to approving equity awards to the Company’s Named Executive Officers; (xi) review and approve any renewals of the Chief Executive Officer’s employment contract and set his compensation levels for such contract based on market peer banks’ comparable compensation and other relevant factors at the time of renewal; (xii) annually approve bonuses for all employees; (xiii) review and approve any employment agreements, salary continuation agreements or other contractual arrangements with any officers; (xiv) produce an annual report on executive compensation, and review and approve the Compensation Discussion and Analysis appearing in the Proxy Statement, which report shall include a certification that the Compensation Committee has completed the risk assessment requirements related to the Capital Purchase Program during the period of the Company’s participation in this program; and (xv) review and make recommendations to the Board concerning personnel policies and any similar documents relating to personnel matters which require Board approval.
Compensation Committee Charter. The Board of Directors has adopted a Compensation Committee charter, which outlines the purpose of the Compensation Committee, delineates the membership requirements and addresses the key responsibilities of the Committee. The charter may be found on our web site,http://www.centerbank.com under “Investor Relations—Corporate Governance.”
Compensation Committee Interlocks and Insider Participation in Compensation Decisions. The persons named in the report below were the only persons who served on the Compensation Committee during the fiscal year ended December 31, 2010. None of these individuals has ever been an officer or employee of Center Financial Corporation or any of its subsidiaries. None of our executive officers serves as a member of the Board of Directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board of Directors or our Compensation Committee.
Compensation Committee Report. In performing its oversight role, the Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this document with management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this document for filing with the Securities and Exchange Commission.
The Compensation Committee has concluded, through a comprehensive risk assessment, that the compensation programs and practices at the Company do not encourage employees, including the named executive officers, to take unnecessary and excessive risks that would threaten the value of the Company. The risk assessment included various discussions, review and evaluation of the Company’s compensation plans and practices.
The Compensation Committee certifies that: (i) it has reviewed with senior risk officers the senior executive officer compensation plans and has made all reasonable efforts to ensure that these plans do not encourage senior executive officers to take unnecessary and excessive risks that threaten the value of the Company; (ii) it has reviewed with senior risk officers the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these plans pose to the Company; and (iii) it has reviewed the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of reported earnings of the Company to enhance the compensation of any employee.
During the fiscal year ended December 31, 2010, the Compensation Committee did not engage a compensation consultant.
Submitted by the Compensation Committee of the Board of Directors.
Chang Hwi Kim, Chairman | ||
David Z. Hong | Peter Y. S. Kim | |
Jin Chul Jhung | Sang Hoon Kim | |
Kevin S. Kim | Chung Hyun Lee |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished to the Company during and with respect to its 2010 fiscal year, no director, executive officer or beneficial owner of 10% or more of our common stock failed to file, on a timely basis, reports required during or with respect to 2010 by Section 16(a) of the Exchange Act.
COMPENSATION DISCUSSION AND ANALYSIS
General
This section addresses the Company’s compensation programs, philosophy and objectives, including the process for making compensation decisions, the role of management in the design of such program, and the Company’s 2010 executive compensation components. The discussion is intended to address the factors most relevant to understanding what our compensation programs are designed to reward, including the essential elements of compensation, why we choose to pay each element of compensation, how we determine the amount of each compensation element, and how each compensation element fits into our overall compensation objectives and affects decisions regarding other compensation elements.
Compensation Philosophy
The Company’s executive compensation programs, including those for its banking subsidiary, Center Bank, are designed to attract and retain high quality executive officers that are critical to its long-term success. The Company’s Board and management believe that the most effective executive compensation program is one that is designed to reward the achievement of specific annual, long-term and strategic goals, and to align the executives’ interests with those of the stockholders by rewarding performance based on the above established goals, with the ultimate goal of improving stockholder value.
Base compensation levels for the Named Executive Officers, or “NEOs,” are established based on the officer’s roles and responsibilities, compensation of executives at comparable companies who perform similar duties, and prior year compensation. Bonus and equity compensation have historically been based on both corporate and individual performance objectives, which include asset and revenue growth, asset quality, identification of strategic opportunities, core earnings performance, regulatory compliance and personnel management. However, as discussed further below, the Company’s ability to provide incentive compensation to certain employees (including most of our NEOs) has been severely limited due to the Company’s participation in the U.S. Treasury Department’s Capital Purchase Program portion of the Troubled Asset Relief Program (the “CPP” or the “Capital Purchase Program”).
Process for Making Compensation Decisions
Role of the Executive Officers. The Chief Executive Officer (the “CEO”), assisted by the Manager of Human Resources, conducts an annual performance evaluation process for each of the Named Executive Officers, other than himself. As part of each annual performance evaluation, he considers, among other key factors, (i) financial performance, (ii) the executives’ contribution to meeting the Company’s overall goals, (iii) the executives’ performance of job responsibilities and achievement of individual and/or departmental objectives, and (iv) management and leadership skills, including effective communication, problem solving and business development.
Based on this evaluation, the CEO determines recommendations for each such officer for salary adjustments, including merit increases, and annual incentive bonus amounts, if permissible, and submits such recommendations to the Compensation Committee for its approval. The majority of each NEO’s incentive bonus payment has historically been determined by various performance-related factors, including the Company’s financial performance relative to that year’s pre-tax earnings goal. The Compensation Committee historically reviewed the CEO’s recommendations and could modify a recommended amount in its discretion. Recommendations by the CEO for the grant of stock awards to NEOs under the Company’s equity compensation plan are also submitted to the Compensation Committee for approval at this time to assure that the committee considers the other elements of proposed compensation at the same time.
Role of the Compensation Committee. The Compensation Committee has responsibility for establishing, implementing and continually monitoring adherence with the Company’s compensation philosophy. The Compensation Committee’s decisions are designed to ensure that the total compensation paid to the NEOs is fair, reasonable and competitive (generally, the types of compensation and benefits provided to the NEOs are similar to those of other officers of similar positions at comparable companies). The Compensation Committee is also responsible for (i) reviewing and approving corporate goals and objectives relevant to the compensation of our CEO, (ii) evaluating the CEO’s performance in light of these goals and objectives, and (iii) determining and approving any discretionary elements of the CEO’s compensation, if permissible, based on this evaluation. Additionally, the Compensation Committee has reviewed compensation levels for the NEOs and has approved or modified the CEO’s recommendations concerning annual salary increases, and bonuses, when permissible, for NEOs.
The Compensation Committee also periodically reviews the compensation levels of the Board of Directors. In its review, the Compensation Committee looks to ensure that the compensation is fair and reasonably commensurate to the amount of work required both from the individual directors and from the Board in the aggregate.
To achieve these goals and objectives, the Compensation Committee has sought to maintain an executive compensation program that is set at competitive levels relative to comparable public financial services institutions with comparable performance. The Compensation Committee has determined base compensation and targeted equity-based compensation for all Named Executive Officers.
Effect of the Company’s Participation in the U.S. Treasury Department’s Capital Purchase Program
On December 12, 2008, as part of the Capital Purchase Program, the Company sold 55,000 shares of Preferred Stock to the U.S. Treasury Department (the “Treasury Department”) at an aggregate purchase price of $55 million (the “Treasury Preferred Stock”), along with a warrant to purchase 864,780 shares of Common Stock (subsequently reduced to 432,390 shares due to the Company’s successful capital raises in the fourth quarter of 2009) at an initial exercise price of $9.54 per share. As a result of this transaction, the Company became subject to certain executive compensation requirements under the Capital Purchase Program, the Emergency Economic Stabilization Act of 2008 (“EESA”), and related Treasury Department regulations. Most of these compensation requirements apply to the Company’s “Senior Executive Officers” (“SEOs”), which for a public reporting company is typically identical to the Named Executive Officers disclosed in Securities and Exchange Commission filings. Certain provisions apply to employees based on compensation levels, either instead of or in addition to SEOs.
The requirements may be summarized as follows:
A prohibition on providing incentive compensation arrangements that encourage SEOs to take unnecessary or excessive risks;
The Compensation Committee must review incentive compensation arrangements for all employees with senior risk officers to ensure that employees are not encouraged to take such risks and must meet semi-annually with senior risk officers to discuss and review the relationship between risk management policies and practices and the employees’ incentive compensation arrangements;
Recovery of any bonus or incentive compensation paid to an SEO and the next 20 most highly compensated employees where the payment was later found to have been based on statements of earnings, gains, or other criteria which prove to be materially inaccurate or based on any other materially inaccurate performance metric criteria;
Limits on the amounts that can be paid under change in control and similar agreements which provide payments upon separation of service; and
The Company’s tax deduction for compensation paid to any SEO is limited to $500,000 annually.
Effect of the American Reinvestment and Recovery Act of 2009
The American Recovery and Reinvestment Act of 2009 (the “Stimulus Bill”), enacted in February 2009, amended the executive compensation and corporate governance provisions of the EESA and contains expansive new restrictions on executive compensation for participants in the CPP.
Key features of the Stimulus Bill as applicable to the Company are as follows:
A prohibition of the payment of any “bonus, retention award, or incentive compensation” to our five most highly compensated employees (based on annual compensation earned in the prior year) until the Treasury Preferred Stock has been redeemed. The prohibition does not apply to bonuses payable pursuant to “employment agreements” in effect prior to February 11, 2009;
“Long-term” restricted stock is excluded from this bonus prohibition, but only to the extent the value of the stock does not exceed one-third of the total amount of annual compensation of the employee receiving the stock, the stock does not “fully vest” until after the Treasury Preferred Stock has been redeemed, and any other conditions which the Treasury Department may specify have been met;
Prohibition on any payment to any SEO or any of the next five most highly compensated employees upon termination of employment for any reason until after the Treasury Preferred Stock has been redeemed;
Recovery is required of any bonus or other incentive payment made on the basis of materially inaccurate financial or other performance criteria that is paid to the SEOs or any of the next 20 most highly compensated employees;
Prohibition on compensation plans that “encourage” earnings manipulation;
A requirement that the principal executive officer and principal financial officer provide a written certification of compliance with the executive compensation restrictions of the Stimulus Bill in the Company’s annual filings with the Securities and Exchange Commission;
Implementation of a company-wide policy regarding excessive or luxury expenditures; and
The Treasury Department will review bonuses, retention awards, and other compensation paid to the SEOs and the next 20 most highly compensated employees of each company receiving CPP funds before the Stimulus Bill was enacted, and to “seek to negotiate” with the recipient and affected employees for reimbursement if it finds any such payments were inconsistent with the CPP or otherwise in conflict with the public interest.
Following the publication by the Treasury Department and the Securities and Exchange Commission of the rules implementing these new executive compensation restrictions on June 2, 2009, the Compensation Committee has considered and reviewed the impact of these new limits on the Company’s executive compensation program.
Objectives of Our Compensation Strategy
The Compensation Committee has followed certain fundamental objectives to ensure the effectiveness of the Company’s compensation strategy. These objectives include the following:
Internal and External Fairness. The Compensation Committee recognizes the importance of perceived fairness of compensation practices both internally and externally. The Compensation Committee has evaluated the overall economic impact of the Company’s compensation practices and, when and if the Committee deems necessary, will consult with independent outside consultants in the evaluation of contractual obligations and compensation levels.
Performance-Based Incentives. The Compensation Committee believes that the establishment of financial incentives for the Named Executive Officers who meet certain objectives is critical to providing proper motivation to the NEOs, and thereby assisting the Company in meeting its long-term growth and financial goals. Historically, the Committee established incentives for the NEOs other than the CEO, based on objectives and goals which served as guidelines only, and determined bonuses for those individuals on a discretionary basis, after taking into account both objective and subjective factors. However, due to the Company’s participation in the CPP and the enactment of the Stimulus Bill, the Committee suspended the non-equity incentive arrangements for its NEOs (and any other employees subject to TARP bonus prohibitions) in 2010.
Stockholder Value and Long-Term Incentives. The Compensation Committee believes that the long-term success of the Company and its ability to consistently increase stockholder value is dependent on its ability to attract and retain skilled executives. The Company’s compensation strategy engages equity-based compensation, specifically, restricted stock awards, as limited by the Treasury Department regulations discussed under “Effect of the American Reinvestment and Recovery Act of 2009” above, to align the interests of the Named Executive Officers with those of our stockholders.
Full Disclosure.The Compensation Committee seeks to provide full disclosure to the Board of Directors regarding compensation practices and issues, to ensure that all directors understand the implications of the Committee’s decisions. The Compensation Committee has reviewed the compensation practices of peers and considered the NEOs’ individual efforts and contributions to the Company’s performance, and has also reviewed various subjective measures in determining the adequacy and appropriateness of the NEOs’ compensation. The Compensation Committee takes into account the performance of the NEOs as well as their longevity with the Company, and recognizes that competition among financial institutions for attracting and retaining senior management executives has become more intense in the past few years. The Compensation Committee takes such market considerations into account to ensure that the Company is providing appropriate long-term incentives to enable it to continue to attract new senior management executives and to retain the ones it already employs. The Committee also considers general economic conditions and the Company’s past practices in making its compensation decisions.
Measures of Achieving Performance Objectives
The Compensation Committee has established various processes to assist it in ensuring that the Company’s compensation program is achieving its objectives. Among these are:
Assessment of Company Performance.In establishing total compensation ranges, the Committee considers various measures of Company and industry performance, including asset growth, earnings per share, return on assets, return on equity, total stockholder return and the effective execution of the Company’s growth strategy. The Committee does not apply a specific formula or assign these performance measures designated relative weights. Instead, it makes a subjective determination after considering such measures collectively.
Assessment of Individual Performance.Individual performance has a strong impact on the compensation of all employees, including the CEO and the other NEOs. The CEO’s compensation in 2010 was governed by his employment contract, which is described below. For the other NEOs, the Committee receives a performance assessment and compensation recommendation from the CEO and also exercises its judgment based on the Board’s interactions with the officer. As with the CEO, the performance evaluation of these executives is based on their contributions to the Company’s performance and other leadership accomplishments.
Total Compensation Review.The Committee reviews each Named Executive Officer’s base pay and equity incentives annually. In addition to these primary compensation elements, the Committee reviews the perquisites that the NEOs are entitled to receive. Following the 2010 review, the Committee determined that these elements of compensation were reasonable in the aggregate.
Executive Compensation Components
For the fiscal year ended December 31, 2010, the principal components of compensation for Named Executive Officers were (i) base salary; (ii) equity incentives; and (iii) perquisites and other personal benefits. Of the NEOs who served during 2010, only Jae Whan Yoo, our former President and CEO, had a written employment agreement dated January 16, 2010, that governed the terms of his compensation in 2010. His employment agreement is described below under “Executive Officer and Director Compensation—Employment Agreements.” Our policies and practices for each of the principal compensation components are explained in the following paragraphs.
Base Salaries.Base salaries for our NEOs other than the CEO are dependent on the scope of their responsibilities, taking into account competitive market compensation paid by similar companies for comparable positions. Generally, we believe that executive base salaries should be targeted near the median range for executives in similar positions with similar responsibilities at comparable companies. Our Compensation Committee considers and approves our CEO’s recommendations (after any modifications) concerning base salaries for these other NEOs, including merit increases. As part of this process, the Committee considers relevant market practices by reviewing the data on peer companies of similar size, growth potential and market area. The peer group consists of three publicly traded Korean-American bank holding companies headquartered in our market area (the “Peer Group”).18 Base salary adjustments are effective following the performance evaluation conducted annually for the NEOs other than the CEO. Base salaries, including merit increases, for the NEOs other than the CEO in 2010 were primarily based on our financial and overall performance in 2009, performance of the executive and the executive’s department(s) or division(s), and base salary levels in the Peer Group. Merit increases in base pay are designed to reward our NEOs for their job performance and to manage pay growth consistent with our stated compensation objectives.
The base salary for Mr. Yoo was set forth in his employment agreement (see “Executive Officer and Director Compensation—Employment Agreements”). In determining the base salary of our CEO when negotiating the terms of his employment agreement, the Committee reviewed the levels of such salaries at comparable financial institutions, and ultimately selected a base salary figure which approximated Mr. Yoo’s prior base salary plus his minimum guaranteed bonus under his prior contract.
The salaries for the Named Executive Officers are generally targeted to be near the median range for executives in comparable positions in the Peer Group. In 2010, Mr. Yoo recommended to the Committee, and the Committee accepted his recommendation, to increase the salary and to grant equity incentives to our Executive Vice President and Chief Credit Officer. The Committee also accepted Mr. Yoo’s recommendation to increase the salaries of two other NEOs in January 2010: our General Counsel and our Chief Operations Officer.
18 | The Peer Group consisted of the following three bank holding companies located in Los Angeles: Hanmi Financial Corporation, Nara Bancorp and Wilshire Bancorp. |
Performance-Based Bonuses. The Compensation Committee historically awarded annual incentive bonuses to the Named Executive Officers other than the CEO after reviewing the Company’s and each individual’s performance for the past year. The incentive bonuses were intended to reward these individuals for favorable performance, and while not calculated on the achievement of itemized corporate performance targets in accordance with any numerical formula, were based in part on achievement of corporate performance factors including profitability, efficiency, growth, asset quality and liquidity. The Committee also considered subjective factors such as the safety and soundness of the organization, including credit quality, capital management, personnel management and regulatory compliance. However, due to the Company’s participation in the CPP, performance-based bonuses to the NEOs were suspended and no such bonuses to these individuals were awarded for 2010. Since performance-based bonuses to the NEOs were suspended in 2010, no specific criteria for 2010 were established.
In compliance with the executive compensation provisions of the EESA, Mr. Yoo’s employment agreement dated January 16, 2010, did not provide for any annual incentive bonuses.
Equity Incentives
The Compensation Committee is responsible for granting equity compensation awards under our stock incentive plan to our Named Executive Officers, and grants such awards to further each of our stated compensation program objectives.
Consistent with our general philosophy of granting substantial equity awards upon the initial appointment of our NEOs, our Executive Vice President and General Counsel, our Executive Vice President and Chief Operations Officer, our former Chief Executive Officer and our former Chief Financial officer were each granted substantial stock options in 2007, on or shortly after their appointments. Details of these options are set forth below under “Executive Officer and Director Compensation—Outstanding Equity Awards at Fiscal Year-End.” Due to the Company’s participation in the CPP, current and future grants of stock options to the NEOs were suspended effective February 2009, and restricted stock awards are the only form of equity award being considered. Pursuant to his employment agreement dated January 16, 2010, Mr. Yoo was granted a restricted stock award covering 28,301 shares of common stock. Our current Chief Credit Officer was also granted a restricted stock award covering 14,708 shares of common stock in February 2010. Details of these restricted stock awards are set forth below under “Executive Officer and Director Compensation—Grants of Plan-Based Awards.” Our current Chief Executive Officer was also granted a restricted stock award upon his appointment in January 2011. See “Executive Officer and Director Compensation—Employment Agreements” below.
Perquisites and Other Personal Benefits
Consistent with the Company’s compensation objectives, the Named Executive Officers are provided perquisites and other personal benefits that the Committee believes are reasonable and consistent with our overall compensation program and which keep us competitive in the marketplace. The Committee periodically reviews the level of perquisites and other personal benefits provided to the NEOs for suitability with our program objectives. The NEOs receive medical and life insurance benefits as well as 401(k) Plan matching employer contributions which are available to all employees. In addition, the NEOs receive automobile allowances or the use of automobiles, and gas and cellular telephone allowances or reimbursement; and the CEO and the Chief Credit Officer also receive golf club membership dues. The amounts of such benefits are included and explained in the Summary Compensation Table below (see “Executive Officer and Director—Summary Executive Compensation Information”), with the exception of the medical and life insurance benefit amounts which are excluded in accordance with the Securities and Exchange Commission rules.
Risk Assessment Review
On August 25, 2010 and February 23, 2011, the Compensation Committee conducted its semi-annual compensation risk assessments. The Committee reviewed each employee compensation plan and the eligible employees for each plan. The compensation plans included: base salary, mid-year and year-end bonuses, performance incentive bonuses, stock options, restricted stock awards, SBA loan referral fees, SBA Department incentive payments, gas/auto/cell phone allowances, deposit incentive payments and teller incentive payments. The Committee and senior management reviewed and assigned a risk level to each compensation plan based on the plan’s potential for promoting unnecessary and excessive risk-taking. Most compensation plans had a low level of risk. For those compensation plans with moderate or higher risk levels, the Committee noted that management had implemented revisions to the structure of the compensation plan so as to mitigate the risk. The revisions included deferred payment of the SBA loan referral fees paid over a period of twelve months from the loan date contingent on the loan quality. Similarly, deposit incentive payments are deferred for three months and based on a three-month average balance. This payment may be subject to clawback if any losses or charge-offs result from the deposit account.
Following the assessment, the Compensation Committee certified to various matters set forth above under “Committees of the Board—Compensation Committee—Compensation Committee Report.”
Conclusion
The Compensation Committee intends to continue to link executive compensation to corporate performance and stockholder return. We believe our executive compensation policies and programs serve the best interests of our Company and our stockholders. The various pay vehicles offered are balanced to compensate our executives for current performance and provide motivation for them to contribute to our overall future success, thereby enhancing the Company’s value for the benefit of all our stockholders.
Executive Officer and Director Compensation
Summary Executive Compensation Information
The following table sets forth certain summary compensation information with respect to our “Named Executive Officers” as defined in the Securities and Exchange Commission regulations, for the fiscal year ended December 31, 2010:
Name and Principal Position | Year | Salary19 | Bonus20 | Non-Equity Incentive Plan Compensation20 | Stock and Option Awards21 | All Other Compensation22 | Total | |||||||||||||||||||||
Lisa Kim Pai Executive Vice President General Counsel, Corporate Secretary and Chief Risk Officer |
| 2010 2009 2008 |
| $
| 202,070 200,000 192,500 |
|
$ | — — 5,700 |
|
| — — — |
|
| — — — |
| $
| 7,780 11,583 20,125 |
| $
| 209,850 211,583 218,325 |
| |||||||
Jason K. Kim Senior Vice President and Chief Credit Officer |
| 2010 2009 2008 |
| $
| 159,183 140,608 140,157 |
|
$ | — — 4,215 |
|
| — — — |
| $
| 70,304 — — |
| $
| 17,309 20,924 27,342 |
| $
| 246,796 161,532 171,714 |
| |||||||
Sook Kyong Goo Senior Vice President and Chief Operations Officer |
| 2010 2009 2008 |
| $
| 152,038 150,000 150,000 |
|
$ | — — 4,450 |
|
| — — — |
|
| — ��� — |
| $
| 7,689 10,633 18,712 |
| $
| 159,727 160,633 173,162 |
| |||||||
Douglas Goddard Interim Chief Financial Officer23 | 2010 | $ | 128,122 | 24 | — | — | $ | 4,025 | $ | 132,147 | ||||||||||||||||||
Jae Whan Yoo Former President and Chief Executive Officer |
| 2010 2009 2008 |
| $
| 302,074 257,906 257,906 |
|
| — — — |
|
| — — — |
| $
| 149,995 — — |
| $
| 15,980 44,865 51,503 |
| $
| 468,049 302,771 309,409 |
| |||||||
Lonny D. Robinson Former Executive Vice President and Chief Financial Officer |
| 2010 2009 2008 |
| $
| 102,902 200,000 192,500 | 25
|
$ | — — 5,700 |
|
| — — — |
|
| — — — |
| $
| 3,108 8,333 11,478 |
| $
| 106,010 208,333 209,678 |
|
19 | Includes portions of these individuals’ salaries, if applicable, which were deferred pursuant to the Company’s 401(k) Plan (the “401(k) Plan”). The 401(k) Plan permits all participants to contribute up to 15% of their annual compensation on a pre-tax basis (subject to a statutory maximum, which contributions vest immediately when made). Until May 1, 2009, the Company's policy was to match 75% of the employee's contribution up to 4% of his or her compensation, and 25% of the employee's contribution that exceeds 4% but is less than 8% of his or her compensation, which contributions become vested over a period of six years at the rate of 20% per year beginning at the end of the second year of completed employment. The Company’s matching contributions were suspended as of May 1, 2009 but reinstated effective January 1, 2011. |
20 | Mr. Yoo was entitled to receive a non-equity incentive plan award of $40,000 for 2009 and 2008 based on his employment agreement, but declined to accept this incentive bonus in view of the financial crisis affecting the U.S. economy, the Company’s performance, and the fact that the other Named Executive Officers did not receive performance-based bonuses for those years. However, all of the Named Executive Officers, except for the CEO, received small mid-year and year-end bonuses in 2008 due to their participation in a company-wide bonus program for all employees, which bonuses were awarded at the discretion of the Board of Directors. |
21 | Amounts in “stock and option awards” column represent the applicable full grant date fair values of restricted stock awards in accordance with FASB ASC Topic 718, excluding the effect of forfeitures. No options were granted in any of the years covered in the table. To facilitate year-to-year comparisons, the SEC regulations require companies to present recalculated disclosures for each preceding fiscal year required under the rules so that equity awards and stock options reflect the applicable full grant date fair values, excluding the effect of forfeitures. The total compensation column is recalculated accordingly. See Note 18 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2010 for information regarding assumptions underlying valuation of equity awards. |
22 | Figures in the “All Other Compensation” column include employer contributions to these individuals’ accounts pursuant to the 401(k) Plan, automobile allowances or depreciation expense, gas and cellular telephone allowances or reimbursement, nominal life insurance premiums, and golf club membership dues in the case of Messrs. Yoo and Kim. The depreciation expenses for the automobile supplied to Mr. Yoo were $31,987 and $31,987 in 2009 and 2008 respectively. All other amounts described in this footnote were less than $10,000 per individual per year. |
23 | Mr. Goddard is not an “executive officer” of Center Financial Corporation or Center Bank and is therefore not included in “Identification of Directors and Executive Officers” in Item 10 above. He is included in the compensation tables solely because he served as Interim Chief Financial Officer during a portion of 2010. |
24 | Represents compensation paid from June 9, 2010 (date of employment) through December 31, 2010. |
25 | Represents compensation paid from January 1, 2010 through May 20, 2010 (date of resignation). |
Grants of Plan-Based Awards
The following table furnishes information regarding restricted stock awards (“RSAs”) granted to the Named Executive Officers in 2010, which were the only form of plan-based awards granted to the Named Executive Officers during 2010:
Name | Grant Date | Number of Shares Subject to RSAs | Grant Date Fair Value of RSAs | |||||||||
Lisa Kim Pai | — | — | — | |||||||||
Jason K. Kim | 02/10/10 | 14,708 | $ | 70,304 | ||||||||
Sook Kyong Goo | — | — | — | |||||||||
Douglas Goddard | — | — | — | |||||||||
Jae Whan Yoo | 01/15/10 | 28,301 | 26 | $ | 149,995 | |||||||
Lonny D. Robinson | — | — | — |
Outstanding Equity Awards at Fiscal Year-End27
The following table provides information with respect to outstanding stock options, which were the only form of equity awards held by the Named Executive Officers at December 31, 2010:
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Number of Shares Underlying Unexercised Options—Exercisable | Number of Shares Underlying Unexercised Options—Unexercisable | Option Exercise Price | Option Expiration Date | Number of Shares of RSAs That Have Not Vested | Market Value of RSAs That Have Not Vested | ||||||||||||||||||
Lisa Kim Pai | 30,000 | 20,000 | $ | 22.37 | 02/21/17 | — | — | |||||||||||||||||
Jason K. Kim |
| 4,320 8,640 1,800 4,000 12,000 |
|
| — — — — 8,000 |
| $
| 5.00 5.93 13.42 21.06 17.00 |
|
| 03/15/12 05/15/12 01/20/14 05/23/15 06/07/17 |
| 14,708 | $ | 111,487 | |||||||||
Sook Kyong Goo | 18,000 | 12,000 | $ | 14.82 | 08/13/17 | — | — | |||||||||||||||||
Douglas Goddard | — | — | — | — | — | — | ||||||||||||||||||
Jae Whan Yoo | 100,000 | 28 | — | $ | 22.14 | 02/14/17 | 28,301 | 26 | $ | 214,522 | ||||||||||||||
Lonny D. Robinson | 30,000 | 28 | 20,000 | 28 | $ | 17.06 | 05/09/17 | — | — |
Option Exercises and Stock Vested
No stock options were exercised by the Named Executive Officers during 2010, and the Named Executive Officers did not have any vested stock awards as of December 31, 2010.
26 | Represents compensation paid from January 1, 2010 through May 20, 2010 (date of resignation). |
27 | Options are for terms of ten years and the exercise price per share is the closing price of the stock on the date of grant. Options listed in the table which are not fully vested will become vested at the rate of 20% per year commencing one year from the date of grant. Unvested options accelerate in the event of a change in control of the Company, and options terminate in the event of termination of employment, with the time period for exercise of the vested portion depending on the reason the service ceases. In the case of termination for cause, the options expire immediately. |
28 | These options terminated unexercised on February 5, 2011 and June 19, 2010, respectively. |
Deferred Compensation
In May 2004 the Board of Directors approved the Company’s Executive Deferred Compensation Plan, pursuant to which executive officers may elect to defer a portion of their annual compensation. The Deferred Compensation Plan is unfunded for tax purposes and for purposes of ERISA. The Named Executive Officers were all eligible to participate in the Executive Deferred Compensation Plan in 2010 but only two of them elected to participate. There are no employer contributions to the plan. The amounts to be deferred are selected initially by the participant and can generally be changed within 45 days before the beginning of the next plan year. Interest on the amounts deferred is credited monthly at the rate of 1% over the Wall Street Journal Prime Rate. The balance in the account is paid to the participant over a period of one year in twelve equal installments in the event of retirement, or in a lump sum within 30 days following earlier termination of employment, whether due to resignation, termination without cause, a change in control, or disability.
The following table sets forth information concerning the Executive Deferred Compensation Plan for the Named Executive Officers as of and for the fiscal year ended December 31, 2010:
Nonqualified Deferred Compensation
Name | Executive Contributions in Last Fiscal Year | Company Contributions in Last Fiscal Year | Aggregate Earnings in Last Fiscal Year | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last Fiscal Year-End | |||||||||||||||
Lisa Kim Pai | — | — | — | — | — | |||||||||||||||
Jason K. Kim | $ | 25,796 | — | $ | 1,702 | — | $ | 27,499 | ||||||||||||
Sook Kyong Goo | $ | 36,000 | — | $ | 4,094 | — | $ | 40,094 | ||||||||||||
Douglas Goddard | — | — | — | — | — | |||||||||||||||
Jae Whan Yoo | — | — | — | — | — | |||||||||||||||
Lonny D. Robinson | — | — | — | — | — |
Potential Payments Upon Termination or Change in Control
Assuming that a termination of employment had occurred on December 31, 2010 for reasons other than a change in control, none of the Named Executive Officers would have been entitled to any severance or other benefits. The benefits which would have been triggered in the event of a change in control would have consisted solely of acceleration of unvested stock options and unvested RSAs. No acceleration shall occur, however, if the surviving entity in the change in control transaction assumes the outstanding options and RSAs or substitutes similar awards for the outstanding options and RSAs. If a change in control had occurred on December 31, 2010 and the conditions under the equity plan documents for acceleration of options and RSAs had been satisfied, all of the Named Executive Officers would have been entitled to exercise their unvested options as of that date, but no unvested options had any value on that date. As of December 31, 2010, Messrs. Kim and Yoo held unvested RSAs with market values of $111,487 and $214,522, respectively, which would have become vested in the event of a change in control if such RSAs were not assumed by the surviving entity or if the surviving entity does not substitute similar awards for such RSAs. Mr. Yoo’s unvested RSA has subsequently been forfeited and Mr. Kim’s unvested RSA remains outstanding.
Employment Agreements
On January 6, 2011, Center and Center Bank entered into an at-will employment letter agreement with Richard S. Cupp in connection with his appointment as Chief Executive Officer and President of Center and Center Bank. Pursuant to letter agreement, Mr. Cupp will serve in these capacities until the earlier of December 31, 2011 or the close of the pending merger with Nara. The letter agreement calls for a base salary at an annual rate of $300,000 during the term of the letter agreement and customary employee benefits and perquisites which Center generally makes available to its executive officers. Pursuant to the letter agreement, Mr. Cupp will also receive a cash bonus of $30,000 if he remains employed through the end of the term of the letter agreement and his employment is not terminated by him or by reason of his death or disability. In addition, Center has granted
Mr. Cupp an RSA covering 3,979 shares of Center common stock at $7.54 per share with an aggregate award value of $30,000 effective as of January 6, 2011. The RSA will vest if and only if Mr. Cupp remains employed with Center through the end of the term and his employment is not terminated by him or by reason of his death or disability. The Compensation Committee of Center determined Mr. Cupp’s compensation by assessing, among other items, (i) his banking and financial institution background, including his experience as president and chief executive officer of various community banks, (ii) the scope of responsibilities associated with Mr. Cupp’s positions at Center and Center Bank, (iii) the compensation paid for similar positions at comparable institutions and (iv) the compensation previously paid to the prior President and Chief Executive Officer of Center and Center Bank.
Effective January 16, 2010, the Company and Center Bank entered into a three year employment agreement with Jae Whan Yoo, as President and Chief Executive Officer, to replace his previous employment agreement which was scheduled to expire on January 17, 2010. This employment agreement was terminated on January 6, 2011. The employment agreement specified an annual base salary of $300,000 for the first year of the contract term, with annual increases thereafter based on increases in the applicable Consumer Price Index, not to exceed 7% per year. Mr. Yoo was also entitled to the use of a company-owned automobile, medical and life insurance benefits, reimbursement for business expenses, and payment of country club membership expenses. In addition, pursuant to his employment agreement, on January 15, 2010, Mr. Yoo was granted restricted stock awards described above under “Grants of Plan-Based Awards,” which awards have subsequently been forfeited due to Mr. Yoo’s termination.
Compensation of Directors
The Chairman of the Board receives $5,100 per month, the chairmen of the various Board committees receive $4,500 per month, and the other non-employee directors receive $3,500 per month, for their membership on the Board and attendance at Board and committee meetings. The non-employee directors also receive certain medical and dental benefits in excess of those provided to all employees. Specifically, each such director receives full medical and dental coverage (including dependent coverage) at no cost, compared to employees, who must pay between $50 and $160 per month depending on the type of coverage selected. Three directors and their dependents receive reimbursement of Medicare premiums and supplemental insurance premiums in lieu of medical benefits. These reimbursements are at similar levels as the medical benefits provided to other directors.
In May 2004, each of the non-employee directors became a participant in Center Bank’s Director Survivor Income Plan, which provides for a payment to each director’s chosen beneficiary in the amount of $200,000. Center Bank, in return, has purchased whole life insurance policies insuring the life of each director in amounts which exceed the benefits payable to such beneficiaries. Center Bank is the beneficiary of each of the insurance policies.
No stock options were exercised by, and no restricted stock awards were granted to, the non-employee directors during 2010. As of December 31, 2010, director Kevin S. Kim held a stock option covering 25,000 shares of authorized but unissued common stock at an exercise price of $4.74 per share, with an expiration date
in February 2019, and each of the remaining non-employee directors held a stock option covering 30,000 shares of authorized but unissued common stock, at an exercise price of $17.23 per share, with an expiration date of June 4, 2017. As of December 31, 2010, Kevin Kim’s stock option was vested as to one-third of such shares, and the stock options held by all other non-employee directors were fully vested. Information concerning stock options held as of December 31, 2010 by Jae Whan Yoo, who was also a Named Executive Officer, is set forth above under “Outstanding Equity Awards at Fiscal Year-End.”
The table below summarizes the compensation paid to the non-employee directors for the year ended December 31, 2010. Compensation paid to Jae Whan Yoo, the only director in 2010 who was also a Named Executive Officer, is set forth above in the various sections above concerning compensation paid to the Named Executive Officers.
Director Summary Compensation Table
Name | Fees Earned or Paid in Cash29 | Option Awards | All Other Compensation30 | Total | ||||||||||||
David Z. Hong | $ | 54,900 | — | $ | 16,334 | $ | 71,234 | |||||||||
Jin Chul Jhung | 62,100 | — | 14,724 | 76,824 | ||||||||||||
Chang Hwi Kim | 54,900 | — | 14,724 | 69,624 | ||||||||||||
Kevin S. Kim | 54,900 | — | 21,552 | 76,452 | ||||||||||||
Peter Y. S. Kim | 54,900 | — | 21,552 | 76,452 | ||||||||||||
Sang Hoon Kim | 54,900 | — | 14,150 | 69,050 | ||||||||||||
Chung Hyun Lee | 54,900 | — | 8,740 | 63,640 |
29 | Includes a year-end bonus of $900. |
30 | Consists entirely of premiums for medical and dental insurance or equivalent reimbursements (see narrative description preceding table). |
In February 2011, the Board approved the payment of additional special director compensation to two of its board members as consideration for the additional duties being performed by such directors in connection with the proposed merger with Nara. This compensation arrangement is further described above under “The Merger—Interests of Directors and Executive Officers in the Merger—Interests of Center Directors and Executive Officers—Special Director Compensation.”
Security Ownership of Certain Beneficial Owners and Management
Based upon information made available to Center, management knows of no person who owned beneficially more than 5% of the outstanding common stock of the Company as of March 31,June 30, 2011, except for Wellington Management Company, LLP (“Wellington Management”) and, Fidelity Management & Research Company (“Fidelity”) and Wells Fargo & Company (“Wells”). Information concerning the stock ownership of the Company’s executive officers and directors is set forth above under “—Center Proposal 2: Election of Directors.” The following table furnishes information concerning Wellington Management, Fidelity and Fidelity:Wells:
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
Wellington Management Company, LLP 280 Congress Street Boston, Massachusetts 02110 | 3,587,998 | 31 | 8.99 | % | ||||
Fidelity Management & Research Company 82 Devonshire Street Boston, Massachusetts 02109 | 32 | % | ||||||
Wells Fargo & Company 420 Montgomery Street San Francisco, California 94104 | 2,284,300 | 33 | 5.72 | % |
31 | Based solely on a Schedule 13G as of December 31, 2010, filed with the SEC on February 14, 2011 by Wellington Management, a registered investment adviser under the Investment Advisers Act of 1940. Wellington Management, in its capacity as an investment adviser, may be deemed to have beneficial ownership of 3,587,998 shares of common stock that are owned by its investment advisory clients, none of which is known to have such interest with respect to more than 5% of the class of shares. Wellington Management has shared voting authority over 3,487,965 shares and shared dispositive power over 3,587,998 shares. |
32 | Based solely on a Schedule 13G as of December 31, 2010, filed with the SEC on February 14, 2011 by FMR LLC, a registered investment adviser under the Investment Advisers Act of 1940. Fidelity, a wholly owned subsidiary of FMR LLC and an investment adviser registered under the Investment Advisers Act of 1940, is the beneficial owner of 3,583,781 shares of common stock as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940. |
The ownership of one investment company, Fidelity Low-Priced Stock Fund, amounted to 2,185,331 shares or 5.477% of the Common Stock outstanding. Fidelity Low Priced Stock Fund has its principal business office at 82 Devonshire Street, Boston, Massachusetts 02109. |
Edward C. Johnson 3d and FMR LLC, through its control of Fidelity, and the funds each has sole power to dispose of the 3,583,781 shares owned by the Funds. |
Members of the family of Edward C. Johnson 3d, Chairman of FMR LLC, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. |
Neither FMR LLC nor Edward C. Johnson 3d, Chairman of FMR LLC, has the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resides with the Funds’ Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the Funds’ Boards of Trustees. |
Pyramis Global Advisors, LLC (“PGALLC”), 900 Salem Street, Smithfield, Rhode Island 02917, an indirect wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 180,000 shares or 0.451% of the outstanding Common Stock of Center Financial Corporation as a result of its serving as investment adviser to institutional accounts, non-U.S. mutual funds, or investment companies registered under Section 8 of the Investment Company Act of 1940 owning such shares. |
Edward C. Johnson 3d and FMR LLC, through its control of PGALLC, each has sole dispositive power over 180,000 shares and sole power to vote or to direct the voting of 180,000 shares of Common Stock owned by the institutional accounts or funds advised by PGALLC as reported above. |
33 | Based solely on a Schedule 13G as of December 31, 2010, filed with the SEC on January 25, 2011 by Wells Fargo & Company. Wells Capital Management Incorporated, a subsidiary of Wells Fargo & Company, may be deemed to have beneficial ownership of 2,263,004 shares in its capacity as an investment adviser. Wells Capital Management Incorporated has the sole voting authority over 343,314 shares and sole dispositive power over 2,263,004 shares. |
Certain of our executive officers and directors and the companies with which they are associated have been customers of, and have had banking transactions with Center Bank in the ordinary course of Center Bank’s business since January 1, 2010, and Center Bank expects to continue to have such banking transactions in the future. All loans and commitments to lend included in such transactions were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons not related to Center Bank, and in the opinion of the Board of Directors, did not involve more than the normal risk of repayment or present any other unfavorable features.
Center Proposal 3: Ratification of Appointment of Accountants
General
The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2011. In April 2010, KPMG replaced Grant Thornton LLP (“Grant Thornton”), which audited the Company’s financial statements for the year ended December 31, 2009. (See “—Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” below.) Representatives of KPMG are expected to be present at the Meeting. They will have the opportunity to make a statement should they desire to do so and will be available to respond to appropriate questions.
Although not required to do so, the Board of Directors has chosen to submit this proposal to the vote of the stockholders in order to ratify the Audit Committee’s appointment of KPMG. It is the intention of the persons named in the Proxy to vote such Proxy “FOR” the ratification of this appointment. If the Company’s stockholders do not ratify the selection, the Audit Committee will reconsider whether to retain KPMG, but may still retain them. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
Fees
The aggregate fees billed by KPMG LLP, the Company’s independent registered public accounting firm, for the fiscal year ended December 31, 2010, and by Grant Thornton LLP, the Company’s independent registered public accounting firm, for the fiscal year ended December 31, 2009 were as follows:
2010 | 2009 | |||||||
Audit fees | $ | 707,363 | $ | 628,124 | ||||
Audit related fees | — | — | ||||||
Tax fees | — | — | ||||||
All other fees | — | — | ||||||
Total | $ | 707,363 | $ | 628,124 | ||||
None of the fees paid to KPMG LLP for 2010 or to Grant Thornton LLP for 2009 were paid under the de minimis safe harbor exception from Audit Committee pre-approval requirements.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
At a meeting on April 14, 2010, Center Financial Corporation, as a result of a competitive request for proposal process undertaken by the Audit Committee of the Board of Directors, decided that it would not retain Grant Thornton as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2010. At the same meeting, the Audit Committee selected the accounting firm of KPMG as the
independent auditor for the Company’s 2010 fiscal year. The change in accountants did not result from any
dissatisfaction with the quality of professional services rendered by Grant Thornton. Grant Thornton continued as the Company’s independent registered accounting firm until the filing of our Form 10-Q with the Securities and Exchange Commission for the quarter ended March 31, 2010.
In the two fiscal years ended December 31, 2009 and 2008, and from January 1, 2010 through the end of Grant Thornton’s engagement, there have been no disagreements between the Company and Grant Thornton on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Grant Thornton’s satisfaction, would have caused Grant Thornton to make reference to the subject matter of the disagreement in connection with its opinion on the Company’s consolidated financial statements for such year, and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K except as set forth below:
In the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which the Company filed with the Securities and Exchange Commission on March 30, 2009, Management’s Report on the Internal Control over Financial Reporting stated, as of December 31, 2008, that the Company did not maintain effective internal control over financial reporting, due to an internal control deficiency that constituted a “material weakness,” based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The weakness concerned controls over the preparation and review of the Company’s allowance for loan losses. Specifically, the Company did not maintain effective internal controls over the review process on historical risk factors to reflect directional consistency in current loan loss provision. This control deficiency resulted in an increase in the Company’s allowance for loan losses and loan loss provision as of and for the year ended December 31, 2008. Accordingly, management determined that this control deficiency constituted a material weakness in internal control over financial reporting as of December 31, 2008. The material weakness was remediated prior to December 31, 2009. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed on March 12, 2010, as amended April 8, 2010, stated that, as of December 31, 2009, management believed that the Company maintained effective control over financial reporting. Grant Thornton’s report as of that same date included with the Form 10-K also contained its opinion that the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009.
The Company has given permission to Grant Thornton to respond fully to the inquiries of the successor auditor.
The Company requested that Grant Thornton review the disclosure in the Report on Form 8-K filed with respect to the change in accountants (which disclosure was substantially identical to the disclosure contained herein), and Grant Thornton was given the opportunity to furnish the Company with a copy of its letter addressed to the Securities and Exchange Commission containing any new information, clarification of the Company’s expression of its views, or the respects in which it does not agree with the statements made by the Company herein. Such letter was filed as an exhibit to the Form 8-K.
The Company engaged KPMG as the Company’s independent registered public accounting firm as of April 1, 2010. Prior to such date, the Company did not consult with KPMG regarding (i) the application of accounting principles to a specified transaction, (ii) the type of audit opinion that might be rendered by KPMG, or (iii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as defined in Item 304(a)(1)(v) of Regulation S-K.
Board of Directors’ Recommendation and Required Vote
The proposal will be approved if the votes cast favoring the ratification of the appointment exceed the votes cast opposing it.it and constitute at least a majority of the required quorum.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL 3.
Center Proposal 4: Advisory Vote on Executive Compensation
The American Recovery and Reinvestment Act of 2009, enacted in February 2009, requires the Company, among other things, to submit to its stockholders a non-binding vote on the compensation of the Company’s Named Executive Officers as disclosed in accordance with the Securities and Exchange Commission regulations, until our preferred stock issued to the Treasury Department pursuant to the Capital Purchase Program has been redeemed (see “Compensation Discussion and Analysis” above for further information about this program). Such a non-binding vote is now also required for public reporting companies such as ours by new Securities and Exchange Commission regulations regardless of participation in the TARP CPP.
This proposal, commonly known as a “say-on-pay” proposal, gives the Company’s stockholders the opportunity to endorse or not endorse the Company’s executive pay program and policies through the following resolution:
“Resolved, that the stockholders approve the compensation of the Company’s Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, the executive compensation tables, and any related disclosures contained in the proxy statement for the Company’s 2011 Annual Meeting of Stockholders.”
This vote shall not be binding on the Board of Directors or the Compensation Committee and will not be construed as overruling a decision by, nor create or imply any additional fiduciary duty by, the Board or the Compensation Committee. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
Board of Directors’ Recommendation and Required Vote
The Board of Directors and the Compensation Committee believe that the Company’s compensation practices and procedures are (i) designed to accomplish the objectives stated in the Company’s compensation philosophy; (ii) competitive, reasonable and effective; and (iii) appropriately aligned with the long-term success of the Company and the interests of stockholders.
This proposal will be approved if the votes cast in favor exceed the votes cast against it.it and constitute at least a majority of the required quorum.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL 4.
Center Proposal 5: Adjournment of the Annual Meeting
If there are not sufficient votes to constitute a quorum or to adopt and approve the merger agreement at the time of our annual meeting, the merger agreement cannot be adopted and approved unless our annual meeting is adjourned to a later date or dates to permit further solicitation of proxies. To allow proxies that we have received at the time of our annual meeting to be voted for an adjournment, if deemed necessary, we have submitted the question of adjournment to our stockholders as a separate matter for their consideration. If it is deemed necessary to adjourn the annual meeting, no notice of the adjourned meeting is required to be given to our stockholders (unless the adjournment is for 45 days or more or if a new record date is fixed), other than an announcement at the meeting of the place, date and time to which the meeting is adjourned.
This proposal will be approved if the votes cast in favor exceed the votes cast against it.it and constitute at least a majority of the required quorum. In the absence of a quorum, the Center annual meeting may be adjourned to a later time by the vote of a majority of the shares of Center common stock represented at the annual meeting and entitled to vote.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL 5.
The validity of the Nara common stock to be issued in connection with the merger will be passed upon for Nara by Mayer Brown LLP, Los Angeles, California, counsel to Nara.
Mayer Brown LLP and Morrison & Foerster LLP, Los Angeles, California, counsel to Center, will provide opinions regarding certain federal income tax consequences of the merger for Nara and Center, respectively, at the closing of the merger.
The audited financial statements of Nara Bancorp, Inc. incorporated into this document by reference to Nara’s Annual Report on Form 10-K for the year ended December 31, 2010 have been so incorporated in reliance on the report of Crowe Horwath LLP, independent registered public accountants, given on the authority of that firm as experts in accounting and auditing.
The consolidated statement of financial condition of Center Financial Corporation and subsidiaries as of December 31, 2010 and the related consolidated statements of operations, shareholders’ equity and comprehensive income (loss), and cash flows for the year then ended, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2010 have been incorporated by reference herein, in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Center Financial Corporation, included in the Annual Report on Form 10-K for the year ended December 31, 2010, have been incorporated by reference herein, in reliance upon the report of Grant Thornton LLP, independent registered public accounting firm, and upon the authority of said firm as experts in accounting and auditing.
Nara
To be eligible under the Securities and Exchange Commission’s stockholder proposal rule (Rule 14a-8) for inclusion in Nara’s proxy statement, proxy card and presentation at Nara’s 2012 annual meeting of stockholders, a proper stockholder proposal must be received by Nara at its principal offices at 3731 Wilshire Boulevard, Suite 1000, Los Angeles, California 90010 no later than [—] [—], 2012, which is 120 calendar days before the anniversary of the date on which Nara first mailed its proxy statement for 2011.2011, unless the 2012 annual meeting is held earlier than July 19, 2012. In that case, Nara will disclose the new deadline by which such stockholder proposals must be received under Item 5 of Part II of Nara’s earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any means reasonably determined to inform stockholders.
In addition, Nara’s bylaws establish an advance notice procedure with regard to director nominations and other business proposals by stockholders intended to be presented at Nara’s 2012 annual meeting but not included in Nara’s 2012 annual meeting proxy materials. For director nominations or other business proposals to be properly brought before the 2012 annual meeting by a stockholder, assuming the 2012 annual meeting occurs on a date that is not later than [—] [—], 2012 nor earlier than [—] [—], 2012, the stockholder must deliver written notice to Nara no later than the close of business on [—] [—], 2012 nor earlier than the close of business on [—] [—], 2012. If Nara schedules a 2012 annual meeting to be held after [—] [—], 2012 or before [—] [—], 2012, the stockholder must deliver written notice to Nara no later than the close of business on the 10th day following the day on which public announcement is first made of the date of the annual meeting. Such nominations and other business proposals must comply with all requirements set forth in Nara’s bylaws.
Center
If the merger is consummated, there will be no Center annual meeting of stockholders next year. In that case, stockholder proposals must be submitted to Nara in accordance with the procedures described above. In case the merger is not consummated, set forth below is information relevant to a regularly scheduled 2012 annual meeting of stockholders of Center.
To be eligible under the Securities and Exchange Commission’s stockholder proposal rule (Rule 14a-8) and under Center’s amended and restated bylaws for inclusion in Center’s proxy statement, proxy card and presentation at Center’s 2012 annual meeting of stockholders, a proper stockholder proposal must be received by Center at its principal offices at 3435 Wilshire Boulevard, Suite 700, Los Angeles, California 90010 no later than [—] [—], 2012, which is 120 calendar days before the anniversary of the date on which Center first mailed its proxy statement for 2011. The notice must be in the manner and form required by Center’s amended and restated bylaws and Rule 14a-8 under the Exchange Act.
DOCUMENTS INCORPORATED BY REFERENCE
Nara has filed a registration statement under the Securities Act of 1933 with the Securities and Exchange Commission on Form S-4 with respect to Nara’s common stock to be issued in connection with the merger. This document constitutes the prospectus of Nara that was filed as part of the registration statement. Some of the information in the registration statement has not been included in this document as permitted by the rules and regulations of the Securities and Exchange Commission. The registration statement and its exhibits are available for inspection and copying as described above.
In addition, Nara and Center file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any document we file at the Securities and Exchange Commission’s public reference rooms in Washington, D.C. You may telephone the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms. Our Securities and Exchange Commission filings are also available to the public at the Securities and Exchange Commission’s website athttp://www.sec.gov.
The Securities and Exchange Commission allows us to “incorporate by reference” into this document documents filed with the Securities and Exchange Commission by Nara and Center. This means that we can disclose information to you by referring you to those documents. The information incorporated by reference, which you may regard as important, is considered to be a part of this document, and later information that we file with the Securities and Exchange Commission will update and supersede that information.
Nara and Center, respectively, incorporate by reference the documents relating to ourselves listed below and any documents filed by Nara or Center under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act 1934 after the original date of filing of the registration statement in which this document is included and before the date of our annual stockholder meetings:
Nara Filings (SEC File Number 000-50245) | Period or Date Filed | |
Annual Report on Form 10-K | Year ended December 31, 2010 | |
Quarterly Report on Form 10-Q | Quarter ended March 31, 2011 | |
Current Reports on Form 8-K (other than the portions of those documents not deemed to be filed) | April 15, 2011, April 26, 2011, | |
The description of Nara’s common stock contained in Registration Statement on Form 8A | April 23, 2003 | |
Center Filings (SEC File Number 000-50050) | Period or Date Filed | |
Annual Report on Form 10-K | Year ended December 31, 2010 | |
Quarterly Report on Form 10-Q | Quarter ended March 31, 2011 | |
Current Reports on Form 8-K (other than the portions of those documents not deemed to be filed) | January 7, 2011, February 23, 2011, April 15, 2011, |
You may request a copy of the documents incorporated by reference into this document. See “Where You Can Find More Information” on page [—].
AGREEMENT AND PLAN OF MERGER
dated as of December 9, 2010
between
NARA BANCORP, INC.
and
CENTER FINANCIAL CORPORATION
Page | ||||||||||
ARTICLE I | THE MERGER | 1 | ||||||||
1.1 | Effective Time of the Merger | 1 | ||||||||
1.2 | Closing | 1 | ||||||||
1.3 | Effects of the Merger | 2 | ||||||||
1.4 | Certificate of Incorporation and By-Laws | 2 | ||||||||
1.5 | Bank Merger | 2 | ||||||||
ARTICLE II | EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES | 2 | ||||||||
2.1 | Effect on Capital Stock | 2 | ||||||||
(a) | Cancellation of Stock Owned by the Parties | 2 | ||||||||
(b) | Conversion of Center Financial Common Stock | 2 | ||||||||
(c) | Conversion of Center Financial Series A Preferred Stock | 3 | ||||||||
(d) | Stock Options and Other Equity-Based Awards | 3 | ||||||||
(e) | Warrant | 4 | ||||||||
(f) | Dissenters’ Rights | 5 | ||||||||
(g) | Nara Capital Stock | 5 | ||||||||
2.2 | Exchange of Certificates | 5 | ||||||||
(a) | Exchange Agent | 5 | ||||||||
(b) | Exchange Procedures | 5 | ||||||||
(c) | Distributions with Respect to Unexchanged Shares | 6 | ||||||||
(d) | No Further Ownership Rights | 6 | ||||||||
(e) | No Fractional Shares | 6 | ||||||||
(f) | Termination of Exchange Fund | 7 | ||||||||
(g) | No Liability | 7 | ||||||||
(h) | Withholding | 7 | ||||||||
(i) | Center Financial Series A Preferred Stock | 7 | ||||||||
2.3 | Reservation of Right to Revise Structure | 7 | ||||||||
ARTICLE III | REPRESENTATIONS AND WARRANTIES | 8 | ||||||||
3.1 | Representations and Warranties of Center Financial | 8 | ||||||||
(a) | Organization, Standing and Power | 8 | ||||||||
(b) | Capital Structure | 8 | ||||||||
(c) | Authority | 9 | ||||||||
(d) | SEC Documents; Regulatory Reports; Undisclosed Liabilities | 10 | ||||||||
(e) | Information Supplied | 12 | ||||||||
(f) | Compliance with Applicable Legal and Reporting Requirements | 12 | ||||||||
(g) | Accounting and Internal Controls | 12 | ||||||||
(h) | Legal Proceedings | 13 | ||||||||
(i) | Taxes | 13 | ||||||||
(j) | Certain Agreements | 14 | ||||||||
(k) | Benefit Plans | 15 | ||||||||
(l) | Bank Subsidiary | 16 | ||||||||
(m) | Agreements with Regulators | 16 |
-i-
Page | ||||||||||
(n) | Absence of Certain Changes or Events | 17 | ||||||||
(o) | Board Approval | 17 | ||||||||
(p) | Vote Required | 17 | ||||||||
(q) | Properties | 17 | ||||||||
(r) | Intellectual Property | 17 | ||||||||
(s) | Derivatives | 18 | ||||||||
(t) | Loan Portfolio | 18 | ||||||||
(u) | Insurance | 19 | ||||||||
(v) | Transactions with Affiliates | 19 | ||||||||
(w) | Brokers or Finders | 20 | ||||||||
(x) | Opinion of Financial Advisor of Center Financial | 20 | ||||||||
(y) | No Other Representations or Warranties | 20 | ||||||||
3.2 | Representations and Warranties of Nara | 20 | ||||||||
(a) | Organization, Standing and Power | 20 | ||||||||
(b) | Capital Structure | 20 | ||||||||
(c) | Authority | 22 | ||||||||
(d) | SEC Documents; Regulatory Reports; Undisclosed Liabilities | 22 | ||||||||
(e) | Information Supplied | 24 | ||||||||
(f) | Compliance with Applicable Legal and Reporting Requirements | 24 | ||||||||
(g) | Accounting and Internal Controls | 24 | ||||||||
(h) | Legal Proceedings | 25 | ||||||||
(i) | Taxes | 25 | ||||||||
(j) | Certain Agreements | 26 | ||||||||
(k) | Benefit Plans | 27 | ||||||||
(l) | Bank Subsidiary | 28 | ||||||||
(m) | Agreements with Regulators | 28 | ||||||||
(n) | Absence of Certain Changes or Events | 28 | ||||||||
(o) | Board Approval | 28 | ||||||||
(p) | Vote Required | 28 | ||||||||
(q) | Properties | 29 | ||||||||
(r) | Intellectual Property | 29 | ||||||||
(s) | Derivatives | 29 | ||||||||
(t) | Loan Portfolio | 29 | ||||||||
(u) | Insurance | 30 | ||||||||
(v) | Transactions with Affiliates | 30 | ||||||||
(w) | Brokers or Finders | 30 | ||||||||
(x) | Opinion of Nara Financial Advisor | 31 | ||||||||
(y) | No Other Representations or Warranties | 31 | ||||||||
ARTICLE IV | COVENANTS RELATING TO CONDUCT OF BUSINESS | 31 | ||||||||
4.1 | Covenants of Center Financial | 31 | ||||||||
(a) | Ordinary Course | 31 | ||||||||
(b) | Dividends; Changes in Stock | 31 | ||||||||
(c) | Issuance of Securities | 32 | ||||||||
(d) | Governing Documents | 32 | ||||||||
(e) | No Acquisitions | 32 | ||||||||
(f) | No Dispositions | 32 | ||||||||
(g) | Indebtedness | 32 | ||||||||
(h) | Other Actions | 33 |
-ii-
Page | ||||||||||
(i) | Accounting Methods | 33 | ||||||||
(j) | Tax Matters | 33 | ||||||||
(k) | Compensation and Benefit Plans | 33 | ||||||||
(l) | Investment Portfolio; Interest Rate Risk; Other Risk | 33 | ||||||||
(m) | No Liquidation | 33 | ||||||||
(n) | Other Agreements | 33 | ||||||||
4.2 | Covenants of Nara | 33 | ||||||||
(a) | Ordinary Course | 34 | ||||||||
(b) | Dividends; Changes in Stock | 34 | ||||||||
(c) | Issuance of Securities | 34 | ||||||||
(d) | Governing Documents | 34 | ||||||||
(e) | No Acquisitions | 34 | ||||||||
(f) | No Dispositions | 35 | ||||||||
(g) | Indebtedness | 35 | ||||||||
(h) | Other Actions | 35 | ||||||||
(i) | Accounting Methods | 35 | ||||||||
(j) | Tax Matters | 35 | ||||||||
(k) | Compensation and Benefit Plans | 35 | ||||||||
(l) | Investment Portfolio; Interest Rate Risk; Other Risk | 36 | ||||||||
(m) | No Liquidation | 36 | ||||||||
(n) | Other Agreements | 36 | ||||||||
4.3 | Transition | 36 | ||||||||
4.4 | Advice of Changes; Government Filings | 36 | ||||||||
4.5 | Insurance | 37 | ||||||||
4.6 | No Control of Other Party’s Business | 37 | ||||||||
ARTICLE V | ADDITIONAL AGREEMENTS | 37 | ||||||||
5.1 | Preparation of Proxy Statement; Stockholders Meetings | 37 | ||||||||
5.2 | Access to Information | 40 | ||||||||
5.3 | Reasonable Best Efforts | 40 | ||||||||
5.4 | Acquisition Proposals | 42 | ||||||||
5.5 | Stock Exchange Listing | 43 | ||||||||
5.6 | Employee Benefit Plans and Employee Matters | 43 | ||||||||
5.7 | Center Financial Stock Option and Center Financial Restricted Shares | 44 | ||||||||
5.8 | Fees and Expenses | 44 | ||||||||
5.9 | Governance; Name Change | 45 | ||||||||
5.10 | Indemnification; Directors’ and Officers’ Insurance | 45 | ||||||||
5.11 | Public Announcements | 46 | ||||||||
5.12 | Tax Matters | 46 | ||||||||
5.13 | Additional Agreements | 46 | ||||||||
ARTICLE VI | CONDITIONS PRECEDENT | 46 |
-iii-
Page | ||||||||||
6.1 | Conditions to Each Party’s Obligation To Effect the Merger | 46 | ||||||||
(a) | Stockholder Approval | 46 | ||||||||
(b) | Stock Exchange Listing | 47 | ||||||||
(c) | Other Approvals | 47 | ||||||||
(d) | Form S-4 | 47 | ||||||||
(e) | No Injunctions or Restraints; Illegality | 47 | ||||||||
(f) | Absence of Burdensome Conditions | 47 | ||||||||
(g) | By-Law Amendment | 47 | ||||||||
6.2 | Conditions to Obligation of Nara | 47 | ||||||||
(a) | Representations and Warranties | 47 | ||||||||
(b) | Performance of Obligations | 47 | ||||||||
(c) | Tax Opinion | 48 | ||||||||
(d) | Material Adverse Effect | 48 | ||||||||
(e) | Appraisal Rights | 48 | ||||||||
6.3 | Conditions to Obligation of Center Financial | 48 | ||||||||
(a) | Representations and Warranties | 48 | ||||||||
(b) | Performance of Obligations | 48 | ||||||||
(c) | Tax Opinion | 48 | ||||||||
(d) | Material Adverse Effect | 48 | ||||||||
ARTICLE VII | TERMINATION AND AMENDMENT | 48 | ||||||||
7.1 | Termination | 48 | ||||||||
7.2 | Effect of Termination | 50 | ||||||||
7.3 | Amendment | 51 | ||||||||
7.4 | Extension; Waiver | 51 | ||||||||
ARTICLE VIII | GENERAL PROVISIONS | 52 | ||||||||
8.1 | Definitions | 52 | ||||||||
8.2 | Non-survival of Representations, Warranties and Agreements | 55 | ||||||||
8.3 | Notices | 55 | ||||||||
8.4 | Interpretation | 56 | ||||||||
8.5 | Counterparts | 56 | ||||||||
8.6 | Entire Agreement; No Third Party Beneficiaries | 56 | ||||||||
8.7 | Governing Law | 57 | ||||||||
8.8 | Severability | 57 | ||||||||
8.9 | Assignment | 57 | ||||||||
8.10 | Submission to Jurisdiction | 57 | ||||||||
8.11 | Enforcement | 57 | ||||||||
8.12 | Waiver of Jury Trial | 57 |
-iv-
EXHIBITS
Exhibit 1.4 | Amendment to By-laws | |
Exhibit 1.5 | Form of Bank Merger Agreement |
INDEX OF DEFINED TERMS
Acquisition Proposal | Section 5.4(a) | |
Agreement | Preamble | |
Applicable Legal Requirements | Section 8.1 | |
Assumed Options | Section 2.1(d) | |
Assumed Plan | Section 2.1(d) | |
Assumed Restricted Shares | Section 2.1(d) | |
Bank Merger | Recitals | |
Bank Merger Act | Section 3.1(c) | |
Bank Merger Agreement | Section 1.5 | |
Benefit Plans | Section 3.1(k) | |
BHC Act | Section 3.1(a) | |
Board Recommendations | Section 5.1(c) | |
Center Financial | Preamble | |
Center Bank | Recitals | |
Center Financial Benefit Plans | Section 3.1(k) | |
Center Financial Board | Section 3.1(g) | |
Center Financial Board Approval | Section 3.1(o) | |
Center Financial Board Recommendation | Section 5.1(b) | |
Center Financial Certificates | Section 8.1 | |
Center Financial Common Stock | Section 3.1(b) | |
Center Financial Contracts | Section 3.1(j) | |
Center Financial Disclosure Schedule | Section 3.1 | |
Center Financial Insider | Section 8.1 | |
Center Financial Intellectual Property | Section 3.1(r) | |
Center Financial Permits | Section 3.1(f) | |
Center Financial Preferred Stock | Section 3.1(b) | |
Center Financial Restricted Share | Section 8.1 | |
Center Financial SEC Documents | Section 3.1(d) | |
Center Financial Series A Preferred Stock | Section 3.1(b) | |
Center Financial Stock | Section 8.1 | |
Center Financial Stock Option | Section 8.1 | |
Center Financial Stock Plan | Section 3.1(b) | |
Center Financial Stockholders Meetings | Section 5.1(b) | |
Center Financial TARP Warrant | Section 2.1(e) | |
Center Financial Termination Fee | Section 7.2(c) | |
Center Financial’s Current Premium | Section 5.10(b) | |
Certificate of Merger | Section 1.1 | |
CGCL | Section 1.1 | |
Change in Recommendation | Section 5.1(e) | |
Closing | Section 1.2 | |
Closing Date | Section 1.2 | |
Code | Recitals | |
Confidentiality Agreement | Section 5.2(b) | |
Constituent Corporations | Section 8.1 |
-v-
Covered Loans | Section 8.1 | |
Covered OREOs | Section 8.1 | |
Derivative Contract | Section 3.1(s) | |
DFI | Section 3.1(c) | |
DGCL | Section 1.1 | |
DPC shares | Section 3.1(b) | |
EDGAR | Section 3.1(d) | |
Effective Time | Section 1.1 | |
ERISA | Section 3.1(k) | |
ERISA Affiliate | Section 8.1 | |
Exchange Act | Section 3.1(c) | |
Exchange Agent | Section 2.2(a) | |
Exchange Fund | Section 8.1 | |
Exchange Ratio | Section 2.1(b) | |
FDIA | Section 3.1(l) | |
FDIC | Section 8.1 | |
Federal Reserve | Section 3.1(c) | |
Form S-4 | Section 5.1(a) | |
Governmental Entity | Section 8.1 | |
Indemnified Liabilities | Section 5.10(a) | |
Indemnified Parties | Section 5.10(a) | |
Injunction | Section 6.1(e) | |
Intervening Event | Section 5.1(f) | |
IRS | Section 8.1 | |
Joint Proxy Statement/Prospectus | Section 5.1(a) | |
Loans | Section 8.1 | |
Loss-Sharing Approvals | Section 3.1(c) | |
material | Section 8.1 | |
Material Adverse Effect | Section 8.1 | |
Merger | Recitals | |
Nara | Preamble | |
Nara Bank | Recitals | |
Nara Benefit Plans | Section 3.2(k) | |
Nara Board | Section 2.1(c) | |
Nara Board Approval | Section 3.2(o) | |
Nara Board Recommendation | Section 5.1(c) | |
Nara Certificates | Section 2.2(a) | |
Nara Common Stock | Section 3.2(b) | |
Nara Contracts | Section 3.2(j) | |
Nara Disclosure Schedule | Section 3.2 | |
Nara Intellectual Property | Section 3.2(r) | |
Nara Performance Units | Section 2.1(b) | |
Nara Permits | Section 3.2(f) | |
Nara Preferred Stock | Section 3.2(b) | |
Nara SEC Documents | Section 3.2(d) | |
Nara Series A Preferred Stock | Section 3.2(b) | |
Nara Series B Preferred Stock | Section 2.1(c) | |
Nara Stock | Section 8.1 | |
Nara Stock Option | Section 8.1 | |
Nara Stock Plan | Section 3.2(b) | |
Nara Stockholders Meeting | Section 5.1(c) | |
Nara TARP Warrant | Section 3.2(b) |
-vi-
Nara Termination Fee | Section 7.2(b) | |
NASDAQ | Section 8.1 | |
OREO | Section 3.1(t) | |
Party | Preamble | |
Person | Section 8.1 | |
Permitted Liens | Section 8.1 | |
Public Proposal | Section 7.2(b) | |
Required Center Financial Vote | Section 3.1(p) | |
Required Nara Vote | Section 3.2(p) | |
Requisite Regulatory Approvals | Section 3.1(c) | |
SBA | Section 3.1(c) | |
SBIA | Section 3.1(c) | |
SEC | Section 8.1 | |
Section 16 Information | Section 8.1 | |
Securities Act | Section 3.1(b) | |
Significant Subsidiary | Section 8.1 | |
SOX Act | Section 3.1(d) | |
Subsidiary | Section 8.1 | |
Superior Proposal | Section 8.1 | |
Surviving Corporation | Section 8.1 | |
Target Party | Section 5.1(f) | |
tax or taxes | Section 8.1 | |
tax return | Section 8.1 | |
Trust Document | Section 8.1 | |
Violation | Section 3.1(c) | |
Voting Debt | Section 8.1 |
-vii-
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 9, 2010 (this “Agreement”), is entered into between NARA BANCORP, INC., a Delaware corporation (“Nara”), and CENTER FINANCIAL CORPORATION, a California corporation (“Center Financial”). Nara and Center Financial are sometimes referred to herein collectively as the “Parties” and individually as a “Party.”
WHEREAS, the boards of directors of Nara and Center Financial have approved, and declared it to be advisable and in the best interests of their respective stockholders to consummate, the business combination transaction provided for herein in which Center Financial would merge with and into Nara (the “Merger”);
WHEREAS, the boards of directors of Nara and Center Financial have each determined that the Merger and the other transactions contemplated hereby are consistent with, and in furtherance of, their respective business strategies and goals;
WHEREAS, Nara and Center Financial desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Treasury Regulation Section 1.368-2(g); and
WHEREAS, the boards of directors of Nara’s wholly owned subsidiary, Nara Bank, a California state chartered banking corporation (“Nara Bank”), and Center Financial’s wholly owned subsidiary, Center Bank, a California state chartered banking corporation (“Center Bank”), have approved, and declared it to be advisable and in the best interests of their respective stockholders, Nara and Center Financial, to consummate, concurrently with or as soon as reasonably practicable after the Merger, a business combination transaction in which Center Bank would merge with and into Nara Bank (the “Bank Merger”).
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, subject to the conditions set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
THE MERGERARTICLE III
1.1Effective Time of the Merger. Upon the terms3.1
1.2Closing. The closing of the Merger (the “Closing”) will take place at 10:00 a.m. on the date (the “Closing Date”) that is the third business day after the satisfaction or waiver of the conditions set forth inArticle VI (excluding those conditions that, by their nature, are to be satisfied as of the Closing, but subject to the satisfaction or waiver of those conditions as of the Closing), unless another time or date is agreed to in writing by the Parties. The Closing shall be held at the offices of Mayer Brown LLP, 350 South Grand Avenue, Los Angeles, California 90071, unless another place is agreed to in writing by the Parties.
A-1-1
1.3Effects of the Merger. Nara shall be the Surviving Corporation in the Merger. At the Effective Time, Center Financial shall be merged with and into Nara and the separate existenceWarranties of Center Financial shall cease. The Merger will have the effects set forth in the DGCL
(a)
Organization, Standing and the CGCL.Power
1.4Certificate of Incorporation and By-Laws. The Certificate of Incorporation of Nara as in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation, except that such Certificate of Incorporation shall be amended to provide that, effective as of the Effective Time, the name of the Surviving Corporation shall be changed to a name mutually acceptable to Center Financial and Nara. The By-laws of Nara as in effect immediately prior to the Effective Time, as amended substantially in the form set forth inExhibit 1.4, shall be the By-laws of the Surviving Corporation.(b)
1.5Bank Merger. As soon as reasonably practicable after the date hereof, Nara and Center Financial shall cause Nara Bank and Center Bank to enter into a bank merger agreement in substantially the form attached to this Agreement asExhibit 1.5 (the “Bank Merger Agreement”), providing for the Bank Merger in accordanceCapital Structure
(c)
Authority
(d)
SEC Documents; Regulatory Reports; Undisclosed Liabilities
(e)
Information Supplied
(f)
Compliance with Applicable Legal Requirements and the termsReporting Requirements
(g)
Accounting and Internal Controls
(h)
Legal Proceedings
(i)
Taxes
(j)
Certain Agreements
(k)
Benefit Plans
(l)
Bank Subsidiary
(m)
Agreements with Regulators
-i-
Page | ||||||||||
(n) | Absence of Certain Changes or Events | 17 | ||||||||
(o) | Board Approval | 17 | ||||||||
(p) | Vote Required | 17 | ||||||||
(q) | Properties | 17 | ||||||||
(r) | Intellectual Property | 17 | ||||||||
(s) | Derivatives | 18 | ||||||||
(t) | Loan Portfolio | 18 | ||||||||
(u) | Insurance | 19 | ||||||||
(v) | Transactions with Affiliates | 19 | ||||||||
(w) | Brokers or Finders | 20 | ||||||||
(x) | Opinion of Financial Advisor of Center Financial | 20 | ||||||||
(y) | No Other Representations or Warranties | 20 | ||||||||
3.2 | Representations and Warranties of Nara | 20 | ||||||||
(a) | Organization, Standing and Power | 20 | ||||||||
(b) | Capital Structure | 20 | ||||||||
(c) | Authority | 22 | ||||||||
(d) | SEC Documents; Regulatory Reports; Undisclosed Liabilities | 22 | ||||||||
(e) | Information Supplied | 24 | ||||||||
(f) | Compliance with Applicable Legal and Reporting Requirements | 24 | ||||||||
(g) | Accounting and Internal Controls | 24 | ||||||||
(h) | Legal Proceedings | 25 | ||||||||
(i) | Taxes | 25 | ||||||||
(j) | Certain Agreements | 26 | ||||||||
(k) | Benefit Plans | 27 | ||||||||
(l) | Bank Subsidiary | 28 | ||||||||
(m) | Agreements with Regulators | 28 | ||||||||
(n) | Absence of Certain Changes or Events | 28 | ||||||||
(o) | Board Approval | 28 | ||||||||
(p) | Vote Required | 28 | ||||||||
(q) | Properties | 29 | ||||||||
(r) | Intellectual Property | 29 | ||||||||
(s) | Derivatives | 29 | ||||||||
(t) | Loan Portfolio | 29 | ||||||||
(u) | Insurance | 30 | ||||||||
(v) | Transactions with Affiliates | 30 | ||||||||
(w) | Brokers or Finders | 30 | ||||||||
(x) | Opinion of Nara Financial Advisor | 31 | ||||||||
(y) | No Other Representations or Warranties | 31 | ||||||||
ARTICLE IV | COVENANTS RELATING TO CONDUCT OF BUSINESS | 31 | ||||||||
4.1 | Covenants of Center Financial | 31 | ||||||||
(a) | Ordinary Course | 31 | ||||||||
(b) | Dividends; Changes in Stock | 31 | ||||||||
(c) | Issuance of Securities | 32 | ||||||||
(d) | Governing Documents | 32 | ||||||||
(e) | No Acquisitions | 32 | ||||||||
(f) | No Dispositions | 32 | ||||||||
(g) | Indebtedness | 32 | ||||||||
(h) | Other Actions | 33 |
-ii-
Page | ||||||||||
(i) | Accounting Methods | 33 | ||||||||
(j) | Tax Matters | 33 | ||||||||
(k) | Compensation and Benefit Plans | 33 | ||||||||
(l) | Investment Portfolio; Interest Rate Risk; Other Risk | 33 | ||||||||
(m) | No Liquidation | 33 | ||||||||
(n) | Other Agreements | 33 | ||||||||
4.2 | Covenants of Nara | 33 | ||||||||
(a) | Ordinary Course | 34 | ||||||||
(b) | Dividends; Changes in Stock | 34 | ||||||||
(c) | Issuance of Securities | 34 | ||||||||
(d) | Governing Documents | 34 | ||||||||
(e) | No Acquisitions | 34 | ||||||||
(f) | No Dispositions | 35 | ||||||||
(g) | Indebtedness | 35 | ||||||||
(h) | Other Actions | 35 | ||||||||
(i) | Accounting Methods | 35 | ||||||||
(j) | Tax Matters | 35 | ||||||||
(k) | Compensation and Benefit Plans | 35 | ||||||||
(l) | Investment Portfolio; Interest Rate Risk; Other Risk | 36 | ||||||||
(m) | No Liquidation | 36 | ||||||||
(n) | Other Agreements | 36 | ||||||||
4.3 | Transition | 36 | ||||||||
4.4 | Advice of Changes; Government Filings | 36 | ||||||||
4.5 | Insurance | 37 | ||||||||
4.6 | No Control of Other Party’s Business | 37 | ||||||||
ARTICLE V | ADDITIONAL AGREEMENTS | 37 | ||||||||
5.1 | Preparation of Proxy Statement; Stockholders Meetings | 37 | ||||||||
5.2 | Access to Information | 40 | ||||||||
5.3 | Reasonable Best Efforts | 40 | ||||||||
5.4 | Acquisition Proposals | 42 | ||||||||
5.5 | Stock Exchange Listing | 43 | ||||||||
5.6 | Employee Benefit Plans and Employee Matters | 43 | ||||||||
5.7 | Center Financial Stock Option and Center Financial Restricted Shares | 44 | ||||||||
5.8 | Fees and Expenses | 44 | ||||||||
5.9 | Governance; Name Change | 45 | ||||||||
5.10 | Indemnification; Directors’ and Officers’ Insurance | 45 | ||||||||
5.11 | Public Announcements | 46 | ||||||||
5.12 | Tax Matters | 46 | ||||||||
5.13 | Additional Agreements | 46 | ||||||||
ARTICLE VI | CONDITIONS PRECEDENT | 46 |
-iii-
Page | ||||||||||
6.1 | Conditions to Each Party’s Obligation To Effect the Merger | 46 | ||||||||
(a) | Stockholder Approval | 46 | ||||||||
(b) | Stock Exchange Listing | 47 | ||||||||
(c) | Other Approvals | 47 | ||||||||
(d) | Form S-4 | 47 | ||||||||
(e) | No Injunctions or Restraints; Illegality | 47 | ||||||||
(f) | Absence of Burdensome Conditions | 47 | ||||||||
(g) | By-Law Amendment | 47 | ||||||||
6.2 | Conditions to Obligation of Nara | 47 | ||||||||
(a) | Representations and Warranties | 47 | ||||||||
(b) | Performance of Obligations | 47 | ||||||||
(c) | Tax Opinion | 48 | ||||||||
(d) | Material Adverse Effect | 48 | ||||||||
(e) | Appraisal Rights | 48 | ||||||||
6.3 | Conditions to Obligation of Center Financial | 48 | ||||||||
(a) | Representations and Warranties | 48 | ||||||||
(b) | Performance of Obligations | 48 | ||||||||
(c) | Tax Opinion | 48 | ||||||||
(d) | Material Adverse Effect | 48 | ||||||||
ARTICLE VII | TERMINATION AND AMENDMENT | 48 | ||||||||
7.1 | Termination | 48 | ||||||||
7.2 | Effect of Termination | 50 | ||||||||
7.3 | Amendment | 51 | ||||||||
7.4 | Extension; Waiver | 51 | ||||||||
ARTICLE VIII | GENERAL PROVISIONS | 52 | ||||||||
8.1 | Definitions | 52 | ||||||||
8.2 | Non-survival of Representations, Warranties and Agreements | 55 | ||||||||
8.3 | Notices | 55 | ||||||||
8.4 | Interpretation | 56 | ||||||||
8.5 | Counterparts | 56 | ||||||||
8.6 | Entire Agreement; No Third Party Beneficiaries | 56 | ||||||||
8.7 | Governing Law | 57 | ||||||||
8.8 | Severability | 57 | ||||||||
8.9 | Assignment | 57 | ||||||||
8.10 | Submission to Jurisdiction | 57 | ||||||||
8.11 | Enforcement | 57 | ||||||||
8.12 | Waiver of Jury Trial | 57 |
-iv-
EXHIBITS
Exhibit 1.4 | Amendment to By-laws | |
Exhibit 1.5 | Form of |
INDEX OF DEFINED TERMS
| Section 5.4(a) | |
| Preamble | |
| Section 8.1 | |
| Section 2.1(d) | |
Assumed Plan | Section 2.1(d) | |
Assumed Restricted Shares | Section 2.1(d) | |
Bank Merger | Recitals | |
Bank Merger | Section 3.1(c) | |
Bank Merger Agreement | Section 1.5 | |
Benefit Plans | Section 3.1(k) | |
BHC Act | Section 3.1(a) | |
Board Recommendations | Section 5.1(c) | |
Center Financial | Preamble | |
Center Bank | Recitals | |
Center Financial | Section 3.1(k) | |
| Section 3.1(g) | |
Center Financial Board Approval | Section 3.1(o) | |
Center Financial Board Recommendation | Section 5.1(b) | |
Center Financial Certificates | Section 8.1 | |
Center Financial Common Stock | Section 3.1(b) | |
Center Financial | Section 3.1(j) | |
Center Financial | Section 3.1 | |
Center Financial | Section 8.1 | |
Center Financial | Section 3.1(r) | |
| Section | |
Center Financial | Section | |
Center Financial Restricted | Section | |
Center Financial | Section 3.1(d) | |
| Section 3.1(b) | |
Center Financial Stock | Section 8.1 | |
Center Financial Stock Option | Section 8.1 | |
Center Financial Stock Plan | Section 3.1(b) | |
Center Financial Stockholders Meetings | Section 5.1(b) | |
Center Financial TARP Warrant | Section 2.1(e) | |
Center Financial Termination Fee | Section 7.2(c) | |
Center Financial’s Current Premium | Section 5.10(b) | |
Certificate of | Section 1.1 | |
CGCL | Section 1.1 | |
Change in Recommendation | Section 5.1(e) | |
Closing | Section 1.2 | |
Closing Date | Section 1.2 | |
Code | Recitals | |
Confidentiality Agreement | Section 5.2(b) | |
Constituent Corporations | Section 8.1 |
-v-
Covered Loans | Section 8.1 | |
Covered OREOs | Section 8.1 | |
Derivative Contract | Section 3.1(s) | |
DFI | Section 3.1(c) | |
DGCL | Section 1.1 | |
DPC shares | Section 3.1(b) | |
EDGAR | Section 3.1(d) | |
Effective Time | Section 1.1 | |
ERISA | Section 3.1(k) | |
ERISA Affiliate | Section 8.1 | |
Exchange Act | Section 3.1(c) | |
Exchange Agent | Section 2.2(a) | |
Exchange Fund | Section 8.1 | |
Exchange Ratio | Section 2.1(b) | |
FDIA | Section 3.1(l) | |
FDIC | Section 8.1 | |
Federal Reserve | Section 3.1(c) | |
Form S-4 | Section 5.1(a) | |
Governmental Entity | Section 8.1 | |
Indemnified Liabilities | Section 5.10(a) | |
Indemnified Parties | Section 5.10(a) | |
Injunction | Section 6.1(e) | |
Intervening Event | Section 5.1(f) | |
IRS | Section 8.1 | |
Joint Proxy Statement/Prospectus | Section 5.1(a) | |
Loans | Section 8.1 | |
Loss-Sharing Approvals | Section 3.1(c) | |
material | Section 8.1 | |
Material Adverse Effect | Section 8.1 | |
Merger | Recitals | |
Nara | Preamble | |
Nara Bank | Recitals | |
Nara Benefit Plans | Section 3.2(k) | |
Nara Board | Section 2.1(c) | |
Nara Board Approval | Section 3.2(o) | |
Nara Board Recommendation | Section 5.1(c) | |
Nara Certificates | Section 2.2(a) | |
Nara Common Stock | Section 3.2(b) | |
Nara Contracts | Section 3.2(j) | |
Nara Disclosure Schedule | Section 3.2 | |
Nara Intellectual Property | Section 3.2(r) | |
Nara Performance Units | Section 2.1(b) | |
Nara Permits | Section 3.2(f) | |
Nara Preferred Stock | Section 3.2(b) | |
Nara SEC Documents | Section 3.2(d) | |
Nara Series A Preferred Stock | Section 3.2(b) | |
Nara Series B Preferred Stock | Section 2.1(c) | |
Nara | Section 8.1 | |
Nara Stock | Section 8.1 | |
Nara | Section 3.2(b) | |
Nara | Section 5.1(c) | |
Nara | Section 3.2(b) |
-vi-
Nara | Section 7.2(b) | |
NASDAQ | Section 8.1 | |
OREO | Section 3.1(t) | |
Party | Preamble | |
Person | Section 8.1 | |
Permitted Liens | Section 8.1 | |
Public Proposal | Section 7.2(b) | |
Required Center Financial | Section 3.1(p) | |
Required Nara
| Section | |
| Section 3.1(c) | |
SBA | Section 3.1(c) | |
SBIA | Section 3.1(c) | |
SEC | Section 8.1 | |
Section 16 Information | Section 8.1 | |
Securities Act | Section 3.1(b) | |
Significant Subsidiary | Section 8.1 | |
SOX Act | Section 3.1(d) | |
Subsidiary | Section 8.1 | |
Superior Proposal | Section 8.1 | |
Surviving Corporation | Section 8.1 | |
Target Party | Section 5.1(f) | |
tax or | Section 8.1 | |
tax return | Section 8.1 | |
Trust Document | Section 8.1 | |
| Section 3.1(c) | |
Voting Debt | Section 8.1 |
-vii-
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 9, 2010 (this “Agreement”), is entered into between NARA BANCORP, INC., a Delaware corporation (“Nara”), and CENTER FINANCIAL CORPORATION, a California corporation (“Center Financial”). Nara and Center Financial are sometimes referred to herein collectively as the “Parties” and individually as a “Party.”
WHEREAS, the boards of directors of Nara and Center Financial have approved, and declared it to be advisable and in the best interests of their respective stockholders to consummate, the business combination transaction provided for herein in which Center Financial would merge with and into Nara (the “Merger”);
WHEREAS, the boards of directors of Nara and Center Financial have each determined that the Merger and the other transactions contemplated hereby are consistent with, and in furtherance of, their respective business strategies and goals;
WHEREAS, Nara and Center Financial desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Treasury Regulation Section 1.368-2(g); and
WHEREAS, the boards of directors of Nara’s wholly owned subsidiary, Nara Bank, a California state chartered banking corporation (“Nara Bank”), and Center Financial’s wholly owned subsidiary, Center Bank, a California state chartered banking corporation (“Center Bank”), have approved, and declared it to be advisable and in the best interests of their respective stockholders, Nara and Center Financial, to consummate, concurrently with or as soon as reasonably practicable after the Merger, a business combination transaction in which Center Bank would merge with and into Nara Bank (the “Bank Merger”).
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, subject to the conditions set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
ARTICLE III
3.1
3.1
(a)
(a)Organization, Standing and Power. Center Financial is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). Each of Center Financial and its Significant Subsidiaries is a corporation, trust or partnership duly organized, validly existing and, in the case of corporations, in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. The copies of Articles of Incorporation and By-laws of Center Financial and Center Bank, which have been previously furnished to Nara, are true, correct and complete copies of such documents as in effect on the date of this Agreement.
(b)
Capital Structure.
(i) The authorized capital stock of Center Financial consists of 100,000,000 shares of common stock, without par value (the “Center Financial Common Stock”), and 10,000,000 shares of preferred stock, without par value (the “Center Financial Preferred Stock”). As of the close of business on November 30, 2010, (A) 39,992,745 shares of Center Financial Common Stock, including 79,334 Center Financial Restricted Shares, were issued and outstanding, 864,780 shares of Center Financial Common Stock were reserved for issuance upon the exercise of the Center Financial TARP Warrant, 717,140 shares of Center Financial Common Stock were subject to outstanding stock options issued under the Center Financial 2006 Stock Incentive Plan (the “Center Financial Stock Plan”) and 2,230,383 shares of Center Financial Common Stock were reserved for future issuance upon exercise of stock options or other awards under the Center Financial Stock Plan, and no shares of Center Financial Common Stock were held by Subsidiaries of Center Financial (exclusive of any shares acquired in respect of debts previously contracted (any such shares being referred to herein as “DPC shares”)); (B) 55,000 shares of Center Financial Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Center Financial Series A Preferred Stock”) were issued and outstanding. As of the close of business on November 30, 2010, options to acquire 52,745 shares of Center Financial Common Stock with an exercise price in excess of the closing share price of Center Financial as of the close of business on December 8, 2010 were issued and outstanding. All outstanding shares of Center Financial Common Stock and Center Financial Preferred Stock have been duly authorized and validly issued and are fully paid and non-assessable and the issuance of none of such shares was subject to preemptive rights.(c)
(ii) Set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule is a true, correct and complete list of all outstanding bonds, debentures, notes, trust preferred securities or other similar obligations that Center Financial or any of its Subsidiaries has issued. Except as set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule, no Voting Debt of Center Financial or any Center Financial Subsidiary is issued or outstanding. All outstanding bonds, debentures, notes, trust preferred securities or other similar obligations of Center Financial or any of its Subsidiaries were issued in compliance in all material respects with all Applicable Legal Requirements. Each Trust Document entered into by Center Financial or any of its Subsidiaries is in full force and effect and constitutes the valid, binding and legally enforceable obligation of Center Financial or one of its Subsidiaries, and to the knowledge of Center Financial, the other parties thereto, enforceable inAuthority
(d)
A-1-8
accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles). Except as set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule or otherwise in thisSection 3.1(b), no Center Financial Subsidiary has issued securities held by any entity other than Center Financial or a Center Financial Subsidiary.
(iii) Except for (A) this Agreement, (B) the Center Financial TARP Warrant, (C) Center Financial Stock Options, which represented, as of November 30, 2010, the right to acquire up to an aggregate of 717,140 shares of Center Financial Common Stock, and (D) agreements entered into and securities and other instruments issued after the date of this Agreement to the extent permitted bySection 4.1, there are no options, warrants, calls, rights, commitments or agreements of any character to which Center Financial or any Subsidiary of Center Financial is a party or by which it or any such Subsidiary is bound obligating Center Financial or any Subsidiary of Center Financial to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or any Voting Debt or stock appreciation rights of Center Financial or of any Subsidiary of Center Financial or obligating Center Financial or any Subsidiary of Center Financial to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding contractual obligations of Center Financial or any of its Subsidiaries (A) to repurchase, redeem or otherwise acquire any shares of capital stock of Center Financial or any of its Subsidiaries or (B) pursuant to which Center Financial or any of its Subsidiaries is or could be required to register shares of Center Financial Common Stock, Center Financial Preferred Stock or other securities under the Securities Act of 1933, as amended (the “Securities Act”), except any such contractual obligations entered into after the date hereof to the extent permitted bySection 4.1.
(iv) Since December 31, 2009, except to the extent permitted bySection 4.1, Center Financial has not (A) issued any shares of capital stock, stock appreciation rights or securities exercisable or exchangeable for or convertible into shares of capital stock of Center Financial or any of its Subsidiaries, other than pursuant to and as required by the terms of the Center Financial Stock Plan and any employee stock options and other awards issued under the Center Financial Stock Plan prior to the date hereof (or issued after the date hereof in compliance withSections 4.1(c) and4.1(k)); (B) repurchased, redeemed or otherwise acquired, directly or indirectly through one or more Center Financial Subsidiaries, any shares of capital stock of Center Financial or any of its Subsidiaries (other than the acquisition of DPC shares in the ordinary course of business consistent with past practice); or (C) declared, set aside, made or paid to the stockholders of Center Financial dividends or other distributions on the outstanding shares of capital stock of Center Financial, other than cash dividends on the Center Financial Series A Preferred Stock as required by the terms of such preferred stock as in effect on the date hereof.
(v) Set forth inSection 3.1(b)(v) of the Center Financial Disclosure Schedule is a true, correct and complete list of all equity securities that Center Financial or any of its Subsidiaries owns, controls or holds for its own account, and neither Center Financial nor any of its Subsidiaries owns more than 4.9% of a class of voting securities of, or otherwise controls, any Person other than Center Financial Bank, in the case of Center Financial.
(c)Authority.
(i) Center Financial has all requisite corporate power and authority to enter into this Agreement and, subject in the case of the consummation of the Merger to the approval of the principal terms of the Merger by the requisite vote of the holders of Center Financial Stock, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Center Financial, subject in the case of the consummation of the Merger to the approval of the principal terms of the Merger by the stockholders of Center Financial. This Agreement has been duly
A-1-9
executed and delivered by Center Financial and constitutes a valid and binding obligation of Center Financial, enforceable against Center Financial in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(ii) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (A) conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or the loss of a material benefit under, or the creation of a lien, pledge, security interest, charge or other encumbrance on any assets (any such conflict, violation, default, right of termination, cancellation or acceleration, loss or creation, a “Violation”) pursuant to, any provision of the Articles of Incorporation or By-laws of Center Financial or any Subsidiary of Center Financial, or (B) except as set forth inSection 3.1(c)(ii) of the Center Financial Disclosure Schedule and subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to therein or inclause (iii) below, result in any Violation of any loan or credit agreement, note, mortgage, indenture, lease, Center Financial Benefit Plan or other agreement, obligation, instrument, permit, concession, franchise or license, or any Applicable Legal Requirements applicable to Center Financial or any Subsidiary of Center Financial or their respective properties or assets, which Violation, in the case ofclauses (A) and(B) above, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation.
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity (acting in any capacity) is required by or with respect to Center Financial or any Subsidiary of Center Financial in connection with the execution and delivery of this Agreement by Center Financial or the consummation by Center Financial of the transactions contemplated hereby, the failure to make or obtain which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation, except for (A) the filing of appropriate applications and notices with the Board of Governors of the Federal Reserve System (the “Federal Reserve”) under the BHC Act and the Bank Merger Act of 1960, as amended (the “Bank Merger Act”), and approval of the same, (B) the filing of an appropriate application with the California Department of Financial Institutions (the “DFI”) and approval of the same (the approvals required by the immediately precedingclauses (A) and(B) are referred to herein collectively as the “Requisite Regulatory Approvals”), (C) the filing with the SEC of (1) the Form S-4, including the Joint Proxy Statement/Prospectus and (2) such reports under Sections 12, 13(a), 13(d) and 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (D) the filing of the Certificate of Merger (or other appropriate documents as provided herein or in the CGCL) with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, (E) obtaining the appropriate approvals or consents under each loss-sharing agreement with the FDIC to which Center Financial or any Subsidiary of Center Financial is a party (the “Loss-Sharing Approvals”), and (F) such filings, notifications and approvals as may be required under the Small Business Investment Act of 1958 (“SBIA”) and the rules and regulations of the Small Business Administration (“SBA”) thereunder.
(d)SEC Documents; Regulatory Reports; Undisclosed Liabilities.
(i) Center Financial has filed all reports, schedules, registration statements and other documents required under Applicable Legal Requirements to be filed by it with the SEC since December 31, 2007 (the “Center Financial SEC Documents”). Center Financial has delivered or made available to Nara true, correct and complete copies of all Center Financial SEC Documents, all comment letters received by Center Financial from the SEC since December 31, 2007, all responses to such comment letters by or on behalf of Center Financial and all other correspondence since December 31, 2007 between the(e)
A-1-10
SEC and Center Financial, in each case to the extent not available to the public in completely unredacted form on the SEC’s EDGAR website (“EDGAR”). No Subsidiary of Center Financial is, or since December 31, 2007 has been, required to file any form, report, registration statement or other document with the SEC. As of their respective dates of filing with the SEC (or, if amended or superseded by a filing prior to the date hereof, as of the date of such filing), the Center Financial SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act or the Sarbanes-Oxley Act of 2002 (the “SOX Act”), as the case may be, and the rules and regulations of the SEC thereunder applicable to such Center Financial SEC Documents, and none of the Center Financial SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including, in each case, any notes thereto) of Center Financial included in the Center Financial SEC Documents complied, as of their respective dates of filing with the SEC, in all material respects with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be disclosed therein) and fairly present in all material respects the consolidated financial position of Center Financial and its consolidated Subsidiaries and the consolidated results of operations, changes in stockholders’ equity and cash flows of such companies as of the dates and for the periods shown, subject, in the case of interim financial statements, to (i) the omission of notes to the extent permitted by Regulations S-X of the SEC (but only if, in the case of interim financial statements included in Center Financial SEC Documents since Center Financial’s most recent Annual Report on Form 10-K, such notes would not differ materially from the notes to the financial statements included in such Annual Report) and (ii) normal, recurring year-end adjustments (but only if the effect of such adjustments would not, individually or in the aggregate, be material). No financial statements of any Person other than the Subsidiaries of Center Financial are, or, since December 31, 2007 have been, required by generally accepted accounting principles to be included in the consolidated financial statements of Center Financial.
(ii) Since December 31, 2007, Center Financial and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were required to be filed by them under any Applicable Legal Requirements with the Federal Reserve, the FDIC, the DFI and with any other applicable Governmental Entity, and have paid all fees and assessments due and payable in connection therewith, except to the extent that the failure to file such report, registration or statement or to pay such fees and assessments would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. As of their respective dates (and without giving effect to any amendments or modifications filed after the date of this Agreement with respect to reports and documents filed before the date of this Agreement), each of such reports, registrations and statements (including the financial statements, exhibits and schedules therein) complied in all material respects with the applicable statutes, rules, regulations and orders enforced or promulgated by the Governmental Entity with which they were filed.
(iii) Except for (A) those liabilities that are fully reflected or reserved for in the consolidated financial statements of Center Financial included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010, as filed with the SEC prior to the date of this Agreement, (B) liabilities incurred since September 30, 2010 in the ordinary course of business consistent with past practice, and (C) liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial, Center Financial and its Subsidiaries do not have, and since September 30, 2010 Center Financial and its Subsidiaries have not incurred (except to the extent permitted bySection 4.1), any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise and whether or not required to be reflected in Center Financial’s financial statements in accordance with generally accepted accounting principles).
A-1-11
(iv) Center Financial is, and since December 31, 2007 has been, in compliance with the applicable listing and corporate governance rules and regulations of NASDAQ. Center Financial has delivered to Nara true, correct and complete copes of all correspondence between Center Financial and NASDAQ since December 31, 2007.
(v) As used in thisSection 3.1(d), the term “file” shall be broadly construed to include any manner in which a document or information is filed, furnished, transmitted or otherwise made available to the SEC or any other Governmental Entity.
(e)Information Supplied. None of the information supplied or to be supplied by Center Financial for inclusion or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Joint Proxy Statement/Prospectus will, at the date of mailing to stockholders and at the times of the meetings of stockholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Joint Proxy Statement/ Prospectus will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, except that no representation or warranty is made by Center Financial with respect to statements made or incorporated by reference therein based on information supplied by Nara for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus.
(f)
Compliance with Applicable Legal and Reporting Requirements.
(i) Center Financial and its Subsidiaries hold all permits, authorizations, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of the businesses of Center Financial and its Subsidiaries, taken as a whole (the “Center Financial Permits”), the Center Financial Permits are in full force and effect and Center Financial and its Subsidiaries are in compliance with the terms of the Center Financial Permits, except where the failure so to hold, be in full force and effect or comply, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.(g)
(ii) Except as set forth inSection 3.1(f)(ii) of the Center Financial Disclosure Schedule, since December 31, 2007, Center Financial and each of its Subsidiaries has conducted its business in compliance with all Applicable Legal Requirements (including the SOX Act, the USA PATRIOT Act of 2001, any other applicable anti-money laundering statute, rule or regulation or any rule or regulation issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the privacy and customer information requirements contained in Applicable Legal Requirements, and all applicable fair lending and other discrimination-related statutes, rules or regulations) or to the employees conducting such businesses, except for possible violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. To the knowledge of Center Financial, no investigation by any Governmental Entity with respect to Center Financial or any of its Subsidiaries is pending or threatened, other than, in each case, those the outcome of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(g)Accounting and Internal Controls.
(i) The records, systems, controls, data and information of Center Financial and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Center Financial or its Subsidiaries (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control which would not, individually or in the(h)
A-1-12
aggregate, reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the following clause.
(ii) Center Financial and its Subsidiaries have implemented and maintain a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that: (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(iii) Center Financial has (A) implemented and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and such controls and procedures are effective to ensure that (1) all information required to be disclosed by Center Financial in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) all such information is accumulated and communicated to Center Financial’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure and (B) disclosed, based on its most recent evaluation prior to the date hereof, to Center Financial’s auditors and the audit committee of the board of directors of Center Financial (the “Center Financial Board”) (1) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Center Financial’s ability to record, process, summarize and report financial data and have identified for Center Financial’s auditors any material weaknesses in internal controls and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in Center Financial’s internal controls. Center Financial has made available to Nara a summary of any such disclosure made by management to Center Financial’s auditors and audit committee since December 31, 2007.
(iv) Since December 31, 2007, neither Center Financial nor any of its Subsidiaries or, to the knowledge of Center Financial, any director, officer, employee, auditor, accountant or representative of Center Financial or any of its Subsidiaries has received or has otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Center Financial or any of its Subsidiaries or their internal control over financial reporting, including any complaint, allegation, assertion or claim that Center Financial or any of its Subsidiaries has engaged in questionable accounting or auditing practices.
(h)Legal Proceedings. Except as set forth inSection 3.1(h) of the Center Financial Disclosure Schedule, there is no suit, action, investigation or proceeding (whether judicial, arbitral, administrative or other) pending or, to the knowledge of Center Financial, threatened, against or affecting Center Financial or any Subsidiary of Center Financial as to which there is a significant possibility of an adverse outcome which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Center Financial or any Subsidiary of Center Financial having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or on the Surviving Corporation.
(i)Taxes. Except as set forth inSection 3.1(i) of the Center Financial Disclosure Schedule:
(i) Each of Center Financial and the Center Financial Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all
Taxes
(j)
A-1-13
material tax returns required to be filed by it, and all such filed tax returns were true, correct and complete in all material respects. All taxes shown to be due on such tax returns have been timely paid.
(ii) No written or, to the knowledge of Center Financial, unwritten notice of any deficiency with respect to taxes that has been proposed, asserted or assessed against Center Financial or any of the Center Financial Subsidiaries and has not previously been paid has been received by Center Financial or any Center Financial Subsidiary.
(iii) To the knowledge of Center Financial, no tax return of Center Financial or any Center Financial Subsidiary is under audit or examination by any Governmental Entity. No written or, to the knowledge of Center Financial, unwritten notice of such an audit or examination by any Governmental Entity has been received by Center Financial or any Center Financial Subsidiary. Any assessments for taxes due with respect to any completed and settled examinations or any concluded litigation have been fully paid.
(iv) Neither Center Financial nor any Center Financial Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code within the two-year period ending on the Closing Date.
(v) Neither Center Financial nor any Center Financial Subsidiary has any liability for any tax under Treasury Regulation Section 1.1502-6 or any similar provision of any other tax law, except for taxes of the affiliated group of which Center Financial is the common parent, within the meaning of Section 1504(a)(1) of the Code or any similar provision of any other tax law.
(vi) Neither Center Financial nor any Center Financial Subsidiary has taken or agreed to take (or failed to take or agree to take) any action or knows of any facts or circumstances that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(vii) Neither Center Financial nor any Center Financial Subsidiary has engaged in a transaction that would be reportable by or with respect to Center Financial or any Center Financial Subsidiary pursuant to Sections 6011, 6111 or 6112 of the Code.
(viii) Center Financial and the Center Financial Subsidiaries have withheld (or will withhold) from payments to or on behalf of its employees, independent contractors, creditors, stockholders or other third parties, and have timely paid (or will timely pay) to the appropriate Governmental Entity, all material amounts required to be withheld from such persons in accordance with applicable tax law;provided,however, that the foregoing withholding representation shall apply only with respect to payments made before the Closing Date and that the foregoing timely payment representation shall apply only with respect to payments which, to be timely, must be made to the appropriate Governmental Entity before the Closing Date.
(ix) There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any material taxes.
(x) Neither Center Financial nor any Center Financial Subsidiary is a party to or bound by any tax sharing agreement, tax indemnity obligation or agreement or arrangement with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any Governmental Entity).
(xi) Center Bank operates at least one significant historic business line, or owns at least a significant portion of its historic business assets, in each case within the meaning of Treasury Regulation Section 1.368-1(d).
(j)Certain Agreements. Except as set forth inSection 3.1(j) of the Center Financial Disclosure Schedule and except for this Agreement, neither Center Financial nor any of its Subsidiaries is a party to or
(k)
A-1-14
bound by any contract, arrangement, commitment or understanding (i) with respect to the employment of any directors or executive officers, or with any consultants that are natural persons, involving the payment of $150,000 or more per annum, (ii) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) which limits the ability of Center Financial or any of its Subsidiaries to compete in any line of business, in any geographic area or with any Person, or which requires referrals of business or requires Center Financial or any of its affiliates to make available investment opportunities to any Person on a priority, equal or exclusive basis, and in each case which limitation or requirement would reasonably be expected to be material to Center Financial and its Subsidiaries taken as a whole, (iv) with or to a labor union or other collective bargaining representative (including any collective bargaining agreement), (v) in the case of a Center Financial Benefit 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, (vi) which would prohibit or delay the consummation of any of the transactions contemplated by this Agreement, (vii) which involve the payment of more than $250,000 and are not terminable without penalty on notice of 90 days or less, (viii) real property leases or (ix) agreements providing for indemnification, contribution or any guaranty in favor of any officer or director or that were not entered into in the ordinary course of business. Center Financial has previously made available to Nara complete and accurate copies of each contract, arrangement, commitment or understanding of the type described in thisSection 3.1(j) (collectively referred to herein as the “Center Financial Contracts”). All of the Center Financial Contracts are valid and in full force and effect, except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. Neither Center Financial nor any of its Subsidiaries has, and to the best knowledge of Center Financial, none of the other parties thereto have, violated any provision of, or committed or failed to perform any act, and no event or condition exists, which with or without notice, lapse of time or both would constitute a default under the provisions of, any Center Financial Contract, except in each case for those violations and defaults which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(k)Benefit Plans.
(i) With respect to each employee benefit plan (including any “employee benefit plan”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and all stock purchase, stock option, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and other material employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, whether formal or informal, oral or written, legally binding or not (all the foregoing being herein called “Benefit Plans”), under which any employee or former employee of Center Financial or any of its Subsidiaries has any present or future right to benefits, and which is maintained or contributed to by Center Financial or any of its Subsidiaries or under which Center Financial or any of its Subsidiaries has any present or future liability (the “Center Financial Benefit Plans”), Center Financial has made available to Nara a true, correct and complete copy of (A) the most recent annual report (Form 5500) filed with the IRS and, where applicable, the related audited financial statements thereof, (B) such Center Financial Benefit Plan and all related amendments thereto, (C) each trust agreement relating to such Center Financial Benefit Plan and all related amendments thereto, (D) the most recent summary plan description for each Center Financial Benefit Plan for which a summary plan description is required by ERISA and, for Benefit Plans not subject to ERISA, any relevant summaries and (E) the most recent determination letter issued by the IRS with respect to any Center Financial Benefit Plan qualified under Section 401(a) of the Code.(l)
(ii) None of the Center Financial Benefit Plans are subject to Title IV of ERISA.
(iii) Neither Center Financial, its Subsidiaries, nor any of their ERISA Affiliates has any liability under or with respect to a multiemployer plan (as defined in Section 3(37) of ERISA) nor any liability
A-1-15
or contingent liability for providing, under any Center Financial Benefit Plan or otherwise, any post-retirement medical or life insurance benefits, other than statutory liability for providing group health plan continuation coverage under Part 6 of Title I of ERISA and Section 4980B of the Code or applicable state law.
(iv) Each Center Financial Benefit Plan that is a nonqualified deferred compensation subject to Section 409A of the Code has been operated and administered in good faith compliance with, and complies in form with, Section 409A of the Code and applicable guidance with respect thereto from the period beginning January 1, 2005 through the date hereof.
(v) With respect to the Center Financial Benefit Plans, individually and in the aggregate, no event has occurred and, to the knowledge of Center Financial, there exists no condition or set of circumstances in connection with which Center Financial or any of its Subsidiaries could be subject to any liability which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial under ERISA, the Code or any other Applicable Legal Requirements.
(vi) True and complete copies of the Center Financial Stock Plans as in effect on the date hereof, and copies of all outstanding awards agreements relating thereto, have been provided or made available to Nara.
(vii) Except as set forth inSection 3.1(k)(vii) of the Center Financial Disclosure Schedule, no Center Financial Benefit Plan or Center Financial Stock Plan exists that could result in the payment to any present or former employee of Center Financial or any Subsidiary of Center Financial of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of Center Financial or any Subsidiary of Center Financial as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Section 280G of the Code.
(viii) Except as set forth inSection 3.1(k)(viii) of the Center Financial Disclosure Schedule, none of the assets of any Center Financial Benefit Plan are invested in employer securities or employer real property.
(ix) With respect to each of the Center Financial Benefit Plans, all contributions or premium payments due and payable on or before the Closing Date have been timely made, and, to the extent not presently payable, appropriate reserves have been established for the payment and properly accrued in accordance with customary accounting practices.
(l)Bank Subsidiary. Center Financial owns all of the outstanding shares of capital stock of Center Bank, free and clear of any claim, lien or encumbrance. All of the shares of capital stock of Center Bank have been duly authorized and validly issued and are fully paid and non-assessable and not subject to preemptive rights. Center Bank is an “insured bank” as defined in the Federal Deposit Insurance Act (the “FDIA”) and applicable regulations thereunder. Center Bank is a California-state chartered nonmember bank whose primary federal bank regulator is the FDIC.
(m)
Agreements with Regulators. Except as set forth inSection 3.1(m) of the Center Financial Disclosure Schedule, neither Center Financial nor any Subsidiary of Center Financial is a party or subject to any written agreement, consent decree or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any cease-and-desist or other order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policies, procedures or board resolutions at the request of, any Governmental Entity which restricts materially the conduct of its business, imposes any material requirements or procedures or in any manner relates to its capital adequacy, its credit or risk management policies or its management, nor has Center Financial been advised by any Governmental Entity that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such agreement, decree, memorandum of understanding, extraordinary supervisory letter, commitment letter, order,
A-1-16
directive or similar submission, or any such policy, procedure or board resolutions. Center Financial and its Subsidiaries are in compliance with all of the foregoing so listed inSection 3.1(m) of the Center Financial Disclosure Schedule, except to the extent that the failure so to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. There are no formal or informal investigations, known to Center Financial, relating to any regulatory matters pending before any Governmental Entity with respect to Center Financial or any of its Subsidiaries.
(n)Absence of Certain Changes or Events. From September 30, 2010 through the date of this Agreement: (i) Center Financial and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices, (ii) there has not been any change, circumstance or event (including any event involving a prospective change) which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial and (iii) there has not been (A) any action or event of the type that would have required the consent of Nara underSection 4.1 or (B) any material loss, damage or destruction to, or any material interruption in the use of, any of the assets of Center Financial or any of its Subsidiaries (whether or not covered by insurance).
(o)Board Approval. The Center Financial Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held (the “Center Financial Board Approval”), has (i) determined that this Agreement and the Merger are fair to and in the best interests of Center Financial and its stockholders and declared the Merger to be advisable, (ii) approved this Agreement and the Merger, and (iii) recommended that the stockholders of Center Financial approve the principal terms of the Merger and directed that such matter be submitted for consideration by Center Financial stockholders at the Center Financial Stockholders Meeting. No state takeover statute is applicable to this Agreement, the Merger or the other transactions contemplated hereby.
(p)Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of each class of Center Financial Stock approving the principal terms of the Merger (the “Required Center Financial Vote”) is the only vote of the holders of Center Financial Stock necessary to authorize the transactions contemplated hereby (including the Merger).
(q)Properties. Center Financial or one of its Subsidiaries (i) has good and marketable title to all the properties and assets reflected in the latest audited balance sheet included in the Center Financial SEC Documents filed prior to the date hereof as being owned by Center Financial or one of its Subsidiaries or acquired after the date thereof which are material to Center Financial’s business on a consolidated basis (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all claims, liens, charges, security interests or encumbrances of any nature whatsoever, except for Permitted Liens, and (ii) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such Center Financial SEC Documents or acquired after the date thereof which are material to its business on a consolidated basis (except for leases that have expired by their terms since the date thereof) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to Center Financial’s knowledge, the lessor, except in the case ofclauses (i) and(ii) above which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(r)Intellectual Property. Center Financial and its Subsidiaries own or have a valid license to use all trademarks, service marks and trade names (including any registrations or applications for registration of any of the foregoing) (collectively, the “Center Financial Intellectual Property”) necessary to carry on their business substantially as currently conducted, except where such failures to own or validly license such Center Financial Intellectual Property would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. Neither Center Financial nor any such Subsidiary has received any notice of infringement of or conflict with, and to Center Financial’s knowledge, there are no infringements of or conflicts with, the rights of others with respect to the use of any Center Financial Intellectual Property which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
A-1-17
(s)Derivatives. All swaps, caps, floors, option agreements, futures and forward contracts and other similar derivative transactions (each, a “Derivative Contract”), whether entered into for Center Financial’s own account, or for the account of one or more of its Subsidiaries or their respective customers, were entered into (i) in accordance with prudent business practices and all Applicable Legal Requirements and (ii) with counterparties which Center Financial believes to be financially responsible. Each Derivative Contract of Center Financial or any of its Subsidiaries constitutes the valid and legally binding obligation of Center Financial or one or more of its Subsidiaries, as the case may be, that is enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles), and is in full force and effect. Neither Center Financial nor its Subsidiaries, nor to the knowledge of Center Financial any other party thereto, is in breach of any of its obligations under any Derivative Contract of Center Financial or one of its Subsidiaries. The financial position of Center Financial and its Subsidiaries on a consolidated basis under or with respect to each such Derivative Contract has been reflected in the books and records of Center Financial and such Subsidiaries in accordance with generally accepted accounting principles applied on a consistent basis.
(t)Loan Portfolio.
(i) Neither Center Financial nor any of its Subsidiaries is a party to any written or oral (A) Loans, other than any Covered Loans, under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Center Financial, in default of any other provision, or (B) Loans with any director, executive officer or 5% or greater stockholder of Center Financial or any of its Subsidiaries, or to the knowledge of Center Financial, any affiliate of any of the foregoing. Set forth inSection 3.1(t)(i) of the Center Financial Disclosure Schedule is a true, correct and complete list of (A) all of the Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified by Center Financial as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, (B) by category of Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the other Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on such Loans by category, and (C) each asset of Center Financial or any of its Subsidiaries that, as of September 30, 2010, was classified as “Other Real Estate Owned” (“OREO”) and the book value thereof (other than any Covered OREOs); it being understood and agreed that the Loans referenced inclauses (A) and(B) of this sentence include any Loans so classified by Center Financial or by any Governmental Entity, but shall not include any Covered Loans (as to whichSection 3.1(t)(ii) shall apply). Center Financial shall provide to Nara, on a monthly basis, (1) a schedule of Loans of Center Financial and its Subsidiaries that become classified in the manner described in the previous sentence, or any Loan of Center Financial and its Subsidiaries the classification of which is changed to a lower classification or to OREO, and (2) a schedule of Loans of Center Financial and its Subsidiaries in which the obligor is delinquent in payment by 30 days or more, in each case after the date of this Agreement.
(ii) Neither Center Financial nor any of its Subsidiaries is a party to any written or oral Covered Loans under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Center Financial, in default of any other provision. Set forth inSection 3.1(t)(ii) of the Center Financial Disclosure Schedule is a true, correct and complete list of (A) all of the Covered Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified by Center Financial as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower
A-1-18
thereunder, (B) by category of Covered Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the Covered Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on such Covered Loans by category, and (C) each asset of Center Financial or any of its Subsidiaries that, as of September 30, 2010, was classified as Covered OREO and the book value thereof; it being understood and agreed that the Covered Loans referenced inclauses (A) and(B) of this sentence include any Covered Loans so classified by Center Financial or by any Governmental Entity. Center Financial shall provide to Nara, on a monthly basis, a schedule of the Covered Loans and assets of Center Financial and its Subsidiaries that become classified in the manner described in the previous sentence after the date of this Agreement.
(iii) Each Loan of Center Financial and its Subsidiaries (A) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (B) to the extent carried on the books and records of Center Financial and its Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restriction, claims, liens or encumbrances, as applicable, which have been perfected and (C) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(iv) Each outstanding Loan of Center Financial and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of Center Financial and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all Applicable Legal Requirements.
(v) Except as set forth inSection 3.1(t)(v) of the Center Financial Disclosure Schedule, none of the agreements pursuant to which Center Financial or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
(vi) There are no outstanding Loans made by Center Financial or any of its Subsidiaries to any “executive officer” or other “insider” (as each such term is defined in Regulation O promulgated by the Federal Reserve) of Center Financial or its Subsidiaries, other than Loans that are subject to and that were made and continue to be in compliance with Regulation O or that are exempt therefrom.
(u)Insurance. Set forth inSection 3.1(u) of the Center Financial Disclosure Schedule is a true, correct and complete list of all insurance policies maintained by Center Financial and its Subsidiaries. All such insurance policies and bonds are in full force and effect and neither Center Financial nor any of its Subsidiaries is in default under any such policy or bond. Except as set forth inSection 3.1(u) of the Center Financial Disclosure Schedule, as of the date hereof, there are no claims in excess of $100,000 under any of such insurance policies or bonds, which claims are pending or as to which coverage has been denied or disputed by the underwriters of such insurance policies or bonds.
(v)Transactions with Affiliates. Except as set forth inSection 3.1(v) of the Center Financial Disclosure Schedule, there are no agreements, contracts, plans, arrangements or other transactions between Center Financial or any of its Subsidiaries, on the one hand, and any (i) officer or director of Center Financial or any of its Subsidiaries, (ii) record or beneficial owner of 5% or more of the voting securities of Center Financial, (iii) affiliate or family member of any such officer, director or record or beneficial owner or (iv) any other affiliate of Center Financial, on the other hand, except those of a type available to employees of Center Financial generally.
A-1-19
(w)Brokers or Finders. No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement, except D.A. Davidson & Co., and, if the Merger is not consummated, Center Financial agrees to indemnify Nara and to hold Nara harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or expenses asserted by any Person on the basis of any act or statement alleged to have been made by Center Financial or its affiliates.
(x)Opinion of Financial Advisor of Center Financial. Center Financial has received the opinion of its financial advisor, D.A. Davidson & Co., dated the date of this Agreement, to the effect that the Exchange Ratio is fair, from a financial point of view, to the holders of Center Financial Common Stock.
(y)No Other Representations or Warranties. Except for the representations and warranties contained in thisSection 3.1, neither Center Financial nor any other Person on behalf of Center Financial is making or has made any express or implied representation or warranty with respect to Center Financial or with respect to any other information provided to Nara in connection with the transactions contemplated herein. Neither Center Financial nor any other Person shall have or be subject to any liability or indemnification obligation to Nara or any other Person resulting from the distribution to Nara, or the use by Nara of, any such information, including any information, documents, projections, forecasts or other material made available to Nara in any “virtual data room” or management presentation in expectation of the transactions contemplated by this Agreement, unless any such information is expressly included in a representation or warranty contained in thisSection 3.1. Center Financial acknowledges that Nara is making no representations or warranties other than the representations and warranties contained inSection 3.2.
3.2Representations and Warranties of Nara. Except, with respect to any subsection of thisSection 3.2, as set forth in the correspondingly identified subsection of the disclosure schedule delivered by Nara to Center Financial concurrently herewith (the “Nara Disclosure Schedule”), Nara represents and warrants to Center Financial as follows:
(a)Organization, Standing and Power. Nara is a bank holding company registered under the BHC Act. Each of Nara and its Significant Subsidiaries is a corporation, trust or partnership duly organized, validly existing and, in the case of corporations, in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. The copies of Certificate of Incorporation and By-laws of Nara and Nara Bank, which have been previously furnished to Center Financial, are true, correct and complete copies of such documents as in effect on the date of this Agreement.
(b)Capital Structure.
(i) The authorized capital stock of Nara consists of 100,000,000 shares of common stock, par value $0.001 per share (the “Nara Common Stock”), and 10,000,000 shares of preferred stock, par value $0.001 (the “Nara Preferred Stock”). As of the close of business on November 30, 2010, (A) 37,971,527 shares of Nara Common Stock were issued and outstanding, 521,266 shares of Nara Common Stock were reserved for issuance upon the exercise of the outstanding warrant held by the United States Treasury Department (the “Nara TARP Warrant”) and 820,730 shares of Nara Common Stock were reserved for issuance upon exercise of stock options, Nara Performance Units or other awards under the Amended Nara 2007 Equity Incentive Plan (the “Nara Stock Plan”), and 60,686,477 shares of Nara Common Stock were held by Nara in its treasury or by its Subsidiaries (exclusive of DPC shares); and (B) 67,000 shares of Nara Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Nara Series A Preferred Stock”) were issued and outstanding. All outstanding shares of Nara Common Stock and Nara Preferred Stock have been duly authorized
A-1-20
and validly issued and are fully paid and non-assessable and the issuance of none of such shares was subject to preemptive rights. The shares of Nara Common Stock and Nara Series B Preferred Stock to be issued pursuant to or as specifically contemplated by this Agreement will have been duly authorized as of the Effective Time and, if and when issued in accordance with the terms hereof, will be validly issued, fully paid and non-assessable and the issuance of none of such shares was or will be subject to preemptive rights. As of the close of business on November 30, 2010, options to acquire 150,000 shares of Nara Common Stock with an exercise price in excess of the closing share price of Nara as of the close of business on December 8, 2010 were issued and outstanding.
(ii) Set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule is a true, correct and complete list of all outstanding bonds, debentures, notes, trust preferred securities or other similar obligations that Nara or any of its Subsidiaries has issued. Except as set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule, no Voting Debt of Nara or any Nara Subsidiary is issued or outstanding. All outstanding bonds, debentures, notes, trust preferred securities or other similar obligations of Nara or any of its Subsidiaries were issued in compliance in all material respects with all Applicable Legal Requirements. Each Trust Document entered into by Nara or any of its Subsidiaries is in full force and effect and constitutes the valid, binding and legally enforceable obligation of Nara or one of its Subsidiaries, and to the knowledge of Center Financial, the other parties thereto, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles). Except as set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule or otherwise in thisSection 3.2(b), no Nara Subsidiary has issued securities held by any entity other than Nara or a Nara Subsidiary.
(iii) Except for (A) this Agreement, (B) the Nara TARP Warrant, (C) Nara Stock Options, restricted units and performance units issued under the Nara Stock Plans, which represented, as of November 30, 2010, the right to acquire (in the case of Nara Stock Options) or to receive the value of up to an aggregate of, respectively, 543,250, zero and 36,200 shares of Nara Common Stock, and (D) agreements entered into and securities and other instruments issued after the date of this Agreement to the extent permitted bySection 4.2, there are no options, warrants, calls, rights, commitments or agreements of any character to which Nara or any Subsidiary of Nara is a party or by which it or any such Subsidiary is bound obligating Nara or any Subsidiary of Nara to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or any Voting Debt or stock appreciation rights of Nara or of any Subsidiary of Nara or obligating Nara or any Subsidiary of Nara to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding contractual obligations of Nara or any of its Subsidiaries (A) to repurchase, redeem or otherwise acquire any shares of capital stock of Nara or any of its Subsidiaries or (B) pursuant to which Nara or any of its Subsidiaries is or could be required to register shares of Nara Common Stock, Nara Preferred Stock or other securities under the Securities Act, except any such contractual obligations entered into after the date hereof to the extent permitted bySection 4.2.
(iv) Since December 31, 2009, except to the extent permitted bySection 4.2, Nara has not (A) issued any shares of capital stock, stock appreciation rights or securities exercisable or exchangeable for or convertible into shares of capital stock of Nara or any of its Subsidiaries, other than pursuant to and as required by the terms of the Nara Stock Plan and any employee stock options and other awards issued under the Nara Stock Plans prior to the date hereof (or issued after the date hereof in compliance withSections 4.2(c) and4.2(k)); (B) repurchased, redeemed or otherwise acquired, directly or indirectly through one or more Nara Subsidiaries, any shares of capital stock of Nara or any of its Subsidiaries (other than the acquisition of DPC shares in the ordinary course of business consistent with past practice); or (C) declared, set aside, made or paid to the stockholders of Nara dividends or other distributions on the outstanding shares of capital stock of Nara, other than cash dividends on the Nara Series A Preferred Stock as required by the terms of such preferred stock as in effect on the date hereof.
A-1-21
(v) Set forth inSection 3.2(b)(v) of the Nara Disclosure Schedule is a true, correct and complete list of all equity securities that Nara or any of its Subsidiaries owns, controls or holds for its own account, and neither Nara nor any of its Subsidiaries owns more than 4.9% of a class of voting securities of, or otherwise controls, any Person other than Nara Bank, in the case of Nara.
(c)Authority.
(i) Nara has all requisite corporate power and authority to enter into this Agreement and, subject in the case of the consummation of the Merger to the adoption of this Agreement by the requisite vote of the holders of Nara Common Stock, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Nara, subject in the case of the consummation of the Merger to the adoption of this Agreement by the stockholders of Nara. This Agreement has been duly executed and delivered by Nara and constitutes a valid and binding obligation of Nara, enforceable against Nara in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(ii) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (A) result in any Violation pursuant to any provision of the Certificate of Incorporation or By-laws of Nara or any Subsidiary of Nara, or (B) except as set forth inSection 3.2(c)(ii) of the Nara Disclosure Schedule and subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to therein or inclause (iii) below, result in any Violation of any loan or credit agreement, note, mortgage, indenture, lease, Nara Benefit Plan or other agreement, obligation, instrument, permit, concession, franchise or license, or any Applicable Legal Requirements applicable to Nara or any Subsidiary of Nara or their respective properties or assets, which Violation, in the case ofclauses (A) and(B) above, which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity (acting in any capacity) is required by or with respect to Nara or any Subsidiary of Nara in connection with the execution and delivery of this Agreement by Nara or the consummation by Nara of the transactions contemplated hereby, the failure to make or obtain which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or the Surviving Corporation, except for (A) the Requisite Regulatory Approvals, (B) the filing with the SEC of (1) the Form S-4, including the Joint Proxy Statement/Prospectus and (2) such reports under Sections 12, 13(a), 13(d) and 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (C) the filing of the Certificate of Merger (or other appropriate documents as provided herein or in the CGCL) with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, and (D) such filings, notifications and approvals as may be required under the SBIA and the rules and regulations of the SBA thereunder.
(d)SEC Documents; Regulatory Reports; Undisclosed Liabilities.
(i) Nara has filed all reports, schedules, registration statements and other documents required under Applicable Legal Requirements to be filed by it with the SEC since December 31, 2007 (the “Nara SEC Documents”). Nara has delivered or made available to Center Financial true, correct and complete copies of all Nara SEC Documents, all comment letters received by Nara from the SEC since December 31, 2007, all responses to such comment letters by or on behalf of Nara and all other correspondence since December 31, 2007 between the SEC and Nara, in each case to the extent not available to the public in completely unredacted form on EDGAR. No Subsidiary of Nara is, or since December 31, 2007 has been, required to file any form, report, registration statement or other document with the SEC. As of their respective dates of filing with the SEC (or, if amended or superseded by a
A-1-22
filing prior to the date hereof, as of the date of such filing), the Nara SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act or the SOX Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Nara SEC Documents, and none of the Nara SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including, in each case, any notes thereto) of Nara included in the Nara SEC Documents complied, as of their respective dates of filing with the SEC, in all material respects with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be disclosed therein) and fairly present in all material respects the consolidated financial position of Nara and its consolidated Subsidiaries and the consolidated results of operations, changes in stockholders’ equity and cash flows of such companies as of the dates and for the periods shown, subject, in the case of interim financial statements, to (i) the omission of notes to the extent permitted by Regulations S-X of the SEC (but only if, in the case of interim financial statements included in Nara SEC Documents since Nara’s most recent Annual Report on Form 10-K, such notes would not differ materially from the notes to the financial statements included in such Annual Report) and (ii) normal, recurring year-end adjustments (but only if the effect of such adjustments would not, individually or in the aggregate, be material). No financial statements of any Person other than the Subsidiaries of Nara are, or, since December 31, 2007 have been, required by generally accepted accounting principles to be included in the consolidated financial statements of Nara.
(ii) Since December 31, 2007, Nara and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were required to be filed by them under any Applicable Legal Requirements with the Federal Reserve, the FDIC, the DFI and with any other applicable Governmental Entity, and have paid all fees and assessments due and payable in connection therewith, except to the extent that the failure to file such report, registration or statement or to pay such fees and assessments would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. As of their respective dates (and without giving effect to any amendments or modifications filed after the date of this Agreement with respect to reports and documents filed before the date of this Agreement), each of such reports, registrations and statements (including the financial statements, exhibits and schedules therein) complied in all material respects with the applicable statutes, rules, regulations and orders enforced or promulgated by the Governmental Entity with which they were filed.
(iii) Except for (A) those liabilities that are fully reflected or reserved for in the consolidated financial statements of Nara included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010, as filed with the SEC prior to the date of this Agreement, (B) liabilities incurred since September 30, 2010 in the ordinary course of business consistent with past practice, and (C) liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara, Nara and its Subsidiaries do not have, and since September 30, 2010 Nara and its Subsidiaries have not incurred (except to the extent permitted bySection 4.2), any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise and whether or not required to be reflected in Nara’s financial statements in accordance with generally accepted accounting principles).
(iv) Nara is, and since December 31, 2007 has been, in compliance with the applicable listing and corporate governance rules and regulations of NASDAQ. Nara has delivered to Center Financial true, correct and complete copes of all correspondence between Nara and NASDAQ since December 31, 2007.
A-1-23
(v) As used in thisSection 3.2(d), the term “file” shall be broadly construed to include any manner in which a document or information is filed, furnished, transmitted or otherwise made available to the SEC or any other Governmental Entity.
(e)Information Supplied. None of the information supplied or to be supplied by Nara for inclusion or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Joint Proxy Statement/Prospectus will, at the date of mailing to stockholders and at the times of the meetings of stockholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Joint Proxy Statement/Prospectus will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, and the Form S-4 will comply as to form in all material respects with the requirements of the Securities Act and the rules and regulations of the SEC thereunder, except that no representation or warranty is made by Nara with respect to statements made or incorporated by reference therein based on information supplied by Center Financial for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus or Form S-4.
(f)Compliance with Applicable Legal and Reporting Requirements.
(i) Nara and its Subsidiaries hold all permits, authorizations, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of the businesses of Nara and its Subsidiaries, taken as a whole (the “Nara Permits”), the Nara Permits are in full force and effect and Nara and its Subsidiaries are in compliance with the terms of the Nara Permits, except where the failure so to hold, be in full force and effect or comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(ii) Since December 31, 2007, Nara and each of its Subsidiaries has conducted its business in compliance with all Applicable Legal Requirements (including the SOX Act, the USA PATRIOT Act of 2001, any other applicable anti-money laundering statute, rule or regulation or any rule or regulation issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the privacy and customer information requirements contained in Applicable Legal Requirements, and all applicable fair lending and other discrimination-related statutes, rules or regulations) or to the employees conducting such businesses, except for possible violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. To the knowledge of Nara, no investigation by any Governmental Entity with respect to Nara or any of its Subsidiaries is pending or threatened, other than, in each case, those the outcome of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(g)Accounting and Internal Controls.
(i) The records, systems, controls, data and information of Nara and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Nara or its Subsidiaries (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the following clause.
(ii) Nara and its Subsidiaries have implemented and maintain a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles,
A-1-24
including that: (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(iii) Nara has (A) implemented and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and such controls and procedures are effective to ensure that (1) all information required to be disclosed by Nara in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) all such information is accumulated and communicated to Nara’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure and (B) disclosed, based on its most recent evaluation prior to the date hereof, to Nara’s auditors and the audit committee of the Nara Board (1) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Nara’s ability to record, process, summarize and report financial data and have identified for Nara’s auditors any material weaknesses in internal controls and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in Nara’s internal controls. Nara has made available to Center Financial a summary of any such disclosure made by management to Nara’s auditors and audit committee since December 31, 2007.
(iv) Since December 31, 2007, neither Nara nor any of its Subsidiaries or, to the knowledge of Nara, any director, officer, employee, auditor, accountant or representative of Nara or any of its Subsidiaries has received or has otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Nara or any of its Subsidiaries or their internal control over financial reporting, including any complaint, allegation, assertion or claim that Nara or any of its Subsidiaries has engaged in questionable accounting or auditing practices.
(h)Legal Proceedings. There is no suit, action, investigation or proceeding (whether judicial, arbitral, administrative or other) pending or, to the knowledge of Nara, threatened, against or affecting Nara or any Subsidiary of Nara as to which there is a significant possibility of an adverse outcome which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Nara or any Subsidiary of Nara having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or on the Surviving Corporation.
(i)Taxes. Except as set forth inSection 3.2(i) of the Nara Disclosure Schedule:
(i) Each of Nara and the Nara Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all material tax returns required to be filed by it, and all such filed tax returns were true, correct and complete in all material respects. All taxes shown to be due on such tax returns have been timely paid.
(ii) No written or, to the knowledge of Nara, unwritten notice of any deficiency with respect to taxes that has been proposed, asserted or assessed against Nara or any of the Nara Subsidiaries and has not previously been paid has been received by Nara or any Nara Subsidiary.
(iii) To the knowledge of Nara, no tax return of Nara or any Nara Subsidiary is under audit or examination by any Governmental Entity. No written or, to the knowledge of Nara, unwritten notice of such an audit or examination by any Governmental Entity has been received by Nara or any Nara Subsidiary. Any assessments for taxes due with respect to any completed and settled examinations or any concluded litigation have been fully paid.
A-1-25
(iv) Neither Nara nor any Nara Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code within the two-year period ending on the Closing Date.
(v) Neither Nara nor any Nara Subsidiary has any liability for any tax under Treasury Regulation Section 1.1502-6 or any similar provision of any other tax law, except for taxes of the affiliated group of which Nara is the common parent, within the meaning of Section 1504(a)(1) of the Code or any similar provision of any other tax law.
(vi) Neither Nara nor any Nara Subsidiary has taken or agreed to take (or failed to take or agree to take) any action or knows of any facts or circumstances that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(vii) Neither Nara nor any Nara Subsidiary has engaged in a transaction that would be reportable by or with respect to Nara or any Nara Subsidiary pursuant to Sections 6011, 6111 or 6112 of the Code.
(viii) Nara and the Nara Subsidiaries have withheld (or will withhold) from payments to or on behalf of its employees, independent contractors, creditors, stockholders or other third parties, and have timely paid (or will timely pay) to the appropriate Governmental Entity, all material amounts required to be withheld from such persons in accordance with applicable tax law.
(ix) There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any material taxes.
(x) Neither Nara nor any Nara Subsidiary is a party to or bound by any tax sharing agreement, tax indemnity obligation or agreement or arrangement with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any Governmental Entity).
(xi) Except for the actions required by the Bank Merger, Nara has no present plan or intention to, following the Closing, dispose of any of the capital stock of any Center Financial Subsidiary or of any Nara Subsidiary or permit any Center Financial Subsidiary or any Nara Subsidiary to dispose of or discontinue any Center Financial Subsidiary’s significant historic business assets or to substantially alter any Center Financial Subsidiary’s significant historic business lines. The Parties agree that any bulk sales after the Merger of certain non-performing loans previously owned by Center Financial, representing not more than 20% of Center Financial’s loan portfolio immediately before the Merger, are not inconsistent with the representation in the preceding sentence.
(j)Certain Agreements. Except as set forth inSection 3.2(j) of the Nara Disclosure Schedule and except for this Agreement, neither Nara nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (i) with respect to the employment of any directors or executive officers, or with any consultants that are natural persons, involving the payment of $150,000 or more per annum, (ii) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) which limits the ability of Nara or any of its Subsidiaries to compete in any line of business, in any geographic area or with any Person, or which requires referrals of business or requires Nara or any of its affiliates to make available investment opportunities to any Person on a priority, equal or exclusive basis, and in each case which limitation or requirement would reasonably be expected to be material to Nara and its Subsidiaries taken as a whole, (iv) with or to a labor union or other collective bargaining representative (including any collective bargaining agreement), (v) in the case of a Nara Benefit 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, (vi) which would prohibit or delay the consummation of any of the transactions contemplated by this Agreement, (vii) which involve the payment of more than $250,000 and are not terminable without penalty on notice of 90 days or less, (viii) real property leases or (ix) agreements providing for indemnification, contribution or any guaranty in favor of any officer or director or that were not entered into
A-1-26
in the ordinary course of business. Nara has previously made available to Center Financial complete and accurate copies of each contract, arrangement, commitment or understanding of the type described in thisSection 3.2(j) (collectively referred to herein as the “Nara Contracts”). All of the Nara Contracts are valid and in full force and effect, except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. Neither Nara nor any of its Subsidiaries has, and to the best knowledge of Nara, none of the other parties thereto have, violated any provision of, or committed or failed to perform any act, and no event or condition exists, which, with or without notice, lapse of time or both would constitute a default under the provisions of, any Nara Contract, except in each case for those violations and defaults which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(k)Benefit Plans.
(i) With respect to each Benefit Plan under which any employee or former employee of Nara or any of its Subsidiaries has any present or future right to benefits, and which is maintained or contributed to by Nara or any of its Subsidiaries or under which Nara or any of its Subsidiaries has any present or future liability (the “Nara Benefit Plans”), Nara has made available to Center Financial a true, correct and complete copy of (A) the most recent annual report (Form 5500) filed with the IRS and, where applicable, the related audited financial statements thereof, (B) such Nara Benefit Plan and all related amendments thereto, (C) each trust agreement relating to such Nara Benefit Plan and all related amendments thereto, (D) the most recent summary plan description for each Nara Benefit Plan for which a summary plan description is required by ERISA and, for Benefit Plans not subject to ERISA, any relevant summaries and (E) the most recent determination letter issued by the IRS with respect to any Nara Benefit Plan qualified under Section 401(a) of the Code.
(ii) None of the Nara Benefit Plans are subject to Title IV of ERISA.
(iii) Neither Nara, its Subsidiaries, nor any of their ERISA Affiliates has any liability under or with respect to a multiemployer plan (as defined in Section 3(37) of ERISA) nor any liability or contingent liability for providing, under any Nara Benefit Plan or otherwise, any post-retirement medical or life insurance benefits, other than statutory liability for providing group health plan continuation coverage under Part 6 of Title I of ERISA and Section 4980B of the Code or applicable state law.
(iv) Each Nara Benefit Plan that is a nonqualified deferred compensation subject to Section 409A of the Code has been operated and administered in good faith compliance with, and complies in form with, Section 409A of the Code and applicable guidance with respect thereto from the period beginning January 1, 2005 through the date hereof.
(v) With respect to the Nara Benefit Plans, individually and in the aggregate, no event has occurred and, to the knowledge of Nara, there exists no condition or set of circumstances in connection with which Nara or any of its Subsidiaries could be subject to any liability which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara under ERISA, the Code or any other Applicable Legal Requirements.
(vi) True and complete copies of the Nara Stock Plans as in effect on the date hereof, and copies of all outstanding awards agreements relating thereto, have been provided or made available to Center Financial.
(vii) Except as set forth inSection 3.2(k)(vii) of the Nara Disclosure Schedule, no Nara Benefit Plan or Nara Stock Plan exists that could result in the payment to any present or former employee of Nara or any Subsidiary of Nara of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of Nara or any Subsidiary of Nara as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Section 280G of the Code.
A-1-27
(viii) Except as set forth inSection 3.2(k)(viii) of the Nara Disclosure Schedule, none of the assets of any Nara Benefit Plan are invested in employer securities or employer real property.
(ix) With respect to each of the Nara Benefit Plans, all contributions or premium payments due and payable on or before the Closing Date have been timely made, and, to the extent not presently payable, appropriate reserves have been established for the payment and properly accrued in accordance with customary accounting practices.
(l)Bank Subsidiary. Nara owns all of the outstanding shares of capital stock of Nara Bank, free and clear of any claim, lien or encumbrance. All of the shares of capital stock of Nara Bank have been duly authorized and validly issued and are fully paid and non-assessable and not subject to preemptive rights. Nara Bank is an “insured bank” as defined in the FDIA and applicable regulations thereunder. Nara Bank is a California-state chartered member bank whose primary federal bank regulator is the Federal Reserve.
(m)Agreements with Regulators. Except as set forth inSection 3.2(m) of the Nara Disclosure Schedule, neither Nara nor any Subsidiary of Nara is a party or subject to any written agreement, consent decree or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any cease-and-desist or other order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policies, procedures or board resolutions at the request of, any Governmental Entity which restricts materially the conduct of its business, imposes any material requirements or procedures or in any manner relates to its capital adequacy, its credit or risk management policies or its management, nor has Nara been advised by any Governmental Entity that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such agreement, decree, memorandum of understanding, extraordinary supervisory letter, commitment letter, order, directive or similar submission, or any such policy, procedure or board resolutions. Nara and its Subsidiaries are in compliance with all of the foregoing so listed inSection 3.2(m) of the Nara Disclosure Schedule, except to the extent that the failure so to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. There are no formal or informal investigations, known to Nara, relating to any regulatory matters pending before any Governmental Entity with respect to Nara or any of its Subsidiaries.
(n)Absence of Certain Changes or Events. From September 30, 2010 through the date of this Agreement: (i) Nara and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices, (ii) there has not been any change, circumstance or event (including any event involving a prospective change) which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara and (iii) there has not been (A) any action or event of the type that would have required the consent of Center Financial underSection 4.2 or (B) any material loss, damage or destruction to, or any material interruption in the use of, any of the assets of Nara or any of its Subsidiaries (whether or not covered by insurance).
(o)Board Approval. The Nara Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held (the “Nara Board Approval”), has (i) determined that this Agreement and the Merger are fair to and in the best interests of Nara and its stockholders and declared the Merger to be advisable, (ii) approved this Agreement and the Merger, and (iii) recommended that the stockholders of Nara adopt this Agreement and directed that such matter be submitted for consideration by Nara stockholders at the Nara Stockholders Meeting. No state takeover statute is applicable to this Agreement, the Merger or the other transactions contemplated hereby.
(p)Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of Nara Common Stock to adopt this Agreement (the “Required Nara Vote”) is the only vote of the holders of any class or series of Nara capital stock necessary to approve and adopt this Agreement and the transactions contemplated hereby (including the Merger).
A-1-28
(q)Properties. Nara or one of its Subsidiaries (i) has good and marketable title to all the properties and assets reflected in the latest audited balance sheet included in the Nara SEC Documents filed prior to the date hereof as being owned by Nara or one of its Subsidiaries or acquired after the date thereof which are material to Nara’s business on a consolidated basis (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all claims, liens, charges, security interests or encumbrances of any nature whatsoever, except for Permitted Liens, and (ii) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such Nara SEC Documents or acquired after the date thereof which are material to its business on a consolidated basis (except for leases that have expired by their terms since the date thereof) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to Nara’s knowledge, the lessor, except in the case ofclauses (i) and(ii) above which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(r)Intellectual Property. Nara and its Subsidiaries own or have a valid license to use all trademarks, service marks and trade names (including any registrations or applications for registration of any of the foregoing) (collectively, the “Nara Intellectual Property”) necessary to carry on their business substantially as currently conducted, except where such failures to own or validly license such Nara Intellectual Property would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. Neither Nara nor any such Subsidiary has received any notice of infringement of or conflict with, and to Nara’s knowledge, there are no infringements of or conflicts with, the rights of others with respect to the use of any Nara Intellectual Property which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(s)Derivatives. All Derivative Contracts, whether entered into for Nara’s own account, or for the account of one or more of its Subsidiaries or their respective customers, were entered into (i) in accordance with prudent business practices and all Applicable Legal Requirements and (ii) with counterparties which Nara believes to be financially responsible. Each Derivative Contract of Nara or any of its Subsidiaries constitutes the valid and legally binding obligation of Nara or one or more of its Subsidiaries, as the case may be, that is enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles), and is in full force and effect. Neither Nara nor its Subsidiaries, nor to the knowledge of Nara any other party thereto, is in breach of any of its obligations under any Derivative Contract of Nara or one of its Subsidiaries. The financial position of Nara and its Subsidiaries on a consolidated basis under or with respect to each such Derivative Contract has been reflected in the books and records of Nara and such Subsidiaries in accordance with generally accepted accounting principles applied on a consistent basis.
(t)Loan Portfolio.
(i) Neither Nara nor any of its Subsidiaries is a party to any written or oral (A) Loans under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Nara, in default of any other provision, or (B) Loans with any director, executive officer or 5% or greater stockholder of Nara or any of its Subsidiaries, or to the knowledge of Nara, any affiliate of any of the foregoing. Set forth inSection 3.2(t) of the Nara Disclosure Schedule is a true, correct and complete list of (A) all of the Loans of Nara and its Subsidiaries that, as of September 30, 2010, were classified by Nara as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, (B) by category of Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the other Loans of Nara and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on
A-1-29
such Loans by category, and (C) each asset of Nara or any of its Subsidiaries that, as of September 30, 2010, was classified as OREO and the book value thereof, it being understood and agreed that the Loans referenced inclauses (A) and(B) of this sentence include any Loans so classified by Nara or by any Governmental Entity. Nara shall provide to Center Financial, on a monthly basis, (1) a schedule of Loans of Nara and its Subsidiaries that become classified in the manner described in the previous sentence, or any Loan of Nara and its Subsidiaries the classification of which is changed to a lower classification or to OREO, and (2) a schedule of Loans of Nara and its Subsidiaries in which the obligor is delinquent in payment by 30 days or more, in each case after the date of this Agreement.
(ii) Each Loan of Nara and its Subsidiaries (A) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (B) to the extent carried on the books and records of Nara and its Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restriction, claims, liens or encumbrances, as applicable, which have been perfected and (C) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(iii) Each outstanding Loan of Nara and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of Nara and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all Applicable Legal Requirements.
(iv) Except as set forth inSection 3.1(t)(iv) of the Nara Disclosure Schedule, none of the agreements pursuant to which Nara or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
(v) There are no outstanding Loans made by Nara or any of its Subsidiaries to any “executive officer” or other “insider” (as each such term is defined in Regulation O promulgated by the Federal Reserve) of Nara or its Subsidiaries, other than Loans that are subject to and that were made and continue to be in compliance with Regulation O or that are exempt therefrom.
(u)Insurance. Set forth inSection 3.2(u) of the Nara Disclosure Schedule is a true, correct and complete list of all insurance policies maintained by Nara and its Subsidiaries. All such insurance policies and bonds are in full force and effect, and neither Nara nor any of its Subsidiaries is in default under any such policy or bond. Except as set forth inSection 3.2(u) of the Nara Disclosure Schedule, as of the date hereof, there are no claims in excess of $100,000 under any of such insurance policies or bonds, which claims are pending or as to which coverage has been denied or disputed by the underwriters of such insurance policies or bonds.
(v)Transactions with Affiliates. Except as set forth inSection 3.2(v) of the Nara Disclosure Schedule, there are no agreements, contracts, plans, arrangements or other transactions between Nara or any of its Subsidiaries, on the one hand, and any (i) officer or director of Nara or any of its Subsidiaries, (ii) record or beneficial owner of 5% or more of the voting securities of Nara, (iii) affiliate or family member of any such officer, director or record or beneficial owner or (iv) any other affiliate of Nara, on the other hand, except those of a type available to employees of Nara generally.
(w)Brokers or Finders. No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement, except Keefe, Bruyette & Woods, Inc., and, if the Merger is not consummated, Nara agrees to indemnify Center Financial and to hold Center Financial harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or
A-1-30
expenses asserted by any Person on the basis of any act or statement alleged to have been made by Nara or its affiliates.
(x)Opinion of Nara Financial Advisor. Nara has received the opinion of its financial advisor, Keefe, Bruyette & Woods, Inc., dated the date of this Agreement, to the effect that the Exchange Ratio is fair, from a financial point of view, to Nara and the holders of Nara Common Stock.
(y)No Other Representations or Warranties. Except for the representations and warranties contained in thisSection 3.2, neither Nara nor any other Person on behalf of Nara is making or has made any express or implied representation or warranty with respect to Nara or with respect to any other information provided to Center Financial in connection with the transactions contemplated herein. Neither Nara nor any other Person shall have or be subject to any liability or indemnification obligation to Center Financial or any other Person resulting from the distribution to Center Financial, or the use by Center Financial of, any such information, including any information, documents, projections, forecasts or other material made available to Center Financial in any “virtual data room” or management presentation in expectation of the transactions contemplated by this Agreement, unless any such information is expressly included in a representation or warranty contained in thisSection 3.2. Nara acknowledges that Center Financial is making no representations or warranties other than the representations and warranties contained inSection 3.1.
-i-
Page | ||||||||||
(n) | Absence of Certain Changes or Events | 17 | ||||||||
(o) | Board Approval | 17 | ||||||||
(p) | Vote Required | 17 | ||||||||
(q) | Properties | 17 | ||||||||
(r) | Intellectual Property | 17 | ||||||||
(s) | Derivatives | 18 | ||||||||
(t) | Loan Portfolio | 18 | ||||||||
(u) | Insurance | 19 | ||||||||
(v) | Transactions with Affiliates | 19 | ||||||||
(w) | Brokers or Finders | 20 | ||||||||
(x) | Opinion of Financial Advisor of Center Financial | 20 | ||||||||
(y) | No Other Representations or Warranties | 20 | ||||||||
3.2 | Representations and Warranties of Nara | 20 | ||||||||
(a) | Organization, Standing and Power | 20 | ||||||||
(b) | Capital Structure | 20 | ||||||||
(c) | Authority | 22 | ||||||||
(d) | SEC Documents; Regulatory Reports; Undisclosed Liabilities | 22 | ||||||||
(e) | Information Supplied | 24 | ||||||||
(f) | Compliance with Applicable Legal and Reporting Requirements | 24 | ||||||||
(g) | Accounting and Internal Controls | 24 | ||||||||
(h) | Legal Proceedings | 25 | ||||||||
(i) | Taxes | 25 | ||||||||
(j) | Certain Agreements | 26 | ||||||||
(k) | Benefit Plans | 27 | ||||||||
(l) | Bank Subsidiary | 28 | ||||||||
(m) | Agreements with Regulators | 28 | ||||||||
(n) | Absence of Certain Changes or Events | 28 | ||||||||
(o) | Board Approval | 28 | ||||||||
(p) | Vote Required | 28 | ||||||||
(q) | Properties | 29 | ||||||||
(r) | Intellectual Property | 29 | ||||||||
(s) | Derivatives | 29 | ||||||||
(t) | Loan Portfolio | 29 | ||||||||
(u) | Insurance | 30 | ||||||||
(v) | Transactions with Affiliates | 30 | ||||||||
(w) | Brokers or Finders | 30 | ||||||||
(x) | Opinion of Nara Financial Advisor | 31 | ||||||||
(y) | No Other Representations or Warranties | 31 | ||||||||
ARTICLE IV | COVENANTS RELATING TO CONDUCT OF BUSINESS | 31 | ||||||||
4.1 | Covenants of Center Financial | 31 | ||||||||
(a) | Ordinary Course | 31 | ||||||||
(b) | Dividends; Changes in Stock | 31 | ||||||||
(c) | Issuance of Securities | 32 | ||||||||
(d) | Governing Documents | 32 | ||||||||
(e) | No Acquisitions | 32 | ||||||||
(f) | No Dispositions | 32 | ||||||||
(g) | Indebtedness | 32 | ||||||||
(h) | Other Actions | 33 |
-ii-
Page | ||||||||||
(i) | Accounting Methods | 33 | ||||||||
(j) | Tax Matters | 33 | ||||||||
(k) | Compensation and Benefit Plans | 33 | ||||||||
(l) | Investment Portfolio; Interest Rate Risk; Other Risk | 33 | ||||||||
(m) | No Liquidation | 33 | ||||||||
(n) | Other Agreements | 33 | ||||||||
4.2 | Covenants of Nara | 33 | ||||||||
(a) | Ordinary Course | 34 | ||||||||
(b) | Dividends; Changes in Stock | 34 | ||||||||
(c) | Issuance of Securities | 34 | ||||||||
(d) | Governing Documents | 34 | ||||||||
(e) | No Acquisitions | 34 | ||||||||
(f) | No Dispositions | 35 | ||||||||
(g) | Indebtedness | 35 | ||||||||
(h) | Other Actions | 35 | ||||||||
(i) | Accounting Methods | 35 | ||||||||
(j) | Tax Matters | 35 | ||||||||
(k) | Compensation and Benefit Plans | 35 | ||||||||
(l) | Investment Portfolio; Interest Rate Risk; Other Risk | 36 | ||||||||
(m) | No Liquidation | 36 | ||||||||
(n) | Other Agreements | 36 | ||||||||
4.3 | Transition | 36 | ||||||||
4.4 | Advice of Changes; Government Filings | 36 | ||||||||
4.5 | Insurance | 37 | ||||||||
4.6 | No Control of Other Party’s Business | 37 | ||||||||
ARTICLE V | ADDITIONAL AGREEMENTS | 37 | ||||||||
5.1 | Preparation of Proxy Statement; Stockholders Meetings | 37 | ||||||||
5.2 | Access to Information | 40 | ||||||||
5.3 | Reasonable Best Efforts | 40 | ||||||||
5.4 | Acquisition Proposals | 42 | ||||||||
5.5 | Stock Exchange Listing | 43 | ||||||||
5.6 | Employee Benefit Plans and Employee Matters | 43 | ||||||||
5.7 | Center Financial Stock Option and Center Financial Restricted Shares | 44 | ||||||||
5.8 | Fees and Expenses | 44 | ||||||||
5.9 | Governance; Name Change | 45 | ||||||||
5.10 | Indemnification; Directors’ and Officers’ Insurance | 45 | ||||||||
5.11 | Public Announcements | 46 | ||||||||
5.12 | Tax Matters | 46 | ||||||||
5.13 | Additional Agreements | 46 | ||||||||
ARTICLE VI | CONDITIONS PRECEDENT | 46 |
-iii-
Page | ||||||||||
6.1 | Conditions to Each Party’s Obligation To Effect the Merger | 46 | ||||||||
(a) | Stockholder Approval | 46 | ||||||||
(b) | Stock Exchange Listing | 47 | ||||||||
(c) | Other Approvals | 47 | ||||||||
(d) | Form S-4 | 47 | ||||||||
(e) | No Injunctions or Restraints; Illegality | 47 | ||||||||
(f) | Absence of Burdensome Conditions | 47 | ||||||||
(g) | By-Law Amendment | 47 | ||||||||
6.2 | Conditions to Obligation of Nara | 47 | ||||||||
(a) | Representations and Warranties | 47 | ||||||||
(b) | Performance of Obligations | 47 | ||||||||
(c) | Tax Opinion | 48 | ||||||||
(d) | Material Adverse Effect | 48 | ||||||||
(e) | Appraisal Rights | 48 | ||||||||
6.3 | Conditions to Obligation of Center Financial | 48 | ||||||||
(a) | Representations and Warranties | 48 | ||||||||
(b) | Performance of Obligations | 48 | ||||||||
(c) | Tax Opinion | 48 | ||||||||
(d) | Material Adverse Effect | 48 | ||||||||
ARTICLE VII | TERMINATION AND AMENDMENT | 48 | ||||||||
7.1 | Termination | 48 | ||||||||
7.2 | Effect of Termination | 50 | ||||||||
7.3 | Amendment | 51 | ||||||||
7.4 | Extension; Waiver | 51 | ||||||||
ARTICLE VIII | GENERAL PROVISIONS | 52 | ||||||||
8.1 | Definitions | 52 | ||||||||
8.2 | Non-survival of Representations, Warranties and Agreements | 55 | ||||||||
8.3 | Notices | 55 | ||||||||
8.4 | Interpretation | 56 | ||||||||
8.5 | Counterparts | 56 | ||||||||
8.6 | Entire Agreement; No Third Party Beneficiaries | 56 | ||||||||
8.7 | Governing Law | 57 | ||||||||
8.8 | Severability | 57 | ||||||||
8.9 | Assignment | 57 | ||||||||
8.10 | Submission to Jurisdiction | 57 | ||||||||
8.11 | Enforcement | 57 | ||||||||
8.12 | Waiver of Jury Trial | 57 |
-iv-
EXHIBITS
Exhibit 1.4 | Amendment to By-laws | |
Exhibit 1.5 | Form of Bank Merger Agreement |
INDEX OF DEFINED TERMS
Acquisition Proposal | Section 5.4(a) | |
Agreement | Preamble | |
Applicable Legal Requirements | Section 8.1 | |
Assumed Options | Section 2.1(d) | |
Assumed Plan | Section 2.1(d) | |
Assumed Restricted Shares | Section 2.1(d) | |
Bank Merger | Recitals | |
Bank Merger Act | Section 3.1(c) | |
Bank Merger Agreement | Section 1.5 | |
Benefit Plans | Section 3.1(k) | |
BHC Act | Section 3.1(a) | |
Board Recommendations | Section 5.1(c) | |
Center Financial | Preamble | |
Center Bank | Recitals | |
Center Financial Benefit Plans | Section 3.1(k) | |
Center Financial Board | Section 3.1(g) | |
Center Financial Board Approval | Section 3.1(o) | |
Center Financial Board Recommendation | Section 5.1(b) | |
Center Financial Certificates | Section 8.1 | |
Center Financial Common Stock | Section 3.1(b) | |
Center Financial Contracts | Section 3.1(j) | |
Center Financial Disclosure Schedule | Section 3.1 | |
Center Financial Insider | Section 8.1 | |
Center Financial Intellectual Property | Section 3.1(r) | |
Center Financial Permits | Section 3.1(f) | |
Center Financial Preferred Stock | Section 3.1(b) | |
Center Financial Restricted Share | Section 8.1 | |
Center Financial SEC Documents | Section 3.1(d) | |
Center Financial Series A Preferred Stock | Section 3.1(b) | |
Center Financial Stock | Section 8.1 | |
Center Financial Stock Option | Section 8.1 | |
Center Financial Stock Plan | Section 3.1(b) | |
Center Financial Stockholders Meetings | Section 5.1(b) | |
Center Financial TARP Warrant | Section 2.1(e) | |
Center Financial Termination Fee | Section 7.2(c) | |
Center Financial’s Current Premium | Section 5.10(b) | |
Certificate of Merger | Section 1.1 | |
CGCL | Section 1.1 | |
Change in Recommendation | Section 5.1(e) | |
Closing | Section 1.2 | |
Closing Date | Section 1.2 | |
Code | Recitals | |
Confidentiality Agreement | Section 5.2(b) | |
Constituent Corporations | Section 8.1 |
-v-
Covered Loans | Section 8.1 | |
Covered OREOs | Section 8.1 | |
Derivative Contract | Section 3.1(s) | |
DFI | Section 3.1(c) | |
DGCL | Section 1.1 | |
DPC shares | Section 3.1(b) | |
EDGAR | Section 3.1(d) | |
Effective Time | Section 1.1 | |
ERISA | Section 3.1(k) | |
ERISA Affiliate | Section 8.1 | |
Exchange Act | Section 3.1(c) | |
Exchange Agent | Section 2.2(a) | |
Exchange Fund | Section 8.1 | |
Exchange Ratio | Section 2.1(b) | |
FDIA | Section 3.1(l) | |
FDIC | Section 8.1 | |
Federal Reserve | Section 3.1(c) | |
Form S-4 | Section 5.1(a) | |
Governmental Entity | Section 8.1 | |
Indemnified Liabilities | Section 5.10(a) | |
Indemnified Parties | Section 5.10(a) | |
Injunction | Section 6.1(e) | |
Intervening Event | Section 5.1(f) | |
IRS | Section 8.1 | |
Joint Proxy Statement/Prospectus | Section 5.1(a) | |
Loans | Section 8.1 | |
Loss-Sharing Approvals | Section 3.1(c) | |
material | Section 8.1 | |
Material Adverse Effect | Section 8.1 | |
Merger | Recitals | |
Nara | Preamble | |
Nara Bank | Recitals | |
Nara Benefit Plans | Section 3.2(k) | |
Nara Board | Section 2.1(c) | |
Nara Board Approval | Section 3.2(o) | |
Nara Board Recommendation | Section 5.1(c) | |
Nara Certificates | Section 2.2(a) | |
Nara Common Stock | Section 3.2(b) | |
Nara Contracts | Section 3.2(j) | |
Nara Disclosure Schedule | Section 3.2 | |
Nara Intellectual Property | Section 3.2(r) | |
Nara Performance Units | Section 2.1(b) | |
Nara Permits | Section 3.2(f) | |
Nara Preferred Stock | Section 3.2(b) | |
Nara SEC Documents | Section 3.2(d) | |
Nara Series A Preferred Stock | Section 3.2(b) | |
Nara Series B Preferred Stock | Section 2.1(c) | |
Nara Stock | Section 8.1 | |
Nara Stock Option | Section 8.1 | |
Nara Stock Plan | Section 3.2(b) | |
Nara Stockholders Meeting | Section 5.1(c) | |
Nara TARP Warrant | Section 3.2(b) |
-vi-
Nara Termination Fee | Section 7.2(b) | |
NASDAQ | Section 8.1 | |
OREO | Section 3.1(t) | |
Party | Preamble | |
Person | Section 8.1 | |
Permitted Liens | Section 8.1 | |
Public Proposal | Section 7.2(b) | |
Required Center Financial Vote | Section 3.1(p) | |
Required Nara Vote | Section 3.2(p) | |
Requisite Regulatory Approvals | Section 3.1(c) | |
SBA | Section 3.1(c) | |
SBIA | Section 3.1(c) | |
SEC | Section 8.1 | |
Section 16 Information | Section 8.1 | |
Securities Act | Section 3.1(b) | |
Significant Subsidiary | Section 8.1 | |
SOX Act | Section 3.1(d) | |
Subsidiary | Section 8.1 | |
Superior Proposal | Section 8.1 | |
Surviving Corporation | Section 8.1 | |
Target Party | Section 5.1(f) | |
tax or taxes | Section 8.1 | |
tax return | Section 8.1 | |
Trust Document | Section 8.1 | |
Violation | Section 3.1(c) | |
Voting Debt | Section 8.1 |
-vii-
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 9, 2010 (this “Agreement”), is entered into between NARA BANCORP, INC., a Delaware corporation (“Nara”), and CENTER FINANCIAL CORPORATION, a California corporation (“Center Financial”). Nara and Center Financial are sometimes referred to herein collectively as the “Parties” and individually as a “Party.”
WHEREAS, the boards of directors of Nara and Center Financial have approved, and declared it to be advisable and in the best interests of their respective stockholders to consummate, the business combination transaction provided for herein in which Center Financial would merge with and into Nara (the “Merger”);
WHEREAS, the boards of directors of Nara and Center Financial have each determined that the Merger and the other transactions contemplated hereby are consistent with, and in furtherance of, their respective business strategies and goals;
WHEREAS, Nara and Center Financial desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Treasury Regulation Section 1.368-2(g); and
WHEREAS, the boards of directors of Nara’s wholly owned subsidiary, Nara Bank, a California state chartered banking corporation (“Nara Bank”), and Center Financial’s wholly owned subsidiary, Center Bank, a California state chartered banking corporation (“Center Bank”), have approved, and declared it to be advisable and in the best interests of their respective stockholders, Nara and Center Financial, to consummate, concurrently with or as soon as reasonably practicable after the Merger, a business combination transaction in which Center Bank would merge with and into Nara Bank (the “Bank Merger”).
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, subject to the conditions set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
THE MERGER
1.1Effective Time of the Merger. Upon the terms and subject to the conditions set forth in this Agreement, Nara and Center Financial shall cause the Merger to be consummated by filing a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law (the “DGCL”), and shall concurrently cause the Certificate of Merger, or any other certificate, agreement or other document specified in the relevant provisions of the California General Corporation Law (the “CGCL”) to cause the Merger to be effective in California, to be filed with the Secretary of State of the State of California, in such form as required by, and executed in accordance with, the relevant provisions of the CGCL. The Merger shall become effective upon (a) such filing of the Certificate of Merger with the Secretary of State of the State of Delaware or (b) such later date and time as may be specified in the Certificate of Merger (the “Effective Time”).
1.2Closing. The closing of the Merger (the “Closing”) will take place at 10:00 a.m. on the date (the “Closing Date”) that is the third business day after the satisfaction or waiver of the conditions set forth inArticle VI (excluding those conditions that, by their nature, are to be satisfied as of the Closing, but subject to the satisfaction or waiver of those conditions as of the Closing), unless another time or date is agreed to in writing by the Parties. The Closing shall be held at the offices of Mayer Brown LLP, 350 South Grand Avenue, Los Angeles, California 90071, unless another place is agreed to in writing by the Parties.
A-1-1
1.3Effects of the Merger. Nara shall be the Surviving Corporation in the Merger. At the Effective Time, Center Financial shall be merged with and into Nara and the separate existence of Center Financial shall cease. The Merger will have the effects set forth in the DGCL and the CGCL.
1.4Certificate of Incorporation and By-Laws. The Certificate of Incorporation of Nara as in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation, except that such Certificate of Incorporation shall be amended to provide that, effective as of the Effective Time, the name of the Surviving Corporation shall be changed to a name mutually acceptable to Center Financial and Nara. The By-laws of Nara as in effect immediately prior to the Effective Time, as amended substantially in the form set forth inExhibit 1.4, shall be the By-laws of the Surviving Corporation.
1.5Bank Merger. As soon as reasonably practicable after the date hereof, Nara and Center Financial shall cause Nara Bank and Center Bank to enter into a bank merger agreement in substantially the form attached to this Agreement asExhibit 1.5 (the “Bank Merger Agreement”), providing for the Bank Merger in accordance with Applicable Legal Requirements and the terms of the Bank Merger Agreement concurrently with or as soon as reasonably practicable after consummation of the Merger.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of Nara, Center Financial or the holder of any of the following securities:
(a)Cancellation of Stock Owned by the Parties. Any shares of Center Financial Common Stock that are issued and outstanding immediately prior to the Effective Time and are owned by Center Financial or Nara (other than, for the avoidance of doubt, any DPC shares or shares for which Center Financial is the record holder for the benefit of another Person) shall be cancelled and retired and no stock of Nara or other consideration shall be delivered in exchange therefor. Any shares of Nara Common Stock that are issued and outstanding immediately prior to the Effective Time and are owned by Center Financial (other than, for the avoidance of doubt, any DPC shares or shares for which Center Financial is the record holder for the benefit of another Person) shall be cancelled and retired.
(b)Conversion of Center Financial Common Stock. Subject toSection 2.2(e), each share of Center Financial Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be cancelled in accordance withSection 2.1(a) and dissenting shares as provided inSection 2.1(f)) shall be converted into 0.7804 (the “Exchange Ratio”) fully paid and nonassessable shares of Nara Common Stock. None of such shares of Center Financial Common Stock shall remain outstanding and all of such shares shall automatically be cancelled and retired and shall cease to exist, and each stock certificate previously representing any such shares shall thereafter represent solely the shares of Nara Common Stock into which such Center Financial Common Stock has been converted and the right pursuant toSection 2.2(e) to receive payment of cash in lieu of the issuance of fractional shares, without interest, if applicable. The Parties acknowledge and agree that the Exchange Ratio has been determined based upon (i) the number of shares of Center Financial Common Stock and Center Financial Restricted Shares and Nara Common Stock and Nara’s performance units issued under the Nara Stock Plan (the “Nara Performance Units”) represented and warranted herein by the respective Parties to be issued and outstanding, in each case as of November 30, 2010, as set forth inSection 3.1(b)(i) andSections 3.2(b)(i) and3.2(b)(iii), respectively, and (ii) on a diluted basis using the treasury stock method, each issued and outstanding Center Financial Stock Option and Nara Stock Option with an exercise price that was below the closing price of a share of Nara Common Stock and Center Financial Common Stock, respectively, as reported on the NASDAQ website at the close of NASDAQ’s regular session of trading on December 8, 2010, and represented and warranted herein by the respective Parties to be issued and outstanding as of November 30, 2010, as set forth inSections 3.1(b)(i) and3.2(b)(i). Other than any increases in outstanding shares of Center Financial
A-1-2
Common Stock or Nara Common Stock resulting from the exercise of Center Financial Stock Options and Nara Stock Options issued and outstanding as of the date hereof, if the number of shares of Center Financial Common Stock or Nara Common Stock or the number of Center Financial Restricted Shares or Nara Performance Units that are issued and outstanding shall have increased or decreased as of the Closing, whether as permitted by or in breach of this Agreement, the Parties agree that, without limiting any other right or remedy to which the Parties are entitled at law or in equity, a corresponding adjustment shall be made to the Exchange Ratio such that holders of Center Financial Common Stock and holders of Nara Common Stock shall receive 45% and 55%, respectively, of the outstanding shares of common stock of the Surviving Corporation after the Merger is consummated. The Exchange Ratio, as recalculated, if applicable, shall, for all purposes hereunder, constitute the “Exchange Ratio.”
(c)Conversion of Center Financial Series A Preferred Stock. Each share of Center Financial Series A Preferred Stock issued and outstanding immediately prior to the Effective Time shall be converted into one fully paid and nonassessable share of Nara Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Nara Series B Preferred Stock”), which series of Nara Preferred Stock shall be authorized by action of the board of directors of Nara (the “Nara Board”) pursuant to the Certificate of Incorporation of Nara as in effect immediately prior to the Effective Time. The Nara Board shall take all necessary action to create the Nara Series B Preferred Stock prior to the Effective Time. The shares of Nara Series B Preferred Stock shall have, in respect of Nara, the same rights, preferences, privileges and voting powers, and limitations and restrictions thereof, as the shares of Center Financial Series A Preferred Stock had in respect of Center Financial immediately prior to the Effective Time. None of such shares of Center Financial Series A Preferred Stock shall remain outstanding and all of such shares shall automatically be cancelled and retired and shall cease to exist, and each stock certificate previously representing any such shares shall thereafter represent solely the shares of Nara Series B Preferred Stock into which such Center Financial Series A Preferred Stock has been converted, without interest.
(d)Stock Options and Other Equity-Based Awards. Unless otherwise agreed by Center Financial after the date hereof:
(i)Assumption of Center Financial Options. Center Financial and Nara shall take all actions necessary (including delivery of any required notices by Center Financial) to provide that, effective as of the Effective Time, without any action on the part of the holders thereof, each outstanding Center Financial Stock Option shall cease to represent the right to acquire shares of Center Financial Common Stock and shall instead be converted automatically into an option to acquire shares of Nara Common Stock as provided below (an “Assumed Option”), and such Assumed Options will be assumed by Nara on substantially the same terms and conditions as were applicable under the corresponding Center Financial Stock Options immediately prior to the Effective Time;provided,however, that after the Effective Time:
(1) each Assumed Option will be exercisable for a number of shares of Nara Common Stock equal to the product of (x) the number of shares of Center Financial Common Stock that would be issuable upon exercise of such Center Financial Stock Option outstanding immediately prior to the Effective Time multiplied by (y) the Exchange Ratio, rounded down to the nearest whole share; and
(2) the per share exercise price for the Nara Common Stock issuable upon exercise of such Assumed Option will be equal to the quotient determined by dividing (x) the per share exercise price for such Center Financial Stock Option outstanding immediately prior to the Effective Time by (y) the Exchange Ratio, rounded up to the nearest whole cent.
Any restriction on the exercisability of such Center Financial Stock Option in effect as of the date hereof will continue in full force and effect, and the term, exercisability, and vesting schedule of such Center Financial Stock Option as in effect on the date hereof will remain unchanged. As soon as reasonably practicable following the Closing Date, the Surviving Corporation will deliver to each
A-1-3
Person who holds an Assumed Option a document evidencing the foregoing assumption of such Center Financial Stock Option by the Surviving Corporation. Center Financial and Nara will cooperate and coordinate with respect to any materials to be submitted to the holders of Center Financial Stock Options in connection with any notice required under thisSection 2.1(d)(i).
(ii)Assumption of Center Financial Stock Plan. By virtue of the Merger, and without any action by any holders of equity awards, the Surviving Corporation shall, subject to the foregoing, assume the Center Financial Stock Plan (the “Assumed Plan”), with such assumption to be effective as of the Effective Time. Upon and following the Effective Time, the Surviving Corporation will be able to grant stock awards, to the extent permitted by Applicable Legal Requirements and applicable stock exchange listing regulations, under the terms of the Assumed Plan, to issue the reserved but unissued shares of Center Financial Common Stock under the Assumed Plan and the shares that would otherwise return to the Assumed Plan pursuant to the terms thereof, except that immediately upon the Effective Time, all references to a number of shares of Center Financial Common Stock will be (A) changed to references to Nara Common Stock and (B) converted to a number of shares of Nara Common Stock equal to the product of the number of shares of Center Financial Common Stock stated in the Center Financial Stock Plan multiplied by the Exchange Ratio, rounded down to the nearest whole share. The board of directors of the Surviving Corporation (or a committee thereof) shall, effective as of the Effective Time, become the administrator of the Assumed Plan.
(iii)Center Financial Restricted Shares. At the Effective Time, each Center Financial Restricted Share then outstanding shall be assumed by Nara. Subject to, and in accordance with, the terms of the Center Financial Stock Plan and any applicable award or other agreement, each award of Center Financial Restricted Shares then outstanding shall be converted into the number of shares of Nara Common Stock equal to the number of shares of Center Financial Common Stock subject to the Center Financial Restricted Share immediately prior to the Effective Time multiplied by the Exchange Ratio (rounded down to the nearest whole share of Nara Common Stock) (the “Assumed Restricted Shares”). Except as specifically provided in the preceding sentence, following the Effective Time, each Assumed Restricted Shares shall otherwise be subject to the same restrictions, terms and conditions as were applicable to such shares immediately prior to the Effective Time. Center Financial and Nara shall take all steps necessary to cause the foregoing provisions of thisSection 2.1(d)(iii) to occur, including but not limited to delivering all required notices. Center Financial and Nara will cooperate and coordinate with respect to any materials to be submitted to the holders of Center Financial Restricted Shares in connection with any notice required under thisSection 2.1(d)(iii).
(iv)Violation of Applicable Legal Requirements. No provision ofSections 2.1(d)(i),(ii) or(iii) shall be implemented with respect to an individual if such implementation would violate Applicable Legal Requirements, including those applicable to the Troubled Asset Relief Program.
(e)Warrant. The Warrant issued on December 12, 2008 to the United States Department of the Treasury in connection with the issuance of the Center Financial Series A Preferred Stock (the “Center Financial TARP Warrant”) shall, by virtue of the Merger and without any action on the part of any Person, cease to be a warrant to purchase Center Financial Common Stock and will become, automatically in accordance with its terms, a warrant to purchase Nara Common Stock, and, by virtue of the Merger and without any action on the part of any Person, Nara will assume such warrant subject to its terms;provided,however, that after the Effective Time:
(i) the number of shares of Nara Common Stock purchasable upon exercise of the Center Financial TARP Warrant will equal the product of (x) the number of shares of Center Financial Common Stock that were purchasable pursuant to the Center Financial TARP Warrant immediately before the Effective Time and (y) the Exchange Ratio, rounded to the nearest one-hundredth (1/100th) of a share; and
A-1-4
(ii) the per share exercise price for the Center Financial TARP Warrant will equal the quotient of (x) the per share exercise price of the Center Financial TARP Warrant in effect immediately before the Effective Time and (y) the Exchange Ratio, rounded to the nearest one-tenth (1/10th) of a cent.
(f)Dissenters’ Rights. Notwithstanding anything in this Agreement to the contrary, shares of Center Financial Stock that have not been voted in favor of approving the principal terms of the Merger and with respect to which dissenters’ rights shall have been properly demanded and may properly be exercised in accordance with the CGCL shall not be converted as set forth inSection 2.1(b) at or after the Effective Time unless and until the holder of such shares withdraws such holder’s demand for appraisal in accordance with Applicable Legal Requirements or becomes ineligible for such appraisal, at which time such shares shall be converted as set forth inSection 2.1(b), without interest. Center Financial shall give Nara (i) prompt notice of any written demands for appraisal, withdrawals of demands for appraisal and any other instruments in respect thereof received by Center Financial prior to the Effective Time and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal. Without the prior written consent of Nara, Center Financial shall not make any payment with respect to any demands for appraisal and shall not settle or offer to settle any such demands.
(g)Nara Capital Stock. Each share of Nara Common Stock and each share of Nara Preferred Stock shall remain outstanding without change following the Effective Time as shares of the Surviving Corporation, except as provided inSection 2.1(a).
2.2Exchange of Certificates.
(a)Exchange Agent. As of the Effective Time, Nara shall deposit or make available to a bank or trust company designated by Nara and reasonably acceptable to Center Financial (the “Exchange Agent”), for the benefit of the holders of Center Financial Common Stock for exchange in accordance with thisArticle II, (i) certificates or, at the option of Nara, evidence of shares in book entry form (collectively “Nara Certificates”) representing the shares of Nara Common Stock issuable pursuant toSection 2.1 in exchange for such shares of Center Financial Common Stock and (ii) sufficient cash to pay cash in lieu of fractional shares in accordance withSection 2.2(e).
(b)Exchange Procedures. As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of shares of Center Financial Common Stock of record immediately prior to the Effective Time whose shares were converted into shares of Nara Common Stock pursuant toSection 2.1 (i) a letter of transmittal (which shall specify that, with respect to Center Financial Certificates, delivery shall be effected and risk of loss and title to the Center Financial Certificates shall pass, only upon delivery of the Center Financial Certificates and such letter of transmittal to the Exchange Agent, and which shall be in such form and have such other provisions as Nara and Center Financial may reasonably specify) and (ii) instructions for use in effecting the surrender of the Center Financial Certificates or Center Financial Common Stock held in book entry form, as applicable, in exchange for Nara Certificates representing the number of whole shares of Nara Common Stock into which such Center Financial Common Stock has been so converted. Upon surrender of a Center Financial Certificate for cancellation to the Exchange Agent together with such letter of transmittal or submission of a letter of transmittal in respect of shares of Center Financial Common Stock in book entry form, as applicable, duly executed, and such other documents as the Exchange Agent may reasonably require, the holder of such Center Financial Common Stock shall be entitled to receive in exchange therefor a Nara Certificate representing that number of whole shares of Nara Common Stock, which such holder has the right to receive in respect of the Center Financial Common Stock surrendered pursuant to the provisions of thisArticle II (after taking into account all shares of Center Financial Common Stock then held by such holder), and the Center Financial Common Stock so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of Center Financial Common Stock which is not registered in the transfer records of Center Financial, a Nara Certificate representing the proper number of shares of Nara Common Stock may be issued to a transferee if a duly executed letter of transmittal accompanied, in the case of Center Financial Common Stock in certificated form, by the relevant Center Financial Certificate representing such Center Financial Common Stock, is
A-1-5
presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by thisSection 2.2, each Center Financial Certificate and each book entry in respect of Common Stock in book entry form shall be deemed at any time after the Effective Time to represent only the Nara Common Stock into which such shares of Center Financial Common Stock have been converted as provided in thisArticle II and the right to receive upon such surrender cash in lieu of any fractional shares of Nara Common Stock, if applicable, as contemplated by thisSection 2.2.
(c)Distributions with Respect to Unexchanged Shares. No dividends or other distributions declared or made with respect to Nara Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Center Financial Common Stock with respect to the shares of Nara Common Stock represented thereby, and no cash payment in lieu of fractional shares shall be paid to any such holder of unsurrendered Center Financial Common Stock pursuant toSection 2.2(e), until the holder of such Center Financial Common Stock shall have complied with the exchange procedures set forth inSection 2.2(b). Subject to the effect of Applicable Legal Requirements, following the surrender of any such Center Financial Common Stock, there shall be paid to the holder of whole shares of Nara Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender the amount of any cash payable with respect to a fractional share of Nara Common Stock to which such holder is entitled pursuant toSection 2.2(e), if applicable, and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid (but withheld pursuant to the immediately preceding sentence) with respect to such whole shares of Nara Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole shares of Nara Common Stock.
(d)No Further Ownership Rights. All shares of Nara Common Stock issued upon conversion of shares of Center Financial Common Stock in accordance with the terms hereof (in each case, including any cash paid pursuant toSection 2.2(c) or2.2(e)) and all shares of Nara Series B Preferred Stock issued upon conversion of shares of Center Financial Series A Preferred Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Center Financial Common Stock or Center Financial Series A Preferred Stock, respectively; subject, however, to the Surviving Corporation’s obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by Center Financial on such shares of Center Financial Series A Preferred Stock in accordance with the terms of this Agreement on or prior to the Effective Time and which remain unpaid at the Effective Time, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Center Financial Common Stock or Center Financial Series A Preferred Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Center Financial Certificate or letter of transmittal in respect of shares of Center Financial Common Stock in book entry form, as applicable, is presented to the Surviving Corporation for any reason, the Center Financial Common Stock represented thereby or referred to therein shall be cancelled and exchanged as provided in thisArticle II.
(e)No Fractional Shares. No certificates or scrip representing fractional shares of Nara Common Stock shall be issued upon the surrender for exchange of Center Financial Common Stock, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of the Surviving Corporation. In lieu thereof, upon surrender of the applicable Center Financial Common Stock by submission of a letter of transmittal to the Exchange Agent accompanied, in the case of Center Financial Common Stock in certificated form, by the applicable Center Financial Certificates, the Exchange Agent shall pay each holder of such Center Financial Common Stock an amount in cash equal to the product obtained by multiplying (i) the fractional share interest to which such holder (after taking into account all shares of Center Financial Common Stock held at the Effective Time by such holder) would otherwise be entitled by (ii) the closing price on NASDAQ, as reported on the NASDAQ website at the close of NASDAQ’s regular session of trading, for a share of Nara Common Stock on the last trading day immediately preceding the Effective Time.
A-1-6
(f)Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the stockholders of Center Financial for six months after the Effective Time shall be delivered to the Surviving Corporation, upon demand, and any holders of Center Financial Common Stock who have not theretofore complied with thisArticle II shall thereafter look only to the Surviving Corporation for payment of their claim for Nara Common Stock, any cash in lieu of fractional shares of Nara Common Stock and any dividends or distributions with respect to Nara Common Stock.
(g)No Liability. None of Nara, Center Financial or the Surviving Corporation shall be liable to any holder of shares of Center Financial Common Stock or to any holder of shares of Center Financial Series A Preferred Stock for shares of Nara Common Stock or Nara Series B Preferred Stock, as applicable, or dividends or distributions with respect thereto or cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.
(h)Withholding. Nara shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Center Financial Common Stock or to any holder of shares of Center Financial Series A Preferred Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Nara, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Center Financial Common Stock or Center Financial Series A Preferred Stock, as applicable, in respect of which such deduction and withholding was made by Nara.
(i)Center Financial Series A Preferred Stock. The Parties shall contact the holder of the Center Financial Series A Preferred Stock prior to the Closing Date to make arrangements reasonably acceptable to such holder for the exchange of such holder’s shares of such stock after the Effective Time.
2.3Reservation of Right to Revise Structure. Prior to the Effective Time, the Parties shall have the right to change the method of effecting the Merger and/or the Bank Merger to an alternative structure mutually agreed by the Parties, including by re-structuring the transactions contemplated hereby and under the Bank Merger Agreement to provide for the merger of Nara with and into Center Financial, with Center Financial being the surviving corporation, the merger of Nara Bank with and into Center Bank, with Center Bank being the surviving bank, or both;provided,however, that any actions taken pursuant to this Section 2.3 shall not (a) alter or change the kind or amount of consideration to be issued to or retained by holders of Center Financial Common Stock, Center Financial Series A Preferred Stock, Nara Common Stock or Nara Series B Preferred Stock, as compared with what they would otherwise receive or retain pursuant to this Agreement, and holders of Center Financial Common Stock and holders of Nara Common Stock shall receive 45% and 55%, respectively, of the outstanding shares of common stock of the Surviving Corporation after the Merger is consummated, (b) adversely affect the tax consequences of the transaction to any such holder, (c) materially delay receipt of any Requisite Regulatory Approval, or (d) otherwise cause any closing condition not to be capable of being fulfilled (unless duly waived by the Party entitled to the benefits thereof). If the Parties mutually agree to change the structure of the Merger and/or Bank Merger, the Parties shall execute an appropriate amendment to this Agreement and/or the Bank Merger Agreement, as applicable, in order to reflect the change in structure;provided,however, that any such amendment shall not otherwise substantially affect the economic and other rights and obligations of the Parties or their respective shareholders.
A-1-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1Representations and Warranties of Center Financial. Except, with respect to any subsection of thisSection 3.1, as set forth in the correspondingly identified subsection of the disclosure schedule delivered by Center Financial to Nara concurrently herewith (the “Center Financial Disclosure Schedule”), Center Financial represents and warrants to Nara as follows:
(a)Organization, Standing and Power. Center Financial is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). Each of Center Financial and its Significant Subsidiaries is a corporation, trust or partnership duly organized, validly existing and, in the case of corporations, in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. The copies of Articles of Incorporation and By-laws of Center Financial and Center Bank, which have been previously furnished to Nara, are true, correct and complete copies of such documents as in effect on the date of this Agreement.
(b)Capital Structure.
(i) The authorized capital stock of Center Financial consists of 100,000,000 shares of common stock, without par value (the “Center Financial Common Stock”), and 10,000,000 shares of preferred stock, without par value (the “Center Financial Preferred Stock”). As of the close of business on November 30, 2010, (A) 39,992,745 shares of Center Financial Common Stock, including 79,334 Center Financial Restricted Shares, were issued and outstanding, 864,780 shares of Center Financial Common Stock were reserved for issuance upon the exercise of the Center Financial TARP Warrant, 717,140 shares of Center Financial Common Stock were subject to outstanding stock options issued under the Center Financial 2006 Stock Incentive Plan (the “Center Financial Stock Plan”) and 2,230,383 shares of Center Financial Common Stock were reserved for future issuance upon exercise of stock options or other awards under the Center Financial Stock Plan, and no shares of Center Financial Common Stock were held by Subsidiaries of Center Financial (exclusive of any shares acquired in respect of debts previously contracted (any such shares being referred to herein as “DPC shares”)); (B) 55,000 shares of Center Financial Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Center Financial Series A Preferred Stock”) were issued and outstanding. As of the close of business on November 30, 2010, options to acquire 52,745 shares of Center Financial Common Stock with an exercise price in excess of the closing share price of Center Financial as of the close of business on December 8, 2010 were issued and outstanding. All outstanding shares of Center Financial Common Stock and Center Financial Preferred Stock have been duly authorized and validly issued and are fully paid and non-assessable and the issuance of none of such shares was subject to preemptive rights.
(ii) Set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule is a true, correct and complete list of all outstanding bonds, debentures, notes, trust preferred securities or other similar obligations that Center Financial or any of its Subsidiaries has issued. Except as set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule, no Voting Debt of Center Financial or any Center Financial Subsidiary is issued or outstanding. All outstanding bonds, debentures, notes, trust preferred securities or other similar obligations of Center Financial or any of its Subsidiaries were issued in compliance in all material respects with all Applicable Legal Requirements. Each Trust Document entered into by Center Financial or any of its Subsidiaries is in full force and effect and constitutes the valid, binding and legally enforceable obligation of Center Financial or one of its Subsidiaries, and to the knowledge of Center Financial, the other parties thereto, enforceable in
A-1-8
accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles). Except as set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule or otherwise in thisSection 3.1(b), no Center Financial Subsidiary has issued securities held by any entity other than Center Financial or a Center Financial Subsidiary.
(iii) Except for (A) this Agreement, (B) the Center Financial TARP Warrant, (C) Center Financial Stock Options, which represented, as of November 30, 2010, the right to acquire up to an aggregate of 717,140 shares of Center Financial Common Stock, and (D) agreements entered into and securities and other instruments issued after the date of this Agreement to the extent permitted bySection 4.1, there are no options, warrants, calls, rights, commitments or agreements of any character to which Center Financial or any Subsidiary of Center Financial is a party or by which it or any such Subsidiary is bound obligating Center Financial or any Subsidiary of Center Financial to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or any Voting Debt or stock appreciation rights of Center Financial or of any Subsidiary of Center Financial or obligating Center Financial or any Subsidiary of Center Financial to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding contractual obligations of Center Financial or any of its Subsidiaries (A) to repurchase, redeem or otherwise acquire any shares of capital stock of Center Financial or any of its Subsidiaries or (B) pursuant to which Center Financial or any of its Subsidiaries is or could be required to register shares of Center Financial Common Stock, Center Financial Preferred Stock or other securities under the Securities Act of 1933, as amended (the “Securities Act”), except any such contractual obligations entered into after the date hereof to the extent permitted bySection 4.1.
(iv) Since December 31, 2009, except to the extent permitted bySection 4.1, Center Financial has not (A) issued any shares of capital stock, stock appreciation rights or securities exercisable or exchangeable for or convertible into shares of capital stock of Center Financial or any of its Subsidiaries, other than pursuant to and as required by the terms of the Center Financial Stock Plan and any employee stock options and other awards issued under the Center Financial Stock Plan prior to the date hereof (or issued after the date hereof in compliance withSections 4.1(c) and4.1(k)); (B) repurchased, redeemed or otherwise acquired, directly or indirectly through one or more Center Financial Subsidiaries, any shares of capital stock of Center Financial or any of its Subsidiaries (other than the acquisition of DPC shares in the ordinary course of business consistent with past practice); or (C) declared, set aside, made or paid to the stockholders of Center Financial dividends or other distributions on the outstanding shares of capital stock of Center Financial, other than cash dividends on the Center Financial Series A Preferred Stock as required by the terms of such preferred stock as in effect on the date hereof.
(v) Set forth inSection 3.1(b)(v) of the Center Financial Disclosure Schedule is a true, correct and complete list of all equity securities that Center Financial or any of its Subsidiaries owns, controls or holds for its own account, and neither Center Financial nor any of its Subsidiaries owns more than 4.9% of a class of voting securities of, or otherwise controls, any Person other than Center Financial Bank, in the case of Center Financial.
(c)Authority.
(i) Center Financial has all requisite corporate power and authority to enter into this Agreement and, subject in the case of the consummation of the Merger to the approval of the principal terms of the Merger by the requisite vote of the holders of Center Financial Stock, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Center Financial, subject in the case of the consummation of the Merger to the approval of the principal terms of the Merger by the stockholders of Center Financial. This Agreement has been duly
A-1-9
executed and delivered by Center Financial and constitutes a valid and binding obligation of Center Financial, enforceable against Center Financial in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(ii) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (A) conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or the loss of a material benefit under, or the creation of a lien, pledge, security interest, charge or other encumbrance on any assets (any such conflict, violation, default, right of termination, cancellation or acceleration, loss or creation, a “Violation”) pursuant to, any provision of the Articles of Incorporation or By-laws of Center Financial or any Subsidiary of Center Financial, or (B) except as set forth inSection 3.1(c)(ii) of the Center Financial Disclosure Schedule and subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to therein or inclause (iii) below, result in any Violation of any loan or credit agreement, note, mortgage, indenture, lease, Center Financial Benefit Plan or other agreement, obligation, instrument, permit, concession, franchise or license, or any Applicable Legal Requirements applicable to Center Financial or any Subsidiary of Center Financial or their respective properties or assets, which Violation, in the case ofclauses (A) and(B) above, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation.
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity (acting in any capacity) is required by or with respect to Center Financial or any Subsidiary of Center Financial in connection with the execution and delivery of this Agreement by Center Financial or the consummation by Center Financial of the transactions contemplated hereby, the failure to make or obtain which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation, except for (A) the filing of appropriate applications and notices with the Board of Governors of the Federal Reserve System (the “Federal Reserve”) under the BHC Act and the Bank Merger Act of 1960, as amended (the “Bank Merger Act”), and approval of the same, (B) the filing of an appropriate application with the California Department of Financial Institutions (the “DFI”) and approval of the same (the approvals required by the immediately precedingclauses (A) and(B) are referred to herein collectively as the “Requisite Regulatory Approvals”), (C) the filing with the SEC of (1) the Form S-4, including the Joint Proxy Statement/Prospectus and (2) such reports under Sections 12, 13(a), 13(d) and 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (D) the filing of the Certificate of Merger (or other appropriate documents as provided herein or in the CGCL) with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, (E) obtaining the appropriate approvals or consents under each loss-sharing agreement with the FDIC to which Center Financial or any Subsidiary of Center Financial is a party (the “Loss-Sharing Approvals”), and (F) such filings, notifications and approvals as may be required under the Small Business Investment Act of 1958 (“SBIA”) and the rules and regulations of the Small Business Administration (“SBA”) thereunder.
(d)SEC Documents; Regulatory Reports; Undisclosed Liabilities.
(i) Center Financial has filed all reports, schedules, registration statements and other documents required under Applicable Legal Requirements to be filed by it with the SEC since December 31, 2007 (the “Center Financial SEC Documents”). Center Financial has delivered or made available to Nara true, correct and complete copies of all Center Financial SEC Documents, all comment letters received by Center Financial from the SEC since December 31, 2007, all responses to such comment letters by or on behalf of Center Financial and all other correspondence since December 31, 2007 between the
A-1-10
SEC and Center Financial, in each case to the extent not available to the public in completely unredacted form on the SEC’s EDGAR website (“EDGAR”). No Subsidiary of Center Financial is, or since December 31, 2007 has been, required to file any form, report, registration statement or other document with the SEC. As of their respective dates of filing with the SEC (or, if amended or superseded by a filing prior to the date hereof, as of the date of such filing), the Center Financial SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act or the Sarbanes-Oxley Act of 2002 (the “SOX Act”), as the case may be, and the rules and regulations of the SEC thereunder applicable to such Center Financial SEC Documents, and none of the Center Financial SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including, in each case, any notes thereto) of Center Financial included in the Center Financial SEC Documents complied, as of their respective dates of filing with the SEC, in all material respects with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be disclosed therein) and fairly present in all material respects the consolidated financial position of Center Financial and its consolidated Subsidiaries and the consolidated results of operations, changes in stockholders’ equity and cash flows of such companies as of the dates and for the periods shown, subject, in the case of interim financial statements, to (i) the omission of notes to the extent permitted by Regulations S-X of the SEC (but only if, in the case of interim financial statements included in Center Financial SEC Documents since Center Financial’s most recent Annual Report on Form 10-K, such notes would not differ materially from the notes to the financial statements included in such Annual Report) and (ii) normal, recurring year-end adjustments (but only if the effect of such adjustments would not, individually or in the aggregate, be material). No financial statements of any Person other than the Subsidiaries of Center Financial are, or, since December 31, 2007 have been, required by generally accepted accounting principles to be included in the consolidated financial statements of Center Financial.
(ii) Since December 31, 2007, Center Financial and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were required to be filed by them under any Applicable Legal Requirements with the Federal Reserve, the FDIC, the DFI and with any other applicable Governmental Entity, and have paid all fees and assessments due and payable in connection therewith, except to the extent that the failure to file such report, registration or statement or to pay such fees and assessments would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. As of their respective dates (and without giving effect to any amendments or modifications filed after the date of this Agreement with respect to reports and documents filed before the date of this Agreement), each of such reports, registrations and statements (including the financial statements, exhibits and schedules therein) complied in all material respects with the applicable statutes, rules, regulations and orders enforced or promulgated by the Governmental Entity with which they were filed.
(iii) Except for (A) those liabilities that are fully reflected or reserved for in the consolidated financial statements of Center Financial included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010, as filed with the SEC prior to the date of this Agreement, (B) liabilities incurred since September 30, 2010 in the ordinary course of business consistent with past practice, and (C) liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial, Center Financial and its Subsidiaries do not have, and since September 30, 2010 Center Financial and its Subsidiaries have not incurred (except to the extent permitted bySection 4.1), any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise and whether or not required to be reflected in Center Financial’s financial statements in accordance with generally accepted accounting principles).
A-1-11
(iv) Center Financial is, and since December 31, 2007 has been, in compliance with the applicable listing and corporate governance rules and regulations of NASDAQ. Center Financial has delivered to Nara true, correct and complete copes of all correspondence between Center Financial and NASDAQ since December 31, 2007.
(v) As used in thisSection 3.1(d), the term “file” shall be broadly construed to include any manner in which a document or information is filed, furnished, transmitted or otherwise made available to the SEC or any other Governmental Entity.
(e)Information Supplied. None of the information supplied or to be supplied by Center Financial for inclusion or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Joint Proxy Statement/Prospectus will, at the date of mailing to stockholders and at the times of the meetings of stockholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Joint Proxy Statement/ Prospectus will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, except that no representation or warranty is made by Center Financial with respect to statements made or incorporated by reference therein based on information supplied by Nara for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus.
(f)Compliance with Applicable Legal and Reporting Requirements.
(i) Center Financial and its Subsidiaries hold all permits, authorizations, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of the businesses of Center Financial and its Subsidiaries, taken as a whole (the “Center Financial Permits”), the Center Financial Permits are in full force and effect and Center Financial and its Subsidiaries are in compliance with the terms of the Center Financial Permits, except where the failure so to hold, be in full force and effect or comply, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(ii) Except as set forth inSection 3.1(f)(ii) of the Center Financial Disclosure Schedule, since December 31, 2007, Center Financial and each of its Subsidiaries has conducted its business in compliance with all Applicable Legal Requirements (including the SOX Act, the USA PATRIOT Act of 2001, any other applicable anti-money laundering statute, rule or regulation or any rule or regulation issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the privacy and customer information requirements contained in Applicable Legal Requirements, and all applicable fair lending and other discrimination-related statutes, rules or regulations) or to the employees conducting such businesses, except for possible violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. To the knowledge of Center Financial, no investigation by any Governmental Entity with respect to Center Financial or any of its Subsidiaries is pending or threatened, other than, in each case, those the outcome of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(g)Accounting and Internal Controls.
(i) The records, systems, controls, data and information of Center Financial and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Center Financial or its Subsidiaries (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control which would not, individually or in the
A-1-12
aggregate, reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the following clause.
(ii) Center Financial and its Subsidiaries have implemented and maintain a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that: (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(iii) Center Financial has (A) implemented and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and such controls and procedures are effective to ensure that (1) all information required to be disclosed by Center Financial in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) all such information is accumulated and communicated to Center Financial’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure and (B) disclosed, based on its most recent evaluation prior to the date hereof, to Center Financial’s auditors and the audit committee of the board of directors of Center Financial (the “Center Financial Board”) (1) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Center Financial’s ability to record, process, summarize and report financial data and have identified for Center Financial’s auditors any material weaknesses in internal controls and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in Center Financial’s internal controls. Center Financial has made available to Nara a summary of any such disclosure made by management to Center Financial’s auditors and audit committee since December 31, 2007.
(iv) Since December 31, 2007, neither Center Financial nor any of its Subsidiaries or, to the knowledge of Center Financial, any director, officer, employee, auditor, accountant or representative of Center Financial or any of its Subsidiaries has received or has otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Center Financial or any of its Subsidiaries or their internal control over financial reporting, including any complaint, allegation, assertion or claim that Center Financial or any of its Subsidiaries has engaged in questionable accounting or auditing practices.
(h)Legal Proceedings. Except as set forth inSection 3.1(h) of the Center Financial Disclosure Schedule, there is no suit, action, investigation or proceeding (whether judicial, arbitral, administrative or other) pending or, to the knowledge of Center Financial, threatened, against or affecting Center Financial or any Subsidiary of Center Financial as to which there is a significant possibility of an adverse outcome which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Center Financial or any Subsidiary of Center Financial having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or on the Surviving Corporation.
(i)Taxes. Except as set forth inSection 3.1(i) of the Center Financial Disclosure Schedule:
(i) Each of Center Financial and the Center Financial Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all
A-1-13
material tax returns required to be filed by it, and all such filed tax returns were true, correct and complete in all material respects. All taxes shown to be due on such tax returns have been timely paid.
(ii) No written or, to the knowledge of Center Financial, unwritten notice of any deficiency with respect to taxes that has been proposed, asserted or assessed against Center Financial or any of the Center Financial Subsidiaries and has not previously been paid has been received by Center Financial or any Center Financial Subsidiary.
(iii) To the knowledge of Center Financial, no tax return of Center Financial or any Center Financial Subsidiary is under audit or examination by any Governmental Entity. No written or, to the knowledge of Center Financial, unwritten notice of such an audit or examination by any Governmental Entity has been received by Center Financial or any Center Financial Subsidiary. Any assessments for taxes due with respect to any completed and settled examinations or any concluded litigation have been fully paid.
(iv) Neither Center Financial nor any Center Financial Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code within the two-year period ending on the Closing Date.
(v) Neither Center Financial nor any Center Financial Subsidiary has any liability for any tax under Treasury Regulation Section 1.1502-6 or any similar provision of any other tax law, except for taxes of the affiliated group of which Center Financial is the common parent, within the meaning of Section 1504(a)(1) of the Code or any similar provision of any other tax law.
(vi) Neither Center Financial nor any Center Financial Subsidiary has taken or agreed to take (or failed to take or agree to take) any action or knows of any facts or circumstances that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(vii) Neither Center Financial nor any Center Financial Subsidiary has engaged in a transaction that would be reportable by or with respect to Center Financial or any Center Financial Subsidiary pursuant to Sections 6011, 6111 or 6112 of the Code.
(viii) Center Financial and the Center Financial Subsidiaries have withheld (or will withhold) from payments to or on behalf of its employees, independent contractors, creditors, stockholders or other third parties, and have timely paid (or will timely pay) to the appropriate Governmental Entity, all material amounts required to be withheld from such persons in accordance with applicable tax law;provided,however, that the foregoing withholding representation shall apply only with respect to payments made before the Closing Date and that the foregoing timely payment representation shall apply only with respect to payments which, to be timely, must be made to the appropriate Governmental Entity before the Closing Date.
(ix) There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any material taxes.
(x) Neither Center Financial nor any Center Financial Subsidiary is a party to or bound by any tax sharing agreement, tax indemnity obligation or agreement or arrangement with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any Governmental Entity).
(xi) Center Bank operates at least one significant historic business line, or owns at least a significant portion of its historic business assets, in each case within the meaning of Treasury Regulation Section 1.368-1(d).
(j)Certain Agreements. Except as set forth inSection 3.1(j) of the Center Financial Disclosure Schedule and except for this Agreement, neither Center Financial nor any of its Subsidiaries is a party to or
A-1-14
bound by any contract, arrangement, commitment or understanding (i) with respect to the employment of any directors or executive officers, or with any consultants that are natural persons, involving the payment of $150,000 or more per annum, (ii) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) which limits the ability of Center Financial or any of its Subsidiaries to compete in any line of business, in any geographic area or with any Person, or which requires referrals of business or requires Center Financial or any of its affiliates to make available investment opportunities to any Person on a priority, equal or exclusive basis, and in each case which limitation or requirement would reasonably be expected to be material to Center Financial and its Subsidiaries taken as a whole, (iv) with or to a labor union or other collective bargaining representative (including any collective bargaining agreement), (v) in the case of a Center Financial Benefit 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, (vi) which would prohibit or delay the consummation of any of the transactions contemplated by this Agreement, (vii) which involve the payment of more than $250,000 and are not terminable without penalty on notice of 90 days or less, (viii) real property leases or (ix) agreements providing for indemnification, contribution or any guaranty in favor of any officer or director or that were not entered into in the ordinary course of business. Center Financial has previously made available to Nara complete and accurate copies of each contract, arrangement, commitment or understanding of the type described in thisSection 3.1(j) (collectively referred to herein as the “Center Financial Contracts”). All of the Center Financial Contracts are valid and in full force and effect, except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. Neither Center Financial nor any of its Subsidiaries has, and to the best knowledge of Center Financial, none of the other parties thereto have, violated any provision of, or committed or failed to perform any act, and no event or condition exists, which with or without notice, lapse of time or both would constitute a default under the provisions of, any Center Financial Contract, except in each case for those violations and defaults which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(k)Benefit Plans.
(i) With respect to each employee benefit plan (including any “employee benefit plan”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and all stock purchase, stock option, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and other material employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, whether formal or informal, oral or written, legally binding or not (all the foregoing being herein called “Benefit Plans”), under which any employee or former employee of Center Financial or any of its Subsidiaries has any present or future right to benefits, and which is maintained or contributed to by Center Financial or any of its Subsidiaries or under which Center Financial or any of its Subsidiaries has any present or future liability (the “Center Financial Benefit Plans”), Center Financial has made available to Nara a true, correct and complete copy of (A) the most recent annual report (Form 5500) filed with the IRS and, where applicable, the related audited financial statements thereof, (B) such Center Financial Benefit Plan and all related amendments thereto, (C) each trust agreement relating to such Center Financial Benefit Plan and all related amendments thereto, (D) the most recent summary plan description for each Center Financial Benefit Plan for which a summary plan description is required by ERISA and, for Benefit Plans not subject to ERISA, any relevant summaries and (E) the most recent determination letter issued by the IRS with respect to any Center Financial Benefit Plan qualified under Section 401(a) of the Code.
(ii) None of the Center Financial Benefit Plans are subject to Title IV of ERISA.
(iii) Neither Center Financial, its Subsidiaries, nor any of their ERISA Affiliates has any liability under or with respect to a multiemployer plan (as defined in Section 3(37) of ERISA) nor any liability
A-1-15
or contingent liability for providing, under any Center Financial Benefit Plan or otherwise, any post-retirement medical or life insurance benefits, other than statutory liability for providing group health plan continuation coverage under Part 6 of Title I of ERISA and Section 4980B of the Code or applicable state law.
(iv) Each Center Financial Benefit Plan that is a nonqualified deferred compensation subject to Section 409A of the Code has been operated and administered in good faith compliance with, and complies in form with, Section 409A of the Code and applicable guidance with respect thereto from the period beginning January 1, 2005 through the date hereof.
(v) With respect to the Center Financial Benefit Plans, individually and in the aggregate, no event has occurred and, to the knowledge of Center Financial, there exists no condition or set of circumstances in connection with which Center Financial or any of its Subsidiaries could be subject to any liability which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial under ERISA, the Code or any other Applicable Legal Requirements.
(vi) True and complete copies of the Center Financial Stock Plans as in effect on the date hereof, and copies of all outstanding awards agreements relating thereto, have been provided or made available to Nara.
(vii) Except as set forth inSection 3.1(k)(vii) of the Center Financial Disclosure Schedule, no Center Financial Benefit Plan or Center Financial Stock Plan exists that could result in the payment to any present or former employee of Center Financial or any Subsidiary of Center Financial of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of Center Financial or any Subsidiary of Center Financial as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Section 280G of the Code.
(viii) Except as set forth inSection 3.1(k)(viii) of the Center Financial Disclosure Schedule, none of the assets of any Center Financial Benefit Plan are invested in employer securities or employer real property.
(ix) With respect to each of the Center Financial Benefit Plans, all contributions or premium payments due and payable on or before the Closing Date have been timely made, and, to the extent not presently payable, appropriate reserves have been established for the payment and properly accrued in accordance with customary accounting practices.
(l)Bank Subsidiary. Center Financial owns all of the outstanding shares of capital stock of Center Bank, free and clear of any claim, lien or encumbrance. All of the shares of capital stock of Center Bank have been duly authorized and validly issued and are fully paid and non-assessable and not subject to preemptive rights. Center Bank is an “insured bank” as defined in the Federal Deposit Insurance Act (the “FDIA”) and applicable regulations thereunder. Center Bank is a California-state chartered nonmember bank whose primary federal bank regulator is the FDIC.
(m)Agreements with Regulators. Except as set forth inSection 3.1(m) of the Center Financial Disclosure Schedule, neither Center Financial nor any Subsidiary of Center Financial is a party or subject to any written agreement, consent decree or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any cease-and-desist or other order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policies, procedures or board resolutions at the request of, any Governmental Entity which restricts materially the conduct of its business, imposes any material requirements or procedures or in any manner relates to its capital adequacy, its credit or risk management policies or its management, nor has Center Financial been advised by any Governmental Entity that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such agreement, decree, memorandum of understanding, extraordinary supervisory letter, commitment letter, order,
A-1-16
directive or similar submission, or any such policy, procedure or board resolutions. Center Financial and its Subsidiaries are in compliance with all of the foregoing so listed inSection 3.1(m) of the Center Financial Disclosure Schedule, except to the extent that the failure so to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. There are no formal or informal investigations, known to Center Financial, relating to any regulatory matters pending before any Governmental Entity with respect to Center Financial or any of its Subsidiaries.
(n)Absence of Certain Changes or Events. From September 30, 2010 through the date of this Agreement: (i) Center Financial and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices, (ii) there has not been any change, circumstance or event (including any event involving a prospective change) which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial and (iii) there has not been (A) any action or event of the type that would have required the consent of Nara underSection 4.1 or (B) any material loss, damage or destruction to, or any material interruption in the use of, any of the assets of Center Financial or any of its Subsidiaries (whether or not covered by insurance).
(o)Board Approval. The Center Financial Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held (the “Center Financial Board Approval”), has (i) determined that this Agreement and the Merger are fair to and in the best interests of Center Financial and its stockholders and declared the Merger to be advisable, (ii) approved this Agreement and the Merger, and (iii) recommended that the stockholders of Center Financial approve the principal terms of the Merger and directed that such matter be submitted for consideration by Center Financial stockholders at the Center Financial Stockholders Meeting. No state takeover statute is applicable to this Agreement, the Merger or the other transactions contemplated hereby.
(p)Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of each class of Center Financial Stock approving the principal terms of the Merger (the “Required Center Financial Vote”) is the only vote of the holders of Center Financial Stock necessary to authorize the transactions contemplated hereby (including the Merger).
(q)Properties. Center Financial or one of its Subsidiaries (i) has good and marketable title to all the properties and assets reflected in the latest audited balance sheet included in the Center Financial SEC Documents filed prior to the date hereof as being owned by Center Financial or one of its Subsidiaries or acquired after the date thereof which are material to Center Financial’s business on a consolidated basis (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all claims, liens, charges, security interests or encumbrances of any nature whatsoever, except for Permitted Liens, and (ii) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such Center Financial SEC Documents or acquired after the date thereof which are material to its business on a consolidated basis (except for leases that have expired by their terms since the date thereof) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to Center Financial’s knowledge, the lessor, except in the case ofclauses (i) and(ii) above which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(r)Intellectual Property. Center Financial and its Subsidiaries own or have a valid license to use all trademarks, service marks and trade names (including any registrations or applications for registration of any of the foregoing) (collectively, the “Center Financial Intellectual Property”) necessary to carry on their business substantially as currently conducted, except where such failures to own or validly license such Center Financial Intellectual Property would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. Neither Center Financial nor any such Subsidiary has received any notice of infringement of or conflict with, and to Center Financial’s knowledge, there are no infringements of or conflicts with, the rights of others with respect to the use of any Center Financial Intellectual Property which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
A-1-17
(s)Derivatives. All swaps, caps, floors, option agreements, futures and forward contracts and other similar derivative transactions (each, a “Derivative Contract”), whether entered into for Center Financial’s own account, or for the account of one or more of its Subsidiaries or their respective customers, were entered into (i) in accordance with prudent business practices and all Applicable Legal Requirements and (ii) with counterparties which Center Financial believes to be financially responsible. Each Derivative Contract of Center Financial or any of its Subsidiaries constitutes the valid and legally binding obligation of Center Financial or one or more of its Subsidiaries, as the case may be, that is enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles), and is in full force and effect. Neither Center Financial nor its Subsidiaries, nor to the knowledge of Center Financial any other party thereto, is in breach of any of its obligations under any Derivative Contract of Center Financial or one of its Subsidiaries. The financial position of Center Financial and its Subsidiaries on a consolidated basis under or with respect to each such Derivative Contract has been reflected in the books and records of Center Financial and such Subsidiaries in accordance with generally accepted accounting principles applied on a consistent basis.
(t)Loan Portfolio.
(i) Neither Center Financial nor any of its Subsidiaries is a party to any written or oral (A) Loans, other than any Covered Loans, under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Center Financial, in default of any other provision, or (B) Loans with any director, executive officer or 5% or greater stockholder of Center Financial or any of its Subsidiaries, or to the knowledge of Center Financial, any affiliate of any of the foregoing. Set forth inSection 3.1(t)(i) of the Center Financial Disclosure Schedule is a true, correct and complete list of (A) all of the Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified by Center Financial as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, (B) by category of Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the other Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on such Loans by category, and (C) each asset of Center Financial or any of its Subsidiaries that, as of September 30, 2010, was classified as “Other Real Estate Owned” (“OREO”) and the book value thereof (other than any Covered OREOs); it being understood and agreed that the Loans referenced inclauses (A) and(B) of this sentence include any Loans so classified by Center Financial or by any Governmental Entity, but shall not include any Covered Loans (as to whichSection 3.1(t)(ii) shall apply). Center Financial shall provide to Nara, on a monthly basis, (1) a schedule of Loans of Center Financial and its Subsidiaries that become classified in the manner described in the previous sentence, or any Loan of Center Financial and its Subsidiaries the classification of which is changed to a lower classification or to OREO, and (2) a schedule of Loans of Center Financial and its Subsidiaries in which the obligor is delinquent in payment by 30 days or more, in each case after the date of this Agreement.
(ii) Neither Center Financial nor any of its Subsidiaries is a party to any written or oral Covered Loans under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Center Financial, in default of any other provision. Set forth inSection 3.1(t)(ii) of the Center Financial Disclosure Schedule is a true, correct and complete list of (A) all of the Covered Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified by Center Financial as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower
A-1-18
thereunder, (B) by category of Covered Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the Covered Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on such Covered Loans by category, and (C) each asset of Center Financial or any of its Subsidiaries that, as of September 30, 2010, was classified as Covered OREO and the book value thereof; it being understood and agreed that the Covered Loans referenced inclauses (A) and(B) of this sentence include any Covered Loans so classified by Center Financial or by any Governmental Entity. Center Financial shall provide to Nara, on a monthly basis, a schedule of the Covered Loans and assets of Center Financial and its Subsidiaries that become classified in the manner described in the previous sentence after the date of this Agreement.
(iii) Each Loan of Center Financial and its Subsidiaries (A) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (B) to the extent carried on the books and records of Center Financial and its Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restriction, claims, liens or encumbrances, as applicable, which have been perfected and (C) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(iv) Each outstanding Loan of Center Financial and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of Center Financial and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all Applicable Legal Requirements.
(v) Except as set forth inSection 3.1(t)(v) of the Center Financial Disclosure Schedule, none of the agreements pursuant to which Center Financial or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
(vi) There are no outstanding Loans made by Center Financial or any of its Subsidiaries to any “executive officer” or other “insider” (as each such term is defined in Regulation O promulgated by the Federal Reserve) of Center Financial or its Subsidiaries, other than Loans that are subject to and that were made and continue to be in compliance with Regulation O or that are exempt therefrom.
(u)Insurance. Set forth inSection 3.1(u) of the Center Financial Disclosure Schedule is a true, correct and complete list of all insurance policies maintained by Center Financial and its Subsidiaries. All such insurance policies and bonds are in full force and effect and neither Center Financial nor any of its Subsidiaries is in default under any such policy or bond. Except as set forth inSection 3.1(u) of the Center Financial Disclosure Schedule, as of the date hereof, there are no claims in excess of $100,000 under any of such insurance policies or bonds, which claims are pending or as to which coverage has been denied or disputed by the underwriters of such insurance policies or bonds.
(v)Transactions with Affiliates. Except as set forth inSection 3.1(v) of the Center Financial Disclosure Schedule, there are no agreements, contracts, plans, arrangements or other transactions between Center Financial or any of its Subsidiaries, on the one hand, and any (i) officer or director of Center Financial or any of its Subsidiaries, (ii) record or beneficial owner of 5% or more of the voting securities of Center Financial, (iii) affiliate or family member of any such officer, director or record or beneficial owner or (iv) any other affiliate of Center Financial, on the other hand, except those of a type available to employees of Center Financial generally.
A-1-19
(w)Brokers or Finders. No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement, except D.A. Davidson & Co., and, if the Merger is not consummated, Center Financial agrees to indemnify Nara and to hold Nara harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or expenses asserted by any Person on the basis of any act or statement alleged to have been made by Center Financial or its affiliates.
(x)Opinion of Financial Advisor of Center Financial. Center Financial has received the opinion of its financial advisor, D.A. Davidson & Co., dated the date of this Agreement, to the effect that the Exchange Ratio is fair, from a financial point of view, to the holders of Center Financial Common Stock.
(y)No Other Representations or Warranties. Except for the representations and warranties contained in thisSection 3.1, neither Center Financial nor any other Person on behalf of Center Financial is making or has made any express or implied representation or warranty with respect to Center Financial or with respect to any other information provided to Nara in connection with the transactions contemplated herein. Neither Center Financial nor any other Person shall have or be subject to any liability or indemnification obligation to Nara or any other Person resulting from the distribution to Nara, or the use by Nara of, any such information, including any information, documents, projections, forecasts or other material made available to Nara in any “virtual data room” or management presentation in expectation of the transactions contemplated by this Agreement, unless any such information is expressly included in a representation or warranty contained in thisSection 3.1. Center Financial acknowledges that Nara is making no representations or warranties other than the representations and warranties contained inSection 3.2.
3.2Representations and Warranties of Nara. Except, with respect to any subsection of thisSection 3.2, as set forth in the correspondingly identified subsection of the disclosure schedule delivered by Nara to Center Financial concurrently herewith (the “Nara Disclosure Schedule”), Nara represents and warrants to Center Financial as follows:
(a)Organization, Standing and Power. Nara is a bank holding company registered under the BHC Act. Each of Nara and its Significant Subsidiaries is a corporation, trust or partnership duly organized, validly existing and, in the case of corporations, in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. The copies of Certificate of Incorporation and By-laws of Nara and Nara Bank, which have been previously furnished to Center Financial, are true, correct and complete copies of such documents as in effect on the date of this Agreement.
(b)Capital Structure.
(i) The authorized capital stock of Nara consists of 100,000,000 shares of common stock, par value $0.001 per share (the “Nara Common Stock”), and 10,000,000 shares of preferred stock, par value $0.001 (the “Nara Preferred Stock”). As of the close of business on November 30, 2010, (A) 37,971,527 shares of Nara Common Stock were issued and outstanding, 521,266 shares of Nara Common Stock were reserved for issuance upon the exercise of the outstanding warrant held by the United States Treasury Department (the “Nara TARP Warrant”) and 820,730 shares of Nara Common Stock were reserved for issuance upon exercise of stock options, Nara Performance Units or other awards under the Amended Nara 2007 Equity Incentive Plan (the “Nara Stock Plan”), and 60,686,477 shares of Nara Common Stock were held by Nara in its treasury or by its Subsidiaries (exclusive of DPC shares); and (B) 67,000 shares of Nara Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Nara Series A Preferred Stock”) were issued and outstanding. All outstanding shares of Nara Common Stock and Nara Preferred Stock have been duly authorized
A-1-20
and validly issued and are fully paid and non-assessable and the issuance of none of such shares was subject to preemptive rights. The shares of Nara Common Stock and Nara Series B Preferred Stock to be issued pursuant to or as specifically contemplated by this Agreement will have been duly authorized as of the Effective Time and, if and when issued in accordance with the terms hereof, will be validly issued, fully paid and non-assessable and the issuance of none of such shares was or will be subject to preemptive rights. As of the close of business on November 30, 2010, options to acquire 150,000 shares of Nara Common Stock with an exercise price in excess of the closing share price of Nara as of the close of business on December 8, 2010 were issued and outstanding.
(ii) Set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule is a true, correct and complete list of all outstanding bonds, debentures, notes, trust preferred securities or other similar obligations that Nara or any of its Subsidiaries has issued. Except as set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule, no Voting Debt of Nara or any Nara Subsidiary is issued or outstanding. All outstanding bonds, debentures, notes, trust preferred securities or other similar obligations of Nara or any of its Subsidiaries were issued in compliance in all material respects with all Applicable Legal Requirements. Each Trust Document entered into by Nara or any of its Subsidiaries is in full force and effect and constitutes the valid, binding and legally enforceable obligation of Nara or one of its Subsidiaries, and to the knowledge of Center Financial, the other parties thereto, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles). Except as set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule or otherwise in thisSection 3.2(b), no Nara Subsidiary has issued securities held by any entity other than Nara or a Nara Subsidiary.
(iii) Except for (A) this Agreement, (B) the Nara TARP Warrant, (C) Nara Stock Options, restricted units and performance units issued under the Nara Stock Plans, which represented, as of November 30, 2010, the right to acquire (in the case of Nara Stock Options) or to receive the value of up to an aggregate of, respectively, 543,250, zero and 36,200 shares of Nara Common Stock, and (D) agreements entered into and securities and other instruments issued after the date of this Agreement to the extent permitted bySection 4.2, there are no options, warrants, calls, rights, commitments or agreements of any character to which Nara or any Subsidiary of Nara is a party or by which it or any such Subsidiary is bound obligating Nara or any Subsidiary of Nara to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or any Voting Debt or stock appreciation rights of Nara or of any Subsidiary of Nara or obligating Nara or any Subsidiary of Nara to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding contractual obligations of Nara or any of its Subsidiaries (A) to repurchase, redeem or otherwise acquire any shares of capital stock of Nara or any of its Subsidiaries or (B) pursuant to which Nara or any of its Subsidiaries is or could be required to register shares of Nara Common Stock, Nara Preferred Stock or other securities under the Securities Act, except any such contractual obligations entered into after the date hereof to the extent permitted bySection 4.2.
(iv) Since December 31, 2009, except to the extent permitted bySection 4.2, Nara has not (A) issued any shares of capital stock, stock appreciation rights or securities exercisable or exchangeable for or convertible into shares of capital stock of Nara or any of its Subsidiaries, other than pursuant to and as required by the terms of the Nara Stock Plan and any employee stock options and other awards issued under the Nara Stock Plans prior to the date hereof (or issued after the date hereof in compliance withSections 4.2(c) and4.2(k)); (B) repurchased, redeemed or otherwise acquired, directly or indirectly through one or more Nara Subsidiaries, any shares of capital stock of Nara or any of its Subsidiaries (other than the acquisition of DPC shares in the ordinary course of business consistent with past practice); or (C) declared, set aside, made or paid to the stockholders of Nara dividends or other distributions on the outstanding shares of capital stock of Nara, other than cash dividends on the Nara Series A Preferred Stock as required by the terms of such preferred stock as in effect on the date hereof.
A-1-21
(v) Set forth inSection 3.2(b)(v) of the Nara Disclosure Schedule is a true, correct and complete list of all equity securities that Nara or any of its Subsidiaries owns, controls or holds for its own account, and neither Nara nor any of its Subsidiaries owns more than 4.9% of a class of voting securities of, or otherwise controls, any Person other than Nara Bank, in the case of Nara.
(c)Authority.
(i) Nara has all requisite corporate power and authority to enter into this Agreement and, subject in the case of the consummation of the Merger to the adoption of this Agreement by the requisite vote of the holders of Nara Common Stock, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Nara, subject in the case of the consummation of the Merger to the adoption of this Agreement by the stockholders of Nara. This Agreement has been duly executed and delivered by Nara and constitutes a valid and binding obligation of Nara, enforceable against Nara in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(ii) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (A) result in any Violation pursuant to any provision of the Certificate of Incorporation or By-laws of Nara or any Subsidiary of Nara, or (B) except as set forth inSection 3.2(c)(ii) of the Nara Disclosure Schedule and subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to therein or inclause (iii) below, result in any Violation of any loan or credit agreement, note, mortgage, indenture, lease, Nara Benefit Plan or other agreement, obligation, instrument, permit, concession, franchise or license, or any Applicable Legal Requirements applicable to Nara or any Subsidiary of Nara or their respective properties or assets, which Violation, in the case ofclauses (A) and(B) above, which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity (acting in any capacity) is required by or with respect to Nara or any Subsidiary of Nara in connection with the execution and delivery of this Agreement by Nara or the consummation by Nara of the transactions contemplated hereby, the failure to make or obtain which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or the Surviving Corporation, except for (A) the Requisite Regulatory Approvals, (B) the filing with the SEC of (1) the Form S-4, including the Joint Proxy Statement/Prospectus and (2) such reports under Sections 12, 13(a), 13(d) and 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (C) the filing of the Certificate of Merger (or other appropriate documents as provided herein or in the CGCL) with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, and (D) such filings, notifications and approvals as may be required under the SBIA and the rules and regulations of the SBA thereunder.
(d)SEC Documents; Regulatory Reports; Undisclosed Liabilities.
(i) Nara has filed all reports, schedules, registration statements and other documents required under Applicable Legal Requirements to be filed by it with the SEC since December 31, 2007 (the “Nara SEC Documents”). Nara has delivered or made available to Center Financial true, correct and complete copies of all Nara SEC Documents, all comment letters received by Nara from the SEC since December 31, 2007, all responses to such comment letters by or on behalf of Nara and all other correspondence since December 31, 2007 between the SEC and Nara, in each case to the extent not available to the public in completely unredacted form on EDGAR. No Subsidiary of Nara is, or since December 31, 2007 has been, required to file any form, report, registration statement or other document with the SEC. As of their respective dates of filing with the SEC (or, if amended or superseded by a
A-1-22
filing prior to the date hereof, as of the date of such filing), the Nara SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act or the SOX Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Nara SEC Documents, and none of the Nara SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including, in each case, any notes thereto) of Nara included in the Nara SEC Documents complied, as of their respective dates of filing with the SEC, in all material respects with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be disclosed therein) and fairly present in all material respects the consolidated financial position of Nara and its consolidated Subsidiaries and the consolidated results of operations, changes in stockholders’ equity and cash flows of such companies as of the dates and for the periods shown, subject, in the case of interim financial statements, to (i) the omission of notes to the extent permitted by Regulations S-X of the SEC (but only if, in the case of interim financial statements included in Nara SEC Documents since Nara’s most recent Annual Report on Form 10-K, such notes would not differ materially from the notes to the financial statements included in such Annual Report) and (ii) normal, recurring year-end adjustments (but only if the effect of such adjustments would not, individually or in the aggregate, be material). No financial statements of any Person other than the Subsidiaries of Nara are, or, since December 31, 2007 have been, required by generally accepted accounting principles to be included in the consolidated financial statements of Nara.
(ii) Since December 31, 2007, Nara and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were required to be filed by them under any Applicable Legal Requirements with the Federal Reserve, the FDIC, the DFI and with any other applicable Governmental Entity, and have paid all fees and assessments due and payable in connection therewith, except to the extent that the failure to file such report, registration or statement or to pay such fees and assessments would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. As of their respective dates (and without giving effect to any amendments or modifications filed after the date of this Agreement with respect to reports and documents filed before the date of this Agreement), each of such reports, registrations and statements (including the financial statements, exhibits and schedules therein) complied in all material respects with the applicable statutes, rules, regulations and orders enforced or promulgated by the Governmental Entity with which they were filed.
(iii) Except for (A) those liabilities that are fully reflected or reserved for in the consolidated financial statements of Nara included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010, as filed with the SEC prior to the date of this Agreement, (B) liabilities incurred since September 30, 2010 in the ordinary course of business consistent with past practice, and (C) liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara, Nara and its Subsidiaries do not have, and since September 30, 2010 Nara and its Subsidiaries have not incurred (except to the extent permitted bySection 4.2), any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise and whether or not required to be reflected in Nara’s financial statements in accordance with generally accepted accounting principles).
(iv) Nara is, and since December 31, 2007 has been, in compliance with the applicable listing and corporate governance rules and regulations of NASDAQ. Nara has delivered to Center Financial true, correct and complete copes of all correspondence between Nara and NASDAQ since December 31, 2007.
A-1-23
(v) As used in thisSection 3.2(d), the term “file” shall be broadly construed to include any manner in which a document or information is filed, furnished, transmitted or otherwise made available to the SEC or any other Governmental Entity.
(e)Information Supplied. None of the information supplied or to be supplied by Nara for inclusion or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Joint Proxy Statement/Prospectus will, at the date of mailing to stockholders and at the times of the meetings of stockholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Joint Proxy Statement/Prospectus will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, and the Form S-4 will comply as to form in all material respects with the requirements of the Securities Act and the rules and regulations of the SEC thereunder, except that no representation or warranty is made by Nara with respect to statements made or incorporated by reference therein based on information supplied by Center Financial for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus or Form S-4.
(f)Compliance with Applicable Legal and Reporting Requirements.
(i) Nara and its Subsidiaries hold all permits, authorizations, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of the businesses of Nara and its Subsidiaries, taken as a whole (the “Nara Permits”), the Nara Permits are in full force and effect and Nara and its Subsidiaries are in compliance with the terms of the Nara Permits, except where the failure so to hold, be in full force and effect or comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(ii) Since December 31, 2007, Nara and each of its Subsidiaries has conducted its business in compliance with all Applicable Legal Requirements (including the SOX Act, the USA PATRIOT Act of 2001, any other applicable anti-money laundering statute, rule or regulation or any rule or regulation issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the privacy and customer information requirements contained in Applicable Legal Requirements, and all applicable fair lending and other discrimination-related statutes, rules or regulations) or to the employees conducting such businesses, except for possible violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. To the knowledge of Nara, no investigation by any Governmental Entity with respect to Nara or any of its Subsidiaries is pending or threatened, other than, in each case, those the outcome of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(g)Accounting and Internal Controls.
(i) The records, systems, controls, data and information of Nara and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Nara or its Subsidiaries (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the following clause.
(ii) Nara and its Subsidiaries have implemented and maintain a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles,
A-1-24
including that: (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(iii) Nara has (A) implemented and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and such controls and procedures are effective to ensure that (1) all information required to be disclosed by Nara in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) all such information is accumulated and communicated to Nara’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure and (B) disclosed, based on its most recent evaluation prior to the date hereof, to Nara’s auditors and the audit committee of the Nara Board (1) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Nara’s ability to record, process, summarize and report financial data and have identified for Nara’s auditors any material weaknesses in internal controls and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in Nara’s internal controls. Nara has made available to Center Financial a summary of any such disclosure made by management to Nara’s auditors and audit committee since December 31, 2007.
(iv) Since December 31, 2007, neither Nara nor any of its Subsidiaries or, to the knowledge of Nara, any director, officer, employee, auditor, accountant or representative of Nara or any of its Subsidiaries has received or has otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Nara or any of its Subsidiaries or their internal control over financial reporting, including any complaint, allegation, assertion or claim that Nara or any of its Subsidiaries has engaged in questionable accounting or auditing practices.
(h)Legal Proceedings. There is no suit, action, investigation or proceeding (whether judicial, arbitral, administrative or other) pending or, to the knowledge of Nara, threatened, against or affecting Nara or any Subsidiary of Nara as to which there is a significant possibility of an adverse outcome which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Nara or any Subsidiary of Nara having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or on the Surviving Corporation.
(i)Taxes. Except as set forth inSection 3.2(i) of the Nara Disclosure Schedule:
(i) Each of Nara and the Nara Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all material tax returns required to be filed by it, and all such filed tax returns were true, correct and complete in all material respects. All taxes shown to be due on such tax returns have been timely paid.
(ii) No written or, to the knowledge of Nara, unwritten notice of any deficiency with respect to taxes that has been proposed, asserted or assessed against Nara or any of the Nara Subsidiaries and has not previously been paid has been received by Nara or any Nara Subsidiary.
(iii) To the knowledge of Nara, no tax return of Nara or any Nara Subsidiary is under audit or examination by any Governmental Entity. No written or, to the knowledge of Nara, unwritten notice of such an audit or examination by any Governmental Entity has been received by Nara or any Nara Subsidiary. Any assessments for taxes due with respect to any completed and settled examinations or any concluded litigation have been fully paid.
A-1-25
(iv) Neither Nara nor any Nara Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code within the two-year period ending on the Closing Date.
(v) Neither Nara nor any Nara Subsidiary has any liability for any tax under Treasury Regulation Section 1.1502-6 or any similar provision of any other tax law, except for taxes of the affiliated group of which Nara is the common parent, within the meaning of Section 1504(a)(1) of the Code or any similar provision of any other tax law.
(vi) Neither Nara nor any Nara Subsidiary has taken or agreed to take (or failed to take or agree to take) any action or knows of any facts or circumstances that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(vii) Neither Nara nor any Nara Subsidiary has engaged in a transaction that would be reportable by or with respect to Nara or any Nara Subsidiary pursuant to Sections 6011, 6111 or 6112 of the Code.
(viii) Nara and the Nara Subsidiaries have withheld (or will withhold) from payments to or on behalf of its employees, independent contractors, creditors, stockholders or other third parties, and have timely paid (or will timely pay) to the appropriate Governmental Entity, all material amounts required to be withheld from such persons in accordance with applicable tax law.
(ix) There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any material taxes.
(x) Neither Nara nor any Nara Subsidiary is a party to or bound by any tax sharing agreement, tax indemnity obligation or agreement or arrangement with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any Governmental Entity).
(xi) Except for the actions required by the Bank Merger, Nara has no present plan or intention to, following the Closing, dispose of any of the capital stock of any Center Financial Subsidiary or of any Nara Subsidiary or permit any Center Financial Subsidiary or any Nara Subsidiary to dispose of or discontinue any Center Financial Subsidiary’s significant historic business assets or to substantially alter any Center Financial Subsidiary’s significant historic business lines. The Parties agree that any bulk sales after the Merger of certain non-performing loans previously owned by Center Financial, representing not more than 20% of Center Financial’s loan portfolio immediately before the Merger, are not inconsistent with the representation in the preceding sentence.
(j)Certain Agreements. Except as set forth inSection 3.2(j) of the Nara Disclosure Schedule and except for this Agreement, neither Nara nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (i) with respect to the employment of any directors or executive officers, or with any consultants that are natural persons, involving the payment of $150,000 or more per annum, (ii) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) which limits the ability of Nara or any of its Subsidiaries to compete in any line of business, in any geographic area or with any Person, or which requires referrals of business or requires Nara or any of its affiliates to make available investment opportunities to any Person on a priority, equal or exclusive basis, and in each case which limitation or requirement would reasonably be expected to be material to Nara and its Subsidiaries taken as a whole, (iv) with or to a labor union or other collective bargaining representative (including any collective bargaining agreement), (v) in the case of a Nara Benefit 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, (vi) which would prohibit or delay the consummation of any of the transactions contemplated by this Agreement, (vii) which involve the payment of more than $250,000 and are not terminable without penalty on notice of 90 days or less, (viii) real property leases or (ix) agreements providing for indemnification, contribution or any guaranty in favor of any officer or director or that were not entered into
A-1-26
in the ordinary course of business. Nara has previously made available to Center Financial complete and accurate copies of each contract, arrangement, commitment or understanding of the type described in thisSection 3.2(j) (collectively referred to herein as the “Nara Contracts”). All of the Nara Contracts are valid and in full force and effect, except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. Neither Nara nor any of its Subsidiaries has, and to the best knowledge of Nara, none of the other parties thereto have, violated any provision of, or committed or failed to perform any act, and no event or condition exists, which, with or without notice, lapse of time or both would constitute a default under the provisions of, any Nara Contract, except in each case for those violations and defaults which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(k)Benefit Plans.
(i) With respect to each Benefit Plan under which any employee or former employee of Nara or any of its Subsidiaries has any present or future right to benefits, and which is maintained or contributed to by Nara or any of its Subsidiaries or under which Nara or any of its Subsidiaries has any present or future liability (the “Nara Benefit Plans”), Nara has made available to Center Financial a true, correct and complete copy of (A) the most recent annual report (Form 5500) filed with the IRS and, where applicable, the related audited financial statements thereof, (B) such Nara Benefit Plan and all related amendments thereto, (C) each trust agreement relating to such Nara Benefit Plan and all related amendments thereto, (D) the most recent summary plan description for each Nara Benefit Plan for which a summary plan description is required by ERISA and, for Benefit Plans not subject to ERISA, any relevant summaries and (E) the most recent determination letter issued by the IRS with respect to any Nara Benefit Plan qualified under Section 401(a) of the Code.
(ii) None of the Nara Benefit Plans are subject to Title IV of ERISA.
(iii) Neither Nara, its Subsidiaries, nor any of their ERISA Affiliates has any liability under or with respect to a multiemployer plan (as defined in Section 3(37) of ERISA) nor any liability or contingent liability for providing, under any Nara Benefit Plan or otherwise, any post-retirement medical or life insurance benefits, other than statutory liability for providing group health plan continuation coverage under Part 6 of Title I of ERISA and Section 4980B of the Code or applicable state law.
(iv) Each Nara Benefit Plan that is a nonqualified deferred compensation subject to Section 409A of the Code has been operated and administered in good faith compliance with, and complies in form with, Section 409A of the Code and applicable guidance with respect thereto from the period beginning January 1, 2005 through the date hereof.
(v) With respect to the Nara Benefit Plans, individually and in the aggregate, no event has occurred and, to the knowledge of Nara, there exists no condition or set of circumstances in connection with which Nara or any of its Subsidiaries could be subject to any liability which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara under ERISA, the Code or any other Applicable Legal Requirements.
(vi) True and complete copies of the Nara Stock Plans as in effect on the date hereof, and copies of all outstanding awards agreements relating thereto, have been provided or made available to Center Financial.
(vii) Except as set forth inSection 3.2(k)(vii) of the Nara Disclosure Schedule, no Nara Benefit Plan or Nara Stock Plan exists that could result in the payment to any present or former employee of Nara or any Subsidiary of Nara of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of Nara or any Subsidiary of Nara as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Section 280G of the Code.
A-1-27
(viii) Except as set forth inSection 3.2(k)(viii) of the Nara Disclosure Schedule, none of the assets of any Nara Benefit Plan are invested in employer securities or employer real property.
(ix) With respect to each of the Nara Benefit Plans, all contributions or premium payments due and payable on or before the Closing Date have been timely made, and, to the extent not presently payable, appropriate reserves have been established for the payment and properly accrued in accordance with customary accounting practices.
(l)Bank Subsidiary. Nara owns all of the outstanding shares of capital stock of Nara Bank, free and clear of any claim, lien or encumbrance. All of the shares of capital stock of Nara Bank have been duly authorized and validly issued and are fully paid and non-assessable and not subject to preemptive rights. Nara Bank is an “insured bank” as defined in the FDIA and applicable regulations thereunder. Nara Bank is a California-state chartered member bank whose primary federal bank regulator is the Federal Reserve.
(m)Agreements with Regulators. Except as set forth inSection 3.2(m) of the Nara Disclosure Schedule, neither Nara nor any Subsidiary of Nara is a party or subject to any written agreement, consent decree or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any cease-and-desist or other order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policies, procedures or board resolutions at the request of, any Governmental Entity which restricts materially the conduct of its business, imposes any material requirements or procedures or in any manner relates to its capital adequacy, its credit or risk management policies or its management, nor has Nara been advised by any Governmental Entity that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such agreement, decree, memorandum of understanding, extraordinary supervisory letter, commitment letter, order, directive or similar submission, or any such policy, procedure or board resolutions. Nara and its Subsidiaries are in compliance with all of the foregoing so listed inSection 3.2(m) of the Nara Disclosure Schedule, except to the extent that the failure so to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. There are no formal or informal investigations, known to Nara, relating to any regulatory matters pending before any Governmental Entity with respect to Nara or any of its Subsidiaries.
(n)Absence of Certain Changes or Events. From September 30, 2010 through the date of this Agreement: (i) Nara and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices, (ii) there has not been any change, circumstance or event (including any event involving a prospective change) which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara and (iii) there has not been (A) any action or event of the type that would have required the consent of Center Financial underSection 4.2 or (B) any material loss, damage or destruction to, or any material interruption in the use of, any of the assets of Nara or any of its Subsidiaries (whether or not covered by insurance).
(o)Board Approval. The Nara Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held (the “Nara Board Approval”), has (i) determined that this Agreement and the Merger are fair to and in the best interests of Nara and its stockholders and declared the Merger to be advisable, (ii) approved this Agreement and the Merger, and (iii) recommended that the stockholders of Nara adopt this Agreement and directed that such matter be submitted for consideration by Nara stockholders at the Nara Stockholders Meeting. No state takeover statute is applicable to this Agreement, the Merger or the other transactions contemplated hereby.
(p)Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of Nara Common Stock to adopt this Agreement (the “Required Nara Vote”) is the only vote of the holders of any class or series of Nara capital stock necessary to approve and adopt this Agreement and the transactions contemplated hereby (including the Merger).
A-1-28
(q)Properties. Nara or one of its Subsidiaries (i) has good and marketable title to all the properties and assets reflected in the latest audited balance sheet included in the Nara SEC Documents filed prior to the date hereof as being owned by Nara or one of its Subsidiaries or acquired after the date thereof which are material to Nara’s business on a consolidated basis (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all claims, liens, charges, security interests or encumbrances of any nature whatsoever, except for Permitted Liens, and (ii) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such Nara SEC Documents or acquired after the date thereof which are material to its business on a consolidated basis (except for leases that have expired by their terms since the date thereof) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to Nara’s knowledge, the lessor, except in the case ofclauses (i) and(ii) above which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(r)Intellectual Property. Nara and its Subsidiaries own or have a valid license to use all trademarks, service marks and trade names (including any registrations or applications for registration of any of the foregoing) (collectively, the “Nara Intellectual Property”) necessary to carry on their business substantially as currently conducted, except where such failures to own or validly license such Nara Intellectual Property would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. Neither Nara nor any such Subsidiary has received any notice of infringement of or conflict with, and to Nara’s knowledge, there are no infringements of or conflicts with, the rights of others with respect to the use of any Nara Intellectual Property which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(s)Derivatives. All Derivative Contracts, whether entered into for Nara’s own account, or for the account of one or more of its Subsidiaries or their respective customers, were entered into (i) in accordance with prudent business practices and all Applicable Legal Requirements and (ii) with counterparties which Nara believes to be financially responsible. Each Derivative Contract of Nara or any of its Subsidiaries constitutes the valid and legally binding obligation of Nara or one or more of its Subsidiaries, as the case may be, that is enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles), and is in full force and effect. Neither Nara nor its Subsidiaries, nor to the knowledge of Nara any other party thereto, is in breach of any of its obligations under any Derivative Contract of Nara or one of its Subsidiaries. The financial position of Nara and its Subsidiaries on a consolidated basis under or with respect to each such Derivative Contract has been reflected in the books and records of Nara and such Subsidiaries in accordance with generally accepted accounting principles applied on a consistent basis.
(t)Loan Portfolio.
(i) Neither Nara nor any of its Subsidiaries is a party to any written or oral (A) Loans under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Nara, in default of any other provision, or (B) Loans with any director, executive officer or 5% or greater stockholder of Nara or any of its Subsidiaries, or to the knowledge of Nara, any affiliate of any of the foregoing. Set forth inSection 3.2(t) of the Nara Disclosure Schedule is a true, correct and complete list of (A) all of the Loans of Nara and its Subsidiaries that, as of September 30, 2010, were classified by Nara as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, (B) by category of Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the other Loans of Nara and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on
A-1-29
such Loans by category, and (C) each asset of Nara or any of its Subsidiaries that, as of September 30, 2010, was classified as OREO and the book value thereof, it being understood and agreed that the Loans referenced inclauses (A) and(B) of this sentence include any Loans so classified by Nara or by any Governmental Entity. Nara shall provide to Center Financial, on a monthly basis, (1) a schedule of Loans of Nara and its Subsidiaries that become classified in the manner described in the previous sentence, or any Loan of Nara and its Subsidiaries the classification of which is changed to a lower classification or to OREO, and (2) a schedule of Loans of Nara and its Subsidiaries in which the obligor is delinquent in payment by 30 days or more, in each case after the date of this Agreement.
(ii) Each Loan of Nara and its Subsidiaries (A) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (B) to the extent carried on the books and records of Nara and its Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restriction, claims, liens or encumbrances, as applicable, which have been perfected and (C) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(iii) Each outstanding Loan of Nara and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of Nara and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all Applicable Legal Requirements.
(iv) Except as set forth inSection 3.1(t)(iv) of the Nara Disclosure Schedule, none of the agreements pursuant to which Nara or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
(v) There are no outstanding Loans made by Nara or any of its Subsidiaries to any “executive officer” or other “insider” (as each such term is defined in Regulation O promulgated by the Federal Reserve) of Nara or its Subsidiaries, other than Loans that are subject to and that were made and continue to be in compliance with Regulation O or that are exempt therefrom.
(u)Insurance. Set forth inSection 3.2(u) of the Nara Disclosure Schedule is a true, correct and complete list of all insurance policies maintained by Nara and its Subsidiaries. All such insurance policies and bonds are in full force and effect, and neither Nara nor any of its Subsidiaries is in default under any such policy or bond. Except as set forth inSection 3.2(u) of the Nara Disclosure Schedule, as of the date hereof, there are no claims in excess of $100,000 under any of such insurance policies or bonds, which claims are pending or as to which coverage has been denied or disputed by the underwriters of such insurance policies or bonds.
(v)Transactions with Affiliates. Except as set forth inSection 3.2(v) of the Nara Disclosure Schedule, there are no agreements, contracts, plans, arrangements or other transactions between Nara or any of its Subsidiaries, on the one hand, and any (i) officer or director of Nara or any of its Subsidiaries, (ii) record or beneficial owner of 5% or more of the voting securities of Nara, (iii) affiliate or family member of any such officer, director or record or beneficial owner or (iv) any other affiliate of Nara, on the other hand, except those of a type available to employees of Nara generally.
(w)Brokers or Finders. No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement, except Keefe, Bruyette & Woods, Inc., and, if the Merger is not consummated, Nara agrees to indemnify Center Financial and to hold Center Financial harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or
A-1-30
expenses asserted by any Person on the basis of any act or statement alleged to have been made by Nara or its affiliates.
(x)Opinion of Nara Financial Advisor. Nara has received the opinion of its financial advisor, Keefe, Bruyette & Woods, Inc., dated the date of this Agreement, to the effect that the Exchange Ratio is fair, from a financial point of view, to Nara and the holders of Nara Common Stock.
(y)No Other Representations or Warranties. Except for the representations and warranties contained in thisSection 3.2, neither Nara nor any other Person on behalf of Nara is making or has made any express or implied representation or warranty with respect to Nara or with respect to any other information provided to Center Financial in connection with the transactions contemplated herein. Neither Nara nor any other Person shall have or be subject to any liability or indemnification obligation to Center Financial or any other Person resulting from the distribution to Center Financial, or the use by Center Financial of, any such information, including any information, documents, projections, forecasts or other material made available to Center Financial in any “virtual data room” or management presentation in expectation of the transactions contemplated by this Agreement, unless any such information is expressly included in a representation or warranty contained in thisSection 3.2. Nara acknowledges that Center Financial is making no representations or warranties other than the representations and warranties contained inSection 3.1.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1Covenants of Center Financial. During the period from the date of this Agreement and continuing until the Effective Time, Center Financial agrees as to itself and its Subsidiaries that, except as expressly contemplated or permitted by this Agreement or to the extent that Nara shall otherwise consent in writing:
(a)Ordinary Course. Center Financial and its Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course consistent with past practice and use all reasonable efforts to preserve intact their present business organizations, maintain their rights, franchises, licenses and other authorizations issued by Governmental Entities, preserve their relationships with directors, officers, employees, customers, suppliers and others having business dealings with them and maintain their respective properties and assets in their present state of repair, order and condition, reasonable wear and tear excepted, to the end that their goodwill and ongoing businesses shall not be impaired in any material respect as of the Effective Time. Center Financial shall not, nor shall it permit any of its Subsidiaries to, (i) enter into any new material line of business, (ii) change its or its Subsidiaries’ lending, investment, underwriting, risk and asset-liability management or other material banking or operating policies in any respect which is material to Center Financial, except as required by Applicable Legal Requirements or by policies imposed by a Governmental Entity, (iii) incur or commit to any capital expenditures or any obligations or liabilities in connection therewith other than capital expenditures and obligations or liabilities incurred or committed to in the ordinary course of business consistent with past practice, (iv) enter into or terminate any material lease, contract or agreement, or make any change to any existing material leases, contracts or agreements, except in the ordinary course of business consistent with past practice or (v) take any action or fail to take any action, which action or failure causes a material breach of any material lease, contract or agreement.
(b)Dividends; Changes in Stock. Center Financial shall not, nor shall it permit any of its Subsidiaries to, or propose to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, except (A) the declaration and payment of regular cash dividends on the Center Financial Series A Preferred Stock in accordance with the terms of such preferred stock as in effect on the date of this Agreement with usual record and payment dates for such dividends in accordance with Center Financial’s past dividend practice or as required by the terms of such preferred stock, (B) for dividends by a wholly owned Subsidiary of Center Financial, and (C) the declaration and payment of regular cash dividends on any currently outstanding trust preferred securities issued by any Subsidiary of Center Financial in accordance with the terms of the Trust
A-1-31
Documents entered into by such Subsidiary, (ii) split, combine, exchange, adjust or reclassify any of its capital stock or issue or authorize or propose the issuance or authorization of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, or (iii) purchase, redeem or otherwise acquire, or permit any Subsidiary to purchase, redeem or otherwise acquire, any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock (except for the acquisition of DPC shares in the ordinary course of business consistent with past practice and except pursuant to agreements in effect on the date hereof and disclosed inSection 4.1(b) of the Center Financial Disclosure Schedule).
(c)Issuance of Securities. Center Financial shall not, nor shall it permit any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock of any class, any Voting Debt, any stock appreciation rights or any securities convertible into or exercisable or exchangeable for, or any rights, warrants or options to acquire, any such shares or Voting Debt, or enter into any agreement with respect to any of the foregoing, other than (i) the issuance of Center Financial Common Stock upon the exercise or settlement of Center Financial Stock Options outstanding on the date of this Agreement, (ii) issuance of Center Financial Common Stock upon exercise of the Center Financial TARP Warrants, and (iii) issuances by a wholly owned Subsidiary of its capital stock to its parent or to another wholly owned Subsidiary of Center Financial.
(d)Governing Documents. Center Financial shall not, and shall not permit any of its Subsidiaries to, amend or propose to amend its Articles of Incorporation, By-laws or similar organizational documents, as applicable, or, except to the extent permitted bySection 4.1(e) or4.1(f), enter into, or permit any Subsidiary to enter into, a plan of consolidation, merger or reorganization with any Person other than a wholly owned Subsidiary of Center Financial.
(e)No Acquisitions. Center Financial shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire, by merging or consolidating with, by purchasing a substantial equity interest in or a substantial portion of the assets of, by forming a partnership or joint venture with, or in any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any material assets not in the ordinary course of business;provided,however, that the foregoing shall not prohibit foreclosures, repossessions or other debt-previously-contracted acquisitions in the ordinary course of business.
(f)No Dispositions. Other than sales of OREOs and non-performing assets not exceeding $10 million in the aggregate in each calendar month in the ordinary course of business consistent with past practice, and sales of performing loans and investment securities in the ordinary course of business consistent with past practice, Center Financial shall not, and shall not permit any of its Subsidiaries to, sell, lease, assign, encumber or otherwise dispose of, or agree to sell, lease, assign, encumber or otherwise dispose of, any of its assets (including capital stock of its Subsidiaries and indebtedness of others held by Center Financial and its Subsidiaries) which are material, individually or in the aggregate, to Center Financial.
(g)Indebtedness. Center Financial shall not, and shall not permit any of its Subsidiaries to, (i) incur, create or assume any long-term indebtedness for borrowed money (or modify any of the material terms of any such outstanding long-term indebtedness), guarantee any such long-term indebtedness or issue or sell any long-term debt securities or warrants or rights to acquire any long-term debt securities of Center Financial or any of its Subsidiaries or guarantee any long-term debt securities of others, other than (A) indebtedness of any Subsidiary of Center Financial to Center Financial or to another Subsidiary of Center Financial, and (B) in the ordinary course of business consistent with past practice (including advances under existing lines of credit with the Federal Home Loan Bank of San Francisco or the Federal Reserve Bank and borrowings from the U.S. Treasury Department under its Treasury Tax and Loan Investment Program) or (ii) prepay or voluntarily repay any subordinated indebtedness or trust preferred securities.
A-1-32
(h)Other Actions. Center Financial shall not, and shall not permit any of its Subsidiaries to, intentionally take any action that would, or reasonably might be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue, or in any of the conditions to the Merger set forth inArticle VI not being satisfied or in a violation of any provision of this Agreement, or (unless such action is required by Applicable Legal Requirements) which would adversely affect the ability of the Parties to obtain any of the Requisite Regulatory Approvals without imposition of a condition or restriction of the type referred to inSection 6.1(f).
(i)Accounting Methods. Center Financial shall not, and shall not permit any of its Subsidiaries to, change its methods of accounting in effect at September 30, 2010, except as required by changes in generally accepted accounting principles as concurred in by Center Financial’s independent auditors or required by bank regulatory authorities.
(j)Tax Matters. Center Financial shall not, and shall not permit its Subsidiaries to, make or rescind any material tax election, make any material amendments to tax returns previously filed, or settle or compromise any material tax liability or refund, without the prior written consent of Nara.
(k)Compensation and Benefit Plans. Center Financial shall not, and shall not permit any of its Subsidiaries to, (i) enter into, adopt, amend (except for such amendments as may be required by Applicable Legal Requirements) or terminate any Center Financial Benefit Plan, or any agreement, arrangement, plan or policy between Center Financial or a Subsidiary of Center Financial and one or more of its directors or officers, (ii) except for normal payments, awards and increases in the ordinary course of business or as required by any plan or arrangement as in effect as of the date hereof, increase in any manner the compensation or benefits of any director, officer or employee or pay any benefit not required by any plan or arrangement as in effect as of the date hereof or enter into any contract, agreement, commitment or arrangement to do any of the foregoing, (iii) enter into or renew any contract, agreement, commitment or arrangement (other than a renewal occurring in accordance with the terms thereof) providing for the payment to any director, officer or employee of compensation or benefits contingent, or the terms of which are materially altered, upon the occurrence of any of the transactions contemplated by this Agreement or (iv) provide that, with respect to the right to any bonus or incentive compensation and the grant of any stock option, restricted stock, restricted stock unit or other equity-related award pursuant to the Center Financial 2006 Incentive Stock Plan or otherwise granted on or after the date hereof, the vesting of any such bonus, incentive compensation, or stock option, restricted stock, restricted stock unit or other equity-related award shall accelerate or otherwise be affected by the occurrence of any of the transactions contemplated by this Agreement, either alone or in combination with some other event.
(l)Investment Portfolio; Interest Rate Risk; Other Risk. Center Financial shall not, and shall not permit any of its Subsidiaries to, materially restructure or materially change (on a consolidated basis) its investment securities portfolio, its hedging strategy or its interest rate risk position, through purchases, sales or otherwise, or the manner in which its investment securities portfolio is classified or reported or materially increase the credit or other risk concentrations associated with its investment securities portfolio;provided,however, that the foregoing shall not restrict the purchase or sale of investment securities by Center Financial or any of its Subsidiaries in the ordinary course of business consistent with past practice.
(m)No Liquidation. Center Financial shall not, and shall not permit any of its Subsidiaries to, adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, restructuring, recapitalization or reorganization.
(n)Other Agreements. Center Financial shall not, and shall not permit any of its Subsidiaries to, agree to, or make any commitment to, take, or authorize, any of the actions prohibited by thisSection 4.1.
4.2Covenants of Nara. Except as otherwise permitted or contemplated bySection 4.2 of the Nara Disclosure Schedule, during the period from the date of this Agreement and continuing until the Effective Time,
A-1-33
Nara agrees as to itself and its Subsidiaries that, except as expressly contemplated or permitted by this Agreement or to the extent that Center Financial shall otherwise consent in writing:
(a)Ordinary Course. Nara and its Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course consistent with past practice and use all reasonable efforts to preserve intact their present business organizations, maintain their rights, franchises, licenses and other authorizations issued by Governmental Entities, preserve their relationships with directors, officers, employees, customers, suppliers and others having business dealings with them and maintain their respective properties and assets in their present state of repair, order and condition, reasonable wear and tear excepted, to the end that their goodwill and ongoing businesses shall not be impaired in any material respect as of the Effective Time. Nara shall not, nor shall it permit any of its Subsidiaries to, (i) enter into any new material line of business, (ii) change its or its Subsidiaries’ lending, investment, underwriting, risk and asset-liability management or other material banking or operating policies in any respect which is material to Nara, except as required by Applicable Legal Requirements or by policies imposed by a Governmental Entity, (iii) incur or commit to any capital expenditures or any obligations or liabilities in connection therewith other than capital expenditures and obligations or liabilities incurred or committed to in the ordinary course of business consistent with past practice, (iv) enter into or terminate any material lease, contract or agreement, or make any change to any existing material leases, contracts or agreements, except in the ordinary course of business consistent with past practice or (v) take any action or fail to take any action, which action or failure causes a material breach of any material lease, contract or agreement.
(b)Dividends; Changes in Stock. Nara shall not, nor shall it permit any of its Subsidiaries to, or propose to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, except (A) the declaration and payment of regular cash dividends on the Nara Series A Preferred Stock in accordance with the terms of such preferred stock as in effect on the date of this Agreement with usual record and payment dates for such dividends in accordance with Nara’s past dividend practice or as required by the terms of such preferred stock, (B) for dividends by a wholly owned Subsidiary of Nara, and (C) the declaration and payment of regular cash dividends on any currently outstanding trust preferred securities issued by any Subsidiary of Nara in accordance with the terms of the Trust Documents entered into by such Subsidiary, (ii) split, combine, exchange, adjust or reclassify any of its capital stock or issue or authorize or propose the issuance or authorization of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, or (iii) purchase, redeem or otherwise acquire, or permit any Subsidiary to purchase, redeem or otherwise acquire, any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock (except for the acquisition of DPC shares in the ordinary course of business consistent with past practice).
(c)Issuance of Securities. Nara shall not, nor shall it permit any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock of any class, any Voting Debt, any stock appreciation rights or any securities convertible into or exercisable or exchangeable for, or any rights, warrants or options to acquire, any such shares or Voting Debt, or enter into any agreement with respect to any of the foregoing, other than (i) the issuance of Nara Common Stock upon the exercise or settlement of Nara Stock Options outstanding on the date of this Agreement, (ii) issuance of Nara Common Stock upon exercise of the Nara TARP Warrants, and (iii) issuances by a wholly owned Subsidiary of its capital stock to its parent or to another wholly owned Subsidiary of Nara.
(d)Governing Documents. Except as contemplated by this Agreement, Nara shall not, and shall not permit any of its Subsidiaries to, amend or propose to amend its Certificate of Incorporation, By-laws or similar organizational documents, as applicable, or, except to the extent permitted bySection 4.2(e) or4.2(f), enter into, or permit any Subsidiary to enter into, a plan of consolidation, merger or reorganization with any Person other than a wholly owned Subsidiary of Nara.
(e)No Acquisitions. Nara shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire, by merging or consolidating with, by purchasing a substantial equity interest in or a substantial portion of the assets of, by forming a partnership or joint venture with, or in any other manner, any business or any
A-1-34
corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any material assets not in the ordinary course of business;provided,however, that the foregoing shall not prohibit foreclosures, repossessions or other debt-previously-contracted acquisitions in the ordinary course of business.
(f)No Dispositions. Other than sales of OREOs and non-performing assets not exceeding $10 million in the aggregate in each calendar month in the ordinary course of business consistent with past practice, and sales of performing loans and investment securities in the ordinary course of business consistent with past practice, Nara shall not, and shall not permit any of its Subsidiaries to, sell, lease, assign, encumber or otherwise dispose of, or agree to sell, lease, assign, encumber or otherwise dispose of, any of its assets (including capital stock of its Subsidiaries and indebtedness of others held by Nara and its Subsidiaries) which are material, individually or in the aggregate, to Nara.
(g)Indebtedness. Nara shall not, and shall not permit any of its Subsidiaries to, (i) incur, create or assume any long-term indebtedness for borrowed money (or modify any of the material terms of any such outstanding long-term indebtedness), guarantee any such long-term indebtedness or issue or sell any long-term debt securities or warrants or rights to acquire any long-term debt securities of Nara or any of its Subsidiaries or guarantee any long-term debt securities of others, other than (A) indebtedness of any Subsidiary of Nara to Nara or to another Subsidiary of Nara, and (B) in the ordinary course of business consistent with past practice (including advances under existing lines of credit with the Federal Home Loan Bank of San Francisco or the Federal Reserve Bank and borrowings from the U.S. Treasury Department under its Treasury Tax and Loan Investment Program) or (ii) prepay or voluntarily repay any subordinated indebtedness or trust preferred securities.
(h)Other Actions. Nara shall not, and shall not permit any of its Subsidiaries to, intentionally take any action that would, or reasonably might be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue, or in any of the conditions to the Merger set forth inArticle VI not being satisfied or in a violation of any provision of this Agreement, or (unless such action is required by Applicable Legal Requirements) which would adversely affect the ability of the Parties to obtain any of the Requisite Regulatory Approvals without imposition of a condition or restriction of the type referred to inSection 6.1(f).
(i)Accounting Methods. Nara shall not, and shall not permit any of its Subsidiaries to, change its methods of accounting in effect at September 30, 2010, except as required by changes in generally accepted accounting principles as concurred in by Nara’s independent auditors or required by bank regulatory authorities.
(j)Tax Matters. Nara shall not, and shall not permit its Subsidiaries to, make or rescind any material tax election, make any material amendments to tax returns previously filed, or settle or compromise any material tax liability or refund, without the prior written consent of Center Financial.
(k)Compensation and Benefit Plans. Nara shall not, and shall not permit any of its Subsidiaries to, (i) enter into, adopt, amend (except for such amendments as may be required by Applicable Legal Requirements) or terminate any Nara Benefit Plan, or any agreement, arrangement, plan or policy between Nara or a Subsidiary of Nara and one or more of its directors or officers, (ii) except for normal payments, awards and increases in the ordinary course of business or as required by any plan or arrangement as in effect as of the date hereof, increase in any manner the compensation or benefits of any director, officer or employee or pay any benefit not required by any plan or arrangement as in effect as of the date hereof or enter into any contract, agreement, commitment or arrangement to do any of the foregoing, (iii) enter into or renew any contract, agreement, commitment or arrangement (other than a renewal occurring in accordance with the terms thereof) providing for the payment to any director, officer or employee of compensation or benefits contingent, or the terms of which are materially altered, upon the occurrence of any of the transactions contemplated by this Agreement or (iv) provide that, with respect to the right to any bonus or incentive compensation and the grant of any stock option, restricted stock,
A-1-35
restricted stock unit or other equity-related award pursuant to the Amended Nara 2007 Equity Incentive Plan or otherwise granted on or after the date hereof, the vesting of any such bonus, incentive compensation, or stock option, restricted stock, restricted stock unit or other equity-related award shall accelerate or otherwise be affected by the occurrence of any of the transactions contemplated by this Agreement, either alone or in combination with some other event.
(l)Investment Portfolio; Interest Rate Risk; Other Risk. Nara shall not, and shall not permit any of its Subsidiaries to, materially restructure or materially change (on a consolidated basis) its investment securities portfolio, its hedging strategy or its interest rate risk position, through purchases, sales or otherwise, or the manner in which its investment securities portfolio is classified or reported or materially increase the credit or other risk concentrations associated with its investment securities portfolio;provided,however, that the foregoing shall not restrict the purchase or sale of investment securities by Nara or any of its Subsidiaries in the ordinary course of business consistent with past practice.
(m)No Liquidation. Nara shall not, and shall not permit any of its Subsidiaries to, adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, restructuring, recapitalization or reorganization.
(n)Other Agreements. Nara shall not, and shall not permit any of its Subsidiaries to, agree to, or make any commitment to, take, or authorize, any of the actions prohibited by thisSection 4.2.
4.3Transition. In order to facilitate the integration of the operations of Center Financial and Nara and their Subsidiaries and to permit the coordination of their related operations on a timely basis, and in an effort to accelerate to the earliest time possible following the Effective Time the realization of synergies, operating efficiencies and other benefits expected to be realized by the Parties as a result of the Merger, each of Center Financial and Nara shall, and shall cause its Subsidiaries to, consult with the other on all strategic and operational matters to the extent such consultation is not in violation of Applicable Legal Requirements, including laws regarding the exchange of information and other laws regarding competition. Each of Center Financial and Nara shall, and shall cause its Subsidiaries to, make available to the other at its facilities and those of its Subsidiaries, where determined by Nara or Center Financial, as the case may be, to be appropriate and necessary, office space in order to assist it in observing all operations and reviewing, to the extent not in violation of Applicable Legal Requirements, all matters concerning the affairs of the other Party. Without in any way limiting the provisions ofSection 5.2, Center Financial and Nara, their respective Subsidiaries and their respective officers, employees, counsel, financial advisors and other representatives shall, upon reasonable notice to the other Party, be entitled to review the operations and visit the facilities of the other Party and its Subsidiaries at all times as may be deemed reasonably necessary by Nara or Center Financial, as the case may be, in order to accomplish the foregoing arrangements.
4.4Advice of Changes; Government Filings.
(a) Each Party shall confer on a regular and frequent basis with the other, report on operational matters and promptly advise the other orally and in writing of any change or event having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on such Party or which would cause or constitute a material breach of any of the representations, warranties or covenants of such Party contained herein;provided,however, that any noncompliance with the foregoing shall not constitute the failure to be satisfied of a condition set forth inArticle VI or give rise to any right of termination underArticle VII unless the underlying breach shall independently constitute such a failure or give rise to such a right.
(b) Center Financial and Nara shall file all reports required to be filed by each of them with the SEC between the date of this Agreement and the Effective Time and shall deliver to the other Party copies of all such reports promptly after the same are filed. Center Financial, Center Bank, Nara and Nara Bank shall file all call reports with the appropriate bank regulators and all other reports, applications and other documents required to
A-1-36
be filed with the applicable Governmental Entities between the date hereof and the Effective Time and shall make available to the other Party copies of all such reports promptly after the same are filed. Each of Center Financial and Nara shall have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to Applicable Legal Requirements relating to the exchange of information, with respect to all the information relating to the other Party, and any of their respective Subsidiaries, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the Parties agrees to act reasonably and as promptly as practicable. Each Party agrees that to the extent practicable it will consult with the other Party with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each Party will keep the other Party apprised of the status of matters relating to completion of the transactions contemplated hereby.
4.5Insurance. During the period from the date of this Agreement and continuing until the Effective Time, each of Nara and Center Financial shall, and shall cause their respective Subsidiaries to, (a) use their commercially reasonable efforts to maintain and keep in full force and effect all of their respective policies of insurance presently in effect, or replacements for such policies, including insurance of customer deposit accounts with the FDIC, and (b) take all requisite action (including the making of claims and the giving of notices) pursuant to their respective policies of insurance in order to preserve all rights thereunder with respect to all matters which could reasonably give rise to a claim prior to the Effective Time.
4.6No Control of Other Party’s Business. Nothing contained in this Agreement (includingSection 4.3) shall give Nara, directly or indirectly, the right to control or direct the operations of Center Financial or shall give Center Financial, directly or indirectly, the right to control or direct the operations of Nara prior to the Effective Time. Prior to the Effective Time, each of Center Financial and Nara shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries’ respective operations.
ARTICLE V
ADDITIONAL AGREEMENTSARTICLE VI
-iii-
Page | ||||||||||
6.1 | Conditions to Each Party’s Obligation To Effect the Merger | 46 | ||||||||
(a) | Stockholder Approval | 46 | ||||||||
(b) | Stock Exchange Listing | 47 | ||||||||
(c) | Other Approvals | 47 | ||||||||
(d) | Form S-4 | 47 | ||||||||
(e) | No Injunctions or Restraints; Illegality | 47 | ||||||||
(f) | Absence of Burdensome Conditions | 47 | ||||||||
(g) | By-Law Amendment | 47 | ||||||||
6.2 | Conditions to Obligation of Nara | 47 | ||||||||
(a) | Representations and Warranties | 47 | ||||||||
(b) | Performance of Obligations | 47 | ||||||||
(c) | Tax Opinion | 48 | ||||||||
(d) | Material Adverse Effect | 48 | ||||||||
(e) | Appraisal Rights | 48 | ||||||||
6.3 | Conditions to Obligation of Center Financial | 48 | ||||||||
(a) | Representations and Warranties | 48 | ||||||||
(b) | Performance of Obligations | 48 | ||||||||
(c) | Tax Opinion | 48 | ||||||||
(d) | Material Adverse Effect | 48 | ||||||||
ARTICLE VII | TERMINATION AND AMENDMENT | 48 | ||||||||
7.1 | Termination | 48 | ||||||||
7.2 | Effect of Termination | 50 | ||||||||
7.3 | Amendment | 51 | ||||||||
7.4 | Extension; Waiver | 51 | ||||||||
ARTICLE VIII | GENERAL PROVISIONS | 52 | ||||||||
8.1 | Definitions | 52 | ||||||||
8.2 | Non-survival of Representations, Warranties and Agreements | 55 | ||||||||
8.3 | Notices | 55 | ||||||||
8.4 | Interpretation | 56 | ||||||||
8.5 | Counterparts | 56 | ||||||||
8.6 | Entire Agreement; No Third Party Beneficiaries | 56 | ||||||||
8.7 | Governing Law | 57 | ||||||||
8.8 | Severability | 57 | ||||||||
8.9 | Assignment | 57 | ||||||||
8.10 | Submission to Jurisdiction | 57 | ||||||||
8.11 | Enforcement | 57 | ||||||||
8.12 | Waiver of Jury Trial | 57 |
-iv-
EXHIBITS
| Amendment to By-laws | |
Exhibit 1.5 | Form of |
INDEX OF DEFINED TERMS
| Section 5.4(a) | |
Agreement | Preamble | |
Applicable Legal Requirements | Section 8.1 | |
Assumed Options | Section 2.1(d) | |
Assumed Plan | Section 2.1(d) | |
Assumed Restricted Shares | Section 2.1(d) | |
Bank Merger | Recitals | |
Bank Merger Act | Section 3.1(c) | |
Bank Merger Agreement | Section 1.5 | |
Benefit Plans | Section 3.1(k) | |
BHC Act | Section 3.1(a) | |
Board Recommendations | Section 5.1(c) | |
Center Financial | Preamble | |
Center Bank | Recitals | |
Center Financial | Section 3.1(k) | |
Center Financial | Section 3.1(g) | |
Center Financial Board Approval | Section 3.1(o) | |
Center Financial Board Recommendation | Section 5.1(b) | |
Center Financial Certificates | Section 8.1 | |
Center Financial Common Stock | Section 3.1(b) | |
Center Financial Contracts | Section 3.1(j) | |
Center Financial Disclosure Schedule | Section 3.1 | |
Center Financial Insider | Section 8.1 | |
Center Financial Intellectual Property | Section 3.1(r) | |
Center Financial Permits | Section 3.1(f) | |
Center Financial Preferred Stock | Section 3.1(b) | |
Center Financial Restricted Share | Section 8.1 | |
Center Financial SEC Documents | Section 3.1(d) | |
Center Financial Series A Preferred Stock | Section 3.1(b) | |
Center Financial Stock | Section 8.1 | |
Center Financial Stock Option | Section 8.1 | |
Center Financial Stock Plan | Section 3.1(b) | |
Center Financial Stockholders | Section 5.1(b) | |
Center Financial TARP Warrant | Section 2.1(e) | |
Center Financial Termination Fee | Section 7.2(c) | |
Center Financial’s Current Premium | Section 5.10(b) | |
Certificate of Merger | Section 1.1 | |
CGCL | Section 1.1 | |
Change in Recommendation | Section 5.1(e) | |
Closing | Section 1.2 | |
Closing Date | Section 1.2 | |
Code | Recitals | |
Confidentiality Agreement | Section 5.2(b) | |
Constituent Corporations | Section 8.1 |
-v-
Covered Loans | Section 8.1 | |
Covered OREOs | Section 8.1 | |
Derivative Contract | Section 3.1(s) | |
DFI | Section 3.1(c) | |
DGCL | Section 1.1 | |
DPC shares | Section 3.1(b) | |
EDGAR | Section 3.1(d) | |
Effective Time | Section 1.1 | |
ERISA | Section 3.1(k) | |
ERISA Affiliate | Section 8.1 | |
Exchange Act | Section 3.1(c) | |
Exchange Agent | Section 2.2(a) | |
Exchange Fund | Section 8.1 | |
Exchange Ratio | Section 2.1(b) | |
FDIA | Section 3.1(l) | |
FDIC | Section 8.1 | |
Federal Reserve | Section 3.1(c) | |
Form S-4 | Section 5.1(a) | |
Governmental Entity | Section 8.1 | |
Indemnified Liabilities | Section 5.10(a) | |
Indemnified Parties | Section 5.10(a) | |
Injunction | Section 6.1(e) | |
Intervening Event | Section 5.1(f) | |
IRS | Section 8.1 | |
Joint Proxy Statement/Prospectus | Section 5.1(a) | |
Loans | Section 8.1 | |
Loss-Sharing Approvals | Section 3.1(c) | |
material | Section 8.1 | |
Material Adverse Effect | Section 8.1 | |
Merger | Recitals | |
Nara | Preamble | |
Nara | Recitals | |
Nara Benefit Plans | Section 3.2(k) | |
Nara Board | Section 2.1(c) | |
Nara Board Approval | Section 3.2(o) | |
Nara Board Recommendation | Section 5.1(c) | |
Nara Certificates | Section 2.2(a) | |
Nara Common Stock | Section 3.2(b) | |
Nara | Section 3.2(j) | |
Nara Disclosure Schedule | Section 3.2 | |
Nara Intellectual Property | Section 3.2(r) | |
Nara Performance Units | Section 2.1(b) | |
Nara Permits | Section 3.2(f) | |
Nara Preferred Stock | Section 3.2(b) | |
Nara SEC | Section 3.2(d) | |
Nara | Section 3.2(b) | |
| Section | |
Nara Stock | Section | |
| Section 8.1 | |
Nara Stock Plan | Section 3.2(b) | |
Nara Stockholders Meeting | Section 5.1(c) | |
Nara | Section
|
-vi-
| Section 7.2(b) | |
NASDAQ | Section 8.1 | |
OREO | Section 3.1(t) | |
Party | Preamble | |
Person | Section 8.1 | |
Permitted Liens | Section 8.1 | |
Public Proposal | Section 7.2(b) | |
| Section 3.1(p) | |
Required Nara Vote
| Section | |
| Section | |
SBA | Section | |
SBIA
| Section | |
SEC
| Section | |
| Section 8.1 | |
Securities Act | Section 3.1(b) | |
Significant Subsidiary | Section 8.1 | |
SOX Act | Section 3.1(d) | |
Subsidiary | Section 8.1 | |
Superior Proposal | Section 8.1 | |
Surviving Corporation | Section 8.1 | |
Target Party | Section 5.1(f) | |
tax or | Section | |
tax return | Section | |
Trust Document
| Section | |
Violation
| Section | |
Voting Debt
| Section
|
-vii-
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 9, 2010 (this “Agreement”), is entered into between NARA BANCORP, INC., a Delaware corporation (“Nara”), and CENTER FINANCIAL CORPORATION, a California corporation (“Center Financial”). Nara and Center Financial are sometimes referred to herein collectively as the “Parties” and individually as a “Party.”
WHEREAS, the boards of directors of Nara and Center Financial have approved, and declared it to be advisable and in the best interests of their respective stockholders to consummate, the business combination transaction provided for herein in which Center Financial would merge with and into Nara (the “Merger”);
WHEREAS, the boards of directors of Nara and Center Financial have each determined that the Merger and the other transactions contemplated hereby are consistent with, and in furtherance of, their respective business strategies and goals;
WHEREAS, Nara and Center Financial desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Treasury Regulation Section 1.368-2(g); and
WHEREAS, the boards of directors of Nara’s wholly owned subsidiary, Nara Bank, a California state chartered banking corporation (“Nara Bank”), and Center Financial’s wholly owned subsidiary, Center Bank, a California state chartered banking corporation (“Center Bank”), have approved, and declared it to be advisable and in the best interests of their respective stockholders, Nara and Center Financial, to consummate, concurrently with or as soon as reasonably practicable after the Merger, a business combination transaction in which Center Bank would merge with and into Nara Bank (the “Bank Merger”).
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, subject to the conditions set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
THE MERGER
1.1Effective Time of the Merger. Upon the terms and subject to the conditions set forth in this Agreement, Nara and Center Financial shall cause the Merger to be consummated by filing a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law (the “DGCL”), and shall concurrently cause the Certificate of Merger, or any other certificate, agreement or other document specified in the relevant provisions of the California General Corporation Law (the “CGCL”) to cause the Merger to be effective in California, to be filed with the Secretary of State of the State of California, in such form as required by, and executed in accordance with, the relevant provisions of the CGCL. The Merger shall become effective upon (a) such filing of the Certificate of Merger with the Secretary of State of the State of Delaware or (b) such later date and time as may be specified in the Certificate of Merger (the “Effective Time”).
1.2Closing. The closing of the Merger (the “Closing”) will take place at 10:00 a.m. on the date (the “Closing Date”) that is the third business day after the satisfaction or waiver of the conditions set forth inArticle VI (excluding those conditions that, by their nature, are to be satisfied as of the Closing, but subject to the satisfaction or waiver of those conditions as of the Closing), unless another time or date is agreed to in writing by the Parties. The Closing shall be held at the offices of Mayer Brown LLP, 350 South Grand Avenue, Los Angeles, California 90071, unless another place is agreed to in writing by the Parties.
A-1-1
1.3Effects of the Merger. Nara shall be the Surviving Corporation in the Merger. At the Effective Time, Center Financial shall be merged with and into Nara and the separate existence of Center Financial shall cease. The Merger will have the effects set forth in the DGCL and the CGCL.
1.4Certificate of Incorporation and By-Laws. The Certificate of Incorporation of Nara as in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation, except that such Certificate of Incorporation shall be amended to provide that, effective as of the Effective Time, the name of the Surviving Corporation shall be changed to a name mutually acceptable to Center Financial and Nara. The By-laws of Nara as in effect immediately prior to the Effective Time, as amended substantially in the form set forth inExhibit 1.4, shall be the By-laws of the Surviving Corporation.
1.5Bank Merger. As soon as reasonably practicable after the date hereof, Nara and Center Financial shall cause Nara Bank and Center Bank to enter into a bank merger agreement in substantially the form attached to this Agreement asExhibit 1.5 (the “Bank Merger Agreement”), providing for the Bank Merger in accordance with Applicable Legal Requirements and the terms of the Bank Merger Agreement concurrently with or as soon as reasonably practicable after consummation of the Merger.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of Nara, Center Financial or the holder of any of the following securities:
(a)Cancellation of Stock Owned by the Parties. Any shares of Center Financial Common Stock that are issued and outstanding immediately prior to the Effective Time and are owned by Center Financial or Nara (other than, for the avoidance of doubt, any DPC shares or shares for which Center Financial is the record holder for the benefit of another Person) shall be cancelled and retired and no stock of Nara or other consideration shall be delivered in exchange therefor. Any shares of Nara Common Stock that are issued and outstanding immediately prior to the Effective Time and are owned by Center Financial (other than, for the avoidance of doubt, any DPC shares or shares for which Center Financial is the record holder for the benefit of another Person) shall be cancelled and retired.
(b)Conversion of Center Financial Common Stock. Subject toSection 2.2(e), each share of Center Financial Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be cancelled in accordance withSection 2.1(a) and dissenting shares as provided inSection 2.1(f)) shall be converted into 0.7804 (the “Exchange Ratio”) fully paid and nonassessable shares of Nara Common Stock. None of such shares of Center Financial Common Stock shall remain outstanding and all of such shares shall automatically be cancelled and retired and shall cease to exist, and each stock certificate previously representing any such shares shall thereafter represent solely the shares of Nara Common Stock into which such Center Financial Common Stock has been converted and the right pursuant toSection 2.2(e) to receive payment of cash in lieu of the issuance of fractional shares, without interest, if applicable. The Parties acknowledge and agree that the Exchange Ratio has been determined based upon (i) the number of shares of Center Financial Common Stock and Center Financial Restricted Shares and Nara Common Stock and Nara’s performance units issued under the Nara Stock Plan (the “Nara Performance Units”) represented and warranted herein by the respective Parties to be issued and outstanding, in each case as of November 30, 2010, as set forth inSection 3.1(b)(i) andSections 3.2(b)(i) and3.2(b)(iii), respectively, and (ii) on a diluted basis using the treasury stock method, each issued and outstanding Center Financial Stock Option and Nara Stock Option with an exercise price that was below the closing price of a share of Nara Common Stock and Center Financial Common Stock, respectively, as reported on the NASDAQ website at the close of NASDAQ’s regular session of trading on December 8, 2010, and represented and warranted herein by the respective Parties to be issued and outstanding as of November 30, 2010, as set forth inSections 3.1(b)(i) and3.2(b)(i). Other than any increases in outstanding shares of Center Financial
A-1-2
Common Stock or Nara Common Stock resulting from the exercise of Center Financial Stock Options and Nara Stock Options issued and outstanding as of the date hereof, if the number of shares of Center Financial Common Stock or Nara Common Stock or the number of Center Financial Restricted Shares or Nara Performance Units that are issued and outstanding shall have increased or decreased as of the Closing, whether as permitted by or in breach of this Agreement, the Parties agree that, without limiting any other right or remedy to which the Parties are entitled at law or in equity, a corresponding adjustment shall be made to the Exchange Ratio such that holders of Center Financial Common Stock and holders of Nara Common Stock shall receive 45% and 55%, respectively, of the outstanding shares of common stock of the Surviving Corporation after the Merger is consummated. The Exchange Ratio, as recalculated, if applicable, shall, for all purposes hereunder, constitute the “Exchange Ratio.”
(c)Conversion of Center Financial Series A Preferred Stock. Each share of Center Financial Series A Preferred Stock issued and outstanding immediately prior to the Effective Time shall be converted into one fully paid and nonassessable share of Nara Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Nara Series B Preferred Stock”), which series of Nara Preferred Stock shall be authorized by action of the board of directors of Nara (the “Nara Board”) pursuant to the Certificate of Incorporation of Nara as in effect immediately prior to the Effective Time. The Nara Board shall take all necessary action to create the Nara Series B Preferred Stock prior to the Effective Time. The shares of Nara Series B Preferred Stock shall have, in respect of Nara, the same rights, preferences, privileges and voting powers, and limitations and restrictions thereof, as the shares of Center Financial Series A Preferred Stock had in respect of Center Financial immediately prior to the Effective Time. None of such shares of Center Financial Series A Preferred Stock shall remain outstanding and all of such shares shall automatically be cancelled and retired and shall cease to exist, and each stock certificate previously representing any such shares shall thereafter represent solely the shares of Nara Series B Preferred Stock into which such Center Financial Series A Preferred Stock has been converted, without interest.
(d)Stock Options and Other Equity-Based Awards. Unless otherwise agreed by Center Financial after the date hereof:
(i)Assumption of Center Financial Options. Center Financial and Nara shall take all actions necessary (including delivery of any required notices by Center Financial) to provide that, effective as of the Effective Time, without any action on the part of the holders thereof, each outstanding Center Financial Stock Option shall cease to represent the right to acquire shares of Center Financial Common Stock and shall instead be converted automatically into an option to acquire shares of Nara Common Stock as provided below (an “Assumed Option”), and such Assumed Options will be assumed by Nara on substantially the same terms and conditions as were applicable under the corresponding Center Financial Stock Options immediately prior to the Effective Time;provided,however, that after the Effective Time:
(1) each Assumed Option will be exercisable for a number of shares of Nara Common Stock equal to the product of (x) the number of shares of Center Financial Common Stock that would be issuable upon exercise of such Center Financial Stock Option outstanding immediately prior to the Effective Time multiplied by (y) the Exchange Ratio, rounded down to the nearest whole share; and
(2) the per share exercise price for the Nara Common Stock issuable upon exercise of such Assumed Option will be equal to the quotient determined by dividing (x) the per share exercise price for such Center Financial Stock Option outstanding immediately prior to the Effective Time by (y) the Exchange Ratio, rounded up to the nearest whole cent.
Any restriction on the exercisability of such Center Financial Stock Option in effect as of the date hereof will continue in full force and effect, and the term, exercisability, and vesting schedule of such Center Financial Stock Option as in effect on the date hereof will remain unchanged. As soon as reasonably practicable following the Closing Date, the Surviving Corporation will deliver to each
A-1-3
Person who holds an Assumed Option a document evidencing the foregoing assumption of such Center Financial Stock Option by the Surviving Corporation. Center Financial and Nara will cooperate and coordinate with respect to any materials to be submitted to the holders of Center Financial Stock Options in connection with any notice required under thisSection 2.1(d)(i).
(ii)Assumption of Center Financial Stock Plan. By virtue of the Merger, and without any action by any holders of equity awards, the Surviving Corporation shall, subject to the foregoing, assume the Center Financial Stock Plan (the “Assumed Plan”), with such assumption to be effective as of the Effective Time. Upon and following the Effective Time, the Surviving Corporation will be able to grant stock awards, to the extent permitted by Applicable Legal Requirements and applicable stock exchange listing regulations, under the terms of the Assumed Plan, to issue the reserved but unissued shares of Center Financial Common Stock under the Assumed Plan and the shares that would otherwise return to the Assumed Plan pursuant to the terms thereof, except that immediately upon the Effective Time, all references to a number of shares of Center Financial Common Stock will be (A) changed to references to Nara Common Stock and (B) converted to a number of shares of Nara Common Stock equal to the product of the number of shares of Center Financial Common Stock stated in the Center Financial Stock Plan multiplied by the Exchange Ratio, rounded down to the nearest whole share. The board of directors of the Surviving Corporation (or a committee thereof) shall, effective as of the Effective Time, become the administrator of the Assumed Plan.
(iii)Center Financial Restricted Shares. At the Effective Time, each Center Financial Restricted Share then outstanding shall be assumed by Nara. Subject to, and in accordance with, the terms of the Center Financial Stock Plan and any applicable award or other agreement, each award of Center Financial Restricted Shares then outstanding shall be converted into the number of shares of Nara Common Stock equal to the number of shares of Center Financial Common Stock subject to the Center Financial Restricted Share immediately prior to the Effective Time multiplied by the Exchange Ratio (rounded down to the nearest whole share of Nara Common Stock) (the “Assumed Restricted Shares”). Except as specifically provided in the preceding sentence, following the Effective Time, each Assumed Restricted Shares shall otherwise be subject to the same restrictions, terms and conditions as were applicable to such shares immediately prior to the Effective Time. Center Financial and Nara shall take all steps necessary to cause the foregoing provisions of thisSection 2.1(d)(iii) to occur, including but not limited to delivering all required notices. Center Financial and Nara will cooperate and coordinate with respect to any materials to be submitted to the holders of Center Financial Restricted Shares in connection with any notice required under thisSection 2.1(d)(iii).
(iv)Violation of Applicable Legal Requirements. No provision ofSections 2.1(d)(i),(ii) or(iii) shall be implemented with respect to an individual if such implementation would violate Applicable Legal Requirements, including those applicable to the Troubled Asset Relief Program.
(e)Warrant. The Warrant issued on December 12, 2008 to the United States Department of the Treasury in connection with the issuance of the Center Financial Series A Preferred Stock (the “Center Financial TARP Warrant”) shall, by virtue of the Merger and without any action on the part of any Person, cease to be a warrant to purchase Center Financial Common Stock and will become, automatically in accordance with its terms, a warrant to purchase Nara Common Stock, and, by virtue of the Merger and without any action on the part of any Person, Nara will assume such warrant subject to its terms;provided,however, that after the Effective Time:
(i) the number of shares of Nara Common Stock purchasable upon exercise of the Center Financial TARP Warrant will equal the product of (x) the number of shares of Center Financial Common Stock that were purchasable pursuant to the Center Financial TARP Warrant immediately before the Effective Time and (y) the Exchange Ratio, rounded to the nearest one-hundredth (1/100th) of a share; and
A-1-4
(ii) the per share exercise price for the Center Financial TARP Warrant will equal the quotient of (x) the per share exercise price of the Center Financial TARP Warrant in effect immediately before the Effective Time and (y) the Exchange Ratio, rounded to the nearest one-tenth (1/10th) of a cent.
(f)Dissenters’ Rights. Notwithstanding anything in this Agreement to the contrary, shares of Center Financial Stock that have not been voted in favor of approving the principal terms of the Merger and with respect to which dissenters’ rights shall have been properly demanded and may properly be exercised in accordance with the CGCL shall not be converted as set forth inSection 2.1(b) at or after the Effective Time unless and until the holder of such shares withdraws such holder’s demand for appraisal in accordance with Applicable Legal Requirements or becomes ineligible for such appraisal, at which time such shares shall be converted as set forth inSection 2.1(b), without interest. Center Financial shall give Nara (i) prompt notice of any written demands for appraisal, withdrawals of demands for appraisal and any other instruments in respect thereof received by Center Financial prior to the Effective Time and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal. Without the prior written consent of Nara, Center Financial shall not make any payment with respect to any demands for appraisal and shall not settle or offer to settle any such demands.
(g)Nara Capital Stock. Each share of Nara Common Stock and each share of Nara Preferred Stock shall remain outstanding without change following the Effective Time as shares of the Surviving Corporation, except as provided inSection 2.1(a).
2.2Exchange of Certificates.
(a)Exchange Agent. As of the Effective Time, Nara shall deposit or make available to a bank or trust company designated by Nara and reasonably acceptable to Center Financial (the “Exchange Agent”), for the benefit of the holders of Center Financial Common Stock for exchange in accordance with thisArticle II, (i) certificates or, at the option of Nara, evidence of shares in book entry form (collectively “Nara Certificates”) representing the shares of Nara Common Stock issuable pursuant toSection 2.1 in exchange for such shares of Center Financial Common Stock and (ii) sufficient cash to pay cash in lieu of fractional shares in accordance withSection 2.2(e).
(b)Exchange Procedures. As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of shares of Center Financial Common Stock of record immediately prior to the Effective Time whose shares were converted into shares of Nara Common Stock pursuant toSection 2.1 (i) a letter of transmittal (which shall specify that, with respect to Center Financial Certificates, delivery shall be effected and risk of loss and title to the Center Financial Certificates shall pass, only upon delivery of the Center Financial Certificates and such letter of transmittal to the Exchange Agent, and which shall be in such form and have such other provisions as Nara and Center Financial may reasonably specify) and (ii) instructions for use in effecting the surrender of the Center Financial Certificates or Center Financial Common Stock held in book entry form, as applicable, in exchange for Nara Certificates representing the number of whole shares of Nara Common Stock into which such Center Financial Common Stock has been so converted. Upon surrender of a Center Financial Certificate for cancellation to the Exchange Agent together with such letter of transmittal or submission of a letter of transmittal in respect of shares of Center Financial Common Stock in book entry form, as applicable, duly executed, and such other documents as the Exchange Agent may reasonably require, the holder of such Center Financial Common Stock shall be entitled to receive in exchange therefor a Nara Certificate representing that number of whole shares of Nara Common Stock, which such holder has the right to receive in respect of the Center Financial Common Stock surrendered pursuant to the provisions of thisArticle II (after taking into account all shares of Center Financial Common Stock then held by such holder), and the Center Financial Common Stock so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of Center Financial Common Stock which is not registered in the transfer records of Center Financial, a Nara Certificate representing the proper number of shares of Nara Common Stock may be issued to a transferee if a duly executed letter of transmittal accompanied, in the case of Center Financial Common Stock in certificated form, by the relevant Center Financial Certificate representing such Center Financial Common Stock, is
A-1-5
presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by thisSection 2.2, each Center Financial Certificate and each book entry in respect of Common Stock in book entry form shall be deemed at any time after the Effective Time to represent only the Nara Common Stock into which such shares of Center Financial Common Stock have been converted as provided in thisArticle II and the right to receive upon such surrender cash in lieu of any fractional shares of Nara Common Stock, if applicable, as contemplated by thisSection 2.2.
(c)Distributions with Respect to Unexchanged Shares. No dividends or other distributions declared or made with respect to Nara Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Center Financial Common Stock with respect to the shares of Nara Common Stock represented thereby, and no cash payment in lieu of fractional shares shall be paid to any such holder of unsurrendered Center Financial Common Stock pursuant toSection 2.2(e), until the holder of such Center Financial Common Stock shall have complied with the exchange procedures set forth inSection 2.2(b). Subject to the effect of Applicable Legal Requirements, following the surrender of any such Center Financial Common Stock, there shall be paid to the holder of whole shares of Nara Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender the amount of any cash payable with respect to a fractional share of Nara Common Stock to which such holder is entitled pursuant toSection 2.2(e), if applicable, and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid (but withheld pursuant to the immediately preceding sentence) with respect to such whole shares of Nara Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole shares of Nara Common Stock.
(d)No Further Ownership Rights. All shares of Nara Common Stock issued upon conversion of shares of Center Financial Common Stock in accordance with the terms hereof (in each case, including any cash paid pursuant toSection 2.2(c) or2.2(e)) and all shares of Nara Series B Preferred Stock issued upon conversion of shares of Center Financial Series A Preferred Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Center Financial Common Stock or Center Financial Series A Preferred Stock, respectively; subject, however, to the Surviving Corporation’s obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by Center Financial on such shares of Center Financial Series A Preferred Stock in accordance with the terms of this Agreement on or prior to the Effective Time and which remain unpaid at the Effective Time, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Center Financial Common Stock or Center Financial Series A Preferred Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Center Financial Certificate or letter of transmittal in respect of shares of Center Financial Common Stock in book entry form, as applicable, is presented to the Surviving Corporation for any reason, the Center Financial Common Stock represented thereby or referred to therein shall be cancelled and exchanged as provided in thisArticle II.
(e)No Fractional Shares. No certificates or scrip representing fractional shares of Nara Common Stock shall be issued upon the surrender for exchange of Center Financial Common Stock, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of the Surviving Corporation. In lieu thereof, upon surrender of the applicable Center Financial Common Stock by submission of a letter of transmittal to the Exchange Agent accompanied, in the case of Center Financial Common Stock in certificated form, by the applicable Center Financial Certificates, the Exchange Agent shall pay each holder of such Center Financial Common Stock an amount in cash equal to the product obtained by multiplying (i) the fractional share interest to which such holder (after taking into account all shares of Center Financial Common Stock held at the Effective Time by such holder) would otherwise be entitled by (ii) the closing price on NASDAQ, as reported on the NASDAQ website at the close of NASDAQ’s regular session of trading, for a share of Nara Common Stock on the last trading day immediately preceding the Effective Time.
A-1-6
(f)Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the stockholders of Center Financial for six months after the Effective Time shall be delivered to the Surviving Corporation, upon demand, and any holders of Center Financial Common Stock who have not theretofore complied with thisArticle II shall thereafter look only to the Surviving Corporation for payment of their claim for Nara Common Stock, any cash in lieu of fractional shares of Nara Common Stock and any dividends or distributions with respect to Nara Common Stock.
(g)No Liability. None of Nara, Center Financial or the Surviving Corporation shall be liable to any holder of shares of Center Financial Common Stock or to any holder of shares of Center Financial Series A Preferred Stock for shares of Nara Common Stock or Nara Series B Preferred Stock, as applicable, or dividends or distributions with respect thereto or cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.
(h)Withholding. Nara shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Center Financial Common Stock or to any holder of shares of Center Financial Series A Preferred Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Nara, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Center Financial Common Stock or Center Financial Series A Preferred Stock, as applicable, in respect of which such deduction and withholding was made by Nara.
(i)Center Financial Series A Preferred Stock. The Parties shall contact the holder of the Center Financial Series A Preferred Stock prior to the Closing Date to make arrangements reasonably acceptable to such holder for the exchange of such holder’s shares of such stock after the Effective Time.
2.3Reservation of Right to Revise Structure. Prior to the Effective Time, the Parties shall have the right to change the method of effecting the Merger and/or the Bank Merger to an alternative structure mutually agreed by the Parties, including by re-structuring the transactions contemplated hereby and under the Bank Merger Agreement to provide for the merger of Nara with and into Center Financial, with Center Financial being the surviving corporation, the merger of Nara Bank with and into Center Bank, with Center Bank being the surviving bank, or both;provided,however, that any actions taken pursuant to this Section 2.3 shall not (a) alter or change the kind or amount of consideration to be issued to or retained by holders of Center Financial Common Stock, Center Financial Series A Preferred Stock, Nara Common Stock or Nara Series B Preferred Stock, as compared with what they would otherwise receive or retain pursuant to this Agreement, and holders of Center Financial Common Stock and holders of Nara Common Stock shall receive 45% and 55%, respectively, of the outstanding shares of common stock of the Surviving Corporation after the Merger is consummated, (b) adversely affect the tax consequences of the transaction to any such holder, (c) materially delay receipt of any Requisite Regulatory Approval, or (d) otherwise cause any closing condition not to be capable of being fulfilled (unless duly waived by the Party entitled to the benefits thereof). If the Parties mutually agree to change the structure of the Merger and/or Bank Merger, the Parties shall execute an appropriate amendment to this Agreement and/or the Bank Merger Agreement, as applicable, in order to reflect the change in structure;provided,however, that any such amendment shall not otherwise substantially affect the economic and other rights and obligations of the Parties or their respective shareholders.
A-1-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1Representations and Warranties of Center Financial. Except, with respect to any subsection of thisSection 3.1, as set forth in the correspondingly identified subsection of the disclosure schedule delivered by Center Financial to Nara concurrently herewith (the “Center Financial Disclosure Schedule”), Center Financial represents and warrants to Nara as follows:
(a)Organization, Standing and Power. Center Financial is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). Each of Center Financial and its Significant Subsidiaries is a corporation, trust or partnership duly organized, validly existing and, in the case of corporations, in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. The copies of Articles of Incorporation and By-laws of Center Financial and Center Bank, which have been previously furnished to Nara, are true, correct and complete copies of such documents as in effect on the date of this Agreement.
(b)Capital Structure.
(i) The authorized capital stock of Center Financial consists of 100,000,000 shares of common stock, without par value (the “Center Financial Common Stock”), and 10,000,000 shares of preferred stock, without par value (the “Center Financial Preferred Stock”). As of the close of business on November 30, 2010, (A) 39,992,745 shares of Center Financial Common Stock, including 79,334 Center Financial Restricted Shares, were issued and outstanding, 864,780 shares of Center Financial Common Stock were reserved for issuance upon the exercise of the Center Financial TARP Warrant, 717,140 shares of Center Financial Common Stock were subject to outstanding stock options issued under the Center Financial 2006 Stock Incentive Plan (the “Center Financial Stock Plan”) and 2,230,383 shares of Center Financial Common Stock were reserved for future issuance upon exercise of stock options or other awards under the Center Financial Stock Plan, and no shares of Center Financial Common Stock were held by Subsidiaries of Center Financial (exclusive of any shares acquired in respect of debts previously contracted (any such shares being referred to herein as “DPC shares”)); (B) 55,000 shares of Center Financial Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Center Financial Series A Preferred Stock”) were issued and outstanding. As of the close of business on November 30, 2010, options to acquire 52,745 shares of Center Financial Common Stock with an exercise price in excess of the closing share price of Center Financial as of the close of business on December 8, 2010 were issued and outstanding. All outstanding shares of Center Financial Common Stock and Center Financial Preferred Stock have been duly authorized and validly issued and are fully paid and non-assessable and the issuance of none of such shares was subject to preemptive rights.
(ii) Set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule is a true, correct and complete list of all outstanding bonds, debentures, notes, trust preferred securities or other similar obligations that Center Financial or any of its Subsidiaries has issued. Except as set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule, no Voting Debt of Center Financial or any Center Financial Subsidiary is issued or outstanding. All outstanding bonds, debentures, notes, trust preferred securities or other similar obligations of Center Financial or any of its Subsidiaries were issued in compliance in all material respects with all Applicable Legal Requirements. Each Trust Document entered into by Center Financial or any of its Subsidiaries is in full force and effect and constitutes the valid, binding and legally enforceable obligation of Center Financial or one of its Subsidiaries, and to the knowledge of Center Financial, the other parties thereto, enforceable in
A-1-8
accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles). Except as set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule or otherwise in thisSection 3.1(b), no Center Financial Subsidiary has issued securities held by any entity other than Center Financial or a Center Financial Subsidiary.
(iii) Except for (A) this Agreement, (B) the Center Financial TARP Warrant, (C) Center Financial Stock Options, which represented, as of November 30, 2010, the right to acquire up to an aggregate of 717,140 shares of Center Financial Common Stock, and (D) agreements entered into and securities and other instruments issued after the date of this Agreement to the extent permitted bySection 4.1, there are no options, warrants, calls, rights, commitments or agreements of any character to which Center Financial or any Subsidiary of Center Financial is a party or by which it or any such Subsidiary is bound obligating Center Financial or any Subsidiary of Center Financial to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or any Voting Debt or stock appreciation rights of Center Financial or of any Subsidiary of Center Financial or obligating Center Financial or any Subsidiary of Center Financial to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding contractual obligations of Center Financial or any of its Subsidiaries (A) to repurchase, redeem or otherwise acquire any shares of capital stock of Center Financial or any of its Subsidiaries or (B) pursuant to which Center Financial or any of its Subsidiaries is or could be required to register shares of Center Financial Common Stock, Center Financial Preferred Stock or other securities under the Securities Act of 1933, as amended (the “Securities Act”), except any such contractual obligations entered into after the date hereof to the extent permitted bySection 4.1.
(iv) Since December 31, 2009, except to the extent permitted bySection 4.1, Center Financial has not (A) issued any shares of capital stock, stock appreciation rights or securities exercisable or exchangeable for or convertible into shares of capital stock of Center Financial or any of its Subsidiaries, other than pursuant to and as required by the terms of the Center Financial Stock Plan and any employee stock options and other awards issued under the Center Financial Stock Plan prior to the date hereof (or issued after the date hereof in compliance withSections 4.1(c) and4.1(k)); (B) repurchased, redeemed or otherwise acquired, directly or indirectly through one or more Center Financial Subsidiaries, any shares of capital stock of Center Financial or any of its Subsidiaries (other than the acquisition of DPC shares in the ordinary course of business consistent with past practice); or (C) declared, set aside, made or paid to the stockholders of Center Financial dividends or other distributions on the outstanding shares of capital stock of Center Financial, other than cash dividends on the Center Financial Series A Preferred Stock as required by the terms of such preferred stock as in effect on the date hereof.
(v) Set forth inSection 3.1(b)(v) of the Center Financial Disclosure Schedule is a true, correct and complete list of all equity securities that Center Financial or any of its Subsidiaries owns, controls or holds for its own account, and neither Center Financial nor any of its Subsidiaries owns more than 4.9% of a class of voting securities of, or otherwise controls, any Person other than Center Financial Bank, in the case of Center Financial.
(c)Authority.
(i) Center Financial has all requisite corporate power and authority to enter into this Agreement and, subject in the case of the consummation of the Merger to the approval of the principal terms of the Merger by the requisite vote of the holders of Center Financial Stock, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Center Financial, subject in the case of the consummation of the Merger to the approval of the principal terms of the Merger by the stockholders of Center Financial. This Agreement has been duly
A-1-9
executed and delivered by Center Financial and constitutes a valid and binding obligation of Center Financial, enforceable against Center Financial in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(ii) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (A) conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or the loss of a material benefit under, or the creation of a lien, pledge, security interest, charge or other encumbrance on any assets (any such conflict, violation, default, right of termination, cancellation or acceleration, loss or creation, a “Violation”) pursuant to, any provision of the Articles of Incorporation or By-laws of Center Financial or any Subsidiary of Center Financial, or (B) except as set forth inSection 3.1(c)(ii) of the Center Financial Disclosure Schedule and subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to therein or inclause (iii) below, result in any Violation of any loan or credit agreement, note, mortgage, indenture, lease, Center Financial Benefit Plan or other agreement, obligation, instrument, permit, concession, franchise or license, or any Applicable Legal Requirements applicable to Center Financial or any Subsidiary of Center Financial or their respective properties or assets, which Violation, in the case ofclauses (A) and(B) above, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation.
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity (acting in any capacity) is required by or with respect to Center Financial or any Subsidiary of Center Financial in connection with the execution and delivery of this Agreement by Center Financial or the consummation by Center Financial of the transactions contemplated hereby, the failure to make or obtain which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation, except for (A) the filing of appropriate applications and notices with the Board of Governors of the Federal Reserve System (the “Federal Reserve”) under the BHC Act and the Bank Merger Act of 1960, as amended (the “Bank Merger Act”), and approval of the same, (B) the filing of an appropriate application with the California Department of Financial Institutions (the “DFI”) and approval of the same (the approvals required by the immediately precedingclauses (A) and(B) are referred to herein collectively as the “Requisite Regulatory Approvals”), (C) the filing with the SEC of (1) the Form S-4, including the Joint Proxy Statement/Prospectus and (2) such reports under Sections 12, 13(a), 13(d) and 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (D) the filing of the Certificate of Merger (or other appropriate documents as provided herein or in the CGCL) with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, (E) obtaining the appropriate approvals or consents under each loss-sharing agreement with the FDIC to which Center Financial or any Subsidiary of Center Financial is a party (the “Loss-Sharing Approvals”), and (F) such filings, notifications and approvals as may be required under the Small Business Investment Act of 1958 (“SBIA”) and the rules and regulations of the Small Business Administration (“SBA”) thereunder.
(d)SEC Documents; Regulatory Reports; Undisclosed Liabilities.
(i) Center Financial has filed all reports, schedules, registration statements and other documents required under Applicable Legal Requirements to be filed by it with the SEC since December 31, 2007 (the “Center Financial SEC Documents”). Center Financial has delivered or made available to Nara true, correct and complete copies of all Center Financial SEC Documents, all comment letters received by Center Financial from the SEC since December 31, 2007, all responses to such comment letters by or on behalf of Center Financial and all other correspondence since December 31, 2007 between the
A-1-10
SEC and Center Financial, in each case to the extent not available to the public in completely unredacted form on the SEC’s EDGAR website (“EDGAR”). No Subsidiary of Center Financial is, or since December 31, 2007 has been, required to file any form, report, registration statement or other document with the SEC. As of their respective dates of filing with the SEC (or, if amended or superseded by a filing prior to the date hereof, as of the date of such filing), the Center Financial SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act or the Sarbanes-Oxley Act of 2002 (the “SOX Act”), as the case may be, and the rules and regulations of the SEC thereunder applicable to such Center Financial SEC Documents, and none of the Center Financial SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including, in each case, any notes thereto) of Center Financial included in the Center Financial SEC Documents complied, as of their respective dates of filing with the SEC, in all material respects with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be disclosed therein) and fairly present in all material respects the consolidated financial position of Center Financial and its consolidated Subsidiaries and the consolidated results of operations, changes in stockholders’ equity and cash flows of such companies as of the dates and for the periods shown, subject, in the case of interim financial statements, to (i) the omission of notes to the extent permitted by Regulations S-X of the SEC (but only if, in the case of interim financial statements included in Center Financial SEC Documents since Center Financial’s most recent Annual Report on Form 10-K, such notes would not differ materially from the notes to the financial statements included in such Annual Report) and (ii) normal, recurring year-end adjustments (but only if the effect of such adjustments would not, individually or in the aggregate, be material). No financial statements of any Person other than the Subsidiaries of Center Financial are, or, since December 31, 2007 have been, required by generally accepted accounting principles to be included in the consolidated financial statements of Center Financial.
(ii) Since December 31, 2007, Center Financial and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were required to be filed by them under any Applicable Legal Requirements with the Federal Reserve, the FDIC, the DFI and with any other applicable Governmental Entity, and have paid all fees and assessments due and payable in connection therewith, except to the extent that the failure to file such report, registration or statement or to pay such fees and assessments would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. As of their respective dates (and without giving effect to any amendments or modifications filed after the date of this Agreement with respect to reports and documents filed before the date of this Agreement), each of such reports, registrations and statements (including the financial statements, exhibits and schedules therein) complied in all material respects with the applicable statutes, rules, regulations and orders enforced or promulgated by the Governmental Entity with which they were filed.
(iii) Except for (A) those liabilities that are fully reflected or reserved for in the consolidated financial statements of Center Financial included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010, as filed with the SEC prior to the date of this Agreement, (B) liabilities incurred since September 30, 2010 in the ordinary course of business consistent with past practice, and (C) liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial, Center Financial and its Subsidiaries do not have, and since September 30, 2010 Center Financial and its Subsidiaries have not incurred (except to the extent permitted bySection 4.1), any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise and whether or not required to be reflected in Center Financial’s financial statements in accordance with generally accepted accounting principles).
A-1-11
(iv) Center Financial is, and since December 31, 2007 has been, in compliance with the applicable listing and corporate governance rules and regulations of NASDAQ. Center Financial has delivered to Nara true, correct and complete copes of all correspondence between Center Financial and NASDAQ since December 31, 2007.
(v) As used in thisSection 3.1(d), the term “file” shall be broadly construed to include any manner in which a document or information is filed, furnished, transmitted or otherwise made available to the SEC or any other Governmental Entity.
(e)Information Supplied. None of the information supplied or to be supplied by Center Financial for inclusion or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Joint Proxy Statement/Prospectus will, at the date of mailing to stockholders and at the times of the meetings of stockholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Joint Proxy Statement/ Prospectus will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, except that no representation or warranty is made by Center Financial with respect to statements made or incorporated by reference therein based on information supplied by Nara for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus.
(f)Compliance with Applicable Legal and Reporting Requirements.
(i) Center Financial and its Subsidiaries hold all permits, authorizations, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of the businesses of Center Financial and its Subsidiaries, taken as a whole (the “Center Financial Permits”), the Center Financial Permits are in full force and effect and Center Financial and its Subsidiaries are in compliance with the terms of the Center Financial Permits, except where the failure so to hold, be in full force and effect or comply, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(ii) Except as set forth inSection 3.1(f)(ii) of the Center Financial Disclosure Schedule, since December 31, 2007, Center Financial and each of its Subsidiaries has conducted its business in compliance with all Applicable Legal Requirements (including the SOX Act, the USA PATRIOT Act of 2001, any other applicable anti-money laundering statute, rule or regulation or any rule or regulation issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the privacy and customer information requirements contained in Applicable Legal Requirements, and all applicable fair lending and other discrimination-related statutes, rules or regulations) or to the employees conducting such businesses, except for possible violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. To the knowledge of Center Financial, no investigation by any Governmental Entity with respect to Center Financial or any of its Subsidiaries is pending or threatened, other than, in each case, those the outcome of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(g)Accounting and Internal Controls.
(i) The records, systems, controls, data and information of Center Financial and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Center Financial or its Subsidiaries (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control which would not, individually or in the
A-1-12
aggregate, reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the following clause.
(ii) Center Financial and its Subsidiaries have implemented and maintain a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that: (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(iii) Center Financial has (A) implemented and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and such controls and procedures are effective to ensure that (1) all information required to be disclosed by Center Financial in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) all such information is accumulated and communicated to Center Financial’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure and (B) disclosed, based on its most recent evaluation prior to the date hereof, to Center Financial’s auditors and the audit committee of the board of directors of Center Financial (the “Center Financial Board”) (1) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Center Financial’s ability to record, process, summarize and report financial data and have identified for Center Financial’s auditors any material weaknesses in internal controls and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in Center Financial’s internal controls. Center Financial has made available to Nara a summary of any such disclosure made by management to Center Financial’s auditors and audit committee since December 31, 2007.
(iv) Since December 31, 2007, neither Center Financial nor any of its Subsidiaries or, to the knowledge of Center Financial, any director, officer, employee, auditor, accountant or representative of Center Financial or any of its Subsidiaries has received or has otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Center Financial or any of its Subsidiaries or their internal control over financial reporting, including any complaint, allegation, assertion or claim that Center Financial or any of its Subsidiaries has engaged in questionable accounting or auditing practices.
(h)Legal Proceedings. Except as set forth inSection 3.1(h) of the Center Financial Disclosure Schedule, there is no suit, action, investigation or proceeding (whether judicial, arbitral, administrative or other) pending or, to the knowledge of Center Financial, threatened, against or affecting Center Financial or any Subsidiary of Center Financial as to which there is a significant possibility of an adverse outcome which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Center Financial or any Subsidiary of Center Financial having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or on the Surviving Corporation.
(i)Taxes. Except as set forth inSection 3.1(i) of the Center Financial Disclosure Schedule:
(i) Each of Center Financial and the Center Financial Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all
A-1-13
material tax returns required to be filed by it, and all such filed tax returns were true, correct and complete in all material respects. All taxes shown to be due on such tax returns have been timely paid.
(ii) No written or, to the knowledge of Center Financial, unwritten notice of any deficiency with respect to taxes that has been proposed, asserted or assessed against Center Financial or any of the Center Financial Subsidiaries and has not previously been paid has been received by Center Financial or any Center Financial Subsidiary.
(iii) To the knowledge of Center Financial, no tax return of Center Financial or any Center Financial Subsidiary is under audit or examination by any Governmental Entity. No written or, to the knowledge of Center Financial, unwritten notice of such an audit or examination by any Governmental Entity has been received by Center Financial or any Center Financial Subsidiary. Any assessments for taxes due with respect to any completed and settled examinations or any concluded litigation have been fully paid.
(iv) Neither Center Financial nor any Center Financial Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code within the two-year period ending on the Closing Date.
(v) Neither Center Financial nor any Center Financial Subsidiary has any liability for any tax under Treasury Regulation Section 1.1502-6 or any similar provision of any other tax law, except for taxes of the affiliated group of which Center Financial is the common parent, within the meaning of Section 1504(a)(1) of the Code or any similar provision of any other tax law.
(vi) Neither Center Financial nor any Center Financial Subsidiary has taken or agreed to take (or failed to take or agree to take) any action or knows of any facts or circumstances that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(vii) Neither Center Financial nor any Center Financial Subsidiary has engaged in a transaction that would be reportable by or with respect to Center Financial or any Center Financial Subsidiary pursuant to Sections 6011, 6111 or 6112 of the Code.
(viii) Center Financial and the Center Financial Subsidiaries have withheld (or will withhold) from payments to or on behalf of its employees, independent contractors, creditors, stockholders or other third parties, and have timely paid (or will timely pay) to the appropriate Governmental Entity, all material amounts required to be withheld from such persons in accordance with applicable tax law;provided,however, that the foregoing withholding representation shall apply only with respect to payments made before the Closing Date and that the foregoing timely payment representation shall apply only with respect to payments which, to be timely, must be made to the appropriate Governmental Entity before the Closing Date.
(ix) There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any material taxes.
(x) Neither Center Financial nor any Center Financial Subsidiary is a party to or bound by any tax sharing agreement, tax indemnity obligation or agreement or arrangement with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any Governmental Entity).
(xi) Center Bank operates at least one significant historic business line, or owns at least a significant portion of its historic business assets, in each case within the meaning of Treasury Regulation Section 1.368-1(d).
(j)Certain Agreements. Except as set forth inSection 3.1(j) of the Center Financial Disclosure Schedule and except for this Agreement, neither Center Financial nor any of its Subsidiaries is a party to or
A-1-14
bound by any contract, arrangement, commitment or understanding (i) with respect to the employment of any directors or executive officers, or with any consultants that are natural persons, involving the payment of $150,000 or more per annum, (ii) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) which limits the ability of Center Financial or any of its Subsidiaries to compete in any line of business, in any geographic area or with any Person, or which requires referrals of business or requires Center Financial or any of its affiliates to make available investment opportunities to any Person on a priority, equal or exclusive basis, and in each case which limitation or requirement would reasonably be expected to be material to Center Financial and its Subsidiaries taken as a whole, (iv) with or to a labor union or other collective bargaining representative (including any collective bargaining agreement), (v) in the case of a Center Financial Benefit 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, (vi) which would prohibit or delay the consummation of any of the transactions contemplated by this Agreement, (vii) which involve the payment of more than $250,000 and are not terminable without penalty on notice of 90 days or less, (viii) real property leases or (ix) agreements providing for indemnification, contribution or any guaranty in favor of any officer or director or that were not entered into in the ordinary course of business. Center Financial has previously made available to Nara complete and accurate copies of each contract, arrangement, commitment or understanding of the type described in thisSection 3.1(j) (collectively referred to herein as the “Center Financial Contracts”). All of the Center Financial Contracts are valid and in full force and effect, except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. Neither Center Financial nor any of its Subsidiaries has, and to the best knowledge of Center Financial, none of the other parties thereto have, violated any provision of, or committed or failed to perform any act, and no event or condition exists, which with or without notice, lapse of time or both would constitute a default under the provisions of, any Center Financial Contract, except in each case for those violations and defaults which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(k)Benefit Plans.
(i) With respect to each employee benefit plan (including any “employee benefit plan”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and all stock purchase, stock option, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and other material employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, whether formal or informal, oral or written, legally binding or not (all the foregoing being herein called “Benefit Plans”), under which any employee or former employee of Center Financial or any of its Subsidiaries has any present or future right to benefits, and which is maintained or contributed to by Center Financial or any of its Subsidiaries or under which Center Financial or any of its Subsidiaries has any present or future liability (the “Center Financial Benefit Plans”), Center Financial has made available to Nara a true, correct and complete copy of (A) the most recent annual report (Form 5500) filed with the IRS and, where applicable, the related audited financial statements thereof, (B) such Center Financial Benefit Plan and all related amendments thereto, (C) each trust agreement relating to such Center Financial Benefit Plan and all related amendments thereto, (D) the most recent summary plan description for each Center Financial Benefit Plan for which a summary plan description is required by ERISA and, for Benefit Plans not subject to ERISA, any relevant summaries and (E) the most recent determination letter issued by the IRS with respect to any Center Financial Benefit Plan qualified under Section 401(a) of the Code.
(ii) None of the Center Financial Benefit Plans are subject to Title IV of ERISA.
(iii) Neither Center Financial, its Subsidiaries, nor any of their ERISA Affiliates has any liability under or with respect to a multiemployer plan (as defined in Section 3(37) of ERISA) nor any liability
A-1-15
or contingent liability for providing, under any Center Financial Benefit Plan or otherwise, any post-retirement medical or life insurance benefits, other than statutory liability for providing group health plan continuation coverage under Part 6 of Title I of ERISA and Section 4980B of the Code or applicable state law.
(iv) Each Center Financial Benefit Plan that is a nonqualified deferred compensation subject to Section 409A of the Code has been operated and administered in good faith compliance with, and complies in form with, Section 409A of the Code and applicable guidance with respect thereto from the period beginning January 1, 2005 through the date hereof.
(v) With respect to the Center Financial Benefit Plans, individually and in the aggregate, no event has occurred and, to the knowledge of Center Financial, there exists no condition or set of circumstances in connection with which Center Financial or any of its Subsidiaries could be subject to any liability which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial under ERISA, the Code or any other Applicable Legal Requirements.
(vi) True and complete copies of the Center Financial Stock Plans as in effect on the date hereof, and copies of all outstanding awards agreements relating thereto, have been provided or made available to Nara.
(vii) Except as set forth inSection 3.1(k)(vii) of the Center Financial Disclosure Schedule, no Center Financial Benefit Plan or Center Financial Stock Plan exists that could result in the payment to any present or former employee of Center Financial or any Subsidiary of Center Financial of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of Center Financial or any Subsidiary of Center Financial as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Section 280G of the Code.
(viii) Except as set forth inSection 3.1(k)(viii) of the Center Financial Disclosure Schedule, none of the assets of any Center Financial Benefit Plan are invested in employer securities or employer real property.
(ix) With respect to each of the Center Financial Benefit Plans, all contributions or premium payments due and payable on or before the Closing Date have been timely made, and, to the extent not presently payable, appropriate reserves have been established for the payment and properly accrued in accordance with customary accounting practices.
(l)Bank Subsidiary. Center Financial owns all of the outstanding shares of capital stock of Center Bank, free and clear of any claim, lien or encumbrance. All of the shares of capital stock of Center Bank have been duly authorized and validly issued and are fully paid and non-assessable and not subject to preemptive rights. Center Bank is an “insured bank” as defined in the Federal Deposit Insurance Act (the “FDIA”) and applicable regulations thereunder. Center Bank is a California-state chartered nonmember bank whose primary federal bank regulator is the FDIC.
(m)Agreements with Regulators. Except as set forth inSection 3.1(m) of the Center Financial Disclosure Schedule, neither Center Financial nor any Subsidiary of Center Financial is a party or subject to any written agreement, consent decree or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any cease-and-desist or other order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policies, procedures or board resolutions at the request of, any Governmental Entity which restricts materially the conduct of its business, imposes any material requirements or procedures or in any manner relates to its capital adequacy, its credit or risk management policies or its management, nor has Center Financial been advised by any Governmental Entity that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such agreement, decree, memorandum of understanding, extraordinary supervisory letter, commitment letter, order,
A-1-16
directive or similar submission, or any such policy, procedure or board resolutions. Center Financial and its Subsidiaries are in compliance with all of the foregoing so listed inSection 3.1(m) of the Center Financial Disclosure Schedule, except to the extent that the failure so to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. There are no formal or informal investigations, known to Center Financial, relating to any regulatory matters pending before any Governmental Entity with respect to Center Financial or any of its Subsidiaries.
(n)Absence of Certain Changes or Events. From September 30, 2010 through the date of this Agreement: (i) Center Financial and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices, (ii) there has not been any change, circumstance or event (including any event involving a prospective change) which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial and (iii) there has not been (A) any action or event of the type that would have required the consent of Nara underSection 4.1 or (B) any material loss, damage or destruction to, or any material interruption in the use of, any of the assets of Center Financial or any of its Subsidiaries (whether or not covered by insurance).
(o)Board Approval. The Center Financial Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held (the “Center Financial Board Approval”), has (i) determined that this Agreement and the Merger are fair to and in the best interests of Center Financial and its stockholders and declared the Merger to be advisable, (ii) approved this Agreement and the Merger, and (iii) recommended that the stockholders of Center Financial approve the principal terms of the Merger and directed that such matter be submitted for consideration by Center Financial stockholders at the Center Financial Stockholders Meeting. No state takeover statute is applicable to this Agreement, the Merger or the other transactions contemplated hereby.
(p)Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of each class of Center Financial Stock approving the principal terms of the Merger (the “Required Center Financial Vote”) is the only vote of the holders of Center Financial Stock necessary to authorize the transactions contemplated hereby (including the Merger).
(q)Properties. Center Financial or one of its Subsidiaries (i) has good and marketable title to all the properties and assets reflected in the latest audited balance sheet included in the Center Financial SEC Documents filed prior to the date hereof as being owned by Center Financial or one of its Subsidiaries or acquired after the date thereof which are material to Center Financial’s business on a consolidated basis (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all claims, liens, charges, security interests or encumbrances of any nature whatsoever, except for Permitted Liens, and (ii) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such Center Financial SEC Documents or acquired after the date thereof which are material to its business on a consolidated basis (except for leases that have expired by their terms since the date thereof) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to Center Financial’s knowledge, the lessor, except in the case ofclauses (i) and(ii) above which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(r)Intellectual Property. Center Financial and its Subsidiaries own or have a valid license to use all trademarks, service marks and trade names (including any registrations or applications for registration of any of the foregoing) (collectively, the “Center Financial Intellectual Property”) necessary to carry on their business substantially as currently conducted, except where such failures to own or validly license such Center Financial Intellectual Property would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. Neither Center Financial nor any such Subsidiary has received any notice of infringement of or conflict with, and to Center Financial’s knowledge, there are no infringements of or conflicts with, the rights of others with respect to the use of any Center Financial Intellectual Property which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
A-1-17
(s)Derivatives. All swaps, caps, floors, option agreements, futures and forward contracts and other similar derivative transactions (each, a “Derivative Contract”), whether entered into for Center Financial’s own account, or for the account of one or more of its Subsidiaries or their respective customers, were entered into (i) in accordance with prudent business practices and all Applicable Legal Requirements and (ii) with counterparties which Center Financial believes to be financially responsible. Each Derivative Contract of Center Financial or any of its Subsidiaries constitutes the valid and legally binding obligation of Center Financial or one or more of its Subsidiaries, as the case may be, that is enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles), and is in full force and effect. Neither Center Financial nor its Subsidiaries, nor to the knowledge of Center Financial any other party thereto, is in breach of any of its obligations under any Derivative Contract of Center Financial or one of its Subsidiaries. The financial position of Center Financial and its Subsidiaries on a consolidated basis under or with respect to each such Derivative Contract has been reflected in the books and records of Center Financial and such Subsidiaries in accordance with generally accepted accounting principles applied on a consistent basis.
(t)Loan Portfolio.
(i) Neither Center Financial nor any of its Subsidiaries is a party to any written or oral (A) Loans, other than any Covered Loans, under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Center Financial, in default of any other provision, or (B) Loans with any director, executive officer or 5% or greater stockholder of Center Financial or any of its Subsidiaries, or to the knowledge of Center Financial, any affiliate of any of the foregoing. Set forth inSection 3.1(t)(i) of the Center Financial Disclosure Schedule is a true, correct and complete list of (A) all of the Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified by Center Financial as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, (B) by category of Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the other Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on such Loans by category, and (C) each asset of Center Financial or any of its Subsidiaries that, as of September 30, 2010, was classified as “Other Real Estate Owned” (“OREO”) and the book value thereof (other than any Covered OREOs); it being understood and agreed that the Loans referenced inclauses (A) and(B) of this sentence include any Loans so classified by Center Financial or by any Governmental Entity, but shall not include any Covered Loans (as to whichSection 3.1(t)(ii) shall apply). Center Financial shall provide to Nara, on a monthly basis, (1) a schedule of Loans of Center Financial and its Subsidiaries that become classified in the manner described in the previous sentence, or any Loan of Center Financial and its Subsidiaries the classification of which is changed to a lower classification or to OREO, and (2) a schedule of Loans of Center Financial and its Subsidiaries in which the obligor is delinquent in payment by 30 days or more, in each case after the date of this Agreement.
(ii) Neither Center Financial nor any of its Subsidiaries is a party to any written or oral Covered Loans under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Center Financial, in default of any other provision. Set forth inSection 3.1(t)(ii) of the Center Financial Disclosure Schedule is a true, correct and complete list of (A) all of the Covered Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified by Center Financial as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower
A-1-18
thereunder, (B) by category of Covered Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the Covered Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on such Covered Loans by category, and (C) each asset of Center Financial or any of its Subsidiaries that, as of September 30, 2010, was classified as Covered OREO and the book value thereof; it being understood and agreed that the Covered Loans referenced inclauses (A) and(B) of this sentence include any Covered Loans so classified by Center Financial or by any Governmental Entity. Center Financial shall provide to Nara, on a monthly basis, a schedule of the Covered Loans and assets of Center Financial and its Subsidiaries that become classified in the manner described in the previous sentence after the date of this Agreement.
(iii) Each Loan of Center Financial and its Subsidiaries (A) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (B) to the extent carried on the books and records of Center Financial and its Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restriction, claims, liens or encumbrances, as applicable, which have been perfected and (C) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(iv) Each outstanding Loan of Center Financial and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of Center Financial and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all Applicable Legal Requirements.
(v) Except as set forth inSection 3.1(t)(v) of the Center Financial Disclosure Schedule, none of the agreements pursuant to which Center Financial or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
(vi) There are no outstanding Loans made by Center Financial or any of its Subsidiaries to any “executive officer” or other “insider” (as each such term is defined in Regulation O promulgated by the Federal Reserve) of Center Financial or its Subsidiaries, other than Loans that are subject to and that were made and continue to be in compliance with Regulation O or that are exempt therefrom.
(u)Insurance. Set forth inSection 3.1(u) of the Center Financial Disclosure Schedule is a true, correct and complete list of all insurance policies maintained by Center Financial and its Subsidiaries. All such insurance policies and bonds are in full force and effect and neither Center Financial nor any of its Subsidiaries is in default under any such policy or bond. Except as set forth inSection 3.1(u) of the Center Financial Disclosure Schedule, as of the date hereof, there are no claims in excess of $100,000 under any of such insurance policies or bonds, which claims are pending or as to which coverage has been denied or disputed by the underwriters of such insurance policies or bonds.
(v)Transactions with Affiliates. Except as set forth inSection 3.1(v) of the Center Financial Disclosure Schedule, there are no agreements, contracts, plans, arrangements or other transactions between Center Financial or any of its Subsidiaries, on the one hand, and any (i) officer or director of Center Financial or any of its Subsidiaries, (ii) record or beneficial owner of 5% or more of the voting securities of Center Financial, (iii) affiliate or family member of any such officer, director or record or beneficial owner or (iv) any other affiliate of Center Financial, on the other hand, except those of a type available to employees of Center Financial generally.
A-1-19
(w)Brokers or Finders. No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement, except D.A. Davidson & Co., and, if the Merger is not consummated, Center Financial agrees to indemnify Nara and to hold Nara harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or expenses asserted by any Person on the basis of any act or statement alleged to have been made by Center Financial or its affiliates.
(x)Opinion of Financial Advisor of Center Financial. Center Financial has received the opinion of its financial advisor, D.A. Davidson & Co., dated the date of this Agreement, to the effect that the Exchange Ratio is fair, from a financial point of view, to the holders of Center Financial Common Stock.
(y)No Other Representations or Warranties. Except for the representations and warranties contained in thisSection 3.1, neither Center Financial nor any other Person on behalf of Center Financial is making or has made any express or implied representation or warranty with respect to Center Financial or with respect to any other information provided to Nara in connection with the transactions contemplated herein. Neither Center Financial nor any other Person shall have or be subject to any liability or indemnification obligation to Nara or any other Person resulting from the distribution to Nara, or the use by Nara of, any such information, including any information, documents, projections, forecasts or other material made available to Nara in any “virtual data room” or management presentation in expectation of the transactions contemplated by this Agreement, unless any such information is expressly included in a representation or warranty contained in thisSection 3.1. Center Financial acknowledges that Nara is making no representations or warranties other than the representations and warranties contained inSection 3.2.
3.2Representations and Warranties of Nara. Except, with respect to any subsection of thisSection 3.2, as set forth in the correspondingly identified subsection of the disclosure schedule delivered by Nara to Center Financial concurrently herewith (the “Nara Disclosure Schedule”), Nara represents and warrants to Center Financial as follows:
(a)Organization, Standing and Power. Nara is a bank holding company registered under the BHC Act. Each of Nara and its Significant Subsidiaries is a corporation, trust or partnership duly organized, validly existing and, in the case of corporations, in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. The copies of Certificate of Incorporation and By-laws of Nara and Nara Bank, which have been previously furnished to Center Financial, are true, correct and complete copies of such documents as in effect on the date of this Agreement.
(b)Capital Structure.
(i) The authorized capital stock of Nara consists of 100,000,000 shares of common stock, par value $0.001 per share (the “Nara Common Stock”), and 10,000,000 shares of preferred stock, par value $0.001 (the “Nara Preferred Stock”). As of the close of business on November 30, 2010, (A) 37,971,527 shares of Nara Common Stock were issued and outstanding, 521,266 shares of Nara Common Stock were reserved for issuance upon the exercise of the outstanding warrant held by the United States Treasury Department (the “Nara TARP Warrant”) and 820,730 shares of Nara Common Stock were reserved for issuance upon exercise of stock options, Nara Performance Units or other awards under the Amended Nara 2007 Equity Incentive Plan (the “Nara Stock Plan”), and 60,686,477 shares of Nara Common Stock were held by Nara in its treasury or by its Subsidiaries (exclusive of DPC shares); and (B) 67,000 shares of Nara Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Nara Series A Preferred Stock”) were issued and outstanding. All outstanding shares of Nara Common Stock and Nara Preferred Stock have been duly authorized
A-1-20
and validly issued and are fully paid and non-assessable and the issuance of none of such shares was subject to preemptive rights. The shares of Nara Common Stock and Nara Series B Preferred Stock to be issued pursuant to or as specifically contemplated by this Agreement will have been duly authorized as of the Effective Time and, if and when issued in accordance with the terms hereof, will be validly issued, fully paid and non-assessable and the issuance of none of such shares was or will be subject to preemptive rights. As of the close of business on November 30, 2010, options to acquire 150,000 shares of Nara Common Stock with an exercise price in excess of the closing share price of Nara as of the close of business on December 8, 2010 were issued and outstanding.
(ii) Set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule is a true, correct and complete list of all outstanding bonds, debentures, notes, trust preferred securities or other similar obligations that Nara or any of its Subsidiaries has issued. Except as set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule, no Voting Debt of Nara or any Nara Subsidiary is issued or outstanding. All outstanding bonds, debentures, notes, trust preferred securities or other similar obligations of Nara or any of its Subsidiaries were issued in compliance in all material respects with all Applicable Legal Requirements. Each Trust Document entered into by Nara or any of its Subsidiaries is in full force and effect and constitutes the valid, binding and legally enforceable obligation of Nara or one of its Subsidiaries, and to the knowledge of Center Financial, the other parties thereto, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles). Except as set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule or otherwise in thisSection 3.2(b), no Nara Subsidiary has issued securities held by any entity other than Nara or a Nara Subsidiary.
(iii) Except for (A) this Agreement, (B) the Nara TARP Warrant, (C) Nara Stock Options, restricted units and performance units issued under the Nara Stock Plans, which represented, as of November 30, 2010, the right to acquire (in the case of Nara Stock Options) or to receive the value of up to an aggregate of, respectively, 543,250, zero and 36,200 shares of Nara Common Stock, and (D) agreements entered into and securities and other instruments issued after the date of this Agreement to the extent permitted bySection 4.2, there are no options, warrants, calls, rights, commitments or agreements of any character to which Nara or any Subsidiary of Nara is a party or by which it or any such Subsidiary is bound obligating Nara or any Subsidiary of Nara to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or any Voting Debt or stock appreciation rights of Nara or of any Subsidiary of Nara or obligating Nara or any Subsidiary of Nara to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding contractual obligations of Nara or any of its Subsidiaries (A) to repurchase, redeem or otherwise acquire any shares of capital stock of Nara or any of its Subsidiaries or (B) pursuant to which Nara or any of its Subsidiaries is or could be required to register shares of Nara Common Stock, Nara Preferred Stock or other securities under the Securities Act, except any such contractual obligations entered into after the date hereof to the extent permitted bySection 4.2.
(iv) Since December 31, 2009, except to the extent permitted bySection 4.2, Nara has not (A) issued any shares of capital stock, stock appreciation rights or securities exercisable or exchangeable for or convertible into shares of capital stock of Nara or any of its Subsidiaries, other than pursuant to and as required by the terms of the Nara Stock Plan and any employee stock options and other awards issued under the Nara Stock Plans prior to the date hereof (or issued after the date hereof in compliance withSections 4.2(c) and4.2(k)); (B) repurchased, redeemed or otherwise acquired, directly or indirectly through one or more Nara Subsidiaries, any shares of capital stock of Nara or any of its Subsidiaries (other than the acquisition of DPC shares in the ordinary course of business consistent with past practice); or (C) declared, set aside, made or paid to the stockholders of Nara dividends or other distributions on the outstanding shares of capital stock of Nara, other than cash dividends on the Nara Series A Preferred Stock as required by the terms of such preferred stock as in effect on the date hereof.
A-1-21
(v) Set forth inSection 3.2(b)(v) of the Nara Disclosure Schedule is a true, correct and complete list of all equity securities that Nara or any of its Subsidiaries owns, controls or holds for its own account, and neither Nara nor any of its Subsidiaries owns more than 4.9% of a class of voting securities of, or otherwise controls, any Person other than Nara Bank, in the case of Nara.
(c)Authority.
(i) Nara has all requisite corporate power and authority to enter into this Agreement and, subject in the case of the consummation of the Merger to the adoption of this Agreement by the requisite vote of the holders of Nara Common Stock, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Nara, subject in the case of the consummation of the Merger to the adoption of this Agreement by the stockholders of Nara. This Agreement has been duly executed and delivered by Nara and constitutes a valid and binding obligation of Nara, enforceable against Nara in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(ii) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (A) result in any Violation pursuant to any provision of the Certificate of Incorporation or By-laws of Nara or any Subsidiary of Nara, or (B) except as set forth inSection 3.2(c)(ii) of the Nara Disclosure Schedule and subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to therein or inclause (iii) below, result in any Violation of any loan or credit agreement, note, mortgage, indenture, lease, Nara Benefit Plan or other agreement, obligation, instrument, permit, concession, franchise or license, or any Applicable Legal Requirements applicable to Nara or any Subsidiary of Nara or their respective properties or assets, which Violation, in the case ofclauses (A) and(B) above, which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity (acting in any capacity) is required by or with respect to Nara or any Subsidiary of Nara in connection with the execution and delivery of this Agreement by Nara or the consummation by Nara of the transactions contemplated hereby, the failure to make or obtain which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or the Surviving Corporation, except for (A) the Requisite Regulatory Approvals, (B) the filing with the SEC of (1) the Form S-4, including the Joint Proxy Statement/Prospectus and (2) such reports under Sections 12, 13(a), 13(d) and 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (C) the filing of the Certificate of Merger (or other appropriate documents as provided herein or in the CGCL) with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, and (D) such filings, notifications and approvals as may be required under the SBIA and the rules and regulations of the SBA thereunder.
(d)SEC Documents; Regulatory Reports; Undisclosed Liabilities.
(i) Nara has filed all reports, schedules, registration statements and other documents required under Applicable Legal Requirements to be filed by it with the SEC since December 31, 2007 (the “Nara SEC Documents”). Nara has delivered or made available to Center Financial true, correct and complete copies of all Nara SEC Documents, all comment letters received by Nara from the SEC since December 31, 2007, all responses to such comment letters by or on behalf of Nara and all other correspondence since December 31, 2007 between the SEC and Nara, in each case to the extent not available to the public in completely unredacted form on EDGAR. No Subsidiary of Nara is, or since December 31, 2007 has been, required to file any form, report, registration statement or other document with the SEC. As of their respective dates of filing with the SEC (or, if amended or superseded by a
A-1-22
filing prior to the date hereof, as of the date of such filing), the Nara SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act or the SOX Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Nara SEC Documents, and none of the Nara SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including, in each case, any notes thereto) of Nara included in the Nara SEC Documents complied, as of their respective dates of filing with the SEC, in all material respects with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be disclosed therein) and fairly present in all material respects the consolidated financial position of Nara and its consolidated Subsidiaries and the consolidated results of operations, changes in stockholders’ equity and cash flows of such companies as of the dates and for the periods shown, subject, in the case of interim financial statements, to (i) the omission of notes to the extent permitted by Regulations S-X of the SEC (but only if, in the case of interim financial statements included in Nara SEC Documents since Nara’s most recent Annual Report on Form 10-K, such notes would not differ materially from the notes to the financial statements included in such Annual Report) and (ii) normal, recurring year-end adjustments (but only if the effect of such adjustments would not, individually or in the aggregate, be material). No financial statements of any Person other than the Subsidiaries of Nara are, or, since December 31, 2007 have been, required by generally accepted accounting principles to be included in the consolidated financial statements of Nara.
(ii) Since December 31, 2007, Nara and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were required to be filed by them under any Applicable Legal Requirements with the Federal Reserve, the FDIC, the DFI and with any other applicable Governmental Entity, and have paid all fees and assessments due and payable in connection therewith, except to the extent that the failure to file such report, registration or statement or to pay such fees and assessments would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. As of their respective dates (and without giving effect to any amendments or modifications filed after the date of this Agreement with respect to reports and documents filed before the date of this Agreement), each of such reports, registrations and statements (including the financial statements, exhibits and schedules therein) complied in all material respects with the applicable statutes, rules, regulations and orders enforced or promulgated by the Governmental Entity with which they were filed.
(iii) Except for (A) those liabilities that are fully reflected or reserved for in the consolidated financial statements of Nara included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010, as filed with the SEC prior to the date of this Agreement, (B) liabilities incurred since September 30, 2010 in the ordinary course of business consistent with past practice, and (C) liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara, Nara and its Subsidiaries do not have, and since September 30, 2010 Nara and its Subsidiaries have not incurred (except to the extent permitted bySection 4.2), any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise and whether or not required to be reflected in Nara’s financial statements in accordance with generally accepted accounting principles).
(iv) Nara is, and since December 31, 2007 has been, in compliance with the applicable listing and corporate governance rules and regulations of NASDAQ. Nara has delivered to Center Financial true, correct and complete copes of all correspondence between Nara and NASDAQ since December 31, 2007.
A-1-23
(v) As used in thisSection 3.2(d), the term “file” shall be broadly construed to include any manner in which a document or information is filed, furnished, transmitted or otherwise made available to the SEC or any other Governmental Entity.
(e)Information Supplied. None of the information supplied or to be supplied by Nara for inclusion or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Joint Proxy Statement/Prospectus will, at the date of mailing to stockholders and at the times of the meetings of stockholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Joint Proxy Statement/Prospectus will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, and the Form S-4 will comply as to form in all material respects with the requirements of the Securities Act and the rules and regulations of the SEC thereunder, except that no representation or warranty is made by Nara with respect to statements made or incorporated by reference therein based on information supplied by Center Financial for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus or Form S-4.
(f)Compliance with Applicable Legal and Reporting Requirements.
(i) Nara and its Subsidiaries hold all permits, authorizations, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of the businesses of Nara and its Subsidiaries, taken as a whole (the “Nara Permits”), the Nara Permits are in full force and effect and Nara and its Subsidiaries are in compliance with the terms of the Nara Permits, except where the failure so to hold, be in full force and effect or comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(ii) Since December 31, 2007, Nara and each of its Subsidiaries has conducted its business in compliance with all Applicable Legal Requirements (including the SOX Act, the USA PATRIOT Act of 2001, any other applicable anti-money laundering statute, rule or regulation or any rule or regulation issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the privacy and customer information requirements contained in Applicable Legal Requirements, and all applicable fair lending and other discrimination-related statutes, rules or regulations) or to the employees conducting such businesses, except for possible violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. To the knowledge of Nara, no investigation by any Governmental Entity with respect to Nara or any of its Subsidiaries is pending or threatened, other than, in each case, those the outcome of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(g)Accounting and Internal Controls.
(i) The records, systems, controls, data and information of Nara and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Nara or its Subsidiaries (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the following clause.
(ii) Nara and its Subsidiaries have implemented and maintain a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles,
A-1-24
including that: (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(iii) Nara has (A) implemented and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and such controls and procedures are effective to ensure that (1) all information required to be disclosed by Nara in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) all such information is accumulated and communicated to Nara’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure and (B) disclosed, based on its most recent evaluation prior to the date hereof, to Nara’s auditors and the audit committee of the Nara Board (1) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Nara’s ability to record, process, summarize and report financial data and have identified for Nara’s auditors any material weaknesses in internal controls and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in Nara’s internal controls. Nara has made available to Center Financial a summary of any such disclosure made by management to Nara’s auditors and audit committee since December 31, 2007.
(iv) Since December 31, 2007, neither Nara nor any of its Subsidiaries or, to the knowledge of Nara, any director, officer, employee, auditor, accountant or representative of Nara or any of its Subsidiaries has received or has otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Nara or any of its Subsidiaries or their internal control over financial reporting, including any complaint, allegation, assertion or claim that Nara or any of its Subsidiaries has engaged in questionable accounting or auditing practices.
(h)Legal Proceedings. There is no suit, action, investigation or proceeding (whether judicial, arbitral, administrative or other) pending or, to the knowledge of Nara, threatened, against or affecting Nara or any Subsidiary of Nara as to which there is a significant possibility of an adverse outcome which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Nara or any Subsidiary of Nara having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or on the Surviving Corporation.
(i)Taxes. Except as set forth inSection 3.2(i) of the Nara Disclosure Schedule:
(i) Each of Nara and the Nara Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all material tax returns required to be filed by it, and all such filed tax returns were true, correct and complete in all material respects. All taxes shown to be due on such tax returns have been timely paid.
(ii) No written or, to the knowledge of Nara, unwritten notice of any deficiency with respect to taxes that has been proposed, asserted or assessed against Nara or any of the Nara Subsidiaries and has not previously been paid has been received by Nara or any Nara Subsidiary.
(iii) To the knowledge of Nara, no tax return of Nara or any Nara Subsidiary is under audit or examination by any Governmental Entity. No written or, to the knowledge of Nara, unwritten notice of such an audit or examination by any Governmental Entity has been received by Nara or any Nara Subsidiary. Any assessments for taxes due with respect to any completed and settled examinations or any concluded litigation have been fully paid.
A-1-25
(iv) Neither Nara nor any Nara Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code within the two-year period ending on the Closing Date.
(v) Neither Nara nor any Nara Subsidiary has any liability for any tax under Treasury Regulation Section 1.1502-6 or any similar provision of any other tax law, except for taxes of the affiliated group of which Nara is the common parent, within the meaning of Section 1504(a)(1) of the Code or any similar provision of any other tax law.
(vi) Neither Nara nor any Nara Subsidiary has taken or agreed to take (or failed to take or agree to take) any action or knows of any facts or circumstances that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(vii) Neither Nara nor any Nara Subsidiary has engaged in a transaction that would be reportable by or with respect to Nara or any Nara Subsidiary pursuant to Sections 6011, 6111 or 6112 of the Code.
(viii) Nara and the Nara Subsidiaries have withheld (or will withhold) from payments to or on behalf of its employees, independent contractors, creditors, stockholders or other third parties, and have timely paid (or will timely pay) to the appropriate Governmental Entity, all material amounts required to be withheld from such persons in accordance with applicable tax law.
(ix) There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any material taxes.
(x) Neither Nara nor any Nara Subsidiary is a party to or bound by any tax sharing agreement, tax indemnity obligation or agreement or arrangement with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any Governmental Entity).
(xi) Except for the actions required by the Bank Merger, Nara has no present plan or intention to, following the Closing, dispose of any of the capital stock of any Center Financial Subsidiary or of any Nara Subsidiary or permit any Center Financial Subsidiary or any Nara Subsidiary to dispose of or discontinue any Center Financial Subsidiary’s significant historic business assets or to substantially alter any Center Financial Subsidiary’s significant historic business lines. The Parties agree that any bulk sales after the Merger of certain non-performing loans previously owned by Center Financial, representing not more than 20% of Center Financial’s loan portfolio immediately before the Merger, are not inconsistent with the representation in the preceding sentence.
(j)Certain Agreements. Except as set forth inSection 3.2(j) of the Nara Disclosure Schedule and except for this Agreement, neither Nara nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (i) with respect to the employment of any directors or executive officers, or with any consultants that are natural persons, involving the payment of $150,000 or more per annum, (ii) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) which limits the ability of Nara or any of its Subsidiaries to compete in any line of business, in any geographic area or with any Person, or which requires referrals of business or requires Nara or any of its affiliates to make available investment opportunities to any Person on a priority, equal or exclusive basis, and in each case which limitation or requirement would reasonably be expected to be material to Nara and its Subsidiaries taken as a whole, (iv) with or to a labor union or other collective bargaining representative (including any collective bargaining agreement), (v) in the case of a Nara Benefit 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, (vi) which would prohibit or delay the consummation of any of the transactions contemplated by this Agreement, (vii) which involve the payment of more than $250,000 and are not terminable without penalty on notice of 90 days or less, (viii) real property leases or (ix) agreements providing for indemnification, contribution or any guaranty in favor of any officer or director or that were not entered into
A-1-26
in the ordinary course of business. Nara has previously made available to Center Financial complete and accurate copies of each contract, arrangement, commitment or understanding of the type described in thisSection 3.2(j) (collectively referred to herein as the “Nara Contracts”). All of the Nara Contracts are valid and in full force and effect, except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. Neither Nara nor any of its Subsidiaries has, and to the best knowledge of Nara, none of the other parties thereto have, violated any provision of, or committed or failed to perform any act, and no event or condition exists, which, with or without notice, lapse of time or both would constitute a default under the provisions of, any Nara Contract, except in each case for those violations and defaults which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(k)Benefit Plans.
(i) With respect to each Benefit Plan under which any employee or former employee of Nara or any of its Subsidiaries has any present or future right to benefits, and which is maintained or contributed to by Nara or any of its Subsidiaries or under which Nara or any of its Subsidiaries has any present or future liability (the “Nara Benefit Plans”), Nara has made available to Center Financial a true, correct and complete copy of (A) the most recent annual report (Form 5500) filed with the IRS and, where applicable, the related audited financial statements thereof, (B) such Nara Benefit Plan and all related amendments thereto, (C) each trust agreement relating to such Nara Benefit Plan and all related amendments thereto, (D) the most recent summary plan description for each Nara Benefit Plan for which a summary plan description is required by ERISA and, for Benefit Plans not subject to ERISA, any relevant summaries and (E) the most recent determination letter issued by the IRS with respect to any Nara Benefit Plan qualified under Section 401(a) of the Code.
(ii) None of the Nara Benefit Plans are subject to Title IV of ERISA.
(iii) Neither Nara, its Subsidiaries, nor any of their ERISA Affiliates has any liability under or with respect to a multiemployer plan (as defined in Section 3(37) of ERISA) nor any liability or contingent liability for providing, under any Nara Benefit Plan or otherwise, any post-retirement medical or life insurance benefits, other than statutory liability for providing group health plan continuation coverage under Part 6 of Title I of ERISA and Section 4980B of the Code or applicable state law.
(iv) Each Nara Benefit Plan that is a nonqualified deferred compensation subject to Section 409A of the Code has been operated and administered in good faith compliance with, and complies in form with, Section 409A of the Code and applicable guidance with respect thereto from the period beginning January 1, 2005 through the date hereof.
(v) With respect to the Nara Benefit Plans, individually and in the aggregate, no event has occurred and, to the knowledge of Nara, there exists no condition or set of circumstances in connection with which Nara or any of its Subsidiaries could be subject to any liability which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara under ERISA, the Code or any other Applicable Legal Requirements.
(vi) True and complete copies of the Nara Stock Plans as in effect on the date hereof, and copies of all outstanding awards agreements relating thereto, have been provided or made available to Center Financial.
(vii) Except as set forth inSection 3.2(k)(vii) of the Nara Disclosure Schedule, no Nara Benefit Plan or Nara Stock Plan exists that could result in the payment to any present or former employee of Nara or any Subsidiary of Nara of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of Nara or any Subsidiary of Nara as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Section 280G of the Code.
A-1-27
(viii) Except as set forth inSection 3.2(k)(viii) of the Nara Disclosure Schedule, none of the assets of any Nara Benefit Plan are invested in employer securities or employer real property.
(ix) With respect to each of the Nara Benefit Plans, all contributions or premium payments due and payable on or before the Closing Date have been timely made, and, to the extent not presently payable, appropriate reserves have been established for the payment and properly accrued in accordance with customary accounting practices.
(l)Bank Subsidiary. Nara owns all of the outstanding shares of capital stock of Nara Bank, free and clear of any claim, lien or encumbrance. All of the shares of capital stock of Nara Bank have been duly authorized and validly issued and are fully paid and non-assessable and not subject to preemptive rights. Nara Bank is an “insured bank” as defined in the FDIA and applicable regulations thereunder. Nara Bank is a California-state chartered member bank whose primary federal bank regulator is the Federal Reserve.
(m)Agreements with Regulators. Except as set forth inSection 3.2(m) of the Nara Disclosure Schedule, neither Nara nor any Subsidiary of Nara is a party or subject to any written agreement, consent decree or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any cease-and-desist or other order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policies, procedures or board resolutions at the request of, any Governmental Entity which restricts materially the conduct of its business, imposes any material requirements or procedures or in any manner relates to its capital adequacy, its credit or risk management policies or its management, nor has Nara been advised by any Governmental Entity that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such agreement, decree, memorandum of understanding, extraordinary supervisory letter, commitment letter, order, directive or similar submission, or any such policy, procedure or board resolutions. Nara and its Subsidiaries are in compliance with all of the foregoing so listed inSection 3.2(m) of the Nara Disclosure Schedule, except to the extent that the failure so to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. There are no formal or informal investigations, known to Nara, relating to any regulatory matters pending before any Governmental Entity with respect to Nara or any of its Subsidiaries.
(n)Absence of Certain Changes or Events. From September 30, 2010 through the date of this Agreement: (i) Nara and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices, (ii) there has not been any change, circumstance or event (including any event involving a prospective change) which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara and (iii) there has not been (A) any action or event of the type that would have required the consent of Center Financial underSection 4.2 or (B) any material loss, damage or destruction to, or any material interruption in the use of, any of the assets of Nara or any of its Subsidiaries (whether or not covered by insurance).
(o)Board Approval. The Nara Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held (the “Nara Board Approval”), has (i) determined that this Agreement and the Merger are fair to and in the best interests of Nara and its stockholders and declared the Merger to be advisable, (ii) approved this Agreement and the Merger, and (iii) recommended that the stockholders of Nara adopt this Agreement and directed that such matter be submitted for consideration by Nara stockholders at the Nara Stockholders Meeting. No state takeover statute is applicable to this Agreement, the Merger or the other transactions contemplated hereby.
(p)Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of Nara Common Stock to adopt this Agreement (the “Required Nara Vote”) is the only vote of the holders of any class or series of Nara capital stock necessary to approve and adopt this Agreement and the transactions contemplated hereby (including the Merger).
A-1-28
(q)Properties. Nara or one of its Subsidiaries (i) has good and marketable title to all the properties and assets reflected in the latest audited balance sheet included in the Nara SEC Documents filed prior to the date hereof as being owned by Nara or one of its Subsidiaries or acquired after the date thereof which are material to Nara’s business on a consolidated basis (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all claims, liens, charges, security interests or encumbrances of any nature whatsoever, except for Permitted Liens, and (ii) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such Nara SEC Documents or acquired after the date thereof which are material to its business on a consolidated basis (except for leases that have expired by their terms since the date thereof) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to Nara’s knowledge, the lessor, except in the case ofclauses (i) and(ii) above which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(r)Intellectual Property. Nara and its Subsidiaries own or have a valid license to use all trademarks, service marks and trade names (including any registrations or applications for registration of any of the foregoing) (collectively, the “Nara Intellectual Property”) necessary to carry on their business substantially as currently conducted, except where such failures to own or validly license such Nara Intellectual Property would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. Neither Nara nor any such Subsidiary has received any notice of infringement of or conflict with, and to Nara’s knowledge, there are no infringements of or conflicts with, the rights of others with respect to the use of any Nara Intellectual Property which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(s)Derivatives. All Derivative Contracts, whether entered into for Nara’s own account, or for the account of one or more of its Subsidiaries or their respective customers, were entered into (i) in accordance with prudent business practices and all Applicable Legal Requirements and (ii) with counterparties which Nara believes to be financially responsible. Each Derivative Contract of Nara or any of its Subsidiaries constitutes the valid and legally binding obligation of Nara or one or more of its Subsidiaries, as the case may be, that is enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles), and is in full force and effect. Neither Nara nor its Subsidiaries, nor to the knowledge of Nara any other party thereto, is in breach of any of its obligations under any Derivative Contract of Nara or one of its Subsidiaries. The financial position of Nara and its Subsidiaries on a consolidated basis under or with respect to each such Derivative Contract has been reflected in the books and records of Nara and such Subsidiaries in accordance with generally accepted accounting principles applied on a consistent basis.
(t)Loan Portfolio.
(i) Neither Nara nor any of its Subsidiaries is a party to any written or oral (A) Loans under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Nara, in default of any other provision, or (B) Loans with any director, executive officer or 5% or greater stockholder of Nara or any of its Subsidiaries, or to the knowledge of Nara, any affiliate of any of the foregoing. Set forth inSection 3.2(t) of the Nara Disclosure Schedule is a true, correct and complete list of (A) all of the Loans of Nara and its Subsidiaries that, as of September 30, 2010, were classified by Nara as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, (B) by category of Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the other Loans of Nara and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on
A-1-29
such Loans by category, and (C) each asset of Nara or any of its Subsidiaries that, as of September 30, 2010, was classified as OREO and the book value thereof, it being understood and agreed that the Loans referenced inclauses (A) and(B) of this sentence include any Loans so classified by Nara or by any Governmental Entity. Nara shall provide to Center Financial, on a monthly basis, (1) a schedule of Loans of Nara and its Subsidiaries that become classified in the manner described in the previous sentence, or any Loan of Nara and its Subsidiaries the classification of which is changed to a lower classification or to OREO, and (2) a schedule of Loans of Nara and its Subsidiaries in which the obligor is delinquent in payment by 30 days or more, in each case after the date of this Agreement.
(ii) Each Loan of Nara and its Subsidiaries (A) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (B) to the extent carried on the books and records of Nara and its Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restriction, claims, liens or encumbrances, as applicable, which have been perfected and (C) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(iii) Each outstanding Loan of Nara and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of Nara and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all Applicable Legal Requirements.
(iv) Except as set forth inSection 3.1(t)(iv) of the Nara Disclosure Schedule, none of the agreements pursuant to which Nara or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
(v) There are no outstanding Loans made by Nara or any of its Subsidiaries to any “executive officer” or other “insider” (as each such term is defined in Regulation O promulgated by the Federal Reserve) of Nara or its Subsidiaries, other than Loans that are subject to and that were made and continue to be in compliance with Regulation O or that are exempt therefrom.
(u)Insurance. Set forth inSection 3.2(u) of the Nara Disclosure Schedule is a true, correct and complete list of all insurance policies maintained by Nara and its Subsidiaries. All such insurance policies and bonds are in full force and effect, and neither Nara nor any of its Subsidiaries is in default under any such policy or bond. Except as set forth inSection 3.2(u) of the Nara Disclosure Schedule, as of the date hereof, there are no claims in excess of $100,000 under any of such insurance policies or bonds, which claims are pending or as to which coverage has been denied or disputed by the underwriters of such insurance policies or bonds.
(v)Transactions with Affiliates. Except as set forth inSection 3.2(v) of the Nara Disclosure Schedule, there are no agreements, contracts, plans, arrangements or other transactions between Nara or any of its Subsidiaries, on the one hand, and any (i) officer or director of Nara or any of its Subsidiaries, (ii) record or beneficial owner of 5% or more of the voting securities of Nara, (iii) affiliate or family member of any such officer, director or record or beneficial owner or (iv) any other affiliate of Nara, on the other hand, except those of a type available to employees of Nara generally.
(w)Brokers or Finders. No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement, except Keefe, Bruyette & Woods, Inc., and, if the Merger is not consummated, Nara agrees to indemnify Center Financial and to hold Center Financial harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or
A-1-30
expenses asserted by any Person on the basis of any act or statement alleged to have been made by Nara or its affiliates.
(x)Opinion of Nara Financial Advisor. Nara has received the opinion of its financial advisor, Keefe, Bruyette & Woods, Inc., dated the date of this Agreement, to the effect that the Exchange Ratio is fair, from a financial point of view, to Nara and the holders of Nara Common Stock.
(y)No Other Representations or Warranties. Except for the representations and warranties contained in thisSection 3.2, neither Nara nor any other Person on behalf of Nara is making or has made any express or implied representation or warranty with respect to Nara or with respect to any other information provided to Center Financial in connection with the transactions contemplated herein. Neither Nara nor any other Person shall have or be subject to any liability or indemnification obligation to Center Financial or any other Person resulting from the distribution to Center Financial, or the use by Center Financial of, any such information, including any information, documents, projections, forecasts or other material made available to Center Financial in any “virtual data room” or management presentation in expectation of the transactions contemplated by this Agreement, unless any such information is expressly included in a representation or warranty contained in thisSection 3.2. Nara acknowledges that Center Financial is making no representations or warranties other than the representations and warranties contained inSection 3.1.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1Covenants of Center Financial. During the period from the date of this Agreement and continuing until the Effective Time, Center Financial agrees as to itself and its Subsidiaries that, except as expressly contemplated or permitted by this Agreement or to the extent that Nara shall otherwise consent in writing:
(a)Ordinary Course. Center Financial and its Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course consistent with past practice and use all reasonable efforts to preserve intact their present business organizations, maintain their rights, franchises, licenses and other authorizations issued by Governmental Entities, preserve their relationships with directors, officers, employees, customers, suppliers and others having business dealings with them and maintain their respective properties and assets in their present state of repair, order and condition, reasonable wear and tear excepted, to the end that their goodwill and ongoing businesses shall not be impaired in any material respect as of the Effective Time. Center Financial shall not, nor shall it permit any of its Subsidiaries to, (i) enter into any new material line of business, (ii) change its or its Subsidiaries’ lending, investment, underwriting, risk and asset-liability management or other material banking or operating policies in any respect which is material to Center Financial, except as required by Applicable Legal Requirements or by policies imposed by a Governmental Entity, (iii) incur or commit to any capital expenditures or any obligations or liabilities in connection therewith other than capital expenditures and obligations or liabilities incurred or committed to in the ordinary course of business consistent with past practice, (iv) enter into or terminate any material lease, contract or agreement, or make any change to any existing material leases, contracts or agreements, except in the ordinary course of business consistent with past practice or (v) take any action or fail to take any action, which action or failure causes a material breach of any material lease, contract or agreement.
(b)Dividends; Changes in Stock. Center Financial shall not, nor shall it permit any of its Subsidiaries to, or propose to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, except (A) the declaration and payment of regular cash dividends on the Center Financial Series A Preferred Stock in accordance with the terms of such preferred stock as in effect on the date of this Agreement with usual record and payment dates for such dividends in accordance with Center Financial’s past dividend practice or as required by the terms of such preferred stock, (B) for dividends by a wholly owned Subsidiary of Center Financial, and (C) the declaration and payment of regular cash dividends on any currently outstanding trust preferred securities issued by any Subsidiary of Center Financial in accordance with the terms of the Trust
A-1-31
Documents entered into by such Subsidiary, (ii) split, combine, exchange, adjust or reclassify any of its capital stock or issue or authorize or propose the issuance or authorization of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, or (iii) purchase, redeem or otherwise acquire, or permit any Subsidiary to purchase, redeem or otherwise acquire, any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock (except for the acquisition of DPC shares in the ordinary course of business consistent with past practice and except pursuant to agreements in effect on the date hereof and disclosed inSection 4.1(b) of the Center Financial Disclosure Schedule).
(c)Issuance of Securities. Center Financial shall not, nor shall it permit any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock of any class, any Voting Debt, any stock appreciation rights or any securities convertible into or exercisable or exchangeable for, or any rights, warrants or options to acquire, any such shares or Voting Debt, or enter into any agreement with respect to any of the foregoing, other than (i) the issuance of Center Financial Common Stock upon the exercise or settlement of Center Financial Stock Options outstanding on the date of this Agreement, (ii) issuance of Center Financial Common Stock upon exercise of the Center Financial TARP Warrants, and (iii) issuances by a wholly owned Subsidiary of its capital stock to its parent or to another wholly owned Subsidiary of Center Financial.
(d)Governing Documents. Center Financial shall not, and shall not permit any of its Subsidiaries to, amend or propose to amend its Articles of Incorporation, By-laws or similar organizational documents, as applicable, or, except to the extent permitted bySection 4.1(e) or4.1(f), enter into, or permit any Subsidiary to enter into, a plan of consolidation, merger or reorganization with any Person other than a wholly owned Subsidiary of Center Financial.
(e)No Acquisitions. Center Financial shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire, by merging or consolidating with, by purchasing a substantial equity interest in or a substantial portion of the assets of, by forming a partnership or joint venture with, or in any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any material assets not in the ordinary course of business;provided,however, that the foregoing shall not prohibit foreclosures, repossessions or other debt-previously-contracted acquisitions in the ordinary course of business.
(f)No Dispositions. Other than sales of OREOs and non-performing assets not exceeding $10 million in the aggregate in each calendar month in the ordinary course of business consistent with past practice, and sales of performing loans and investment securities in the ordinary course of business consistent with past practice, Center Financial shall not, and shall not permit any of its Subsidiaries to, sell, lease, assign, encumber or otherwise dispose of, or agree to sell, lease, assign, encumber or otherwise dispose of, any of its assets (including capital stock of its Subsidiaries and indebtedness of others held by Center Financial and its Subsidiaries) which are material, individually or in the aggregate, to Center Financial.
(g)Indebtedness. Center Financial shall not, and shall not permit any of its Subsidiaries to, (i) incur, create or assume any long-term indebtedness for borrowed money (or modify any of the material terms of any such outstanding long-term indebtedness), guarantee any such long-term indebtedness or issue or sell any long-term debt securities or warrants or rights to acquire any long-term debt securities of Center Financial or any of its Subsidiaries or guarantee any long-term debt securities of others, other than (A) indebtedness of any Subsidiary of Center Financial to Center Financial or to another Subsidiary of Center Financial, and (B) in the ordinary course of business consistent with past practice (including advances under existing lines of credit with the Federal Home Loan Bank of San Francisco or the Federal Reserve Bank and borrowings from the U.S. Treasury Department under its Treasury Tax and Loan Investment Program) or (ii) prepay or voluntarily repay any subordinated indebtedness or trust preferred securities.
A-1-32
(h)Other Actions. Center Financial shall not, and shall not permit any of its Subsidiaries to, intentionally take any action that would, or reasonably might be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue, or in any of the conditions to the Merger set forth inArticle VI not being satisfied or in a violation of any provision of this Agreement, or (unless such action is required by Applicable Legal Requirements) which would adversely affect the ability of the Parties to obtain any of the Requisite Regulatory Approvals without imposition of a condition or restriction of the type referred to inSection 6.1(f).
(i)Accounting Methods. Center Financial shall not, and shall not permit any of its Subsidiaries to, change its methods of accounting in effect at September 30, 2010, except as required by changes in generally accepted accounting principles as concurred in by Center Financial’s independent auditors or required by bank regulatory authorities.
(j)Tax Matters. Center Financial shall not, and shall not permit its Subsidiaries to, make or rescind any material tax election, make any material amendments to tax returns previously filed, or settle or compromise any material tax liability or refund, without the prior written consent of Nara.
(k)Compensation and Benefit Plans. Center Financial shall not, and shall not permit any of its Subsidiaries to, (i) enter into, adopt, amend (except for such amendments as may be required by Applicable Legal Requirements) or terminate any Center Financial Benefit Plan, or any agreement, arrangement, plan or policy between Center Financial or a Subsidiary of Center Financial and one or more of its directors or officers, (ii) except for normal payments, awards and increases in the ordinary course of business or as required by any plan or arrangement as in effect as of the date hereof, increase in any manner the compensation or benefits of any director, officer or employee or pay any benefit not required by any plan or arrangement as in effect as of the date hereof or enter into any contract, agreement, commitment or arrangement to do any of the foregoing, (iii) enter into or renew any contract, agreement, commitment or arrangement (other than a renewal occurring in accordance with the terms thereof) providing for the payment to any director, officer or employee of compensation or benefits contingent, or the terms of which are materially altered, upon the occurrence of any of the transactions contemplated by this Agreement or (iv) provide that, with respect to the right to any bonus or incentive compensation and the grant of any stock option, restricted stock, restricted stock unit or other equity-related award pursuant to the Center Financial 2006 Incentive Stock Plan or otherwise granted on or after the date hereof, the vesting of any such bonus, incentive compensation, or stock option, restricted stock, restricted stock unit or other equity-related award shall accelerate or otherwise be affected by the occurrence of any of the transactions contemplated by this Agreement, either alone or in combination with some other event.
(l)Investment Portfolio; Interest Rate Risk; Other Risk. Center Financial shall not, and shall not permit any of its Subsidiaries to, materially restructure or materially change (on a consolidated basis) its investment securities portfolio, its hedging strategy or its interest rate risk position, through purchases, sales or otherwise, or the manner in which its investment securities portfolio is classified or reported or materially increase the credit or other risk concentrations associated with its investment securities portfolio;provided,however, that the foregoing shall not restrict the purchase or sale of investment securities by Center Financial or any of its Subsidiaries in the ordinary course of business consistent with past practice.
(m)No Liquidation. Center Financial shall not, and shall not permit any of its Subsidiaries to, adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, restructuring, recapitalization or reorganization.
(n)Other Agreements. Center Financial shall not, and shall not permit any of its Subsidiaries to, agree to, or make any commitment to, take, or authorize, any of the actions prohibited by thisSection 4.1.
4.2Covenants of Nara. Except as otherwise permitted or contemplated bySection 4.2 of the Nara Disclosure Schedule, during the period from the date of this Agreement and continuing until the Effective Time,
A-1-33
Nara agrees as to itself and its Subsidiaries that, except as expressly contemplated or permitted by this Agreement or to the extent that Center Financial shall otherwise consent in writing:
(a)Ordinary Course. Nara and its Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course consistent with past practice and use all reasonable efforts to preserve intact their present business organizations, maintain their rights, franchises, licenses and other authorizations issued by Governmental Entities, preserve their relationships with directors, officers, employees, customers, suppliers and others having business dealings with them and maintain their respective properties and assets in their present state of repair, order and condition, reasonable wear and tear excepted, to the end that their goodwill and ongoing businesses shall not be impaired in any material respect as of the Effective Time. Nara shall not, nor shall it permit any of its Subsidiaries to, (i) enter into any new material line of business, (ii) change its or its Subsidiaries’ lending, investment, underwriting, risk and asset-liability management or other material banking or operating policies in any respect which is material to Nara, except as required by Applicable Legal Requirements or by policies imposed by a Governmental Entity, (iii) incur or commit to any capital expenditures or any obligations or liabilities in connection therewith other than capital expenditures and obligations or liabilities incurred or committed to in the ordinary course of business consistent with past practice, (iv) enter into or terminate any material lease, contract or agreement, or make any change to any existing material leases, contracts or agreements, except in the ordinary course of business consistent with past practice or (v) take any action or fail to take any action, which action or failure causes a material breach of any material lease, contract or agreement.
(b)Dividends; Changes in Stock. Nara shall not, nor shall it permit any of its Subsidiaries to, or propose to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, except (A) the declaration and payment of regular cash dividends on the Nara Series A Preferred Stock in accordance with the terms of such preferred stock as in effect on the date of this Agreement with usual record and payment dates for such dividends in accordance with Nara’s past dividend practice or as required by the terms of such preferred stock, (B) for dividends by a wholly owned Subsidiary of Nara, and (C) the declaration and payment of regular cash dividends on any currently outstanding trust preferred securities issued by any Subsidiary of Nara in accordance with the terms of the Trust Documents entered into by such Subsidiary, (ii) split, combine, exchange, adjust or reclassify any of its capital stock or issue or authorize or propose the issuance or authorization of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, or (iii) purchase, redeem or otherwise acquire, or permit any Subsidiary to purchase, redeem or otherwise acquire, any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock (except for the acquisition of DPC shares in the ordinary course of business consistent with past practice).
(c)Issuance of Securities. Nara shall not, nor shall it permit any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock of any class, any Voting Debt, any stock appreciation rights or any securities convertible into or exercisable or exchangeable for, or any rights, warrants or options to acquire, any such shares or Voting Debt, or enter into any agreement with respect to any of the foregoing, other than (i) the issuance of Nara Common Stock upon the exercise or settlement of Nara Stock Options outstanding on the date of this Agreement, (ii) issuance of Nara Common Stock upon exercise of the Nara TARP Warrants, and (iii) issuances by a wholly owned Subsidiary of its capital stock to its parent or to another wholly owned Subsidiary of Nara.
(d)Governing Documents. Except as contemplated by this Agreement, Nara shall not, and shall not permit any of its Subsidiaries to, amend or propose to amend its Certificate of Incorporation, By-laws or similar organizational documents, as applicable, or, except to the extent permitted bySection 4.2(e) or4.2(f), enter into, or permit any Subsidiary to enter into, a plan of consolidation, merger or reorganization with any Person other than a wholly owned Subsidiary of Nara.
(e)No Acquisitions. Nara shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire, by merging or consolidating with, by purchasing a substantial equity interest in or a substantial portion of the assets of, by forming a partnership or joint venture with, or in any other manner, any business or any
A-1-34
corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any material assets not in the ordinary course of business;provided,however, that the foregoing shall not prohibit foreclosures, repossessions or other debt-previously-contracted acquisitions in the ordinary course of business.
(f)No Dispositions. Other than sales of OREOs and non-performing assets not exceeding $10 million in the aggregate in each calendar month in the ordinary course of business consistent with past practice, and sales of performing loans and investment securities in the ordinary course of business consistent with past practice, Nara shall not, and shall not permit any of its Subsidiaries to, sell, lease, assign, encumber or otherwise dispose of, or agree to sell, lease, assign, encumber or otherwise dispose of, any of its assets (including capital stock of its Subsidiaries and indebtedness of others held by Nara and its Subsidiaries) which are material, individually or in the aggregate, to Nara.
(g)Indebtedness. Nara shall not, and shall not permit any of its Subsidiaries to, (i) incur, create or assume any long-term indebtedness for borrowed money (or modify any of the material terms of any such outstanding long-term indebtedness), guarantee any such long-term indebtedness or issue or sell any long-term debt securities or warrants or rights to acquire any long-term debt securities of Nara or any of its Subsidiaries or guarantee any long-term debt securities of others, other than (A) indebtedness of any Subsidiary of Nara to Nara or to another Subsidiary of Nara, and (B) in the ordinary course of business consistent with past practice (including advances under existing lines of credit with the Federal Home Loan Bank of San Francisco or the Federal Reserve Bank and borrowings from the U.S. Treasury Department under its Treasury Tax and Loan Investment Program) or (ii) prepay or voluntarily repay any subordinated indebtedness or trust preferred securities.
(h)Other Actions. Nara shall not, and shall not permit any of its Subsidiaries to, intentionally take any action that would, or reasonably might be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue, or in any of the conditions to the Merger set forth inArticle VI not being satisfied or in a violation of any provision of this Agreement, or (unless such action is required by Applicable Legal Requirements) which would adversely affect the ability of the Parties to obtain any of the Requisite Regulatory Approvals without imposition of a condition or restriction of the type referred to inSection 6.1(f).
(i)Accounting Methods. Nara shall not, and shall not permit any of its Subsidiaries to, change its methods of accounting in effect at September 30, 2010, except as required by changes in generally accepted accounting principles as concurred in by Nara’s independent auditors or required by bank regulatory authorities.
(j)Tax Matters. Nara shall not, and shall not permit its Subsidiaries to, make or rescind any material tax election, make any material amendments to tax returns previously filed, or settle or compromise any material tax liability or refund, without the prior written consent of Center Financial.
(k)Compensation and Benefit Plans. Nara shall not, and shall not permit any of its Subsidiaries to, (i) enter into, adopt, amend (except for such amendments as may be required by Applicable Legal Requirements) or terminate any Nara Benefit Plan, or any agreement, arrangement, plan or policy between Nara or a Subsidiary of Nara and one or more of its directors or officers, (ii) except for normal payments, awards and increases in the ordinary course of business or as required by any plan or arrangement as in effect as of the date hereof, increase in any manner the compensation or benefits of any director, officer or employee or pay any benefit not required by any plan or arrangement as in effect as of the date hereof or enter into any contract, agreement, commitment or arrangement to do any of the foregoing, (iii) enter into or renew any contract, agreement, commitment or arrangement (other than a renewal occurring in accordance with the terms thereof) providing for the payment to any director, officer or employee of compensation or benefits contingent, or the terms of which are materially altered, upon the occurrence of any of the transactions contemplated by this Agreement or (iv) provide that, with respect to the right to any bonus or incentive compensation and the grant of any stock option, restricted stock,
A-1-35
restricted stock unit or other equity-related award pursuant to the Amended Nara 2007 Equity Incentive Plan or otherwise granted on or after the date hereof, the vesting of any such bonus, incentive compensation, or stock option, restricted stock, restricted stock unit or other equity-related award shall accelerate or otherwise be affected by the occurrence of any of the transactions contemplated by this Agreement, either alone or in combination with some other event.
(l)Investment Portfolio; Interest Rate Risk; Other Risk. Nara shall not, and shall not permit any of its Subsidiaries to, materially restructure or materially change (on a consolidated basis) its investment securities portfolio, its hedging strategy or its interest rate risk position, through purchases, sales or otherwise, or the manner in which its investment securities portfolio is classified or reported or materially increase the credit or other risk concentrations associated with its investment securities portfolio;provided,however, that the foregoing shall not restrict the purchase or sale of investment securities by Nara or any of its Subsidiaries in the ordinary course of business consistent with past practice.
(m)No Liquidation. Nara shall not, and shall not permit any of its Subsidiaries to, adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, restructuring, recapitalization or reorganization.
(n)Other Agreements. Nara shall not, and shall not permit any of its Subsidiaries to, agree to, or make any commitment to, take, or authorize, any of the actions prohibited by thisSection 4.2.
4.3Transition. In order to facilitate the integration of the operations of Center Financial and Nara and their Subsidiaries and to permit the coordination of their related operations on a timely basis, and in an effort to accelerate to the earliest time possible following the Effective Time the realization of synergies, operating efficiencies and other benefits expected to be realized by the Parties as a result of the Merger, each of Center Financial and Nara shall, and shall cause its Subsidiaries to, consult with the other on all strategic and operational matters to the extent such consultation is not in violation of Applicable Legal Requirements, including laws regarding the exchange of information and other laws regarding competition. Each of Center Financial and Nara shall, and shall cause its Subsidiaries to, make available to the other at its facilities and those of its Subsidiaries, where determined by Nara or Center Financial, as the case may be, to be appropriate and necessary, office space in order to assist it in observing all operations and reviewing, to the extent not in violation of Applicable Legal Requirements, all matters concerning the affairs of the other Party. Without in any way limiting the provisions ofSection 5.2, Center Financial and Nara, their respective Subsidiaries and their respective officers, employees, counsel, financial advisors and other representatives shall, upon reasonable notice to the other Party, be entitled to review the operations and visit the facilities of the other Party and its Subsidiaries at all times as may be deemed reasonably necessary by Nara or Center Financial, as the case may be, in order to accomplish the foregoing arrangements.
4.4Advice of Changes; Government Filings.
(a) Each Party shall confer on a regular and frequent basis with the other, report on operational matters and promptly advise the other orally and in writing of any change or event having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on such Party or which would cause or constitute a material breach of any of the representations, warranties or covenants of such Party contained herein;provided,however, that any noncompliance with the foregoing shall not constitute the failure to be satisfied of a condition set forth inArticle VI or give rise to any right of termination underArticle VII unless the underlying breach shall independently constitute such a failure or give rise to such a right.
(b) Center Financial and Nara shall file all reports required to be filed by each of them with the SEC between the date of this Agreement and the Effective Time and shall deliver to the other Party copies of all such reports promptly after the same are filed. Center Financial, Center Bank, Nara and Nara Bank shall file all call reports with the appropriate bank regulators and all other reports, applications and other documents required to
A-1-36
be filed with the applicable Governmental Entities between the date hereof and the Effective Time and shall make available to the other Party copies of all such reports promptly after the same are filed. Each of Center Financial and Nara shall have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to Applicable Legal Requirements relating to the exchange of information, with respect to all the information relating to the other Party, and any of their respective Subsidiaries, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the Parties agrees to act reasonably and as promptly as practicable. Each Party agrees that to the extent practicable it will consult with the other Party with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each Party will keep the other Party apprised of the status of matters relating to completion of the transactions contemplated hereby.
4.5Insurance. During the period from the date of this Agreement and continuing until the Effective Time, each of Nara and Center Financial shall, and shall cause their respective Subsidiaries to, (a) use their commercially reasonable efforts to maintain and keep in full force and effect all of their respective policies of insurance presently in effect, or replacements for such policies, including insurance of customer deposit accounts with the FDIC, and (b) take all requisite action (including the making of claims and the giving of notices) pursuant to their respective policies of insurance in order to preserve all rights thereunder with respect to all matters which could reasonably give rise to a claim prior to the Effective Time.
4.6No Control of Other Party’s Business. Nothing contained in this Agreement (includingSection 4.3) shall give Nara, directly or indirectly, the right to control or direct the operations of Center Financial or shall give Center Financial, directly or indirectly, the right to control or direct the operations of Nara prior to the Effective Time. Prior to the Effective Time, each of Center Financial and Nara shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries’ respective operations.
ARTICLE V
ARTICLE VI
6.1Conditions to Each Party’s Obligation To Effect the Merger. The respective obligation of each Party to effect the Merger shall be subject to the satisfaction of the following conditions at or prior to the Closing and the continued satisfaction thereof through the Effective Time:
(a)Stockholder Approval. Center Financial shall have obtained the Required Center Financial Vote, and Nara shall have obtained the Required Nara Vote.
A-1-46
(b)Stock Exchange Listing. The shares of Nara Common Stock to be issued in the Merger shall have been authorized for listing on NASDAQ upon official notice of issuance.
(c)Other Approvals. Other than the filings provided for bySection 1.1, (i) all authorizations, consents, orders or approvals of, or declarations or filings with, and all expirations of waiting periods required from, any Governmental Entity which are necessary to obtain the Requisite Regulatory Approvals and the Loss-Sharing Approvals shall have been obtained, been made, occurred or been filed, and all such authorizations, consents, orders, approvals, declarations or filings shall be in full force and effect, and (ii) any other consents or approvals from any Governmental Entity or other third party relating to the Merger, the Bank Merger or any of the other transactions provided for in this Agreement, except those the failure of which to be obtained would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Surviving Corporation, shall have been obtained, and all such consents or approvals shall be in full force and effect.
(d)Form S-4. The Form S-4 shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order.
(e)No Injunctions or Restraints; Illegality. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition (an “Injunction”) preventing the consummation of the Merger shall be in effect and no action brought by a Governmental Entity with respect to such an Injunction shall be pending. There shall not be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Merger, by any Governmental Entity of competent jurisdiction which makes the consummation of the Merger illegal.
(f)Absence of Burdensome Conditions. No Requisite Regulatory Approval shall have been granted subject to any condition or conditions which, and there shall not have been any action taken, or any statute, rule, regulation, order or decree enacted, entered, enforced or deemed applicable to the Merger by any Governmental Entity of competent jurisdiction which, in connection with the grant of a Requisite Regulatory Approval or otherwise, requires any of the Parties, including the Surviving Corporation, (i) to pay any amounts (other than customary filing fees), or (ii) divest any banking office, or (iii) which imposes any condition, requirement or restriction upon the Surviving Corporation or its Subsidiaries, that, in the case ofclause (i),(ii) or(iii), would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the present or prospective consolidated financial condition, business or operating results of the Surviving Corporation.
(g)By-Law Amendment. Nara and Center Financial shall have taken all action necessary so that the amendment to Nara’s By-laws substantially in the form set forth inExhibit 1.4, and the resolutions contemplated therein, shall have been duly adopted by the Nara Board effective no later than the Effective Time.
6.2Conditions to Obligation of Nara. The obligation of Nara to effect the Merger is subject to the satisfaction of the following conditions unless waived by Nara:
(a)Representations and Warranties. Each of the representations and warranties of Center Financial set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date and, if later, the Effective Time as though made on and as of the Closing Date and, if later, the Effective Time, subject to such exceptions as do not have, and would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation, and Nara shall have received a certificate signed on behalf of Center Financial by the chief executive officer and by the chief financial officer of Center Financial to such effect.
(b)Performance of Obligations. Center Financial shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Nara shall have received a certificate signed on behalf of Center Financial by the chief executive officer and by the chief financial officer of Center Financial to such effect.
A-1-47
(c)Tax Opinion. Nara shall have received the opinion of Mayer Brown LLP, counsel to Nara, dated the Closing Date, to the effect that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, counsel to Nara shall be entitled to rely upon customary assumptions and representations provided by Nara and Center Financial.
(d)Material Adverse Effect. Since the date of this Agreement, Center Financial shall not have suffered a Material Adverse Effect.
(e)Appraisal Rights. Center Financial shall have delivered notice in accordance with the applicable provisions of the CGCL such that no holder of Center Financial Common Stock will be able to exercise dissenters’ rights if such holder has not perfected such dissenters’ rights prior to the Closing, and the holders of less than 6% of the outstanding shares of Center Financial Common Stock shall have exercised, or shall continue to have a right to exercise, appraisal, dissenters’ or similar rights under Applicable Legal Requirements with respect to their Center Financial Common Stock by virtue of the Merger.
6.3Conditions to Obligation of Center Financial. The obligation of Center Financial to effect the Merger is subject to the satisfaction of the following conditions unless waived by Center Financial:
(a)Representations and Warranties. Each of the representations and warranties of Nara set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date and, if later, the Effective Time as though made on and as of the Closing Date and, if later, the Effective Time, subject to such exceptions as do not have, and would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or the Surviving Corporation, and Center Financial shall have received a certificate signed on behalf of Nara by the chief executive officer and by the chief financial officer of Nara to such effect.
(b)Performance of Obligations. Nara shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Center Financial shall have received a certificate signed on behalf of Nara by the chief executive officer and by the chief financial officer of Nara to such effect.
(c)Tax Opinion. Center Financial shall have received the opinion of Morrison & Foerster LLP, counsel to Center Financial, dated the Closing Date, to the effect that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, counsel to Center Financial shall be entitled to rely upon customary assumptions and representations provided by Nara and Center Financial.
(d)Material Adverse Effect. Since the date of this Agreement, Nara shall not have suffered a Material Adverse Effect.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1Termination. This Agreement may be terminated at any time prior to the Effective Time, by action taken or authorized by the board of directors of the terminating Party or Parties, whether before or after approval of the Merger by the stockholders of Center Financial or Nara:
(a) by mutual consent of Nara and Center Financial in a written instrument;
(b) by either Nara or Center Financial, upon written notice to the other Party, if a Governmental Entity of competent jurisdiction which must grant a Requisite Regulatory Approval has denied approval of the Merger and such denial has become final and non-appealable; or any Governmental Entity of competent jurisdiction shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the Merger, and such order, decree, ruling or other action has become final and nonappealable;
A-1-48
provided,however, that the right to terminate this Agreement under thisSection 7.1(b) shall not be available to any Party whose failure to comply withSection 5.3 or any other provision of this Agreement shall have resulted in, or materially contributed to, such action;
(c) by either Nara or Center Financial, upon written notice to the other Party, if the Merger shall not have been consummated on or before July 31, 2011;provided,however, that (i) such date may be extended one or more times, but not past November 30, 2011, by notice from either Party delivered to the other Party on or before July 31, 2011, or the later date to which such date has then been most recently extended as provided herein, if the only condition to the Closing that has not been satisfied as of the date such notice is delivered is receipt of any Requisite Regulatory Approval and the satisfaction of such condition remains reasonably possible and (ii) the right to terminate this Agreement under thisSection 7.1(c) shall not be available to any Party whose failure to comply with any provision of this Agreement shall have resulted in, or materially contributed to, the failure of the Effective Time to occur on or before such date;
(d) by Nara, upon written notice to Center Financial, if (i) Center Financial shall have (A) failed to recommend approval of the principal terms of the Merger at the Center Financial Stockholders Meeting in accordance withSection 5.1(b) or (B) materially breached its obligations under this Agreement by reason of a failure to (1) call the Center Financial Stockholders Meeting in accordance withSection 5.1(b), (2) prepare and mail to its stockholders the Joint Proxy Statement/Prospectus in accordance withSection 5.1(a), or (3) comply in all material respects with the provisions ofSection 5.4; or (ii) there shall have occurred a Change in Recommendation by the Center Financial Board or Center Financial, whether or not permitted by the terms hereof;
(e) by Center Financial, upon written notice to Nara, if (i) Nara shall have (A) failed to recommend adoption of this Agreement at the Nara Stockholders Meeting in accordance withSection 5.1(c) or (B) materially breached its obligations under this Agreement by reason of a failure to (1) call the Nara Stockholders Meeting in accordance withSection 5.1(c), (2) prepare and mail to its stockholders the Joint Proxy Statement/Prospectus in accordance withSection 5.1(a), or (3) comply in all material respects with the provisions ofSection 5.4; or (ii) there shall have occurred a Change in Recommendation by the Nara Board or Nara, whether or not permitted by the terms hereof;
(f) by either Nara or Center Financial, upon written notice to the other Party, if there shall have been a breach by the other Party of any of the covenants or agreements or any of the representations or warranties set forth in this Agreement on the part of such other Party, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of the condition set forth inSections 6.2(a),6.2(b),6.3(a) or6.3(b), as the case may be, and which breach has not been cured within 60 days following written notice thereof to the breaching Party or, by its nature, cannot be cured within such time period;
(g) by either Nara or Center Financial, if a vote shall have been taken at the duly convened Nara Stockholders Meeting or Center Financial Stockholders Meeting, as the case may be, and the Required Nara Vote or Required Center Financial Vote shall not have been obtained;
(h) by Nara, if, since the date of this Agreement, Center Financial shall have suffered a Material Adverse Effect;
(i) by Center Financial, if, since the date of this Agreement, Nara shall have suffered a Material Adverse Effect; or
(j) by Nara, if the holders of 6% or more of the outstanding shares of Center Financial Common Stock shall have exercised appraisal, dissenters’ or similar rights under Applicable Legal Requirements with respect to their Center Financial Common Stock by virtue of the Merger.
A-1-49
7.2Effect of Termination.
(a) In the event of termination of this Agreement by either Center Financial or Nara as provided inSection 7.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Nara or Center Financial or their respective officers or directors, except with respect toSections 3.1(w),3.2(w),5.2(b) and5.8, thisSection 7.2 andArticle VIII, which shall survive such termination and except that no Party shall be relieved or released from any liabilities or damages arising out of its willful and material breach of this Agreement.
(b) Nara shall pay Center Financial, by wire transfer of immediately available funds, the sum of $10,000,000 (the “Nara Termination Fee”) if this Agreement is terminated as follows:
(i) if Center Financial shall terminate this Agreement pursuant toSection 7.1(e), then Nara shall pay the Nara Termination Fee on the business day following such termination;
(ii) if (A) either Party shall terminate this Agreement pursuant toSection 7.1(g) because the Required Nara Vote shall not have been received and (B) at any time after the date of this Agreement and at or before the date of the Nara Stockholders Meeting an Acquisition Proposal with respect to (1) 50% or more of the outstanding shares of Nara Common Stock, (2) 50% or more of the consolidated assets of Nara and its Subsidiaries or (3) any liquidation, dissolution or similar transaction involving Nara or Nara Bank, shall have been publicly announced or is otherwise publicly known (a “Public Proposal”), then Nara shall pay 25% of the Nara Termination Fee on the business day following such termination; and if (C) within eighteen (18) months of the date of such termination of this Agreement, Nara or any of its Subsidiaries executes any definitive agreement with respect to, or consummates, any Acquisition Proposal, then Nara shall pay the remainder of the Nara Termination Fee upon the date of such execution or consummation; and
(iii) if (A) either Party shall terminate this Agreement pursuant toSection 7.1(c) or Center Financial shall terminate this Agreement pursuant toSection 7.1(f), (B) at any time after the date of this Agreement and before such termination there shall have been a Public Proposal with respect to Nara relating (1) 50% or more of the outstanding shares of Nara Common Stock, (2) 50% or more of the consolidated assets of Nara and its Subsidiaries or (3) any liquidation, dissolution or similar transaction involving Nara or Nara Bank, and (C) following the occurrence of such Public Proposal, Nara shall have intentionally breached (and not cured after notice thereof) any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach shall have resulted in a failure of the conditions set forth inSections 6.3(a) or6.3(b), as the case may be, or otherwise shall have materially contributed to the failure of the Effective Time to occur prior to the termination of this Agreement, then Nara shall pay 25% of the Nara Termination Fee on the business day following such termination; and if (D) within eighteen (18) months of the date of such termination of this Agreement, Nara or any of its Subsidiaries executes any definitive agreement with respect to, or consummates, any Acquisition Proposal, then Nara shall pay the remainder of the Nara Termination Fee upon the date of such execution or consummation.
If Nara fails to pay all amounts due to Center Financial on the dates specified, then Nara shall pay all costs and expenses (including legal fees and expenses) incurred by Center Financial in connection with any action or proceeding (including the filing of any lawsuit) taken by it to collect such unpaid amounts, together with interest on such unpaid amounts at the prime lending rate prevailing at such time, as published in the Wall Street Journal, from the date such amounts were required to be paid until the date actually received by Center Financial.
(c) Center Financial shall pay Nara, by wire transfer of immediately available funds, the sum of $10,000,000 (the “Center Financial Termination Fee”) if this Agreement is terminated as follows:
(i) if Nara shall terminate this Agreement pursuant toSection 7.1(d), then Center Financial shall pay the Center Financial Termination Fee on the business day following such termination;
A-1-50
(ii) if (A) either Party shall terminate this Agreement pursuant toSection 7.1(g) because the Required Center Financial Vote shall not have been received and (B) at any time after the date of this Agreement and at or before the date of the Center Financial Stockholders Meeting there shall have been a Public Proposal with respect to (1) 50% or more of the outstanding shares of Center Financial Common Stock, (2) 50% or more of the consolidated assets of Center Financial and its Subsidiaries or (3) any liquidation, dissolution or similar transaction involving Center Financial or Center Bank, then Center Financial shall pay 25% of the Center Financial Termination Fee on the business day following such termination; and if (C) within eighteen (18) months of the date of such termination of this Agreement, Center Financial or any of its Subsidiaries executes any definitive agreement with respect to, or consummates, any Acquisition Proposal, then Center Financial shall pay the remainder of the Center Financial Termination Fee upon the date of such execution or consummation; and
(iii) if (A) either Party shall terminate this Agreement pursuant toSection 7.1(c) or Nara shall terminate this Agreement pursuant toSection 7.1(f), (B) at any time after the date of this Agreement and before such termination there shall have been a Public Proposal with respect to (1) 50% or more of the outstanding shares of Center Financial Common Stock, (2) 50% or more of the consolidated assets of Center Financial and its Subsidiaries or (3) any liquidation, dissolution or similar transaction involving Center Financial or Center Bank, and (C) following the occurrence of such Public Proposal, Center Financial shall have intentionally breached (and not cured after notice thereof) any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach shall have resulted in a failure of the conditions set forth inSections 6.2(a) or6.2(b), as the case may be, or otherwise shall have materially contributed to the failure of the Effective Time to occur prior to the termination of this Agreement, then Center Financial shall pay 25% of the Center Financial Termination Fee on the business day following such termination; and if (D) within eighteen (18) months of the date of such termination of this Agreement, Center Financial or any of its Subsidiaries executes any definitive agreement with respect to, or consummates, any Acquisition Proposal, then Center Financial shall pay the remainder of the Center Financial Termination Fee upon the date of such execution or consummation.
If Center Financial fails to pay all amounts due to Nara on the dates specified, then Center Financial shall pay all costs and expenses (including legal fees and expenses) incurred by Nara in connection with any action or proceeding (including the filing of any lawsuit) taken by it to collect such unpaid amounts, together with interest on such unpaid amounts at the prime lending rate prevailing at such time, as published in the Wall Street Journal, from the date such amounts were required to be paid until the date actually received by Nara.
7.3Amendment. This Agreement may be amended by the Parties, by action taken or authorized by their respective boards of directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of Center Financial or of Nara, but, after any such approval, no amendment shall be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties.
7.4Extension; Waiver. At any time prior to the Effective Time, the Parties, by action taken or authorized by their respective board of directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other Party, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such Party. The failure of a Party to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. No single or partial exercise of any right, remedy, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. Any waiver shall be effective only in the specific instance and for the specific purpose for which given and shall not constitute a waiver to any subsequent or other exercise of any right, remedy, power or privilege hereunder.
A-1-51
-iii-
Page | ||||||||||
6.1 | Conditions to Each Party’s Obligation To Effect the Merger | 46 | ||||||||
(a) | Stockholder Approval | 46 | ||||||||
(b) | Stock Exchange Listing | 47 | ||||||||
(c) | Other Approvals | 47 | ||||||||
(d) | Form S-4 | 47 | ||||||||
(e) | No Injunctions or Restraints; Illegality | 47 | ||||||||
(f) | Absence of Burdensome Conditions | 47 | ||||||||
(g) | By-Law Amendment | 47 | ||||||||
6.2 | Conditions to Obligation of Nara | 47 | ||||||||
(a) | Representations and Warranties | 47 | ||||||||
(b) | Performance of Obligations | 47 | ||||||||
(c) | Tax Opinion | 48 | ||||||||
(d) | Material Adverse Effect | 48 | ||||||||
(e) | Appraisal Rights | 48 | ||||||||
6.3 | Conditions to Obligation of Center Financial | 48 | ||||||||
(a) | Representations and Warranties | 48 | ||||||||
(b) | Performance of Obligations | 48 | ||||||||
(c) | Tax Opinion | 48 | ||||||||
(d) | Material Adverse Effect | 48 | ||||||||
ARTICLE VII | TERMINATION AND AMENDMENT | 48 | ||||||||
7.1 | Termination | 48 | ||||||||
7.2 | Effect of Termination | 50 | ||||||||
7.3 | Amendment | 51 | ||||||||
7.4 | Extension; Waiver | 51 | ||||||||
ARTICLE VIII | GENERAL PROVISIONS | 52 | ||||||||
8.1 | Definitions | 52 | ||||||||
8.2 | Non-survival of Representations, Warranties and Agreements | 55 | ||||||||
8.3 | Notices | 55 | ||||||||
8.4 | Interpretation | 56 | ||||||||
8.5 | Counterparts | 56 | ||||||||
8.6 | Entire Agreement; No Third Party Beneficiaries | 56 | ||||||||
8.7 | Governing Law | 57 | ||||||||
8.8 | Severability | 57 | ||||||||
8.9 | Assignment | 57 | ||||||||
8.10 | Submission to Jurisdiction | 57 | ||||||||
8.11 | Enforcement | 57 | ||||||||
8.12 | Waiver of Jury Trial | 57 |
-iv-
EXHIBITS
Exhibit 1.4 | Amendment to By-laws | |
Exhibit 1.5 | Form of Bank Merger Agreement |
INDEX OF DEFINED TERMS
Acquisition Proposal | Section 5.4(a) | |
Agreement | Preamble | |
Applicable Legal Requirements | Section 8.1 | |
Assumed Options | Section 2.1(d) | |
Assumed Plan | Section 2.1(d) | |
Assumed Restricted Shares | Section 2.1(d) | |
Bank Merger | Recitals | |
Bank Merger Act | Section 3.1(c) | |
Bank Merger Agreement | Section 1.5 | |
Benefit Plans | Section 3.1(k) | |
BHC Act | Section 3.1(a) | |
Board Recommendations | Section 5.1(c) | |
Center Financial | Preamble | |
Center Bank | Recitals | |
Center Financial Benefit Plans | Section 3.1(k) | |
Center Financial Board | Section 3.1(g) | |
Center Financial Board Approval | Section 3.1(o) | |
Center Financial Board Recommendation | Section 5.1(b) | |
Center Financial Certificates | Section 8.1 | |
Center Financial Common Stock | Section 3.1(b) | |
Center Financial Contracts | Section 3.1(j) | |
Center Financial Disclosure Schedule | Section 3.1 | |
Center Financial Insider | Section 8.1 | |
Center Financial Intellectual Property | Section 3.1(r) | |
Center Financial Permits | Section 3.1(f) | |
Center Financial Preferred Stock | Section 3.1(b) | |
Center Financial Restricted Share | Section 8.1 | |
Center Financial SEC Documents | Section 3.1(d) | |
Center Financial Series A Preferred Stock | Section 3.1(b) | |
Center Financial Stock | Section 8.1 | |
Center Financial Stock Option | Section 8.1 | |
Center Financial Stock Plan | Section 3.1(b) | |
Center Financial Stockholders Meetings | Section 5.1(b) | |
Center Financial TARP Warrant | Section 2.1(e) | |
Center Financial Termination Fee | Section 7.2(c) | |
Center Financial’s Current Premium | Section 5.10(b) | |
Certificate of Merger | Section 1.1 | |
CGCL | Section 1.1 | |
Change in Recommendation | Section 5.1(e) | |
Closing | Section 1.2 | |
Closing Date | Section 1.2 | |
Code | Recitals | |
Confidentiality Agreement | Section 5.2(b) | |
Constituent Corporations | Section 8.1 |
-v-
Covered Loans | Section 8.1 | |
Covered OREOs | Section 8.1 | |
Derivative Contract | Section 3.1(s) | |
DFI | Section 3.1(c) | |
DGCL | Section 1.1 | |
DPC shares | Section 3.1(b) | |
EDGAR | Section 3.1(d) | |
Effective Time | Section 1.1 | |
ERISA | Section 3.1(k) | |
ERISA Affiliate | Section 8.1 | |
Exchange Act | Section 3.1(c) | |
Exchange Agent | Section 2.2(a) | |
Exchange Fund | Section 8.1 | |
Exchange Ratio | Section 2.1(b) | |
FDIA | Section 3.1(l) | |
FDIC | Section 8.1 | |
Federal Reserve | Section 3.1(c) | |
Form S-4 | Section 5.1(a) | |
Governmental Entity | Section 8.1 | |
Indemnified Liabilities | Section 5.10(a) | |
Indemnified Parties | Section 5.10(a) | |
Injunction | Section 6.1(e) | |
Intervening Event | Section 5.1(f) | |
IRS | Section 8.1 | |
Joint Proxy Statement/Prospectus | Section 5.1(a) | |
Loans | Section 8.1 | |
Loss-Sharing Approvals | Section 3.1(c) | |
material | Section 8.1 | |
Material Adverse Effect | Section 8.1 | |
Merger | Recitals | |
Nara | Preamble | |
Nara Bank | Recitals | |
Nara Benefit Plans | Section 3.2(k) | |
Nara Board | Section 2.1(c) | |
Nara Board Approval | Section 3.2(o) | |
Nara Board Recommendation | Section 5.1(c) | |
Nara Certificates | Section 2.2(a) | |
Nara Common Stock | Section 3.2(b) | |
Nara Contracts | Section 3.2(j) | |
Nara Disclosure Schedule | Section 3.2 | |
Nara Intellectual Property | Section 3.2(r) | |
Nara Performance Units | Section 2.1(b) | |
Nara Permits | Section 3.2(f) | |
Nara Preferred Stock | Section 3.2(b) | |
Nara SEC Documents | Section 3.2(d) | |
Nara Series A Preferred Stock | Section 3.2(b) | |
Nara Series B Preferred Stock | Section 2.1(c) | |
Nara Stock | Section 8.1 | |
Nara Stock Option | Section 8.1 | |
Nara Stock Plan | Section 3.2(b) | |
Nara Stockholders Meeting | Section 5.1(c) | |
Nara TARP Warrant | Section 3.2(b) |
-vi-
Nara Termination Fee | Section 7.2(b) | |
NASDAQ | Section 8.1 | |
OREO | Section 3.1(t) | |
Party | Preamble | |
Person | Section 8.1 | |
Permitted Liens | Section 8.1 | |
Public Proposal | Section 7.2(b) | |
Required Center Financial Vote | Section 3.1(p) | |
Required Nara Vote | Section 3.2(p) | |
Requisite Regulatory Approvals | Section 3.1(c) | |
SBA | Section 3.1(c) | |
SBIA | Section 3.1(c) | |
SEC | Section 8.1 | |
Section 16 Information | Section 8.1 | |
Securities Act | Section 3.1(b) | |
Significant Subsidiary | Section 8.1 | |
SOX Act | Section 3.1(d) | |
Subsidiary | Section 8.1 | |
Superior Proposal | Section 8.1 | |
Surviving Corporation | Section 8.1 | |
Target Party | Section 5.1(f) | |
tax or taxes | Section 8.1 | |
tax return | Section 8.1 | |
Trust Document | Section 8.1 | |
Violation | Section 3.1(c) | |
Voting Debt | Section 8.1 |
-vii-
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 9, 2010 (this “Agreement”), is entered into between NARA BANCORP, INC., a Delaware corporation (“Nara”), and CENTER FINANCIAL CORPORATION, a California corporation (“Center Financial”). Nara and Center Financial are sometimes referred to herein collectively as the “Parties” and individually as a “Party.”
WHEREAS, the boards of directors of Nara and Center Financial have approved, and declared it to be advisable and in the best interests of their respective stockholders to consummate, the business combination transaction provided for herein in which Center Financial would merge with and into Nara (the “Merger”);
WHEREAS, the boards of directors of Nara and Center Financial have each determined that the Merger and the other transactions contemplated hereby are consistent with, and in furtherance of, their respective business strategies and goals;
WHEREAS, Nara and Center Financial desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Treasury Regulation Section 1.368-2(g); and
WHEREAS, the boards of directors of Nara’s wholly owned subsidiary, Nara Bank, a California state chartered banking corporation (“Nara Bank”), and Center Financial’s wholly owned subsidiary, Center Bank, a California state chartered banking corporation (“Center Bank”), have approved, and declared it to be advisable and in the best interests of their respective stockholders, Nara and Center Financial, to consummate, concurrently with or as soon as reasonably practicable after the Merger, a business combination transaction in which Center Bank would merge with and into Nara Bank (the “Bank Merger”).
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, subject to the conditions set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
THE MERGER
1.1Effective Time of the Merger. Upon the terms and subject to the conditions set forth in this Agreement, Nara and Center Financial shall cause the Merger to be consummated by filing a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law (the “DGCL”), and shall concurrently cause the Certificate of Merger, or any other certificate, agreement or other document specified in the relevant provisions of the California General Corporation Law (the “CGCL”) to cause the Merger to be effective in California, to be filed with the Secretary of State of the State of California, in such form as required by, and executed in accordance with, the relevant provisions of the CGCL. The Merger shall become effective upon (a) such filing of the Certificate of Merger with the Secretary of State of the State of Delaware or (b) such later date and time as may be specified in the Certificate of Merger (the “Effective Time”).
1.2Closing. The closing of the Merger (the “Closing”) will take place at 10:00 a.m. on the date (the “Closing Date”) that is the third business day after the satisfaction or waiver of the conditions set forth inArticle VI (excluding those conditions that, by their nature, are to be satisfied as of the Closing, but subject to the satisfaction or waiver of those conditions as of the Closing), unless another time or date is agreed to in writing by the Parties. The Closing shall be held at the offices of Mayer Brown LLP, 350 South Grand Avenue, Los Angeles, California 90071, unless another place is agreed to in writing by the Parties.
A-1-1
1.3Effects of the Merger. Nara shall be the Surviving Corporation in the Merger. At the Effective Time, Center Financial shall be merged with and into Nara and the separate existence of Center Financial shall cease. The Merger will have the effects set forth in the DGCL and the CGCL.
1.4Certificate of Incorporation and By-Laws. The Certificate of Incorporation of Nara as in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation, except that such Certificate of Incorporation shall be amended to provide that, effective as of the Effective Time, the name of the Surviving Corporation shall be changed to a name mutually acceptable to Center Financial and Nara. The By-laws of Nara as in effect immediately prior to the Effective Time, as amended substantially in the form set forth inExhibit 1.4, shall be the By-laws of the Surviving Corporation.
1.5Bank Merger. As soon as reasonably practicable after the date hereof, Nara and Center Financial shall cause Nara Bank and Center Bank to enter into a bank merger agreement in substantially the form attached to this Agreement asExhibit 1.5 (the “Bank Merger Agreement”), providing for the Bank Merger in accordance with Applicable Legal Requirements and the terms of the Bank Merger Agreement concurrently with or as soon as reasonably practicable after consummation of the Merger.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of Nara, Center Financial or the holder of any of the following securities:
(a)Cancellation of Stock Owned by the Parties. Any shares of Center Financial Common Stock that are issued and outstanding immediately prior to the Effective Time and are owned by Center Financial or Nara (other than, for the avoidance of doubt, any DPC shares or shares for which Center Financial is the record holder for the benefit of another Person) shall be cancelled and retired and no stock of Nara or other consideration shall be delivered in exchange therefor. Any shares of Nara Common Stock that are issued and outstanding immediately prior to the Effective Time and are owned by Center Financial (other than, for the avoidance of doubt, any DPC shares or shares for which Center Financial is the record holder for the benefit of another Person) shall be cancelled and retired.
(b)Conversion of Center Financial Common Stock. Subject toSection 2.2(e), each share of Center Financial Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be cancelled in accordance withSection 2.1(a) and dissenting shares as provided inSection 2.1(f)) shall be converted into 0.7804 (the “Exchange Ratio”) fully paid and nonassessable shares of Nara Common Stock. None of such shares of Center Financial Common Stock shall remain outstanding and all of such shares shall automatically be cancelled and retired and shall cease to exist, and each stock certificate previously representing any such shares shall thereafter represent solely the shares of Nara Common Stock into which such Center Financial Common Stock has been converted and the right pursuant toSection 2.2(e) to receive payment of cash in lieu of the issuance of fractional shares, without interest, if applicable. The Parties acknowledge and agree that the Exchange Ratio has been determined based upon (i) the number of shares of Center Financial Common Stock and Center Financial Restricted Shares and Nara Common Stock and Nara’s performance units issued under the Nara Stock Plan (the “Nara Performance Units”) represented and warranted herein by the respective Parties to be issued and outstanding, in each case as of November 30, 2010, as set forth inSection 3.1(b)(i) andSections 3.2(b)(i) and3.2(b)(iii), respectively, and (ii) on a diluted basis using the treasury stock method, each issued and outstanding Center Financial Stock Option and Nara Stock Option with an exercise price that was below the closing price of a share of Nara Common Stock and Center Financial Common Stock, respectively, as reported on the NASDAQ website at the close of NASDAQ’s regular session of trading on December 8, 2010, and represented and warranted herein by the respective Parties to be issued and outstanding as of November 30, 2010, as set forth inSections 3.1(b)(i) and3.2(b)(i). Other than any increases in outstanding shares of Center Financial
A-1-2
Common Stock or Nara Common Stock resulting from the exercise of Center Financial Stock Options and Nara Stock Options issued and outstanding as of the date hereof, if the number of shares of Center Financial Common Stock or Nara Common Stock or the number of Center Financial Restricted Shares or Nara Performance Units that are issued and outstanding shall have increased or decreased as of the Closing, whether as permitted by or in breach of this Agreement, the Parties agree that, without limiting any other right or remedy to which the Parties are entitled at law or in equity, a corresponding adjustment shall be made to the Exchange Ratio such that holders of Center Financial Common Stock and holders of Nara Common Stock shall receive 45% and 55%, respectively, of the outstanding shares of common stock of the Surviving Corporation after the Merger is consummated. The Exchange Ratio, as recalculated, if applicable, shall, for all purposes hereunder, constitute the “Exchange Ratio.”
(c)Conversion of Center Financial Series A Preferred Stock. Each share of Center Financial Series A Preferred Stock issued and outstanding immediately prior to the Effective Time shall be converted into one fully paid and nonassessable share of Nara Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Nara Series B Preferred Stock”), which series of Nara Preferred Stock shall be authorized by action of the board of directors of Nara (the “Nara Board”) pursuant to the Certificate of Incorporation of Nara as in effect immediately prior to the Effective Time. The Nara Board shall take all necessary action to create the Nara Series B Preferred Stock prior to the Effective Time. The shares of Nara Series B Preferred Stock shall have, in respect of Nara, the same rights, preferences, privileges and voting powers, and limitations and restrictions thereof, as the shares of Center Financial Series A Preferred Stock had in respect of Center Financial immediately prior to the Effective Time. None of such shares of Center Financial Series A Preferred Stock shall remain outstanding and all of such shares shall automatically be cancelled and retired and shall cease to exist, and each stock certificate previously representing any such shares shall thereafter represent solely the shares of Nara Series B Preferred Stock into which such Center Financial Series A Preferred Stock has been converted, without interest.
(d)Stock Options and Other Equity-Based Awards. Unless otherwise agreed by Center Financial after the date hereof:
(i)Assumption of Center Financial Options. Center Financial and Nara shall take all actions necessary (including delivery of any required notices by Center Financial) to provide that, effective as of the Effective Time, without any action on the part of the holders thereof, each outstanding Center Financial Stock Option shall cease to represent the right to acquire shares of Center Financial Common Stock and shall instead be converted automatically into an option to acquire shares of Nara Common Stock as provided below (an “Assumed Option”), and such Assumed Options will be assumed by Nara on substantially the same terms and conditions as were applicable under the corresponding Center Financial Stock Options immediately prior to the Effective Time;provided,however, that after the Effective Time:
(1) each Assumed Option will be exercisable for a number of shares of Nara Common Stock equal to the product of (x) the number of shares of Center Financial Common Stock that would be issuable upon exercise of such Center Financial Stock Option outstanding immediately prior to the Effective Time multiplied by (y) the Exchange Ratio, rounded down to the nearest whole share; and
(2) the per share exercise price for the Nara Common Stock issuable upon exercise of such Assumed Option will be equal to the quotient determined by dividing (x) the per share exercise price for such Center Financial Stock Option outstanding immediately prior to the Effective Time by (y) the Exchange Ratio, rounded up to the nearest whole cent.
Any restriction on the exercisability of such Center Financial Stock Option in effect as of the date hereof will continue in full force and effect, and the term, exercisability, and vesting schedule of such Center Financial Stock Option as in effect on the date hereof will remain unchanged. As soon as reasonably practicable following the Closing Date, the Surviving Corporation will deliver to each
A-1-3
Person who holds an Assumed Option a document evidencing the foregoing assumption of such Center Financial Stock Option by the Surviving Corporation. Center Financial and Nara will cooperate and coordinate with respect to any materials to be submitted to the holders of Center Financial Stock Options in connection with any notice required under thisSection 2.1(d)(i).
(ii)Assumption of Center Financial Stock Plan. By virtue of the Merger, and without any action by any holders of equity awards, the Surviving Corporation shall, subject to the foregoing, assume the Center Financial Stock Plan (the “Assumed Plan”), with such assumption to be effective as of the Effective Time. Upon and following the Effective Time, the Surviving Corporation will be able to grant stock awards, to the extent permitted by Applicable Legal Requirements and applicable stock exchange listing regulations, under the terms of the Assumed Plan, to issue the reserved but unissued shares of Center Financial Common Stock under the Assumed Plan and the shares that would otherwise return to the Assumed Plan pursuant to the terms thereof, except that immediately upon the Effective Time, all references to a number of shares of Center Financial Common Stock will be (A) changed to references to Nara Common Stock and (B) converted to a number of shares of Nara Common Stock equal to the product of the number of shares of Center Financial Common Stock stated in the Center Financial Stock Plan multiplied by the Exchange Ratio, rounded down to the nearest whole share. The board of directors of the Surviving Corporation (or a committee thereof) shall, effective as of the Effective Time, become the administrator of the Assumed Plan.
(iii)Center Financial Restricted Shares. At the Effective Time, each Center Financial Restricted Share then outstanding shall be assumed by Nara. Subject to, and in accordance with, the terms of the Center Financial Stock Plan and any applicable award or other agreement, each award of Center Financial Restricted Shares then outstanding shall be converted into the number of shares of Nara Common Stock equal to the number of shares of Center Financial Common Stock subject to the Center Financial Restricted Share immediately prior to the Effective Time multiplied by the Exchange Ratio (rounded down to the nearest whole share of Nara Common Stock) (the “Assumed Restricted Shares”). Except as specifically provided in the preceding sentence, following the Effective Time, each Assumed Restricted Shares shall otherwise be subject to the same restrictions, terms and conditions as were applicable to such shares immediately prior to the Effective Time. Center Financial and Nara shall take all steps necessary to cause the foregoing provisions of thisSection 2.1(d)(iii) to occur, including but not limited to delivering all required notices. Center Financial and Nara will cooperate and coordinate with respect to any materials to be submitted to the holders of Center Financial Restricted Shares in connection with any notice required under thisSection 2.1(d)(iii).
(iv)Violation of Applicable Legal Requirements. No provision ofSections 2.1(d)(i),(ii) or(iii) shall be implemented with respect to an individual if such implementation would violate Applicable Legal Requirements, including those applicable to the Troubled Asset Relief Program.
(e)Warrant. The Warrant issued on December 12, 2008 to the United States Department of the Treasury in connection with the issuance of the Center Financial Series A Preferred Stock (the “Center Financial TARP Warrant”) shall, by virtue of the Merger and without any action on the part of any Person, cease to be a warrant to purchase Center Financial Common Stock and will become, automatically in accordance with its terms, a warrant to purchase Nara Common Stock, and, by virtue of the Merger and without any action on the part of any Person, Nara will assume such warrant subject to its terms;provided,however, that after the Effective Time:
(i) the number of shares of Nara Common Stock purchasable upon exercise of the Center Financial TARP Warrant will equal the product of (x) the number of shares of Center Financial Common Stock that were purchasable pursuant to the Center Financial TARP Warrant immediately before the Effective Time and (y) the Exchange Ratio, rounded to the nearest one-hundredth (1/100th) of a share; and
A-1-4
(ii) the per share exercise price for the Center Financial TARP Warrant will equal the quotient of (x) the per share exercise price of the Center Financial TARP Warrant in effect immediately before the Effective Time and (y) the Exchange Ratio, rounded to the nearest one-tenth (1/10th) of a cent.
(f)Dissenters’ Rights. Notwithstanding anything in this Agreement to the contrary, shares of Center Financial Stock that have not been voted in favor of approving the principal terms of the Merger and with respect to which dissenters’ rights shall have been properly demanded and may properly be exercised in accordance with the CGCL shall not be converted as set forth inSection 2.1(b) at or after the Effective Time unless and until the holder of such shares withdraws such holder’s demand for appraisal in accordance with Applicable Legal Requirements or becomes ineligible for such appraisal, at which time such shares shall be converted as set forth inSection 2.1(b), without interest. Center Financial shall give Nara (i) prompt notice of any written demands for appraisal, withdrawals of demands for appraisal and any other instruments in respect thereof received by Center Financial prior to the Effective Time and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal. Without the prior written consent of Nara, Center Financial shall not make any payment with respect to any demands for appraisal and shall not settle or offer to settle any such demands.
(g)Nara Capital Stock. Each share of Nara Common Stock and each share of Nara Preferred Stock shall remain outstanding without change following the Effective Time as shares of the Surviving Corporation, except as provided inSection 2.1(a).
2.2Exchange of Certificates.
(a)Exchange Agent. As of the Effective Time, Nara shall deposit or make available to a bank or trust company designated by Nara and reasonably acceptable to Center Financial (the “Exchange Agent”), for the benefit of the holders of Center Financial Common Stock for exchange in accordance with thisArticle II, (i) certificates or, at the option of Nara, evidence of shares in book entry form (collectively “Nara Certificates”) representing the shares of Nara Common Stock issuable pursuant toSection 2.1 in exchange for such shares of Center Financial Common Stock and (ii) sufficient cash to pay cash in lieu of fractional shares in accordance withSection 2.2(e).
(b)Exchange Procedures. As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of shares of Center Financial Common Stock of record immediately prior to the Effective Time whose shares were converted into shares of Nara Common Stock pursuant toSection 2.1 (i) a letter of transmittal (which shall specify that, with respect to Center Financial Certificates, delivery shall be effected and risk of loss and title to the Center Financial Certificates shall pass, only upon delivery of the Center Financial Certificates and such letter of transmittal to the Exchange Agent, and which shall be in such form and have such other provisions as Nara and Center Financial may reasonably specify) and (ii) instructions for use in effecting the surrender of the Center Financial Certificates or Center Financial Common Stock held in book entry form, as applicable, in exchange for Nara Certificates representing the number of whole shares of Nara Common Stock into which such Center Financial Common Stock has been so converted. Upon surrender of a Center Financial Certificate for cancellation to the Exchange Agent together with such letter of transmittal or submission of a letter of transmittal in respect of shares of Center Financial Common Stock in book entry form, as applicable, duly executed, and such other documents as the Exchange Agent may reasonably require, the holder of such Center Financial Common Stock shall be entitled to receive in exchange therefor a Nara Certificate representing that number of whole shares of Nara Common Stock, which such holder has the right to receive in respect of the Center Financial Common Stock surrendered pursuant to the provisions of thisArticle II (after taking into account all shares of Center Financial Common Stock then held by such holder), and the Center Financial Common Stock so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of Center Financial Common Stock which is not registered in the transfer records of Center Financial, a Nara Certificate representing the proper number of shares of Nara Common Stock may be issued to a transferee if a duly executed letter of transmittal accompanied, in the case of Center Financial Common Stock in certificated form, by the relevant Center Financial Certificate representing such Center Financial Common Stock, is
A-1-5
presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by thisSection 2.2, each Center Financial Certificate and each book entry in respect of Common Stock in book entry form shall be deemed at any time after the Effective Time to represent only the Nara Common Stock into which such shares of Center Financial Common Stock have been converted as provided in thisArticle II and the right to receive upon such surrender cash in lieu of any fractional shares of Nara Common Stock, if applicable, as contemplated by thisSection 2.2.
(c)Distributions with Respect to Unexchanged Shares. No dividends or other distributions declared or made with respect to Nara Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Center Financial Common Stock with respect to the shares of Nara Common Stock represented thereby, and no cash payment in lieu of fractional shares shall be paid to any such holder of unsurrendered Center Financial Common Stock pursuant toSection 2.2(e), until the holder of such Center Financial Common Stock shall have complied with the exchange procedures set forth inSection 2.2(b). Subject to the effect of Applicable Legal Requirements, following the surrender of any such Center Financial Common Stock, there shall be paid to the holder of whole shares of Nara Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender the amount of any cash payable with respect to a fractional share of Nara Common Stock to which such holder is entitled pursuant toSection 2.2(e), if applicable, and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid (but withheld pursuant to the immediately preceding sentence) with respect to such whole shares of Nara Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole shares of Nara Common Stock.
(d)No Further Ownership Rights. All shares of Nara Common Stock issued upon conversion of shares of Center Financial Common Stock in accordance with the terms hereof (in each case, including any cash paid pursuant toSection 2.2(c) or2.2(e)) and all shares of Nara Series B Preferred Stock issued upon conversion of shares of Center Financial Series A Preferred Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Center Financial Common Stock or Center Financial Series A Preferred Stock, respectively; subject, however, to the Surviving Corporation’s obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by Center Financial on such shares of Center Financial Series A Preferred Stock in accordance with the terms of this Agreement on or prior to the Effective Time and which remain unpaid at the Effective Time, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Center Financial Common Stock or Center Financial Series A Preferred Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Center Financial Certificate or letter of transmittal in respect of shares of Center Financial Common Stock in book entry form, as applicable, is presented to the Surviving Corporation for any reason, the Center Financial Common Stock represented thereby or referred to therein shall be cancelled and exchanged as provided in thisArticle II.
(e)No Fractional Shares. No certificates or scrip representing fractional shares of Nara Common Stock shall be issued upon the surrender for exchange of Center Financial Common Stock, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of the Surviving Corporation. In lieu thereof, upon surrender of the applicable Center Financial Common Stock by submission of a letter of transmittal to the Exchange Agent accompanied, in the case of Center Financial Common Stock in certificated form, by the applicable Center Financial Certificates, the Exchange Agent shall pay each holder of such Center Financial Common Stock an amount in cash equal to the product obtained by multiplying (i) the fractional share interest to which such holder (after taking into account all shares of Center Financial Common Stock held at the Effective Time by such holder) would otherwise be entitled by (ii) the closing price on NASDAQ, as reported on the NASDAQ website at the close of NASDAQ’s regular session of trading, for a share of Nara Common Stock on the last trading day immediately preceding the Effective Time.
A-1-6
(f)Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the stockholders of Center Financial for six months after the Effective Time shall be delivered to the Surviving Corporation, upon demand, and any holders of Center Financial Common Stock who have not theretofore complied with thisArticle II shall thereafter look only to the Surviving Corporation for payment of their claim for Nara Common Stock, any cash in lieu of fractional shares of Nara Common Stock and any dividends or distributions with respect to Nara Common Stock.
(g)No Liability. None of Nara, Center Financial or the Surviving Corporation shall be liable to any holder of shares of Center Financial Common Stock or to any holder of shares of Center Financial Series A Preferred Stock for shares of Nara Common Stock or Nara Series B Preferred Stock, as applicable, or dividends or distributions with respect thereto or cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.
(h)Withholding. Nara shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Center Financial Common Stock or to any holder of shares of Center Financial Series A Preferred Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Nara, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Center Financial Common Stock or Center Financial Series A Preferred Stock, as applicable, in respect of which such deduction and withholding was made by Nara.
(i)Center Financial Series A Preferred Stock. The Parties shall contact the holder of the Center Financial Series A Preferred Stock prior to the Closing Date to make arrangements reasonably acceptable to such holder for the exchange of such holder’s shares of such stock after the Effective Time.
2.3Reservation of Right to Revise Structure. Prior to the Effective Time, the Parties shall have the right to change the method of effecting the Merger and/or the Bank Merger to an alternative structure mutually agreed by the Parties, including by re-structuring the transactions contemplated hereby and under the Bank Merger Agreement to provide for the merger of Nara with and into Center Financial, with Center Financial being the surviving corporation, the merger of Nara Bank with and into Center Bank, with Center Bank being the surviving bank, or both;provided,however, that any actions taken pursuant to this Section 2.3 shall not (a) alter or change the kind or amount of consideration to be issued to or retained by holders of Center Financial Common Stock, Center Financial Series A Preferred Stock, Nara Common Stock or Nara Series B Preferred Stock, as compared with what they would otherwise receive or retain pursuant to this Agreement, and holders of Center Financial Common Stock and holders of Nara Common Stock shall receive 45% and 55%, respectively, of the outstanding shares of common stock of the Surviving Corporation after the Merger is consummated, (b) adversely affect the tax consequences of the transaction to any such holder, (c) materially delay receipt of any Requisite Regulatory Approval, or (d) otherwise cause any closing condition not to be capable of being fulfilled (unless duly waived by the Party entitled to the benefits thereof). If the Parties mutually agree to change the structure of the Merger and/or Bank Merger, the Parties shall execute an appropriate amendment to this Agreement and/or the Bank Merger Agreement, as applicable, in order to reflect the change in structure;provided,however, that any such amendment shall not otherwise substantially affect the economic and other rights and obligations of the Parties or their respective shareholders.
A-1-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1Representations and Warranties of Center Financial. Except, with respect to any subsection of thisSection 3.1, as set forth in the correspondingly identified subsection of the disclosure schedule delivered by Center Financial to Nara concurrently herewith (the “Center Financial Disclosure Schedule”), Center Financial represents and warrants to Nara as follows:
(a)Organization, Standing and Power. Center Financial is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). Each of Center Financial and its Significant Subsidiaries is a corporation, trust or partnership duly organized, validly existing and, in the case of corporations, in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. The copies of Articles of Incorporation and By-laws of Center Financial and Center Bank, which have been previously furnished to Nara, are true, correct and complete copies of such documents as in effect on the date of this Agreement.
(b)Capital Structure.
(i) The authorized capital stock of Center Financial consists of 100,000,000 shares of common stock, without par value (the “Center Financial Common Stock”), and 10,000,000 shares of preferred stock, without par value (the “Center Financial Preferred Stock”). As of the close of business on November 30, 2010, (A) 39,992,745 shares of Center Financial Common Stock, including 79,334 Center Financial Restricted Shares, were issued and outstanding, 864,780 shares of Center Financial Common Stock were reserved for issuance upon the exercise of the Center Financial TARP Warrant, 717,140 shares of Center Financial Common Stock were subject to outstanding stock options issued under the Center Financial 2006 Stock Incentive Plan (the “Center Financial Stock Plan”) and 2,230,383 shares of Center Financial Common Stock were reserved for future issuance upon exercise of stock options or other awards under the Center Financial Stock Plan, and no shares of Center Financial Common Stock were held by Subsidiaries of Center Financial (exclusive of any shares acquired in respect of debts previously contracted (any such shares being referred to herein as “DPC shares”)); (B) 55,000 shares of Center Financial Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Center Financial Series A Preferred Stock”) were issued and outstanding. As of the close of business on November 30, 2010, options to acquire 52,745 shares of Center Financial Common Stock with an exercise price in excess of the closing share price of Center Financial as of the close of business on December 8, 2010 were issued and outstanding. All outstanding shares of Center Financial Common Stock and Center Financial Preferred Stock have been duly authorized and validly issued and are fully paid and non-assessable and the issuance of none of such shares was subject to preemptive rights.
(ii) Set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule is a true, correct and complete list of all outstanding bonds, debentures, notes, trust preferred securities or other similar obligations that Center Financial or any of its Subsidiaries has issued. Except as set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule, no Voting Debt of Center Financial or any Center Financial Subsidiary is issued or outstanding. All outstanding bonds, debentures, notes, trust preferred securities or other similar obligations of Center Financial or any of its Subsidiaries were issued in compliance in all material respects with all Applicable Legal Requirements. Each Trust Document entered into by Center Financial or any of its Subsidiaries is in full force and effect and constitutes the valid, binding and legally enforceable obligation of Center Financial or one of its Subsidiaries, and to the knowledge of Center Financial, the other parties thereto, enforceable in
A-1-8
accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles). Except as set forth inSection 3.1(b)(ii) of the Center Financial Disclosure Schedule or otherwise in thisSection 3.1(b), no Center Financial Subsidiary has issued securities held by any entity other than Center Financial or a Center Financial Subsidiary.
(iii) Except for (A) this Agreement, (B) the Center Financial TARP Warrant, (C) Center Financial Stock Options, which represented, as of November 30, 2010, the right to acquire up to an aggregate of 717,140 shares of Center Financial Common Stock, and (D) agreements entered into and securities and other instruments issued after the date of this Agreement to the extent permitted bySection 4.1, there are no options, warrants, calls, rights, commitments or agreements of any character to which Center Financial or any Subsidiary of Center Financial is a party or by which it or any such Subsidiary is bound obligating Center Financial or any Subsidiary of Center Financial to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or any Voting Debt or stock appreciation rights of Center Financial or of any Subsidiary of Center Financial or obligating Center Financial or any Subsidiary of Center Financial to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding contractual obligations of Center Financial or any of its Subsidiaries (A) to repurchase, redeem or otherwise acquire any shares of capital stock of Center Financial or any of its Subsidiaries or (B) pursuant to which Center Financial or any of its Subsidiaries is or could be required to register shares of Center Financial Common Stock, Center Financial Preferred Stock or other securities under the Securities Act of 1933, as amended (the “Securities Act”), except any such contractual obligations entered into after the date hereof to the extent permitted bySection 4.1.
(iv) Since December 31, 2009, except to the extent permitted bySection 4.1, Center Financial has not (A) issued any shares of capital stock, stock appreciation rights or securities exercisable or exchangeable for or convertible into shares of capital stock of Center Financial or any of its Subsidiaries, other than pursuant to and as required by the terms of the Center Financial Stock Plan and any employee stock options and other awards issued under the Center Financial Stock Plan prior to the date hereof (or issued after the date hereof in compliance withSections 4.1(c) and4.1(k)); (B) repurchased, redeemed or otherwise acquired, directly or indirectly through one or more Center Financial Subsidiaries, any shares of capital stock of Center Financial or any of its Subsidiaries (other than the acquisition of DPC shares in the ordinary course of business consistent with past practice); or (C) declared, set aside, made or paid to the stockholders of Center Financial dividends or other distributions on the outstanding shares of capital stock of Center Financial, other than cash dividends on the Center Financial Series A Preferred Stock as required by the terms of such preferred stock as in effect on the date hereof.
(v) Set forth inSection 3.1(b)(v) of the Center Financial Disclosure Schedule is a true, correct and complete list of all equity securities that Center Financial or any of its Subsidiaries owns, controls or holds for its own account, and neither Center Financial nor any of its Subsidiaries owns more than 4.9% of a class of voting securities of, or otherwise controls, any Person other than Center Financial Bank, in the case of Center Financial.
(c)Authority.
(i) Center Financial has all requisite corporate power and authority to enter into this Agreement and, subject in the case of the consummation of the Merger to the approval of the principal terms of the Merger by the requisite vote of the holders of Center Financial Stock, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Center Financial, subject in the case of the consummation of the Merger to the approval of the principal terms of the Merger by the stockholders of Center Financial. This Agreement has been duly
A-1-9
executed and delivered by Center Financial and constitutes a valid and binding obligation of Center Financial, enforceable against Center Financial in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(ii) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (A) conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or the loss of a material benefit under, or the creation of a lien, pledge, security interest, charge or other encumbrance on any assets (any such conflict, violation, default, right of termination, cancellation or acceleration, loss or creation, a “Violation”) pursuant to, any provision of the Articles of Incorporation or By-laws of Center Financial or any Subsidiary of Center Financial, or (B) except as set forth inSection 3.1(c)(ii) of the Center Financial Disclosure Schedule and subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to therein or inclause (iii) below, result in any Violation of any loan or credit agreement, note, mortgage, indenture, lease, Center Financial Benefit Plan or other agreement, obligation, instrument, permit, concession, franchise or license, or any Applicable Legal Requirements applicable to Center Financial or any Subsidiary of Center Financial or their respective properties or assets, which Violation, in the case ofclauses (A) and(B) above, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation.
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity (acting in any capacity) is required by or with respect to Center Financial or any Subsidiary of Center Financial in connection with the execution and delivery of this Agreement by Center Financial or the consummation by Center Financial of the transactions contemplated hereby, the failure to make or obtain which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation, except for (A) the filing of appropriate applications and notices with the Board of Governors of the Federal Reserve System (the “Federal Reserve”) under the BHC Act and the Bank Merger Act of 1960, as amended (the “Bank Merger Act”), and approval of the same, (B) the filing of an appropriate application with the California Department of Financial Institutions (the “DFI”) and approval of the same (the approvals required by the immediately precedingclauses (A) and(B) are referred to herein collectively as the “Requisite Regulatory Approvals”), (C) the filing with the SEC of (1) the Form S-4, including the Joint Proxy Statement/Prospectus and (2) such reports under Sections 12, 13(a), 13(d) and 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (D) the filing of the Certificate of Merger (or other appropriate documents as provided herein or in the CGCL) with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, (E) obtaining the appropriate approvals or consents under each loss-sharing agreement with the FDIC to which Center Financial or any Subsidiary of Center Financial is a party (the “Loss-Sharing Approvals”), and (F) such filings, notifications and approvals as may be required under the Small Business Investment Act of 1958 (“SBIA”) and the rules and regulations of the Small Business Administration (“SBA”) thereunder.
(d)SEC Documents; Regulatory Reports; Undisclosed Liabilities.
(i) Center Financial has filed all reports, schedules, registration statements and other documents required under Applicable Legal Requirements to be filed by it with the SEC since December 31, 2007 (the “Center Financial SEC Documents”). Center Financial has delivered or made available to Nara true, correct and complete copies of all Center Financial SEC Documents, all comment letters received by Center Financial from the SEC since December 31, 2007, all responses to such comment letters by or on behalf of Center Financial and all other correspondence since December 31, 2007 between the
A-1-10
SEC and Center Financial, in each case to the extent not available to the public in completely unredacted form on the SEC’s EDGAR website (“EDGAR”). No Subsidiary of Center Financial is, or since December 31, 2007 has been, required to file any form, report, registration statement or other document with the SEC. As of their respective dates of filing with the SEC (or, if amended or superseded by a filing prior to the date hereof, as of the date of such filing), the Center Financial SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act or the Sarbanes-Oxley Act of 2002 (the “SOX Act”), as the case may be, and the rules and regulations of the SEC thereunder applicable to such Center Financial SEC Documents, and none of the Center Financial SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including, in each case, any notes thereto) of Center Financial included in the Center Financial SEC Documents complied, as of their respective dates of filing with the SEC, in all material respects with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be disclosed therein) and fairly present in all material respects the consolidated financial position of Center Financial and its consolidated Subsidiaries and the consolidated results of operations, changes in stockholders’ equity and cash flows of such companies as of the dates and for the periods shown, subject, in the case of interim financial statements, to (i) the omission of notes to the extent permitted by Regulations S-X of the SEC (but only if, in the case of interim financial statements included in Center Financial SEC Documents since Center Financial’s most recent Annual Report on Form 10-K, such notes would not differ materially from the notes to the financial statements included in such Annual Report) and (ii) normal, recurring year-end adjustments (but only if the effect of such adjustments would not, individually or in the aggregate, be material). No financial statements of any Person other than the Subsidiaries of Center Financial are, or, since December 31, 2007 have been, required by generally accepted accounting principles to be included in the consolidated financial statements of Center Financial.
(ii) Since December 31, 2007, Center Financial and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were required to be filed by them under any Applicable Legal Requirements with the Federal Reserve, the FDIC, the DFI and with any other applicable Governmental Entity, and have paid all fees and assessments due and payable in connection therewith, except to the extent that the failure to file such report, registration or statement or to pay such fees and assessments would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. As of their respective dates (and without giving effect to any amendments or modifications filed after the date of this Agreement with respect to reports and documents filed before the date of this Agreement), each of such reports, registrations and statements (including the financial statements, exhibits and schedules therein) complied in all material respects with the applicable statutes, rules, regulations and orders enforced or promulgated by the Governmental Entity with which they were filed.
(iii) Except for (A) those liabilities that are fully reflected or reserved for in the consolidated financial statements of Center Financial included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010, as filed with the SEC prior to the date of this Agreement, (B) liabilities incurred since September 30, 2010 in the ordinary course of business consistent with past practice, and (C) liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial, Center Financial and its Subsidiaries do not have, and since September 30, 2010 Center Financial and its Subsidiaries have not incurred (except to the extent permitted bySection 4.1), any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise and whether or not required to be reflected in Center Financial’s financial statements in accordance with generally accepted accounting principles).
A-1-11
(iv) Center Financial is, and since December 31, 2007 has been, in compliance with the applicable listing and corporate governance rules and regulations of NASDAQ. Center Financial has delivered to Nara true, correct and complete copes of all correspondence between Center Financial and NASDAQ since December 31, 2007.
(v) As used in thisSection 3.1(d), the term “file” shall be broadly construed to include any manner in which a document or information is filed, furnished, transmitted or otherwise made available to the SEC or any other Governmental Entity.
(e)Information Supplied. None of the information supplied or to be supplied by Center Financial for inclusion or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Joint Proxy Statement/Prospectus will, at the date of mailing to stockholders and at the times of the meetings of stockholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Joint Proxy Statement/ Prospectus will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, except that no representation or warranty is made by Center Financial with respect to statements made or incorporated by reference therein based on information supplied by Nara for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus.
(f)Compliance with Applicable Legal and Reporting Requirements.
(i) Center Financial and its Subsidiaries hold all permits, authorizations, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of the businesses of Center Financial and its Subsidiaries, taken as a whole (the “Center Financial Permits”), the Center Financial Permits are in full force and effect and Center Financial and its Subsidiaries are in compliance with the terms of the Center Financial Permits, except where the failure so to hold, be in full force and effect or comply, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(ii) Except as set forth inSection 3.1(f)(ii) of the Center Financial Disclosure Schedule, since December 31, 2007, Center Financial and each of its Subsidiaries has conducted its business in compliance with all Applicable Legal Requirements (including the SOX Act, the USA PATRIOT Act of 2001, any other applicable anti-money laundering statute, rule or regulation or any rule or regulation issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the privacy and customer information requirements contained in Applicable Legal Requirements, and all applicable fair lending and other discrimination-related statutes, rules or regulations) or to the employees conducting such businesses, except for possible violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. To the knowledge of Center Financial, no investigation by any Governmental Entity with respect to Center Financial or any of its Subsidiaries is pending or threatened, other than, in each case, those the outcome of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(g)Accounting and Internal Controls.
(i) The records, systems, controls, data and information of Center Financial and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Center Financial or its Subsidiaries (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control which would not, individually or in the
A-1-12
aggregate, reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the following clause.
(ii) Center Financial and its Subsidiaries have implemented and maintain a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that: (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(iii) Center Financial has (A) implemented and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and such controls and procedures are effective to ensure that (1) all information required to be disclosed by Center Financial in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) all such information is accumulated and communicated to Center Financial’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure and (B) disclosed, based on its most recent evaluation prior to the date hereof, to Center Financial’s auditors and the audit committee of the board of directors of Center Financial (the “Center Financial Board”) (1) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Center Financial’s ability to record, process, summarize and report financial data and have identified for Center Financial’s auditors any material weaknesses in internal controls and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in Center Financial’s internal controls. Center Financial has made available to Nara a summary of any such disclosure made by management to Center Financial’s auditors and audit committee since December 31, 2007.
(iv) Since December 31, 2007, neither Center Financial nor any of its Subsidiaries or, to the knowledge of Center Financial, any director, officer, employee, auditor, accountant or representative of Center Financial or any of its Subsidiaries has received or has otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Center Financial or any of its Subsidiaries or their internal control over financial reporting, including any complaint, allegation, assertion or claim that Center Financial or any of its Subsidiaries has engaged in questionable accounting or auditing practices.
(h)Legal Proceedings. Except as set forth inSection 3.1(h) of the Center Financial Disclosure Schedule, there is no suit, action, investigation or proceeding (whether judicial, arbitral, administrative or other) pending or, to the knowledge of Center Financial, threatened, against or affecting Center Financial or any Subsidiary of Center Financial as to which there is a significant possibility of an adverse outcome which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Center Financial or any Subsidiary of Center Financial having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or on the Surviving Corporation.
(i)Taxes. Except as set forth inSection 3.1(i) of the Center Financial Disclosure Schedule:
(i) Each of Center Financial and the Center Financial Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all
A-1-13
material tax returns required to be filed by it, and all such filed tax returns were true, correct and complete in all material respects. All taxes shown to be due on such tax returns have been timely paid.
(ii) No written or, to the knowledge of Center Financial, unwritten notice of any deficiency with respect to taxes that has been proposed, asserted or assessed against Center Financial or any of the Center Financial Subsidiaries and has not previously been paid has been received by Center Financial or any Center Financial Subsidiary.
(iii) To the knowledge of Center Financial, no tax return of Center Financial or any Center Financial Subsidiary is under audit or examination by any Governmental Entity. No written or, to the knowledge of Center Financial, unwritten notice of such an audit or examination by any Governmental Entity has been received by Center Financial or any Center Financial Subsidiary. Any assessments for taxes due with respect to any completed and settled examinations or any concluded litigation have been fully paid.
(iv) Neither Center Financial nor any Center Financial Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code within the two-year period ending on the Closing Date.
(v) Neither Center Financial nor any Center Financial Subsidiary has any liability for any tax under Treasury Regulation Section 1.1502-6 or any similar provision of any other tax law, except for taxes of the affiliated group of which Center Financial is the common parent, within the meaning of Section 1504(a)(1) of the Code or any similar provision of any other tax law.
(vi) Neither Center Financial nor any Center Financial Subsidiary has taken or agreed to take (or failed to take or agree to take) any action or knows of any facts or circumstances that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(vii) Neither Center Financial nor any Center Financial Subsidiary has engaged in a transaction that would be reportable by or with respect to Center Financial or any Center Financial Subsidiary pursuant to Sections 6011, 6111 or 6112 of the Code.
(viii) Center Financial and the Center Financial Subsidiaries have withheld (or will withhold) from payments to or on behalf of its employees, independent contractors, creditors, stockholders or other third parties, and have timely paid (or will timely pay) to the appropriate Governmental Entity, all material amounts required to be withheld from such persons in accordance with applicable tax law;provided,however, that the foregoing withholding representation shall apply only with respect to payments made before the Closing Date and that the foregoing timely payment representation shall apply only with respect to payments which, to be timely, must be made to the appropriate Governmental Entity before the Closing Date.
(ix) There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any material taxes.
(x) Neither Center Financial nor any Center Financial Subsidiary is a party to or bound by any tax sharing agreement, tax indemnity obligation or agreement or arrangement with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any Governmental Entity).
(xi) Center Bank operates at least one significant historic business line, or owns at least a significant portion of its historic business assets, in each case within the meaning of Treasury Regulation Section 1.368-1(d).
(j)Certain Agreements. Except as set forth inSection 3.1(j) of the Center Financial Disclosure Schedule and except for this Agreement, neither Center Financial nor any of its Subsidiaries is a party to or
A-1-14
bound by any contract, arrangement, commitment or understanding (i) with respect to the employment of any directors or executive officers, or with any consultants that are natural persons, involving the payment of $150,000 or more per annum, (ii) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) which limits the ability of Center Financial or any of its Subsidiaries to compete in any line of business, in any geographic area or with any Person, or which requires referrals of business or requires Center Financial or any of its affiliates to make available investment opportunities to any Person on a priority, equal or exclusive basis, and in each case which limitation or requirement would reasonably be expected to be material to Center Financial and its Subsidiaries taken as a whole, (iv) with or to a labor union or other collective bargaining representative (including any collective bargaining agreement), (v) in the case of a Center Financial Benefit 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, (vi) which would prohibit or delay the consummation of any of the transactions contemplated by this Agreement, (vii) which involve the payment of more than $250,000 and are not terminable without penalty on notice of 90 days or less, (viii) real property leases or (ix) agreements providing for indemnification, contribution or any guaranty in favor of any officer or director or that were not entered into in the ordinary course of business. Center Financial has previously made available to Nara complete and accurate copies of each contract, arrangement, commitment or understanding of the type described in thisSection 3.1(j) (collectively referred to herein as the “Center Financial Contracts”). All of the Center Financial Contracts are valid and in full force and effect, except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. Neither Center Financial nor any of its Subsidiaries has, and to the best knowledge of Center Financial, none of the other parties thereto have, violated any provision of, or committed or failed to perform any act, and no event or condition exists, which with or without notice, lapse of time or both would constitute a default under the provisions of, any Center Financial Contract, except in each case for those violations and defaults which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(k)Benefit Plans.
(i) With respect to each employee benefit plan (including any “employee benefit plan”, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and all stock purchase, stock option, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and other material employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, whether formal or informal, oral or written, legally binding or not (all the foregoing being herein called “Benefit Plans”), under which any employee or former employee of Center Financial or any of its Subsidiaries has any present or future right to benefits, and which is maintained or contributed to by Center Financial or any of its Subsidiaries or under which Center Financial or any of its Subsidiaries has any present or future liability (the “Center Financial Benefit Plans”), Center Financial has made available to Nara a true, correct and complete copy of (A) the most recent annual report (Form 5500) filed with the IRS and, where applicable, the related audited financial statements thereof, (B) such Center Financial Benefit Plan and all related amendments thereto, (C) each trust agreement relating to such Center Financial Benefit Plan and all related amendments thereto, (D) the most recent summary plan description for each Center Financial Benefit Plan for which a summary plan description is required by ERISA and, for Benefit Plans not subject to ERISA, any relevant summaries and (E) the most recent determination letter issued by the IRS with respect to any Center Financial Benefit Plan qualified under Section 401(a) of the Code.
(ii) None of the Center Financial Benefit Plans are subject to Title IV of ERISA.
(iii) Neither Center Financial, its Subsidiaries, nor any of their ERISA Affiliates has any liability under or with respect to a multiemployer plan (as defined in Section 3(37) of ERISA) nor any liability
A-1-15
or contingent liability for providing, under any Center Financial Benefit Plan or otherwise, any post-retirement medical or life insurance benefits, other than statutory liability for providing group health plan continuation coverage under Part 6 of Title I of ERISA and Section 4980B of the Code or applicable state law.
(iv) Each Center Financial Benefit Plan that is a nonqualified deferred compensation subject to Section 409A of the Code has been operated and administered in good faith compliance with, and complies in form with, Section 409A of the Code and applicable guidance with respect thereto from the period beginning January 1, 2005 through the date hereof.
(v) With respect to the Center Financial Benefit Plans, individually and in the aggregate, no event has occurred and, to the knowledge of Center Financial, there exists no condition or set of circumstances in connection with which Center Financial or any of its Subsidiaries could be subject to any liability which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial under ERISA, the Code or any other Applicable Legal Requirements.
(vi) True and complete copies of the Center Financial Stock Plans as in effect on the date hereof, and copies of all outstanding awards agreements relating thereto, have been provided or made available to Nara.
(vii) Except as set forth inSection 3.1(k)(vii) of the Center Financial Disclosure Schedule, no Center Financial Benefit Plan or Center Financial Stock Plan exists that could result in the payment to any present or former employee of Center Financial or any Subsidiary of Center Financial of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of Center Financial or any Subsidiary of Center Financial as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Section 280G of the Code.
(viii) Except as set forth inSection 3.1(k)(viii) of the Center Financial Disclosure Schedule, none of the assets of any Center Financial Benefit Plan are invested in employer securities or employer real property.
(ix) With respect to each of the Center Financial Benefit Plans, all contributions or premium payments due and payable on or before the Closing Date have been timely made, and, to the extent not presently payable, appropriate reserves have been established for the payment and properly accrued in accordance with customary accounting practices.
(l)Bank Subsidiary. Center Financial owns all of the outstanding shares of capital stock of Center Bank, free and clear of any claim, lien or encumbrance. All of the shares of capital stock of Center Bank have been duly authorized and validly issued and are fully paid and non-assessable and not subject to preemptive rights. Center Bank is an “insured bank” as defined in the Federal Deposit Insurance Act (the “FDIA”) and applicable regulations thereunder. Center Bank is a California-state chartered nonmember bank whose primary federal bank regulator is the FDIC.
(m)Agreements with Regulators. Except as set forth inSection 3.1(m) of the Center Financial Disclosure Schedule, neither Center Financial nor any Subsidiary of Center Financial is a party or subject to any written agreement, consent decree or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any cease-and-desist or other order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policies, procedures or board resolutions at the request of, any Governmental Entity which restricts materially the conduct of its business, imposes any material requirements or procedures or in any manner relates to its capital adequacy, its credit or risk management policies or its management, nor has Center Financial been advised by any Governmental Entity that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such agreement, decree, memorandum of understanding, extraordinary supervisory letter, commitment letter, order,
A-1-16
directive or similar submission, or any such policy, procedure or board resolutions. Center Financial and its Subsidiaries are in compliance with all of the foregoing so listed inSection 3.1(m) of the Center Financial Disclosure Schedule, except to the extent that the failure so to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. There are no formal or informal investigations, known to Center Financial, relating to any regulatory matters pending before any Governmental Entity with respect to Center Financial or any of its Subsidiaries.
(n)Absence of Certain Changes or Events. From September 30, 2010 through the date of this Agreement: (i) Center Financial and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices, (ii) there has not been any change, circumstance or event (including any event involving a prospective change) which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial and (iii) there has not been (A) any action or event of the type that would have required the consent of Nara underSection 4.1 or (B) any material loss, damage or destruction to, or any material interruption in the use of, any of the assets of Center Financial or any of its Subsidiaries (whether or not covered by insurance).
(o)Board Approval. The Center Financial Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held (the “Center Financial Board Approval”), has (i) determined that this Agreement and the Merger are fair to and in the best interests of Center Financial and its stockholders and declared the Merger to be advisable, (ii) approved this Agreement and the Merger, and (iii) recommended that the stockholders of Center Financial approve the principal terms of the Merger and directed that such matter be submitted for consideration by Center Financial stockholders at the Center Financial Stockholders Meeting. No state takeover statute is applicable to this Agreement, the Merger or the other transactions contemplated hereby.
(p)Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of each class of Center Financial Stock approving the principal terms of the Merger (the “Required Center Financial Vote”) is the only vote of the holders of Center Financial Stock necessary to authorize the transactions contemplated hereby (including the Merger).
(q)Properties. Center Financial or one of its Subsidiaries (i) has good and marketable title to all the properties and assets reflected in the latest audited balance sheet included in the Center Financial SEC Documents filed prior to the date hereof as being owned by Center Financial or one of its Subsidiaries or acquired after the date thereof which are material to Center Financial’s business on a consolidated basis (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all claims, liens, charges, security interests or encumbrances of any nature whatsoever, except for Permitted Liens, and (ii) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such Center Financial SEC Documents or acquired after the date thereof which are material to its business on a consolidated basis (except for leases that have expired by their terms since the date thereof) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to Center Financial’s knowledge, the lessor, except in the case ofclauses (i) and(ii) above which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
(r)Intellectual Property. Center Financial and its Subsidiaries own or have a valid license to use all trademarks, service marks and trade names (including any registrations or applications for registration of any of the foregoing) (collectively, the “Center Financial Intellectual Property”) necessary to carry on their business substantially as currently conducted, except where such failures to own or validly license such Center Financial Intellectual Property would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial. Neither Center Financial nor any such Subsidiary has received any notice of infringement of or conflict with, and to Center Financial’s knowledge, there are no infringements of or conflicts with, the rights of others with respect to the use of any Center Financial Intellectual Property which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial.
A-1-17
(s)Derivatives. All swaps, caps, floors, option agreements, futures and forward contracts and other similar derivative transactions (each, a “Derivative Contract”), whether entered into for Center Financial’s own account, or for the account of one or more of its Subsidiaries or their respective customers, were entered into (i) in accordance with prudent business practices and all Applicable Legal Requirements and (ii) with counterparties which Center Financial believes to be financially responsible. Each Derivative Contract of Center Financial or any of its Subsidiaries constitutes the valid and legally binding obligation of Center Financial or one or more of its Subsidiaries, as the case may be, that is enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles), and is in full force and effect. Neither Center Financial nor its Subsidiaries, nor to the knowledge of Center Financial any other party thereto, is in breach of any of its obligations under any Derivative Contract of Center Financial or one of its Subsidiaries. The financial position of Center Financial and its Subsidiaries on a consolidated basis under or with respect to each such Derivative Contract has been reflected in the books and records of Center Financial and such Subsidiaries in accordance with generally accepted accounting principles applied on a consistent basis.
(t)Loan Portfolio.
(i) Neither Center Financial nor any of its Subsidiaries is a party to any written or oral (A) Loans, other than any Covered Loans, under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Center Financial, in default of any other provision, or (B) Loans with any director, executive officer or 5% or greater stockholder of Center Financial or any of its Subsidiaries, or to the knowledge of Center Financial, any affiliate of any of the foregoing. Set forth inSection 3.1(t)(i) of the Center Financial Disclosure Schedule is a true, correct and complete list of (A) all of the Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified by Center Financial as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, (B) by category of Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the other Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on such Loans by category, and (C) each asset of Center Financial or any of its Subsidiaries that, as of September 30, 2010, was classified as “Other Real Estate Owned” (“OREO”) and the book value thereof (other than any Covered OREOs); it being understood and agreed that the Loans referenced inclauses (A) and(B) of this sentence include any Loans so classified by Center Financial or by any Governmental Entity, but shall not include any Covered Loans (as to whichSection 3.1(t)(ii) shall apply). Center Financial shall provide to Nara, on a monthly basis, (1) a schedule of Loans of Center Financial and its Subsidiaries that become classified in the manner described in the previous sentence, or any Loan of Center Financial and its Subsidiaries the classification of which is changed to a lower classification or to OREO, and (2) a schedule of Loans of Center Financial and its Subsidiaries in which the obligor is delinquent in payment by 30 days or more, in each case after the date of this Agreement.
(ii) Neither Center Financial nor any of its Subsidiaries is a party to any written or oral Covered Loans under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Center Financial, in default of any other provision. Set forth inSection 3.1(t)(ii) of the Center Financial Disclosure Schedule is a true, correct and complete list of (A) all of the Covered Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified by Center Financial as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower
A-1-18
thereunder, (B) by category of Covered Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the Covered Loans of Center Financial and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on such Covered Loans by category, and (C) each asset of Center Financial or any of its Subsidiaries that, as of September 30, 2010, was classified as Covered OREO and the book value thereof; it being understood and agreed that the Covered Loans referenced inclauses (A) and(B) of this sentence include any Covered Loans so classified by Center Financial or by any Governmental Entity. Center Financial shall provide to Nara, on a monthly basis, a schedule of the Covered Loans and assets of Center Financial and its Subsidiaries that become classified in the manner described in the previous sentence after the date of this Agreement.
(iii) Each Loan of Center Financial and its Subsidiaries (A) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (B) to the extent carried on the books and records of Center Financial and its Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restriction, claims, liens or encumbrances, as applicable, which have been perfected and (C) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(iv) Each outstanding Loan of Center Financial and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of Center Financial and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all Applicable Legal Requirements.
(v) Except as set forth inSection 3.1(t)(v) of the Center Financial Disclosure Schedule, none of the agreements pursuant to which Center Financial or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
(vi) There are no outstanding Loans made by Center Financial or any of its Subsidiaries to any “executive officer” or other “insider” (as each such term is defined in Regulation O promulgated by the Federal Reserve) of Center Financial or its Subsidiaries, other than Loans that are subject to and that were made and continue to be in compliance with Regulation O or that are exempt therefrom.
(u)Insurance. Set forth inSection 3.1(u) of the Center Financial Disclosure Schedule is a true, correct and complete list of all insurance policies maintained by Center Financial and its Subsidiaries. All such insurance policies and bonds are in full force and effect and neither Center Financial nor any of its Subsidiaries is in default under any such policy or bond. Except as set forth inSection 3.1(u) of the Center Financial Disclosure Schedule, as of the date hereof, there are no claims in excess of $100,000 under any of such insurance policies or bonds, which claims are pending or as to which coverage has been denied or disputed by the underwriters of such insurance policies or bonds.
(v)Transactions with Affiliates. Except as set forth inSection 3.1(v) of the Center Financial Disclosure Schedule, there are no agreements, contracts, plans, arrangements or other transactions between Center Financial or any of its Subsidiaries, on the one hand, and any (i) officer or director of Center Financial or any of its Subsidiaries, (ii) record or beneficial owner of 5% or more of the voting securities of Center Financial, (iii) affiliate or family member of any such officer, director or record or beneficial owner or (iv) any other affiliate of Center Financial, on the other hand, except those of a type available to employees of Center Financial generally.
A-1-19
(w)Brokers or Finders. No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement, except D.A. Davidson & Co., and, if the Merger is not consummated, Center Financial agrees to indemnify Nara and to hold Nara harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or expenses asserted by any Person on the basis of any act or statement alleged to have been made by Center Financial or its affiliates.
(x)Opinion of Financial Advisor of Center Financial. Center Financial has received the opinion of its financial advisor, D.A. Davidson & Co., dated the date of this Agreement, to the effect that the Exchange Ratio is fair, from a financial point of view, to the holders of Center Financial Common Stock.
(y)No Other Representations or Warranties. Except for the representations and warranties contained in thisSection 3.1, neither Center Financial nor any other Person on behalf of Center Financial is making or has made any express or implied representation or warranty with respect to Center Financial or with respect to any other information provided to Nara in connection with the transactions contemplated herein. Neither Center Financial nor any other Person shall have or be subject to any liability or indemnification obligation to Nara or any other Person resulting from the distribution to Nara, or the use by Nara of, any such information, including any information, documents, projections, forecasts or other material made available to Nara in any “virtual data room” or management presentation in expectation of the transactions contemplated by this Agreement, unless any such information is expressly included in a representation or warranty contained in thisSection 3.1. Center Financial acknowledges that Nara is making no representations or warranties other than the representations and warranties contained inSection 3.2.
3.2Representations and Warranties of Nara. Except, with respect to any subsection of thisSection 3.2, as set forth in the correspondingly identified subsection of the disclosure schedule delivered by Nara to Center Financial concurrently herewith (the “Nara Disclosure Schedule”), Nara represents and warrants to Center Financial as follows:
(a)Organization, Standing and Power. Nara is a bank holding company registered under the BHC Act. Each of Nara and its Significant Subsidiaries is a corporation, trust or partnership duly organized, validly existing and, in the case of corporations, in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. The copies of Certificate of Incorporation and By-laws of Nara and Nara Bank, which have been previously furnished to Center Financial, are true, correct and complete copies of such documents as in effect on the date of this Agreement.
(b)Capital Structure.
(i) The authorized capital stock of Nara consists of 100,000,000 shares of common stock, par value $0.001 per share (the “Nara Common Stock”), and 10,000,000 shares of preferred stock, par value $0.001 (the “Nara Preferred Stock”). As of the close of business on November 30, 2010, (A) 37,971,527 shares of Nara Common Stock were issued and outstanding, 521,266 shares of Nara Common Stock were reserved for issuance upon the exercise of the outstanding warrant held by the United States Treasury Department (the “Nara TARP Warrant”) and 820,730 shares of Nara Common Stock were reserved for issuance upon exercise of stock options, Nara Performance Units or other awards under the Amended Nara 2007 Equity Incentive Plan (the “Nara Stock Plan”), and 60,686,477 shares of Nara Common Stock were held by Nara in its treasury or by its Subsidiaries (exclusive of DPC shares); and (B) 67,000 shares of Nara Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Nara Series A Preferred Stock”) were issued and outstanding. All outstanding shares of Nara Common Stock and Nara Preferred Stock have been duly authorized
A-1-20
and validly issued and are fully paid and non-assessable and the issuance of none of such shares was subject to preemptive rights. The shares of Nara Common Stock and Nara Series B Preferred Stock to be issued pursuant to or as specifically contemplated by this Agreement will have been duly authorized as of the Effective Time and, if and when issued in accordance with the terms hereof, will be validly issued, fully paid and non-assessable and the issuance of none of such shares was or will be subject to preemptive rights. As of the close of business on November 30, 2010, options to acquire 150,000 shares of Nara Common Stock with an exercise price in excess of the closing share price of Nara as of the close of business on December 8, 2010 were issued and outstanding.
(ii) Set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule is a true, correct and complete list of all outstanding bonds, debentures, notes, trust preferred securities or other similar obligations that Nara or any of its Subsidiaries has issued. Except as set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule, no Voting Debt of Nara or any Nara Subsidiary is issued or outstanding. All outstanding bonds, debentures, notes, trust preferred securities or other similar obligations of Nara or any of its Subsidiaries were issued in compliance in all material respects with all Applicable Legal Requirements. Each Trust Document entered into by Nara or any of its Subsidiaries is in full force and effect and constitutes the valid, binding and legally enforceable obligation of Nara or one of its Subsidiaries, and to the knowledge of Center Financial, the other parties thereto, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles). Except as set forth inSection 3.2(b)(ii) of the Nara Disclosure Schedule or otherwise in thisSection 3.2(b), no Nara Subsidiary has issued securities held by any entity other than Nara or a Nara Subsidiary.
(iii) Except for (A) this Agreement, (B) the Nara TARP Warrant, (C) Nara Stock Options, restricted units and performance units issued under the Nara Stock Plans, which represented, as of November 30, 2010, the right to acquire (in the case of Nara Stock Options) or to receive the value of up to an aggregate of, respectively, 543,250, zero and 36,200 shares of Nara Common Stock, and (D) agreements entered into and securities and other instruments issued after the date of this Agreement to the extent permitted bySection 4.2, there are no options, warrants, calls, rights, commitments or agreements of any character to which Nara or any Subsidiary of Nara is a party or by which it or any such Subsidiary is bound obligating Nara or any Subsidiary of Nara to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or any Voting Debt or stock appreciation rights of Nara or of any Subsidiary of Nara or obligating Nara or any Subsidiary of Nara to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding contractual obligations of Nara or any of its Subsidiaries (A) to repurchase, redeem or otherwise acquire any shares of capital stock of Nara or any of its Subsidiaries or (B) pursuant to which Nara or any of its Subsidiaries is or could be required to register shares of Nara Common Stock, Nara Preferred Stock or other securities under the Securities Act, except any such contractual obligations entered into after the date hereof to the extent permitted bySection 4.2.
(iv) Since December 31, 2009, except to the extent permitted bySection 4.2, Nara has not (A) issued any shares of capital stock, stock appreciation rights or securities exercisable or exchangeable for or convertible into shares of capital stock of Nara or any of its Subsidiaries, other than pursuant to and as required by the terms of the Nara Stock Plan and any employee stock options and other awards issued under the Nara Stock Plans prior to the date hereof (or issued after the date hereof in compliance withSections 4.2(c) and4.2(k)); (B) repurchased, redeemed or otherwise acquired, directly or indirectly through one or more Nara Subsidiaries, any shares of capital stock of Nara or any of its Subsidiaries (other than the acquisition of DPC shares in the ordinary course of business consistent with past practice); or (C) declared, set aside, made or paid to the stockholders of Nara dividends or other distributions on the outstanding shares of capital stock of Nara, other than cash dividends on the Nara Series A Preferred Stock as required by the terms of such preferred stock as in effect on the date hereof.
A-1-21
(v) Set forth inSection 3.2(b)(v) of the Nara Disclosure Schedule is a true, correct and complete list of all equity securities that Nara or any of its Subsidiaries owns, controls or holds for its own account, and neither Nara nor any of its Subsidiaries owns more than 4.9% of a class of voting securities of, or otherwise controls, any Person other than Nara Bank, in the case of Nara.
(c)Authority.
(i) Nara has all requisite corporate power and authority to enter into this Agreement and, subject in the case of the consummation of the Merger to the adoption of this Agreement by the requisite vote of the holders of Nara Common Stock, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Nara, subject in the case of the consummation of the Merger to the adoption of this Agreement by the stockholders of Nara. This Agreement has been duly executed and delivered by Nara and constitutes a valid and binding obligation of Nara, enforceable against Nara in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(ii) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (A) result in any Violation pursuant to any provision of the Certificate of Incorporation or By-laws of Nara or any Subsidiary of Nara, or (B) except as set forth inSection 3.2(c)(ii) of the Nara Disclosure Schedule and subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to therein or inclause (iii) below, result in any Violation of any loan or credit agreement, note, mortgage, indenture, lease, Nara Benefit Plan or other agreement, obligation, instrument, permit, concession, franchise or license, or any Applicable Legal Requirements applicable to Nara or any Subsidiary of Nara or their respective properties or assets, which Violation, in the case ofclauses (A) and(B) above, which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity (acting in any capacity) is required by or with respect to Nara or any Subsidiary of Nara in connection with the execution and delivery of this Agreement by Nara or the consummation by Nara of the transactions contemplated hereby, the failure to make or obtain which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or the Surviving Corporation, except for (A) the Requisite Regulatory Approvals, (B) the filing with the SEC of (1) the Form S-4, including the Joint Proxy Statement/Prospectus and (2) such reports under Sections 12, 13(a), 13(d) and 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (C) the filing of the Certificate of Merger (or other appropriate documents as provided herein or in the CGCL) with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, and (D) such filings, notifications and approvals as may be required under the SBIA and the rules and regulations of the SBA thereunder.
(d)SEC Documents; Regulatory Reports; Undisclosed Liabilities.
(i) Nara has filed all reports, schedules, registration statements and other documents required under Applicable Legal Requirements to be filed by it with the SEC since December 31, 2007 (the “Nara SEC Documents”). Nara has delivered or made available to Center Financial true, correct and complete copies of all Nara SEC Documents, all comment letters received by Nara from the SEC since December 31, 2007, all responses to such comment letters by or on behalf of Nara and all other correspondence since December 31, 2007 between the SEC and Nara, in each case to the extent not available to the public in completely unredacted form on EDGAR. No Subsidiary of Nara is, or since December 31, 2007 has been, required to file any form, report, registration statement or other document with the SEC. As of their respective dates of filing with the SEC (or, if amended or superseded by a
A-1-22
filing prior to the date hereof, as of the date of such filing), the Nara SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act or the SOX Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Nara SEC Documents, and none of the Nara SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements (including, in each case, any notes thereto) of Nara included in the Nara SEC Documents complied, as of their respective dates of filing with the SEC, in all material respects with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be disclosed therein) and fairly present in all material respects the consolidated financial position of Nara and its consolidated Subsidiaries and the consolidated results of operations, changes in stockholders’ equity and cash flows of such companies as of the dates and for the periods shown, subject, in the case of interim financial statements, to (i) the omission of notes to the extent permitted by Regulations S-X of the SEC (but only if, in the case of interim financial statements included in Nara SEC Documents since Nara’s most recent Annual Report on Form 10-K, such notes would not differ materially from the notes to the financial statements included in such Annual Report) and (ii) normal, recurring year-end adjustments (but only if the effect of such adjustments would not, individually or in the aggregate, be material). No financial statements of any Person other than the Subsidiaries of Nara are, or, since December 31, 2007 have been, required by generally accepted accounting principles to be included in the consolidated financial statements of Nara.
(ii) Since December 31, 2007, Nara and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were required to be filed by them under any Applicable Legal Requirements with the Federal Reserve, the FDIC, the DFI and with any other applicable Governmental Entity, and have paid all fees and assessments due and payable in connection therewith, except to the extent that the failure to file such report, registration or statement or to pay such fees and assessments would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. As of their respective dates (and without giving effect to any amendments or modifications filed after the date of this Agreement with respect to reports and documents filed before the date of this Agreement), each of such reports, registrations and statements (including the financial statements, exhibits and schedules therein) complied in all material respects with the applicable statutes, rules, regulations and orders enforced or promulgated by the Governmental Entity with which they were filed.
(iii) Except for (A) those liabilities that are fully reflected or reserved for in the consolidated financial statements of Nara included in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010, as filed with the SEC prior to the date of this Agreement, (B) liabilities incurred since September 30, 2010 in the ordinary course of business consistent with past practice, and (C) liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara, Nara and its Subsidiaries do not have, and since September 30, 2010 Nara and its Subsidiaries have not incurred (except to the extent permitted bySection 4.2), any liabilities or obligations of any nature whatsoever (whether accrued, absolute, contingent or otherwise and whether or not required to be reflected in Nara’s financial statements in accordance with generally accepted accounting principles).
(iv) Nara is, and since December 31, 2007 has been, in compliance with the applicable listing and corporate governance rules and regulations of NASDAQ. Nara has delivered to Center Financial true, correct and complete copes of all correspondence between Nara and NASDAQ since December 31, 2007.
A-1-23
(v) As used in thisSection 3.2(d), the term “file” shall be broadly construed to include any manner in which a document or information is filed, furnished, transmitted or otherwise made available to the SEC or any other Governmental Entity.
(e)Information Supplied. None of the information supplied or to be supplied by Nara for inclusion or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Joint Proxy Statement/Prospectus will, at the date of mailing to stockholders and at the times of the meetings of stockholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Joint Proxy Statement/Prospectus will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, and the Form S-4 will comply as to form in all material respects with the requirements of the Securities Act and the rules and regulations of the SEC thereunder, except that no representation or warranty is made by Nara with respect to statements made or incorporated by reference therein based on information supplied by Center Financial for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus or Form S-4.
(f)Compliance with Applicable Legal and Reporting Requirements.
(i) Nara and its Subsidiaries hold all permits, authorizations, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of the businesses of Nara and its Subsidiaries, taken as a whole (the “Nara Permits”), the Nara Permits are in full force and effect and Nara and its Subsidiaries are in compliance with the terms of the Nara Permits, except where the failure so to hold, be in full force and effect or comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(ii) Since December 31, 2007, Nara and each of its Subsidiaries has conducted its business in compliance with all Applicable Legal Requirements (including the SOX Act, the USA PATRIOT Act of 2001, any other applicable anti-money laundering statute, rule or regulation or any rule or regulation issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the privacy and customer information requirements contained in Applicable Legal Requirements, and all applicable fair lending and other discrimination-related statutes, rules or regulations) or to the employees conducting such businesses, except for possible violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. To the knowledge of Nara, no investigation by any Governmental Entity with respect to Nara or any of its Subsidiaries is pending or threatened, other than, in each case, those the outcome of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(g)Accounting and Internal Controls.
(i) The records, systems, controls, data and information of Nara and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Nara or its Subsidiaries (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the following clause.
(ii) Nara and its Subsidiaries have implemented and maintain a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles,
A-1-24
including that: (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(iii) Nara has (A) implemented and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and such controls and procedures are effective to ensure that (1) all information required to be disclosed by Nara in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) all such information is accumulated and communicated to Nara’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure and (B) disclosed, based on its most recent evaluation prior to the date hereof, to Nara’s auditors and the audit committee of the Nara Board (1) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect Nara’s ability to record, process, summarize and report financial data and have identified for Nara’s auditors any material weaknesses in internal controls and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in Nara’s internal controls. Nara has made available to Center Financial a summary of any such disclosure made by management to Nara’s auditors and audit committee since December 31, 2007.
(iv) Since December 31, 2007, neither Nara nor any of its Subsidiaries or, to the knowledge of Nara, any director, officer, employee, auditor, accountant or representative of Nara or any of its Subsidiaries has received or has otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Nara or any of its Subsidiaries or their internal control over financial reporting, including any complaint, allegation, assertion or claim that Nara or any of its Subsidiaries has engaged in questionable accounting or auditing practices.
(h)Legal Proceedings. There is no suit, action, investigation or proceeding (whether judicial, arbitral, administrative or other) pending or, to the knowledge of Nara, threatened, against or affecting Nara or any Subsidiary of Nara as to which there is a significant possibility of an adverse outcome which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Nara or any Subsidiary of Nara having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or on the Surviving Corporation.
(i)Taxes. Except as set forth inSection 3.2(i) of the Nara Disclosure Schedule:
(i) Each of Nara and the Nara Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all material tax returns required to be filed by it, and all such filed tax returns were true, correct and complete in all material respects. All taxes shown to be due on such tax returns have been timely paid.
(ii) No written or, to the knowledge of Nara, unwritten notice of any deficiency with respect to taxes that has been proposed, asserted or assessed against Nara or any of the Nara Subsidiaries and has not previously been paid has been received by Nara or any Nara Subsidiary.
(iii) To the knowledge of Nara, no tax return of Nara or any Nara Subsidiary is under audit or examination by any Governmental Entity. No written or, to the knowledge of Nara, unwritten notice of such an audit or examination by any Governmental Entity has been received by Nara or any Nara Subsidiary. Any assessments for taxes due with respect to any completed and settled examinations or any concluded litigation have been fully paid.
A-1-25
(iv) Neither Nara nor any Nara Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code within the two-year period ending on the Closing Date.
(v) Neither Nara nor any Nara Subsidiary has any liability for any tax under Treasury Regulation Section 1.1502-6 or any similar provision of any other tax law, except for taxes of the affiliated group of which Nara is the common parent, within the meaning of Section 1504(a)(1) of the Code or any similar provision of any other tax law.
(vi) Neither Nara nor any Nara Subsidiary has taken or agreed to take (or failed to take or agree to take) any action or knows of any facts or circumstances that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(vii) Neither Nara nor any Nara Subsidiary has engaged in a transaction that would be reportable by or with respect to Nara or any Nara Subsidiary pursuant to Sections 6011, 6111 or 6112 of the Code.
(viii) Nara and the Nara Subsidiaries have withheld (or will withhold) from payments to or on behalf of its employees, independent contractors, creditors, stockholders or other third parties, and have timely paid (or will timely pay) to the appropriate Governmental Entity, all material amounts required to be withheld from such persons in accordance with applicable tax law.
(ix) There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any material taxes.
(x) Neither Nara nor any Nara Subsidiary is a party to or bound by any tax sharing agreement, tax indemnity obligation or agreement or arrangement with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any Governmental Entity).
(xi) Except for the actions required by the Bank Merger, Nara has no present plan or intention to, following the Closing, dispose of any of the capital stock of any Center Financial Subsidiary or of any Nara Subsidiary or permit any Center Financial Subsidiary or any Nara Subsidiary to dispose of or discontinue any Center Financial Subsidiary’s significant historic business assets or to substantially alter any Center Financial Subsidiary’s significant historic business lines. The Parties agree that any bulk sales after the Merger of certain non-performing loans previously owned by Center Financial, representing not more than 20% of Center Financial’s loan portfolio immediately before the Merger, are not inconsistent with the representation in the preceding sentence.
(j)Certain Agreements. Except as set forth inSection 3.2(j) of the Nara Disclosure Schedule and except for this Agreement, neither Nara nor any of its Subsidiaries is a party to or bound by any contract, arrangement, commitment or understanding (i) with respect to the employment of any directors or executive officers, or with any consultants that are natural persons, involving the payment of $150,000 or more per annum, (ii) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii) which limits the ability of Nara or any of its Subsidiaries to compete in any line of business, in any geographic area or with any Person, or which requires referrals of business or requires Nara or any of its affiliates to make available investment opportunities to any Person on a priority, equal or exclusive basis, and in each case which limitation or requirement would reasonably be expected to be material to Nara and its Subsidiaries taken as a whole, (iv) with or to a labor union or other collective bargaining representative (including any collective bargaining agreement), (v) in the case of a Nara Benefit 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, (vi) which would prohibit or delay the consummation of any of the transactions contemplated by this Agreement, (vii) which involve the payment of more than $250,000 and are not terminable without penalty on notice of 90 days or less, (viii) real property leases or (ix) agreements providing for indemnification, contribution or any guaranty in favor of any officer or director or that were not entered into
A-1-26
in the ordinary course of business. Nara has previously made available to Center Financial complete and accurate copies of each contract, arrangement, commitment or understanding of the type described in thisSection 3.2(j) (collectively referred to herein as the “Nara Contracts”). All of the Nara Contracts are valid and in full force and effect, except to the extent they have previously expired in accordance with their terms or if the failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. Neither Nara nor any of its Subsidiaries has, and to the best knowledge of Nara, none of the other parties thereto have, violated any provision of, or committed or failed to perform any act, and no event or condition exists, which, with or without notice, lapse of time or both would constitute a default under the provisions of, any Nara Contract, except in each case for those violations and defaults which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(k)Benefit Plans.
(i) With respect to each Benefit Plan under which any employee or former employee of Nara or any of its Subsidiaries has any present or future right to benefits, and which is maintained or contributed to by Nara or any of its Subsidiaries or under which Nara or any of its Subsidiaries has any present or future liability (the “Nara Benefit Plans”), Nara has made available to Center Financial a true, correct and complete copy of (A) the most recent annual report (Form 5500) filed with the IRS and, where applicable, the related audited financial statements thereof, (B) such Nara Benefit Plan and all related amendments thereto, (C) each trust agreement relating to such Nara Benefit Plan and all related amendments thereto, (D) the most recent summary plan description for each Nara Benefit Plan for which a summary plan description is required by ERISA and, for Benefit Plans not subject to ERISA, any relevant summaries and (E) the most recent determination letter issued by the IRS with respect to any Nara Benefit Plan qualified under Section 401(a) of the Code.
(ii) None of the Nara Benefit Plans are subject to Title IV of ERISA.
(iii) Neither Nara, its Subsidiaries, nor any of their ERISA Affiliates has any liability under or with respect to a multiemployer plan (as defined in Section 3(37) of ERISA) nor any liability or contingent liability for providing, under any Nara Benefit Plan or otherwise, any post-retirement medical or life insurance benefits, other than statutory liability for providing group health plan continuation coverage under Part 6 of Title I of ERISA and Section 4980B of the Code or applicable state law.
(iv) Each Nara Benefit Plan that is a nonqualified deferred compensation subject to Section 409A of the Code has been operated and administered in good faith compliance with, and complies in form with, Section 409A of the Code and applicable guidance with respect thereto from the period beginning January 1, 2005 through the date hereof.
(v) With respect to the Nara Benefit Plans, individually and in the aggregate, no event has occurred and, to the knowledge of Nara, there exists no condition or set of circumstances in connection with which Nara or any of its Subsidiaries could be subject to any liability which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara under ERISA, the Code or any other Applicable Legal Requirements.
(vi) True and complete copies of the Nara Stock Plans as in effect on the date hereof, and copies of all outstanding awards agreements relating thereto, have been provided or made available to Center Financial.
(vii) Except as set forth inSection 3.2(k)(vii) of the Nara Disclosure Schedule, no Nara Benefit Plan or Nara Stock Plan exists that could result in the payment to any present or former employee of Nara or any Subsidiary of Nara of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of Nara or any Subsidiary of Nara as a result of the transactions contemplated by this Agreement, whether or not such payment would constitute a parachute payment within the meaning of Section 280G of the Code.
A-1-27
(viii) Except as set forth inSection 3.2(k)(viii) of the Nara Disclosure Schedule, none of the assets of any Nara Benefit Plan are invested in employer securities or employer real property.
(ix) With respect to each of the Nara Benefit Plans, all contributions or premium payments due and payable on or before the Closing Date have been timely made, and, to the extent not presently payable, appropriate reserves have been established for the payment and properly accrued in accordance with customary accounting practices.
(l)Bank Subsidiary. Nara owns all of the outstanding shares of capital stock of Nara Bank, free and clear of any claim, lien or encumbrance. All of the shares of capital stock of Nara Bank have been duly authorized and validly issued and are fully paid and non-assessable and not subject to preemptive rights. Nara Bank is an “insured bank” as defined in the FDIA and applicable regulations thereunder. Nara Bank is a California-state chartered member bank whose primary federal bank regulator is the Federal Reserve.
(m)Agreements with Regulators. Except as set forth inSection 3.2(m) of the Nara Disclosure Schedule, neither Nara nor any Subsidiary of Nara is a party or subject to any written agreement, consent decree or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any cease-and-desist or other order or directive by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policies, procedures or board resolutions at the request of, any Governmental Entity which restricts materially the conduct of its business, imposes any material requirements or procedures or in any manner relates to its capital adequacy, its credit or risk management policies or its management, nor has Nara been advised by any Governmental Entity that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such agreement, decree, memorandum of understanding, extraordinary supervisory letter, commitment letter, order, directive or similar submission, or any such policy, procedure or board resolutions. Nara and its Subsidiaries are in compliance with all of the foregoing so listed inSection 3.2(m) of the Nara Disclosure Schedule, except to the extent that the failure so to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. There are no formal or informal investigations, known to Nara, relating to any regulatory matters pending before any Governmental Entity with respect to Nara or any of its Subsidiaries.
(n)Absence of Certain Changes or Events. From September 30, 2010 through the date of this Agreement: (i) Nara and its Subsidiaries have conducted their respective businesses in the ordinary course consistent with their past practices, (ii) there has not been any change, circumstance or event (including any event involving a prospective change) which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara and (iii) there has not been (A) any action or event of the type that would have required the consent of Center Financial underSection 4.2 or (B) any material loss, damage or destruction to, or any material interruption in the use of, any of the assets of Nara or any of its Subsidiaries (whether or not covered by insurance).
(o)Board Approval. The Nara Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held (the “Nara Board Approval”), has (i) determined that this Agreement and the Merger are fair to and in the best interests of Nara and its stockholders and declared the Merger to be advisable, (ii) approved this Agreement and the Merger, and (iii) recommended that the stockholders of Nara adopt this Agreement and directed that such matter be submitted for consideration by Nara stockholders at the Nara Stockholders Meeting. No state takeover statute is applicable to this Agreement, the Merger or the other transactions contemplated hereby.
(p)Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of Nara Common Stock to adopt this Agreement (the “Required Nara Vote”) is the only vote of the holders of any class or series of Nara capital stock necessary to approve and adopt this Agreement and the transactions contemplated hereby (including the Merger).
A-1-28
(q)Properties. Nara or one of its Subsidiaries (i) has good and marketable title to all the properties and assets reflected in the latest audited balance sheet included in the Nara SEC Documents filed prior to the date hereof as being owned by Nara or one of its Subsidiaries or acquired after the date thereof which are material to Nara’s business on a consolidated basis (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all claims, liens, charges, security interests or encumbrances of any nature whatsoever, except for Permitted Liens, and (ii) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such Nara SEC Documents or acquired after the date thereof which are material to its business on a consolidated basis (except for leases that have expired by their terms since the date thereof) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to Nara’s knowledge, the lessor, except in the case ofclauses (i) and(ii) above which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(r)Intellectual Property. Nara and its Subsidiaries own or have a valid license to use all trademarks, service marks and trade names (including any registrations or applications for registration of any of the foregoing) (collectively, the “Nara Intellectual Property”) necessary to carry on their business substantially as currently conducted, except where such failures to own or validly license such Nara Intellectual Property would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara. Neither Nara nor any such Subsidiary has received any notice of infringement of or conflict with, and to Nara’s knowledge, there are no infringements of or conflicts with, the rights of others with respect to the use of any Nara Intellectual Property which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara.
(s)Derivatives. All Derivative Contracts, whether entered into for Nara’s own account, or for the account of one or more of its Subsidiaries or their respective customers, were entered into (i) in accordance with prudent business practices and all Applicable Legal Requirements and (ii) with counterparties which Nara believes to be financially responsible. Each Derivative Contract of Nara or any of its Subsidiaries constitutes the valid and legally binding obligation of Nara or one or more of its Subsidiaries, as the case may be, that is enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles), and is in full force and effect. Neither Nara nor its Subsidiaries, nor to the knowledge of Nara any other party thereto, is in breach of any of its obligations under any Derivative Contract of Nara or one of its Subsidiaries. The financial position of Nara and its Subsidiaries on a consolidated basis under or with respect to each such Derivative Contract has been reflected in the books and records of Nara and such Subsidiaries in accordance with generally accepted accounting principles applied on a consistent basis.
(t)Loan Portfolio.
(i) Neither Nara nor any of its Subsidiaries is a party to any written or oral (A) Loans under the terms of which the obligor was, as of September 30, 2010, over 90 days or more delinquent in payment of principal or interest or, to the knowledge of Nara, in default of any other provision, or (B) Loans with any director, executive officer or 5% or greater stockholder of Nara or any of its Subsidiaries, or to the knowledge of Nara, any affiliate of any of the foregoing. Set forth inSection 3.2(t) of the Nara Disclosure Schedule is a true, correct and complete list of (A) all of the Loans of Nara and its Subsidiaries that, as of September 30, 2010, were classified by Nara as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the borrower thereunder, (B) by category of Loan (i.e., commercial real estate, commercial and industrial, consumer, other), all of the other Loans of Nara and its Subsidiaries that, as of September 30, 2010, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest on
A-1-29
such Loans by category, and (C) each asset of Nara or any of its Subsidiaries that, as of September 30, 2010, was classified as OREO and the book value thereof, it being understood and agreed that the Loans referenced inclauses (A) and(B) of this sentence include any Loans so classified by Nara or by any Governmental Entity. Nara shall provide to Center Financial, on a monthly basis, (1) a schedule of Loans of Nara and its Subsidiaries that become classified in the manner described in the previous sentence, or any Loan of Nara and its Subsidiaries the classification of which is changed to a lower classification or to OREO, and (2) a schedule of Loans of Nara and its Subsidiaries in which the obligor is delinquent in payment by 30 days or more, in each case after the date of this Agreement.
(ii) Each Loan of Nara and its Subsidiaries (A) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (B) to the extent carried on the books and records of Nara and its Subsidiaries as secured Loans, has been secured by valid charges, mortgages, pledges, security interests, restriction, claims, liens or encumbrances, as applicable, which have been perfected and (C) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
(iii) Each outstanding Loan of Nara and its Subsidiaries (including Loans held for resale to investors) was solicited and originated, and is and has been administered and, where applicable, serviced, and the relevant Loan files are being maintained, in all material respects in accordance with the relevant notes or other credit or security documents, the written underwriting standards of Nara and its Subsidiaries (and, in the case of Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all Applicable Legal Requirements.
(iv) Except as set forth inSection 3.1(t)(iv) of the Nara Disclosure Schedule, none of the agreements pursuant to which Nara or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
(v) There are no outstanding Loans made by Nara or any of its Subsidiaries to any “executive officer” or other “insider” (as each such term is defined in Regulation O promulgated by the Federal Reserve) of Nara or its Subsidiaries, other than Loans that are subject to and that were made and continue to be in compliance with Regulation O or that are exempt therefrom.
(u)Insurance. Set forth inSection 3.2(u) of the Nara Disclosure Schedule is a true, correct and complete list of all insurance policies maintained by Nara and its Subsidiaries. All such insurance policies and bonds are in full force and effect, and neither Nara nor any of its Subsidiaries is in default under any such policy or bond. Except as set forth inSection 3.2(u) of the Nara Disclosure Schedule, as of the date hereof, there are no claims in excess of $100,000 under any of such insurance policies or bonds, which claims are pending or as to which coverage has been denied or disputed by the underwriters of such insurance policies or bonds.
(v)Transactions with Affiliates. Except as set forth inSection 3.2(v) of the Nara Disclosure Schedule, there are no agreements, contracts, plans, arrangements or other transactions between Nara or any of its Subsidiaries, on the one hand, and any (i) officer or director of Nara or any of its Subsidiaries, (ii) record or beneficial owner of 5% or more of the voting securities of Nara, (iii) affiliate or family member of any such officer, director or record or beneficial owner or (iv) any other affiliate of Nara, on the other hand, except those of a type available to employees of Nara generally.
(w)Brokers or Finders. No agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other similar commission or fee in connection with any of the transactions contemplated by this Agreement, except Keefe, Bruyette & Woods, Inc., and, if the Merger is not consummated, Nara agrees to indemnify Center Financial and to hold Center Financial harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or
A-1-30
expenses asserted by any Person on the basis of any act or statement alleged to have been made by Nara or its affiliates.
(x)Opinion of Nara Financial Advisor. Nara has received the opinion of its financial advisor, Keefe, Bruyette & Woods, Inc., dated the date of this Agreement, to the effect that the Exchange Ratio is fair, from a financial point of view, to Nara and the holders of Nara Common Stock.
(y)No Other Representations or Warranties. Except for the representations and warranties contained in thisSection 3.2, neither Nara nor any other Person on behalf of Nara is making or has made any express or implied representation or warranty with respect to Nara or with respect to any other information provided to Center Financial in connection with the transactions contemplated herein. Neither Nara nor any other Person shall have or be subject to any liability or indemnification obligation to Center Financial or any other Person resulting from the distribution to Center Financial, or the use by Center Financial of, any such information, including any information, documents, projections, forecasts or other material made available to Center Financial in any “virtual data room” or management presentation in expectation of the transactions contemplated by this Agreement, unless any such information is expressly included in a representation or warranty contained in thisSection 3.2. Nara acknowledges that Center Financial is making no representations or warranties other than the representations and warranties contained inSection 3.1.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1Covenants of Center Financial. During the period from the date of this Agreement and continuing until the Effective Time, Center Financial agrees as to itself and its Subsidiaries that, except as expressly contemplated or permitted by this Agreement or to the extent that Nara shall otherwise consent in writing:
(a)Ordinary Course. Center Financial and its Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course consistent with past practice and use all reasonable efforts to preserve intact their present business organizations, maintain their rights, franchises, licenses and other authorizations issued by Governmental Entities, preserve their relationships with directors, officers, employees, customers, suppliers and others having business dealings with them and maintain their respective properties and assets in their present state of repair, order and condition, reasonable wear and tear excepted, to the end that their goodwill and ongoing businesses shall not be impaired in any material respect as of the Effective Time. Center Financial shall not, nor shall it permit any of its Subsidiaries to, (i) enter into any new material line of business, (ii) change its or its Subsidiaries’ lending, investment, underwriting, risk and asset-liability management or other material banking or operating policies in any respect which is material to Center Financial, except as required by Applicable Legal Requirements or by policies imposed by a Governmental Entity, (iii) incur or commit to any capital expenditures or any obligations or liabilities in connection therewith other than capital expenditures and obligations or liabilities incurred or committed to in the ordinary course of business consistent with past practice, (iv) enter into or terminate any material lease, contract or agreement, or make any change to any existing material leases, contracts or agreements, except in the ordinary course of business consistent with past practice or (v) take any action or fail to take any action, which action or failure causes a material breach of any material lease, contract or agreement.
(b)Dividends; Changes in Stock. Center Financial shall not, nor shall it permit any of its Subsidiaries to, or propose to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, except (A) the declaration and payment of regular cash dividends on the Center Financial Series A Preferred Stock in accordance with the terms of such preferred stock as in effect on the date of this Agreement with usual record and payment dates for such dividends in accordance with Center Financial’s past dividend practice or as required by the terms of such preferred stock, (B) for dividends by a wholly owned Subsidiary of Center Financial, and (C) the declaration and payment of regular cash dividends on any currently outstanding trust preferred securities issued by any Subsidiary of Center Financial in accordance with the terms of the Trust
A-1-31
Documents entered into by such Subsidiary, (ii) split, combine, exchange, adjust or reclassify any of its capital stock or issue or authorize or propose the issuance or authorization of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, or (iii) purchase, redeem or otherwise acquire, or permit any Subsidiary to purchase, redeem or otherwise acquire, any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock (except for the acquisition of DPC shares in the ordinary course of business consistent with past practice and except pursuant to agreements in effect on the date hereof and disclosed inSection 4.1(b) of the Center Financial Disclosure Schedule).
(c)Issuance of Securities. Center Financial shall not, nor shall it permit any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock of any class, any Voting Debt, any stock appreciation rights or any securities convertible into or exercisable or exchangeable for, or any rights, warrants or options to acquire, any such shares or Voting Debt, or enter into any agreement with respect to any of the foregoing, other than (i) the issuance of Center Financial Common Stock upon the exercise or settlement of Center Financial Stock Options outstanding on the date of this Agreement, (ii) issuance of Center Financial Common Stock upon exercise of the Center Financial TARP Warrants, and (iii) issuances by a wholly owned Subsidiary of its capital stock to its parent or to another wholly owned Subsidiary of Center Financial.
(d)Governing Documents. Center Financial shall not, and shall not permit any of its Subsidiaries to, amend or propose to amend its Articles of Incorporation, By-laws or similar organizational documents, as applicable, or, except to the extent permitted bySection 4.1(e) or4.1(f), enter into, or permit any Subsidiary to enter into, a plan of consolidation, merger or reorganization with any Person other than a wholly owned Subsidiary of Center Financial.
(e)No Acquisitions. Center Financial shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire, by merging or consolidating with, by purchasing a substantial equity interest in or a substantial portion of the assets of, by forming a partnership or joint venture with, or in any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any material assets not in the ordinary course of business;provided,however, that the foregoing shall not prohibit foreclosures, repossessions or other debt-previously-contracted acquisitions in the ordinary course of business.
(f)No Dispositions. Other than sales of OREOs and non-performing assets not exceeding $10 million in the aggregate in each calendar month in the ordinary course of business consistent with past practice, and sales of performing loans and investment securities in the ordinary course of business consistent with past practice, Center Financial shall not, and shall not permit any of its Subsidiaries to, sell, lease, assign, encumber or otherwise dispose of, or agree to sell, lease, assign, encumber or otherwise dispose of, any of its assets (including capital stock of its Subsidiaries and indebtedness of others held by Center Financial and its Subsidiaries) which are material, individually or in the aggregate, to Center Financial.
(g)Indebtedness. Center Financial shall not, and shall not permit any of its Subsidiaries to, (i) incur, create or assume any long-term indebtedness for borrowed money (or modify any of the material terms of any such outstanding long-term indebtedness), guarantee any such long-term indebtedness or issue or sell any long-term debt securities or warrants or rights to acquire any long-term debt securities of Center Financial or any of its Subsidiaries or guarantee any long-term debt securities of others, other than (A) indebtedness of any Subsidiary of Center Financial to Center Financial or to another Subsidiary of Center Financial, and (B) in the ordinary course of business consistent with past practice (including advances under existing lines of credit with the Federal Home Loan Bank of San Francisco or the Federal Reserve Bank and borrowings from the U.S. Treasury Department under its Treasury Tax and Loan Investment Program) or (ii) prepay or voluntarily repay any subordinated indebtedness or trust preferred securities.
A-1-32
(h)Other Actions. Center Financial shall not, and shall not permit any of its Subsidiaries to, intentionally take any action that would, or reasonably might be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue, or in any of the conditions to the Merger set forth inArticle VI not being satisfied or in a violation of any provision of this Agreement, or (unless such action is required by Applicable Legal Requirements) which would adversely affect the ability of the Parties to obtain any of the Requisite Regulatory Approvals without imposition of a condition or restriction of the type referred to inSection 6.1(f).
(i)Accounting Methods. Center Financial shall not, and shall not permit any of its Subsidiaries to, change its methods of accounting in effect at September 30, 2010, except as required by changes in generally accepted accounting principles as concurred in by Center Financial’s independent auditors or required by bank regulatory authorities.
(j)Tax Matters. Center Financial shall not, and shall not permit its Subsidiaries to, make or rescind any material tax election, make any material amendments to tax returns previously filed, or settle or compromise any material tax liability or refund, without the prior written consent of Nara.
(k)Compensation and Benefit Plans. Center Financial shall not, and shall not permit any of its Subsidiaries to, (i) enter into, adopt, amend (except for such amendments as may be required by Applicable Legal Requirements) or terminate any Center Financial Benefit Plan, or any agreement, arrangement, plan or policy between Center Financial or a Subsidiary of Center Financial and one or more of its directors or officers, (ii) except for normal payments, awards and increases in the ordinary course of business or as required by any plan or arrangement as in effect as of the date hereof, increase in any manner the compensation or benefits of any director, officer or employee or pay any benefit not required by any plan or arrangement as in effect as of the date hereof or enter into any contract, agreement, commitment or arrangement to do any of the foregoing, (iii) enter into or renew any contract, agreement, commitment or arrangement (other than a renewal occurring in accordance with the terms thereof) providing for the payment to any director, officer or employee of compensation or benefits contingent, or the terms of which are materially altered, upon the occurrence of any of the transactions contemplated by this Agreement or (iv) provide that, with respect to the right to any bonus or incentive compensation and the grant of any stock option, restricted stock, restricted stock unit or other equity-related award pursuant to the Center Financial 2006 Incentive Stock Plan or otherwise granted on or after the date hereof, the vesting of any such bonus, incentive compensation, or stock option, restricted stock, restricted stock unit or other equity-related award shall accelerate or otherwise be affected by the occurrence of any of the transactions contemplated by this Agreement, either alone or in combination with some other event.
(l)Investment Portfolio; Interest Rate Risk; Other Risk. Center Financial shall not, and shall not permit any of its Subsidiaries to, materially restructure or materially change (on a consolidated basis) its investment securities portfolio, its hedging strategy or its interest rate risk position, through purchases, sales or otherwise, or the manner in which its investment securities portfolio is classified or reported or materially increase the credit or other risk concentrations associated with its investment securities portfolio;provided,however, that the foregoing shall not restrict the purchase or sale of investment securities by Center Financial or any of its Subsidiaries in the ordinary course of business consistent with past practice.
(m)No Liquidation. Center Financial shall not, and shall not permit any of its Subsidiaries to, adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, restructuring, recapitalization or reorganization.
(n)Other Agreements. Center Financial shall not, and shall not permit any of its Subsidiaries to, agree to, or make any commitment to, take, or authorize, any of the actions prohibited by thisSection 4.1.
4.2Covenants of Nara. Except as otherwise permitted or contemplated bySection 4.2 of the Nara Disclosure Schedule, during the period from the date of this Agreement and continuing until the Effective Time,
A-1-33
Nara agrees as to itself and its Subsidiaries that, except as expressly contemplated or permitted by this Agreement or to the extent that Center Financial shall otherwise consent in writing:
(a)Ordinary Course. Nara and its Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course consistent with past practice and use all reasonable efforts to preserve intact their present business organizations, maintain their rights, franchises, licenses and other authorizations issued by Governmental Entities, preserve their relationships with directors, officers, employees, customers, suppliers and others having business dealings with them and maintain their respective properties and assets in their present state of repair, order and condition, reasonable wear and tear excepted, to the end that their goodwill and ongoing businesses shall not be impaired in any material respect as of the Effective Time. Nara shall not, nor shall it permit any of its Subsidiaries to, (i) enter into any new material line of business, (ii) change its or its Subsidiaries’ lending, investment, underwriting, risk and asset-liability management or other material banking or operating policies in any respect which is material to Nara, except as required by Applicable Legal Requirements or by policies imposed by a Governmental Entity, (iii) incur or commit to any capital expenditures or any obligations or liabilities in connection therewith other than capital expenditures and obligations or liabilities incurred or committed to in the ordinary course of business consistent with past practice, (iv) enter into or terminate any material lease, contract or agreement, or make any change to any existing material leases, contracts or agreements, except in the ordinary course of business consistent with past practice or (v) take any action or fail to take any action, which action or failure causes a material breach of any material lease, contract or agreement.
(b)Dividends; Changes in Stock. Nara shall not, nor shall it permit any of its Subsidiaries to, or propose to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, except (A) the declaration and payment of regular cash dividends on the Nara Series A Preferred Stock in accordance with the terms of such preferred stock as in effect on the date of this Agreement with usual record and payment dates for such dividends in accordance with Nara’s past dividend practice or as required by the terms of such preferred stock, (B) for dividends by a wholly owned Subsidiary of Nara, and (C) the declaration and payment of regular cash dividends on any currently outstanding trust preferred securities issued by any Subsidiary of Nara in accordance with the terms of the Trust Documents entered into by such Subsidiary, (ii) split, combine, exchange, adjust or reclassify any of its capital stock or issue or authorize or propose the issuance or authorization of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, or (iii) purchase, redeem or otherwise acquire, or permit any Subsidiary to purchase, redeem or otherwise acquire, any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock (except for the acquisition of DPC shares in the ordinary course of business consistent with past practice).
(c)Issuance of Securities. Nara shall not, nor shall it permit any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock of any class, any Voting Debt, any stock appreciation rights or any securities convertible into or exercisable or exchangeable for, or any rights, warrants or options to acquire, any such shares or Voting Debt, or enter into any agreement with respect to any of the foregoing, other than (i) the issuance of Nara Common Stock upon the exercise or settlement of Nara Stock Options outstanding on the date of this Agreement, (ii) issuance of Nara Common Stock upon exercise of the Nara TARP Warrants, and (iii) issuances by a wholly owned Subsidiary of its capital stock to its parent or to another wholly owned Subsidiary of Nara.
(d)Governing Documents. Except as contemplated by this Agreement, Nara shall not, and shall not permit any of its Subsidiaries to, amend or propose to amend its Certificate of Incorporation, By-laws or similar organizational documents, as applicable, or, except to the extent permitted bySection 4.2(e) or4.2(f), enter into, or permit any Subsidiary to enter into, a plan of consolidation, merger or reorganization with any Person other than a wholly owned Subsidiary of Nara.
(e)No Acquisitions. Nara shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire, by merging or consolidating with, by purchasing a substantial equity interest in or a substantial portion of the assets of, by forming a partnership or joint venture with, or in any other manner, any business or any
A-1-34
corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any material assets not in the ordinary course of business;provided,however, that the foregoing shall not prohibit foreclosures, repossessions or other debt-previously-contracted acquisitions in the ordinary course of business.
(f)No Dispositions. Other than sales of OREOs and non-performing assets not exceeding $10 million in the aggregate in each calendar month in the ordinary course of business consistent with past practice, and sales of performing loans and investment securities in the ordinary course of business consistent with past practice, Nara shall not, and shall not permit any of its Subsidiaries to, sell, lease, assign, encumber or otherwise dispose of, or agree to sell, lease, assign, encumber or otherwise dispose of, any of its assets (including capital stock of its Subsidiaries and indebtedness of others held by Nara and its Subsidiaries) which are material, individually or in the aggregate, to Nara.
(g)Indebtedness. Nara shall not, and shall not permit any of its Subsidiaries to, (i) incur, create or assume any long-term indebtedness for borrowed money (or modify any of the material terms of any such outstanding long-term indebtedness), guarantee any such long-term indebtedness or issue or sell any long-term debt securities or warrants or rights to acquire any long-term debt securities of Nara or any of its Subsidiaries or guarantee any long-term debt securities of others, other than (A) indebtedness of any Subsidiary of Nara to Nara or to another Subsidiary of Nara, and (B) in the ordinary course of business consistent with past practice (including advances under existing lines of credit with the Federal Home Loan Bank of San Francisco or the Federal Reserve Bank and borrowings from the U.S. Treasury Department under its Treasury Tax and Loan Investment Program) or (ii) prepay or voluntarily repay any subordinated indebtedness or trust preferred securities.
(h)Other Actions. Nara shall not, and shall not permit any of its Subsidiaries to, intentionally take any action that would, or reasonably might be expected to, result in any of its representations and warranties set forth in this Agreement being or becoming untrue, or in any of the conditions to the Merger set forth inArticle VI not being satisfied or in a violation of any provision of this Agreement, or (unless such action is required by Applicable Legal Requirements) which would adversely affect the ability of the Parties to obtain any of the Requisite Regulatory Approvals without imposition of a condition or restriction of the type referred to inSection 6.1(f).
(i)Accounting Methods. Nara shall not, and shall not permit any of its Subsidiaries to, change its methods of accounting in effect at September 30, 2010, except as required by changes in generally accepted accounting principles as concurred in by Nara’s independent auditors or required by bank regulatory authorities.
(j)Tax Matters. Nara shall not, and shall not permit its Subsidiaries to, make or rescind any material tax election, make any material amendments to tax returns previously filed, or settle or compromise any material tax liability or refund, without the prior written consent of Center Financial.
(k)Compensation and Benefit Plans. Nara shall not, and shall not permit any of its Subsidiaries to, (i) enter into, adopt, amend (except for such amendments as may be required by Applicable Legal Requirements) or terminate any Nara Benefit Plan, or any agreement, arrangement, plan or policy between Nara or a Subsidiary of Nara and one or more of its directors or officers, (ii) except for normal payments, awards and increases in the ordinary course of business or as required by any plan or arrangement as in effect as of the date hereof, increase in any manner the compensation or benefits of any director, officer or employee or pay any benefit not required by any plan or arrangement as in effect as of the date hereof or enter into any contract, agreement, commitment or arrangement to do any of the foregoing, (iii) enter into or renew any contract, agreement, commitment or arrangement (other than a renewal occurring in accordance with the terms thereof) providing for the payment to any director, officer or employee of compensation or benefits contingent, or the terms of which are materially altered, upon the occurrence of any of the transactions contemplated by this Agreement or (iv) provide that, with respect to the right to any bonus or incentive compensation and the grant of any stock option, restricted stock,
A-1-35
restricted stock unit or other equity-related award pursuant to the Amended Nara 2007 Equity Incentive Plan or otherwise granted on or after the date hereof, the vesting of any such bonus, incentive compensation, or stock option, restricted stock, restricted stock unit or other equity-related award shall accelerate or otherwise be affected by the occurrence of any of the transactions contemplated by this Agreement, either alone or in combination with some other event.
(l)Investment Portfolio; Interest Rate Risk; Other Risk. Nara shall not, and shall not permit any of its Subsidiaries to, materially restructure or materially change (on a consolidated basis) its investment securities portfolio, its hedging strategy or its interest rate risk position, through purchases, sales or otherwise, or the manner in which its investment securities portfolio is classified or reported or materially increase the credit or other risk concentrations associated with its investment securities portfolio;provided,however, that the foregoing shall not restrict the purchase or sale of investment securities by Nara or any of its Subsidiaries in the ordinary course of business consistent with past practice.
(m)No Liquidation. Nara shall not, and shall not permit any of its Subsidiaries to, adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, restructuring, recapitalization or reorganization.
(n)Other Agreements. Nara shall not, and shall not permit any of its Subsidiaries to, agree to, or make any commitment to, take, or authorize, any of the actions prohibited by thisSection 4.2.
4.3Transition. In order to facilitate the integration of the operations of Center Financial and Nara and their Subsidiaries and to permit the coordination of their related operations on a timely basis, and in an effort to accelerate to the earliest time possible following the Effective Time the realization of synergies, operating efficiencies and other benefits expected to be realized by the Parties as a result of the Merger, each of Center Financial and Nara shall, and shall cause its Subsidiaries to, consult with the other on all strategic and operational matters to the extent such consultation is not in violation of Applicable Legal Requirements, including laws regarding the exchange of information and other laws regarding competition. Each of Center Financial and Nara shall, and shall cause its Subsidiaries to, make available to the other at its facilities and those of its Subsidiaries, where determined by Nara or Center Financial, as the case may be, to be appropriate and necessary, office space in order to assist it in observing all operations and reviewing, to the extent not in violation of Applicable Legal Requirements, all matters concerning the affairs of the other Party. Without in any way limiting the provisions ofSection 5.2, Center Financial and Nara, their respective Subsidiaries and their respective officers, employees, counsel, financial advisors and other representatives shall, upon reasonable notice to the other Party, be entitled to review the operations and visit the facilities of the other Party and its Subsidiaries at all times as may be deemed reasonably necessary by Nara or Center Financial, as the case may be, in order to accomplish the foregoing arrangements.
4.4Advice of Changes; Government Filings.
(a) Each Party shall confer on a regular and frequent basis with the other, report on operational matters and promptly advise the other orally and in writing of any change or event having, or which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on such Party or which would cause or constitute a material breach of any of the representations, warranties or covenants of such Party contained herein;provided,however, that any noncompliance with the foregoing shall not constitute the failure to be satisfied of a condition set forth inArticle VI or give rise to any right of termination underArticle VII unless the underlying breach shall independently constitute such a failure or give rise to such a right.
(b) Center Financial and Nara shall file all reports required to be filed by each of them with the SEC between the date of this Agreement and the Effective Time and shall deliver to the other Party copies of all such reports promptly after the same are filed. Center Financial, Center Bank, Nara and Nara Bank shall file all call reports with the appropriate bank regulators and all other reports, applications and other documents required to
A-1-36
be filed with the applicable Governmental Entities between the date hereof and the Effective Time and shall make available to the other Party copies of all such reports promptly after the same are filed. Each of Center Financial and Nara shall have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to Applicable Legal Requirements relating to the exchange of information, with respect to all the information relating to the other Party, and any of their respective Subsidiaries, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the Parties agrees to act reasonably and as promptly as practicable. Each Party agrees that to the extent practicable it will consult with the other Party with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each Party will keep the other Party apprised of the status of matters relating to completion of the transactions contemplated hereby.
4.5Insurance. During the period from the date of this Agreement and continuing until the Effective Time, each of Nara and Center Financial shall, and shall cause their respective Subsidiaries to, (a) use their commercially reasonable efforts to maintain and keep in full force and effect all of their respective policies of insurance presently in effect, or replacements for such policies, including insurance of customer deposit accounts with the FDIC, and (b) take all requisite action (including the making of claims and the giving of notices) pursuant to their respective policies of insurance in order to preserve all rights thereunder with respect to all matters which could reasonably give rise to a claim prior to the Effective Time.
4.6No Control of Other Party’s Business. Nothing contained in this Agreement (includingSection 4.3) shall give Nara, directly or indirectly, the right to control or direct the operations of Center Financial or shall give Center Financial, directly or indirectly, the right to control or direct the operations of Nara prior to the Effective Time. Prior to the Effective Time, each of Center Financial and Nara shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries’ respective operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1Preparation of Proxy Statement; Stockholders Meetings.
(a) As promptly as reasonably practicable following the date hereof, Nara and Center Financial shall cooperate in preparing mutually acceptable proxy materials which shall constitute the proxy statement/prospectus relating to the matters to be submitted to the Center Financial stockholders at the Center Financial Stockholders Meeting and to the Nara stockholders at the Nara Stockholders Meeting (such joint proxy statement/prospectus, and any amendments or supplements thereto, the “Joint Proxy Statement/Prospectus”), and Nara shall prepare and file with the SEC a registration statement on Form S-4 (of which the Joint Proxy Statement/Prospectus shall be a part) in form and substance reasonably satisfactory to Center Financial with respect to the issuance of Nara Common Stock in the Merger (such Form S-4, and any amendments or supplements thereto, the “Form S-4”). Each of Nara and Center Financial shall use reasonable best efforts to have the Joint Proxy Statement/Prospectus cleared by the SEC and the Form S-4 declared effective by the SEC as promptly as is reasonably practicable and to keep the Form S-4 effective as long as is necessary to consummate the Merger and the transactions contemplated thereby. Nara and Center Financial shall, as promptly as practicable after receipt thereof, provide the other Party with copies of any written comments and advise the other Party of any oral comments with respect to the Joint Proxy Statement/Prospectus or Form S-4 received from the SEC. Each Party shall cooperate and provide the other Party with a reasonable opportunity to review and comment on any amendment or supplement to the Joint Proxy Statement/Prospectus and the Form S-4 prior to filing such with the SEC, and each Party will provide the other Party with a copy of all such filings made with the SEC. Nara shall use its reasonable best efforts to take any action required to be taken under any applicable state securities laws in connection with
A-1-37
the Merger and each Party shall furnish all information concerning it and the holders of its capital stock as may be reasonably requested in connection with any such action. Nara will advise Center Financial, promptly after it receives notice thereof, of the time when the Form S-4 has become effective, the issuance of any stop order, the suspension of the qualification of the Nara Common Stock and Nara Series B Preferred Stock issuable in connection with the Merger for offering or sale in any jurisdiction, or any request by the SEC for amendment of the Joint Proxy Statement/Prospectus or the Form S-4. If at any time prior to the Effective Time any information relating to either of the Parties, or their respective affiliates, officers or directors, should be discovered by either Party which should be set forth in an amendment or supplement to any of the Form S-4 or the Joint Proxy Statement/Prospectus so that such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Party which discovers such information shall promptly notify the other Party hereto and, to the extent required by law, rules or regulations, an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and disseminated to the stockholders of Center Financial and Nara.
(b) Center Financial shall duly take all lawful action to call, give notice of, convene and hold a meeting of its stockholders as promptly as practicable following the date upon which the Form S-4 becomes effective (the “Center Financial Stockholders Meeting”) for the purpose of obtaining the Required Center Financial Vote. The Center Financial Board shall use its reasonable best efforts to obtain from the Center Financial stockholders the Required Center Financial Vote;provided,however, that the foregoing covenant shall not be deemed to limit the right of the Center Financial Board to make a Change in Recommendation in compliance withSection 5.1(f). Nothing contained in this Agreement shall be deemed to relieve Center Financial of its obligation to submit this Agreement to its stockholders for a vote on the approval of the principal terms of the Merger. Subject toSection 5.1(f), the Joint Proxy Statement/Prospectus shall include the recommendation of the Center Financial Board that the stockholders of Center Financial vote to approve the principal terms of the Merger (such recommendation being referred to herein as the “Center Financial Board Recommendation”).
(c) Nara shall duly take all lawful action to call, give notice of, convene and hold a meeting of its stockholders as promptly as practicable following the date upon which the Form S-4 becomes effective (the “Nara Stockholders Meeting”) for the purpose of obtaining the Required Nara Vote. The Nara Board shall use its reasonable best efforts to obtain from the Nara stockholders the Required Nara Vote;provided,however, that the foregoing covenant shall not be deemed to limit the right of the Nara Board to make a Change in Recommendation in compliance withSection 5.1(f). Nothing contained in this Agreement shall be deemed to relieve Nara of its obligation to submit this Agreement to its stockholders for a vote on the adoption thereof. Subject toSection 5.1(f), the Joint Proxy Statement/Prospectus shall include the recommendation of the Nara Board that the stockholders of Nara vote to approve and adopt this Agreement (such recommendation being referred to herein as the “Nara Board Recommendation” and, together with the Center Financial Board Recommendation, the “Board Recommendations”).
(d) Center Financial and Nara shall each use their reasonable best efforts to cause the Center Financial Stockholders Meeting and the Nara Stockholders Meeting to be held on the same date.
(e) Subject toSection 5.1(f), neither the Center Financial Board or the Nara Board nor any committee of either thereof shall: (i) withdraw, modify or qualify its Board Recommendation in a manner adverse to the other Party, or adopt or propose a resolution to withdraw, modify or qualify its Board Recommendation in a manner adverse to the other Party or take any other action that is or becomes disclosed publicly and which can reasonably be interpreted as indicating that such board of directors or any committee thereof does not support the Merger and this Agreement or does not believe that the Merger and this Agreement are in the best interests of its stockholders; (ii) fail to reaffirm, without qualification, its Board Recommendation or fail to state publicly, without qualification, that the Merger and this Agreement are in the best interests of its stockholders within five business days after the other Party requests in writing that such action be taken; (iii) fail to announce publicly within ten business days after a tender offer or exchange offer relating to the Center Financial Common Stock (in
A-1-38
the case of the Center Financial Board) or the Nara Common Stock (in the case of the Nara Board), shall have been commenced, that it recommends rejection of such tender or exchange offer; (iv) fail to issue within 10 business days after an Acquisition Proposal is publicly announced with respect to Center Financial (in the case of the Center Financial Board) or Nara (in the case of the Nara Board) a press release announcing its opposition to such Acquisition Proposal; (v) approve, endorse or recommend any such Acquisition Proposal with respect to Center Financial (in the case of the Center Financial Board) or Nara (in the case of the Nara Board) or (vi) resolve or propose to take any action described inclauses (i) through(v) of this sentence (each of the foregoing actions described inclauses (i) through(vi) of this sentence being referred to herein as a “Change in Recommendation”).
(f) Notwithstanding anything to the contrary contained inSections 5.1(b),5.1(c) or5.1(e), at any time prior to the approval of the principal terms of the Merger by the Required Center Financial Vote (in the case of Center Financial) or at any time prior to the approval and adoption of this Agreement by the Required Nara Vote (in the case of Nara), the Center Financial Board or the Nara Board, as the case may be, may effect, or cause Center Financial or Nara, respectively, to effect a Change in Recommendation:
(i) if: (A) after the date of this Agreement, an unsolicited, bona fide written offer to effect a transaction of the type referred to in the definition of the term Superior Proposal is made to Center Financial or Nara (such Party under such circumstances being referred to herein as a “Target Party”) and is not withdrawn; (B) such unsolicited, bona fide, written offer was not obtained or made as a direct or indirect result of a breach of, or any action inconsistent with, this Agreement; (C) the Target Party has materially complied with its obligations to provide notices to the other Party of any Acquisition Proposal and other matters requiring notice underSection 5.4(b)(ii); (D) at least five business days prior to each meeting of the board of directors of a Target Party, at which such board of directors will consider and determine whether any such offer constitutes a Superior Proposal, the Target Party provides the other Party with a written notice specifying the date and time of such meeting, the reasons for holding such meeting, the terms and conditions of the offer that is the basis of the potential action by the board of directors of the Target Party (including a copy of any draft definitive agreement reflecting the offer) and the identity of the Person making the offer (it being agreed that any change to the terms and conditions of such offer shall require a new notice and five business day period); (E) such board of directors determines in good faith, after obtaining and taking into account the advice of a financial advisor of nationally recognized reputation and its outside legal counsel, that such offer constitutes a Superior Proposal; (F) such board of directors does not effect, or cause the Target Party to effect, a Change in Recommendation at any time within five business days after the other Party receives written notice from the Target Party confirming that such board of directors has determined that such offer is a Superior Proposal and intends to effect a Change in Recommendation; (G) during such five business day period, if requested by such other Party, the Target Party engages in good faith negotiations with such other Party to amend this Agreement in such a manner that the offer that was determined to constitute a Superior Proposal no longer constitutes a Superior Proposal; (H) at the end of such five business day period, such offer has not been withdrawn and continues to constitute a Superior Proposal (taking into account any changes to the terms of this Agreement proposed by the other Party as a result of the negotiations required byclause (G) or otherwise); and (I) the board of directors of the Target Party reasonably determines in good faith, after obtaining and taking into account the advice of its outside legal counsel that, in light of such Superior Proposal, a Change in Recommendation is required in order for such board of directors to comply with its fiduciary duties to its stockholders under the Applicable Legal Requirements; or
(ii) if: (A) a material development or change in circumstances occurs (that is not an Acquisition Proposal) or arises after the date of this Agreement that was neither known to Center Financial or Nara or any of their respective executive officers, directors, advisors and representatives nor reasonably foreseeable by Center Financial or Nara or any of their respective executive officers, directors, advisors and representatives as of the date of this Agreement (such material development or change in such circumstances being referred to herein as an “Intervening Event”); (B) at least five business days prior
A-1-39
to each meeting of the Center Financial Board or the Nara Board at which such board of directors intends to consider whether such Intervening Event requires such board of directors to effect or cause Center Financial (in the case of the Center Financial Board) or Nara (in the case of the Nara Board) to effect, a Change in Recommendation, the Party whose board of directors is to meet for such purpose provides the other Party with a written notice specifying the date and time of such meeting and the reasons for holding such meeting, including a reasonably detailed explanation of the Intervening Event (it being agreed that any material change in such Intervening Event shall require a new notice and five business day period); (C) during such five business day period, if requested by the Party so notified, the Party whose board of directors is to meet for such purpose engages in good faith negotiations with the Party so notified to amend this Agreement in a manner that obviates the need to effect or cause a Change in Recommendation as a result of such Intervening Event; and (D) the board of directors that is considering whether to effect a Change in Recommendation reasonably determines in good faith, after obtaining and taking into account the advice of outside legal counsel, that, in light of such Intervening Event, a Change in Recommendation is required in order for such board of directors to comply with its fiduciary duties to its stockholders under Applicable Legal Requirements.
5.2Access to Information.
(a) Upon reasonable notice, Center Financial and Nara shall each (and shall cause each of their respective Subsidiaries to) afford to the representatives of the other, access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts and records and, during such period, each of Center Financial and Nara shall (and shall cause each of their respective Subsidiaries to) make available to the other (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal or state securities laws, federal or state banking laws or the rules and regulations of self regulatory organizations (other than reports or documents which such Party is not permitted to disclose under Applicable Legal Requirements) and (ii) all other information concerning its business, properties and personnel as such other Party may reasonably request. Neither Party nor any of its Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of its customers, jeopardize the attorney-client privilege of the institution in possession or control of such information or contravene any law, rule, regulation, order, judgment, decree or binding agreement entered into prior to the date of this Agreement. The Parties will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.
(b) The Parties will hold any such information which is nonpublic in confidence to the extent required by, and in accordance with, the provisions of the letter dated as of October 8, 2010, among Center Financial Bank, Center Financial, Nara Bank and Nara (the “Confidentiality Agreement”), which Confidentiality Agreement will remain in full force and effect.
(c) No such investigation by either Nara or Center Financial shall affect the representations and warranties of the other.
5.3Reasonable Best Efforts.
(a) Each of Center Financial and Nara shall, and shall cause its Subsidiaries to, use all reasonable best efforts (i) to take, or cause to be taken, all actions necessary to comply promptly with all Applicable Legal Requirements which may be imposed on such Party or its Subsidiaries with respect to the Merger and to consummate the Merger, the Bank Merger and the other transactions contemplated by this Agreement as promptly as practicable, and (ii) to obtain (and to cooperate with the other Party to obtain) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity and/or any other public or private third party which is required to be obtained or made by such Party or any of its Subsidiaries pursuant to Applicable Legal Requirements or any contract or other obligation in connection with the Merger and the transactions contemplated by this Agreement;provided,however, that a Party shall not be obligated to take any
A-1-40
action pursuant to the foregoing if the taking of such action or such compliance or the obtaining of such consent, authorization, order, approval or exemption will result in a condition or restriction on such Party or on the Surviving Corporation having an effect of the type referred to inSection 6.1(f). In furtherance and not in limitation of the Parties’ obligations under thisSection 5.3, each of the Parties further agrees as follows:
(i) As soon as practicable after the date hereof, each of Center Financial and Nara shall, and shall cause its Subsidiaries to, use all reasonable best efforts to prepare all necessary documentation and effect all necessary filings in order to obtain the Requisite Regulatory Approvals.
(ii) The Parties will cooperate with each other and will each furnish the other and the other’s counsel with all information concerning themselves, their Subsidiaries, directors, officers and stockholders and such other matters as may be necessary or advisable in connection with any application, petition or any other statement or application made by or on behalf of any Party or its Subsidiaries to any Governmental Entity in connection with the Merger. Center Financial and Nara shall have the right to review in advance all filings made in connection with the transactions contemplated by this Agreement with any Governmental Entity (other than with regard to information reasonably considered confidential by the providing Party). In addition, Center Financial and Nara shall each furnish to the other a final copy of each such filing made in connection with the transactions contemplated by this Agreement with any Governmental Entity (other than any part of such filings reasonably considered confidential by the providing Party).
(iii) Subject to Applicable Legal Requirements, Center Financial and Nara shall permit each other to review and discuss in advance, and consider in good faith the views of the other in connection with, any proposed written or material oral communication (or other correspondence or memoranda) between it and any Governmental Entity (except for any confidential portions thereof).
(iv) Center Financial and Nara shall promptly inform each other of and supply to each other any communication (or other correspondence or memoranda) received by them from, or given by them to, any Governmental Entity, in each case, regarding any of the transactions contemplated hereby.
(v) Center Financial and Nara shall ensure that representatives of Center Financial and Nara shall have the right to attend and participate in any hearing, proceeding, meeting, conference or similar event before or with any Governmental Entity or other organization relating to any Requisite Regulatory Approval or otherwise relating to any transactions contemplated by this Agreement, except as may otherwise be required by such Governmental Entity. In furtherance of the foregoing, Center Financial and Nara shall provide each other reasonable advance notice of any such hearing, proceeding, meeting, conference or similar event.
(b) Nara agrees to execute and deliver, or cause to be executed and delivered by or on behalf of the Surviving Corporation, at or prior to the Effective Time, supplemental indentures and other instruments required for the due assumption of Center Financial’s outstanding debt, guarantees and other securities to the extent required by the terms of such debt, guarantees and securities and the instruments and agreements relating thereto, including under the Indenture dated as of December 30, 2003 between Wells Fargo Bank, National Association, as trustee, and Center Financial, relating to the issuance by Center Financial of its Junior Subordinated Debt Securities due January 7, 2034.
(c) Each of Center Financial and Nara and their respective boards of directors shall, if any state takeover statute or similar statute becomes applicable to this Agreement, the Merger or any other transactions contemplated hereby, use all reasonable best efforts to ensure that the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated hereby and otherwise to minimize the effect of such statute or regulation on this Agreement, the Merger and the other transactions contemplated hereby.
A-1-41
5.4Acquisition Proposals.
(a) Each of Nara and Center Financial agrees that neither it nor any of its Subsidiaries nor any of the officers and directors of it or its Subsidiaries shall, and that it shall use its reasonable best efforts to cause its and its Subsidiaries’ employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries) not to, directly or indirectly, (i) initiate, solicit, encourage or knowingly facilitate any inquiries or the making of any proposal or offer with respect to, or a transaction to effect, a merger, reorganization, share exchange, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving it or any of its Subsidiaries or any purchase or sale of 20% or more of the consolidated assets (including stock of its Subsidiaries) of it and its Subsidiaries, taken as a whole, or any purchase or sale of, or tender or exchange offer for, its voting securities that, if consummated, would result in any Person (or the stockholders of such Person) beneficially owning securities representing 20% or more of the total voting power of it (or of the surviving parent entity in such transaction) or of any of its Subsidiaries (any such proposal, offer or transaction (other than a proposal or offer made by the other Party or an affiliate thereof) being hereinafter referred to as an “Acquisition Proposal”), (ii) have any discussions with or provide any confidential information or data to any Person relating to an Acquisition Proposal, or engage in any negotiations concerning an Acquisition Proposal, or knowingly facilitate any effort or attempt to make or implement an Acquisition Proposal, or (iii) approve or recommend, or propose to approve or recommend, or execute or enter into, any letter of intent, agreement in principle, merger agreement, asset purchase or share exchange agreement, option agreement or other similar agreement related to any Acquisition Proposal or propose or agree to do any of the foregoing.
(b) (i) Notwithstanding the foregoing, the board of directors of each Party shall be permitted, prior to its respective meeting of stockholders to be held pursuant toSection 5.1, and subject to material compliance by such Party with the other terms of thisSection 5.4 and to such Party first entering into a confidentiality agreement with the Person making the Acquisition Proposal described below having provisions that are no less favorable to such Party than those contained in the Confidentiality Agreement, to engage in discussions and negotiations with, or provide any nonpublic information or data to, any Person in response to an unsolicited bona fide written Acquisition Proposal by such Person first made after the date of this Agreement which such Party’s board of directors concludes in good faith constitutes or is reasonably likely to result in a Superior Proposal.
(ii) Each Party shall notify the other Party promptly (but in no event later than 24 hours) after receipt of any Acquisition Proposal, or any request for nonpublic information relating to such Party or any of its Subsidiaries by any Person that informs such Party or any of its Subsidiaries that it is considering making, or has made, an Acquisition Proposal, or any inquiry from any Person seeking to have discussions or negotiations with such Party relating to a possible Acquisition Proposal. Such notice shall be made orally and confirmed in writing, and shall indicate the identity of the Person making the Acquisition Proposal, inquiry or request and the material terms and conditions of any inquiries, proposals or offers (including a copy thereof if in writing and any related documentation or correspondence). Each Party shall also promptly, and in any event within 24 hours, notify the other Party, orally and in writing, if it enters into discussions or negotiations concerning any Acquisition Proposal or provides nonpublic information or data to any Person in accordance with thisSection 5.4(b) (and shall promptly provide to the other Party copies of all material nonpublic information so provided not previously provided to the other Party) and shall keep the other Party promptly and fully informed of the status and terms of any such proposals, offers, discussions or negotiations on a current basis, including by providing within 24 hours of receipt a copy of all material documentation or correspondence relating thereto (including copies of all changes in any terms).
(iii) Nothing contained in thisSection 5.4 shall prohibit either Party or its Subsidiaries from taking and disclosing to its stockholders a position required by Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act;provided,however, that compliance with such rules shall not in any way limit or modify the effect that any action taken pursuant to such rules has under any other provision of this Agreement, includingSection 7.1(d) or7.1(e), as applicable.
A-1-42
(c) Each of Nara and Center Financial agrees that (i) it will and will cause its Subsidiaries, and its and their officers, directors, agents, representatives and advisors to, cease immediately and terminate any and all existing activities, discussions or negotiations with any third parties conducted heretofore with respect to any Acquisition Proposal, and will promptly request each Person, if any, that has heretofore executed a confidentiality agreement with such Party in connection with the consideration of any Acquisition Proposal, to return or destroy all confidential information or data heretofore furnished to such Person, (ii) it shall enforce (and not release any third party from or waive) any provisions of, any confidentiality, standstill or similar agreement to which it or any of its Subsidiaries is a party with respect to any Acquisition Proposal and (iii) it will not take any action to render inapplicable or to exempt any Person from Section 203 of the DGCL or any other antitakeover legislation. Each of Nara and Center Financial agrees that it will use reasonable best efforts to inform its and its Subsidiaries’ respective directors, executive officers, key employees, agents and representatives of the obligations undertaken in thisSection 5.4.
(d) Nothing in thisSection 5.4 shall (i) permit either Party to terminate this Agreement or (ii) affect any other obligation of the Parties under this Agreement. Neither Party shall submit to the vote of its stockholders any Acquisition Proposal other than the Merger.
(e) Any disclosure (other than a “stop, look and listen” or similar communication of the type contemplated by Rule 14d-9(f) under the Exchange Act) made pursuant toSection 5.4(b)(iii) shall be deemed to be a Change in Recommendation by Center Financial or Nara, as the case may be, unless the board of directors of the Party making such disclosure expressly reaffirms its Board Recommendation to its stockholders in favor of the approval of the principal terms of the Merger or the adoption of this Agreement, as applicable.
(f) The provisions of thisSection 5.4 shall be deemed, as between the Parties, to apply to each Party, its Subsidiaries and its and its Subsidiaries’ directors and employees, agents and representatives to the same extent as such provisions apply to the respective Parties, and each Party shall be responsible for any breach of such provisions by any of its or its Subsidiaries’ directors, employees, agents or representatives.
5.5Stock Exchange Listing. Nara shall use all reasonable efforts to cause the shares of Nara Common Stock to be issued in the Merger to be approved for listing on NASDAQ, subject to official notice of issuance, prior to the Closing Date.
5.6Employee Benefit Plans and Employee Matters.
(a) Nara and Center Financial agree that, except as otherwise provided herein (including as set forth inSection 5.6(a) of the Center Financial Disclosure Schedule) and unless otherwise mutually determined, the Nara Benefit Plans and Center Financial Benefit Plans in effect at the date of this Agreement shall remain in effect after the Effective Time with respect to employees covered by such plans at the Effective Time, and the Surviving Corporation shall as promptly as practical formulate Benefit Plans for the Surviving Corporation and its Subsidiaries, with respect both to employees who were covered by the Nara Benefit Plans and Center Financial Benefit Plans at the Effective Time and employees who were not covered by such plans at the Effective Time, that provide benefits for services on a basis that does not discriminate between employees who were covered by the Nara Benefit Plans and employees who were covered by the Center Financial Benefit Plans. Center Financial shall adopt such amendments to the Center Financial Benefit Plans as requested by Nara to implement the foregoing and to avoid the duplication of benefits. Notwithstanding any other provision of this Agreement, if requested by Nara, Center Financial shall terminate the Center Financial Severance Program (Revised August 12, 2009) and any other plans, policies, programs or arrangements providing severance benefits, such termination to be effective prior to the Effective Date.
(b) Center Financial and Nara further agree that, to the extent that employees of Center Financial and its Subsidiaries or Nara and its Subsidiaries are covered by Benefit Plans of the Surviving Corporation, the Surviving Corporation shall: (i) provide employees of Center Financial and its Subsidiaries and employees of
A-1-43
Nara and its Subsidiaries credit for all years of service with Center Financial or any of its Subsidiaries and their predecessors, or Nara and any of its Subsidiaries and their predecessors, as applicable, prior to the Effective Time for the purpose of eligibility and vesting, (ii) cause any and all pre-existing condition limitations (to the extent such limitations did not apply to a pre-existing condition under comparable Benefit Plans applicable to the individual immediately prior to the Closing Date) and eligibility waiting periods under group health plans of the Surviving Corporation to be waived with respect to employees of Center Financial and its Subsidiaries and Nara and its Subsidiaries who remain as employees of the Surviving Corporation or its Subsidiaries (and their eligible dependents) and (iii) cause to be credited, for purposes of the Surviving Corporation’s health plans, any deductibles or out-of-pocket expenses incurred by employees of Center Financial and its Subsidiaries and Nara and its Subsidiaries and their beneficiaries and dependents during the portion of the calendar year prior to their participation in the Surviving Corporation’s health plans with the objective that there be no double counting during the year in which the Closing Date occurs of such deductibles or out-of-pocket expenses. Notwithstanding the preceding sentence, to the extent that the Surviving Corporation reasonably determines that legal, administrative, or other impediments make compliance with the preceding sentence not reasonably practicable or that such compliance would result in the duplication of benefits, the Surviving Corporation shall have no obligations or liabilities with respect to the requirements of the preceding sentence. Center Financial and Nara hereby further agree that, except as otherwise specified in this Agreement, the Surviving Corporation shall honor, or cause to be honored, in accordance with their terms, all vested or accrued benefit obligations to, and contractual rights of, current and former employees of Center Financial and its Subsidiaries and Nara and its Subsidiaries. Without limiting the generality of the foregoing, Nara shall recognize and honor all unused sick leave and unused vacation accrued by the employees of Center Financial and its Subsidiaries as of the Effective Time notwithstanding any limitations on sick leave accruals or carry-overs or vacation accruals applicable under Nara’s sick leave or vacation accrual policies.
5.7Center Financial Stock Option and Center Financial Restricted Shares.
(a) Center Financial shall deliver to Nara the Section 16 Information reasonably in advance of the Effective Time, and the Nara Board, or a committee of Non-Employee Directors thereof (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly thereafter and in any event prior to the Effective Time adopt a resolution providing that the receipt by the Center Financial Insiders of Nara Common Stock in exchange for shares of Center Financial Common Stock (including Center Financial Restricted Shares), and of options to purchase Nara Common Stock upon conversion of Center Financial Stock Options, in each case pursuant to the transactions contemplated hereby and to the extent such securities are listed in the Section 16 Information provided by Center Financial to Nara prior to the Effective Time, are intended to be exempt from liability pursuant to Section 16(b) under the Exchange Act such that any such receipt shall be so exempt.
(b) Nara agrees to file with the SEC, no later than 30 days after the Closing Date, a registration statement on Form S-8 (or any successor form) relating to the Nara Common Stock issuable with respect to the Assumed Options and the Assumed Restricted Shares and shall use commercially reasonable efforts to maintain the effectiveness of such registration statement thereafter for so long as any of Assumed Option or Assumed Restricted Shares remain outstanding.
5.8Fees and Expenses. Whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such expense, except as otherwise provided inSection 7.2 hereof and except that (a) if the Merger is consummated, the Surviving Corporation shall pay, or cause to be paid, any and all property or transfer taxes imposed on either Party in connection with the Merger, and (b) the filing fees and printing and mailing expenses incurred in connection with filing, printing and mailing the Joint Proxy Statement/Prospectus and the Form S-4 shall be shared equally by Nara and Center Financial.
A-1-44
5.9Governance; Name Change.
(a) Prior to the Effective Time, Nara shall use its reasonable best efforts to adopt the amendment to the By-laws of Nara substantially in the form set forth inExhibit 1.4 and to effect the requirements and adopt the resolutions referenced therein. On or prior to the Effective Time, Nara shall cause the number of directors that will comprise the board of directors of the Surviving Corporation at the Effective Time to be 14. Of the members of the initial board of directors of the Surviving Corporation at the Effective Time, seven shall be current members of the Nara Board as designated by Nara prior the Effective Time, and seven shall be current members of the Center Financial Board as designated by Center Financial prior to the Effective Time. No other directors or employees of Nara or Center Financial shall be designated to serve on the board of directors of the Surviving Corporation at the Effective Time. Subject to and in accordance with the By-laws of the Surviving Corporation (as amended substantially in the form set forth inExhibit 1.4), effective as of the Effective Time, (i) Mr. Ki Suh Park shall serve as the Chairman of the board of directors of the Surviving Corporation, (ii) Mr. Chang Hwi Kim shall serve as the Vice Chairman of the board of directors of the Surviving Corporation and (iii) Mr. Alvin D. Kang shall serve as the Chief Executive Officer of the Surviving Corporation.
(b) Nara shall, and shall cause Nara Bank to, take all actions necessary, including by adopting, and causing Nara Bank to adopt, an amendment to the Certificate of Incorporation of Nara and Nara Bank, respectively, to provide that, effective as of the Effective Time, each of the names of the Surviving Corporation and Nara Bank shall be changed to a name mutually acceptable to Center Financial and Nara.
5.10Indemnification; Directors’ and Officers’ Insurance.
(a) From and after the Effective Time, the Surviving Corporation shall, to the fullest extent permitted by Applicable Legal Requirements, indemnify, defend and hold harmless, and provide advancement of expenses to, each person who is now, or has been at any time prior to the date hereof or who becomes prior to the Effective Time, an officer, director or employee of Center Financial or any of its Subsidiaries (the “Indemnified Parties”) against all losses, claims, damages, costs, expenses, liabilities or judgments or amounts that are paid in settlement of or in connection with any claim, action, suit, proceeding or investigation based in whole or in part on or arising in whole or in part out of the fact that such person is or was a director, officer or employee of Center Financial or any Subsidiary of Center Financial, and pertaining to any matter existing or occurring, or any acts or omissions occurring, at or prior to the Effective Time, whether asserted or claimed prior to, or at or after, the Effective Time (including matters, acts or omissions occurring in connection with the approval of this Agreement and the consummation of the transactions contemplated hereby) (“Indemnified Liabilities”) to the same extent such persons are indemnified or have the right to advancement of expenses as of the date of this Agreement by Center Financial pursuant to Center Financial’s Articles of Incorporation, By-laws and indemnification agreements, if any, in existence on the date hereof with any directors, officers and employees of Center Financial and its Subsidiaries.
(b) For a period of six years after the Effective Time, the Surviving Corporation shall cause to be maintained in effect the current policies of directors’ and officers’ liability insurance maintained by Center Financial (provided that the Surviving Corporation may substitute therefor policies with a substantially comparable insurer of at least the same coverage and amounts containing terms and conditions which are no less advantageous to the insured) with respect to claims arising from facts or events which occurred at or before the Effective Time;provided,however, that the Surviving Corporation shall not be obligated to make annual premium payments for such insurance to the extent such premiums exceed 250% of the premiums paid as of the date hereof by Center Financial for such insurance (“Center Financial’s Current Premium”), and if such premiums for such insurance would at any time exceed 250% of Center Financial’s Current Premium, then the Surviving Corporation shall cause to be maintained policies of insurance which, in the Surviving Corporation’s good faith determination, provide the maximum coverage available at an annual premium equal to 250% of Center Financial’s Current Premium. In lieu of the foregoing, Center Financial, in consultation with, but only upon the consent of Nara, may obtain on or prior to the Effective Time a six-year “tail” policy or “extended
A-1-45
discovery period” under Center Financial’s existing directors and officers insurance policy providing equivalent coverage to that described in the preceding sentence if and to the extent that the same may be obtained for an amount that does not exceed Center Financial’s Current Premium.
(c) The Surviving Corporation shall pay (as incurred) all expenses, including reasonable fees and expenses of counsel, that an Indemnified Party may incur in enforcing the indemnity and other obligations provided for in thisSection 5.10.
(d) If the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Surviving Corporation, as the case may be, shall assume the obligations set forth in thisSection 5.10.
(e) The provisions of thisSection 5.10 (i) are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party, his or her heirs and representatives and (ii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such Person may have by contract or otherwise.
5.11Public Announcements. Nara and Center Financial shall use reasonable best efforts (a) to develop a joint communications plan, (b) to ensure that all press releases and other public statements with respect to the transactions contemplated hereby shall be consistent with such joint communications plan, and (c) except in respect of any announcement required by Applicable Legal Requirements or by obligations pursuant to any listing agreement with or rules of any securities exchange, to consult with each other before issuing any press release or, to the extent practical, otherwise making any public statement with respect to this Agreement or the transactions contemplated hereby. In addition to the foregoing, except to the extent disclosed in or consistent with the Joint Proxy Statement/Prospectus in accordance with the provisions ofSection 5.1 or as otherwise permitted underSection 4.4, no Party shall issue any press release or otherwise make any public statement or disclosure concerning the other Party or the other Party’s business, financial condition or results of operations without the consent of such other Party, which consent shall not be unreasonably withheld or delayed. Each Party shall provide the other Party with its stockholder lists and allow and facilitate the other Party’s contact with its stockholders and prospective investors and following a Change in Recommendation by Center Financial or Nara, as the case may be, such contacts may be made without regard to the above limitations of thisSection 5.11.
5.12Tax Matters. (a) Center Financial and Nara each shall not, and shall not permit any of their Subsidiaries to, take or cause to be taken any action, whether before or after the Effective Time, which would reasonably be expected to disqualify the Merger as a reorganization within the meaning of Section 368(a) of the Code and (b) Center Financial and Nara each agree to file all tax returns consistent with the treatment of the Merger as a “reorganization” within the meaning of Section 368(a) of the Code.
5.13Additional Agreements. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full title to all properties, assets, rights, approvals, immunities and franchises of either of the Constituent Corporations, the proper officers and directors of each Party shall take all such necessary action.
ARTICLE VI
CONDITIONS PRECEDENT
6.1Conditions to Each Party’s Obligation To Effect the Merger. The respective obligation of each Party to effect the Merger shall be subject to the satisfaction of the following conditions at or prior to the Closing and the continued satisfaction thereof through the Effective Time:
(a)Stockholder Approval. Center Financial shall have obtained the Required Center Financial Vote, and Nara shall have obtained the Required Nara Vote.
A-1-46
(b)Stock Exchange Listing. The shares of Nara Common Stock to be issued in the Merger shall have been authorized for listing on NASDAQ upon official notice of issuance.
(c)Other Approvals. Other than the filings provided for bySection 1.1, (i) all authorizations, consents, orders or approvals of, or declarations or filings with, and all expirations of waiting periods required from, any Governmental Entity which are necessary to obtain the Requisite Regulatory Approvals and the Loss-Sharing Approvals shall have been obtained, been made, occurred or been filed, and all such authorizations, consents, orders, approvals, declarations or filings shall be in full force and effect, and (ii) any other consents or approvals from any Governmental Entity or other third party relating to the Merger, the Bank Merger or any of the other transactions provided for in this Agreement, except those the failure of which to be obtained would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Surviving Corporation, shall have been obtained, and all such consents or approvals shall be in full force and effect.
(d)Form S-4. The Form S-4 shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order.
(e)No Injunctions or Restraints; Illegality. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition (an “Injunction”) preventing the consummation of the Merger shall be in effect and no action brought by a Governmental Entity with respect to such an Injunction shall be pending. There shall not be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Merger, by any Governmental Entity of competent jurisdiction which makes the consummation of the Merger illegal.
(f)Absence of Burdensome Conditions. No Requisite Regulatory Approval shall have been granted subject to any condition or conditions which, and there shall not have been any action taken, or any statute, rule, regulation, order or decree enacted, entered, enforced or deemed applicable to the Merger by any Governmental Entity of competent jurisdiction which, in connection with the grant of a Requisite Regulatory Approval or otherwise, requires any of the Parties, including the Surviving Corporation, (i) to pay any amounts (other than customary filing fees), or (ii) divest any banking office, or (iii) which imposes any condition, requirement or restriction upon the Surviving Corporation or its Subsidiaries, that, in the case ofclause (i),(ii) or(iii), would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the present or prospective consolidated financial condition, business or operating results of the Surviving Corporation.
(g)By-Law Amendment. Nara and Center Financial shall have taken all action necessary so that the amendment to Nara’s By-laws substantially in the form set forth inExhibit 1.4, and the resolutions contemplated therein, shall have been duly adopted by the Nara Board effective no later than the Effective Time.
6.2Conditions to Obligation of Nara. The obligation of Nara to effect the Merger is subject to the satisfaction of the following conditions unless waived by Nara:
(a)Representations and Warranties. Each of the representations and warranties of Center Financial set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date and, if later, the Effective Time as though made on and as of the Closing Date and, if later, the Effective Time, subject to such exceptions as do not have, and would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation, and Nara shall have received a certificate signed on behalf of Center Financial by the chief executive officer and by the chief financial officer of Center Financial to such effect.
(b)Performance of Obligations. Center Financial shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Nara shall have received a certificate signed on behalf of Center Financial by the chief executive officer and by the chief financial officer of Center Financial to such effect.
A-1-47
(c)Tax Opinion. Nara shall have received the opinion of Mayer Brown LLP, counsel to Nara, dated the Closing Date, to the effect that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, counsel to Nara shall be entitled to rely upon customary assumptions and representations provided by Nara and Center Financial.
(d)Material Adverse Effect. Since the date of this Agreement, Center Financial shall not have suffered a Material Adverse Effect.
(e)Appraisal Rights. Center Financial shall have delivered notice in accordance with the applicable provisions of the CGCL such that no holder of Center Financial Common Stock will be able to exercise dissenters’ rights if such holder has not perfected such dissenters’ rights prior to the Closing, and the holders of less than 6% of the outstanding shares of Center Financial Common Stock shall have exercised, or shall continue to have a right to exercise, appraisal, dissenters’ or similar rights under Applicable Legal Requirements with respect to their Center Financial Common Stock by virtue of the Merger.
6.3Conditions to Obligation of Center Financial. The obligation of Center Financial to effect the Merger is subject to the satisfaction of the following conditions unless waived by Center Financial:
(a)Representations and Warranties. Each of the representations and warranties of Nara set forth in this Agreement shall be true and correct as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date and, if later, the Effective Time as though made on and as of the Closing Date and, if later, the Effective Time, subject to such exceptions as do not have, and would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or the Surviving Corporation, and Center Financial shall have received a certificate signed on behalf of Nara by the chief executive officer and by the chief financial officer of Nara to such effect.
(b)Performance of Obligations. Nara shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Center Financial shall have received a certificate signed on behalf of Nara by the chief executive officer and by the chief financial officer of Nara to such effect.
(c)Tax Opinion. Center Financial shall have received the opinion of Morrison & Foerster LLP, counsel to Center Financial, dated the Closing Date, to the effect that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, counsel to Center Financial shall be entitled to rely upon customary assumptions and representations provided by Nara and Center Financial.
(d)Material Adverse Effect. Since the date of this Agreement, Nara shall not have suffered a Material Adverse Effect.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1Termination. This Agreement may be terminated at any time prior to the Effective Time, by action taken or authorized by the board of directors of the terminating Party or Parties, whether before or after approval of the Merger by the stockholders of Center Financial or Nara:
(a) by mutual consent of Nara and Center Financial in a written instrument;
(b) by either Nara or Center Financial, upon written notice to the other Party, if a Governmental Entity of competent jurisdiction which must grant a Requisite Regulatory Approval has denied approval of the Merger and such denial has become final and non-appealable; or any Governmental Entity of competent jurisdiction shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the Merger, and such order, decree, ruling or other action has become final and nonappealable;
A-1-48
provided,however, that the right to terminate this Agreement under thisSection 7.1(b) shall not be available to any Party whose failure to comply withSection 5.3 or any other provision of this Agreement shall have resulted in, or materially contributed to, such action;
(c) by either Nara or Center Financial, upon written notice to the other Party, if the Merger shall not have been consummated on or before July 31, 2011;provided,however, that (i) such date may be extended one or more times, but not past November 30, 2011, by notice from either Party delivered to the other Party on or before July 31, 2011, or the later date to which such date has then been most recently extended as provided herein, if the only condition to the Closing that has not been satisfied as of the date such notice is delivered is receipt of any Requisite Regulatory Approval and the satisfaction of such condition remains reasonably possible and (ii) the right to terminate this Agreement under thisSection 7.1(c) shall not be available to any Party whose failure to comply with any provision of this Agreement shall have resulted in, or materially contributed to, the failure of the Effective Time to occur on or before such date;
(d) by Nara, upon written notice to Center Financial, if (i) Center Financial shall have (A) failed to recommend approval of the principal terms of the Merger at the Center Financial Stockholders Meeting in accordance withSection 5.1(b) or (B) materially breached its obligations under this Agreement by reason of a failure to (1) call the Center Financial Stockholders Meeting in accordance withSection 5.1(b), (2) prepare and mail to its stockholders the Joint Proxy Statement/Prospectus in accordance withSection 5.1(a), or (3) comply in all material respects with the provisions ofSection 5.4; or (ii) there shall have occurred a Change in Recommendation by the Center Financial Board or Center Financial, whether or not permitted by the terms hereof;
(e) by Center Financial, upon written notice to Nara, if (i) Nara shall have (A) failed to recommend adoption of this Agreement at the Nara Stockholders Meeting in accordance withSection 5.1(c) or (B) materially breached its obligations under this Agreement by reason of a failure to (1) call the Nara Stockholders Meeting in accordance withSection 5.1(c), (2) prepare and mail to its stockholders the Joint Proxy Statement/Prospectus in accordance withSection 5.1(a), or (3) comply in all material respects with the provisions ofSection 5.4; or (ii) there shall have occurred a Change in Recommendation by the Nara Board or Nara, whether or not permitted by the terms hereof;
(f) by either Nara or Center Financial, upon written notice to the other Party, if there shall have been a breach by the other Party of any of the covenants or agreements or any of the representations or warranties set forth in this Agreement on the part of such other Party, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of the condition set forth inSections 6.2(a),6.2(b),6.3(a) or6.3(b), as the case may be, and which breach has not been cured within 60 days following written notice thereof to the breaching Party or, by its nature, cannot be cured within such time period;
(g) by either Nara or Center Financial, if a vote shall have been taken at the duly convened Nara Stockholders Meeting or Center Financial Stockholders Meeting, as the case may be, and the Required Nara Vote or Required Center Financial Vote shall not have been obtained;
(h) by Nara, if, since the date of this Agreement, Center Financial shall have suffered a Material Adverse Effect;
(i) by Center Financial, if, since the date of this Agreement, Nara shall have suffered a Material Adverse Effect; or
(j) by Nara, if the holders of 6% or more of the outstanding shares of Center Financial Common Stock shall have exercised appraisal, dissenters’ or similar rights under Applicable Legal Requirements with respect to their Center Financial Common Stock by virtue of the Merger.
A-1-49
7.2Effect of Termination.
(a) In the event of termination of this Agreement by either Center Financial or Nara as provided inSection 7.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Nara or Center Financial or their respective officers or directors, except with respect toSections 3.1(w),3.2(w),5.2(b) and5.8, thisSection 7.2 andArticle VIII, which shall survive such termination and except that no Party shall be relieved or released from any liabilities or damages arising out of its willful and material breach of this Agreement.
(b) Nara shall pay Center Financial, by wire transfer of immediately available funds, the sum of $10,000,000 (the “Nara Termination Fee”) if this Agreement is terminated as follows:
(i) if Center Financial shall terminate this Agreement pursuant toSection 7.1(e), then Nara shall pay the Nara Termination Fee on the business day following such termination;
(ii) if (A) either Party shall terminate this Agreement pursuant toSection 7.1(g) because the Required Nara Vote shall not have been received and (B) at any time after the date of this Agreement and at or before the date of the Nara Stockholders Meeting an Acquisition Proposal with respect to (1) 50% or more of the outstanding shares of Nara Common Stock, (2) 50% or more of the consolidated assets of Nara and its Subsidiaries or (3) any liquidation, dissolution or similar transaction involving Nara or Nara Bank, shall have been publicly announced or is otherwise publicly known (a “Public Proposal”), then Nara shall pay 25% of the Nara Termination Fee on the business day following such termination; and if (C) within eighteen (18) months of the date of such termination of this Agreement, Nara or any of its Subsidiaries executes any definitive agreement with respect to, or consummates, any Acquisition Proposal, then Nara shall pay the remainder of the Nara Termination Fee upon the date of such execution or consummation; and
(iii) if (A) either Party shall terminate this Agreement pursuant toSection 7.1(c) or Center Financial shall terminate this Agreement pursuant toSection 7.1(f), (B) at any time after the date of this Agreement and before such termination there shall have been a Public Proposal with respect to Nara relating (1) 50% or more of the outstanding shares of Nara Common Stock, (2) 50% or more of the consolidated assets of Nara and its Subsidiaries or (3) any liquidation, dissolution or similar transaction involving Nara or Nara Bank, and (C) following the occurrence of such Public Proposal, Nara shall have intentionally breached (and not cured after notice thereof) any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach shall have resulted in a failure of the conditions set forth inSections 6.3(a) or6.3(b), as the case may be, or otherwise shall have materially contributed to the failure of the Effective Time to occur prior to the termination of this Agreement, then Nara shall pay 25% of the Nara Termination Fee on the business day following such termination; and if (D) within eighteen (18) months of the date of such termination of this Agreement, Nara or any of its Subsidiaries executes any definitive agreement with respect to, or consummates, any Acquisition Proposal, then Nara shall pay the remainder of the Nara Termination Fee upon the date of such execution or consummation.
If Nara fails to pay all amounts due to Center Financial on the dates specified, then Nara shall pay all costs and expenses (including legal fees and expenses) incurred by Center Financial in connection with any action or proceeding (including the filing of any lawsuit) taken by it to collect such unpaid amounts, together with interest on such unpaid amounts at the prime lending rate prevailing at such time, as published in the Wall Street Journal, from the date such amounts were required to be paid until the date actually received by Center Financial.
(c) Center Financial shall pay Nara, by wire transfer of immediately available funds, the sum of $10,000,000 (the “Center Financial Termination Fee”) if this Agreement is terminated as follows:
(i) if Nara shall terminate this Agreement pursuant toSection 7.1(d), then Center Financial shall pay the Center Financial Termination Fee on the business day following such termination;
A-1-50
(ii) if (A) either Party shall terminate this Agreement pursuant toSection 7.1(g) because the Required Center Financial Vote shall not have been received and (B) at any time after the date of this Agreement and at or before the date of the Center Financial Stockholders Meeting there shall have been a Public Proposal with respect to (1) 50% or more of the outstanding shares of Center Financial Common Stock, (2) 50% or more of the consolidated assets of Center Financial and its Subsidiaries or (3) any liquidation, dissolution or similar transaction involving Center Financial or Center Bank, then Center Financial shall pay 25% of the Center Financial Termination Fee on the business day following such termination; and if (C) within eighteen (18) months of the date of such termination of this Agreement, Center Financial or any of its Subsidiaries executes any definitive agreement with respect to, or consummates, any Acquisition Proposal, then Center Financial shall pay the remainder of the Center Financial Termination Fee upon the date of such execution or consummation; and
(iii) if (A) either Party shall terminate this Agreement pursuant toSection 7.1(c) or Nara shall terminate this Agreement pursuant toSection 7.1(f), (B) at any time after the date of this Agreement and before such termination there shall have been a Public Proposal with respect to (1) 50% or more of the outstanding shares of Center Financial Common Stock, (2) 50% or more of the consolidated assets of Center Financial and its Subsidiaries or (3) any liquidation, dissolution or similar transaction involving Center Financial or Center Bank, and (C) following the occurrence of such Public Proposal, Center Financial shall have intentionally breached (and not cured after notice thereof) any of its representations, warranties, covenants or agreements set forth in this Agreement, which breach shall have resulted in a failure of the conditions set forth inSections 6.2(a) or6.2(b), as the case may be, or otherwise shall have materially contributed to the failure of the Effective Time to occur prior to the termination of this Agreement, then Center Financial shall pay 25% of the Center Financial Termination Fee on the business day following such termination; and if (D) within eighteen (18) months of the date of such termination of this Agreement, Center Financial or any of its Subsidiaries executes any definitive agreement with respect to, or consummates, any Acquisition Proposal, then Center Financial shall pay the remainder of the Center Financial Termination Fee upon the date of such execution or consummation.
If Center Financial fails to pay all amounts due to Nara on the dates specified, then Center Financial shall pay all costs and expenses (including legal fees and expenses) incurred by Nara in connection with any action or proceeding (including the filing of any lawsuit) taken by it to collect such unpaid amounts, together with interest on such unpaid amounts at the prime lending rate prevailing at such time, as published in the Wall Street Journal, from the date such amounts were required to be paid until the date actually received by Nara.
7.3Amendment. This Agreement may be amended by the Parties, by action taken or authorized by their respective boards of directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of Center Financial or of Nara, but, after any such approval, no amendment shall be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties.
7.4Extension; Waiver. At any time prior to the Effective Time, the Parties, by action taken or authorized by their respective board of directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other Party, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such Party. The failure of a Party to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. No single or partial exercise of any right, remedy, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. Any waiver shall be effective only in the specific instance and for the specific purpose for which given and shall not constitute a waiver to any subsequent or other exercise of any right, remedy, power or privilege hereunder.
A-1-51
ARTICLE VIII
GENERAL PROVISIONS
8.1Definitions. Except as otherwise provided herein, the terms referenced in the Index of Defined Terms set forth in this Agreement shall have the meanings given to such terms in the applicable Section of this Agreement referenced in the Index of Defined Terms, and the capitalized terms set forth below shall have the following meanings:
“Applicable Legal Requirements” shall mean any federal, state, foreign, or local law, statute, ordinance, rule, order, regulation, writ, injunction, directive, judgment, administrative interpretation, treaty, decree, administrative, judicial or arbitration decision and any other executive, legislative, regulatory or administrative proclamation or other requirement of any Government Entity applicable, in the case of any Person, to such Person or its properties, assets, officers, directors, employees or agents (in connection with such officers’, directors’, employees’ or agents’ activities on behalf of such Person). For the avoidance of doubt, “Applicable Legal Requirements” shall include any rules, regulations or listing requirements of any stock exchange on which shares of a Person’s common stock are listed or included for trading.
“Center Financial Certificate” shall mean a stock certificate that immediately prior to the Effective Time represented one or more shares of Center Financial Common Stock.
“Center Financial Insiders” shall mean those officers and directors of Center Financial who are subject to the reporting requirements of Section 16(a) of the Exchange Act and who are listed in the Section 16 Information.
“Center Financial Restricted Share” shall mean any share of Center Financial Common Stock that remains subject to restrictions imposed pursuant to the Center Financial Stock Plan that do not lapse upon the Effective Time.
“Center Financial Stock” shall mean Center Financial Common Stock and Center Financial Preferred Stock.
“Center Financial Stock Option” shall mean each outstanding option issued pursuant to the Center Financial Stock Plan, or a predecessor plan, to purchase shares of Center Financial Common Stock.
“Constituent Corporations” shall mean each of Nara and Center Financial.
“Covered Loans” shall mean Loans acquired by Center Financial or any of its Subsidiaries in an FDIC-assisted acquisition that are subject to a loss sharing agreement with the FDIC.
“Covered OREOs” shall mean OREOs acquired by Center Financial or any of its Subsidiaries in an FDIC-assisted acquisition that are subject to a loss sharing agreement with the FDIC.
“ERISA Affiliate” shall mean, with respect to any Person, any corporation, trade or business which, together with such Person, is a member of a controlled group of corporations or a group of trades or businesses under common control within the meaning of Section 414 of the Code.
“Exchange Fund” shall mean (i) certificates for shares of Nara Common Stock and Nara Series B Preferred Stock deposited with the Exchange Agent in accordance withSection 2.2(a), together with any dividends or distributions with respect thereto, and (ii) cash made available by Nara to the Exchange Agent in accordance withSection 2.2(a).
“FDIC” shall mean the Federal Deposit Insurance Corporation.
A-1-52
“Governmental Entity” shall mean any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, or industry self-regulatory organization.
“IRS” shall mean the United States Internal Revenue Service.
“Loans” shall mean loans, extensions of credit (including guaranties), commitments to extend credit and other similar assets, including leases intended as financing arrangements, in each case required to be reflected in the financial statements of a Person or its Subsidiaries pursuant to applicable regulatory or accounting principles.
“material” shall mean, with respect to any event, change, fact or state of facts, violation or effect involving a Person, an event, change, fact or state of facts, violation or effect which is material in relation to the financial condition, properties, assets, liabilities, businesses or results of operations of such Person and its Subsidiaries taken as a whole or the ability of any of the Parties to complete the Merger and the other transactions provided for in this Agreement;
“Material Adverse Effect” shall mean, with respect to any Person, a Material Adverse Effect on the financial condition, properties, assets, liabilities, businesses or results of operations of such Person and its Subsidiaries taken as a whole or on the ability of such Person to perform its obligations hereunder on a timely basis;provided that the following shall not be deemed to have a “Material Adverse Effect”: any change or event caused by or resulting from (i) changes in prevailing interest rates, currency exchange rates or other economic or monetary conditions in the United States or elsewhere, (ii) changes in U.S. or foreign securities markets, including changes in price levels or trading volumes, unless such change has a materially disproportionate adverse effect on such Person relative to similarly situated Persons, (iii) changes or events, after the date hereof, affecting the financial services industry generally, unless such changes or events have a materially disproportionate adverse effect on such Person relative to similarly situated Persons and (iv) changes, after the date hereof, in generally accepted accounting principles or regulatory accounting requirements applicable to banks and their holding companies generally, (v) actions or omissions of Nara or Center Financial taken with the prior written consent of the other or required hereunder or (vi) any outbreak of major hostilities in which the United States is involved or any act of terrorism within the United States or directed against its facilities or citizens wherever located; andprovidedfurther, that in no event shall a change in the trading prices of a Party’s capital stock, by itself (but not the underlying cause of such changes, unless such underlying cause would otherwise be expected from this definition), be considered material or constitute a Material Adverse Effect.
“Nara Stock” shall mean Nara Common Stock and Nara Preferred Stock.
“Nara Stock Option” shall mean each outstanding option to purchase shares of Nara Common Stock.
“NASDAQ” shall mean the NASDAQ Global Select Market or The Nasdaq Stock Market, Inc., as applicable.
“Permitted Liens”, with respect to any Person, shall mean (i) liens for current taxes and assessments not yet delinquent or as to which such Person is diligently contesting in good faith and by appropriate proceeding either the amount thereof or the liability therefor or both if the payment of which adequate reserves for the payment of such taxes and assessments have been established on the books of such Persons in accordance with GAAP and regulatory accounting principles; (ii) liens of landlords, carriers, mechanics, materialmen and repairmen incurred in the ordinary course of business consistent with customary and prudent practices for similarly situated financial institutions for sums not yet past due, to the extent reflected on such Person’s books, or which are being contested in good faith by appropriate proceedings and for the payment of which adequate reserves for the payment of such liens have been established on the books of such Person in accordance with GAAP and regulatory accounting principles, or the defense of which has been accepted by a title insurer, bonding company, other surety or other Person; (iii) any recorded lien (other than for funded indebtedness) relating to any leased premises that will not have a Material Adverse Effect on such Person and which do not materially impair the use
A-1-53
of such property or the merchantability or the value of such property or interest therein; (iv) zoning restrictions, easements, licenses and other restrictions on the use of real property or any interest therein, or minor irregularities in title thereto, which do not materially impair the use of such property or the merchantability or the value of such property or interest therein; (v) liens encumbering the interest of the landlord under any real property lease the existence of which does not result in a default by landlord under such real property lease or materially interfere with the use of the related leased premises in the manner it is currently operated; (vi) deposits, liens or pledges to secure payments of worker’s compensation, unemployment insurance, pensions or other social security obligations, public or statutory obligations, surety, stay or appeal bonds, or similar obligations arising in the ordinary course of business; (vii) liens on assets of Subsidiaries of such Person which are banks incurred in the ordinary course of their banking business, including liens on risk assets given to secure deposits and other liabilities of such Subsidiaries arising in the ordinary course of business (including those given to secure borrowings, advances, or discount window availability from any private or governmental banking entity or any clearinghouse); and (viii) pledges of securities to secure fed funds borrowings from other banks.
“Person” shall mean any individual, corporation, partnership, limited liability company, limited partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, person (as defined in Section 13(d)(3) of the Exchange Act), Governmental Entity or other entity.
“SEC” shall mean the United States Securities and Exchange Commission.
“Section 16 Information” shall mean information accurate in all material respects regarding the Center Financial Insiders, the number of shares of Center Financial Common Stock held by each such Center Financial Insider and the number and description of the Center Financial Stock Options and Center Financial Restricted Shares held by each such Center Financial Insider.
“Significant Subsidiary” shall mean any Subsidiary of Center Financial or Nara, as the case may be, that would constitute a Significant Subsidiary of such Party within the meaning of Rule 1-02 of Regulation S-X of the SEC.
“Subsidiary” shall mean, when used with respect to any Party, any corporation, business trust or other organization, whether incorporated or unincorporated, (i) of which such Party or any other Subsidiary of such Party is a general partner (excluding partnerships, the general partnership interests of which held by such Party or any Subsidiary of such Party do not have a majority of the voting interests in such partnership), or (ii) at least a majority of the securities or other interests of which that have by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Party or by any one or more of its Subsidiaries, or by such Party and one or more of its Subsidiaries.
“Superior Proposal” shall mean a bona fide written Acquisition Proposal which the board of directors of Nara or Center Financial, as the case may be, concludes in good faith, after consultation with its financial advisors and legal advisors, taking into account all legal, financial, regulatory and other aspects of the proposal and the Person making the proposal (including any break-up fees, expense reimbursement provisions and conditions to consummation), (i) is more favorable to the stockholders of Nara or Center Financial, as the case may be, from a financial point of view, than the transactions contemplated by this Agreement and (ii) is not subject to any financing contingencies (and if financing is required, then such financing is fully committed to the third party making the Acquisition Proposal), reasonably likely to receive all required governmental approvals on a timely basis and otherwise reasonably capable of being completed on the terms proposed;provided that, for purposes of this definition of “Superior Proposal,” the term Acquisition Proposal shall have the meaning assigned to such term inSection 5.4(a), except that the reference to “20% or more” in the definition of “Acquisition Proposal” shall be deemed to be a reference to “100%” and “Acquisition Proposal” shall only be deemed to refer to a transaction involving Nara or Center Financial, as the case may be.
A-1-54
“Surviving Corporation” shall mean Nara, at and after the Effective Time, as the surviving corporation in the Merger.
“tax” or “taxes” (including with correlative meaning, “taxable”) shall mean (i) any federal, foreign, state, provincial, territorial, municipal, or local tax, including any income, gross income, gross receipts, ad valorem, excise, sales, use, value added, admissions, business, occupation, license, franchise, margin, capital, net worth, customs, premium, real property, personal property, intangibles, capital stock, transfer, profits, windfall profits, environmental, severance, fuel, utility, payroll, social security, employment insurance, unemployment insurance, social insurance, pension plan, employment, withholding, disability, stamp, rent, recording, registration, alternative minimum, unclaimed property, add-on minimum, or other tax, assessment, duty, fee, levy, premium, contribution or other governmental charge of any kind whatsoever imposed by a Governmental Entity, together with and including any and all interest, fines, penalties, assessments and additions to tax resulting from, relating to, or incurred in connection with any such tax or any contest or dispute thereof, (ii) any liability for the payment of any amount of the type described in the immediately precedingclause (i) as a result of being a member of a consolidated, affiliated, unitary or combined group with any other Person at any time prior to and through the Closing Date, and (iii) any liability for the payment of any amount of the type described in the precedingclauses (i) or(ii) as a result of a contractual obligation to any other Person or of transferee, successor or secondary liability.
“tax return” shall mean any report, return, estimate, election, designation, form, document, declaration or other information (including any attached schedules and any amendments to such report, return, document, declaration or other information) required to be supplied to or filed with any Governmental Entity with respect to any tax, including an information return and any document with respect to or accompanying payments, deposits or estimated taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information.
“Trust Document” shall mean any agreements, indentures, instruments and other documents executed and/or delivered in connection with any outstanding debentures or related trust preferred securities issued by Center Financial, Nara or any of their respective Subsidiaries on or before the date hereof.
“Voting Debt” shall mean all bonds, debentures, notes or other indebtedness having the right to vote on any matters on which stockholders may vote.
8.2Non-survival of Representations, Warranties and Agreements. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement, including any rights arising out of any breach of such representations, warranties, covenants, and agreements, shall survive the Effective Time, except for those covenants and agreements contained herein and therein that by their terms apply or are to be performed in whole or in part after the Effective Time.
8.3Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a recognized next-day courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the Party to receive such notice.
(a) | if to Nara, to |
Nara Bancorp, Inc.
3731 Wilshire Boulevard, Suite 1000
Los Angeles, California 90010
Attention: Juliet Stone
Facsimile: (213) 235-3257
A-1-55
with a copy (which shall not constitute notice) to
Mayer Brown LLP
350 South Grand Avenue, 25th Floor
Los Angeles, California 90071
Attention: James R. Walther
Facsimile: (213) 625-0248
and
(b) | if to Center Financial, to |
Center Financial Corporation
3435 Wilshire Blvd, Suite 700
Los Angeles, California 90010
Attention: Lisa K. Pai
Facsimile: (213) 384-2106
with a copy (which shall not constitute notice) to
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, California 90013-1024
Attention: Henry M. Fields
Facsimile: (213) 892-5454
8.4Interpretation. When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The phrase “made available” in this Agreement shall mean that the information referred to has been made available if requested by the Party to whom such information is to be made available. The phrases “herein,” “hereof,” “hereunder” and words of similar import shall be deemed to refer to this Agreement as a whole, including the Exhibits and Schedules hereto, and not to any particular provision of this Agreement. Any pronoun shall include the corresponding masculine, feminine and neuter forms. The phrases “known” or “knowledge” mean, with respect to either Party, the actual knowledge of such Party’s executive officers.
8.5Counterparts. This Agreement may be executed in counterparts (which counterparts may be delivered by facsimile or other commonly used electronic means), each of which shall be considered one and the same agreement and shall become effective when both counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that both Parties need not sign the same counterpart.
8.6Entire Agreement; No Third Party Beneficiaries. This Agreement (including the documents and the instruments referred to herein) (a) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof, other than the Confidentiality Agreement and the Bank Merger Agreement, which shall survive the execution and delivery of this Agreement and (b) except as provided inSection 5.10, is not intended to confer upon any Person other than the Parties any rights or remedies hereunder. In no event shall the terms of this Agreement be deemed to (i) establish, amend or modify any employee benefit plan of Center Financial, Nara or any of their respective Subsidiaries or any other benefit plan, program, agreement or arrangement maintained or sponsored by either of them, (ii) alter or limit the ability of Center Financial, Nara, the Surviving Corporation or any of their respective Subsidiaries to amend, modify or terminate any employee benefit plan maintained by any of them, (iii) confer upon any current or former employee, officer, director or consultant, any right to employment or continued
A-1-56
employment or continued service with Center Financial, Nara or the Surviving Corporation or any of their Subsidiaries, or constitute or create an employment agreement with or for any individual, or (iv) alter or limit the ability of Center Financial, Nara or the Surviving Corporation or any of their Subsidiaries to make necessary or appropriate changes to their respective businesses in response to changed circumstances, unforeseen events or the like.
8.7Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without giving effect to choice of law principles thereof).
8.8Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability and, unless the effect of such invalidity or unenforceability would prevent the Parties from realizing the major portion of the economic benefits of the Merger that they currently anticipate obtaining therefrom, shall not render invalid or unenforceable the remaining terms and provisions of this Agreement or affect the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.
8.9Assignment. Neither this Agreement nor any of the rights, interests or obligations of the Parties hereunder shall be assigned by either of the Parties (whether by operation of law or otherwise) without the prior written consent of the other Party, and any attempt to make any such assignment without such consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns.
8.10Submission to Jurisdiction. Each Party irrevocably submits to the jurisdiction of the state and federal courts located in the State of Delaware, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each Party agrees to commence any action, suit or proceeding relating hereto in such courts. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in such courts, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. Each Party further irrevocably consents to the service of process out of any of such courts in any such suit, action or other proceeding by the mailing of copies thereof by mail to such Party at its address set forth in this Agreement, such service of process to be effective upon acknowledgment of receipt of such registered mail;provided that nothing in thisSection 8.10 shall affect the right of any Party to serve legal process in any other manner permitted by law. The consent to jurisdiction set forth in thisSection 8.10 shall not constitute a general consent to service of process in the State of Delaware and shall have no effect for any purpose except as provided in thisSection 8.10. The Parties agree that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
8.11Enforcement. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms on a timely basis or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or other equitable relief, without the necessity of proving actual monetary loss or posting any bond or other security, to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court identified inSection 8.10, this being in addition to any other remedy to which they are entitled at law or in equity.
8.12WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY DISPUTE WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
A-1-57
RESPECT OF ANY LITIGATION, DIRECTLY OR INDIRECTLY, ARISING OUT OF, OR RELATING TO, THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THISSECTION 8.12. WITHOUT INTENDING IN ANY WAY TO LIMIT THE AGREEMENTS OF THE PARTIES SET FORTH INSECTIONS 8.7 AND8.10 AND IN THISSECTION 8.12, IF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY IS FILED IN A COURT OF THE STATE OF CALIFORNIA BY OR AGAINST ANY PARTY, THE COURT SHALL, AND IS HEREBY DIRECTED TO, MAKE A GENERAL REFERENCE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 TO A REFEREE (WHO SHALL BE A SINGLE ACTIVE OR RETIRED JUDGE) TO HEAR AND DETERMINE ALL OF THE ISSUES IN SUCH ACTION OR PROCEEDING (WHETHER OF FACT OR OF LAW) AND TO REPORT A STATEMENT OF DECISION;PROVIDED THAT AT THE OPTION OF ANY PARTY TO SUCH PROCEEDING, ANY SUCH ISSUES PERTAINING TO A “PROVISIONAL REMEDY” AS DEFINED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1281.8 SHALL BE HEARD AND DETERMINED BY THE COURT.
[Remainder of this page intentionally left blank]
A-1-58
IN WITNESS WHEREOF, Nara and Center Financial have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first set forth above.
NARA BANCORP, INC. | ||
By: | /S/ ALVIN D. KANG | |
Name: | Alvin D. Kang | |
Title: | President and Chief Executive Officer |
CENTER FINANCIAL CORPORATION | ||
By: | /S/ JAE WHAN YOO | |
Name: | Jae Whan Yoo | |
Title: | President and Chief Executive Officer |
A-1-59
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER, dated as of April 13, 2011 (this “Amendment”), is entered into between NARA BANCORP, INC., a Delaware corporation (“Nara”), and CENTER FINANCIAL CORPORATION, a California corporation (“Center Financial”). Nara and Center Financial are sometimes referred to herein collectively as the “Parties” and individually as a “Party.” All capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement (as defined below).
RECITALS
WHEREAS, the Parties have heretofore entered into that certain Agreement and Plan of Merger, dated as of December 9, 2010 (the “Merger Agreement”), providing, among other things, for the merger of Center Financial with and into Nara and the merger of Center Bank with and into Nara Bank concurrently therewith or as soon as reasonably practicable thereafter (the “Original Bank Merger”); and
WHEREAS, pursuant to Sections 2.3 and 7.3 of the Merger Agreement, the Parties wish to amend the Merger Agreement as set forth in this Amendment for the purpose of effectuating a change to the structure of the Original Bank Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and in the Merger Agreement, subject to the conditions set forth in the Merger Agreement, and intending to be legally bound hereby, the Parties agree as follows:
1.Recitals. The last clause in the recitals of the Merger Agreement is amended and restated to read in its entirety as follows:
“WHEREAS, the boards of directors of Nara’s wholly owned subsidiary, Nara Bank, a California state chartered banking corporation (“Nara Bank”), and Center Financial’s wholly owned subsidiary, Center Bank, a California state chartered banking corporation (“Center Bank”), have approved, and declared it to be advisable and in the best interests of their respective stockholders, Nara and Center Financial, to consummate, concurrently with or as soon as reasonably practicable after the Merger, a business combination transaction in which Nara Bank would merge with and into Center Bank (the “Bank Merger”).”
2.Section 2.1 (b). The fourth sentence of Section 2.1(b) of the Merger Agreement, which begins with the words “Other than”, is amended by adding the following phrase to appear immediately after such beginning words: “any increases in outstanding shares of Nara Common Stock resulting from issuances of Nara Common Stock in connection with capital raising transactions approved by Center and”.
3.Section 3.1(c)(iii). Section 3.1(c)(iii) of the Merger Agreement is amended and restated to read in its entirety as follows:
“(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity (acting in any capacity) is required by or with respect to Center Financial or any Subsidiary of Center Financial in connection with the execution and delivery of this Agreement by Center Financial or the consummation by Center Financial of the transactions contemplated hereby, the failure to make or obtain which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Center Financial or the Surviving Corporation, except for (A) the filing of appropriate
A-2-1
applications and notices with the Board of Governors of the Federal Reserve System (the “FederalReserve”) under the BHC Act and with the FDIC under the Bank Merger Act of 1960, as amended (the “Bank Merger Act”), and approval of the same, (B) the filing of an appropriate application with the California Department of Financial Institutions (the “DFI”) and approval of the same (the approvals required by the immediately precedingclauses (A) and(B) are referred to herein collectively as the “Requisite Regulatory Approvals”), (C) the filing with the SEC of (1) the Form S-4, including the Joint Proxy Statement/Prospectus and (2) such reports under Sections 12, 13(a), 13(d) and 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (D) the filing of the Certificate of Merger (or other appropriate documents as provided herein or in the CGCL) with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, (E) obtaining the appropriate approvals or consents under each loss-sharing agreement with the FDIC to which Center Financial or any Subsidiary of Center Financial is a party (the “Loss-Sharing Approvals”), (F) such filings, notifications and approvals as may be required under the Small Business Investment Act of 1958 (“SBIA”) and the rules and regulations of the Small Business Administration (“SBA”) thereunder and (G) the filing of such notifications as may be required with the state banking regulatory authorities in the States of Illinois, New Jersey, New York and Washington.”
4.Section 3.2(c)(iii). Section 3.2(c)(iii) is amended and restated to read in its entirety as follows:
“(iii) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity (acting in any capacity) is required by or with respect to Nara or any Subsidiary of Nara in connection with the execution and delivery of this Agreement by Nara or the consummation by Nara of the transactions contemplated hereby, the failure to make or obtain which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Nara or the Surviving Corporation, except for (A) the Requisite Regulatory Approvals, (B) the filing with the SEC of (1) the Form S-4, including the Joint Proxy Statement/Prospectus and (2) such reports under Sections 12, 13(a), 13(d) and 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby and the obtaining from the SEC of such orders as may be required in connection therewith, (C) the filing of the Certificate of Merger (or other appropriate documents as provided herein or in the CGCL) with the Secretary of State of the State of Delaware and the Secretary of State of the State of California, (D) such filings, notifications and approvals as may be required under the SBIA and the rules and regulations of the SBA thereunder; and (E) the filing of such notifications as may be required with the state banking regulatory authorities in the States of Illinois, New Jersey, New York and Washington.”
5.Section 5.9(b). Section 5.9(b) of the Merger Agreement is amended and restated to read in its entirety as follows:
“(b) Nara shall take all actions necessary, including by adopting an amendment to the Certificate of Incorporation of Nara, to provide that, effective as of the Effective Time, the name of the Surviving Corporation shall be changed to a name mutually acceptable to Center Financial and Nara. Center Financial shall cause Center Bank to take all actions necessary, including by causing Center Bank to adopt an amendment to the Articles of Incorporation of Center Bank, to provide that, effective as of the Effective Time, the name of Center Bank shall be changed to a name mutually acceptable to Center Financial and Nara.”
6.Exhibit 1.4. Exhibit 1.4 to the Merger Agreement is amended by replacing each reference therein to “Nara Bank” with “Center Bank”.
7.Exhibit 1.5. Exhibit 1.5 to the Merger Agreement is amended and restated to read in its entirety as set forth in the form attached to this Amendment asExhibit A.
8.Representations and Warranties. Each Party represents and warrants to the other as follows: (a) such Party has all requisite corporate power and authority to enter into this Amendment; (b) the execution and delivery of
A-2-2
this Amendment has been duly authorized by all necessary corporate action on the part of such Party; and (c) this Amendment has been duly executed and delivered by such Party and constitutes a valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
9.Reference to and Effect on the Merger Agreement. Except as specifically amended by this Amendment, the Merger Agreement shall remain in full force and effect and is hereby ratified and confirmed by the Parties in all respects. This Amendment and the matters set forth herein shall be governed by the terms and conditions of the Merger Agreement, as amended hereby, which are incorporated by reference into this Amendment. This Amendment shall be construed as one with the Merger Agreement, and the Merger Agreement shall, where the context requires, be read and construed throughout so as to incorporate this Amendment. If there is any conflict between the terms and provisions of this Amendment and the terms and provisions of the Merger Agreement, the terms and provisions of this Amendment shall govern.
10.Counterparts. This Amendment may be executed in counterparts (which counterparts may be delivered by facsimile or other commonly used electronic means), each of which shall be considered one and the same agreement and shall become effective when both counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that both Parties need not sign the same counterpart.
[Remainder of this page intentionally left blank]
A-2-3
IN WITNESS WHEREOF, Nara and Center Financial have caused this Amendment to be signed by their respective officers thereunto duly authorized, all as of the date first set forth above.
NARA BANCORP, INC. | ||
By: | /s/ Alvin D. Kang | |
Name: | Alvin D. Kang | |
Title: | President and Chief Executive Officer |
CENTER FINANCIAL CORPORATION | ||
By: | /s/ Richard S. Cupp | |
Name: | Richard S. Cupp | |
Title: | President |
A-2-4
EXHIBIT A
AGREEMENT OF BANK MERGER
THIS AGREEMENT OF BANK MERGER, dated as of [—], 2011 (this “Bank Merger Agreement”), is entered into between Nara Bank, a California state-chartered bank and a wholly owned subsidiary of Nara Bancorp, Inc., a Delaware corporation (“Nara”), and Center Bank, a California state-chartered bank and a wholly owned subsidiary of Center Financial Corporation, a California corporation (“Center Financial”). Nara Bank and Center Bank are sometimes referred to herein collectively as the “Parties” and individually as a “Party.”
WHEREAS, Nara and Center Financial entered into an Agreement and Plan of Merger, dated as of December 9, 2010 (the “Agreement”), providing, among other things, for the merger of Center Financial with and into Nara (the “Merger”);
WHEREAS, in connection with the Merger, Nara and Center Financial desire to merge Nara Bank with and into Center Bank (the “Bank Merger”) concurrently with or as soon as reasonably practicable after the consummation of the Merger upon the terms and subject to the conditions set forth in this Bank Merger Agreement and the Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the Bank Merger shall qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the Parties intend, by executing this Bank Merger Agreement, to adopt a plan of reorganization within the meaning of Treasury Regulation Section 1.368-2(g).
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Bank Merger Agreement and the Agreement, subject to the conditions set forth in this Bank Merger Agreement and the Agreement, and intending to be legally bound hereby, the Parties agree as follows:
1.Effective Time. Upon the terms and subject to the conditions set forth in this Bank Merger Agreement and the Agreement, concurrently with or as soon as reasonably practicable after the consummation of the Merger, Nara Bank and Center Bank shall cause the Bank Merger to be consummated by filing a copy of this Bank Merger Agreement, certified by the Secretary of State of the State of California pursuant to Section 1103 of the California General Corporation Law (the “CGCL”), with the Commissioner of Financial Institutions of the State of California pursuant to Section 4887 of the California Financial Code (the “CFC”). The Bank Merger shall become effective upon the time and date of such filing (the “Effective Time”).
2.The Merger. Center Bank shall be the surviving bank in the Bank Merger (the “Surviving Bank”). At the Effective Time, Nara Bank shall be merged with and into Center Bank and the separate existence of Nara Bank shall cease. The Bank Merger shall be governed by, and shall have the effects set forth in, the CGCL and the CFC. Center Bank shall take all actions necessary to adopt an amendment to the Articles of Incorporation of Center Bank to provide that, effective as of the Effective Time, the name of the Surviving Bank shall be changed to a name mutually acceptable to Center Bank and Nara Bank.
3.Effects of the Merger.
(a) At the Effective Time, the Surviving Bank shall succeed, without other transfer, to all the rights and properties, and shall be subject to all the debts and liabilities, of Nara Bank, and the separate existence of Center Bank, with all its purposes, objects, rights, powers, privileges, liabilities, obligations and franchises, shall continue unaffected and unimpaired by the Bank Merger.
(b) The Articles of Incorporation (as amended effective as of the Effective Time to reflect the new name of the Surviving Bank) and the Bylaws of Center Bank, as in effect as of the Effective Time, shall be the Articles of Incorporation and Bylaws of the Surviving Bank, until thereafter altered, amended or repealed in accordance with their terms and applicable law.
A-2-5
(c) The shares of Center Bank common stock, no par value per share (“Center Bank Common Stock”) and the shares of Nara Bank common stock, no par value per share (“Nara Bank Common Stock”) shall be treated as follows at the Effective Time: (i) each share of Center Bank Common Stock issued and outstanding immediately prior to the Effective Time shall remain an issued and outstanding share of Center Bank Common Stock; and (ii) each share of Nara Bank Common Stock issued and outstanding immediately prior to the Effective Time shall be automatically canceled by operation of law without consideration and cease to be an issued and outstanding share of Nara Bank Common Stock.
4.Procurement of Approvals. This Bank Merger Agreement shall be subject to the approval of Nara, as the sole shareholder of Nara Bank, and Center Financial, as the sole shareholder of Center Bank, at meetings to be called and held or by consent in lieu thereof in accordance with the applicable provisions of law and their respective organizational documents. Nara Bank and Center Bank shall use their commercially reasonable best efforts to proceed expeditiously and cooperate fully in the procurement of any other consents and approvals and in the taking of any other action, and the satisfaction of all other requirements prescribed by applicable law or otherwise necessary for the consummation of the Bank Merger on the terms provided herein, including, without limitation, the preparation and submission of such applications or other filings for approval of the Bank Merger as may be required by applicable laws and regulations.
5.Conditions Precedent. The obligations of the Parties under this Bank Merger Agreement shall be subject to: (a) the approvals of this Bank Merger Agreement by Nara, as the sole shareholder of Nara Bank, and Center Financial, as the sole shareholder of Center Bank, at meetings duly called and held or by consent or consents in lieu thereof, in each case without any exercise of such dissenters’ rights as may be applicable; (b) receipt of approval of the Bank Merger from all governmental and banking authorities whose approval is required by applicable laws and regulations; and (c) the consummation of the Merger pursuant to the Agreement at or before the Effective Time.
6.General Provisions.
(a)Termination and Agreement. The obligations of the Parties to effect the Bank Merger shall be subject to all the terms and conditions contained in the Agreement. This Bank Merger Agreement shall terminate, without any further action of any Party, notwithstanding shareholder approval, in the event that the Agreement shall be terminated as provided therein prior to the Effective Time.
(b)Amendment. This Bank Merger Agreement may not be amended, modified or supplemented except by an instrument in writing signed on behalf of each of the Parties at any time prior to the Effective Time.
(c)Successors and Assigns. This Bank Merger Agreement shall be binding upon and enforceable by the Parties and their respective successors and permitted assigns, but this Bank Merger Agreement may not be assigned by any Party, by operation of law or otherwise, without the prior written consent of the other Party.
(d)Governing Law. This Bank Merger Agreement shall be governed by and construed in accordance with the laws of the State of California (without giving effect to choice of law principles thereof).
(e)Counterparts. This Bank Merger Agreement may be executed in counterparts (which counterparts may be delivered by facsimile or other commonly used electronic means), each of which shall be considered one and the same agreement and shall become effective when both counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that both Parties need not sign the same counterpart.
[Remainder of this page intentionally left blank]
A-2-6
IN WITNESS WHEREOF, Nara Bank and Center Bank have caused this Bank Merger Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first set forth above.
NARA BANK | ||
By: | ||
Name: | ||
Title: | ||
By: | ||
Name: | ||
Title: | ||
CENTER BANK | ||
By: | ||
Name: | ||
Title: | ||
By: | ||
Name: | ||
Title: |
A-2-7
AMENDMENT NO. 2 TO
AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER, dated as of July 6, 2011 (this “Amendment”), is entered into between NARA BANCORP, INC., a Delaware corporation (“Nara”), and CENTER FINANCIAL CORPORATION, a California corporation (“Center Financial”). Nara and Center Financial are sometimes referred to herein collectively as the “Parties” and individually as a “Party.” All capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement (as defined below).
RECITALS
WHEREAS, the Parties have heretofore entered into that certain Agreement and Plan of Merger, dated as of December 9, 2010, as amended pursuant to that certain Amendment No. 1 to Agreement and Plan of Merger, dated as of April 13, 2011 (as amended, the “Merger Agreement”), providing, among other things, for the merger of Center Financial with and into Nara and the merger of Nara Bank with and into Center Bank concurrently therewith or as soon as reasonably practicable thereafter; and
WHEREAS, pursuant to Section 7.3 of the Merger Agreement, the Parties wish to amend the Merger Agreement as set forth in this Amendment for the purpose of amending the termination date provisions set forth in Section 7.1(c) of the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and in the Merger Agreement, subject to the conditions set forth in the Merger Agreement, and intending to be legally bound hereby, the Parties agree as follows:
1.Section 7.1(c). Section 7.1(c) is amended and restated to read in its entirety as follows:
“(c) by either Nara or Center Financial, upon written notice to the other Party, if the Merger shall not have been consummated on or before November 30, 2011; provided, however, that the right to terminate this Agreement under this Section 7.1(c) shall not be available to any Party whose failure to comply with any provision of this Agreement shall have resulted in, or materially contributed to, the failure of the Effective Time to occur on or before such date;”
2.Representations and Warranties. Each Party represents and warrants to the other as follows: (a) such Party has all requisite corporate power and authority to enter into this Amendment; (b) the execution and delivery of this Amendment has been duly authorized by all necessary corporate action on the part of such Party; and (c) this Amendment has been duly executed and delivered by such Party and constitutes a valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.
3.Reference to and Effect on the Merger Agreement. Except as specifically amended by this Amendment, the Merger Agreement shall remain in full force and effect and is hereby ratified and confirmed by the Parties in all respects. This Amendment and the matters set forth herein shall be governed by the terms and conditions of the Merger Agreement, as amended hereby, which are incorporated by reference into this Amendment. This Amendment shall be construed as one with the Merger Agreement, and the Merger Agreement shall, where the context requires, be read and construed throughout so as to incorporate this Amendment. If there is any conflict between the terms and provisions of this Amendment and the terms and provisions of the Merger Agreement, the terms and provisions of this Amendment shall govern.
4.Counterparts. This Amendment may be executed in counterparts (which counterparts may be delivered by facsimile or other commonly used electronic means), each of which shall be considered one and the same agreement and shall become effective when both counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that both Parties need not sign the same counterpart.
[Remainder of this page intentionally left blank]
A-3-1
IN WITNESS WHEREOF, Nara and Center Financial have caused this Amendment to be signed by their respective officers thereunto duly authorized, all as of the date first set forth above.
NARA BANCORP, INC. | ||
By: | /s/ Alvin D. Kang | |
Name: | Alvin D. Kang | |
Title: | President and Chief Executive Officer |
CENTER FINANCIAL CORPORATION | ||
By: | /s/ Richard S. Cupp | |
Name: | Richard S. Cupp | |
Title: | President |
A-3-2
December 9, 2010
The Board of Directors
Nara Bancorp Inc.
3731 Wilshire Blvd, Suite 1000
Los Angeles, CA 90010
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a financial point of view, to Nara Bancorp Inc. (the “Company”) of the exchange ratio in the proposed merger (the “Merger”) of Center Financial Corporation (the “Center Financial”) into the Company pursuant to the Agreement and Plan of Merger, dated as of December 9, 2010, between Center Financial and the Company (the “Agreement”). Pursuant to the terms of the Agreement, each outstanding share of Common Stock, without par value, of Center Financial will be converted into 0.7804 shares of common stock, par value $0.001 per share, of the Company (the “Exchange Ratio”).
Keefe, Bruyette & Woods, Inc., has acted as financial advisor to the Company. As part of our investment banking business, we are continually engaged in the valuation of bank and bank holding company securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of banking companies, we have experience in, and knowledge of, the valuation of the banking enterprises. In the ordinary course of our business as a broker-dealer, we may, from time to time, purchase securities from, and sell securities to, Center Financial and the Company, and as a market maker in securities, we may from time to time have a long or short position in, and buy or sell, debt or equity securities of Center Financial and the Company for our own account and for the accounts of our customers. To the extent we have any such positions as of the date of this opinion it has been disclosed to the Company. We have acted exclusively for the Board of Directors of the Company in rendering this fairness opinion and will receive a fee from the Company for our services. A portion of our fee is contingent upon the successful completion of the Merger.
During the past two years we acted as a sole lead manager in an $86 million offering of common stock by the Company. In addition, we have been granted the right of first refusal to act as lead or co-lead on any equity offering undertaken by the Company during the eighteen month period after the close of the Merger.
In connection with this opinion, we have reviewed, analyzed and relied upon material bearing upon the financial and operating condition of Center Financial and the Company and the Merger, including among other things, the following: (i) the Agreement; (ii) the Annual reports to Stockholders and Annual Reports on Form 10-K for the three years ended December 31, 2009 of Center Financial and the Company; (iii) certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Center Financial and the Company and certain other communications from Center Financial and the Company to their respective stockholders; and (iv) other financial information concerning the businesses and operations of Center Financial and the Company furnished to us by Center Financial and the Company for purposes of our analysis. We have also held discussions with senior management of Center Financial and the Company regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such other matters as we have deemed relevant to our inquiry. In addition, we have compared certain financial and stock market information for
Center Financial and the Company with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the banking industry and performed such other studies and analyses as we considered appropriate.
Keefe, Bruyette & Woods • 101 California Street • Suite 3700 • San Francisco, CA 94111
Corporate Finance 877.520.8569 • Equity 800.345.3053 • Fixed Income 877.778.5330
B-1
In conducting our review and arriving at our opinion, we have relied upon the accuracy and completeness of all of the financial and other information provided to us or publicly available and we have not independently verified the accuracy or completeness of any such information or assumed any responsibility for such verification or accuracy. We have relied upon the management of Center Financial and the Company as to the reasonableness and achievability of the financial and operating forecasts and projections (and the assumptions and bases therefore) provided to us, and we have assumed that such forecasts and projections reflect the best currently available estimates and judgments of such managements and that such forecasts and projections will be realized in the amounts and in the time periods currently estimated by such managements. We are not experts in the independent verification of the adequacy of allowances for loan and lease losses and we have assumed, with your consent that the aggregate allowances for loan and lease losses for Center Financial and the Company are adequate to cover such losses. In rendering our opinion, we have not made or obtained any evaluations or appraisals of the property, assets or liabilities of Center Financial or the Company, nor have we examined any individual credit files.
We have assumed that, in all respects material to our analyses, the following: (i) the Merger will be completed substantially in accordance with the terms set forth in the Agreement, with no adjustment to the Exchange Ratio; (ii) the representations and warranties of each party in the Agreement and in all related documents and instruments referred to in the Agreement are true and correct; (iii) each party to the Agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents; (iv) all conditions to the completion of the Merger will be satisfied without any waivers; and (v) in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the Merger, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, will be imposed that will have a material adverse effect on the future results of operations or financial condition of the combined entity or the contemplated benefits of the Merger, including the cost savings, revenue enhancements and related expenses expected to result from the Merger.
We have considered such financial and other factors as we have deemed appropriate under the circumstances, including, among others, the following: (i) the historical and current financial position and results of operations of Center Financial and the Company; (ii) the assets and liabilities of Center Financial and the Company; and (iii) the nature and terms of certain other merger transactions involving banks and bank holding companies. We have also taken into account our assessment of general economic, market and financial conditions and our experience in other transactions, as well as our experience in securities valuation and knowledge of the banking industry generally. Our opinion is necessarily based upon conditions as they exist and can be evaluated on the date hereof and the information made available to us through the date hereof. Our opinion does not address the underlying business decision of the Company to engage in the Merger, or the relative merits of the Merger as compared to any strategic alternatives that may be available to the Company.
We are not expressing any opinion about the fairness of the amount or nature of the compensation to any of the Company or Center Financial’s officers, directors or employees, or any class of such persons, relative to the compensation to the public shareholders of Center Financial.
This opinion has been reviewed and approved by our Fairness Opinion Committee in conformity with our policies and procedures established under the requirements of Rule 2290 of the NASD Rules of the Financial Institutions Regulatory Authority.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Exchange Ratio in the Merger is fair, from a financial point of view, to the Company.
Very truly yours,
Keefe, Bruyette & Woods, Inc.
December 8, 2010
Board of Directors
Center Financial Corporation
3435 Wilshire Boulevard, Suite 700
Los Angeles, CA 90010
Members of the Board:
It is our understanding that Center Financial Corporation (“Company”) is considering entering into an Agreement and Plan of Merger (“Agreement”) with Nara Bancorp, Inc. (“Partner”) pursuant to which the Company would merge into Partner. Upon consummation of the merger, each share of Company common stock, and common stock equivalents, issued and outstanding will be converted into .7783 shares of Partner common stock, resulting in 45% ownership for Company common shareholders after the merger is consummated (based on share counts at September 30, 2010). If the number of shares of Company or Partner have increased or decreased as of the closing of the merger, an adjustment will be made to the Exchange Ratio such that the holders of Company shares and the holders of Partner shares shall own 45% and 55%, respectively, of the outstanding shares of Partner after the merger is consummated. The transaction is structured as a tax-free 100% stock exchange and the terms and conditions of the merger are more fully set forth in the Agreement and capitalized terms used but not defined herein have the meanings ascribed to them in the Agreement. You have requested our opinion as the fairness, from a financial point of view, of the Exchange Ratio to the holders of Company common stock.
D.A. Davidson & Co., as part of its investment banking business, is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. In arriving at our opinion, we reviewed, among other things:
(i) | a draft of the Agreement dated December 8, 2010; |
(ii) | certain financial statements and other historical financial and business information about the Company and Partner made available to us from published sources and/or from the internal records of the Company and the Partner that we deemed relevant; |
(iii) | consensus earnings estimates by quarter and annually for the years 2011 and 2012 published by Thompson Financial as of December 7, 2010 and the views of senior management of the Company and the Partner as well as limited discussions with senior management regarding past and present business, financial condition, results of operations and future prospects; |
(iv) | the current market environment generally and the banking environment in particular; |
(v) | the publicly reported historical price and trading activity for Company and Partner common stock |
(vi) | the relative contributions of Company and Partner to the combined company |
(vii) | a comparison of certain financial and stock market information for the Company with similar publicly available information for certain other companies of which the securities are publicly traded; |
(viii) | the financial terms of certain other mergers of equals in the financial institutions industry, to the extent publicly available; |
11150 Santa Monica Blvd., Suite 350 Los Angeles, CA 90025 ~ (310) 500-3860 ~ FAX (310) 500-3861
www.davidsoncompanies.com/ecm/
C-1
(ix) | the pro forma financial impact of the merger, taking into consideration the amounts and timing of the transaction costs and cost savings which the managements of Company and Partner estimate will result from the merger; and |
(x) | such other information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant. |
In arriving at our opinion, we have assumed and relied upon the accuracy and completeness of all information supplied or otherwise made available to us, discussed with or reviewed by or for us, or publicly available, and we have not assumed responsibility for independently verifying such information or undertaken an independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of the Company or Partner, nor have we been furnished any such evaluation or appraisal. In addition, we have not assumed any obligation to conduct, nor have we conducted, any physical inspection of the properties or facilities of the Company or Partner. We have further relied on the assurances of management of Company and Partner that they are not aware of any facts or circumstances that would make any of such information inaccurate or misleading. We did not make an independent evaluation of the adequacy of the allowance for loan losses of Company or Partner nor have we reviewed any individual credit files relating to Company or Partner. We have assumed that the respective allowances for loan losses for both Company and Partner are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity. We have assumed that there has been no material change in Company or Partner’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements provided to us. We have assumed in all respects material to our analysis that Company and Partner will remain as going concerns for all periods relevant to our analysis. We have also assumed in all respects material to our analysis that all of the representations and warranties contained in the Agreement and all related agreements are true and correct, that each party to such agreements will perform all of the covenants required to be performed by such party under such agreements and that the conditions precedent in the Agreement are not waived. We assume that there were no material changes to the Agreement from the draft Agreement on December 8, 2010 to the final executed Agreement. We have assumed that in the course of obtaining necessary regulatory or other consents or approvals (contractual or otherwise) for the transaction, no restrictions, including any divestiture requirements or amendment or modifications, will be imposed that will have a material adverse affect on the contemplated benefits of the transaction. In addition, we have also assumed that the transaction will qualify as a tax-free reorganization. We express no view as to, and our opinion does not address, the relative merits of the transaction as compared to any alternative business strategies that might exist for the Company or the effect of any other transaction in which the Company might engage. Our opinion is necessarily based upon information available to us and economic, market, financial and other conditions as they exist and can be evaluated on the date of this letter.
We have acted as the Company’s financial advisor in connection with the merger and will receive a fee for our services, a significant portion of which is contingent upon the consummation of the merger. We will also receive a fee for rendering this opinion. In the ordinary course of business as a broker-dealer, we may actively trade or hold securities of Company or Partner for our own account or for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the proposed Exchange Ratio is fair, from a financial point of view, to the shareholders of the Company. This fairness opinion was reviewed and approved by a D.A. Davidson Fairness Opinion Committee.
C-2
It is understood that this letter is for the information of the Board of Directors of the Company in connection with its consideration of the transaction and is not intended to be and does not constitute a recommendation of the transaction to the Company or its shareholders, nor does it constitute a recommendation to any shareholder as to how such shareholder should vote on any matter relating to the transaction. Additionally, we are not expressing any opinion herein as to the prices at which the shares of Company or Partner currently trade or may trade in the future. This letter is not to be quoted or referred to, in whole or in part, in any statement or document, nor shall this letter be used for any other purposes, without our prior written consent, which consent is hereby given to the inclusion of this letter in a proxy or other document filed with the Securities and Exchange Commission and bank regulatory agencies in connection with the transaction.
Sincere Regards, |
/s/ D.A. Davidson & Co. |
D.A. Davidson & Co. |
SECTIONS 1300-1313 OF THE CALIFORNIA CORPORATIONS CODE
(DISSENTERS’ RIGHTS)
1300. (a) If the approval of the outstanding shares (Section 152) of a corporation is required for a reorganization under subdivisions (a) and (b) or subdivision (e) or (f) of Section 1201, each shareholder of the corporation entitled to vote on the transaction and each shareholder of a subsidiary corporation in a short-form merger may, by complying with this chapter, require the corporation in which the shareholder holds shares to purchase for cash at their fair market value the shares owned by the shareholder which are dissenting shares as defined in subdivision (b). The fair market value shall be determined as of the day before the first announcement of the terms of the proposed reorganization or short-form merger, excluding any appreciation or depreciation in consequence of the proposed action, but adjusted for any stock split, reverse stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, “dissenting shares” means shares which come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form merger listed on any national securities exchange certified by the Commissioner of Corporations under subdivision (o) of Section 25100, and the notice of meeting of shareholders to act upon the reorganization summarizes this section and Sections 1301, 1302, 1303 and 1304; provided, however, that this provision does not apply to any shares with respect to which there exists any restriction on transfer imposed by the corporation or by any law or regulation; and provided, further, that this provision does not apply to any class of shares if demands for payment are filed with respect to 5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of shareholders entitled to vote on the reorganization and (A) were not voted in favor of the reorganization or, (B) if described in paragraph (1) (without regard to the provisos in that paragraph), were voted against the reorganization, or were held of record on the effective date of a short-form merger; provided, however, that subparagraph (A) rather than subparagraph (B) of this paragraph applies in any case where the approval required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in accordance with Section 1302.
(c) As used in this chapter, “dissenting shareholder” means the recordholder of dissenting shares and includes a transferee of record.
1301. (a) If, in the case of a reorganization, any shareholders of a corporation have a right under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to purchase their shares for cash, that corporation shall mail to each such shareholder a notice of the approval of the reorganization by its outstanding shares (Section 152) within 10 days after the date of that approval, accompanied by a copy of Sections 1300, 1302, 1303, and 1304 and this section, a statement of the price determined by the corporation to represent the fair market value of the dissenting shares, and a brief description of the procedure to be followed if the shareholder desires to exercise the shareholder’s right under those sections. The statement of price constitutes an offer by the corporation to purchase at the price stated any dissenting shares as defined in subdivision (b) of Section 1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase the shareholder’s shares for cash under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the corporation to purchase shares shall make written demand upon the corporation for the purchase of
those shares and payment to the shareholder in cash of their fair market value. The demand is not effective for any purpose unless it is received by the corporation or any transfer agent thereof (1) in the case of shares described subdivision (b) of Section 1300 (without regard to the provisos in that paragraph), not later than the date of the shareholders’ meeting to vote upon the reorganization, or (2) in any other case within 30 days after the date on which the notice of the approval by the outstanding shares pursuant to subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record by the shareholder which the shareholder demands that the corporation purchase and shall contain a statement of what that shareholder claims to be the fair market value of those shares as of the day before the announcement of the proposed reorganization or short-form merger. The statement of fair market value constitutes an offer by the shareholder to sell the shares at that price.
1302. Within 30 days after the date on which notice of the approval by the outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, the shareholder shall submit to the corporation at its principal office or at the office of any transfer agent thereof, (a) if the shares are certificated securities, the shareholder’s certificates representing any shares which the shareholder demands that the corporation purchase, to be stamped or endorsed with a statement that the shares are dissenting shares or to be exchanged for certificates of appropriate denomination so stamped or endorsed or (b) if the shares are uncertificated securities, written notice of the number of shares which the shareholder demands that the corporation purchase. Upon subsequent transfers of the dissenting shares on the books of the corporation, the new certificates, initial transaction statement, and other written statements issued therefor shall bear a like statement, together with the name of the original dissenting holder of the shares.
1303. (a) If the corporation and the shareholder agree that the shares are dissenting shares and agree upon the price of the shares, the dissenting shareholder is entitled to the agreed price with interest thereon at the legal rate on judgments from the date of the agreement. Any agreements fixing the fair market value of any dissenting shares as between the corporation and the holders thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market value of dissenting shares shall be made within 30 days after the amount thereof has been agreed or within 30 days after any statutory or contractual conditions to the reorganization are satisfied, whichever is later, and in the case of certificated securities, subject to surrender of the certificates therefor, unless provided otherwise by agreement.
1304. (a) If the corporation denies that the shares are dissenting shares, or the corporation and the shareholder fail to agree upon the fair market value of the shares, then the shareholder demanding purchase of such shares as dissenting shares or any interested corporation, within six months after the date on which notice of the approval by the outstanding shares (Section 152) or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but not thereafter, may file a complaint in the superior court of the proper county praying the court to determine whether the shares are dissenting shares or the fair market value of the dissenting shares or both or may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined as defendants in any such action and two or more such actions may be consolidated.
(c) On the trial of the action, the court shall determine the issues. If the status of the shares as dissenting shares is in issue, the court shall first determine that issue. If the fair market value of the dissenting shares is in issue, the court shall determine, or shall appoint one or more impartial appraisers to determine, the fair market value of the shares.
1305. (a) If the court appoints an appraiser or appraisers, they shall proceed forthwith to determine the fair market value per share. Within the time fixed by the court, the appraisers, or a majority of them, shall make and file a report in the office of the clerk of the court. Thereupon, on the motion of any party, the report shall be submitted to the court and considered on such evidence as the court considers relevant. If the court finds the report reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report within 10 days from the date of their appointment or within such further time as may be allowed by the court or the report is not confirmed by the court, the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered against the corporation for payment of an amount equal to the fair market value of each dissenting share multiplied by the number of dissenting shares which any dissenting shareholder who is a party, or who has intervened, is entitled to require the corporation to purchase, with interest thereon at the legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to uncertificated securities and, with respect to certificated securities, only upon the endorsement and delivery to the corporation of the certificates for the shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the appraisers to be fixed by the court, shall be assessed or apportioned as the court considers equitable, but, if the appraisal exceeds the price offered by the corporation, the corporation shall pay the costs (including in the discretion of the court attorneys’ fees, fees of expert witnesses and interest at the legal rate on judgments from the date of compliance with Sections 1300, 1301 and 1302 if the value awarded by the court for the shares is more than 125 percent of the price offered by the corporation under subdivision (a) of Section 1301).
1306. To the extent that the provisions of Chapter 5 prevent the payment to any holders of dissenting shares of their fair market value, they shall become creditors of the corporation for the amount thereof together with interest at the legal rate on judgments until the date of payment, but subordinate to all other creditors in any liquidation proceeding, such debt to be payable when permissible under the provisions of Chapter 5.
1307. Cash dividends declared and paid by the corporation upon the dissenting shares after the date of approval of the reorganization by the outstanding shares (Section 152) and prior to payment for the shares by the corporation shall be credited against the total amount to be paid by the corporation therefor.
1308. Except as expressly limited in this chapter, holders of dissenting shares continue to have all the rights and privileges incident to their shares, until the fair market value of their shares is agreed upon or determined. A dissenting shareholder may not withdraw a demand for payment unless the corporation consents thereto.
1309. Dissenting shares lose their status as dissenting shares and the holders thereof cease to be dissenting shareholders and cease to be entitled to require the corporation to purchase their shares upon the happening of any of the following:
(a) The corporation abandons the reorganization. Upon abandonment of the reorganization, the corporation shall pay on demand to any dissenting shareholder who has initiated proceedings in good faith under this chapter all necessary expenses incurred in such proceedings and reasonable attorneys’ fees.
(b) The shares are transferred prior to their submission for endorsement in accordance with Section 1302 or are surrendered for conversion into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the status of the shares as dissenting shares or upon the purchase price of the shares, and neither files a complaint or intervenes in a pending action as provided in Section 1304, within six months after the date on which notice of the approval by the outstanding shares or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation, withdraws the shareholder’s demand for purchase of the dissenting shares.
1310. If litigation is instituted to test the sufficiency or regularity of the votes of the shareholders in authorizing a reorganization, any proceedings under Sections 1304 and 1305 shall be suspended until final determination of such litigation.
1311. This chapter, except Section 1312, does not apply to classes of shares whose terms and provisions specifically set forth the amount to be paid in respect to such shares in the event of a reorganization or merger.
1312. (a) No shareholder of a corporation who has a right under this chapter to demand payment of cash for the shares held by the shareholder shall have any right at law or in equity to attack the validity of the reorganization or short-form merger, or to have the reorganization or short-form merger set aside or rescinded, except in an action to test whether the number of shares required to authorize or approve the reorganization have been legally voted in favor thereof; but any holder of shares of a class whose terms and provisions specifically set forth the amount to be paid in respect to them in the event of a reorganization or short-form merger is entitled to payment in accordance with those terms and provisions or, if the principal terms of the reorganization are approved pursuant to subdivision (b) of Section 1202, is entitled to payment in accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, subdivision (a) shall not apply to any shareholder of such party who has not demanded payment of cash for such shareholder’s shares pursuant to this chapter; but if the shareholder institutes any action to attack the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded, the shareholder shall not thereafter have any right to demand payment of cash for the shareholder’s shares pursuant to this chapter. The court in any action attacking the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded shall not restrain or enjoin the consummation of the transaction except upon 10 days’ prior notice to the corporation and upon a determination by the court that clearly no other remedy will adequately protect the complaining shareholder or the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, in any action to attack the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded, (1) a party to a reorganization or short-form merger which controls another party to the reorganization or short-form merger shall have the burden of proving that the transaction is just and reasonable as to the shareholders of the controlled party, and (2) a person who controls two or more parties to a reorganization shall have the burden of proving that the transaction is just and reasonable as to the shareholders of any party so controlled.
1313. A conversion pursuant to Chapter 11.5 (commencing with Section 1150) shall be deemed to constitute a reorganization for purposes of applying the provisions of this chapter, in accordance with and to the extent provided in Section 1159.
AMENDMENT TO BYLAWS
The bylaws of Nara shall be amended at or prior to the Effective Time to include, as of the Effective Time, the following new Article II, Section 9:
Section 9. Integration Period
9.1 The Board of Directors has resolved that the governance and other provisions set forth in this Article II, Section 9 shall apply and be effective during the period beginning at the Effective Time (as defined in the Agreement and Plan of Merger, dated as of December 9, 2010, by and between the Corporation and Center Financial Corporation (“Center Financial”), as may be amended from time to time (the “Merger Agreement”)), and ending on a date not to be later than the second anniversary of the Effective Time or such earlier date, but not prior to the first anniversary of the Effective Time, as may be determined by the affirmative vote of at least a majority of the Board of Directors (the “Integration Period”). Terms defined in the Merger Agreement are used in this Article II, Section 9 as so defined.
9.2 The Board of Directors shall consist of 14 members. Effective as of the Effective Time, seven members of the Board of Directors shall be current members of the Board of Directors designated by the Corporation prior to the Effective Time, including each of the persons designated for specified board of director or officer positions with the Corporation or Nara Bank in this Article II, Section 9 (such seven persons and their replacements, if any, as determined in accordance with Article II, Section 9.5 being referred to in this Article II, Section 9 as the “Continuing Nara Directors”), and seven members of the Board of Directors shall be current members of the board of directors of Center Financial designated by Center Financial prior to the Effective Time, including each of the persons designated for board of director positions with the Corporation or Nara Bank in this Article II, Section 9 (such seven persons and their replacements, if any, as determined in accordance with Article II, Section 9.5 being referred to in this Article II, Section 9 as the “Continuing Center Financial Directors”), in each case, subject to such designee satisfying the eligibility criteria to serve as a Director of the Corporation as set forth in the Nomination and Governance Committee Charter of the Corporation (the “Eligibility Criteria”) as of the Effective Time.
9.3 Effective as of the Effective Time, Mr. Ki Suh Park shall serve as Chairman of the Board of Directors and Mr. Chang Hwi Kim shall serve as Vice Chairman of the Board of Directors. In the event that Mr. Ki Suh Park ceases to serve as Chairman of the Board of Directors for any reason during the Integration Period, his successor as Chairman of the Board of Directors shall be selected by the affirmative vote of at least a majority of the Continuing Nara Directors. In the event that Mr. Chang Hwi Kim ceases to serve as Vice Chairman of the Board of Directors for any reason during the Integration Period, his successor as Vice Chairman of the Board of Directors shall be selected by the affirmative vote of at least a majority of the Continuing Center Financial Directors. For the avoidance of doubt, in the event that Mr. Ki Suh Park or Mr. Chang Hwi Kim ceases to serve as a Director of the Corporation for any reason during the Integration Period, their respective successors as Directors of the Corporation shall be determined in accordance with Article II, Section 9.5.
9.4 Effective as of the Effective Time, Mr. Kevin S. Kim shall serve as Chairman of the board of directors of Nara Bank and Mr. Scott Whang shall serve as Vice Chairman of the board of directors of Nara Bank. In the event that Mr. Kevin S. Kim ceases to serve as Chairman of the board of directors of Nara Bank for any reason during the Integration Period, his successor as Chairman of the board of directors of Nara Bank shall be selected by the affirmative vote of at least a majority of the Continuing Center Financial Directors. In the event that Mr. Scott Whang ceases to serve as Vice Chairman of the board of directors of Nara Bank for any reason during the Integration Period, his successor as Vice Chairman of the board of directors of Nara Bank shall be selected by the affirmative vote of at least a majority of the Continuing Nara Directors. For the avoidance of doubt, in the event that Mr. Kevin S. Kim or Mr. Scott Whang ceases to serve as a Director of the Corporation for any reason during the Integration Period, their respective successors as Directors of the Corporation shall be determined in accordance with Article II, Section 9.5.
9.5 All vacancies on the Board of Directors, and any Committees thereof, created through the cessation of service for any reason of (i) any Continuing Nara Director shall be filled by a nominee proposed to the Nomination and Governance Committee of the Board of Directors (together with any successor Committee thereto, the “Nomination and Governance Committee”) by a majority of the remaining Continuing Nara Directors and approved by the Board of Directors or (ii) any Continuing Center Financial Director shall be filled by a nominee proposed to the Nomination and Governance Committee by a majority of the remaining Continuing Center Financial Directors and approved by the Board of Directors. If the Nomination and Governance Committee does not appoint any such proposed nominee, or if the Board of Directors does not approve any such nominee proposed by the Nomination and Governance Committee, a majority of the remaining Continuing Nara Directors or a majority of the remaining Continuing Center Financial Directors, as applicable, shall propose a substitute nominee to the Nomination and Governance Committee. This process shall be repeated if necessary until the applicable vacancy has been filled. All Directors of the Corporation so nominated and appointed or elected pursuant to this Article II, Section 9.5 shall be considered “Continuing Nara Directors” or “Continuing Center Financial Directors,” as the case may be, for purposes of this Article II, Section 9.
9.6 The Nomination and Governance Committee shall recommend to the Board of Directors that each Continuing Nara Director and each Continuing Center Financial Director be nominated, and the Board of Directors shall nominate each Continuing Nara Director and each Continuing Center Financial Director so recommended, for election at each annual meeting of stockholders that is held during the Integration Period, in each case, so long as such Continuing Nara Director or Continuing Center Financial Director, as the case may be, continues to satisfy the Eligibility Criteria at such time. In the event that any Continuing Center Financial Director or Continuing Nara Director no longer satisfies the Eligibility Criteria at such time, a replacement nominee shall be selected in accordance with Article II, Section 9.5.
9.7 Effective as of the Effective Time, the Board of Directors shall establish a Consolidation Committee of the Board of Directors (together with any successor Committee thereto, the “Consolidation Committee”). The Consolidation Committee shall have primary responsibility for considering the development of integration policies and procedures and overseeing management’s efforts in the integration of the Corporation and Center Financial during the Integration Period and shall have such additional responsibilities, if any, as may be further delegated to it by the Board of Directors. The Consolidation Committee shall consist of a total of four members, of which two shall be Continuing Nara Directors selected by the affirmative vote of at least a majority of the Continuing Nara Directors, and two shall be Continuing Center Financial Directors selected by the affirmative vote of at least a majority of the Continuing Center Financial Directors, and none of whom shall be employees of the Corporation or any of its subsidiaries.
9.8 Subject to any independence and expertise requirements under Applicable Legal Requirements, during the Integration Period: (i) all Committees shall consist of equal numbers of Continuing Nara Directors and Continuing Center Financial Directors, (ii) the Nomination and Governance Committee shall be chaired by a Continuing Center Financial Director, (iii) the Human Resources and Compensation Committee of the Board of Directors (or any successor Committee thereto) shall be chaired by a Continuing Center Financial Director and (iv) the Consolidation Committee shall be chaired by a Continuing Center Financial Director, who, as of the Effective Time, shall be Chang Hwi Kim. During the Integration Period, any deadlocks with respect to decisions of any Committee relating to any matter properly brought before such Committee for action shall be resolved by the affirmative vote of at least a majority of the total number of Directors of the Corporation authorized by this Article II, Section 9; provided that any Director of the Corporation who is an employee of the Corporation or any of its subsidiaries shall be recused from voting on any such matter that may only be decided by independent directors under Applicable Legal Requirements.
9.9 Effective as of the Effective Time, Mr. Alvin D. Kang shall serve as Chief Executive Officer of the Corporation. The removal of Mr. Kang from the position of Chief Executive Officer of the Corporation during the 18-month period commencing as of the Effective Time, including any reduction of his authority not consistent with being a chief executive officer, or the failure to appoint or re-elect Mr. Kang to the position of Chief Executive Officer of the Corporation during such 18-month period, to which action Mr. Kang does not consent, shall each require the affirmative vote of at least 66 percent of the total number of Directors of the
Corporation authorized by this Article II, Section 9. Any amendment to or termination of any employment agreement Mr. Kang may have with the Corporation to which Mr. Kang does not consent during such 18-month period shall require the affirmative vote of at least a majority of the total number of Directors of the Corporation authorized by this Article II, Section 9, including the vote of at least one Continuing Nara Director, with Mr. Kang abstaining; provided, however, that no such termination during such 18-month period shall terminate, or be deemed to terminate, Mr. Kang’s status as Chief Executive Officer of the Corporation. In the event that Mr. Kang ceases to serve as Chief Executive Officer of the Corporation for any reason during such 18-month period, his successor as Chief Executive Officer of the Corporation shall be selected by the affirmative vote of at least a majority of the Continuing Nara Directors. For the avoidance of doubt, in the event that Mr. Kang ceases to serve as a Director of the Corporation for any reason during the Integration Period, his successor as a Director of the Corporation shall be determined in accordance with Article II, Section 9.5.
9.10 This Article II, Section 9 may be modified, amended or repealed, and any provision of these Bylaws inconsistent with the provisions of this Article II, Section 9 may be adopted, by the affirmative vote of at least a majority of the total number of Directors of the Corporation authorized by this Article II, Section 9, including the vote of at least one Continuing Nara Director and at least one Continuing Center Financial Director, provided that any modification, amendment or repeal of the second sentence of Article II, Section 9.9 shall require the affirmative vote of at least 66 percent of the total number of Directors of the Corporation authorized by this Article II, Section 9, with Mr. Kang abstaining with respect to any modification, amendment or repeal of Article II, Section 9.9. Notwithstanding the foregoing, no provision of this Article II, Section 9.10 shall derogate from the right of the stockholders to modify, amend or repeal any or all provisions of this Article II, Section 9 pursuant to Article VII, Section 5 of these Bylaws. In the event of any inconsistency between any provision of this Article II, Section 9 and any other provision of the Certificate of Incorporation or these Bylaws, the provisions of this Article II, Section 9 shall govern and control.
9.11 Whenever it is stated in this Article II, Section 9 that a specified action shall require the affirmative vote of a specified percentage of the Board of Directors, if the application of such percentage does not result in a whole number of required votes, the vote required to approve, adopt or ratify any such action shall be the next highest whole number.
NARA BANCORP, INC.
POLICY REGARDING THE APPROVALOF AUDITAND NON-AUDIT SERVICES
PROVIDEDBYTHE INDEPENDENT AUDITOR
Purpose and Applicability
The Audit Committee of the board of directors of Nara Bancorp, Inc. (the “Company”) is responsible for the appointment, compensation, retention and oversight of the work of the independent auditor of the Company. As part of this responsibility, the Audit Committee is required to approve the audit and non-audit services performed by the independent auditor in order to assure that they do not impair the auditor’s independence from the Company. The Sarbanes-Oxley Act of 2002 (the “Act”) and the rules and regulations adopted by the Securities and Exchange Commission (“SEC”) thereunder contain detailed requirements specifying the types of non-audit services that an independent auditor may not provide to its audit client and the Audit Committee’s administration of the engagement of the independent auditor. Accordingly, the Audit Committee has adopted this “Policy Regarding the Approval of Audit and Non-audit Services Provided by the Independent Auditor” (the “Policy”).
Policy Statement
It is the policy of the Company that all services provided by the Company’s independent auditor, both audit and non-audit in nature must be approved in advance by the Audit Committee. Although the Act permitsde minimisexceptions and allows for the pre-approval of certain categories of audit and non-audit services, our policy is that all services provided by the independent auditor, both audit and non-audit in nature, must be specifically approved in advance by the Audit Committee. The Audit Committee may delegate to the Chair of the Audit Committee, who is independent as defined under applicable NASDAQ rules, the authority to grant approval of permitted services to be provided by the independent auditor up to $25,000. The decision of the Chair to approve a permitted service shall be reported to the Audit Committee at each of its regularly scheduled meetings.
All fees paid to the Company’s independent auditor will be disclosed in the Company’s annual proxy statement in accordance with applicable SEC rules. Subject to SEC rules, the annual proxy statement should include disclosure of the amount of “Audit Related Fees” and other fees required to be disclosed by the rules.
Prohibited Services—Under no circumstances may the Company engage the independent auditors to provide the non-audit services described below to the Company:
1. Bookkeeping or Other Services Related to the Company’s Accounting Records or Financial Statements. The independent auditor cannot maintain or prepare the Company’s accounting records or prepare the Company’s financial statements that are either filed with the SEC or form the basis of financial statements filed with the SEC.
2. Appraisal or Valuation Services or Fairness Opinions. The independent auditor cannot provide appraisal or valuation services when it is reasonably likely that the results of any valuation or appraisal would be material to the Company’s financial statements, or where the independent auditor would audit the results.
3. Actuarial Services. The independent auditor cannot provide insurance actuarial-oriented advisory services unless the Company uses its own actuaries or third party actuaries to provide management with the primary actuarial capabilities, and management accepts responsibility for the actuarial methods and assumptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. | Indemnification of Directors and Officers |
Nara was formed under and is governed by the provisions of the DGCL. Section 145 of the DGCL provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such persons in connection with any threatened, pending or completed actions, suits or proceedings in which any such person is made a party by reason of such person being or having been a director, officer, employee or agent of the corporation. Section 145 provides that it is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except: (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit.
Article IX of Nara’s certificate of incorporation provides that Nara shall, to the fullest extent permitted by Section 145 of the DGCL, as it may be amended and supplemented from time to time, indemnify any and all directors and officers whom it shall have the power to indemnify under Section 145 of the DGCL from and against any and all of the expenses, liabilities or other matters referred to or covered by such section, and that the indemnification provided for therein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of the heirs, executors and administrators of such a person. Article IX further provides that, to the fullest extent permitted by the DGCL, as it may be amended and supplemented from time to time, a director of Nara shall not be liable to it or its stockholders for monetary damages for breach of fiduciary duty as a director.
Article VI of Nara’s bylaws provides that Nara Bancorp shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of Nara) by reason of the fact that the person is or was a director or officer of Nara, or is or was serving at the request of Nara as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of Nara, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Article VI of Nara’s bylaws also provides that Nara shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of Nara to procure a judgment in its favor by reason of the fact that the person is or was a director or officer of Nara, or is or was serving at the request of Nara as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of Nara; except that no indemnification shall be made in respect of any claim, issue or matter as to which the person shall have been adjudged to be liable to Nara unless and only to the extent that the court in which such action or suit
II-1
was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.
Any indemnification under Article VI of Nara’s bylaws, unless ordered by a court, may be made by Nara only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in Article VI.
Nara also maintains directors’ and officers’ insurance which insures the directors and officers of Nara against liability asserted against such persons in such capacity whether or not such directors or officers have the right to indemnification pursuant to the bylaws or otherwise.
The foregoing is only a general summary of certain aspects of the DGCL and Nara’s certificate of incorporation and bylaws dealing with indemnification of directors and officers, and does not purport to be complete. It is qualified in its entirety by reference to the detailed provisions of Section 145 of the DGCL, Article IX of Nara’s certificate of incorporation and Article VI of Nara’s bylaws.
Item 21. | Exhibits and Financial Statement Schedules |
Exhibit Index
Exhibit | Description | |
2.1 | Agreement and Plan of Merger, dated as of December 9, 2010, between Nara Bancorp, Inc. and Center Financial Corporation (included as Annex A to the joint proxy statement/prospectus contained in this Registration Statement) | |
3.1 | Certificate of Incorporation, filed with the Delaware Secretary of State on June 5, 2000 (incorporated herein by reference to Appendix III to the prospectus included in the Registration Statement on Form S-4 filed with the Securities and Exchange Commission (“SEC”) on November 16, 2000), SEC file number 333-50126 | |
3.2 | Certificate of Amendment of Certificate of Incorporation, filed with the Delaware Secretary of State on May 31, 2002 (incorporated herein by reference to the Registration Statement on Form S-8, Exhibit 3.3, filed with the SEC on February 5, 2003), SEC file number 333-102974 | |
3.3 | Certificate of Amendment of Certificate of Incorporation, filed with the Delaware Secretary of State on June 1, 2004 (incorporated herein by reference to the Quarterly Report on Form 10-Q, Exhibit 3.1.1, filed with the SEC on November 8, 2004) | |
3.4 | Certificate of Amendment of Certificate of Incorporation, filed with the Delaware Secretary of State on November 2, 2005 (incorporated herein by reference to the Proxy Statement on Schedule 14A, Appendix B filed with the SEC on September 6, 2005) | |
3.5 | Certificate of Amendment of Certificate of Incorporation, filed with the Delaware Secretary of State on July 20, 2007 (incorporated herein by reference to the Proxy Statement on Schedule 14A, Appendix C filed with the SEC on April 19, 2007) | |
3.6 | Form of Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series B | |
3.7 | Amended and Restated Bylaws (incorporated herein by reference to the Current Report on Form 8-K Exhibit 3.1, filed with the SEC on December 28, 2007) | |
5.1 | Opinion of Mayer Brown LLP regarding the validity of the securities | |
8.1 | Form of Opinion of Mayer Brown LLP regarding certain tax matters |
II-2
Exhibit | Description | |
8.2 | Form of Opinion of Morrison & Foerster LLP regarding certain tax matters | |
23.1 | Consent of David Hong† | |
23.2 | Consent of Jin Chul Jhung† | |
23.3 | Consent of Chang Hwi Kim† | |
23.4 | Consent of Kevin S. Kim† | |
23.5 | Consent of Peter Y. S. Kim† | |
23.6 | Consent of Sang Hoon Kim† | |
23.7 | Consent of Chung Hyun Lee† | |
23.8 | Consent of Crowe Horwath LLP | |
23.9 | Consent of KPMG LLP | |
23.10 | Consent of Grant Thornton LLP | |
23.11 | Consent of Mayer Brown LLP (included in Exhibit 5.1) | |
23.12 | Consent of Mayer Brown LLP (included in Exhibit 8.1) | |
23.13 | Consent of Morrison & Foerster LLP (included in Exhibit 8.2) | |
24.1 | Power of Attorney | |
99.1 | Consent of Keefe, Bruyette & Woods, Inc.† | |
99.2 | Consent of D.A. Davidson & Co.† | |
99.3 | Form of Proxy Card for Nara Annual Meeting of Stockholders | |
99.4 | Form of Proxy Card for Center Annual Meeting of Stockholders |
† | Previously filed. |
Item 22. | Undertakings |
(a) | The undersigned registrant hereby undertakes as follows: |
(1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. |
(ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) that, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement. |
(iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
II-3
(2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fideoffering thereof. |
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering. |
(b) | For purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference into the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fideoffering thereof. |
(c) (1) | The undersigned registrant hereby undertakes as follows: that prior to any public re-offering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such re-offering prospectus will contain the information called for by the applicable registration form with respect to re-offerings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. |
(2) | The registrant undertakes that every prospectus: (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof. |
(d) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 20 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. |
(e) | The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. |
(f) | The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. |
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 12 to the Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto, duly authorized, in the City of Los Angeles, State of California, on June 3,July 12, 2011.
NARA BANCORP, INC. | ||
By: | /s/ ALVIN D. KANG | |
Alvin D. Kang | ||
President and Chief Executive Officer |
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned directors and officers of Nara Bancorp, Inc. do hereby constitute and appoint Alvin D. Kang and Philip Guldeman, and each of them acting individually, with full and individual power of substitution, our true and lawful attorneys-in-fact and agents with full power to them, and to each of them acting individually, to do any and all acts and things in our names and on our behalf in our capacities as directors and officers and to execute any and all instruments for us in our name and in the capacities indicated below, which said attorneys and agents may deem necessary or advisable to enable said registrant to comply with the Securities Act of 1933 and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement on Form S-4, including specifically but without limitation, the power and authority to sign for any of us in our names and in the capacities indicated below any and all amendments, including post-effective amendments, hereof; and we do hereby ratify and confirm all that said attorneys-in-fact and agents shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 12 to the Registration Statement on Form S-4 has been signed by the following persons in the capacities and on the dates indicated.
Name | Title | Date | ||
/s/ ALVIN D. KANG Alvin D. Kang | Director, President and Chief Executive Officer (Principal Executive Officer) | |||
/s/ PHILIP E. GULDEMAN Philip E. Guldeman | Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |||
Steven D. Broidy | Director | |||
Louis M. Cosso | Director | |||
Jesun Paik | Director | |||
John H. Park | Director |
II-5
|
|
| ||
Ki Suh Park | Chairman of the Board | |||
Scott Yoon-Suk Whang | Director |
*By: | /s/ ALVIN D. KANG | |
Alvin D. Kang | ||
Attorney-in-Fact |
II-6II-5