Exhibit 2.1
PLAN AND AGREEMENT OF MERGER
BY AND BETWEEN
HEMET BANCORP
AND
HEMET FINANCIAL GROUP, INC.
DATED AS OF MAY 22, 2002
TABLE OF CONTENTS
PAGE
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ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER....................................1
1.1 Merger................................................................1
1.2 Time and Place of Closing.............................................1
1.3 Effective Time........................................................2
1.4 Restructure of Transaction............................................2
ARTICLE 2 TERMS OF MERGER.....................................................2
2.1 Articles of Incorporation.............................................2
2.2 Bylaws................................................................2
2.3 Directors and Officers................................................2
ARTICLE 3 MANNER OF CONVERTING SHARES.........................................3
3.1 Conversion of Shares..................................................3
3.2 Dissenting Shareholders of HBC........................................3
3.3 Treatment of HBC Stock Options........................................3
ARTICLE 4 EXCHANGE OF SHARES..................................................3
4.1 Exchange Procedures...................................................3
4.2 Rights of Former HFG and HBC Shareholders.............................5
4.3 Legending of Securities...............................................5
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF HFG...............................5
5.1 Organization, Standing, and Power.....................................5
5.2 Authority of HFG; No Breach By Agreement..............................6
5.3 Capital Stock.........................................................6
5.4 Compliance with Laws..................................................7
5.5 Legal Proceedings.....................................................7
5.6 Statements True and Correct...........................................7
5.7 Regulatory Matters....................................................8
5.8 State Takeover Laws...................................................8
5.9 Board Actions.........................................................8
5.10 Purchase for Investment...............................................8
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF HBC...............................9
6.1 Organization, Standing, and Power.....................................9
6.2 Authority; No Breach By Agreement.....................................9
6.3 Capital Stock........................................................10
6.4 Compliance with Laws.................................................10
6.5 Legal Proceedings....................................................10
6.6 Statements True and Correct..........................................11
6.7 Regulatory Matters...................................................11
6.8 State Takeover Laws..................................................11
6.9 Board Actions........................................................11
6.10 Opinion of Financial Advisor.........................................11
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION...........................11
7.1 Covenants of HFG.....................................................11
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7.2 Covenants of HBC.....................................................12
7.3 Notice of Adverse Changes in Condition...............................12
7.4 Reports..............................................................12
ARTICLE 8 ADDITIONAL AGREEMENTS..............................................12
8.1 HBC Proxy Statement; Shareholder Approval............................12
8.2 Consents of Regulatory Authorities...................................13
8.3 Filings with State Offices...........................................13
8.4 Agreement as to Efforts to Consummate................................13
8.5 Investigation........................................................13
8.6 Press Releases.......................................................14
8.7 State Takeover Laws..................................................14
8.8 HFG Common Stock.....................................................14
8.9 Indemnification......................................................14
8.10 HFG Financing........................................................15
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE..................15
9.1 Conditions to Obligations of Each Party..............................15
9.2 Conditions to Obligations of HBC.....................................16
9.3 Conditions to Obligations of HFG.....................................17
ARTICLE 10 TERMINATION.......................................................18
10.1 Termination..........................................................18
10.2 Effect of Termination................................................19
10.3 Non-Survival of Representations and Covenants........................19
ARTICLE 11 MISCELLANEOUS.....................................................19
11.1 Definitions..........................................................19
11.2 Expenses.............................................................23
11.3 Brokers and Finders..................................................23
11.4 Entire Agreement.....................................................23
11.5 Amendments...........................................................23
11.6 Waivers..............................................................23
11.7 Assignment...........................................................24
11.8 Notices..............................................................24
11.9 Governing Law........................................................25
11.10 Counterparts........................................................25
11.11 Captions; Articles and Sections.....................................25
11.12 Interpretations.....................................................26
11.13 Enforcement of Agreement............................................26
11.14 Severability........................................................26
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EXHIBIT INDEX
Exhibit Description Page
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Exhibit 1 HFG Financing.................................................15
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PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Agreement") is made and entered
into as of May 22, 2002, by and between HEMET BANCORP ("HBC"), a California
corporation and HEMET FINANCIAL GROUP, INC. ("HFG"), a Nevada corporation.
PREAMBLE
The respective boards of directors of HFG and HBC have approved and
adopted this Agreement and the transactions described herein and have adopted
resolutions to submit this Agreement to their respective shareholders for their
approval. This Agreement provides for the merger of HFG with and into HBC. At
the effective time of such Merger, the outstanding shares of HBC Common Stock
shall be converted into the right to receive a cash payment from HBC (except as
provided herein) and the outstanding shares of HFG Common Stock shall be
converted into the right to receive shares of HBC Common Stock. As a result, HBC
shall succeed, without other transfer, to all the rights and property of HFG and
shall be subject to all the debts and liabilities of HFG as if HBC had itself
incurred them. The transactions described in this Agreement are subject to the
approvals of the shareholders of HBC, HFG, the Board of Governors of the Federal
Reserve System, and the California Department of Financial Institutions, and the
satisfaction of certain other conditions described in this Agreement. HFG has
engaged, and will engage, only in activities, including its merger with and into
HBC, that are directly related to the negotiation, execution and consummation of
this Agreement.
Certain capitalized terms used in this Agreement are defined in Section
11.1 of this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the Parties agree
as follows:
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER.
Subject to the terms and conditions of this Agreement, at the Effective
Time, HFG shall be merged with and into HBC in accordance with the provisions of
Section 92A.190 of the Nevada General Corporation Law ("NGCL") and Section 1108
of the California General Corporate Law ("CGCL") and with the effect provided in
the provisions of Section 92A.250 of the NGCL and Section 1107 of the CGCL (the
"Merger"). HBC shall be the Surviving Corporation resulting from the Merger and
shall continue to be governed by the laws of the State of California. The Merger
shall be consummated pursuant to the terms of this Agreement, which has been
approved and adopted by the respective Boards of Directors of HFG and HBC.
1.2 TIME AND PLACE OF CLOSING.
The closing of the transactions contemplated hereby (the "Closing") will
take place at 9:00 a.m., Pacific time, on the date that the Effective Time
occurs (or the immediately preceding day if the Effective Time is earlier than
9:00 a.m., Pacific time), or at such other time as the Parties, acting through
their authorized officers, may mutually agree. The Closing shall be held at such
location as may be mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME.
The Merger and other transactions contemplated by this Agreement shall
become effective on the date and at the time the Articles of Merger ("Articles
of Merger") reflecting the Merger shall become effective with the Secretary of
State of the State of Nevada and a copy of the Merger Agreement ("Merger
Agreement") and officers' certificates reflecting the Merger shall become
effective with the Secretary of State of the State of California (the "Effective
Time"). Subject to the terms and conditions hereof, unless otherwise mutually
agreed upon in writing by the authorized officers of each Party, the Parties
shall use their reasonable efforts to cause the Effective Time to occur on the
first business day following the last to occur of (i) the effective date
(including expiration of any applicable waiting period) of the last required
Consent of any Regulatory Authority having authority over and approving or
exempting the Merger, and (ii) the date on which the shareholders of HBC approve
this Agreement and the transactions contemplated hereby, including the Merger;
or such later date within 30 days thereof as may be specified by HBC.
1.4 RESTRUCTURE OF TRANSACTION.
HBC shall, in its reasonable discretion, have the unilateral right to
revise the structure of the Merger contemplated by this Agreement for any reason
which HBC may deem advisable; provided, however, that HBC shall not have the
right, without the approval of the board of directors of HFG and, if required by
applicable law, the holders of the HFG Common Stock or HBC Common Stock, as
applicable, to make any revision to the structure of the Merger which: (i)
changes the amount of the consideration which the holders of shares of HFG
Common Stock are entitled to receive (determined in the manner provided in
Section 3.1 of this Agreement); (ii) would permit HBC to pay the consideration
other than by delivery of the Cash Payments to the holders of HBC Common Stock;
(iii) would be materially adverse to the interests of the holders of shares of
HFG Common Stock or HBC Common Stock; (iv) would materially impede or delay
consummation of the Merger; or (v) would change the tax consequences of the
Merger to the holders of HFG Common Stock. HBC may exercise this right of
revision by giving written notice to HFG in the manner provided in Section 11.8
which notice shall be in the form of an amendment to this Agreement or in the
form of an Amended and Restated Plan and Agreement of Merger.
ARTICLE 2 TERMS OF MERGER
2.1 ARTICLES OF INCORPORATION.
The Articles of Incorporation of HBC in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation after the Effective Time until duly amended or repealed.
2.2 BYLAWS.
The Bylaws of HBC in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation after the Effective Time until
duly amended or repealed.
2.3 DIRECTORS AND OFFICERS.
The directors of HBC in office immediately prior to the Effective Time,
together with such additional persons as may thereafter be elected, shall serve
as the directors of the Surviving Corporation from and after the Effective Time
in accordance with the Bylaws of the Surviving Corporation. The
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officers of HBC in office immediately prior to the Effective Time, together with
such additional persons as may thereafter be elected, shall serve as the
officers of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation.
ARTICLE 3 MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES.
Subject to the provisions of this Article 3, at the Effective Time, by
virtue of the Merger and without any action on the part of HBC, HFG or the
shareholders of either of the foregoing, the shares of the constituent
corporations shall be converted as follows:
(a) Each share of HFG Common Stock issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding and shall be converted
into and exchanged for the right to receive from HBC one (1) share of HBC Common
Stock.
(b) Each share of HBC Common Stock (excluding shares held by
shareholders who perfect their statutory dissenters' rights as provided in
Section 3.2) issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive from HBC a cash payment in the amount of $54.00 (less any
required withholding of taxes, the "Cash Payment").
3.2 DISSENTING SHAREHOLDERS OF HBC.
Any holder of shares of HBC Common Stock who perfects such holder's
dissenters' rights in accordance with and as contemplated by Section 1300 et
seq. of the CGCL shall be entitled to receive from the Surviving Corporation the
value of such shares in cash as determined pursuant to such provisions of law;
provided, that no such payment shall be made to any dissenting shareholder
unless and until such dissenting shareholder has complied with the applicable
provisions of the CGCL and surrendered to HBC the certificate or certificates
representing the shares for which payment is being made. In the event that after
the Effective Time a dissenting shareholder of HBC fails to perfect, or
effectively withdraws or loses, such holder's right to appraisal of and payment
for such holder's shares, HBC shall issue and deliver the consideration to which
such holder of shares of HBC Common Stock is entitled under this Article 3
(without interest) upon surrender by such holder of the certificate or
certificates representing the shares of HBC Common Stock held by such holder.
3.3 TREATMENT OF HBC STOCK OPTIONS.
At the Effective Time, each outstanding option to purchase shares of HBC
Common Stock granted pursuant to The Bank of Hemet 1994 Stock Option Plan shall
remain outstanding and become an obligation of the Surviving Corporation.
ARTICLE 4 EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES.
(a) Promptly after the Effective Time, HBC shall cause HBC's transfer
agent or another agent selected by HBC (the "Exchange Agent") to mail to each
holder of record of a certificate or certificates which represented shares of
HFG Common Stock and HBC Common Stock immediately prior to the Effective Time
(the "Certificates") appropriate transmittal materials and instructions (which
shall specify
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that delivery shall be effected, and risk of loss and title to such Certificates
shall pass, only upon proper delivery of such Certificates to the Exchange
Agent). The Certificate or Certificates of HFG Common Stock and HBC Common Stock
so delivered shall be duly endorsed as the Exchange Agent may require. In the
event of a transfer of ownership of shares of HFG Common Stock or HBC Common
Stock represented by Certificates that is not registered in the transfer records
of HFG or HBC, as applicable, the consideration provided in Section 3.1 may be
issued to a transferee if the Certificates representing such shares are
delivered to the Exchange Agent, accompanied by all documents required to
evidence such transfer and by evidence satisfactory to the Exchange Agent that
any applicable stock transfer taxes have been paid. If any Certificate shall
have been lost, stolen, mislaid or destroyed, upon receipt of (i) an affidavit
of that fact from the holder claiming such Certificate to be lost, mislaid,
stolen or destroyed, (ii) such bond, security or indemnity as HBC and the
Exchange Agent may reasonably require and (iii) any other documents necessary to
evidence and effect the bona fide exchange thereof, the Exchange Agent shall
issue to such holder the consideration into which the shares represented by such
lost, stolen, mislaid or destroyed Certificate shall have been converted. The
Exchange Agent may establish such other reasonable and customary rules and
procedures in connection with its duties as it may deem appropriate. The
Surviving Corporation shall pay all charges and expenses, including those of the
Exchange Agent, in connection with the distribution of the consideration
provided in Section 3.1.
(b) After the Effective Time, each holder of shares of HFG Common Stock
and HBC Common Stock (other than shares of HBC Common Stock as to which
statutory dissenters' rights have been perfected as provided in Section 3.2)
issued and outstanding at the Effective Time shall surrender the Certificate or
Certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.1, except that any Cash Payment owed to a holder of HBC Common
Stock that has executed a promissory note in favor of HFG (as described in
Exhibit 1 to this Agreement) shall be applied to retire the promissory note. HBC
shall not be obligated to deliver the consideration to which any former holder
of HFG Common Stock or HBC Common Stock is entitled as a result of the Merger
until such holder surrenders such holder's Certificate or Certificates for
exchange as provided in this Section 4.1. Until so surrendered, each outstanding
Certificate or Certificates of HFG Common Stock or HBC Common Stock shall be
deemed to represent the consideration into which the Certificates of HFG Common
Stock or HBC Common Stock represented thereby prior to the Effective Time shall
have been converted.
(c) Each of the Surviving Corporation and the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of HFG Common Stock or HBC
Common Stock such amounts, if any, as it is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code or any
provision of state, local or foreign tax law. To the extent that any amounts are
so withheld by the Surviving Corporation or the Exchange Agent, as the case may
be, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of HFG Common Stock or HBC Common
Stock in respect of which such deduction and withholding was made by the
Surviving Corporation or the Exchange Agent, as the case may be.
(d) Any other provision of this Agreement notwithstanding, neither the
Surviving Corporation nor the Exchange Agent shall be liable to a holder of HFG
Common Stock or HBC Common Stock for any amounts paid or property delivered in
good faith to a public official pursuant to any applicable abandoned property,
escheat or similar law. Approval of this Agreement by the holders of HFG Common
Stock and HBC Common Stock shall constitute ratification of the appointment of
the Exchange Agent.
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4.2 RIGHTS OF FORMER HFG AND HBC SHAREHOLDERS.
At the Effective Time, the stock transfer books of HFG and HBC shall be
closed as to holders of HFG Common Stock and HBC Common Stock immediately prior
to the Effective Time and no transfer of HFG Common Stock or HBC Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1, each Certificate
theretofore representing shares of HFG Common Stock or HBC Common Stock (other
than shares of HBC Common Stock as to which statutory dissenters' rights have
been perfected as provided in Section 3.2) shall from and after the Effective
Time represent for all purposes only the right to receive the consideration
provided in Section 3.1 in exchange therefor, 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 have been declared or made
by HFG or HBC in respect of such shares of HFG Common Stock or HBC Common Stock
in accordance with the terms of this Agreement and which remain unpaid at the
Effective Time.
4.3 LEGENDING OF SECURITIES.
The shares of HBC Common Stock to be issued pursuant to Section 3.1(a) will
be issued in a transaction exempt from registration under the Securities Act by
reason of Section 4(2) thereof or Regulation D promulgated thereunder. HBC is
relying on the representations of HFG and its stockholders with respect to such
exemption. Each certificate for HBC Common Stock to be issued in connection with
this Agreement shall bear the following legend (with the appropriate date
inserted):
"The shares evidenced by this certificate have not been registered under
the Securities Act of 1933, as amended, or any state securities laws,
and may not be transferred, nor will any assignee or endorsee hereof be
recognized as an owner hereof by the issuer for any purpose, unless a
registration statement under the Securities Act of 1933, as amended, and
any applicable state securities laws with respect to such shares shall
then be in effect or unless the availability of an exemption from
registration with respect to any proposed transfer or disposition of
such shares shall be established to the satisfaction of counsel for
Hemet Bancorp. In addition, the shares evidenced by this certificate are
subject to the restrictions on transferability contained in a
Shareholders Agreement dated the ____ day of __________, 2002, between
and among Hemet Bancorp and the holders of Common Stock thereof, a copy
of which is on file in the office of Hemet Bancorp. No transfer or
encumbrance of the shares represented hereby may be made except in
accordance with such Agreement."
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF HFG
HFG hereby represents, warrants and covenants to HBC as follows:
5.1 ORGANIZATION, STANDING, AND POWER.
HFG is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Nevada, and has the corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its material assets. HFG is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its assets or the nature
or conduct of its business requires it to be so qualified or licensed,
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except for such jurisdictions in which the failure to be so qualified or
licensed is not reasonably likely to have, individually or in the aggregate, a
HFG Material Adverse Effect. HFG has not engaged in any business activity other
than that directly related to the negotiation, execution and consummation of
this Agreement. HFG has no Subsidiaries.
5.2 AUTHORITY OF HFG; NO BREACH BY AGREEMENT.
(a) HFG has the corporate power and authority necessary to execute,
deliver, and, other than with respect to the Merger, perform this Agreement, and
with respect to the Merger, upon the approval of this Agreement and the Merger
by HFG's stockholders in accordance with this Agreement and Nevada law, to
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of HFG, subject to the approval of this Agreement
by the holders of a majority of the outstanding shares of HFG Common Stock as
contemplated by Section 8.1, which is the only stockholder vote or consent
required for approval of this Agreement and consummation of the Merger by HFG.
Subject to such requisite stockholder approval, this Agreement represents a
legal, valid, and binding obligation of HFG, enforceable against HFG in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by HFG, nor the
consummation by HFG of the transactions contemplated hereby, nor compliance by
HFG with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of HFG's Articles of Incorporation or Bylaws or any
resolution adopted by the board of directors or the stockholders of HFG, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any asset of HFG under, any contract or
permit of HFG, where such Default or Lien, or any failure to obtain such
Consent, is reasonably likely to have, individually or in the aggregate, a HFG
Material Adverse Effect, or, (iii) subject to receipt of the requisite Consents
referred to in Sections 9.1(b) and 9.1(c), constitute or result in a Default
under, or require any Consent pursuant to, any law or order applicable to HFG or
any of its material assets (including HFG becoming subject to or liable for the
payment of any tax or any of the assets owned by HFG being reassessed or
revalued by any Regulatory Authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities laws, and other than
Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service and other than Consents, filings, or
notifications which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a HFG Material Adverse Effect, no notice to,
filing with, or Consent of, any public body or authority is necessary for the
consummation by HFG of the Merger and the other transactions contemplated in
this Agreement.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of HFG consists of 1,000,000 shares of
HFG Common Stock, of which 10 shares are issued and outstanding as of the date
of this Agreement. All of the issued and outstanding shares of HFG Common Stock
are duly and validly issued and outstanding and are fully paid and nonassessable
under the NGCL. None of the outstanding shares of capital stock of HFG has been
issued in violation of any preemptive rights of the current or past stockholders
of HFG.
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(b) Except as set forth in Section 5.3(a), there are no shares of
capital stock or other equity securities of HFG outstanding and no outstanding
Equity Rights relating to HFG Common Stock. Except as specifically contemplated
by this Agreement, no Person has any contract or any right or privilege (whether
pre-emptive or contractual) capable of becoming a contract or Equity Right for
the purchase, subscription or issuance of any securities of HFG.
5.4 COMPLIANCE WITH LAWS.
HFG has in effect all permits necessary for it to enter into this
Agreement and consummate the transactions contemplated hereby, except for those
permits the absence of which are not reasonably likely to have, individually or
in the aggregate, a HFG Material Adverse Effect or which would prevent the
consummation of the Merger, and there has occurred no Default under any such
permit, other than Defaults which could not reasonably be anticipated to have,
individually or in the aggregate, a HFG Material Adverse Effect or which would
prevent the consummation of the Merger. HFG:
(a) is not in Default under any of the provisions of its Articles of
Incorporation or Bylaws;
(b) is not in Default under, or violation of, any applicable laws,
orders, or permits, except for Defaults which could not reasonably be
anticipated to have, individually or in the aggregate, a HFG Material Adverse
Effect; or
(c) since its incorporation on May 6, 2002, has not received any
notification or communication from any agency or department of federal, state,
or local government or any Regulatory Authority or the staff thereof (i)
asserting that HFG is not, or may not be, in compliance with any laws or orders,
where such noncompliance is reasonably likely to have, individually or in the
aggregate, a HFG Material Adverse Effect, (ii) threatening to revoke any
permits, the revocation of which is reasonably likely to have, individually or
in the aggregate, a HFG Material Adverse Effect, or (iii) requiring HFG to enter
into or consent to the issuance of a cease and desist order, injunction formal
agreement, directive, commitment, or memorandum of understanding, or to adopt
any board resolution or similar undertaking.
5.5 LEGAL PROCEEDINGS.
There is no Litigation instituted or pending, or, to the knowledge of
HFG, threatened (or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable possibility of an unfavorable outcome)
against HFG, or against any director or officer in their capacities as such, or
against any asset, interest, or right of any of them, nor are there any orders
outstanding against HFG.
5.6 STATEMENTS TRUE AND CORRECT.
(a) No statement, certificate, instrument, or other writing furnished or
to be furnished by HFG or any Affiliate thereof to HBC pursuant to this
Agreement or any other document, agreement, or instrument referred to herein
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) None of the information supplied or to be supplied by HFG or any
Affiliate thereof for inclusion in the HBC Proxy Statement to be mailed to HBC's
shareholders in connection with the HBC Shareholders' Meeting, and any other
documents to be filed by HFG or any Affiliate thereof with any Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the HBC Proxy
Statement, when first mailed to the
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shareholders of HBC, be false or misleading with respect to any 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, or, in
the case of the HBC Proxy Statement or any amendment thereof or supplement
thereto, at the time of the HBC Shareholders' Meeting, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of any proxy for the HBC Shareholders' Meeting.
(c) All documents that HFG or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable law.
5.7 REGULATORY MATTERS.
Neither HFG nor any Affiliate of HFG has taken or agreed to take any
action, and HFG has no knowledge of any fact or circumstance that is reasonably
likely to Materially impede or delay receipt of any Consents or approvals of
Regulatory Authorities referred to in Section 9.1(b) of this Agreement. To the
knowledge of HFG there exists no fact, circumstance, or reason why the requisite
Consents or approvals referred to in Section 9.1(b) of this Agreement cannot be
received in a timely manner.
5.8 STATE TAKEOVER LAWS.
HFG has taken all necessary action to exempt the transactions
contemplated by this Agreement from, or if necessary to challenge the validity
or applicability of, any applicable "moratorium," "fair price," "business
combination," "control share," or other anti-takeover laws (collectively,
"Takeover Laws").
5.9 BOARD ACTIONS.
The Board of Directors of HFG, at a meeting duly called and held, has by
unanimous vote of the directors present (who constituted all of the directors
then in office) (i) adopted this Agreement and the transactions contemplated
hereby, including the Merger, and (ii) resolved to submit and recommend this
Agreement to the holders of the shares of HFG Common Stock for approval by
written consent of the holders of HFG Common Stock as soon as reasonably
practical after the execution of this Agreement.
5.10 PURCHASE FOR INVESTMENT.
Each stockholder of HFG will represent and warrant to HBC that the
shares of HBC Common Stock that will be acquired by such stockholder of HFG
(each a "HFG Stockholder") pursuant to the Merger are being acquired by such HFG
Stockholder for its own account, not as a nominee or agent, and not with a view
to, or for sale in connection with, any distribution thereof. Each HFG
Stockholder will further represent and warrant to HBC that it understands that
the shares of HBC Common Stock issuable pursuant to the Merger have not been
registered under the Securities Act, or any state securities laws, by reason of
specific exemptions from the registration provisions of the Securities Act and
such laws that may depend upon, among other things, the bona fide nature of such
HFG Stockholder's investment intent as expressed in an investor suitability
questionnaire which is reasonably satisfactory to HBC (each an "Investor
Suitability Questionnaire"). As of the Effective Time, no more than thirty-five
(35) HFG Stockholders shall fail to qualify as an "accredited investor" within
the meaning of Regulation D promulgated by the SEC under the Securities Act.
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ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF HBC
HBC hereby represents and warrants to HFG as follows:
6.1 ORGANIZATION, STANDING, AND POWER.
HBC is a corporation duly organized, validly existing, and in good
standing under the laws of the State of California, and has the corporate power
and authority to carry on its business as now conducted and to own, lease and
operate its material assets. HBC is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a HBC Material
Adverse Effect.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) HBC has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of HBC, subject to the approval
of this Agreement by the holders of a majority of the outstanding shares of HBC
Common Stock as contemplated by Section 8.1, which is the only shareholder vote
required for approval of this Agreement and consummation of the Merger by HBC.
This Agreement represents a legal, valid, and binding obligation of HBC,
enforceable against HBC in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this Agreement by HBC, nor the
consummation by HBC of the transactions contemplated hereby, nor compliance by
HBC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of HBC's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any asset of any HBC Entity under, any
contract or permit of any HBC Entity, where such Default or Lien, or any failure
to obtain such Consent, is reasonably likely to have, individually or in the
aggregate, a HBC Material Adverse Effect, or (iii) subject to receipt of the
requisite Consents referred to in Sections 9.1(b) and 9.1(c), constitute or
result in a Default under, or require any Consent pursuant to, any law or order
applicable to any HBC Entity or any of their respective material assets
(including any HBC Entity becoming subject to or liable for the payment of any
tax or any of the assets owned by any HBC Entity being reassessed or revalued by
any Regulatory Authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities laws, and applicable
rules of National Association of Securities Dealers, Inc., and other than
Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other than Consents,
filings, or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a HBC Material Adverse Effect,
no notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by HBC of the Merger and the other transactions
contemplated in this Agreement.
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6.3 CAPITAL STOCK.
(a) The authorized capital stock of HBC consists of 10,000,000 shares of
HBC Common Stock, of which 806,170 shares are issued and outstanding as of the
date of this Agreement. All of the issued and outstanding shares of HBC Common
Stock are duly and validly issued and outstanding and are fully paid and
nonassessable under the CGCL. None of the outstanding shares of HBC Common Stock
has been issued in violation of any preemptive rights of the current or past
shareholders of HBC.
(b) Except as set forth in Section 6.3(a) and for the options to
purchase shares of HBC Common Stock granted pursuant to The Bank of Hemet 1994
Stock Option Plan, there are no shares of capital stock or other equity
securities of HBC outstanding and no outstanding Equity Rights relating to the
capital stock of HBC. Except as specifically contemplated by this Agreement, no
Person has any contract or any right or privilege (whether pre-emptive or
contractual) capable of becoming a contract or Equity Right for the purchase,
subscription or issuance of any securities of HBC.
6.4 COMPLIANCE WITH LAWS.
HBC is duly registered as a bank holding company under the federal Bank
Holding Company Act of 1956, as amended. Each HBC Entity has in effect all
permits necessary for it to own, lease or operate its material assets and to
carry on its business as now conducted, except for those permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a HBC
Material Adverse Effect, and there has occurred no Default under any such
permit, other than Defaults which could not reasonably be anticipated to have,
individually or in the aggregate, a HBC Material Adverse Effect. None of the HBC
Entities:
(a) is in Default under its Articles of Incorporation or Bylaws (or
other governing instruments); or
(b) is in Default under any laws, orders or permits applicable to its
business or employees conducting its business, except for Defaults which could
not reasonably be anticipated to have, individually or in the aggregate, a HBC
Material Adverse Effect; or
(c) since January 1, 1999, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any HBC Entity is not, or may not be, in compliance with any laws or orders,
where such noncompliance is reasonably likely to have, individually or in the
aggregate, a HBC Material Adverse Effect, (ii) threatening to revoke any
permits, the revocation of which is reasonably likely to have, individually or
in the aggregate, a HBC Material Adverse Effect, or (iii) requiring any HBC
Entity to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment or memorandum of understanding, or to
adopt any board resolution or similar undertaking, which restricts materially
the conduct of its business, or in any manner relates to its employment
decisions, its employment or safety policies or practices, its capital adequacy,
its credit or reserve policies, its management, or the payment of dividends.
6.5 LEGAL PROCEEDINGS.
There is no Litigation instituted or pending, or, to the knowledge of
HBC, threatened (or unasserted but considered probable of assertion and which if
asserted would have at least a reasonable possibility of an unfavorable outcome)
against any HBC Entity, or against any director, employee or employee benefit
plan of any HBC Entity, or against any asset, interest, or right of any of them,
that is reasonably likely to have, individually or in the aggregate, a HBC
Material Adverse Effect, nor are there
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any orders outstanding against any HBC Entity, that is reasonably likely to
have, individually or in the aggregate, a HBC Material Adverse Effect.
6.6 STATEMENTS TRUE AND CORRECT.
(a) No statement, certificate, instrument or other writing furnished or
to be furnished by any HBC Entity or any Affiliate thereof to HFG pursuant to
this Agreement or any other document, agreement or instrument referred to herein
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) All documents that any HBC Entity or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable law.
6.7 REGULATORY MATTERS.
No HBC Entity nor any Affiliate thereof has taken or agreed to take any
action, and HBC has no knowledge of any fact or circumstance that is reasonably
likely to Materially impede or delay receipt of any Consents or approvals of
Regulatory Authorities referred to in Section 9.1(b) of this Agreement. To the
knowledge of HBC there exists no fact, circumstance, or reason why the requisite
Consents or approvals referred to in Section 9.1(b) of this Agreement cannot be
received in a timely manner.
6.8 STATE TAKEOVER LAWS.
HBC has taken all necessary action to exempt the transactions
contemplated by this Agreement from, or if necessary to challenge the validity
or applicability of, any applicable Takeover Laws.
6.9 BOARD ACTIONS.
The Board of Directors of HBC, at a meeting duly called and held, has by
unanimous vote of the directors present (who constituted all of the directors
then in office) (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, and the transactions contemplated
thereby, taken together, are fair to and in the best interests of the
shareholders of HBC, (ii) approved this Agreement, and (iii) resolved to submit
this Agreement for approval by the holders of the shares of HBC Common Stock.
6.10 OPINION OF FINANCIAL ADVISOR.
The Board of Directors of HBC has received the opinion of Alex
Sheshunoff & Co. Investment Banking, L.P., dated the date of this Agreement (the
"HBC Fairness Opinion"), to the effect that, the Cash Payment to be received by
HBC shareholders in the Merger is fair, from a financial point of view, to such
shareholders.
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 COVENANTS OF HFG.
(a) From the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, unless the prior written consent of
HBC shall have been obtained, and except as
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otherwise expressly contemplated herein, HFG covenants and agrees that (i) it
will use its reasonable efforts to preserve intact its business organization and
assets and maintain its rights and franchises, (ii) it shall take no action
which would (A) materially adversely affect the ability of any Party to obtain
any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Section 9.1(b) or 9.1(c), or (B) materially adversely affect the
ability of any Party to perform its covenants and agreements under this
Agreement, and (iii) it shall engage only in activities that are directly and
exclusively related to this Agreement and HFG's performance hereunder.
7.2 COVENANTS OF HBC.
From the date of this Agreement until the earlier of the Effective Time
or the termination of this Agreement, unless the prior written consent of HFG
shall have been obtained, and except as otherwise expressly contemplated herein,
HBC covenants and agrees that it (i) will operate its business only in the
usual, regular and ordinary course, (ii) will use its reasonable efforts to
preserve intact its business organization and assets and maintain its rights and
franchises, and (iii) shall take no action which would (A) materially adversely
affect the ability of any Party to obtain any Consents required for the
transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c), or (B) materially adversely affect the ability of any Party to perform
its covenants and agreements under this Agreement; provided, that the foregoing
shall not prevent any HBC Entity from acquiring any assets or other businesses
or from discontinuing or disposing of any of its assets or business if such
action is, in the judgment of HBC, desirable in the conduct of the business of
HBC and its Subsidiaries.
7.3 NOTICE OF ADVERSE CHANGES IN CONDITION.
Each Party agrees to give written notice promptly to the other Party
upon becoming aware of the occurrence or impending occurrence of any event or
circumstance relating to it or any of its Subsidiaries which (i) is reasonably
likely to have, individually or in the aggregate, a HFG Material Adverse Effect
or a HBC Material Adverse Effect, as applicable, or (ii) would cause or
constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
7.4 REPORTS.
Each Party and its Subsidiaries, if any, shall file all reports required
to be filed by it with Regulatory Authorities 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. As of their respective dates, any
such reports filed with the SEC will comply in all material respects with the
Securities Laws and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE 8 ADDITIONAL AGREEMENTS
8.1 HBC PROXY STATEMENT; SHAREHOLDER APPROVAL.
(a) HBC shall duly call, give notice of, convene and hold the HBC
Shareholders' Meeting, to be held as soon as reasonably practicable after
execution of this Agreement for the purpose of voting upon approval of this
Agreement and the transactions contemplated hereby, including the Merger ("HBC
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Shareholder Approval"), and such other matters as it deems appropriate and
shall, through its Board of Directors use its reasonable efforts to obtain the
HBC Shareholder Approval. In connection with the HBC Shareholders' Meeting, HBC
shall prepare the HBC Proxy Statement and mail the HBC Proxy Statement to its
shareholders, and HFG shall furnish to HBC all information concerning HFG and
its Affiliates that HBC may reasonably request in connection with the HBC Proxy
Statement. HBC and HFG shall timely and properly make all necessary filings with
respect to the Merger under the Securities Laws.
(b) HFG shall, as soon as reasonably practicable after the execution of
this Agreement ("HFG Stockholder Approval"), obtain the unanimous written
consent of the holders of HFG Common Stock to approve this Agreement and the
transactions contemplated hereby, including the Merger.
8.2 CONSENTS OF REGULATORY AUTHORITIES.
The Parties hereto shall cooperate with each other and use their
reasonable efforts to promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings and to obtain as
promptly as practicable all Consents of all Regulatory Authorities and other
Persons which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including the Merger). The Parties agree that
they will consult with each other with respect to the obtaining of all Consents
of all Regulatory Authorities and other Persons necessary or advisable to
consummate the transactions contemplated by this Agreement and each Party will
keep the other apprised of the status of matters relating to contemplation of
the transactions contemplated herein. Each Party also shall promptly advise the
other upon receiving any communication from any Regulatory Authority whose
Consent is required for consummation of the transactions contemplated by this
Agreement which causes such Party to believe that there is a reasonable
likelihood that any requisite Consent will not be obtained or that the receipt
of any such Consent will be materially delayed.
8.3 FILINGS WITH STATE OFFICES.
Upon the terms and subject to the conditions of this Agreement, HBC and
HFG shall file a copy of the Merger Agreement and officers' certificates with
the Secretary of State of the State of California and the Articles of Merger
with the Secretary of State of the State of Nevada in connection with the
Closing.
8.4 AGREEMENT AS TO EFFORTS TO CONSUMMATE.
Subject to the terms and conditions of this Agreement, each Party agrees
to use, and to cause its Subsidiaries, if any, to use, its reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper, or advisable under applicable laws to consummate and
make effective, as soon as reasonably practicable after the date of this
Agreement, the transactions contemplated by this Agreement, including using its
reasonable efforts to lift or rescind any order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement.
8.5 INVESTIGATION.
Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a material breach of
any representation, warranty, covenant or agreement of the other Party or which
has had or is reasonably likely to have a HFG Material Adverse Effect or a HBC
Material Adverse Effect, as applicable.
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8.6 PRESS RELEASES.
Prior to the Effective Time, HFG and HBC shall consult with each other
as to the form and substance of any press release or other public disclosure
materially related to this Agreement or any other transaction contemplated
hereby; provided, that nothing in this Section 8.6 shall be deemed to prohibit
any Party from making any disclosure which its counsel deems necessary or
advisable in order to satisfy such Party's disclosure obligations imposed by
law.
8.7 STATE TAKEOVER LAWS.
Each of HFG and HBC shall take all necessary steps to exempt the
transactions contemplated by this Agreement from, or if necessary to challenge
the validity or applicability of, any applicable Takeover Law.
8.8 HFG COMMON STOCK.
HFG shall use its best efforts to ensure that, as of the Effective Time,
all of the issued and outstanding shares of HFG Common Stock are duly and
validly issued and outstanding and are fully paid and nonassessable under the
NGCL.
8.9 INDEMNIFICATION.
(a) For a period of six years after the Effective Time, HBC shall
indemnify, defend and hold harmless the present and former directors, officers,
and agents of HFG (each, an "Indemnified Party") against all liabilities arising
out of actions or omissions arising out of the Indemnified Party's service or
services as directors, officers, or agents of HFG occurring at or prior to the
Effective Time (including the transactions contemplated by this Agreement) to
the fullest extent permitted under Nevada law and by HFG's Articles of
Incorporation and Bylaws as in effect on the date hereof, including provisions
relating to advances of expenses incurred in the defense of any Litigation and
whether or not HFG is insured against any such matter. Without limiting the
foregoing, in any case in which approval by the Surviving Corporation is
required to effectuate any indemnification, the Surviving Corporation shall
direct, at the election of the Indemnified Party, that the determination of any
such approval shall be made by independent counsel mutually agreed upon between
HBC and the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 8.9, upon learning of any such liability or
Litigation, shall promptly notify HBC thereof. In the event of any such
Litigation (whether arising before or after the Effective Time), (i) the
Surviving Corporation shall have the right to assume the defense thereof and the
Surviving Corporation shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except that if
the Surviving Corporation elects not to assume such defense or if counsel for
the Indemnified Parties advises that there are substantive issues which raise
conflicts of interest between the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
the Surviving Corporation shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received; provided, that the Surviving Corporation shall be obligated pursuant
to this paragraph (b) to pay for only one firm of counsel for all Indemnified
Parties in any jurisdiction; (ii) the Indemnified Parties will cooperate in the
defense of any such Litigation; and (iii) the Surviving Corporation shall not be
liable for any settlement effected without its prior written consent; and
provided further that the Surviving Corporation shall not have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall determine, and such determination
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shall have become final, that the indemnification of such Indemnified Party in
the manner contemplated hereby is prohibited by applicable law.
(c) If the Surviving Corporation or any successors or assigns shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving Person of such consolidation or merger or shall transfer all or
substantially all of its assets to any Person, then and in each case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 8.9.
(d) The provisions of this Section 8.9 are intended to be for the
benefit of and shall be enforceable by, each Indemnified Party and their
respective heirs and representatives.
8.10 HFG FINANCING.
(a) Promptly after the mailing of the HBC Proxy Statement to HBC's
shareholders, HFG shall promptly commence and complete the sales of shares of
HFG Common Stock (the "HFG Financing" ) in accordance with the procedures and
restrictions which are described in Exhibit 1 hereto.
(b) In connection with the HFG Financing, HBC shall, during regular
business hours, use its commercially reasonable efforts to make its executive
officers available to the HFG Investors (as defined in Exhibit 1) for the
purpose of answering questions and providing information with respect to HBC and
the HFG Financing.
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY.
The respective obligations of each Party to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 11.6:
(a) Shareholder Approval. The shareholders of both HFG and HBC shall
have approved this Agreement and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by law
and by the provisions of any governing instruments. In addition, the holders of
HBC Common Stock shall have approved this Agreement and the consummation of the
transactions contemplated hereby, including the Merger, in accordance with
Section 310(a)(1) of the CGCL.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for consummation
of the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
(including requirements relating to the raising of additional capital or the
disposition of assets) which in the reasonable judgment of the board of
directors of HBC would so materially adversely impact the economic or business
benefits of the transactions contemplated by this Agreement that, had such
condition or requirement been known, such Party would not, in its reasonable
judgment, have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred to
in Section 9.1(b)) or for the preventing of any Default under any contract or
permit of such Party which, if not obtained or made, is reasonably likely to
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have, individually or in the aggregate, a HFG Material Adverse Effect or a HBC
Material Adverse Effect, as applicable. No Consent so obtained which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable judgment of the
board of directors of HBC would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement that, had
such condition or requirement been known, such Party would not, in its
reasonable judgment, have entered into this Agreement.
(d) Legal Proceedings. No court or governmental or Regulatory Authority
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law or order (whether temporary, preliminary or permanent) or taken
any other action which prohibits, restricts or makes illegal consummation of the
transactions contemplated by this Agreement.
(e) HFG Financing. HFG shall have completed the HFG Financing in
accordance with the procedures and restrictions set forth in Exhibit 1 (it being
agreed that the procedures and restrictions contained in paragraphs 1. through
3., inclusive, of such exhibit shall be strictly adhered to, without deviation).
(f) Opinion of Counsel. HBC shall have received an opinion of Alston &
Bird LLP, counsel to HBC, dated as of the Closing Date, in form and substance
satisfactory to both HBC and HFG, to the effect that: the merger of HFG with and
into HBC, the conversion of shares of HFG Common Stock into the right to receive
shares of HBC Common Stock, and the conversion of shares of the HBC Common Stock
into the right to receive the Cash Payment, as provided for herein, should be
treated for federal income tax purposes as a redemption (within the meaning of
section 317(b) of the Internal Revenue Code) by HBC of the shares of the HBC
Common Stock converted into the right to receive the Cash Payment where no
mandatory obligation to offset applies as a result of the HFG Financing; no gain
or loss should be recognized by HBC pursuant to consummation of the Merger; and
no gain or loss should be recognized by the stockholders of HFG upon the
conversion of their shares of HFG Common Stock into the right to receive shares
of HBC Common Stock, as provided for herein.
9.2 CONDITIONS TO OBLIGATIONS OF HBC.
The obligations of HBC to perform this Agreement and consummate the
Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by HBC pursuant to
Section 11.6(a):
(a) Representations and Warranties. For purposes of this Section 9.2(a),
the accuracy of the representations and warranties of HFG set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). Except for the representations and warranties set
forth in Section 5.3 which shall be true and correct in their entirety, there
shall not exist inaccuracies in the representations and warranties of HFG set
forth in this Agreement such that the aggregate effect of such inaccuracies has,
or is reasonably likely to have, a HBC Material Adverse Effect. For purposes of
the immediately preceding sentence only, those representations and warranties
which are qualified by references to "material" or "Material Adverse Effect" or
variations thereof, or to the "knowledge" of any Person or to matter being
"known" by any Person shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of HFG to be performed and complied with pursuant to
this Agreement and the other agreements
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contemplated hereby prior to the Closing Date shall have been duly performed and
complied with in all material respects.
(c) Certificates. HFG shall have delivered to HBC (i) a certificate,
dated as of the Closing Date and signed on its behalf by its chief executive
officer and its chief financial officer, to the effect that the conditions set
forth in Section 9.1 as applicable to HFG and in Sections 9.2(a) and 9.2(b) have
been satisfied, and (ii) certified copies of resolutions duly adopted by HFG's
Board of Directors and stockholders evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby,
including the Merger, all in such reasonable detail as HBC and its counsel shall
request.
(d) Investor Suitability Questionnaires. HBC shall have received from
each Person who will be a stockholder of HFG at the Effective Time an executed
Investor Suitability Questionnaire.
(e) HBC Fairness Opinion. The HBC Fairness Opinion shall not have been
withdrawn or adversely modified, unless another financial advisor of nationally
recognized reputation delivers an opinion to the Board of Directors of HBC
substantially to the same effect as provided in Section 6.10 hereof.
(f) No Exercise of Dissenters' Rights. As of the Closing Date no holder
of HFG Common Stock shall have exercised, given notice of exercise or perfected
such holder's dissenters' rights in accordance with and as contemplated by
Section 92A.300 et seq. of the NGCL.
9.3 CONDITIONS TO OBLIGATIONS OF HFG.
The obligations of HFG to perform this Agreement and consummate the
Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by HFG pursuant to
Section 11.6(b):
(a) Representations and Warranties. For purposes of this Section 9.3(a),
the accuracy of the representations and warranties of HBC set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). Except for the representations and warranties set
forth in Section 6.3 which shall be true and correct in their entirety, there
shall not exist inaccuracies in the representations and warranties of HBC set
forth in this Agreement such that the aggregate effect of such inaccuracies has,
or is reasonably likely to have, a HBC Material Adverse Effect. For purposes of
the immediately preceding sentence only, those representations and warranties
which are qualified by references to "material" or "Material Adverse Effect" or
variations thereof, or to the "knowledge" of any Person or to a matter being
"known" by any Person shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of HBC to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the Closing
Date shall have been duly performed and complied with in all material respects.
(c) Certificates. HBC shall have delivered to HFG (i) a certificate,
dated as of the Closing Date and signed on its behalf by its chief executive
officer and its chief financial officer, to the effect that the conditions set
forth in Section 9.1 as applicable to HBC and in Sections 9.3(a) and 9.3(b) have
been satisfied, and (ii) certified copies of resolutions duly adopted by HBC's
Board of Directors and
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shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including the Merger, all
in such reasonable detail as HFG and its counsel shall request.
(d) Minimum Participation in HFG Financing. Holders of at least 90.0% of
the shares of HBC Common Stock issued and outstanding immediately prior to the
Effective Time shall have participated in the HFG Financing.
ARTICLE 10 TERMINATION
10.1 TERMINATION.
Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of this Agreement by the shareholders of HFG and
HBC, this Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Time:
(a) By mutual written agreement of HBC and HFG; or
(b) By either Party (provided that the terminating Party is not then in
material breach of any representation or warranty (under the applicable standard
set forth in Section 9.2(a) in the case of HFG and Section 9.3(a) in the case of
HBC), covenant, or other agreement contained in this Agreement), in the event of
a breach by the other Party of any representation or warranty contained in this
Agreement which cannot be or has not been cured within 30 days after the giving
of written notice to the breaching Party of such breach and which breach is
reasonably likely, in the opinion of the non-breaching Party, to have,
individually or in the aggregate, a HFG Material Adverse Effect or a HBC
Material Adverse Effect, as applicable, on the breaching Party and which breach
is reasonably likely, in the opinion of the non-breaching Party, to permit such
Party to refuse to consummate the transactions contemplated by this Agreement
pursuant to the applicable standard set forth in Section 9.2 or 9.3, as
applicable; or
(c) By either Party (provided that the terminating Party is not then in
material breach of any representation or warranty (under the applicable standard
set forth in Section 9.2(a) in the case of HFG and Section 9.3(a) in the case of
HBC), covenant, or other agreement contained in this Agreement), in the event of
a material breach by the other Party of any covenant or agreement contained in
this Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching Party of such breach; or
(d) By either Party (provided that the terminating Party is not then in
material breach of any representation or warranty (under the applicable standard
set forth in Section 9.2(a) in the case of HFG and Section 9.3(a) in the case of
HBC), covenant, or other agreement contained in this Agreement), in the event
(i) any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal, (ii) any law or
order permanently restraining, enjoining or otherwise prohibiting the
consummation of the Merger shall have become final and nonappealable, or (iii)
the shareholders of either HBC of HFG fail to vote on or give consent to their
approval of the matters relating to this Agreement and the transactions
contemplated hereby where such matters were presented to such shareholders for
approval and voted or acted upon; or
(e) By either Party, in the event that the Merger shall not have been
consummated by December 31, 2002, if the failure to consummate the transactions
contemplated hereby on or before such date is not
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caused by any breach of this Agreement by the Party electing to terminate
pursuant to this Section 10.1(e); or
(f) By HBC, if the board of directors of HBC shall have determined to
approve, endorse or recommend a Superior Proposal to HBC's shareholders.
10.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement and the abandonment of
the Merger pursuant to Section 10.1, this Agreement shall become void and have
no effect, except that (i) the provisions of this Section 10.2, 10.3 and Article
11, shall survive any such termination and abandonment, and (ii) no such
termination shall relieve the breaching Party from liability resulting from any
willful breach by that Party of a representation, warranty, covenant or
agreement contained in this Agreement.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS.
The respective representations, warranties, obligations, covenants, and
agreements of the Parties shall not survive the Effective Time, except for those
covenants and agreements which by their terms apply in whole or in part after
the Effective Time.
ARTICLE 11 MISCELLANEOUS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"AFFILIATE" of a Person means: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled
by or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other
Person for which a Person described in clause (ii) acts in any such
capacity.
"CLOSING DATE" means the date on which the Closing occurs.
"CONSENT" means any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
contract, law, order, or permit.
"DEFAULT" means (i) any breach or violation of, default under,
contravention of, or conflict with, any contract, law, order, or permit,
(ii) any occurrence of any event that with the passage of time or the
giving of notice or both would constitute a breach or violation of,
default under, contravention of, or conflict with, any contract, law,
order, or permit, or (iii) any occurrence of any event that with or
without the passage of time or the giving of notice would give rise to a
right of any Person to exercise any remedy or obtain any relief under,
terminate or revoke, suspend, cancel, or modify or change the current
terms of, or renegotiate, or to accelerate the maturity or performance
of, or to increase or impose any liability under, any contract, law,
order, or permit, where, in any such event, such Default is reasonably
likely to have, individually or in the aggregate, a HFG Material Adverse
Effect or a HBC Material Adverse Effect, as applicable.
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"EQUITY RIGHTS" means all arrangements, calls, commitments,
contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever
relating to, or securities or rights convertible into or exchangeable
for, shares of the capital stock of a Person or by which a Person is or
may be bound to issue additional shares of its capital stock or other
Equity Rights.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied during the periods involved.
"HBC COMMON STOCK" means the common stock, no par value, of HBC.
"HBC ENTITIES" means, collectively, HBC and all HBC Subsidiaries.
"HBC MATERIAL ADVERSE EFFECT" means an event, change or
occurrence which, individually or together with any other event, change
or occurrence, has a material adverse impact on (i) the financial
position, business, or results of operations of HBC and its
Subsidiaries, taken as a whole, or (ii) the ability of HBC to perform
its obligations under this Agreement or to consummate the Merger or the
other transactions contemplated by this Agreement, provided that "HBC
Material Adverse Effect" shall not be deemed to include the impact of
(A) changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (B)
changes in GAAP or regulatory accounting principles generally applicable
to banks and their holding companies, (C) actions and omissions of HBC
(or any of its Subsidiaries) taken with the prior informed written
Consent of HFG in contemplation of the transactions contemplated hereby,
(D) the direct effects of compliance with this Agreement on the
operating performance of HBC, including expenses incurred by HBC in
consummating the transactions contemplated by this Agreement, (E)
effects demonstrably shown to have been proximately caused by the public
announcement of, and the response or reaction of customers, vendors,
licensors, investors or employees of HBC to, this Agreement or any of
the transactions contemplated by this Agreement, (F) failure of HBC to
meet any published revenue or earnings predictions or expectations, for
any period ending on or after the date of this Agreement, or (G) changes
in the market price or trading volume of HBC Common Stock.
"HBC PROXY STATEMENT" means the proxy statement relating to the
HBC Shareholders Meeting.
"HBC SHAREHOLDERS' MEETING" means the meeting of the shareholders
of HBC to be held pursuant to Section 8.1, including any adjournment or
adjournments thereof.
"HFG COMMON STOCK" means the common stock, $0.001 par value per
share, of HFG.
"HFG MATERIAL ADVERSE EFFECT" means an event, change or
occurrence which, individually or together with any other event, change
or occurrence, has a material adverse impact on the ability of HFG to
perform its obligations under this Agreement or to consummate the Merger
or the other transactions contemplated by this Agreement, provided that
"Material Adverse Effect" shall not be deemed to include the impact of
(i) changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (ii)
changes in GAAP or regulatory accounting principles generally applicable
to banks and their holding companies, (ii) actions and omissions of HFG
taken with the prior informed written Consent of HBC in contemplation of
the transactions contemplated hereby, or (iv) the direct
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effects of compliance with this Agreement on the operating performance
of HFG, including expenses incurred by HFG in consummating the
transactions contemplated by this Agreement.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"LIEN" means any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever of, on, or with
respect to any property or property interest, other than (i) Liens for
current property taxes not yet due and payable, (ii) for depository
institution Subsidiaries of a Party, pledges to secure deposits and
other Liens incurred in the ordinary course of the banking business, and
(iii) Liens which do not materially impair the use of or title to the
assets subject to such Lien.
"LITIGATION" means any action, arbitration, cause of action,
lawsuit, claim, complaint, criminal prosecution, governmental or other
examination or investigation, audit (other than regular audits of
financial statements by outside auditors), compliance review,
inspection, hearing, administrative or other proceeding relating to or
affecting a Party, its business, its records, its policies, its
practices, its compliance with law, its actions, its assets (including
contracts related to it), or the transactions contemplated by this
Agreement, but shall not include regular, periodic examinations of
depository institutions and their Affiliates by Regulatory Authorities.
"MATERIAL" or "MATERIAL" for purposes of this Agreement shall be
determined in light of the facts and circumstances of the matter in
question; provided that any specific monetary amount stated in this
Agreement shall determine materiality in that instance.
"PARTY" means either HFG or HBC, and "PARTIES" means both HFG and
HBC.
"PERSON" means a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability
company, limited liability partnership, trust, business association,
group acting in concert, or any person acting in a representative
capacity.
"REGULATORY AUTHORITIES" means, collectively, the SEC, the
National Association of Securities Dealers, Inc., the Board of the
Governors of the Federal Reserve System, the Office of Thrift
Supervision (including its predecessor, the Federal Home Loan Bank
Board), the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the California Department of Financial
Institutions, and all other federal, state, county, local or other
governmental or regulatory agencies, authorities (including taxing and
self-regulatory authorities), instrumentalities, commissions, boards or
bodies having jurisdiction over the Parties and their respective
Subsidiaries.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES LAWS" means the Securities Act, the Exchange Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act
of 1940, as amended, the Trust
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Indenture Act of 1939, as amended, and the rules and regulations of any
Regulatory Authority promulgated thereunder.
"SUBSIDIARIES" means all those corporations, banks, associations,
or other business entities of which the entity in question either (i)
owns or controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which
50% or more of the outstanding equity securities is owned directly or
indirectly by its parent (provided, there shall not be included any such
entity the equity securities of which are owned or controlled in a
fiduciary capacity), (ii) in the case of partnerships, serves as a
general partner, (iii) in the case of a limited liability company,
serves as a managing member, or (iv) otherwise has the ability to elect
a majority of the directors, trustees or managing members thereof.
"SUPERIOR PROPOSAL" means any tender offer, exchange offer or
other proposal (on its most recently amended or modified terms, if
amended or modified) (i) involving the acquisition or purchase of more
than a 15% interest (A) in the total outstanding voting securities of
HBC or any HBC Subsidiary, or (B) of the assets and liabilities of HBC
or any HBC Subsidiary and (ii) with respect to which the board of
directors of HBC (A) determines in good faith that such proposal, if
accepted, is reasonably likely to be consummated on a timely basis,
taking into account all legal, financial, regulatory and other aspects
of such proposal and the Person or Group making such proposal, and (B)
determines in its good faith judgment (based on, among other things, the
advice of a financial advisor of nationally recognized reputation) to be
more favorable to HBC's shareholders than the Merger taking into account
all relevant factors (including whether, in the good faith judgment of
the Board of Directors of HBC, after obtaining the advice of a financial
advisor of nationally recognized reputation, the Person or Group making
such proposal is reasonably able to finance the transaction, and any
proposed changes to this Agreement that may be proposed by HFG in
response to such proposal).
"SURVIVING CORPORATION" means HBC as the surviving corporation
resulting from the Merger.
(b) The terms set forth below shall have the meanings ascribed thereto
in the referenced sections:
TERM PAGE
- ---- ----
Agreement..................................1
Articles of Merger.........................2
Cash Payment...............................3
Certificates...............................3
CGCL.......................................1
Closing....................................1
Effective Time.............................2
Exchange Agent.............................3
HBC........................................1
HBC Fairness Opinion......................11
HBC Shareholder Approval..................13
HFG........................................1
HFG Financing.............................15
HFG Stockholder............................8
Indemnified Party.........................14
Investor Suitability Questionnaire.........8
Merger.....................................1
Merger Agreement...........................2
NGCL.......................................1
Takeover Laws..............................8
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
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11.2 EXPENSES.
Each of the Parties shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including filing, registration and application fees, printing fees,
and fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel. Any fees incurred by one Party that are paid
by the other Party, shall be reimbursed by the first Party as promptly as
practicable after receipt of such notice from the second Party.
11.3 BROKERS AND FINDERS.
Except for Alex Sheshunoff & Co. Investment Banking, L.P. as to HBC,
each of the Parties represents and warrants that neither it nor any of its
officers, directors, employees, or Affiliates has employed any broker or finder
or incurred any liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon such broker's representing or being retained by
or allegedly representing or being retained by HFG or by HBC, each of HFG and
HBC, as the case may be, agrees to indemnify and hold the other Party harmless
of and from any liability in respect of any such claim.
11.4 ENTIRE AGREEMENT.
Except as otherwise expressly provided herein, this Agreement (including
the documents and instruments referred to herein) constitutes the entire
agreement between the Parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
thereto, written or oral. Nothing in this Agreement expressed or implied, is
intended to confer upon any Person, other than the Parties or their respective
successors, any rights, remedies, obligations, or liabilities under or by reason
of this Agreement, other than as provided in Section 8.9.
11.5 AMENDMENTS.
To the extent permitted by law, this Agreement may be amended by a
subsequent writing signed by each of the Parties upon the approval of each of
the Parties, whether before or after shareholder approval of this Agreement has
been obtained; provided, that the provisions of this Agreement relating to the
manner or basis in which shares of HFG Common Stock will be exchanged for shares
of HBC Common Stock, or shares of HBC Common Stock will be exchanged for the
Cash Payment, shall not be amended after the consent of the stockholders of HFG
or after the HBC Shareholders' Meeting without the requisite approval of the
holders of the issued and outstanding shares of HFG Common Stock or HBC Common
Stock, as applicable, entitled to vote thereon.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, HBC, acting through its board of
directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
HFG, to waive or extend the time for the compliance or fulfillment by HFG of any
and all of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of HBC under this Agreement, except any
condition which, if not satisfied, would result in the violation of any law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of HBC (except that any unfulfilled conditions shall be deemed to have
been waived at the Effective Time).
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(b) Prior to or at the Effective Time, HFG, acting through its board of
directors, chief executive officer or other authorized officer, shall have the
right to waive any Default in the performance of any term of this Agreement by
HBC, to waive or extend the time for the compliance or fulfillment by HBC of any
and all of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of HFG under this Agreement, except any
condition which, if not satisfied, would result in the violation of any law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of HFG (except that any unfulfilled conditions shall be deemed to have
been waived at the Effective Time).
(c) The failure of any Party at any time or times to require performance
of any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
11.7 ASSIGNMENT.
Except as expressly contemplated hereby, neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any Party
hereto (whether by operation of law or otherwise) without the prior written
consent of the other Party. 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 assigns.
11.8 NOTICES.
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or certified mail, postage pre-paid, or by courier
or overnight carrier, to the persons at the addresses set forth below (or at
such other address as may be provided hereunder), and shall be deemed to have
been delivered as of the date so delivered:
HFG: Hemet Financial Group, Inc.
300 Capitol Mall
Suite 1100
Sacramento, California 95814
Facsimile Number: (916) 442-3442
Attention: James B. Jaqua
Copy to Counsel: Bartel Eng & Schroder
300 Capitol Mall
Suite 1100
Sacramento, California 95814
Facsimile Number: (916) 442-3442
Attention: Daniel B. Eng
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HBC: Hemet Bancorp
3715 Sunnyside Drive
Riverside, California 92506
Facsimile Number: (909) 784-5771
Attention: James B. Jaqua
Copy to Counsel: Gary Steven Findley & Associates
1470 North Hundley Street
Anaheim, California 92806
Facsimile: (714) 630-7910
Attention: Thomas Q. Kwan
Alston & Bird LLP
601 Pennsylvania Avenue, N.W.
North Building, 10th Floor
Washington, D.C. 20004-2601
Facsimile Number: (202) 756-3333
Attention: Brian E. Lebowitz
11.9 GOVERNING LAW.
Regardless of any conflict of law or choice of law principles that might
otherwise apply, the Parties agree that this Agreement shall be governed by and
construed in all respects in accordance with the laws of the State of
California. The Parties all expressly agree and acknowledge that the State of
California has a reasonable relationship to the Parties and/or this Agreement.
As to any dispute, claim, or litigation arising out of or relating in any way to
this Agreement or the transaction at issue in this Agreement, the Parties hereto
hereby agree and consent to be subject to the exclusive jurisdiction of the
United States District Court for the Central District of California. If
jurisdiction is not present in federal court, then the Parties hereby agree and
consent to the exclusive jurisdiction of the state courts of Riverside County,
California. Each Party hereto hereby irrevocably waives, to the fullest extent
permitted by law, (a) any objection that it may now or hereafter have to laying
venue of any suit, action or proceeding brought in such court, (b) any claim
that any suit, action or proceeding brought in such court has been brought in an
inconvenient forum, (c) any defense that it may now or hereafter have based on
lack of personal jurisdiction in such forum, and (d) the right to a jury trial.
11.10 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
11.11 CAPTIONS; ARTICLES AND SECTIONS.
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement. Unless otherwise indicated, all references
to particular Articles or Sections shall mean and refer to the referenced
Articles and Sections of this Agreement.
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11.12 INTERPRETATIONS.
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved against any Party, whether under any rule of construction
or otherwise. No Party to this Agreement shall be considered the draftsman. The
Parties acknowledge and agree that this Agreement has been reviewed, negotiated,
and accepted by all Parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as fairly to
accomplish the purposes and intentions of all Parties hereto.
11.13 ENFORCEMENT OF AGREEMENT.
The Parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement was not performed in
accordance with its specific terms or was otherwise breached. It is accordingly
agreed that the Parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
11.14 SEVERABILITY.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first above written.
HEMET BANCORP
By: /s/ James B. Jaqua
-------------------------------------
James B. Jaqua
President and Chief Executive Officer
Attest:
By: /s/ Leslie Besic
-------------------------------------
Leslie Besic
Secretary
HEMET FINANCIAL GROUP, INC.
By: /s/ James B. Jaqua
-------------------------------------
James B. Jaqua
President
Attest:
By: /s/ Catherine A. Frei
-------------------------------------
Catherine A. Frei
Secretary
EXHIBIT 1
Principal Terms of HFG Financing
1. A total of approximately 75 Persons (the "HFG Investors") shall subscribe to
shares of HFG Common Stock prior to the Effective Time. All subscriptions shall
be treated as a single private placement by HFG that is exempt from the
registration requirements under the Securities Act pursuant to Regulation D
thereunder and from the registration requirements of applicable state securities
laws.
2. The HFG Investors shall pay for their shares of HFG Common Stock by means of
cash or promissory notes as set forth below. As a condition to their
subscriptions of HFG Common Stock, each HFG Investor shall be required to
execute a Shareholders Agreement (principally designed to achieve and maintain
HBC's status as a Subchapter S corporation after the Merger beginning in 2003),
a consent to HBC's election to become a Subchapter S corporation, an Investor
Suitability Questionnaire and such other documents as are necessary to complete
the HFG Financing.
3. Any HFG Investor owning shares of HBC Common Stock shall subscribe to a
number of shares of HFG Common Stock equal to that number of shares of HBC
Common Stock that such HFG Investor will own at the Effective Time by means of
the execution of a promissory note (each a "Promissory Note") to HFG in a
principal amount equal to the Cash Payment, multiplied by such number of shares
of HBC Common Stock that such HFG Investor will own at the Effective Time. Each
Promissory Note shall be payable at any time after the Effective Time upon
demand and shall be full recourse against the relevant HFG Investor. Each
Promissory Note will be interest-free and shall contain a mandatory set-off
provision, whereby the amount owing to HFG under the Promissory Note shall
automatically be set-off against the amount payable to the relevant HFG Investor
in the Merger.
4. In addition to the subscriptions to purchase shares of HFG Common Stock for
Promissory Notes described in paragraph 3. above, some number of HFG Investors
shall subscribe to purchase shares of HFG Common Stock for cash at a price per
share equal to the Cash Payment per share.
5. It is expected that the subscriptions to purchase shares of HFG Common Stock,
the Shareholders Agreement, the consent to election as a Subchapter S
corporation, the Investor Suitability Questionnaire, the Promissory Notes and
such other documents necessary to complete the HFG Financing will be executed
and delivered by the HFG Investors after the mailing of the definitive HBC Proxy
Statement but before the Effective Time. Each of these agreements will become
effective upon the issuance of the HFG Common Stock, which is expected to occur
immediately prior to the Effective Time.
1-1