EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
among
PBOC HOLDINGS, INC.,
PEOPLE'S BANK OF CALIFORNIA
and
THE BANK OF HOLLYWOOD
dated as of June 22, 1999
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
ARTICLE II THE MERGER 5
2.1 The Merger 5
2.2 Effective Time; Closing 6
2.3 Effect on Outstanding Shares 6
2.4 Shareholder Rights; Stock Transfers 6
2.5 Dissenting Shares 7
2.6 Exchange Procedures 7
2.7 Options 8
2.8 Withholding Rights 9
2.9 Additional Actions 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BOH 9
3.1 Capital Structure 10
3.2 Organization, Standing and Authority of BOH 10
3.3 No BOH Subsidiaries 10
3.4 Reserved 10
3.5 Authorized and Effective Agreement; Consents and Approvals 10
3.6 Regulatory Reports 11
3.7 Financial Statements 11
3.8 Material Adverse Change 12
3.9 Environmental Matters 12
3.10 Tax Matters 13
3.11 Legal Proceedings 13
3.12 Compliance with Laws 14
3.13 Certain Information 14
3.14 Employee Benefit Plans 14
3.15 Certain Contracts 16
3.16 Brokers and Finders 17
3.17 Insurance 17
3.18 Properties 17
3.19 Labor 17
3.20 Transactions with Affiliates 18
3.21 Nonperforming and Classified Assets 18
3.22 Required Vote; Inapplicability of Antitakeover Statutes;
Fairness Opinion 18
3.23 Year 2000 Compliance
3.24 Disclosures 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PBOC 19
4.1 Organization, Standing and Authority of PBOC 19
4.2 Organization, Standing, Authority and Ownership of the
PBOC Subsidiaries 19
4.3 Authorized and Effective Agreement; Consents and Approvals 20
4.4 Securities Documents 20
4.5 Financial Statements 21
4.6 Access to Funds 21
4.7 Legal Proceedings 21
4.8 Certain Information 21
4.9 Disclosures 22
ARTICLE V COVENANTS 22
5.1 Reasonable Best Efforts 22
5.2 Shareholder Meeting 22
5.3 Regulatory Matters 23
5.4 Investigation and Confidentiality 23
5.5 Press Releases 24
5.6 Business of BOH 24
5.7 Current Information 27
5.8 Benefit Plans and Arrangements 27
5.9 Indemnification; Insurance 28
5.10 Reserved 29
5.11 Disclosure Supplements 29
5.12 Failure to Fulfill Conditions 29
ARTICLE VI CONDITIONS PRECEDENT 29
6.1 Conditions Precedent - PBOC, the Bank and BOH 29
6.2 Conditions Precedent - BOH 30
6.3 Conditions Precedent - PBOC and the Bank 31
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT 32
7.1 Termination 32
7.2 Effect of Termination 33
7.3 Survival of Representations, Warranties and Covenants 33
7.4 Waiver 33
7.5 Amendment or Supplement 34
ARTICLE VIII MISCELLANEOUS 34
8.1 Expenses; Termination Fee 34
8.2 Entire Agreement 36
8.3 Assignment; Successors 36
8.4 Notices 36
8.5 Alternative Structure 37
8.6 Interpretation 38
8.7 Counterparts 38
8.8 Governing Law 38
Exhibit A Form of Shareholder Agreement
Exhibit B Form of Employment Agreement with Terry C. Jorgensen
Exhibit C Matters to be covered by opinion of counsel to PBOC
Exhibit D Matters to be covered by opinion of counsel to BOH
Schedule 8.1F Regulatory Approval Conditions
Schedule 5.8B PBOC Severance Policy
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated as of June 22, 1999, by and among PBOC
Holdings, Inc. ("PBOC"), a Delaware corporation, Peoples' Bank of California
("Bank"), a federally chartered stock savings bank and a wholly-owned subsidiary
of PBOC, and The Bank of Hollywood ("BOH"), a California commercial bank (the
"Agreement").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of PBOC and BOH have determined that it
is in the best interests of their respective companies and their shareholders to
consummate the business combination transactions provided for herein, subject to
the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to PBOC's willingness to enter into
this Agreement, the directors and executive officers of BOH (such directors and
executive officers collectively, the "Shareholders") are concurrently entering
into a Shareholder Agreement with PBOC (collectively, the "Shareholder
Agreement"), in the form attached hereto as Exhibit A, pursuant to which, among
other things, the Shareholders agree to vote their shares of BOH Common Stock in
favor of this Agreement and the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
"Acquisition Transaction" shall have the meaning set forth in Section
5.6(b) hereof.
"Affiliate" shall have the meaning set forth in Section 3.20 hereof.
"Articles of Combination" shall have the meaning set forth in Section 2.2
hereof.
"BOH Common Stock" shall mean the common stock, no par value per share, of
BOH.
"BOH ESOP" shall mean BOH's Employee Stock Ownership Plan.
"BOH Financial Statements" shall mean (i) the balance sheets (including
related notes and schedules, if any) of BOH as of December 31, 1998 and 1997 and
the statements of income, changes in shareholders' equity and cash flows
(including related notes and schedules, if any) of BOH for each of the three
years ended December 31, 1998, 1997 and 1996, (ii) the balance sheet (including
related notes and schedules, if any) of BOH as of March 31, 1999 and the
statements of income (including related notes and schedules, if any) of BOH for
the three months ended March 31, 1999 and 1998 and (iii) the balance sheets of
BOH (including related notes and schedules, if any) and the statements of income
(including related notes and schedules, if any) of BOH with respect to the
quarterly and annual periods ended subsequent to March 31, 1999 and delivered to
PBOC pursuant to Section 5.7 hereof.
"BOH Option Plans" shall mean the 1981 Stock Option Plan and the 1991
Stock Option Plan.
"BOH Options" shall mean options to purchase shares of BOH Common Stock
granted pursuant to one or both of the BOH Option Plans.
"CFC" shall mean the California Financial Code.
"CGCL" shall mean the California General Corporation Law.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"HOLA" shall mean the Home Owner's Loan Act, as amended.
"Confidentiality Agreement" shall have the meaning set forth in Section
5.4(b) hereof.
"CRA" shall mean the Community Reinvestment Act of 1977, as amended.
"Department" shall mean the State of California State Banking Department.
"Dissenting Shares" shall have the meaning set forth in Section 2.5
hereof.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the time specified pursuant to Section 2.2
hereof as the
effective time of the Merger.
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of Environmental
Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface or subsurface soil, plant and animal
life or any other natural resource), and/or (2) the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Materials of Environmental Concern. The term
Environmental Laws includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss.9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss.6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss.9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss.1101, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss.300f, et seq; (2) all comparable
state and local laws including but not limited to, the Air Quality Monitoring
Devices Act (Health and Safety Code ss. 42700 et seq.); the Porter-Cologne Water
Control Act (Water Code ss. 13200 et seq.); the Carpenter-Presley-Tanner
Hazardous Substance Control Act (Health and Safety Code ss. 25300 et seq.); the
Clean Waters Act (Fish and Game Code ss. 5650 et seq.); and the Hazard
Communications Act (8 CCR 5194) and any similar, implementing or successor law,
and any amendment, rule, regulation, order, or directive issued thereunder, and
(3) any common law (including without limitation common law that may impose
strict liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation, or any
successor thereto.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"Material Adverse Effect on BOH" shall mean any effect that (i) is
material and adverse to the financial condition, results of operations or
business of BOH or (ii) materially impairs the ability of BOH to consummate the
transactions contemplated by this Agreement (including without limitation the
Merger), provided, however, that Material Adverse Effect shall not be deemed to
include (i) the impact of changes in (a) laws, regulations, or policies of any
Government Entity or interpretations thereof; or (b) generally accepted
accounting principles, that in each case are generally applicable to the banking
industry, or (ii) actions taken or to be taken by BOH upon the written request
of PBOC pursuant to this Agreement.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall have the meaning set forth in Section 2.1(a) hereof.
"Merger Consideration" shall have the meaning set forth in Section 2.3
hereof.
"OTS" shall mean the Office of Thrift Supervision of the U.S. Department
of the Treasury, or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PBOC Financial Statements" shall mean (i) the consolidated balance sheets
(including related notes and schedules, if any) of PBOC as of December 31, 1998
and 1997 and the consolidated statements of income, shareholders' equity and
cash flows (including related notes and schedules, if any) of PBOC for each of
the three years ended December 31, 1998, 1997 and 1996, (ii) the consolidated
balance sheet (including related notes and schedules, if any) of PBOC as of
March 31, 1999 and the consolidated statements of income, shareholders' equity
and cash flows (including related notes and schedules, if any) of PBOC for the
three months ended March 31, 1999 and 1998 and (iii) the consolidated balance
sheets of PBOC (including related notes and schedules, if any) and the
consolidated statements of income, shareholders' equity and cash flows
(including related notes and schedules, if any) of PBOC included in the
Securities Documents filed by PBOC with respect to the quarterly and annual
periods subsequent to March 31, 1999.
"Previously Disclosed" shall mean disclosed in (i) a letter dated the date
hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to this
Agreement and describing in reasonable detail the matters contained therein and
delivered by the other party pursuant to Section 5.11 hereof. The inclusion of
any matter in information Previously Disclosed shall not be deemed an admission
or otherwise to imply that any such matter is material for purposes of this
Agreement.
"Proxy Statement" shall mean the proxy statement to be delivered by BOH to
its shareholders in connection with the solicitation of their approval of this
Agreement and the transactions contemplated hereby, including any amendment or
supplement thereto.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act, the Exchange Act and the
rules and regulations of the Commission promulgated thereunder.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1-02 of Regulation S-X of the Commission.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
THE MERGER
2.1 The Merger
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), BOH shall merge with and into
the Bank (the "Merger") in accordance with the applicable provisions of the laws
of the United States and the State of California. The Bank shall be the
surviving corporation (hereinafter sometimes called the "Surviving Corporation")
of the Merger, and shall continue its corporate existence under the laws of the
United States as a wholly-owned subsidiary of PBOC. The name of the Surviving
Corporation shall continue to be "People's Bank of California." Upon
consummation of the Merger, the separate corporate existence of BOH shall
terminate.
(b) From and after the Effective Time, the Merger shall have the effects
set forth in 12 CFR ss.552.13(l) and Section 2095 of the CFC.
(c) The Federal Stock Charter and Bylaws of the Bank, as in effect
immediately prior to the Effective Time, shall be the Federal Stock Charter and
Bylaws of the Surviving
Corporation, respectively, until altered, amended or repealed in accordance with
their terms and applicable law.
(d) The directors and officers of the Bank immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation
immediately following the Effective Time. Each of such directors and officers
shall hold office in accordance with the Federal Stock Charter and Bylaws of the
Surviving Corporation and applicable provisions of federal law and regulation.
2.2 Effective Time; Closing
The Merger shall become effective upon the filing of articles of
combination (the "Articles of Combination") with the Secretary of the OTS and
the filing of an agreement of merger (the "Agreement of Merger") or a copy of
the Articles of Combination with the California Secretary of State and the
California Commissioner of Financial Institutions, unless a different date and
time is specified as the effective time in such Articles of Combination or
Agreement of Merger (the "Effective Time"). A closing (the "Closing") shall take
place immediately prior to the Effective Time at 10:00 a.m., Pacific Time, on
the fifth business day following the satisfaction or waiver, to the extent
permitted hereunder, of the conditions to the consummation of the Merger
specified in Article VI of this Agreement (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing), at the offices of PBOC located at 5900 Wilshire Boulevard, 16th
Floor, Los Angeles, California, or at such other place, at such other time, or
on such other date as the parties may mutually agree upon. At the Closing, there
shall be delivered to PBOC and BOH the opinions, certificates and other
documents required to be delivered under Article VI hereof.
2.3 Effect on Outstanding Shares
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of a
holder of shares of BOH Common Stock:
(a) each share of BOH Common Stock issued and outstanding at the
Effective Time (other than (i) Dissenting Shares and (ii) shares of BOH Common
Stock owned by BOH or PBOC or any of its wholly-owned subsidiaries, other than
shares held in a fiduciary capacity or in satisfaction of a debt previously
contracted) shall become and be converted into the right to receive $19.00 in
cash without interest (the "Merger Consideration"); and
(b) each share of BOH Common Stock owned by BOH, PBOC or any of
PBOC's wholly-owned Subsidiaries at the Effective Time (other than shares held
in a fiduciary capacity or in satisfaction of a debt previously contracted)
shall be canceled and retired and shall not represent capital stock of the
Surviving Corporation, and no exchange or payment shall be made with respect
thereto.
2.4 Shareholder Rights; Stock Transfers
Except as provided in Section 2.5 hereof, at the Effective Time, holders
of BOH Common Stock shall cease to be and shall have no rights as shareholders
of BOH, other than to receive the aggregate Merger Consideration to which such
holders are entitled pursuant to Section 2.3 hereof. After the Effective Time,
there shall be no transfers on the stock transfers books of BOH or the Surviving
Corporation of shares of BOH Common Stock.
2.5 Dissenting Shares
Each outstanding share of BOH Common Stock the holder of which has
perfected his right to dissent under Section 1300 et seq. of the CGCL and has
not effectively withdrawn or lost such right as of the Effective Time (the
"Dissenting Shares") shall not be converted into or represent a right to receive
the Merger Consideration specified in Section 2.3 hereof, and the holder thereof
shall be entitled only to such rights as are granted by Section 1301 of the
CGCL. If any holder of Dissenting Shares shall fail to perfect or shall have
effectively withdrawn or lost the right to dissent, the Dissenting Shares held
by such holder shall thereupon be treated as though such Dissenting Shares had
been converted into the right to receive the aggregate Merger Consideration to
which such holder would be entitled pursuant to Section 2.3 hereof. BOH shall
give PBOC prompt notice upon receipt by BOH of any such written demands for
payment of the fair value of shares of BOH Common Stock and of withdrawals of
such demands and any other instruments provided pursuant to Section 1301 of the
CGCL. Any payments made in respect of Dissenting Shares shall be made by the
Surviving Corporation.
2.6 Exchange Procedures
(a) At and after the Effective Time, each certificate (each a
"Certificate") previously representing shares of BOH Common Stock, other than
Dissenting Shares, shall represent only the right to receive the aggregate
Merger Consideration specified in Section 2.3 hereof.
(b) As of the Effective Time, PBOC shall deposit, or shall cause to be
deposited, with such bank or trust company reasonably acceptable to BOH as PBOC
may select (the "Exchange Agent"), the aggregate Merger Consideration to be paid
to the holders of shares of BOH Common Stock pursuant to Section 2.3 hereof in
exchange for outstanding shares of BOH Common Stock.
(c) Within five business days after the Effective Time, PBOC shall cause
the Exchange Agent to mail to each holder of record of a Certificate or
Certificates the following: (i) a letter of transmittal specifying that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent, which shall be in
a form and contain any other provisions as PBOC and BOH may determine; and (ii)
instructions for use in effecting the surrender of Certificates in exchange for
the aggregate Merger Consideration to which such holder is entitled pursuant to
Section 2.3 hereof. Upon the proper surrender of a Certificate to the Exchange
Agent, together with a properly completed and
duly executed letter of transmittal, the holder of such Certificate shall be
entitled to receive in exchange therefor a check representing the aggregate
Merger Consideration which such holder has the right to receive in respect of
the Certificate surrendered pursuant to Section 2.3 hereof, and the Certificate
so surrendered shall forthwith be canceled. No interest will be paid or accrued
on the Merger Consideration. In the event of a transfer of ownership of any
shares of BOH Common Stock not registered in the transfer records of BOH, a
check for the aggregate Merger Consideration to which the holder thereof is
entitled pursuant to Section 2.3 hereof may be issued to the holder if the
Certificate representing such BOH Common Stock is presented to the Exchange
Agent, accompanied by documents sufficient, in the reasonable discretion of PBOC
and the Exchange Agent, (i) to evidence and effect such transfer and (ii) to
evidence that all applicable stock transfer taxes have been paid.
(d) Any portion of the aggregate Merger Consideration or the proceeds of
any investments thereof that remains unclaimed by the shareholders of BOH for
six months after the Effective Time shall be repaid by the Exchange Agent to
PBOC. Any shareholders of BOH who have not theretofore complied with this
Section 2.6 shall thereafter look only to PBOC and the Bank for payment of the
Merger Consideration deliverable in respect of each share of BOH Common Stock
such shareholder holds as determined pursuant to Section 2.3 of this Agreement
without any interest thereon. If outstanding Certificates are not surrendered or
the payments for them are not claimed prior to the date on which such payments
would otherwise escheat to or become the property of any Governmental Entity,
the unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of PBOC (and to the extent not in its
possession shall be paid over to it), free and clear of all claims or interest
of any person previously entitled to such claims. Notwithstanding the foregoing,
none of PBOC, the Surviving Corporation, the Exchange Agent or any other person
shall be liable to any former holder of BOH Common Stock for any amount
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by PBOC or the
Exchange Agent, the posting by such person of a bond in such amount as the
Exchange Agent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the aggregate Merger
Consideration deliverable in respect thereof pursuant to Section 2.3 of this
Agreement.
2.7 Options
At the Effective Time, each BOH Option which is outstanding and
unexercised immediately prior to the Effective Time shall be terminated and each
grantee thereof shall be entitled to receive, in lieu of each share of BOH
Common Stock that would otherwise have been issuable upon the exercise thereof,
an amount in cash computed by multiplying (i) the difference between (x) the
Merger Consideration and (y) the per share exercise price applicable to such
BOH Option by (ii) the number of such shares of BOH Common Stock subject to such
BOH Option. BOH agrees to take or cause to be taken all action necessary to
provide for such termination and payment effective at or before the Effective
Time. BOH agrees to provide each holder of a BOH Option granted pursuant to a
BOH Option Plan with any applicable notice and otherwise to take such actions as
may be required to ensure that outstanding BOH Options are terminated in the
manner set forth in this Section 2.7 and are not exercised in accordance with
their terms prior to the Effective Time.
2.8 Withholding Rights
PBOC or the Bank (through the Exchange Agent, if applicable) shall be
entitled to deduct and withhold from any amounts otherwise payable pursuant to
this Agreement to any holder of BOH Common Stock or BOH Options such amounts as
PBOC or the Bank is required under the Code or any provision of state, local or
foreign tax law to deduct and withhold with respect to the making of such
payment. Any amounts so withheld and paid to the applicable taxing authority
shall be treated for all purposes of this Agreement as having been paid to the
holder of BOH Common Stock or BOH Options, as applicable, in respect of which
such deduction and withholding was made by PBOC or the Bank.
2.9 Additional Actions
If, at any time after the Effective Time, the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its rights, title or interest in, to or under any
of the rights, properties or assets of the Bank or BOH, or (ii) otherwise carry
out the purposes of this Agreement, each of the Bank and BOH and its proper
officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Bank, BOH or
otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BOH
Except as Previously Disclosed, BOH represents and warrants to PBOC as
follows:
3.1 Capital Structure
The authorized capital stock of BOH consists solely of 2,000,000 shares of
BOH Common Stock. There are no shares of preferred stock authorized by BOH. As
of the date
hereof, (i) there are 1,434,030 shares of BOH Common Stock issued and
outstanding, and no shares of BOH Common Stock are held as treasury shares. All
outstanding shares of BOH Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and none of the outstanding shares
of BOH Common Stock has been issued in violation of the preemptive rights of any
person, firm or entity. BOH has Previously Disclosed each BOH Option outstanding
as of the date hereof, including the number of shares covered by each such BOH
Option and the exercise price thereof. Except for BOH Options to purchase
113,845 shares of BOH Common Stock as of the date hereof, there are no Rights
authorized, issued or outstanding with respect to the BOH Common Stock.
3.2 Organization, Standing and Authority of BOH
BOH is a California state banking corporation duly organized and validly
existing under the laws of the State of California with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on BOH. BOH has heretofore
delivered to PBOC true and complete copies of the Articles of Incorporation and
Bylaws of BOH as in effect as of the date hereof.
3.3 No Subsidiaries
BOH has no direct or indirect Subsidiaries. Except as Previously
Disclosed, BOH does not own or have the right to acquire, directly or
indirectly, any outstanding capital stock or other voting securities or
ownership interests of any corporation, bank, savings association, partnership,
joint venture or other organization.
3.4 Reserved.
3.5 Authorized and Effective Agreement; Consents and Approvals
(a) BOH has all requisite corporate power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals and
the approval of BOH's shareholders of this Agreement) to perform all of its
obligations under this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of BOH, except for the approval of this Agreement by BOH's shareholders.
This Agreement has been duly and validly executed and delivered by BOH and
constitutes a legal, valid and binding obligation of BOH which is enforceable
against BOH in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the
transactions contemplated hereby (including the Merger) nor compliance by BOH
with any of the provisions hereof, (i) conflict with or result in a breach of
any provisions of the Articles of Incorporation or Bylaws of BOH (ii) except as
Previously Disclosed, violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or give
rise to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any lien, charge or encumbrance upon any property
or asset of BOH pursuant to, any note, bond, mortgage, indenture, deed of trust,
lease, agreement or other instrument or obligation to which BOH is a party, or
by which any of its properties or assets may be bound or affected, or (iii)
subject to receipt of all required governmental and shareholder approvals,
violate any law, rule or regulation or any judgment, decree, order, governmental
permit or license applicable to BOH, excluding from the foregoing clauses (ii)
and (iii) conflicts, breaches, defaults or violations which, either individually
or in the aggregate, would not have a Material Adverse Effect on BOH.
(c) Except for (i) the filing of applications and notices with, and the
consents, approvals and waivers of, as applicable, the OTS, the Department, the
FDIC and the DOJ, (ii) the filing of Articles of Combination with the Secretary
of the OTS pursuant to the laws of the United States in connection with the
Merger, (iii) the filing of an Agreement of Merger or a copy of the Articles of
Combination with the California Secretary of State and the California
Commissioner of Financial Institutions and (iv) the approval of the Merger by
the respective Boards of Directors and shareholders of BOH and the Bank and the
Board of Directors of PBOC and except for such filings, authorizations or
approvals which are Previously Disclosed, no consents or approvals of or filings
or registrations with any Governmental Entity or with any third party are
necessary on the part of BOH in connection with the execution and delivery by
BOH of this Agreement and the transactions contemplated hereby.
3.6 Regulatory Reports
Since January 1, 1995, BOH has duly filed with the Department and the
FDIC, in correct form the monthly, quarterly and annual reports required to be
filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the requirements
of applicable laws and regulations, and BOH has previously delivered or made
available to PBOC accurate and complete copies of all such reports. In
connection with the most recent examinations of BOH by the FDIC, BOH was not
required to correct or change any action, procedure or proceeding which BOH
believes in good faith has not been now corrected or changed as required, other
than corrections or changes which, if not made, either individually or in the
aggregate, would not have a Material Adverse Effect on BOH. The most recent
regulatory rating given to BOH as to compliance with the CRA is "satisfactory."
To the best knowledge of BOH, since its last regulatory examination of CRA
compliance, BOH has not received any complaints as to CRA compliance.
3.7 Financial Statements
(a) BOH has previously delivered or made available to PBOC accurate and
complete copies of the BOH Financial Statements for all periods ended prior to
the date hereof, which in the case of the balance sheets of BOH as of December
31, 1998 and 1997 and the statements of income, changes in shareholders' equity
and cash flows for each of the years ended December 31, 1998, 1997 and 1996 are
accompanied by the audit report of Hutchison and Bloodgood LLP, independent
public accountants with respect to BOH. The BOH Financial Statements referred to
herein, as well as the BOH Financial Statements to be delivered pursuant to
Section 5.7 hereof, fairly present or will fairly present, as the case may be,
the financial condition of BOH as of the respective dates set forth therein, and
the results of operations, changes in shareholders' equity and cash flows of BOH
for the respective periods or as of the respective dates set forth therein.
(b) Each of BOH Financial Statements has been or will be, as the case may
be, prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as stated therein, and
except that unaudited BOH Financial Statements may not include all footnote
disclosures required by generally accepted accounting principles. The audits of
BOH have been conducted in accordance with generally accepted auditing
standards. The books and records of BOH are being maintained in material
compliance with applicable legal and accounting requirements, and such books and
records accurately reflect in all material respects all dealings and
transactions in respect of the business, assets, liabilities and affairs of BOH.
(c) Except to the extent (i) reflected, disclosed or provided for in the
statement of financial condition of BOH as of March 31, 1999 (including related
notes) and (ii) of liabilities incurred since such date in the ordinary course
of business, BOH has no liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of BOH.
3.8 Material Adverse Change
Since March 31, 1999, (i) BOH has conducted its businesses in the ordinary
and usual course and (ii) no event has occurred or circumstances arisen that,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on BOH.
3.9 Environmental Matters
(a) To the best knowledge of BOH, BOH is in compliance with all
Environmental Laws, except for any violations of any Environmental Law which
would not, individually or in the aggregate, have a Material Adverse Effect on
BOH. BOH has not received any communication alleging that BOH is not in such
compliance and, to the best knowledge of BOH, there are no present circumstances
that would prevent or interfere with the continuation of such compliance.
(b) To the best knowledge of BOH, none of the properties owned, leased or
operated
by BOH has been or is in violation of or liable under any Environmental Law,
except any such violations or liabilities which would not individually or in the
aggregate have a Material Adverse Effect on BOH.
(c) To the best knowledge of BOH, there are no past or present actions,
activities, circumstances, conditions, events or incidents that could reasonably
form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against BOH or against any person or entity
whose liability for any Environmental Claim BOH has or may have retained or
assumed either contractually or by operation of law, except such which would
not, individually or in the aggregate, have a Material Adverse Effect on BOH.
(d) BOH has Previously Disclosed any environmental studies conducted by it
with respect to any properties directly or indirectly owned or leased by it as
of the date hereof.
3.10 Tax Matters
(a) BOH has timely filed all federal, state and local (and, if applicable,
foreign) income, franchise, bank, excise, real property, personal property and
other tax returns required by applicable law to be filed by it (including,
without limitation, estimated tax returns, income tax returns, information
returns and withholding and employment tax returns) and have paid, or where
payment is not required to have been made, have set up an adequate reserve or
accrual for the payment of, all taxes required to be paid in respect of the
periods covered by such returns and, as of the Effective Time, will have paid,
or where payment is not required to have been made, will have set up an adequate
reserve or accrual for the payment of, all taxes for any subsequent periods
ending on or prior to the Effective Time. BOH will not have any material
liability for any such taxes in excess of the amounts so paid or reserves or
accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by BOH are complete and accurate in all material respects. BOH is not
delinquent in the payment of any material tax, assessment or governmental
charge, and has not requested any extension of time within which to file any tax
returns in respect of any fiscal year or portion thereof which have not since
been filed. Except as Previously Disclosed, the federal, state and local income
tax returns of BOH have been examined by the applicable tax authorities (or are
closed to examination due to the expiration of the applicable statute of
limitations) and no deficiencies for any tax, assessment or governmental charge
have been proposed, asserted or assessed (tentatively or otherwise) against BOH
as a result of such examinations or otherwise which have not been settled and
paid. There are currently no agreements in effect with respect to BOH to extend
the period of limitations for the assessment or collection of any tax. As of the
date hereof, no audit, examination or deficiency or refund litigation with
respect to any such return is pending or, to the best of BOH's knowledge,
threatened.
(c) BOH (i) is not a party to any agreement providing for the allocation
or sharing of taxes, (ii) is not required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by it (nor does BOH have any knowledge that the
Internal Revenue Service has proposed any such adjustment or change of
accounting method) or (iii) has not filed a consent pursuant to Section 341(f)
of the Code or agreed to have Section 341(f)(2) of the Code apply.
3.11 Legal Proceedings
BOH has Previously Disclosed all existing or, to the best knowledge of
BOH, threatened, legal, administrative, arbitral or other proceedings, claims,
actions, controversies or governmental investigations of any nature against or
involving BOH, any of which if determined adversely would, individually or in
the aggregate, have a Material Adverse Effect on BOH. BOH is not a party to any
order, judgment or decree which has or could reasonably be expected to have a
Material Adverse Effect on BOH.
3.12 Compliance with Laws
(a) BOH has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations with,
federal, state, local and foreign governmental or regulatory bodies that are
necessary in order to permit it to carry on its business as it is presently
being conducted and the absence of which could reasonably be expected to have a
Material Adverse Effect on BOH; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect; and to the best
knowledge of BOH, no suspension or cancellation of any of the same is
threatened.
(b) BOH is not in violation of its Articles of Incorporation or Bylaws, or
of any applicable federal, state or local law or ordinance or any order, rule or
regulation of any federal, state, local or other Governmental Entity (including,
without limitation, all banking, securities, municipal securities, safety,
health, environmental, zoning, anti-discrimination, antitrust, and wage and hour
laws, ordinances, orders, rules and regulations), or in default with respect to
any order, writ, injunction or decree of any court, or in default under any
order, license, regulation or demand of any Governmental Entity, any of which
violations or defaults could reasonably be expected to have a Material Adverse
Effect on BOH; and has not received any notice or communication from any
Governmental Entity asserting that BOH is in violation of any of the foregoing
which could reasonably be expected to have a Material Adverse Effect on BOH. BOH
is not subject to any regulatory or supervisory cease and desist order,
agreement, written directive, memorandum of understanding or written commitment
which could reasonably be expected to have a Material Adverse Effect on BOH, and
BOH has not received any written communication from a Governmental Entity
requesting that it enter into any of the foregoing.
3.13 Certain Information
The Proxy Statement, as of the date such Proxy Statement is mailed to
shareholders of BOH and up to and including the date of the meeting of
shareholders to which such Proxy Statement relates, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading (excluding any information relating specifically to PBOC
which is expressly provided by PBOC to BOH for inclusion therein).
3.14 Employee Benefit Plans
(a) BOH has Previously Disclosed all stock option, employee stock purchase
and stock bonus plans, qualified pension or profit-sharing plans, any deferred
compensation, bonus or group insurance contract or any other incentive, welfare
or employee benefit plan, as defined in Section 3(3) of ERISA, or agreement,
understanding, practice or commitment, formal or informal, sponsored, maintained
or contributed to by BOH for the benefit of the current or former directors,
officers, employees or independent contractors of BOH (the "BOH Employee
Plans"). BOH has previously furnished or made available to PBOC accurate and
complete copies of the BOH Employee Plans together with (i) the most recent
actuarial and financial reports prepared with respect to any such plans that are
qualified plans, (ii) the most recent annual reports filed with any Governmental
Entity with respect to each such plan and (iii) all rulings and determination
letters and any open requests for rulings or letters that pertain to any such
plan that is a qualified plan.
(b) None of BOH, any pension plan maintained by it and qualified under
Section 401 of the Code or, to the best of BOH's knowledge, any fiduciary of
such plan has incurred any liability to the PBGC, the Department of Labor or the
Internal Revenue Service with respect to the coverage of any employees of BOH
under any BOH Employee Plan that has not been satisfied in full and that would
have a Material Adverse Effect on BOH. To the best of BOH's knowledge, no
reportable event under Section 4043(b) of ERISA has occurred with respect to any
BOH Employee Plan that is a pension plan.
(c) BOH does not participate in or has incurred any liability under
Section 4201 of ERISA for a complete or partial withdrawal from a multi-employer
plan (as such term is defined in ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each BOH Employee Plan that is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "BOH Pension
Plan") which is intended to qualify under Section 401 of the Code to the effect
that (i) such plan is qualified under Section 401 of the Code and (ii) the trust
associated with such employee pension plan is tax exempt under Section 501 of
the Code. No such letter has been revoked or, to the best of BOH's knowledge, is
threatened to be revoked and BOH does not know of any ground on which such
revocation may be based. BOH has no material liability under any such plan that
is not reflected on the balance sheet of BOH at March 31, 1999 included in the
BOH Financial Statements, other than liabilities incurred in the
ordinary course of business in connection therewith subsequent to the date
thereof.
(e) No prohibited transaction (which shall mean any transaction prohibited
by Section 406 of ERISA and not exempt under Section 408 of ERISA or Section
4975 of the Code) has occurred with respect to any BOH Employee Plan which would
result in the imposition, directly or indirectly, of a material excise tax on
BOH under Section 4975 of the Code or otherwise have a Material Adverse Effect
on BOH.
(f) Full payment has been made (or proper accruals have been established
to the extent required by generally accepted accounting principles) of all
contributions which are required for periods prior to the date hereof, and full
payment will be so made (or proper accruals will be so established to the extent
required by generally accepted accounting principles) of all contributions which
are due and payable after the date hereof and prior to the Effective Time, under
the terms of each BOH Employee Plan or ERISA; no accumulated funding deficiency
(as defined in Section 302 of ERISA or Section 412 of the Code), whether or not
waived, exists with respect to any BOH Pension Plan, and there is no "unfunded
current liability" (as defined in Section 412 of the Code) with respect to any
BOH Pension Plan.
(g) The BOH Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations.
(h) There are no pending or, to the best knowledge of BOH, threatened
claims (other than routine claims for benefits) by, on behalf of or against any
of the BOH Employee Plans or any trust related thereto or any fiduciary thereof.
3.15 Certain Contracts
(a) Except as Previously Disclosed, BOH is not a party to, is not bound or
affected by, receives or is obligated to pay, benefits under (i) any agreement,
arrangement or commitment, including without limitation any agreement, indenture
or other instrument, relating to the borrowing of money by BOH (other than in
the case of deposits, federal funds purchased and securities sold under
agreements to repurchase in the ordinary course of business) or the guarantee by
BOH of any obligation; (ii) any agreement, arrangement or commitment relating to
the employment of a consultant or the employment, election or retention in
office of any present or former director, officer or employee of BOH, other than
any agreement, arrangement or commitment terminable at will and without the
payment of any penalty by BOH, or the termination of which otherwise would not
have a Material Adverse Effect on BOH; (iii) any agreement, arrangement or
understanding pursuant to which any payment (whether of severance pay or
otherwise) became or may become due to any director, officer or employee of BOH
upon execution of this Agreement or upon or following consummation of the
transactions contemplated by this Agreement (either alone or in connection with
the occurrence of any additional acts or events); (iv) any agreement,
arrangement or understanding pursuant to which
BOH is obligated to indemnify any director, officer, employee or agent of BOH;
(v) any agreement, arrangement or understanding to which BOH is a party or by
which either of the same is bound which limits the freedom of BOH to compete in
any line of business or with any person or entity; (vi) any supervisory
agreement, memorandum of understanding, consent order, cease and desist order or
condition of any regulatory order or decree with or by an applicable federal or
state regulatory agency; (vii) any lease of real or personal property requiring
payments of annual rental in excess of $5,000, whether as lessor or lessee; or
(viii) any other agreement, arrangement or understanding which involves an
annual payment of more than $5,000. A copy of each such agreement, arrangement
or understanding has been made available to PBOC or, if oral, has been described
in writing and Previously Disclosed.
(b) BOH is not in default or in non-compliance, which default or
non-compliance could reasonably be expected to have a Material Adverse Effect on
BOH, under any contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument to which it is a party or by which its assets,
business or operations may be bound or affected, whether entered into in the
ordinary course of business or otherwise and whether written or oral, and there
has not occurred any event that with the lapse of time or the giving of notice,
or both, would constitute such a default or non-compliance.
3.16 Brokers and Finders
Except as Previously Disclosed, neither BOH nor any of its directors,
officers, employees or agents, has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for BOH
in connection with this Agreement or the transactions contemplated hereby.
3.17 Insurance
BOH believes that it is insured, and during each of the past three
calendar years has been insured, for reasonable amounts with financially sound
and reputable insurance companies against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured and has maintained all insurance required by applicable laws and
regulations. BOH has Previously Disclosed to PBOC a list identifying all
insurance policies maintained by it as of the date hereof. All of the policies
and bonds maintained by BOH are in full force and effect and all claims
thereunder have been filed in a due and timely manner and no such claim has been
denied.
3.18 Properties
All real and personal property owned by BOH or presently used by it in its
business is in condition (ordinary wear and tear excepted) sufficient to carry
on the business of BOH in the ordinary course of business consistent with their
past practices. BOH has good and marketable title free and clear of all liens,
encumbrances, charges, defaults or equities (other than equities of
redemption under applicable foreclosure laws or of lessors respecting any leased
property) to all of the material properties and assets, real and personal,
reflected on the balance sheet as of March 31, 1999 included in the BOH
Financial Statements or acquired after such date, other than properties sold by
BOH in the ordinary course of business, except (i) liens for current taxes not
yet due or payable, (ii) pledges to secure deposits and other liens incurred in
the ordinary course of its banking business and (iii) such imperfections of
title, easements and encumbrances, if any, as are not material in character,
amount or extent. All real and personal property which is material to BOH's
business and leased or licensed by BOH is held pursuant to leases or licenses
which are valid and enforceable in accordance with their respective terms and
such leases will not terminate or lapse prior to the Effective Time. BOH has
Previously Disclosed a brief description of each material real property owned or
leased by BOH and used in the conduct of its business.
3.19 Labor
No work stoppage involving BOH is pending or, to the best knowledge of
BOH, threatened. BOH is involved in, or to the best knowledge of BOH threatened
with or affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding involving the employees of BOH which could reasonably be expected to
have a Material Adverse Effect on BOH. Employees of BOH are not represented by
any labor union nor are any collective bargaining agreements otherwise in effect
with respect to such employees, and to the best of BOH's knowledge, there have
been no efforts to unionize or organize any employees of BOH.
3.20 Transactions with Affiliates
Except as Previously Disclosed, there are no existing or pending
transactions, nor are there any agreements or understandings, with any
directors, officers or employees of BOH or any person or entity affiliated with
it (collectively, "Affiliates"), relating to, arising from or affecting BOH,
including without limitation any transactions, arrangements or understandings
relating to the purchase or sale of goods or services, the lending of monies or
the sale, lease or use of any assets of BOH.
3.21 Nonperforming and Classified Assets
(a) Each loan on the books and records of BOH, including unfunded portions
of outstanding lines of credit and loan commitments, was made and has been
serviced in all material respects in accordance with customary lending standards
in the ordinary course of business, is evidenced in all material respects by
appropriate and sufficient documentation and, to the best knowledge of BOH,
constitutes the legal, valid and binding obligation of the obligor named
therein, subject to bankruptcy, insolvency, fraudulent conveyance and other laws
of general applicability relating to or affecting creditor's rights and to
general equity principles.
(b) BOH has Previously Disclosed as of May 31, 1999: (i) any written or,
to BOH's
knowledge, oral loan or similar agreement under the terms of which the obligor
is 60 or more days delinquent in payment of principal or interest, or to the
best of BOH's knowledge, in default of any other provision thereof; (ii) each
loan or similar agreement which has been classified as "substandard," "doubtful"
or "loss" or designated "special mention" by BOH or an applicable regulatory
authority; (iii) a listing of the real estate owned acquired by BOH by
foreclosure or by deed-in-lieu thereof.
3.22 Required Vote; Inapplicability of Antitakeover Statutes; Fairness Opinion
(a) This Agreement and the transactions contemplated hereby are required
to be approved on behalf of BOH by the affirmative vote of the holders of at
least a majority of the outstanding shares of the BOH Common Stock.
(b) No "control share acquisition," "business combination moratorium,"
"fair price" or other form of antitakeover statute or regulation is applicable
to this Agreement and the transactions contemplated hereby.
(c) BOH has received a written opinion of Hovde Financial, Inc. dated the
date hereof to the effect that, as of the date hereof, the consideration to be
received by the shareholders of BOH pursuant to this Agreement is fair to such
shareholders from a financial point of view.
3.23 Year 2000 Compliance
All hardware, firmware, software and computer systems owned, used or
licensed by BOH, including but not limited to system and application programs,
files, databases and computer services, are Year 2000 Compliant (as defined
below) and shall continue to function in accordance with their intended purpose
without material error or material interruption during and after the year 2000.
For purposes of this Agreement, "Year 2000 Compliant" means that the hardware,
firmware, software and computer systems (i) will correctly and accurately
address, produce, store, process and calculate data involving dates beginning
with January 1, 2000 and will not produce abnormally ending or incorrect results
involving such dates as used in any forward or regression dated based functions;
(ii) will provide that all "date"-related functionalities and data fields
include the indication of century and millennium, and will perform calculations
which involve a four-digit year; and (iii) will be interoperable with other Year
2000 Compliant hardware or software owned, used or licensed by BOH which may
deliver records to, receive records from or otherwise interact with such
hardware or software in the course of processing records or data.
3.24 Disclosures
None of the representations and warranties of BOH or any of the written
information or documents which are furnished by BOH to PBOC pursuant to this
Agreement or in connection with the transactions contemplated hereby, when
considered as a whole, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact required to
be stated or necessary to make any such information or document, at the time and
in light of the circumstances (including without limitation the nature and scope
of the information described in the representation, warranty, information or
document), not misleading. Copies of all documents Previously Disclosed or made
available to PBOC pursuant to this Article III are true, correct and complete
copies thereof and include all amendments, supplements and modifications thereto
and all waivers thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PBOC
PBOC represents and warrants to BOH as follows:
4.1 Organization, Standing and Authority of PBOC
PBOC is a corporation duly organized and validly existing under the laws
of the State of Delaware with full corporate power and authority to own or lease
all of its properties and assets and to carry on its business as now conducted
and is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such licensing or qualification, except where the failure to
be so licensed, qualified or in good standing would not have a material adverse
effect on the ability of PBOC to consummate the transactions contemplated
hereby. PBOC is duly registered as a savings and loan holding company under the
HOLA and the regulations of the OTS thereunder.
4.2 Organization, Standing, Authority and Ownership of the PBOC Subsidiaries
Each PBOC Subsidiary which is a Significant Subsidiary (i) is duly
organized and validly existing under the laws of the jurisdiction of its
incorporation; (ii) has full power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted; and (iii)
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so
licensed, qualified or in good standing would not have a material adverse effect
on the ability of the PBOC and the Bank to consummate the transactions
contemplated hereby.
4.3 Authorized and Effective Agreement; Consents and Approvals
(a) Each of PBOC and the Bank has all requisite corporate power and
authority to enter into this Agreement and (subject to receipt of all necessary
governmental approvals) to perform all of its obligations under this Agreement.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of PBOC and
the Bank. This Agreement has been duly and validly executed and delivered by
PBOC and the Bank and constitutes a legal, valid and binding obligation of PBOC
and the Bank which is enforceable against PBOC and the Bank in accordance with
its terms, subject, as to enforceability, to bankruptcy, insolvency and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger), nor compliance
by PBOC and the Bank with any of the provisions hereof, (i) conflict with or
result in a breach of any provisions of the Certificate of Incorporation,
Federal State Charter or Bylaws of PBOC, the Bank or any other PBOC Subsidiary,
(ii) violate, conflict with or result in a breach of any term, condition or
provision of, or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, or give rise to any right
of termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of PBOC,
the Bank or any other PBOC Subsidiary pursuant to, any note, bond, mortgage,
indenture, deed of trust, lease, agreement or other instrument or obligation to
which PBOC, the Bank or any other PBOC Subsidiary is a party, or by which any of
their respective properties or assets may be bound or affected, or (iii) subject
to receipt of all required governmental approvals, violate any law, rule or
regulation or any judgment, decree, order, governmental permit or license
applicable to PBOC, the Bank or any other PBOC Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consents, approvals and waivers of, as applicable, the OTS, the Department, the
FDIC and the DOJ, (ii) the filing of Articles of Combination with the Secretary
of the OTS pursuant to the laws of the United States in connection with the
Merger, (iii) the filing of an Agreement of Merger or a copy of the Articles of
Combination with the California Secretary of State and the California
Superintendent of Banks and (iii) the approval of the Merger by the Board of
Directors and shareholders of BOH and the Bank and the Board of Directors of
PBOC, no consents or approvals of or filings or registrations with any
Governmental Entity or with any third party are necessary on the part of PBOC,
the Bank or any other PBOC Subsidiary in connection with the execution and
delivery by PBOC and the Bank of this Agreement and the transactions
contemplated hereby.
4.4 Securities Documents
PBOC has previously delivered or made available to BOH a complete copy of
all Securities Documents filed by PBOC pursuant to the Securities Laws or mailed
by PBOC to its shareholders as a class since May 31, 1998. PBOC has timely filed
with the Commission all Securities Documents required by the Securities Laws and
such Securities Documents complied in all material respects with the Securities
Laws and did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, at the time and in light of the circumstances under
which they were made, not misleading.
4.5 Financial Statements
PBOC has previously delivered or made available to BOH accurate and
complete copies of the PBOC Financial Statements for all periods ended prior to
the date hereof, which in the case of the consolidated balance sheets of PBOC as
of December 31, 1998 and 1997 and the consolidated statements of income,
shareholders' equity and cash flows for each of the years ended December 31,
1998, 1997 and 1996 are accompanied by the audit report of KPMG Peat Marwick
LLP, independent public accountants with respect to PBOC. The PBOC Financial
Statements fairly present or will fairly present, as the case may be, the
consolidated financial condition of PBOC as of the respective dates set forth
therein, and the consolidated results of operations, shareholders' equity and
cash flows of PBOC for the respective periods or as of the respective dates set
forth therein. Each of the PBOC Financial Statements has been or will be, as the
case may be, prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as stated
therein. Except to the extent (i) reflected, disclosed or provided for in the
consolidated balance sheet of PBOC as of March 31, 1999 (including related
notes) and (ii) of liabilities incurred since March 31, 1999 in the ordinary
course of business, neither PBOC nor any PBOC Subsidiary has any liabilities,
whether absolute, accrued, contingent or otherwise, which would have a material
adverse effect on the ability of PBOC and the Bank to fulfill its obligations to
pay for shares of BOH Common Stock in accordance with the terms of Section 2.3
hereof.
4.6 Access to Funds
The Bank has, or on the date of the Closing will have, all funds necessary
to consummate the Merger and pay the aggregate Merger Consideration to holders
of BOH Common Stock pursuant to Section 2.3 hereof.
4.7 Legal Proceedings
There are no existing or, to the best knowledge of PBOC, threatened,
legal, administrative, arbitral or other proceedings, claims, actions,
controversies or governmental investigations of any nature against or involving
PBOC or any PBOC Subsidiary which could reasonably be expected to have a
material adverse effect on the ability of PBOC or the Bank to consummate the
transactions contemplated hereby.
4.8 Certain Information
None of the information relating to PBOC supplied or to be supplied by
PBOC to BOH expressly for inclusion in the Proxy Statement, as of the date such
Proxy Statement is mailed to shareholders of BOH and up to and including the
date of the meeting of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.9 Disclosures
None of the representations and warranties of PBOC or any of the written
information or documents furnished by PBOC to BOH pursuant to this Agreement or
in connection with the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, at the time and in light of the
circumstances (including without limitation the nature and scope of the
information described in the representation, warranty, information or document),
not misleading.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agreement, each party to this
Agreement shall use its reasonable best efforts in good faith to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary
or advisable under applicable laws and regulations so as to permit consummation
of the Merger (including, without limitation, satisfaction of the conditions to
consummation of the Merger specified in Article VI of this Agreement) on or
before November 30, 1999 or, in the event that requisite regulatory and other
approvals have not yet been obtained, as promptly as practicable thereafter, and
to otherwise enable consummation of the transactions contemplated hereby, and
shall cooperate fully with the other party or parties hereto to that end.
5.2 Shareholder Meeting
BOH shall take all action necessary to have its shareholders consider this
Agreement and the transactions contemplated hereby at a special meeting of
shareholders which is called for the purpose as promptly as practicable after
the date hereof. Except to the extent legally required for the discharge by the
Board of Directors of its fiduciary duties, as advised by counsel, the Board of
Directors of BOH will recommend that the shareholders of BOH approve this
Agreement and the transactions contemplated hereby. The parties hereto shall
promptly cooperate with each other in the preparation of the Proxy Statement,
which shall contain such information as is mutually agreeable to the parties.
5.3 Regulatory Matters
(a) The parties hereto shall cooperate with each other and use their best
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 permits,
consents, approvals and authorizations of all Governmental Entities and third
parties which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including the Merger). PBOC and BOH shall have
the right to review in advance, and to the extent practicable each will consult
with the other on, in each case subject to applicable laws relating to the
exchange of information, all the information which appears in any filing made
with or written materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto shall act reasonably
and as promptly as practicable. The parties hereto agree that they will consult
with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated herein.
(b) PBOC, the Bank and BOH shall, upon request, furnish each other with
all information concerning themselves, their directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Statement or any other statement, filing, notice or
application made by or on behalf of PBOC, the Bank or BOH to any Governmental
Entity in connection with the transactions contemplated by this Agreement.
(c) PBOC and BOH shall promptly furnish each other with copies of written
communications received by, PBOC or BOH, as the case may be, from or delivered
by any of the foregoing to, any Governmental Entity in respect of the
transactions contemplated by this Agreement.
5.4 Investigation and Confidentiality
(a) BOH shall permit PBOC and its representatives reasonable access to its
properties and personnel, and shall disclose and make available to PBOC all
books, papers and records relating to the assets, stock ownership, properties,
operations, obligations and liabilities of BOH including, but not limited to,
all books of account (including the general ledger), tax records, minute books
of meetings of boards of directors (and any committees thereof) and
shareholders, organizational documents, bylaws, material contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which PBOC may have a reasonable interest, provided
that such access shall be reasonably related to the transactions contemplated
hereby and not unduly interfere with normal operations, shall not violate any
law or agreement or constitute the waiver of any privilege and shall not include
any information respecting the deliberations or recommendations of the Board of
Directors of BOH, any committees thereof, or of management, or concerning
compliance by BOH or PBOC and the Bank with the terms of this Agreement. In the
event that BOH is prohibited by law or agreement from providing any of the
access referred to in the preceding sentence to PBOC, it shall use its
reasonable best efforts to obtain promptly waivers thereof so as
to permit such access. BOH shall make the directors, officers, employees and
agents and authorized representatives (including counsel and independent public
accountants) of BOH available to confer with PBOC and its representatives,
provided that such access shall be reasonably related to the transactions
contemplated hereby and not unduly interfere with normal operations.
(b) All information furnished to PBOC by BOH previously in connection with
the transactions contemplated by this Agreement or pursuant hereto shall be held
in confidence to the extent required by, and in accordance with, the
confidentiality agreement, dated February 3, 1999, between BOH and PBOC (the
"Confidentiality Agreement").
5.5 Press Releases
PBOC and BOH shall agree with each other as to the form and substance of
any press release related to this Agreement or the transactions contemplated
hereby, and consult with each other as to the form and substance of other public
disclosures which may relate to the transactions contemplated by this Agreement,
provided, however, that nothing contained herein shall prohibit either party,
following notification to the other party, from making any disclosure which it
determines in good faith is required by law or regulation.
5.6 Business of BOH
(a) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of PBOC, BOH shall carry on its
business in the ordinary course consistent with past practice, including but not
limited to the amount and types of loans originated as of the date hereof. BOH
will use all reasonable efforts to (x) preserve its business organization
intact, (y) keep available to itself and PBOC the present services of the
employees of BOH and (z) preserve for itself and PBOC the goodwill of the
customers of BOH and others with whom business relationships exist. Without
limiting the generality of the foregoing, except with the prior written consent
of PBOC or as expressly contemplated hereby, between the date hereof and the
Effective Time, BOH shall not:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the BOH Common Stock;
(ii) issue any shares of its capital stock (except upon the exercise
of BOH Options presently outstanding), or issue, grant, modify or
authorize any Rights or effect any recapitalization, reclassification,
stock dividend, stock split or like change in capitalization;
(iii) amend its Articles of Incorporation or Bylaws or equivalent
documents; impose, or suffer the imposition, on any share of stock held by
BOH of any material lien,
charge or encumbrance or permit any such lien to exist; or waive or
release any material right or cancel or compromise any material debt or
claim;
(iv) increase the rate of compensation of any of its directors,
executive officers or employees, or pay or agree to pay any bonus or
severance to, or provide any other new employee benefit or incentive to,
any of its directors, officers or employees, except (i) as may be required
pursuant to binding commitments existing on the date hereof and Previously
Disclosed and (ii) in the case of employees who are not officers above the
level of Assistant Vice President, such as may be granted in the ordinary
course of business consistent with past practice;
(v) enter into or, except as may be required by law, modify any
pension, retirement, stock option, stock purchase, stock appreciation
right, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or
employees; or make any contributions to BOH's Employee Plans;
(vi) enter into (w) any agreement, arrangement or commitment not
made in the ordinary course of business, (x) any agreement, indenture or
other instrument relating to the borrowing of money by BOH (other than in
the case of deposits, federal funds purchased and securities sold under
agreements to repurchase in the ordinary course of business) or guarantee
by BOH of any such obligation, (y) any agreement, arrangement or
commitment relating to the employment of, or severance of, an officer,
employee or consultant or amend any such existing agreement, provided that
BOH may employ an employee in the ordinary course of business if the
employment of such employee is terminable by BOH at will without
liability, other than as required by law, or (z) any contract, agreement
or understanding with a labor union;
(vii) change its method of accounting in effect for the year ended
December 31, 1998, except as required by changes in laws or regulations or
generally accepted accounting principles concurred in by its and PBOC's
independent public accountants, or change any of its methods of reporting
income and deductions for federal income tax purposes from those employed
in the preparation of its federal income tax return for the year ended
December 31, 1998, except as required by changes in laws or regulations;
(viii) purchase or otherwise acquire, or sell or otherwise dispose
of, any assets or incur any liabilities other than in the ordinary course
of business consistent with past practice and policies;
(ix) make any capital expenditures, other than pursuant to binding
commitments existing on the date hereof and which are Previously Disclosed
and other than expenditures necessary to maintain existing assets in good
repair, provided that in no event may capital expenditures exceed $10,000
in the aggregate;
(x) file any applications or make any contract with respect to
branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity;
(xii) engage in any transaction with an Affiliate, other than
transactions in the ordinary course of business consistent with past
practice and which are in compliance with the requirements of applicable
laws and regulations;
(xiii) enter into any futures contract, option contract, interest
rate caps, interest rate floors, interest rate exchange agreement or other
agreement for purposes of hedging the exposure of its interest-earning
assets and interest-bearing liabilities to changes in market rates of
interest;
(xiv) discharge or satisfy any material lien or encumbrance or pay
any material obligation or liability (absolute or contingent) other than
at scheduled maturity or in the ordinary course of business;
(xv) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or rights or
requiring the consent of any party to the transfer and assignment of any
such assets or rights;
(xvi) invest in any investment securities other than United States
government agencies with a term of one (1) year or less or federal funds;
(xvii) take any action that would result in any of the
representations and warranties of BOH contained in this Agreement not to
be true and correct in any material respect at the Effective Time or that
could reasonably result in any material delay in consummation of the
transactions contemplated hereby; or
(xviii) agree to do any of the foregoing.
(b) BOH shall not authorize or permit any of its directors, officers,
employees or agents to directly or indirectly solicit, initiate or encourage any
inquiries relating to, or the making of any proposal which constitutes, an
Acquisition Transaction (as defined below), or, except to the extent legally
required for the discharge of the fiduciary duties of the Board of Directors of
BOH, as advised by counsel, (i) recommend or endorse an Acquisition Transaction,
(ii) participate in any discussions or negotiations regarding an Acquisition
Transaction or (iii) provide any third party (other than PBOC) with any
nonpublic information in connection with any inquiry or proposal relating to an
Acquisition Transaction. BOH will immediately cease and cause to be terminated
any existing activities, discussions or negotiations previously conducted with
any parties other than PBOC with respect to any of the foregoing, and will take
all actions necessary or advisable to inform the appropriate individuals or
entities referred to in the first
sentence hereof of the obligations undertaken in this Section 5.6(b). BOH will
notify PBOC immediately if any inquiries or proposals relating to an Acquisition
Transaction are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, BOH,
and BOH will promptly inform PBOC in writing of all of the relevant details with
respect to the foregoing. As used in this Agreement, "Acquisition Transaction"
shall mean (i) a merger or consolidation, or any similar transaction, involving
BOH, (ii) a purchase, lease or other acquisition of a substantial portion of the
assets or liabilities of BOH or (iii) a purchase or other acquisition (including
by way of share exchange, tender offer, exchange offer or otherwise) of more
than 10% of any class or series of equity securities of BOH.
5.7 Current Information
(a) During the period from the date of this Agreement to the Effective
Time, BOH shall, upon the request of PBOC, cause one or more of its designated
representatives to confer on a monthly or more frequent basis with
representatives of PBOC regarding its financial condition, operations, business
and prospects and matters relating to the completion of the transactions
contemplated hereby. Concurrently with the filing thereof, BOH will deliver to
PBOC copies of the regular and periodic reports filed by BOH with the Department
and the FDIC. As soon as reasonably available, but in no event more than 25 days
after the end of each calendar quarter ending after the date of this Agreement
(other than the last quarter of each calendar year ending December 31), BOH will
deliver to PBOC an unaudited balance sheet and a statement of income for such
quarter and the same quarter in the preceding year prepared in accordance with
generally accepted accounting principles, and, as soon as reasonably available,
but in no event more than 90 days after the end of each calendar year, BOH will
deliver to PBOC audited financial statements which are comparable in nature and
scope to the audited BOH Financial Statements at December 31, 1998 and 1997 and
for each of the years ended December 31, 1998, 1997 and 1996.
(b) As soon as reasonably available, but in no event more than 25 days
after the end of each calendar quarter ending after the date of this Agreement
(other than the last quarter of each calendar year ending December 31), PBOC
will deliver to BOH an unaudited consolidated balance sheet and a consolidated
statement of income for such quarter and the same quarter in the preceding year
prepared in accordance with generally accepted accounting principles, and, as
soon as reasonably available, but in no event more than 90 days after the end of
each calendar year, PBOC will deliver to BOH audited consolidated financial
statements which are comparable in nature and scope to the audited PBOC
Financial Statements at December 31, 1998 and 1997 and for each of the years
ended December 31, 1998, 1997 and 1996.
5.8 Benefit Plans and Arrangements
(a) As soon as administratively practicable after the Effective Time, PBOC
shall take all reasonable action so that employees of BOH shall be entitled to
participate in the PBOC
employee benefit plans of general applicability. For purposes of determining
eligibility to participate in and the vesting of benefits under the PBOC
employee benefit plans (other than PBOC's defined benefit pension plan), PBOC
shall recognize years of service with BOH prior to the Effective Time.
(b) PBOC anticipates that most employees of BOH as of the Effective Time
shall become employees of the Bank as of the Effective Time, provided that the
Bank shall have no obligation to continue the employment of any such person and
nothing contained in this Agreement shall give any employee of BOH a right to
continuing employment with PBOC or the Bank after the Effective Time. Any BOH
employee who is terminated or whose position is eliminated following the Closing
shall be entitled to receive the maximum severance benefits to which they would
be entitled as employees of PBOC under PBOC's current severance policy as
Previously Disclosed on Schedule 5.8B, after taking their years of service to
BOH into consideration.
(c) The current President and Chief Executive Officer of BOH, Terry C.
Jorgensen, shall as of the Effective Time enter into an Employment Agreement
with the Bank, in the form attached hereto as Exhibit B and concurrently
therewith, his employment agreement with BOH dated September 18, 1997 shall be
terminated.
(d) The parties hereto agree that the BOH ESOP shall be terminated in
accordance with the terms thereof and applicable laws and regulations effective
as of the Effective Time or as soon thereafter as practicable.
5.9 Indemnification; Insurance
(a) From and after the Effective Time through the fourth anniversary of
the Effective Time, PBOC and the Bank (each an "Indemnifying Party" and together
the "Indemnifying Parties"), agrees to indemnify and hold harmless each present
and former director, officer or employee of BOH, determined as of the Effective
Time (the "Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent to which BOH could indemnify such Indemnified Parties and in the manner
to which it could indemnify such parties under the Bylaws of BOH, in each case
as in effect on the date hereof, provided, however, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the appropriate Indemnifying Party thereof,
but the failure to so notify shall not relieve the Indemnifying Party of any
liability it may have to such Indemnified Party if such failure does not
materially prejudice the Indemnifying Party. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) the Indemnifying Party shall have the right to assume the
defense thereof and the Indemnifying Party 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 Indemnifying Party elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
issues which raise conflicts of interest between the Indemnifying Party and the
Indemnified Parties, the Indemnified Parties may retain counsel which is
reasonably satisfactory to the Indemnifying Party, and the Indemnifying Party
shall pay, promptly as statements therefor are received, the reasonable fees and
expenses of such counsel for the Indemnified Parties (which may not exceed one
firm in any jurisdiction); (ii) the Indemnified Parties will cooperate in the
defense of any such matter; (iii) the Indemnifying Party shall not be liable for
any settlement effected without its prior written consent; and (iv) the
Indemnifying Party shall have no obligation hereunder in the event that a
federal or state banking agency or a court of competent jurisdiction shall
determine that indemnification of an Indemnified Party in the manner
contemplated hereby is prohibited by applicable laws and regulations.
(c) BOH shall be permitted to maintain up to $5,000,000 in aggregate
directors' and officers' liability insurance coverage for acts or omissions
occurring prior to the Effective Time by persons who are currently covered by
the directors' and officers' liability insurance policy maintained by BOH and to
purchase an extension of the claims reporting period for the policy providing
such coverage for a period of three years following the Effective Date. The
premium for the year commencing August 1, 1999 shall not exceed $17,875 and the
total premium for the three-year extension of the claims reporting period shall
not exceed $14,000.
5.10 Reserved
5.11 Disclosure Supplements
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in materials Previously Disclosed to the
other party or which is necessary to correct any information in such materials
which has been rendered inaccurate thereby; no such supplement or amendment to
such materials shall be deemed to have modified the representations, warranties
and covenants of a party for the purposes of determining whether the conditions
set forth in Article VI hereof have been satisfied.
5.12 Failure to Fulfill Conditions
In the event that any of the parties hereto determines that a condition to
its respective obligations to consummate the transactions contemplated hereby
cannot be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party or parties. Each party
will promptly inform the other party or parties of any facts applicable to it
that would be likely to prevent or materially delay approval of the Merger by
any Governmental Entity or third party or which would otherwise prevent or
materially delay completion of the Merger.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - PBOC, the Bank and BOH
The respective obligations of PBOC, the Bank and BOH to effect the
transactions contemplated by this Agreement shall be subject to satisfaction of
the following conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby shall
have been duly and validly taken by PBOC, the Bank and BOH, including approval
by the requisite vote of the shareholders of BOH of this Agreement.
(b) All approvals, consents and waivers from any Governmental Entity the
approval, consent or waiver of which is required for the consummation of the
Merger shall have been received and all statutory waiting periods in respect
thereof shall have expired, provided, however, that no approval, consent or
waiver referred to in this Section 6.1(b) shall be deemed to have been received
if it shall include any condition or requirement that, individually or in the
aggregate, would so materially reduce the economic or business benefits of the
transactions contemplated by this Agreement to PBOC that had such condition or
requirement been known PBOC, in its reasonable judgment, would not have entered
into this Agreement.
(c) None of PBOC, its Subsidiaries or BOH shall be subject to any statute,
rule, regulation, order, injunction or decree which shall have been enacted,
entered, promulgated or enforced by any Governmental Entity which prohibits,
restricts or makes illegal consummation of the Merger.
6.2 Conditions Precedent - BOH
The obligations of BOH to effect the transactions contemplated by this
Agreement shall be subject to satisfaction of the following conditions at or
prior to the Effective Time unless waived by BOH pursuant to Section 7.4 hereof.
(a) The representations and warranties of PBOC set forth in Article IV
hereof shall be true and correct as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time (or on the date
when made in the case of any representation and
warranty which specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.2(a) shall be
deemed to have been satisfied even if such representations and warranties are
not true and correct unless the failure of any of the representations and
warranties to be so true and correct would have, or could reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the
ability of PBOC or the Bank to consummate the Merger.
(b) PBOC shall have performed all material obligations and covenants
required to be performed by it on or prior to the Effective Time.
(c) PBOC shall have delivered to BOH a certificate, dated the date of the
Closing and signed by its Chief Executive Officer and Chief Financial Officer,
to the effect that the conditions set forth in Sections 6.2(a) and 6.2(b) have
been satisfied.
(d) BOH shall have received an opinion or opinions of Elias, Matz, Tiernan
& Herrick L.L.P., Washington, D.C., and Doreen J. Blauschild, Esq., Senior Vice
President and General Counsel of the Bank, dated the date of the Closing, that
collectively address the matters set forth in Exhibit C hereto.
(e) BOH shall have received the written opinion of Hovde Financial, Inc.,
substantially to the effect of the opinion delivered pursuant to Section 3.22(c)
hereof, dated as of the date of the proxy statement utilized by BOH to solicit
approval of this Agreement and the transactions comtemplated hereby.
(f) There shall not be pending any proceeding initiated by any
Governmental Entity to seek an order, injunction or decree which prevents
consummation of the Merger.
(g) PBOC and the Bank shall have furnished BOH with such certificates of
its respective officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.2 as such
conditions relate to PBOC and the Bank as BOH may reasonably request.
6.3 Conditions Precedent - PBOC and the Bank
The obligations of PBOC and the Bank to effect the transactions
contemplated by this Agreement shall be subject to satisfaction of the following
conditions at or prior to the Effective Time unless waived by PBOC and the Bank
pursuant to Section 7.4 hereof.
(a) The representations and warranties of BOH set forth in Article III
hereof shall be true and correct as of the date of this Agreement and as of the
Effective Time as though made on
and as of the Effective Time (or on the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
provided, however, that notwithstanding anything herein to the contrary, this
Section 6.3(a) shall be deemed to have been satisfied even if such
representations and warranties are not true and correct unless the failure of
any of the representations and warranties to be so true and correct would have,
or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on BOH or on the ability of BOH, PBOC or the Bank, to
consummate the Merger.
(b) BOH shall have performed all material obligations and covenants
required to be performed by it on or prior to the Effective Time.
(c) BOH shall have delivered to PBOC a certificate, dated the date of the
Closing and signed by its Chief Executive Officer and Chief Financial Officer,
to the effect that the conditions set forth in Sections 6.3(a) and 6.3(b) have
been satisfied.
(d) PBOC shall have received an opinion or opinions of Fried, Bird &
Krumpacker, Los Angeles, California, dated the date of the Closing, that
collectively address the matters set forth in Exhibit D hereto.
(e) The consent, approval or waiver of each person (other than the
Governmental Entities referred to in Section 6.1(b) hereof) whose consent,
approval or waiver shall be required in connection with the Merger under any
loan or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which BOH is a party or is otherwise bound shall have
been obtained, except those consents or approvals for which failure to obtain
would not, individually or in the aggregate, have a Material Adverse Effect on
BOH or materially adversely affect the ability of PBOC and the Bank to
consummate the Merger and to operate BOH's branches.
(f) There shall not be pending any proceeding initiated by any
Governmental Entity to seek an order, injunction or decree which prevents
consummation of the Merger.
(g) Holders of a number of shares of outstanding BOH Common Stock which
represents 10.0% or more of the BOH Common Stock shall not have elected to
exercise dissenters' or appraisal rights under Section 1301 of the CGCL.
(h) BOH shall have furnished PBOC with such certificates of its officers
or others and such other documents to evidence fulfillment of the conditions set
forth in Sections 6.1 and 6.3 as such conditions relate to BOH as PBOC may
reasonably request.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual consent
in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by PBOC and the Bank in
writing if BOH has, or by BOH in writing if PBOC or the Bank has, in any
material respect, breached (i) any material covenant or undertaking contained
herein, or (ii) any representation or warranty contained herein which in the
case of BOH would have, or could reasonably be expected to have, a Material
Adverse Effect on BOH and in the case of PBOC would have, or could reasonably be
expected to have, a material adverse effect on the ability of PBOC and the Bank,
as applicable, to consummate the Merger, in any case if such breach has not been
cured following written notice of such breach by the earlier of 30 days after
the date on which such written notice of such breach is given to the party
committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the
applications for prior approval referred to in Section 5.3 hereof are denied or
are approved in a manner which does not satisfy the requirements of Section
6.1(b) hereof, and the time period for appeals and requests for reconsideration
has run, unless the failure of such occurrence shall be due to the failure of
the party seeking to terminate to perform or observe in any material respect its
agreements set forth herein to be performed or observed by such party at or
before the Effective Time;
(d) at any time, by any party hereto in writing, if the shareholders of
BOH do not approve this Agreement in the required manner by a vote taken thereon
at a meeting duly called for such purpose (including any adjournments thereof)
unless the failure of such occurrence shall be due to the failure of the party
seeking to terminate to perform or observe in any material respect its
agreements set forth herein to be performed or observed by such party at or
before such meeting of shareholders; and
(e) by any party hereto in writing, if the Effective Time has not occurred
by the close of business on February 29, 2000, provided that this right to
terminate shall not be available to any party whose failure to perform an
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Merger to be consummated by such date.
7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i)
Sections 5.4(b) and Section 8.1 hereof shall survive any such termination and
(ii) a termination pursuant to Section 7.1(b), (c), (d) or (e) hereof shall not
relieve the breaching party from liability for willful breach of any covenant,
undertaking, representation or warranty giving rise to such termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto shall expire on, and be terminated and
extinguished at, the Effective Time other than covenants that by their terms are
to be performed after the Effective Time (including without limitation the
covenants set forth in Sections 5.8(c) and 5.9 hereof), provided that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive PBOC or BOH (or any director, officer or
controlling person thereof) of any defense at law or in equity which otherwise
would be available against the claims of any person, including, without
limitation, any shareholder or former shareholder of either PBOC or BOH.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this Agreement
by the shareholders of BOH) extend the time for the performance of any of the
obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this Agreement or any document delivered pursuant hereto, (ii) compliance
with any of the covenants, undertakings or agreements of the other party or, to
the extent permitted by law, satisfaction of any of the conditions precedent to
its obligations contained herein or (iii) the performance by the other party of
any of its obligations set forth herein, provided that any such waiver granted,
or any amendment or supplement pursuant to Section 7.5 hereof executed, after
shareholders of BOH have approved this Agreement shall not modify either the
amount or form of the Merger Consideration or otherwise materially adversely
affect any of such shareholders without the approval of the shareholders.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of PBOC, the Bank and BOH, subject to the proviso to Section 7.4
hereof. Any such amendment or supplement must be in writing and approved by
their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses; Termination Fee
(a) Each party hereto shall bear and pay all costs and expenses incurred
by it in connection with the transactions contemplated by this Agreement,
including fees and expenses of its own financial consultants, accountants and
counsel, provided that in the event of a termination of this Agreement resulting
from a breach of a representation, warranty, covenant or undertaking,
the party committing such breach shall be liable for the expenses of the other
party without prejudice to any other rights or remedies as may be available to
the non-breaching party, including without limitation any rights under Section
8.1(b) or (f) hereof.
(b) Notwithstanding any provision in this Agreement to the contrary, in
order to induce PBOC to enter into this Agreement and as a means of compensating
PBOC for the substantial direct and indirect monetary and other costs incurred
and to be incurred in connection with this Agreement and the transactions
contemplated hereby, BOH agrees to pay PBOC, and PBOC shall be entitled to
payment of, a fee (the "Fee") of $850,000 upon the occurrence of (i) a
termination of the Agreement by BOH due to the failure of the condition set
forth in Section 6.2(e) hereof, or (ii) a Termination Event (as defined herein)
so long as the Termination Event occurs prior to a Fee Termination Event (as
defined herein). Such payment shall be made to PBOC in immediately available
funds within five business days after the occurrence of (i) a termination of the
Agreement pursuant to clause (i) of the preceding sentence or (ii) a Termination
Event. A Fee Termination Event shall be the first to occur of the following: (i)
the Effective Time, (ii) 15 months after termination of this Agreement in
accordance with its terms following the first occurrence of a Preliminary
Termination Event (as defined herein), (iii) termination of this Agreement in
accordance with the terms hereof prior to the occurrence of a Termination Event
or a Preliminary PBOC Event (other than a termination of this Agreement by PBOC
pursuant to Section 7.1(b) hereof as a result of a willful breach of any
representation, warranty, covenant or agreement of BOH) or (iv) 15 months after
the termination of this Agreement by PBOC pursuant to Section 7.1(b) hereof as a
result of a willful breach of any representation, warranty, covenant or
agreement of BOH.
(c) For purposes of this Agreement, a "Termination Event" shall mean any
of the following events:
(i) BOH, without having received PBOC's prior written consent, shall
have entered into an agreement to engage in an Acquisition Transaction
with any person (the term "person" for purposes of this Agreement having
the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act, and the rules and regulations thereunder), other than PBOC
or a Subsidiary of PBOC, or the Board of Directors of BOH shall have
recommended that the shareholders of BOH approve or accept any Acquisition
Transaction with any person other than PBOC or a Subsidiary of PBOC;
(ii) any person, other than PBOC or a Subsidiary of PBOC, shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) of or the right to acquire beneficial
ownership, or any "group" (as such term is defined in Section 13(d)(3) of
the Exchange Act) shall have been formed which beneficially owns or has
the right to acquire beneficial ownership of, 25% or more of the aggregate
voting power represented by the outstanding BOH Common Stock; or
(iii) one or more Shareholders shall have breached his or her
obligations
pursuant to the Shareholder Agreement in a manner which materially
adversely affects the ability of BOH to obtain the approval of the holders
of BOH Common Stock of this Agreement or otherwise materially adversely
affects the ability of the parties hereto to consummate the transactions
contemplated hereby.
(d) For purposes of this Agreement, a "Preliminary Termination Event"
shall mean any of the following events:
(i) any person (other than PBOC or Subsidiary of PBOC) shall have
commenced (as such term is defined in Rule 14d-2 under the Exchange Act),
or shall have filed a registration statement under the Securities Act with
respect to, a tender offer or exchange offer to purchase any shares of BOH
Common Stock such that, upon consummation of such offer, such person would
own or control 10% or more of BOH Common Stock outstanding (such an offer
being referred to herein as a "Tender Offer" and an "Exchange Offer,"
respectively);
(ii) (A) the holders of BOH Common Stock shall not have approved
this Agreement at the meeting of such shareholders held for the purpose of
voting on this Agreement, (B) such meeting shall not have been held or
shall have been canceled prior to termination of the Agreement or (C)
BOH's Board of Directors shall have withdrawn or modified in a manner
adverse to PBOC the recommendation of BOH's Board of Directors with
respect to the Agreement, in each case after any person (other than PBOC
or a Subsidiary of PBOC) shall have (x) made, or disclosed an intention to
make, a bona fide proposal to BOH or its shareholders to engage in an
Acquisition Transaction, (y) commenced a tender offer or filed a
registration statement under the Securities Act with respect to an
exchange offer or (z) filed an application or given notice, whether in
draft or final form, with the appropriate regulatory authorities for
approval to engage in an Acquisition Transaction; or
(iii) BOH shall have breached any representation, warranty, covenant
or obligation contained in this Agreement and such breach would entitle
PBOC to terminate this Agreement under Section 7.1(b) hereof (without
regard to the cure period provided for therein unless such cure is
promptly effected without jeopardizing consummation of the Merger pursuant
to the terms of this Agreement) after any person (other than PBOC or a
Subsidiary of PBOC) shall have (x) made, or disclosed an intention to
make, a bona fide proposal to BOH or its shareholders to engage in an
Acquisition Transaction, (y) commenced a tender offer or filed a
registration statement under the Securities Act with respect to an
exchange offer or (z) filed an application or given notice, whether in
draft or final form, with the appropriate regulatory authorities for
approval to engage in an Acquisition Transaction.
(e) BOH shall promptly notify PBOC in writing of the occurrence of any
Preliminary Termination Event or Termination Event.
(f) Notwithstanding any provision in this Agreement to the contrary, in
the event PBOC and the Bank terminate this Agreement pursuant to Section 7.1(c)
hereof or refuse to consummate the Merger, in either case because any of the
applications for approval referred to in Section 5.3 hereof are approved subject
to one or more conditions or requirements which do not satisfy the requirements
of Section 8.1(f) hereof and which conditions or requirements have been
Previously Disclosed in Schedule 8.1F, PBOC shall pay to BOH $250,000 and shall
reimburse BOH for all of its reasonable and documented out-of-pocket expenses
incurred in connection with the transactions contemplated by this Agreement.
8.2 Entire Agreement
This Agreement (including the Shareholder Agreement) and the
Confidentiality Agreement contains the entire agreement among the parties with
respect to the transactions contemplated hereby and supersede all prior
arrangements or understandings with respect thereto, written or oral.
8.3 Assignment; Successors
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person without the prior written consent of
the other party or parties. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors. Except as provided in Sections 5.8(c) and Section 5.9
hereof, nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors,
any rights, remedies, obligations or liabilities. In the event that PBOC or any
of its successors, (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors shall assume the obligations set
forth in Sections 5.8(c) and 5.9 hereof, which obligations are expressly
intended to be for the irrevocable benefit of, and shall be enforceable by, each
person covered thereby.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
overnight express or by registered or certified mail, postage prepaid, addressed
as follows:
If to PBOC or the Bank:
PBOC Holdings, Inc.
5900 Wilshire Boulevard, 16th Floor
Los Angeles, California 90036-5013
Attn: Rudolf P. Guenzel
President and Chief Executive Officer
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Norman B. Antin, Esq.
If to BOH:
The Bank of Hollywood
6930 Hollywood Boulevard
Hollywood, California 90028
Attn: Terry C. Jorgensen
President and Chief Executive Officer
With a required copy to:
Fried, Bird & Crumpacker
1900 Avenue of the Stars
25th Floor
Los Angeles, California 90067
Attn: Jack Fried, Esq.
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary, PBOC may
elect, subject to the filing of all necessary applications and the receipt of
all required regulatory approvals, to modify the structure of the acquisition of
BOH set forth herein, provided that (i) the consideration to be paid to the
holders of BOH Common Stock is not thereby changed in kind or reduced in amount
as a result of such modification or alters the taxation of any amounts to be
received by the holders of BOH Common Stock and (ii) such modification will not
materially delay or jeopardize receipt of any required regulatory approvals or
any other condition to PBOC's and the Bank's obligations set forth in Sections
6.1 and 6.3 hereof.
8.6 Interpretation
The table of contents and headings contained in this Agreement are for
reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The phrases "the date of this Agreement," "the date hereof" and
terms of similar import herein, unless the context otherwise requires, shall be
deemed to be the date first above written.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to agreements made and entirely to be
performed within such jurisdiction except to the extent federal law may be
applicable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
PBOC HOLDINGS, INC.
Attest:
/s/ J. Michael Holmes By: /s/ Rudolph P. Guenzel
- ------------------------------------- -----------------------------------
Name: J. Michael Holmes Name: Rudolf P. Guenzel
Title: Executive Vice President, Title: President and Chief Executive
Chief Financial Officer Officer
and Secretary
PEOPLE'S BANK OF CALIFORNIA
Attest:
/s/ Doreen J. Blauschild By: /s/ Rudolph P. Guenzel
- ------------------------------------- -----------------------------------
Name: Doreen J. Blauschild Name: Rudolf P. Guenzel
Title: Senior Vice President, General Title: President and Chief Executive
Counsel and Secretary Officer
THE BANK OF HOLLYWOOD
Attest:
/s/ Donald D. Farquhar By: /s/ Terry C. Jorgensen
- ------------------------------------- -----------------------------------
Name: Donald D. Farquhar Name: Terry C. Jorgensen
Title: Secretary Title: President and Chief Executive
Officer