SHAREHOLDER RIGHTS AGREEMENT
The Shareholder Rights Agreement (the "Agreement"), dated as of April
20, 1998, is entered into by and among PBOC Holdings, Inc., a Delaware
corporation (formerly known as SoCal Holdings, Inc.) (the "Company"),
People's Bank of California, a federally chartered savings bank and a
wholly-owned subsidiary of the Company (formerly known as Southern California
Federal Savings and Loan Association) (the "Bank"), and the Trustees of the
Estate of Bernice Pauahi Bishop, a trust organized under the laws of Hawaii
(the "Bishop Estate"), BIL Securities (Offshore) Limited, a corporation
organized under the laws of New Zealand ("BIL Securities"), and Arbur, Inc.,
a Delaware corporation ("Arbur") (each, a Holder and collectively referred to
herein as the "Shareholders").
WHEREAS, in April 1987, the Company acquired the Bank and, in connection
therewith, the Bank was permitted to include in its regulatory capital and
recognize as supervisory goodwill $217.5 million of cash assistance provided
to the Bank by the Federal Savings and Loan Insurance Corporation, as well as
$79.7 million of goodwill which was recorded by the Bank under generally
accepted accounting principles;
WHEREAS, in August 1989, Congress enacted the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 which provided, among other
things, that savings institutions such as the Bank were no longer permitted
to include goodwill in their regulatory capital (subject to a gradual
phaseout which expired on December 31, 1994);
WHEREAS, on January 28, 1993, the Company, the Bank and certain current
and former stockholders of the Company (collectively, the "Plaintiffs") sued
the United States of America in the United States Court of Federal Claims
(the lawsuit, which is entitled SOUTHERN CALIFORNIA FEDERAL SAVINGS AND LOAN
ASSOCIATION, ET AL. V. UNITED STATES, No. 93-52C, is hereinafter referred to
as the "Litigation") seeking damages for breach of contract and for
deprivation of property without just compensation and without due process of
law;
WHEREAS, as of the date set forth above, the Shareholders are the
holders of all of the outstanding shares of common stock, par value $0.01 per
share ("Common Stock"), of the Company;
WHEREAS, each of the parties hereto has determined that it would be in
its best interest to agree to the terms of the distribution of any recovery
that may be obtained in the Litigation as set forth below;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
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1. DEFINITIONS.
(a) Litigation Recovery. The term "Litigation Recovery" means
any aggregate cash payment or any cash resulting from the liquidation of
Non-Cash Proceeds (as defined in Section 3(b) hereof) (the "Cash Payment"),
if any, actually received by the Company and/or the Bank pursuant to a final,
nonappealable judgment in, or final settlement of, the Litigation (including
any post-judgment interest actually received by the Company and/or the Bank
with respect to any Cash Payment) after deduction of (i) (x) the aggregate
fees and expenses incurred from this date forward by the Company and the Bank
in prosecuting the Litigation and obtaining the Cash Payment (including any
costs and expenses incurred with respect to the monetization of any
marketable assets received and/or liquidation of Non-Cash Proceeds) and/or
(y) the aggregate liabilities, fees and expenses incurred from this date
forward by the Company and the Bank with respect to any claim specified in
Section 6 hereof and/or (z) the amount reimbursed to any Litigation Trustees
under Section 7(c) hereof; (ii) any income tax liability of the Company
and/or the Bank, computed on a pro forma basis, as a result of the Company's
and/or the Bank's receipt of the Cash Payment (net of any income tax benefit
to the Company and/or the Bank from making the Recovery Payment to the
Shareholders, and disregarding for purposes of this clause (ii) the effect of
any net operating loss carryforwards or other tax attributes held by the
Company and the Bank or any of their respective subsidiaries or affiliated
entities); (iii) any portion of the Litigation Recovery (calculated for
purposes of this clause (iii) before the deduction of the amounts calculated
pursuant to clauses (i) and (ii) above and clause (iv) below) which as of the
date of distribution of any Recovery Payment is determined to be owing to one
or more of the Plaintiffs (other than the Company and the Bank) or to any
other third parties; and (iv) any portion of the Litigation Recovery
(calculated for purposes of this clause (iv) before the deduction of the
amounts calculated pursuant to clauses (i), (ii) and (iii) above) which
Doreen J. Blauschild is entitled to receive as a result of her employment
agreement with the Bank, dated as of April 11, 1995.
(b) Recovery Payment. The term "Recovery Payment" means 95% of
the aggregate amount of the Litigation Recovery to which the Shareholders are
entitled as a result of their ownership of Rights.
(c) Rights. The term "Rights" shall have the meaning set forth in
Section 2 hereof.
2. DISTRIBUTION OF RIGHTS.
Pursuant to this Agreement and subject to the terms and conditions
hereof, each Shareholder is entitled to one Contingent Goodwill Participation
Right (each a "Right" and collectively, the "Rights") for each share of
Common Stock held by such Shareholder as of the date hereof. Therefore, each
Shareholder will respectively be entitled to the following number of Rights
corresponding to its pro rata share of
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Common Stock held as of the date hereof: The Bishop Estate: 59,100 Rights
(60%), BIL Securities: 29,550 Rights (30%), Arbur, Inc.: 9,850 Rights (10%).
The parties hereto confirm and agree that, notwithstanding the
provisions of any judgment entered or settlement agreement entered into or
executed in connection with the Litigation, each Right entitles its owner to
receive 0.0009645% of the Litigation Recovery and the 98,500 Rights owned
collectively by the three Shareholders as of the date hereof account for and
represent in the aggregate 95% of the Litigation Recovery and 100% of the
Recovery Payment. It is not the intent of the parties to create a debt
obligation owed by the Company or the Bank to each Shareholder. Each
Shareholder does not have the right to receive any distribution or payment
from the Company and/or the Bank pursuant to this Agreement, nor does the
Company and/or the Bank have a duty to make any payment to each Shareholder
or distribution pursuant to this Agreement, except in each case to the extent
of the Recovery Payment, if any, and except as described herein.
3. THE REDEMPTION AND PAYMENT PROCEDURES.
(a) Payment Notice. Within 5 days of receipt by the Company
and/or the Bank of any Litigation Recovery, or the liquidation by the Company
and/or the Bank of any Non-Cash Proceeds (as required by Section 3(b) below)
received in connection with the Litigation Recovery, the Company shall
deliver to each Shareholder a written notice (the "Payment Notice") (i)
specifying that a Litigation Recovery has been paid, (ii) describing the
amount of cash proceeds received, (iii) describing the type and amount of any
Non-Cash Proceeds received, the amounts received by the Company and/or the
Bank upon liquidation of such Non-Cash Proceeds and the financial and other
documentation supporting such liquidation value (as required by Section 3(b)
below), and (iv) subject to Section 3(d) below, specifying the date and
method by which the Company will redeem the Rights by payment of the Recovery
Payment.
(b) Non-Cash Proceeds. To the extent the Company and/or the Bank
receives all or a portion of the Litigation Recovery in the form of non-cash
proceeds (which does not include nonmarketable assets or assets which are
unable to be sold or liquidated) (the "Non-Cash Proceeds"), the Company and
the Bank shall liquidate the Non-Cash Proceeds. The Company shall provide to
each Shareholder financial and other documentation reasonably sufficient to
support the liquidation value of such Non-Cash Proceeds. With respect to
Non-Cash Proceeds in the form of marketable securities, such documentation
shall include at least two quoted market prices or dealer quotes. With
respect to Non-Cash Proceeds in a form other than marketable securities, such
documentation shall include a valuation from an investment banking or
independent accounting firm, provided that in no event shall the Bank be
required to distribute to the Company or the Company be required to
distribute any amounts to the Shareholders in connection with any liquidation
of Non-Cash Proceeds which exceed the amounts received by the Company and/or
the Bank upon liquidation of such
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Non-Cash Proceeds.
(c) Bank Distribution. Subject to Section 4 below, to the extent
all or any portion of the Litigation Recovery is received by the Bank, the
Bank shall distribute such Litigation Recovery to the Company (the "Bank
Distribution"). To the extent any Litigation Recovery is paid to the Bank in
installments, the distribution to the Company shall be made in similar
installments. Any Cash Proceeds received in connection with the Litigation
Recovery shall be so distributed within 5 days of their receipt,
independently of the need for liquidation by the Bank of any Non-Cash
Proceeds. Any Non-Cash Proceeds received by the Bank will be liquidated in
accordance with section 3(b) hereof. The liquidation value of any such
Non-Cash Proceeds received in connection with the Litigation Recovery shall
be distributed within 5 days of their liquidation, independently of the
distribution of any Cash Proceeds.
(d) Redemption of Rights. Subject to Section 4 hereof, as
promptly as practicable but in no event later than 5 days following the date
of the Payment Notice, the Company shall redeem all of the outstanding Rights
of each Shareholder by payment of the Recovery Payment to the Shareholders.
To the extent the Litigation Recovery is paid to the Company and/or the Bank
in installments, the redemption of the Rights and the distribution of the
Recovery Payment shall be paid in similar installments. However, the parties
confirm and agree that the Company shall not redeem any portion of the Rights
less than one-year from the date of an "ownership change" of the Company
and/or the Bank within the meaning of Section 382 of the Internal Revenue
Code of 1986, as amended (the "Code"), unless the Company obtains an opinion
from an independent accounting firm which states that the redemption should
not materially affect the Company's and/or the Bank's limitation under
Section 382 of the Code with respect to such ownership change.
(e) Interest. The parties hereto agree that the Shareholders will
be entitled to any actual interest earned by the Company and/or the Bank
attributable to its investment of the Recovery Payment for the period of time
between the date on which the Company and/or the Bank receives any Litigation
Recovery in connection with the Litigation and the date on which the Company
either redeems the Rights pursuant to section 3(d) hereinabove or issues
Recovery Payment Preferred pursuant to Section 4.
4. CERTAIN RIGHTS OF SHAREHOLDERS.
(a) The parties to this Agreement intend that the Bank be
obligated to distribute the Bank Distribution and that the Company be
obligated to redeem the Rights and distribute the Recovery Payment pursuant
to the terms hereof. Nevertheless, applicable laws, rules, regulations,
directives or the terms of any judgment or settlement may limit or prevent
the Bank from distributing the Bank Distribution and/or the Company from
redeeming the Rights and distributing all or a portion of the Recovery
Payment. In any such event, the Bank shall distribute such
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portion of the Bank Distribution and the Company shall redeem those Rights
(on a pro rata basis) and distribute such portion of the Recovery Payment (on
a pro rata basis), in each case to the extent not otherwise restricted under
applicable laws, rules, regulations, directives or the terms of any judgment
or settlement. The Bank has a continuing obligation pursuant hereto to
distribute the balance of any Bank Distribution which it has been precluded
from paying as soon as permissible under applicable laws, rules, regulations
or directives or the terms of any judgment or settlement and the Company has
a continuing obligation pursuant hereto to redeem the balance of the Rights
and distribute the balance of any Recovery Payment which it has been
precluded from paying as soon as permissible under applicable laws, rules,
regulations or directives or the terms of any judgment or settlement. In no
event, however, will the Company's redemption of the Rights result in an
aggregate distribution of an amount greater than the Recovery Payment.
(b) If the Bank is limited or prevented from distributing the Bank
Distribution and/or the Company is limited or prevented from redeeming all or
a portion of the Rights and distributing all or a portion of the Recovery
Payment, neither the Company nor the Bank will be deemed in default of this
Agreement or to have violated its obligations hereunder, provided the Company
shall have delivered to the Shareholders a certificate from the Chief
Financial Officer of the Company and the Bank specifying that portion of the
Rights that cannot be redeemed and that portion of the Recovery Payment that
cannot be paid and the applicable law, rule, regulation, directive, judgment,
settlement or action of a regulatory authority that is the source of the
restrictions described above, and either (i) an opinion of outside counsel
substantially to the effect that redemption of the Rights and the
distribution of the Recovery Payment, or the applicable portion thereof, as
the case may be, would result in the violation of the applicable law, rule,
regulation, directive, judgment, settlement, or action of a regulatory
authority that is the source of the restrictions described above or (ii) a
copy of written documentation from the applicable regulatory authority to the
effect that the Bank may not distribute the Bank Distribution, or any portion
thereof, and/or the Company may not redeem the Rights and distribute the
Recovery Payment, or any portion thereof.
(c) (1) To the extent the Company is prohibited from
distributing the Recovery Payment, or any portion thereof, or cannot do so
because the Bank is prohibited from making the Bank Distribution to the
Company, the Company shall, upon the written request of any Shareholder,
issue to such Shareholder preferred stock of the Company with an aggregate
liquidation preference equal in value to the Recovery Payment or portion
thereof which the Company shall have been prohibited from distributing or
unable to distribute (the "Recovery Payment Preferred"). The terms of the
Recovery Payment Preferred, as provided in this Section 4(c)(1) shall be set
forth in Certificate of Designations and Preferences filed as a supplement to
the Company's Amended and Restated Certificate of Incorporation. The Company
shall issue the Recovery Payment Preferred upon surrender to the Company of
such Shareholder's
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Rights.
(2) The stated value of each share of Recovery Payment
Preferred shall be $1,000.
(3) (A) The holders of the Recovery Payment Preferred shall
be entitled to receive, when, as and if declared by the Board of Directors
and out of the assets of the Company which are by law available for the
payment of dividends, cumulative preferential cash dividends payable
quarterly on the last day of each calendar quarter commencing with the first
full quarter following issuance thereof at a fixed rate per share of 9-3/4 %.
(B) Each quarterly dividend shall be fully cumulative
and dividends shall accrue, whether or not earned, declared or the Company
shall have funds or assets available for the payment of dividends, from the
first day of the quarter in which such dividends may be payable, except that
with respect to the first quarterly dividend, such dividend shall accrue from
the date of issue of the Recovery Payment Preferred.
(C) So long as any Recovery Payment Preferred remains
outstanding: (i) no dividend shall be declared or paid upon or set apart for
payment, and no distribution shall be ordered or made in respect of the
Company's Common Stock, or (ii) any other class of stock or series thereof;
and (b) no shares of Common Stock and no shares of any other class of stock
or series thereof; and (c) no moneys, funds or other assets shall be paid to
or made available for a sinking fund for the redemption or purchase of any
shares of: (i) Common Stock; or (ii) any other class of stock or series
thereof; unless, in each instance, full dividends on all outstanding shares
of Recovery Payment Preferred: (i) for all past dividend periods shall have
been paid; and (ii) for the then current calendar quarter shall have been
paid or declared and set aside for payment.
(4) In the event of any dissolution, liquidation or winding up of
the affairs of the Company, after payment or provision for payment of the
debts and other liabilities of the Company, the holders of the Recovery
Payment Preferred shall be entitled to receive, out of the net assets of the
Company available for distribution to its stockholders and before any
distribution shall be made to the holders of Common Stock or to the holders
of any other class of stock or series thereof an amount equal to $1,000 per
share, plus an amount equal to all dividends accrued and unpaid on each share
of Recovery Payment Preferred to but excluding the date fixed for
distribution, and no more. If upon such voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company, the net
assets of the Company shall be insufficient to permit payment in full of the
amounts required to be paid to the holders of the Recovery Payment Preferred,
then a pro rata portion of the full amount required to be paid upon such
dissolution, liquidation or winding up shall be paid to the holders of
Recovery
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Payment Preferred,.
(5) The Company shall have the right, at its option and by
resolution of its Board of Directors, to redeem at any time and from time to
time the Recovery Payment Preferred Stock, in whole or in part, upon payment
in cash in respect to each Share of Recovery Payment Preferred redeemed at
$1,000 per share, plus an amount equal to all dividends accrued and unpaid
thereon to but excluding the date fixed for redemption.
If less than all of the outstanding shares of Recovery Payment Preferred
shall be redeemed, the particular shares to be redeemed shall be allocated by
the Company among the respective holders of Recovery Payment Preferred, pro
rata.
(6) The holders of the Recovery Payment Preferred shall have no
voting power except as set forth in this Section 4(C)(6). If at any time the
equivalent of six or more full quarterly dividends (whether or not
consecutive) payable on any shares of Recovery Payment Preferred shall be in
default, the number of directors constituting the Board of Directors of the
Company shall be increased by two, and the holders of all Recovery Payment
Preferred shall have the exclusive right, voting together as one class, to
elect two directors to fill such newly-created directorships. This right
shall remain vested until all dividends in default on all outstanding
Recovery Payment Preferred have been paid, or declared and set apart for
payment, at which time: (i) the right shall terminate (subject to revesting
in the case of any subsequent default of the kind described above); (ii) the
term of the directors then in office elected by the holders of the
outstanding Recovery Payment Preferred as a class shall terminate; and (iii)
the number of directors constituting the Board of Directors of the Company
shall be reduced by two.
(7) No sinking fund or funds shall be established for the
retirement or redemption of the Recovery Payment Preferred.
(8) Shares of the Recovery Payment Preferred shall not be
convertible into Common Stock or any other class of capital stock of the
Company.
(9) For purposes hereof, any class or classes of stock of the
Company, including Common Stock and other preferred stock, whether now
existing or hereafter created shall be junior to the Recovery Payment
Preferred, as to dividends or as to the distribution of assets upon
redemption, liquidation, dissolution or winding up.
5. FEES AND EXPENSES. The parties hereto agree that, from the date of
this Agreement, the Company shall promptly pay directly all legal,
accounting, consulting and all other fees and expenses incurred by the
Company and the Bank and approved by the Litigation Committee (as defined in
Section 9(a) hereof) in connection with the Litigation or any litigation
against the Bank and/or the Company with respect to any
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claim specified in Section 6 hereof ("Ancillary Litigation"). In accordance
with Section 1 hereof, such fees and expenses shall be deducted from the
Recovery Payment distributed to the Shareholders.
6. INDEMNIFICATION FOR CERTAIN CLAIMS. The Shareholders shall
indemnify the Bank and/or the Company for 95% of liability incurred for
claims specified in clause (1) below and 100% of the liability incurred for
claims specified in clause (2) below (including in both instances for any
amounts paid in any judgment or settlement of such claims or any portion of
the Litigation Recovery which is determined to be owing to parties other than
a Shareholder, the Company, and the Bank):
(1) Any claim by a party now pending or hereafter brought, seeking
in whole or in part any amounts paid or to be paid as the Litigation
Recovery; and
(2) Any claim by a party, other than the Company or the Bank,
challenging the validity or binding effect of this Agreement.
In no event shall the Shareholders be liable, with respect to any and all
claims or indemnities provided for in this Section 6, for an amount in excess
of the actual monies recovered or awarded in the Litigation and paid over to
that Shareholder as part of the Recovery Payment. To the extent any
liability, fees and expenses incurred for a matter covered by this Section 6,
are incurred subsequent to the distribution of the Recovery Payment to the
Shareholders, each Shareholder will bear responsibility and shall reimburse
the Company and/or the Bank for a share of such indemnification in the same
proportion as its pro rata share of the Rights outstanding. The obligations
and duties set forth in this Section 6 shall survive and continue as
obligations of the Shareholders irrespective of whether the Shareholders
assign any or all of the Rights pursuant to Section 7 hereof.
7. SUCCESSORS AND ASSIGNS.
(a) The Company's and the Bank's claims against the Government
that are the basis for the Litigation are, and shall remain, an asset of the
Company and the Bank. In the event of any acquisition, merger or
consolidation of the Company or the Bank in which the Company and/or the Bank
will not be the surviving entity, the Company and the Bank shall require its
respective successors to assume, and such respective successors shall assume,
the rights and obligations of the Company and the Bank under this Agreement.
(b) The Rights of any Shareholder are assignable, in whole or in
part, without charge to each Shareholder hereof upon surrender of this
Agreement with a properly executed assignment at the principal office of the
Company, provided that any such assignee shall execute this Agreement with
respect to the number of Rights assigned and agree to the terms and
conditions hereof. Upon any partial assignment,
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the Company and the Bank will at their expense issue and deliver to the
Shareholder a new Agreement of like tenor, in the name of the Shareholder,
which shall entitle such Shareholder to such number of Rights which were not
so assigned. Notwithstanding the foregoing, the Rights may not be sold,
transferred or otherwise disposed of, except in accordance with and subject
to the provisions of the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
(c) (1) To the extent that the Company enters into a definitive
agreement providing for the acquisition, merger, or consolidation of the
Company or the Bank, in which the Company or the Bank is not the surviving
entity (the "Acquisition Agreement"), such Acquisition Agreement shall be
required to specifically incorporate and provide for the terms set forth in
this Section 7(c).
(2) Effective upon consummation of the transaction
contemplated by the Acquisition Agreement, the Company (or any successor
thereto) shall create a Litigation Trust (the "Litigation Trust"). The
Litigation Trust shall be a statutory business trust created under Delaware
law pursuant to a Declaration of Trust and the filing of a Certificate of
Trust with the Delaware Secretary of State. The Litigation Trust shall have
five Trustees designated by the Shareholders as follows: The Bishop Estate
shall designate three Trustees; BIL Securities alone shall designate one
Trustee; and BIL Securities together with Arbur shall jointly designate one
Trustee. In the event a Trustee dies, resigns or is otherwise unable or
unwilling to perform his or her duties, such Trustee's replacement shall be
designated by the party or parties that designated the Trustee being replaced.
(3) Effective upon consummation of the transaction
contemplated by the Acquisition Agreement, the Company (or any successor
thereto) shall be contractually obligated to assume all duties and
obligations of the Company and the Bank with respect to the Litigation
Recovery and the redemption of the Rights under this Agreement.
(4) Effective upon consummation of the transaction
contemplated by the Acquisition Agreement, the Litigation Trustees shall
assume authority, identical to and succeeding to that of the Litigation
Committee, to make all decisions on behalf of the Company (and its
successors) with respect to the prosecution of the Litigation and in any
Ancillary Litigation, including the selection and supervision of existing and
any new counsel or other persons retained to assist in the prosecution of the
Litigation or in any Ancillary Litigation, and deciding whether or not to
accept any settlement offer. Without prejudice to any rights of the
Shareholders, the Litigation Trustees shall have the authority to bring suit
on behalf of the Shareholders to enforce any provision of this Agreement for
the benefit of the Shareholders, including specifically the redemption of the
Rights under Section 3 hereof. The Litigation Trustees may seek
reimbursement by the Bank and/or the Company for any expenses, costs or fees
reasonably incurred for their own administration and for management of the
Litigation and any Ancillary
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Litigation, to include the retention of professionals, consultants, or other
persons to assist in the management of the Litigation Trust or in the
prosecution of the Litigation or in any Ancillary Litigation. Any such
reimbursement by the Bank and/or the Company shall be deducted from the
Litigation Recovery in accordance with Section 1(a)(i) hereof.
(d) Nothing in this Agreement is intended to create any rights in
the Shareholders against the United States, except as such parties may have
had prior to the date of this Agreement or may have by operation of law.
8. COOPERATION AND RIGHTS OF SHAREHOLDERS. The parties hereto agree
that the Shareholders are and shall remain the principal beneficiaries of the
Litigation so long as they retain their Rights under this Agreement, and that
the Shareholders do and shall retain a significant beneficial interest in the
direction and outcome of the Litigation. The parties also agree that they
shall cooperate in good faith with respect to the prosecution of the
Litigation so as to maximize the Litigation Recovery. The Rights (i) are
junior to all debt obligations (whether for borrowed money or otherwise) of
the Company and the Bank existing at the time of the redemption described in
Section 3(d) except as to an obligation that is expressly made junior to the
Rights, (ii) do not have a right to vote, and (iii) are a senior claim in
relation to the right of the holders of any stock of the Company, including
common stock and other preferred stock, whether now existing or hereafter
created, as to dividends or as to the distribution of assets upon redemption,
liquidation, dissolution, or winding up with respect to a Recovery Payment
attributable to any Litigation Recovery (although the Shareholders will
continue to have such other rights on liquidation attributable to their
status as holders of Common Stock).
9. MANAGEMENT OF THE LITIGATION
(a) The Company shall prosecute the Litigation vigorously following the
distribution of Rights with a view to resolution of the Litigation as
promptly as practicable. In furtherance of this prosecution of the
Litigation, the Board of Directors of the Company shall designate a special
litigation committee of the Board of Directors (the "Litigation Committee")
comprised of three directors which shall include the Chief Executive Officer
of the Company, one Director designated by the Bishop Estate, and one
Director who shall be designated jointly by BIL Securities and Arbur. The
Litigation Committee shall have the exclusive right to oversee and to direct
the prosecution of the Litigation (and any Ancillary Litigation) and to
consider and decide upon settlement of the Litigation (and any Ancillary
Litigation) as hereinafter provided. The Litigation Committee shall be
authorized to make final decisions relating to any dismissal, settlement, or
termination of the Litigation (and any Ancillary Litigation) and to decline
to pursue any appeal or to settle the Litigation (and any Ancillary
Litigation) prior to any Recovery Payment. In the event that any or all of
the Shareholders should lose their representation upon the Board of Directors
before the conclusion of the Litigation (or any Ancillary Litigation) and the
distribution of the Recovery Payment, the relevant
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Shareholder(s) shall retain the right to designate member(s) of the
Litigation Committee, which designees may include persons not members of the
Board of Directors of the Company. If any such designee should not be
simultaneously a member of the Board of Directors, the Litigation Committee
shall thereupon become an advisory committee of the Company. The Litigation
Committee's authority shall thenceforward consist of making recommendations
to the Board of Directors relating to the prosecution of, and any dismissal,
settlement, or termination of the Litigation (and any Ancillary Litigation),
in whole or in part. The Litigation Committee shall present such
recommendations in writing to the Board of Directors of the Company and the
Board of Directors shall not dismiss, settle or terminate the Litigation (and
any Ancillary Litigation), in whole or in part, without first receiving the
favorable recommendation to that effect from the Litigation Committee. The
adoption of any such recommendation to settle or otherwise terminate the
Litigation and any Ancillary Litigation by the Board of Directors shall
require an affirmative vote of 6 of the 7 members of the Board of Directors
of the Company. The Company, as the sole shareholder of the Bank, shall
cause the Bank to take no action which is inconsistent with any action taken
at the direction of the Litigation Committee.
(b) The Litigation Committee, regardless of its composition, shall
select counsel of its choice to represent the Company and the Bank in the
prosecution of the Litigation (or any Ancillary Litigation) and shall have
the right to replace counsel at any time. The Litigation Committee's
authority to hire or replace counsel shall include the authority to enter
into compensation agreements with counsel.
(c) Counsel designated by the Litigation Committee to prosecute the
Litigation (or any Ancillary Litigation) and other persons retained to assist
in the prosecution of the Litigation (or any Ancillary Litigation) shall be
authorized to accept direction and control from the Litigation Committee on
all matters concerning the Litigation (or any Ancillary Litigation).
(d) In the event a member of the Litigation Committee dies, resigns, or
is otherwise unable or unwilling to perform his or her duties, such member's
replacement shall be designated by the party or parties that designated the
member being replaced. The Company or the Bank shall have the right to
remove any member from the Litigation Committee in the event such removal is
required by any federal or state regulator having jurisdiction over the
Company or the Bank or any of their subsidiaries. If any individual is so
removed, his or her replacement shall be designated by the party or parties
that designated the member being replaced. Any designation of a member under
this subparagraph shall be effective upon written notice from the designating
party or parties to the other parties to this Agreement.
10. WAIVER; AMENDMENT. Any provision of this Agreement may be (i)
waived by the party or parties benefited by the provision or (ii) amended or
modified at any time, by an agreement in writing between the parties hereto,
executed in the same
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manner as this Agreement.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and the Agreement shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
12. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Shareholders and the Company and the Bank with respect to the
subject matter hereof, supersedes all previous agreements, negotiations,
discussions, writings, understandings, commitments and conversations with
respect to such subject matter, and there are no agreements or understandings
other than those set forth or referred to herein. Notwithstanding this
section, BIL Securities and Arbur may enter into agreements between
themselves concerning their shared representation on the Board of Directors
of the Company, the Litigation Committee, or the Litigation Trust.
13. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of California, irrespective of the
choice of laws principles of the State of California, as to all matters,
including matters of validity, construction, assignment, enforceability,
performance and remedies.
14. DISPUTES. In any dispute between the Bank or the Company, on the
one hand, and one or more of the Shareholders, on the other hand, arising
under this Agreement, the prevailing party or parties shall be entitled to
reimbursement of its reasonable attorneys fees, costs, and expenses incurred
in the prosecution and resolution of the dispute.
15. SEVERABILITY. Any covenant, provision, agreement or term of this
Agreement that is prohibited or held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective as to the extent
of such prohibition or unenforceability without invalidating the remaining
portions hereof.
16. COMMUNICATIONS. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or air courier
guaranteeing overnight delivery:
(a) If to the Company or the Bank, initially at 5900 Wilshire
Boulevard, Los Angeles, California 90036, Attention: President, Telephone
(213) 938-6300; Telecopier: (213) 965-6218, and thereafter at such other
address, notice of which is given in accordance with this Section 16; and
(b) If to the Holder, initially at the following addresses and
thereafter at such other address, notice of which is given in accordance with
this Section 16:
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Trustees of the Estate of Bernice Pauahi Bishop
567 South King Street
Suite 200
Honolulu, Hawaii 96813
Attention: Aaron Au
Telephone: (808) 523-6319
Telecopier: (808) 524-7013
BIL Securities (Offshore) Limited
Suite 4150
355 South Grand Avenue
Los Angeles, CA 90071
Attention: Michael S. Dreyer
Telephone: (213) 683-8790
Telecopier: (213) 617-1806
Arbur, Inc.
c/o William E. Simon & Sons, Inc.
310 South Street
Morristown, NJ 07960-1913
Attention: Mark Butler
Telephone: (973) 898-0290
Telecopier: (973) 993-0925
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being sent by certified mail, return receipt requested,
if mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the second following business day if timely delivered to
an air courier guaranteeing overnight delivery.
17. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement expressed
or implied is intended to confer upon any person, other than the parties
hereto or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
18. EFFECTIVE DATE. This Agreement shall be effective upon
commencement of the Company's public offering, as contemplated by the
Registration Statement filed with the Securities and Exchange Commission on
March 20, 1998.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first shown above.
PBOC HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
PEOPLE'S BANK OF CALIFORNIA
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
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TRUSTEES OF THE ESTATE OF
BERNICE PAUAHI BISHOP
By:
------------------------------------
Name:
Title: Trustee
By:
------------------------------------
Name:
Title: Trustee
By:
------------------------------------
Name:
Title: Trustee
BIL SECURITIES (OFFSHORE) LIMITED
By:
------------------------------------
Name:
Title:
ARBUR, INC.
By:
------------------------------------
Name:
Title:
15