Exhibit 2.3
SECOND AMENDMENT TO
FIRST RESTATEMENT OF AGREEMENT AND
PLAN OF REORGANIZATION
This SECOND AMENDMENT TO FIRST RESTATEMENT OF AGREEMENT AND
PLAN OF REORGANIZATION (the "Second Amendment") is dated as of ________ 1999
and entered into by and between The Bank of Hemet (the "Bank") and Pacific
Community Banking Group (the "Company").
WHEREAS, the Bank and the Company entered into a First
Restatement of Agreement and Plan of Reorganization dated as of January 5, 1999
(the "Agreement"); and a First Amendment to the Agreement dated as of March 24,
1999.
WHEREAS, the parties hereto desire to amend the Agreement and
the First Amendment as provided in this Second Amendment.
NOW, THEREFORE, in consideration of the premises and mutual
promises of the parties set forth below, the parties hereto agree as follows:
1. Capitalized terms used herein and not otherwise defined
shall have the same meaning as set forth in the Agreement.
2. Recital C of the Agreement is hereby amended to read in its
entirety as follows:
"C. At the Effective Time (hereinafter defined below) of the
Merger, all of the issued and outstanding shares of Bank Stock, except for
shares of Bank Stock held by Dissenting Shareholders (as hereinafter defined
below), shall be converted into and exchanged for a combination of shares of
Company Stock and Warrants exercisable into shares of Company Stock, all upon
the terms and subject to the conditions hereinafter set forth;"
3. Recital I is hereby added to read in its entirety as
follows:
"i. For federal income tax purposes, it is intended that the
Merger shall qualify as a "reorganization" within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and the Bank, the
Company and PCBG Merger Corporation will each be "a party to a reorganization,"
within the meaning of Section 368(b) of the Code, with respect to the Merger;"
4. The definition of Bank Shareholder is hereby added to read
in its entirety as follow:
1
"'Bank Shareholder' shall mean any holder of Bank Stock or an
option to purchase Bank Stock immediately prior to the Merger."
5. The definition of Expected Net Proceeds is hereby deleted.
6. The definition of "Offering" is hereby amended to read in
its entirety as follows:
"'Offering' shall mean a public offering underwritten by the
Underwriters (as defined below), as determined by the Company in its sole
discretion, of a certain number of shares of Company Stock as determined by the
Company in its sole discretion, of shares of the Company held by shareholders of
the Bank and Valley Bank and newly issued shares, at a gross offering price of
not less than $15.00 per share, as described in Section 7.14."
7. The definition of "S-l" is hereby amended in its entirety
as follows:
"'S-1' means the registration statement on Form S-1 to be
filed with the SEC relating to the registration under the Securities Act of the
shares of Company Stock held by shareholders of the Bank and Valley Bank to be
sold, and shares of Company Stock to be issued, in the Offering."
8. The definition of "Selling Shareholder" is hereby added to
read in its entirety as follows:
"'Selling Shareholder' shall mean any Bank shareholder or
holder of a Bank stock option who elects to sell his or her shares of Bank Stock
or to exchange his or her options and sell the Company Stock received in
exchange therefore in the Offering."
9. The definition of "Total Acquisition Costs" is hereby
deleted.
10. The definition of "Undesignated Shares" is hereby added to
read in its entirety as follows:
"'Undesignated Shares' shall have the meaning given such term
in Section 2.10."
11. A second sentence is hereby added to Section 2.1(b), which
will read in its entirety as follows:
"Holders of Bank Stock shall have a right to sell in the
Offering all the shares of Company Stock received in exchange for Bank Stock as
they so elect, as
2
provided in Section 2.10, provided that if more than 88% or less than 75% of the
shares of Company Stock received by the Bank Shareholders (including, for this
purpose, holders of Bank stock options, as provided in Section 2.8) is elected
to be sold in the Offering, the shares sold in the Offering by each Selling
Shareholder shall be adjusted. If more than 88% of the shares of Company Stock
received by the Bank Shareholders (including, for this purpose, holders of Bank
stock options, as provided in Section 2.8) is elected to be sold in the
Offering, the shares sold in the Offering by each Selling Shareholder shall be
decreased ratably in proportion to the number of shares requested to be sold, so
that the total number of shares retained (i.e., not sold in the Offering) by the
Bank Shareholders in the aggregate is equal to at least 12% of the Company Stock
received by the Bank Shareholders. If less than 75% of the shares of Company
Stock received by the Bank Shareholders (including, for this purpose, holders of
Bank stock options, as provided in Section 2.8) is elected to be sold in the
Offering, the shares sold in the Offering by each Selling Shareholder so
electing shall be increased ratably in proportion to the number of shares
requested to be sold, so that the total number of shares retained (i.e., not
sold in the Offering) by the Bank Shareholders in the aggregate is equal to no
more than 25% of the Company Stock received by the Bank Shareholders. If, after
such proration, the number of shares to be retained by all Bank Shareholders in
the aggregate remains more than 25%, then each of the Directors hereby agrees to
decrease the number of shares retained by them, ratably in proportion to their
total shareholdings, to the extent necessary to aggregate retention of 25%. The
Selling Shareholder shall receive, for each share of Company Stock sold in the
Offering, the price at which shares are sold in the Offering, without reduction
for expenses or commissions of the Offering, it being understood that the
Company shall bear such expenses and commissions."
12. Section 2.1(e) is hereby amended to read in its entirety
as follows:
(e) COMPANY CORPORATE GOVERNANCE CHANGES. The Charter
Documents of the Company as in effect immediately prior to the Effective Time
shall continue in effect after the Merger until thereafter amended in accordance
with applicable law and the members of the Board of Directors and the Executive
Officers of the Company immediately prior to the Merger shall continue in their
respective positions after the Merger and be the Board of Directors and the
Executive Officers of the Company, except that the Company shall have taken
prior to the Effective Time all necessary steps so that, (i) two (2) individuals
from the Board of Directors or executive staff of the Bank, which are intended
to be Mr. Jaqua and Mr. Harold Williams, shall be appointed to the Board of
Directors of the Company, shall be renominated by the Board of Directors for
election at the Company's yearly annual meetings for a minimum of (3) three
years;(ii) two (2) individuals from the Board of Directors of Valley Bank shall
be appointed to the Board of Directors of the Company; and (iii) the
individuals elected to fill such four (4) directorships shall be
3
annual appointments as selected in the sole discretion of the Company; (clauses
(i)-(iii) being hereinafter collectively referred to as the "Company Corporate
Governance Changes")."
13. Section 2.4 is hereby amended to read in its entirety as
follows:
"2.4 THE AGGREGATE PURCHASE CONSIDERATION AND PER SHARE
CONSIDERATION. The Aggregate Purchase Consideration shall be equal to the sum of
(i) the product of 844,278 and the Per Share Consideration and (ii) the
Aggregate Option Price. The Per Share Consideration shall be equal to 3.4 shares
of Company Stock for each share of Bank Stock, plus one (1) Warrant."
14. Section 2.5 is hereby amended to read in its entirety as
follows:
"2.5 DELIVERY OF CONSIDERATION. At the Closing, the Company
will deliver to the Exchange Agent an amount of Company Stock and Warrants equal
to the Aggregate Purchase Consideration, plus any cash payment for a fractional
share of Company Stock. In the case of shares of Company Stock to be sold in the
Offering, as provided in Section 2.1(b), the Exchange Agent shall deliver such
shares to, or pursuant to the direction of, the Underwriters. In the case of all
other shares of Company Stock, and the cash and Warrants, the Exchange Agent
shall deliver the same to the Selling Shareholders, provided that share
certificates formerly evidencing Bank Stock (duly executed and in proper form
for transfer, or a lost certificate affidavit acceptable to the Company) shall
have been delivered to the Exchange Agent in accordance with this Section 2.5,
Section 2.10 and an agreement to be entered into between the Company and the
Exchange Agent."
15. Section 2.8 is hereby amended to read in its entirety as
follows:
"2.8 STOCK OPTIONS. Immediately prior to the Effective Time of
the Merger, all stock options will be fully vested and each holder of a Bank
Option will be given the opportunity to, in whole or in part, cancel such option
and receive Company Stock equal to the number of shares of Bank Stock covered by
such option multiplied by the number obtained by subtracting the exercise price
of such option from the Per Share Consideration in effect on the Closing Date
(i.e., shares subject to option times ($51.00 minus exercise price of option),
all divided by $15.00) (the total of sum of such payments for all Bank Options
so cancelled shall be defined as the "Aggregate Option Price"). Holders of Bank
Options who elect to cancel their options in exchange for Company Stock (and
Warrants, as provided in the next sentence) will have their Bank Options
cancelled immediately prior to the Effective Time. For each 3.4 shares of
Company Stock paid by the Company in exchange for options on Bank Stock as
provided in the previous two sentences, each holder of a bank option will also
receive one (1) Warrant. Such payment may be made either by the Bank, the
Company or a combination of both as determined
4
in the sole discretion of the Company. Each such option holder shall be afforded
an election to have the shares so received in the Offering, upon substantially
identical terms as the Selling Shareholders, and subject to proration together
with and on the same terms as the Selling Shareholders. All remaining Bank
Options which are entitled to participate in the Aggregate Option Price but the
holder of a Bank Option elects not to participate in the Aggregate Option Price
shall be cancelled immediately prior to the Effective Time of the Merger."
16. Section 2.9 is hereby amended to read in its entirety as
follows:
"2.9 DIRECTORS' AGREEMENTS. The Directors' Agreements
previously entered into by each of the Directors of the Bank continue to be in
full force and effect, and shall apply to the Agreement as amended pursuant to
this Second Amendment. By signing this Second Amendment, each of the Directors
of the Bank so agrees."
17. Section 2.10 is hereby amended to read in its entirety as
follows:
"2.10 (a) TRANSMITTAL LETTER. On or about the mailing date of
the Joint Proxy Statement/Prospectus, the Company, the Bank or the Company's
Exchange Agent shall mail appropriate transmittal materials to the stockholders
of Bank Stock, in form acceptable to the Company. The transmittal materials
shall include documentation by which stockholders may indicate their election
regarding the sale of shares in the Offering, subject to the possible adjustment
as provided in Section 2.1(b), and shall provide that sale in the Offering will
be contingent on the completion of the Offering. The transmittal letter shall
also contain a power of attorney authorizing an authorized representative of the
Company to exchange the Bank's shares for Company shares, and then immediately
deliver the Company shares to the Underwriter for sale in the Offering. The
transmittal letter shall also require a signature guarantee, from a bank or
brokerage with medallion capability. The holder of Bank Stock shall be
instructed to send to the Company, or to the entity designated by the Company
(which may be the Bank or the Exchange Agent), the holder's Bank Stock
certificates with the properly completed letter of transmittal. The transmittal
letter shall contain an election box and other appropriate and customary
transmittal materials (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore representing shares of
Bank Stock shall pass, only upon proper delivery of such certificates to the
Exchange Agent in such form as Company requires). The transmittal materials
shall identify the Election Deadline established by the Company, which shall not
be less than 30 days from the date of mailing of such transmittal letter to the
holder (or such shorter time as the Bank may approve), and shall state that any
share of Bank Stock (other than Dissenting Common Stock) with respect to which
the holder (or the Beneficial Owner, as the case may be)
5
shall not have submitted an effective, properly completed letter of transmittal
together with the Bank Stock certificates (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) prior to the Election Deadline shall
be deemed to be "Undesignated Shares" hereunder, and shall not sell Company
Stock in the Offering. The Bank shall provide to the Exchange Agent all
information reasonably necessary for it to perform its obligations as specified
herein.
(b) PROPER AND TIMELY ELECTION. Any Election shall have been
properly made and effective only if the Company or its designee shall have
actually received a properly completed letter of transmittal by the date and
time established by the Company and specified in the transmittal materials, as
such date and time may be extended by the Company in its discretion (the
"Election Deadline"). A letter of transmittal shall be deemed properly completed
only if an Election is indicated for each share of Bank Stock covered by such
letter of transmittal and if accompanied by one or more certificates (or
customary affidavits and indemnification regarding the loss or destruction of
such certificates or the guaranteed delivery of such certificates) representing
all shares of Bank Stock owned by the holder of Bank Stock, together with duly
executed transmittal materials included in or required by the letter of
transmittal. Any Election may be revoked or changed by the person submitting a
revised, properly completed letter of transmittal at or prior to the Election
Deadline. In the event a letter of transmittal is revoked prior to the Election
Deadline, the shares of Bank Stock represented by such Election shall
automatically become Undesignated Shares unless and until a new Election is
properly made with respect to such shares on or before the Election Deadline,
and the Company shall cause the certificates representing such shares of Bank
Stock to be promptly returned without charge to the person submitting the
revoked Election upon written request to that effect from the holder who
submitted such Election Form. Subject to the terms of this Agreement and of the
Election, the Company or the Exchange Agent shall have reasonable discretion to
determine whether any election, revocation or change has been properly or timely
made and to disregard immaterial defects in the letter of transmittal, and any
decisions of the Company and Bank required by the Exchange Agent and made in
good faith in determining such matters shall be binding and conclusive. Neither
the Company nor the Exchange Agent shall be liable for the failure to notify any
person of any defect in an Election or the letter of transmittal, provided that
the Company uses its reasonable best efforts promptly to notify (or to cause the
Exchange Agent promptly to notify) any holder of Bank Stock of any defect in an
Election or the Letter of Transmittal.
(c) If the aggregate number of shares of Bank Stock as to
which Elections to sell shall have effectively been submitted would, absent
proration, result in the sale in the Offering of more or less shares than
are permitted pursuant to Section 2.1(b), then the sales in the Offering shall
be increased or reduced pro
6
rata as provided in Section 2.1(b) in order to ensure that the shares sold by
Selling Shareholders in the Offering do not exceed or are not less than the
amounts provided in Section 2.1(b).
(d) CALCULATIONS. The calculations required by this Section
2.10 shall be prepared by the Company prior to the Effective Time and shall be
set forth in a certificate executed by the Chief Financial Officer or Chief
Executive Officer of the Company and furnished to the Bank at least two Business
Days prior to the Closing Date showing the manner of calculation in reasonable
detail. Any cash payment shall be rounded to the nearest cent.
(e) NO FRACTIONAL SHARES OR WARRANTS. Notwithstanding any
other provisions of this Agreement, each holder of shares of Bank Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Company Stock (after taking into account all
certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Company Stock multiplied by $15.00. Notwithstanding any other provision of this
Agreement, no fractional warrants shall be issued, and no cash or other
consideration shall be paid in lieu of fractional warrants. No holder will be
entitled to dividends, voting rights or any other rights as a shareholder in
respect of any fractional share of Company Stock."
18. Section 3.4 is hereby deleted, and Sections 3.4, 3.5, 3.6
and 3.7 are hereby amended in full as follows:
"3.4 EXCHANGE PROCEDURES.
(a) EXCHANGE AGENT. Prior to the Effective Time, the
Company shall deposit with the Exchange Agent shares of Company Stock and
Warrants to be issued to selling shareholders of the Bank, such shares being
the number of shares of Company Stock equal to the Aggregate Purchase
Consideration issuable in the Merger. The Exchange Agent shall deliver or cause
to be delivered to the Underwriter those of such shares to be sold in the
Offering. Upon completion of the Offering, the Underwriter will deposit with
the Exchange Agent the gross proceeds of the sale of shares by selling
shareholders in the Offering. The Exchange Agent shall distribute to each
selling shareholder the cash proceeds, shares of Company Stock and Warrants to
which such selling shareholder is entitled, provided that the selling
shareholder shall have delivered the requisite letter of transmittal and Bank
share certificates (or customary affidavits and indemnification regarding the
loss or destruction of such certificates or the guaranteed delivery of such
certificates). The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to Company Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such shares for the account
7
of the persons entitled thereto.
(b) EXCHANGE OF CERTIFICATES. Each holder of a
certificate formerly representing Bank Stock (other than Dissenting Common
Stock) who surrenders or has surrendered such certificate (or customary
affidavits and indemnification regarding the loss or destruction of such
certificate), together with duly executed transmittal materials required by
Section 2.10, to the Exchange Agent shall, upon acceptance thereof, be entitled
to the Per Share Consideration of a certificate representing Company Stock or
the proceeds of the sale of such stock in the Offering and Warrants into which
the shares of Bank Stock shall have been converted pursuant hereto, as well as
cash in lieu of any fractional shares of Company Stock to which such holder
would otherwise be entitled. The Exchange Agent shall accept such Bank
certificate upon compliance with such reasonable and customary terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal practices. Until surrendered as contemplated
by this Section 3.4, each certificate representing Bank Stock shall be deemed
from and after the Effective Time to evidence only the right to receive the Per
Share Consideration Company Stock and a Warrant, as the case may be, upon such
surrender. The Company shall not be obligated to deliver the consideration to
which any former holder of Bank Stock is entitled as a result of the Merger
until such holder surrenders his certificate or certificates representing
shares of Bank Stock for exchange as provided in this Article III. If any
certificate for shares of Company Stock, or any check representing declared but
unpaid dividends, is to be issued in a name other than that in which a
certificate surrendered for exchange is issued, the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and the
person requesting such exchange shall affix any requisite stock transfer tax
stamps to the certificate surrendered or provide funds for their purchase or
establish to the satisfaction of the Exchange Agent that such taxes are not
payable.
(c) PAYMENT TO HOLDERS OF A BANK OPTION. Each holder of
a Bank Option who presents a demand for cancellation and payment of such Bank
Option as provided in Section 2.8 of the Agreement to the Exchange Agent prior
to the Closing shall, upon acceptance thereof, be entitled to the per share
equivalent of the Aggregate Option Price. Upon receipt of the Aggregate Purchase
Consideration and as soon as reasonably possible after the Closing, the Exchange
Agent shall deliver to each former holder of a Bank Option the consideration due
each such holder under Section 2.8 of the Agreement, in the form of shares of
Company Stock and Warrants as provided therein, or in the form of cash, if the
shares received in exchange for the cancellation of the Bank Option were
submitted for sale in the Offering as provided in Section 7.14(b). The Exchange
Agent shall be entitled to rely upon the records of the Bank and the information
provided in such demand for cancellation documentation provided by any such
holder of a Bank Option, as verified by the Company as to the method and means
of payment and
8
disposition of such consideration.
(d) AFFILIATES. Certificates surrendered for exchange
by any person constituting an "affiliate" of Bank for purposes of Rule 144(a)
under the Securities Act shall not be exchanged for certificates representing
whole shares of Company Stock until the Company has received a written
agreement from such person as provided in Section 6.25.
3.5 VOTING AND DIVIDENDS. Former shareholders of record of
Bank shall not be entitled to vote after the Effective Time at any meeting of
Company shareholders the number of whole shares of Company Stock into which
their respective shares of Bank Stock are converted, until such holders have
exchanged their certificates representing Bank Stock for certificates
representing Company Stock in accordance with the provisions of this Agreement.
Until surrendered for exchange in accordance with the provisions of Sections
2.10 and 3.4 of this Agreement, each certificate theretofore representing shares
of Bank Stock (other than shares to be canceled pursuant to Section 2.1 of this
Agreement) shall from and after the Effective Time represent for all purposes
only the right to receive the Per Share Consideration consisting of shares of
Company Stock and a Warrant, and cash in lieu of fractional shares, as set forth
in this Agreement. No dividends or other distributions declared or made after
the Effective Time with respect to Company Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered certificate of
Bank Stock with respect to the shares of Company Stock represented thereby,
until the holder of such certificate of Common Stock shall surrender such
certificate. Subject to the effect of applicable laws, following surrender of
any such certificates of Bank Stock for which shares of Company Stock are to be
issued, there shall be paid to the holder of the certificates, without interest,
(i) the amount of any cash payable with respect to a fractional share of Company
Stock to which such holder is entitled pursuant to Section 2.1 and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Company Stock, and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole shares of
Company Stock."
3.6 NO LIABILITY. Neither the Company, the Bank nor the
Exchange Agent shall be liable to any holder of shares of Bank Stock for any
shares of Company Stock (or dividends or distributions with respect thereto) or
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
3.7 WITHHOLDING RIGHTS. The Company or the Exchange Agent
shall
9
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Stock such amounts
as the Company or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by the
Company or the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Bank Stock in respect of which such deduction and withholding was made by the
Company or the Exchange Agent."
19. Section 5.18 is hereby amended to read in its entirety as
follows:
"5.18 CAPITAL OF COMPANY, OFFERING AND COMMITMENTS. The
Company intends to use its best efforts to conduct the Offering in order to
permit stockholders of the Bank and Valley Bank, to sell shares of Company Stock
and to provide capital for expenses, growth and operations of the Company. As of
the date of this Agreement, the Company and Sutro have entered into the
Engagement Agreement, a copy of which has been provided to the Bank and which
has not been terminated or materially altered, except that the Company can
change its relationship with Sutro, or increase or decrease the number of
underwriters or co-mangers of the Offering, in the Company's sole discretion.
The Company shall not impose any cost or expense of the Offering, including
Underwriter costs and expenses, on any selling shareholder."
20. The first sentence of Section 6.8 is hereby amended to
read in its entirety as follows:
"As soon as practicable, the Company and the Bank shall
prepare the S-4 and the proxy statement ("Proxy Statement") and take all action
necessary in accordance with applicable Rules and its Charter Documents to
submit the Agreement and the transactions contemplated hereby to its
shareholders for approval by June 21, 1999, or as otherwise reasonably directed
by the Company."
21. Section 7.14 is hereby amended to read in its entirety as
follows:
"7.14 THE OFFERING.
(a) The Company intends to conduct the Offering in order
to permit stockholders of the Bank and Valley Bank, to sell shares of Company
Stock and to provide capital for expenses, growth and operations of the Company.
All shareholders of the Bank will be given the opportunity to sell shares of the
Company (whether in exchange for Bank Stock or Bank Options) in the Offering,
10
subject to proration as provided in Section 2.1(b). Shares of Company Stock sold
by the selling shareholders will not incur any cost and expenses of the
Offering, and that pursuant to the terms of this Section 7.14, the amount of
cash from the Offering to be received by a Selling Shareholder will not be less
than $15.00 per share.
(b) All holders of Bank Options who exchange their options for
shares Company Stock and elect to sell the shares of Company Stock so received
may do so without having to first exercise such options. Such option holders
wishing to sell shares of Company Stock underlying their options to be received
in exchange for the Bank Options may do so by depositing with the Exchange Agent
the options with respect to the shares of Bank Stock to be exchanged prior to
the Offering, together with appropriate Letters of Transmittal properly
completed and executed. At the time of the Merger, the Bank Options will be
deemed exchanged for the number of shares of Company Stock and Warrants as
provided in Section 2.8, and, upon completion of the Offering, the Exchange
Agent will distribute to each former option holder (a) the proceeds of sale of
those of such shares that are sold in the Offering, and (b) the shares and cash
to which the former option holder is entitled.
(c) All Directors and officers of the Company and the
Surviving Bank have undertaken in writing with the Underwriters not to sell any
Warrants or shares of Company Stock held by them for a period of six months
following the completion of the Offering unless specifically granted permission
to do so by the Underwriters, such undertaking is in full force and effect. It
is understood that the Underwriters will (a) reduce the period from six months
to ninety (90) days, and (b) exclude from the effect of these undertakings those
shares sold in the Offering.
(d) Simultaneously with, and upon the condition of, the
consummation of the acquisition of the Bank, the Company through the
Underwriters intends to consummate the Offering at a gross public offering price
of at least $15.00 per share. If the Offering cannot be consummated at a gross
public offering price of at least $15.00 per share, the Company will not be
obligated to proceed with the Offering and the acquisition of the Bank and
Valley Bank."
22. Section 9.4 is hereby amended to read in its entirety as
follows:
"9.4 STOCK OFFERING. An election to sell shares in the
Offering shall have been made, and proper documentation submitted, with respect
to not less than 75% of the shares of Company Stock received by holders of Bank
Stock. The Company shall have entered into a firm commitment underwriting
agreement for the Offering, and all conditions to the consummation of the
Offering, other than the completion of the mergers of PCBG Merger Corporation
with the Bank and of Interim Valley Bank with Valley Bank, shall have been
satisfied or waived."
11
23. Section 9.8 is hereby added to read in its entirety as
follows:
"9.8 TAX OPINION. The Company shall have received from its
accountants an opinion for the benefit of the holders of Bank Stock reasonably
satisfactory to the Company and the Bank to the effect that the Merger shall not
result in the recognition of gain or loss for federal income tax purposes to the
Company or the Bank, the issuance of Company Stock or Warrants shall not result
in the recognition of gain or loss by the holders of Bank Stock who receive
Company Stock and Warrants in connection with the Merger, and shall state that
the holding period for Company Stock, for purposes of capital gains taxation,
shall include the period during which Bank Stock was held. This opinion shall be
dated prior to the date the Proxy Statement is first mailed to the shareholders
of the Company and the Bank and such opinions shall not have been withdrawn or
modified in any respect."
24. Section 11.18 is hereby amended to read in its entirety as
follows:
11.18 PROFESSIONAL FEES. The Bank's costs and expenses for
professional expenses in connection with the transaction contemplated by this
Agreement, including investment banking, accounting, attorney and any related
costs and expenses, shall not exceed the amount that would be reasonable and
customary for a transaction as described in this Agreement. Investment banking
fees are as set forth in Exhibit 4.14. The accounting and attorney fees, and
related costs and expenses thereto, of the Bank shall not exceed $200,000 in the
aggregate. The Company agrees that it will promptly reimburse the Bank at the
close or termination for the first $75,000 of legal and attorney fees and
expenses incurred by the Bank since November 15, 1998 directly related to this
transaction with the Company, and the Bank shall pay for any additional
accounting and attorney fees and expenses incurred by the Bank thereafter. The
Company also consents to the Bank paying at the close up to $25,000 to William
Cockrum for his investment banking services to the Bank related to this
transaction with the Company.
25. Section 14.1(a)(vi) is hereby amended to read in its
entirety as follows:
"(vi) by the Company or the Bank by June 28, 1999, unless
regulatory approvals and/or completion of the Offering is relatively imminent
and is expected to be completed in the near future, in which case the date in
this subsection shall be automatically extended for up to an additional 30
days."
26. Section 14.1(e)(iv) is hereby added to read in its
entirety as follows:
"(iv) If this Agreement is terminated by the Company before
the
12
Closing as a result of a default by the Company in the performance of Sections
5.18 and 7.14, no costs, expenses, fees or other liability or damages will be
accrued or incurred by the Company or any of its representatives or agents."
27. This Second Amendment may be entered into in one or more
counterparts, all of which shall be considered one in the same instrument, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
28. Except as herein amended, the Agreement and the First
Amendment shall remain in full force and effect.
29. This Second Amendment shall be governed by and construed
in accordance with the laws of the State of California.
30. The execution and delivery of this Second Amendment by the
directors and officers executing the Second Amendment have been duly authorized
by the Boards of Directors of the Bank and the Company, and this Second
Amendment constitutes a legal, valid and binding agreement of the parties in
accordance with its respective terms.
13
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
PACIFIC COMMUNITY BANKING GROUP
By:
--------------------------------------
E. Lynn Caswell
Chairman and Chief Executive Officer
By:
--------------------------------------
Alfred Jannard
Secretary
THE BANK OF HEMET
By:
--------------------------------------
John J. McDonough
By:
--------------------------------------
James B. Jaqua
By:
--------------------------------------
John B. Brudin
By:
--------------------------------------
Jack E. Gosch
14
By:
--------------------------------------
E. Kenneth Hyatt
By:
--------------------------------------
Joseph D. Pehl
By:
--------------------------------------
Clayton A. Record, Jr.
15