SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): February 11, 1996
CALIFORNIA BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-9584 94-2147553
(State of Incorporation) (Commission File (IRS Employer
Number) Identification
Number)
100 Park Place, Suite 140
San Ramon, CA 94583
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 743-4200<PAGE>
Item 5. Other Events.
On February 11, 1996, California Bancshares, Inc., a
Delaware corporation (the "Company"), entered into an Agreement
and Plan of Merger (the "Merger Agreement") with U.S. Bancorp,
an Oregon corporation ("Bancorp"), pursuant to which the Com-
pany will be merged with and into Bancorp (the "Merger"). As a
result of the Merger, each outstanding share of the Company's
common stock, par value $2.50 per share ("Company Common
Stock"), will be converted into 0.95 shares of Bancorp Common
Stock, par value $5.00 per share ("Bancorp Common Stock"). The
Merger is conditioned upon, among other things, approval by
shareholders of the Company, and upon certain regulatory ap-
provals. The Merger is expected to be completed during the
second half of 1996. The Merger Agreement is attached as Ex-
hibit 2 hereto and its terms are incorporated herein by refer-
ence.
As a condition to entering into the Merger Agreement,
on February 12, 1996, Bancorp and the Company entered into a
Stock Option Agreement between the Company, as issuer, and Ban-
corp, as grantee (the "Stock Option Agreement"), pursuant to
which the Company granted to Bancorp the right, upon the terms
and subject to the conditions set forth therein, to purchase up
to 19.9 percent of the outstanding shares of Company Common
Stock at a price of $25.75 per share. The Stock Option Agree-
ment is attached as Exhibit 3 hereto, and its terms are incor-
porated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
The following exhibits are filed as part of this re-
port:
1. Press release dated February 12, 1996
2. Agreement and Plan of Merger, dated as of February
11, 1996, by and between U.S. Bancorp and California
Bancshares, Inc.
3. Stock Option Agreement, dated as of February 12,
1996, by and between California Bancshares, Inc. and
U.S. Bancorp<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned here-
unto duly authorized.
Dated: February 22, 1996
CALIFORNIA BANCSHARES, INC.
By /s/ Donald J. Gehb
Donald J. Gehb
Chairman of the Board
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EXHIBIT INDEX
Exhibit
Number Description
1 Press release dated February 12, 1996
2 Agreement and Plan of Merger, dated as of Feb-
ruary 11, 1996, by and between U.S. Bancorp
and California Bancshares, Inc.
3 Stock Option Agreement, dated as of February
12, 1996, by and between California Banc-
shares, Inc. and U.S. Bancorp
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EXHIBIT 1
February 12, 1996
FOR IMMEDIATE RELEASE
Investor contacts: Mary Gambee Patricia Stanton
U.S. Bancorp U.S. Bancorp
(503) 275-6524 (503) 275-5773
Media contacts: U.S. Bancorp California Bancshares, Inc.
Mary Ruble Joe Colmery
(503) 275-6200 (510)743-4201
U.S. BANCORP TO ACQUIRE CALIFORNIA BANCSHARES, INC.
MOVE ENHANCES U.S. BANK OF CALIFORNIA'S
COMMERCIAL BANKING OPERATION
PORTLAND, ORE. & SAN RAMON, CALIF -- U.S. Bancorp (Nasdaq: USBC)
and California Bancshares, Inc. (Nasdaq: CABI) today announced the
signing of a definitive agreement for U.S. Bancorp to acquire Cali-
fornia Bancshares, the holding company for a multi-bank, 36-branch
commercial banking operation serving the east San Francisco Bay
Area and the Central Valley of Northern California.
Under terms of the agreement, which is subject to
approval by regulators and California Bancshares shareholders,
California Bancshares will be merged into U.S. Bancorp, and
each share of California Bancshares common stock will be con-
verted into .95 shares of U.S. Bancorp common stock. The total
value of the transaction is approximately $327 million, or
$32.53 for each share of California Bancshares' common stock,
based on the U.S. Bancorp stock closing price of $34.25 on Feb-
ruary 9, 1996. This transaction will be accounted for as a
pooling of interest.
In connection with the agreement, California Banc-
shares granted U.S. Bancorp an option to acquire 19.9 percent<PAGE>
of California Bancshares stock, which could become exercisable
under certain circumstances,
"The addition of this highly respected company to our
U.S. Bank of California franchise provides entry into densely
populated, growing markets that we have long had an interest
in," said U.S. Bancorp Chairman and CEO, Gerry Cameron. Be-
sides building our California branch presence, this acquisition
gives us an opportunity to leverage one of U.S. Bancorp's key
strengths, our ability to attract and effectively serve a wide
range of business customers.
"Under the direction of Pete Sinclair, we've made
great progress in building a successful commercial enterprise
in California," noted Cameron. "The addition of California
Bancshares will greatly accelerate our growth and performance
in California."
California Bancshares is a $1.6 billion bank holding
company with 10 commercial bank subsidiaries operating in com-
munities throughout Alameda, Contra Costra, Stanislaus and San
Joaquin counties, and one branch in northern Santa Clara
county. This highly profitable and well-capitalized organiza-
tion was formed in 1991 by a merger between Northern California
Community Bancorp and Mission Valley Bancorp, and has grown
through subsequent acquisitions to its current size.
"We are delighted to enter into this agreement," said
California Bancshares president and CEO, Joe Colmery. "We feel
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this affiliation will give us a significant competitive advan-
tage and will clearly benefit our shareholders and customers.
We will now be able to compete more effectively because we can
offer both our business and retail customers a much wider array
of products and services, greater banking convenience through a
variety of traditional and technological avenues, and the fi-
nancial resources of a $32 billion super-regional bank.
"Our business mix and culture mesh very well with
U.S. Bancorp," said Colmery. "We feel our employees will ben-
efit from the increased opportunities presented in a much larg-
er organization."
California Bancshares complements the current U.S.
Bank of California operation which was formed by the acquisi-
tion of eight companies in the late 1980s and early 1990s.
This addition will increase U.S. Bank of California's operation
of 57 branches in 22 northern counties to 93 branches in 27
counties. It will also increase U.S. Bank of California's to-
tal deposits by over 80 percent.
"We see opportunities to enhance revenues through the
considerable number of additional products and services U.S.
Bank can make available to California Bancshares business and
retail customers, as well as the substantial number of new cus-
tomers we can attract," said Pete Sinclair, U.S. Bank of Cali-
fornia president and CEO. "There are tremendous corporate and
commercial real estate development opportunities, as well as
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trust and investment opportunities in this new territory. We
are very excited to be in these markets.
"One of the most attractive features of this transac-
tion is the addition of highly-skilled employees in key markets
not already served by U.S. Bank of California," Sinclair added.
"We are committed to making our neighborhoods better places in
which to live, work and do business, and I am confident that
these employees will help U.S. Bank of California to continue
with its strong record of community reinvestment."
Because there is no overlap in branches, Sinclair
said he expects the majority of California Bancshares branch
employees to continue with the bank in the future. "Customers
can expect to deal with familiar faces," he noted. Cost sav-
ings will be created through the consolidations of California
Bancshares administrative and back office operations. The num-
ber of positions to be eliminated due to the acquisition has
not yet been determined.
The acquisition is expected to be completed during
the second half of 1996; conversion of bank operations is slat-
ed for the first quarter 1997.
California Bancshares is a $1.6 billion bank holding
company which includes the following banks: Alameda First Na-
tional, Community First National, Modesto Banking Co., Com-
mercial Bank of Fremont, Lamorinda National Bank, Centennial
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Bank, Bank of San Ramon Valley, Westside Bank, Concord Commer-
cial Bank and Bank of Milpitas.
Northwest-based U.S. Bancorp is one of the 30 largest
bank holding companies in the nation, with assets of approxi-
mately $32 billion. The company provides comprehensive finan-
cial products and services to consumers, businesses and corpo-
rations, and to individual and institutional investors through
subsidiary banks in six western states.
# # #
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Exhibit 2
AGREEMENT AND PLAN OF MERGER
between
U.S. BANCORP
and
CALIFORNIA BANCSHARES, INC.
Dated as of February 11, 1996<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER........................ 1
1.1 The Merger........................................... 1
1.2 Effective Time....................................... 1
1.3 Effects of the Merger................................ 2
1.4 Conversion of CBI Common Stock....................... 2
1.5 Bancorp Common Stock;
Bancorp Preferred Stock.............................. 3
1.6 Options.............................................. 3
1.7 Articles of Incorporation............................ 3
1.8 Bylaws............................................... 3
1.9 Tax Consequences..................................... 3
1.10 Board of Directors................................... 4
ARTICLE II
EXCHANGE OF SHARES................... 4
2.1 Bancorp to Make Shares Available.................... 4
2.2 Exchange of Shares.................................. 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CBI......... 7
3.1 Corporate Organization.............................. 7
3.2 Capitalization...................................... 8
3.3 Authority; No Violation............................. 9
3.4 Consents and Approvals.............................. 10
3.5 Reports............................................. 11
3.6 Financial Statements................................ 11
3.7 Broker's Fees....................................... 12
3.8 Absence of Certain Changes or Events................ 13
3.9 Legal Proceedings................................... 13
3.10 Taxes and Tax Returns............................... 14
3.11 Employees........................................... 15
3.12 SEC Reports......................................... 17
3.13 Compliance with Applicable law...................... 18
3.14 Certain Contracts................................... 19
3.15 Agreements with Regulatory Agencies................. 20
3.16 Undisclosed Liabilities............................. 20
3.17 State Takeover Laws................................. 20
3.18 Rights Agreement.................................... 20<PAGE>
3.19 Pooling of Interests................................ 20
3.20 Interest Rate Risk Management Instruments;
Derivatives....................................... 21
3.21 Properties.......................................... 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BANCORP....... 22
4.1 Corporate Organization.............................. 22
4.2 Capitalization...................................... 23
4.3 Authority; No Violation............................. 24
4.4 Consents and Approvals.............................. 25
4.5 Reports............................................. 25
4.6 Financial Statements................................ 25
4.7 Brokers' Fees....................................... 27
4.8 Absence of Certain Changes or Events................ 27
4.9 Legal Proceedings................................... 27
4.10 Taxes and Tax Returns............................... 28
4.11 Employees........................................... 29
4.12 SEC Reports......................................... 31
4.13 Compliance with Applicable Law...................... 31
4.14 Certain Contracts................................... 32
4.15 Agreements with Regulatory Agencies................. 33
4.16 Undisclosed Liabilities............................. 33
4.17 Pooling of Interests................................ 34
4.18 Interest Rate Risk Management Instruments;
Derivatives....................................... 34
4.19 State Takeover Laws................................. 34
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS....... 34
5.1 Conduct of CBI Businesses Prior
to the Effective Time............................. 34
5.1 CBI Forbearances.................................... 35
5.3 Bancorp Forbearances................................ 37
ARTICLE VI
ADDITIONAL AGREEMENTS................. 39
6.1 Regulatory Matters.................................. 39
6.2 Access to Information............................... 40
6.3 Shareholder Approval................................ 41
6.4 Legal Conditions to Merger.......................... 41
6.5 Affiliates; Publication of Combined
Financial Results................................. 41
6.6 Stock Exchange Listing of Shares.................... 42
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6.7 Employee Benefit Plans.............................. 42
6.8 Indemnification; Directors'
and Officers' Insurance........................... 43
6.9 Additional Agreements............................... 46
6.10 Advice of Changes................................... 47
6.11 Dividends........................................... 46
ARTICLE VII
CONDITIONS PRECEDENT.................. 47
7.1 Conditions to Each Party's Obligation
to Effect the Merger.............................. 47
(a) Shareholder Approval........................... 47
(b) Nasdaq Listing................................. 47
(c) Other Approvals................................ 47
(d) Form S-4....................................... 48
(e) No Injunctions or Restraints; Illegality....... 48
(f) Federal Tax Opinions........................... 48
(g) Pooling of Interests........................... 49
7.2 Conditions to Obligations of Bancorp................ 49
(a) Representations and Warranties................. 49
(b) Performance of Obligations
of CBI......................................... 49
(c) CBI Rights Agreement........................... 49
7.3 Conditions to Obligations of CBI.................... 49
(a) Representations and Warranties................. 49
(b) Performance of Obligations of Bancorp.......... 50
ARTICLE VIII
TERMINATION AND AMENDMENT............... 50
8.1 Termination......................................... 50
8.2 Effect of Termination............................... 51
8.3 Amendment........................................... 51
8.4 Extension; Waiver................................... 51
ARTICLE IX
GENERAL PROVISIONS................... 52
9.1 Closing............................................. 52
9.2 Nonsurvival of Representations, Warranties,
and Agreements.................................... 52
9.3 Expenses............................................ 52
9.4 Notices............................................. 53
9.5 Interpretation...................................... 53
9.6 Counterparts........................................ 54
9.7 Entire Agreement.................................... 54
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9.8 Governing Law....................................... 54
9.9 Severability........................................ 54
9.10 Publicity........................................... 54
9.11 Assignment.......................................... 55
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February
11, 1996, by and between U.S. BANCORP, an Oregon corporation
("Bancorp"), and CALIFORNIA BANCSHARES, INC., a Delaware corpo-
ration ("CBI").
WHEREAS, the Boards of Directors of Bancorp and CBI
have determined that it is in the best interests of their re-
spective companies and their shareholders to consummate the
merger provided for herein in which CBI will, subject to the
terms and conditions set forth herein, merge (the "Merger")
with and into Bancorp, so that Bancorp is the surviving corpo-
ration in the Merger;
WHEREAS as a condition to, and on the day immediately
after the date of execution of, this Agreement, Bancorp and CBI
are entering into a CBI Stock Option Agreement (the "CBI Option
Agreement"); and
WHEREAS, the parties desire to make certain represen-
tations, warranties and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual cov-
enants, representations, warranties and agreements contained
herein, and intending to be legally bound hereby, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and condi-
tions of this Agreement, CBI shall merge with and into Bancorp
at the Effective Time (as defined in Section 1.2 hereof) in
accordance with the Oregon Business Corporation Act (the
"OBCA") and the Delaware General Corporation Law (the "DGCL").
Bancorp shall be the surviving corporation (hereinafter some-
times called the "Surviving Corporation") in the Merger, and
shall continue its corporate existence under the laws of the
State of Oregon. Upon consummation of the Merger, the separate
corporate existence of CBI shall terminate.
1.2 Effective Time. The Merger shall become effec-
tive as set forth in articles of merger (the "Articles of
Merger") which shall be filed with the Secretary of State of
the State of Oregon (the "Oregon Secretary") and a certificate
of merger (the "Certificate of Merger") which shall be filed
with the Secretary of State of the state of Delaware (the<PAGE>
"Delaware Secretary"), in each case, on the Closing Date (as
defined in Section 9.1 hereof). The date and time when the
Merger becomes effective, as set forth in the Articles of
Merger and the Certificate of Merger, is herein referred to as
the "Effective Time."
1.3 Effects of the Merger. At and after the Effec-
tive Time, the Merger shall have the effects set forth in Sec-
tion 60.497 of the OBCA and Sections 259 and 261 of the DGCL.
1.4 Conversion of CBI Common Stock. At the Effec-
tive Time, subject to Section 2.2(e) hereof, by virtue of the
Merger, and without any action on the part of Bancorp, CBI or
the holder of any share of the common stock, par value $2.50
per share, of CBI ("CBI Common Stock"), each share of CBI Com-
mon Stock issued and outstanding immediately prior to the Ef-
fective Time (other than shares of CBI Common Stock held (x) in
CBI's treasury or (y) directly or indirectly by Bancorp or CBI
or any of their respective Subsidiaries (as defined below) (ex-
cept for Trust Account Shares and DPC Shares, as such terms are
defined below)) shall be converted into the right to receive
.95 shares (the "Exchange Ratio") of common stock, $5.00 par
value per share, of Bancorp ("Bancorp Common Stock").
All of the shares of CBI Common Stock converted into
Bancorp Common Stock pursuant to this Article I shall no longer
be outstanding and shall automatically be canceled and shall
cease to exist as of the Effective Time, and each certificate
(each a "CBI Certificate") previously representing any such
shares of CBI Common Stock shall thereafter represent the right
to receive (i) a certificate representing the number of whole
shares of Bancorp Common Stock and (ii) cash in lieu of frac-
tional shares into which the shares of CBI Common Stock repre-
sented by such CBI Certificate have been converted pursuant to
this Section 1.4 and Section 2.2(e) hereof. CBI Certificates
previously representing shares of CBI Common Stock shall be
exchanged for certificates representing whole shares of Bancorp
Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such CBI Certifi-
cates in accordance with Section 2.2 hereof, without any inter-
est thereon. If prior to the Effective Time (or as of a record
date prior to the Effective Time) the outstanding shares of
Bancorp Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of
shares of securities as a result of a reorganization, recapi-
talization, reclassification, stock dividend, stock split, re-
verse stock split, or other similar change in Bancorp's capi-
talization, then an appropriate and proportionate adjustment
shall be made to the Exchange Ratio.
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At the Effective Time, all shares of CBI Common Stock
that are owned by CBI as treasury stock and all shares of CBI
Common Stock that are owned directly or indirectly by Bancorp
or CBI or any of their respective Subsidiaries (other than
shares of CBI Common Stock held directly or indirectly in trust
accounts, managed accounts and the like or otherwise held in a
fiduciary capacity that are beneficially owned by third parties
(any such shares, and shares of Bancorp Common Stock that are
similarly held, whether held directly or indirectly by Bancorp
or CBI, as the case may be, being referred to herein as "Trust
Account Shares") and other than any shares of CBI Common Stock
held by Bancorp or CBI or any of their respective Subsidiaries
in respect of a debt previously contracted (any such shares of
CBI Common Stock, and shares of Bancorp Common Stock that are
similarly held, whether held directly or indirectly by Bancorp
or CBI or any of their respective Subsidiaries, being referred
to herein as "DPC Shares")) shall be canceled and shall cease
to exist and no stock of Bancorp or other consideration shall
be delivered in exchange therefor. All shares of Bancorp Com-
mon Stock that are owned by CBI or any of its Subsidiaries
(other than Trust Account Shares and DPC Shares) shall become
authorized but unissued stock of Bancorp.
1.5. Bancorp Common Stock; Bancorp Preferred Stock.
At and after the Effective Time, each share of Bancorp Common
Stock and each share of Series A preferred stock, no par value,
of Bancorp issued and outstanding immediately prior to the
Closing Date shall remain an issued and outstanding share of
common stock or preferred stock, as the case may be, of the
Surviving Corporation and shall not be affected by the Merger.
1.6. Options. Outstanding options to purchase CBI
Common Stock shall be exchanged at the Effective Time as pro-
vided in Section 6.7(c).
1.7. Articles of Incorporation. At the Effective
Time, the Articles of Incorporation of Bancorp, as in effect
immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation.
1.8. Bylaws. At the Effective Time, the Bylaws of
Bancorp, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereaf-
ter amended in accordance with applicable law.
1.9. Tax Consequences. It is intended that the
Merger shall constitute a reorganization within the meaning of
Section 368(a) of the Code and that this Agreement shall con-
stitute a "plan of reorganization" for the purposes of Section
368 of the Code.
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1.10. Board of Directors. From and after the Effec-
tive Time, the Board of Directors of the Surviving Corporation
shall consist of members of the Board of Directors of Bancorp
as constituted immediately prior to the Effective Time.
ARTICLE II
EXCHANGE OF SHARES
2.1 Bancorp to Make Shares Available. At or prior
to the Effective Time, Bancorp shall deposit or shall cause to
be deposited, with a bank or trust company selected by Bancorp
and reasonably acceptable to CBI (which may be a Subsidiary of
Bancorp) (the "Exchange Agent"), for the benefit of the holders
of CBI Certificates, for exchange in accordance with this Ar-
ticle II, certificates representing the shares of Bancorp Com-
mon Stock and the cash in lieu of any fractional shares (such
cash and certificates for shares of Bancorp Common Stock, to-
gether with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund")
to be issued pursuant to Section 1.4 and paid pursuant to Sec-
tion 2.2(a) in exchange for outstanding shares of CBI Common
Stock.
2.2 Exchange of Shares. (a) As soon as practicable
after the Effective Time, and in no event later than five busi-
ness days after receipt from CBI or its transfer agent of a
list of shareholders of record of CBI as of the Effective Time,
the Exchange Agent shall mail to each holder of record of a CBI
Certificate or Certificates a form letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of
CBI Certificates to the Exchange Agent) and instructions for
use in effecting the surrender of CBI Certificates in exchange
for certificates representing the shares of Bancorp Common
Stock and the cash in lieu of fractional shares, if any, into
which the shares of CBI Common Stock represented by such the
CBI Certificate or Certificates shall have been converted pur-
suant to this Agreement. Upon proper surrender of a CBI Cer-
tificate for exchange and cancellation to the Exchange Agent,
together with such properly completed letter of transmittal,
duly executed, the holder of such CBI Certificate shall be en-
titled to receive in exchange therefor, as applicable, (i) a
certificate representing that number of whole shares of Bancorp
Common Stock into which the shares of CBI Common Stock thereto-
fore represented by the CBI Certificate so surrendered shall
have been converted pursuant to the provisions of Article I
hereof and (ii) a check representing the amount of cash in lieu
of fractional shares, if any, that such holder has the right to
receive in respect of the CBI Certificate surrendered pursuant
-4-<PAGE>
to the provisions of Article II and the CBI Certificate so sur-
rendered shall forthwith be canceled. No interest will be paid
or accrued on the cash in lieu of fractional shares and unpaid
dividends and distributions, if any, payable to holders of CBI
Certificates. Notwithstanding anything to the contrary con-
tained herein, no certificate representing Bancorp Common Stock
or cash in lieu of a fractional share interest shall be deliv-
ered to a person who is an Affiliate (as defined in Section
6.5) of CBI unless such Affiliate has theretofore executed and
delivered to Bancorp the agreement referred to in Section 6.5.
(b) No dividends or other distributions declared
after the Effective Time with respect to Bancorp Common Stock
shall be paid to the holder of any unsurrendered CBI Certifi-
cate until the holder thereof shall surrender such CBI Certifi-
cate in accordance with this Article II. After the surrender
of a CBI Certificate in accordance with this Article II, the
record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon,
that theretofore had become payable with respect to shares of
Bancorp Common Stock represented by such CBI Certificate.
(c) If any certificate representing shares of Ban-
corp Common Stock is to be issued in a name other than that in
which the CBI Certificate surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof
that the CBI Certificate so surrendered shall be properly en-
dorsed (or accompanied by an appropriate instrument of trans-
fer) and otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent
in advance any transfer or other taxes requested by reason of
the issuance of a certificate representing shares of Bancorp
Common Stock in any name other than that of the registered
holder of the CBI Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no
transfers on the stock transfer books of CBI of the shares of
CBI Common Stock that were issued and outstanding immediately
prior to the Effective Time. If, after the Effective Time, CBI
Certificates representing such shares are presented for trans-
fer to the Exchange Agent, they shall be canceled and exchanged
for certificates representing shares of Bancorp Common Stock as
provided in this Article II.
(e) Notwithstanding anything to the contrary con-
tained herein, no certificates or scrip representing fractional
-5-<PAGE>
shares of Bancorp Common Stock shall be issued upon the sur-
render for exchange of CBI Certificates, no dividend or distri-
bution with respect to Bancorp Common Stock shall be payable on
or with respect to any fractional share, and such fractional
share interests shall not entitle the owner thereof to vote or
to any other rights of a shareholder of CBI. In lieu of the
issuance of any such fractional share, Bancorp shall pay to
each former shareholder of CBI who otherwise would be entitled
to receive such fractional share an amount in cash determined
by multiplying (i) the average of the closing-sale prices of
Bancorp Common Stock on the NASDAQ Stock Market National Market
System as reported by The Wall Street Journal for the five
trading days immediately preceding the date of the Effective
Time by (ii) the fraction of a share of Bancorp Common Stock
which such holder would otherwise be entitled to receive pursu-
ant to Section 1.4.
(f) Any portion of the Exchange Fund that remains
unclaimed by the shareholders of CBI for twelve months after
the Effective Time shall be paid to Bancorp. Any shareholders
of CBI who have not theretofore complied with this Article II
shall thereafter look only to Bancorp for payment of the shares
of Bancorp Common Stock, cash in lieu of any fractional shares
and unpaid dividends and distributions on the Bancorp Common
Stock deliverable in respect of each share of CBI Common Stock
that such shareholder is entitled to receive pursuant to this
Agreement, without any interest thereon. Notwithstanding the
foregoing, none of Bancorp, CBI, the Exchange Agent or any
other person shall be liable to any former holder of shares of
CBI Stock for any amount properly delivered to a public of-
ficial pursuant to applicable abandoned property, escheat or
similar laws.
(g) In the event any CBI Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such CBI Certificate to be
lost, stolen or destroyed and, if required by Bancorp, the
posting by such person of a bond in such amount as Bancorp may
determine is reasonably necessary as indemnity against any
claim that may be made against it with respect to such CBI Cer-
tificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed CBI Certificate the shares of Bancorp
Common Stock and cash in lieu of fractional shares deliverable
in respect thereof pursuant to this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CBI
Except as set forth in the disclosure schedule of CBI
delivered to Bancorp concurrently herewith (the "CBI Disclosure
Schedule"), CBI hereby represents and warrants to Bancorp as
follows:
3.1. Corporate Organization. (a) CBI is a corpora-
tion duly organized and validly existing under the laws of the
state of Delaware. CBI has the corporate power and authority
to own or lease all of its properties and assets and to carry
on its business as it is now being conducted, and is duly li-
censed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the charac-
ter or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except
where the failure to be so licensed or qualified would not have
a Material Adverse Effect (as defined below) on CBI. As used
in this Agreement, the term "Material Adverse Effect" means,
with respect to Bancorp, CBI or the Surviving Corporation, as
the case may be, a material adverse effect on the business,
results of operations or financial condition of such party and
its Subsidiaries taken as a whole. As used in this Agreement,
the word "Subsidiary" when used with respect to any party means
any bank, corporation, partnership or other organization,
whether incorporated or unincorporated, that is consolidated
with such party for financial reporting purposes. CBI is duly
registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). The Certifi-
cate of Incorporation and Bylaws of CBI, copies of which have
previously been made available to Bancorp, are true, complete
and correct copies of such documents as in effect as of the
date of this Agreement.
(b) CBI has previously delivered to Bancorp a sched-
ule listing each CBI Subsidiary and setting forth for each such
CBI Subsidiary the (i) jurisdiction in which it is organized,
(ii) jurisdictions in which it is qualified to do business, and
(iii) office or agency having primary regulatory authority over
its business and operations. Each CBI Subsidiary (i) is duly
organized and validly existing as a bank, corporation or part-
nership under the laws of its jurisdiction of organization,
(ii) is duly qualified to do business and in good standing in
all jurisdictions (whether federal, state, local or foreign)
where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and in which the
failure to be so qualified would have a Material Adverse Effect
-7-<PAGE>
on CBI, and (iii) has all requisite corporate power and author-
ity to own or lease its properties and assets and to carry on
its business as now conducted.
(c) The minute books of CBI accurately reflect in
all material respects all corporate actions since January 1,
1993, of its shareholders and Board of Directors (including
committees of the Board of Directors of CBI).
3.2. Capitalization. (a) The authorized capital
stock of CBI consists of 16,000,000 shares of CBI Common Stock
and 2,000,000 shares of preferred stock, no par value per
share. At the close of business on December 31, 1995, there
were 10,060,685 shares of CBI Common Stock outstanding and no
shares of CBI preferred stock outstanding. On December 31,
1995, no shares of CBI Common Stock or CBI preferred stock were
reserved for issuance, except that (i) 305,846 shares of CBI
Common Stock were reserved for issuance pursuant to CBI's divi-
dend reinvestment and stock purchase plan (the "CBI DRIP"),
(ii) 2,125,110 shares of CBI Common Stock were reserved for
issuance upon the exercise of stock options pursuant to the
1990 Stock Incentive Plan and the Directors Stock Option Plan
(the "CBI Stock Plans"), (iii) 400,000 shares of CBI Series A
junior participating preferred stock, no par value, were re-
served for issuance upon exercise of the rights (the "CBI
Rights") distributed to holders of CBI Common Stock pursuant to
the Rights Agreement, dated as of June 30, 1995, between CBI
and First Interstate Bank of California, as Rights Agent (the
"CBI Rights Agreement"), and (iv) the shares of CBI Common
Stock issuable pursuant to the CBI Option Agreement. All of
the issued and outstanding shares of CBI Common Stock have been
duly authorized and validly issued and are fully paid, non-
assessable and free of preemptive rights with no personal li-
ability attaching to the ownership thereof. Except as stated
above, CBI does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agree-
ments of any character calling for the purchase or issuance of
any shares of CBI Common Stock or CBI preferred stock or any
other equity securities of CBI or any securities representing
the right to purchase or otherwise receive any shares of CBI
Common Stock or CBI preferred stock. CBI has previously pro-
vided Bancorp with a list of the option holders, the date of
each option to purchase CBI Common Stock granted, the number of
shares subject to each such option, the expiration date of each
such option, and the price at which each such option may be
exercised under the CBI Stock Plans. As reflected on such
list, options for 677,555 shares were outstanding at December
31, 1995, all of which will be exercisable prior to the Effec-
tive Time in accordance with their terms. Since December 31,
1995, CBI has not issued any shares of its capital stock or any
-8-<PAGE>
securities convertible into or exercisable for any shares of
its capital stock, other than pursuant to the exercise of em-
ployee stock options.
(b) CBI owns directly all of the issued and out-
standing shares of capital stock of each of the CBI Subsidiar-
ies, free and clear of any liens, charges, encumbrances and
security interests whatsoever, and all of such shares are duly
authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability at-
taching to the ownership thereof. No CBI Subsidiary has or is
bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of capital stock or any
other equity security of such Subsidiary or any securities rep-
resenting the right to purchase or otherwise receive any shares
of capital stock or any other equity security of such Subsid-
iary. Assuming compliance by Bancorp with Section 1.6 hereof,
at the Effective Time, there will not be any outstanding sub-
scriptions, options, warrants, calls, commitments or agreements
of any character by which CBI or any of its Subsidiaries will
be bound calling for the purchase or issuance of any shares of
the capital stock of CBI or any of its Subsidiaries.
3.3. Authority; No Violation. (a) CBI has full
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly approved by the Board of Directors of CBI.
The Board of Directors of CBI has directed that this Agreement
and the transactions contemplated hereby be submitted to CBI's
shareholders for approval at a meeting of such shareholders
and, except for the adoption of this Agreement by the affirma-
tive vote of the holders of a majority of the outstanding
shares of CBI Common Stock, no other corporate proceedings on
the part of CBI are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agree-
ment has been duly and validly executed and delivered by CBI
and (assuming due authorization, execution and delivery by Ban-
corp) constitutes a valid and binding obligation of CBI, en-
forceable against CBI in accordance with its terms, except as
enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
(b) Neither the execution and delivery of this
Agreement by CBI nor the consummation by CBI of the transac-
tions contemplated hereby, nor compliance by CBI with any of
-9-<PAGE>
the terms or provisions hereof, will (i) violate any provision
of the Certificate of Incorporation or Bylaws of CBI or (ii)
assuming that the consents and approvals referred to in Section
3.4 are duly obtained (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction
applicable to CBI or any of its Subsidiaries or any of their
respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any ben-
efit under, constitute a default (or an event that, with notice
or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or can-
cellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the respective proper-
ties or assets of CBI or any of its Subsidiaries under, any of
the terms, conditions or provisions of any note, bond, mort-
gage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which CBI or any of its Sub-
sidiaries is a party, or by which they or any of their respec-
tive properties or assets may be bound or affected, except (in
case of clause (y) above) for such violations, conflicts,
breaches or defaults that, either individually or in the ag-
gregate, will not have or be reasonably likely to have a Mate-
rial Adverse Effect on CBI.
3.4. Consents and Approvals. Except for (i) the
filing of the applications and notices, as applicable, with the
Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") under the BHC Act, (ii) the filing of any req-
uisite applications with the Office of the Comptroller of the
Currency (the "OCC") or the Federal Deposit Insurance Corpora-
tion (the "FDIC") in connection with the merger of Subsidiaries
of CBI and Bancorp, (iii) the filing of any required applica-
tions or notices with any state bank regulatory agencies (the
"State Approvals"), (iv) the filing with the SEC of a proxy
statement in definitive form relating to the meeting of CBI's
shareholders to be held in connection with this Agreement and
the transactions contemplated hereby (the "Proxy Statement")
and the registration statement on Form S-4 (the "S-4") in which
the Proxy Statement will be included as a prospectus, (v) the
filing of the Articles of Merger with the Oregon Secretary pur-
suant to the OBCA, (vi) the filing of the Certificate of Merger
with the Delaware Secretary pursuant to the DGCL, (vii) such
filings and approvals as are required to be made or obtained
under the securities or "Blue Sky" laws of various states in
connection with the issuance of the shares of Bancorp Common
Stock pursuant to this Agreement, (viii) the approval of this
Agreement by the requisite vote of the shareholders of CBI, and
(ix) the consents and approvals set forth in CBI Disclosure
-10-<PAGE>
Schedule, no consents or approvals of or filings or registra-
tions with any court, administrative agency or commission or
other governmental authority or instrumentality (each a "Gov-
ernmental Entity") or with any third party are necessary in
connection with (A) the execution and delivery by CBI of this
Agreement and (B) the consummation by CBI of the Merger and the
other transactions contemplated hereby.
3.5. Reports. CBI and each of its Subsidiaries have
timely and properly filed all material reports, registrations
and statements, together with any amendments required to be
made with respect thereto, that they were required to file
since January 1, 1993, with (i) the Federal Reserve Board, (ii)
the Office of Thrift Supervision (the "OTS") under the Home
Owners' Loan Act ("HOLA"), (iii) any state regulatory authority
(each a "State Regulator"), (iv) the OCC, (v) the FDIC, and
(vi) any other self-regulatory organization ("SRO") (col-
lectively, "Regulatory Agencies"), and all other material re-
ports and statements required to be filed by them since January
1, 1993, and have paid all fees and assessments due and payable
in connection therewith. Except for normal examinations con-
ducted by a Regulatory Agency in the regular course of the
business of CBI and its Subsidiaries, no Regulatory Agency has
initiated any proceeding or, to the best knowledge of CBI, in-
vestigation into the business or operations of CBI or any of
its Subsidiaries since January 1, 1993. There is no material
unresolved violation, criticism, or exception by any Regulatory
Agency with respect to any report or statement relating to any
examinations of CBI or any of its Subsidiaries.
3.6. Financial Statements. CBI has previously de-
livered to Bancorp copies of (a) the consolidated balance
sheets of CBI and its Subsidiaries as of December 31, for the
fiscal years 1993 and 1994, and the related consolidated state-
ments of income, changes in stockholders' equity and cash flows
for the fiscal years 1992 through 1994, inclusive, as reported
in CBI's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, filed with the SEC under the Securities Ex-
change Act of 1934, as amended (the "Exchange Act"), in each
case accompanied by the audit report of KPMG Peat Marwick LLP,
independent public accountants, with respect to CBI, (b) the
unaudited consolidated balance sheet of CBI and its Subsidiar-
ies as of December 31, 1995, and the related unaudited consoli-
dated statements of income, cash flows and changes in stock-
holders' equity for the fiscal year 1995 substantially in the
form that is proposed to be reported in CBI's Annual Report on
Form 10-K for the period ended December 31, 1995, filed with
-11-<PAGE>
the SEC under the Exchange Act, and (c) the unaudited consoli-
dated balance sheets of CBI as of September 30, 1995, and Sep-
tember 30, 1994, and the related unaudited consolidated state-
ments of income, cash flows, and changes in stockholders' eq-
uity for the nine months then ended as reported in CBI's Quar-
terly Report on Form 10-Q for the period ended September 30,
1995, filed with the SEC under the Exchange Act. The financial
statements referred to in this Section 3.6 (including the re-
lated notes, where applicable) fairly present (subject, in the
case of the unaudited statements, to recurring audit adjust-
ments normal in nature and amount), the results of the consoli-
dated operations and changes in stockholders' equity and con-
solidated financial position of CBI and its Subsidiaries for
the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the re-
lated notes, where applicable) comply in all material respects
with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto and each
of such statements (including the related notes, where ap-
plicable) has been prepared in accordance with generally ac-
cepted accounting principles ("GAAP") consistently applied dur-
ing the periods involved, except in each case as indicated in
such statements or in the notes thereto or, in the case of un-
audited quarterly statements, as permitted by Form 10-Q. The
allowances for credit losses contained in the financial state-
ments referred to in this Section 3.6 were adequate as of their
respective dates to absorb reasonably anticipated losses in the
loan portfolio of CBI and its Subsidiaries in view of the size
and character of such portfolio, the current economic condi-
tions, and other pertinent factors and no facts have subse-
quently come to the attention of management of CBI that would
cause management to restate in any material way the level of
such allowance for credit losses. With respect to other real
estate owned by CBI and its Subsidiaries, the value attributed
thereto for purposes of compiling such financial statements
does not exceed the aggregate fair market value of such real
estate as of the date of acquisition of such real estate or as
subsequently reduced, all in accordance with regulations of the
applicable Regulatory Agencies. The books and records of CBI
and its Subsidiaries have been, and are being, maintained in
all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only
actual transactions.
3.7. Broker's Fees. Except for the services of
Goldman, Sachs & Co. pursuant to an agreement dated Novem-
ber 21, 1995, a copy of which has previously been provided to
Bancorp, neither CBI nor any CBI Subsidiary nor any of their
respective officers or directors has employed any broker or
-12-<PAGE>
finder or incurred any liability for any broker's fees, com-
missions or finder's fees in connection with any of the trans-
actions contemplated by this Agreement, or the CBI Option
Agreement.
3.8. Absence of Certain Changes or Events. (a) Ex-
cept as publicly disclosed in CBI Reports (as defined below)
filed prior to the date hereof, since December 31, 1994, (i)
neither CBI nor any of its Subsidiaries has incurred any mate-
rial liability, except in the ordinary course of their business
consistent with their past practices, and (ii) no event has
occurred that has had, or is reasonably likely to have, indi-
vidually or in the aggregate, a Material Adverse Effect on CBI.
(b) Except as publicly disclosed in CBI Reports
filed prior to the date hereof, since December 31, 1994, CBI
and its Subsidiaries have carried on their respective busi-
nesses in the ordinary and usual course consistent with their
past practices.
(c) Since January 1, 1995, neither CBI nor any of
its Subsidiaries has (i) except for normal increases in the
ordinary course of business consistent with past practice or
except as required by applicable law, increased the wages,
salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer, employee, or di-
rector from the amount thereof in effect as of January 1, 1995,
granted any severance or termination pay, entered into any con-
tract to make or grant any severance or termination pay, or
paid any bonus other than customary year-end bonuses, (ii) suf-
fered any strike, work stoppage, slowdown, or other labor dis-
turbance, or (iii) been the subject of any organizing activi-
ties known to CBI.
3.9. Legal Proceedings. (a) Except as publicly
disclosed in CBI Reports filed prior to the date hereof, nei-
ther CBI nor any of its Subsidiaries is a party to any, and
there are no pending or, to the best of CBI's knowledge,
threatened, material legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory in-
vestigations of any nature (i) against CBI or any of its Sub-
sidiaries as to which there is a reasonable possibility of an
adverse determination and which, if adversely determined,
would, individually or in the aggregate, have a Material Ad-
verse Effect on CBI or (ii) challenging the validity or propri-
ety of the transactions contemplated by this Agreement or the
CBI Option Agreement.
-13-<PAGE>
(b) There is no injunction, order, judgment, decree,
or regulatory restriction imposed upon CBI, any of its Subsid-
iaries or the assets of CBI or any of its Subsidiaries that has
had, or might reasonably be expected to have, a Material Ad-
verse Effect on CBI.
3.10. Taxes and Tax Returns. (a) Each of CBI and
its Subsidiaries has duly filed all material federal, state
and, to the best of CBI's knowledge, material local information
returns and tax returns required to be filed by it (all such
returns being accurate and complete in all material respects)
and has duly paid or made provisions for the payment of all
material Taxes (as defined below) and other governmental
charges which have been incurred or are due or claimed to be
due from it by federal, state, county or local taxing authori-
ties (including, without limitation, if and to the extent ap-
plicable, those due in respect of its properties, income, busi-
ness, capital stock, deposits, franchises, licenses, sales and
payrolls) other than Taxes or other charges that (1) are not
yet delinquent or are being contested in good faith and (2)
have not been finally determined. The income tax returns of
CBI and its Subsidiaries have been examined by the Internal
Revenue Service (the "IRS"), and any liability with respect
thereto has been satisfied for all years to and including 1981,
and no material deficiencies were asserted as a result of such
examination or all such deficiencies were satisfied. To the
best of CBI's knowledge, there are no material disputes pend-
ing, or claims asserted for, Taxes or assessments upon CBI or
any of its Subsidiaries, nor has CBI or any of its Subsidiaries
been requested to give any currently effective waivers extend-
ing the statutory period of limitation applicable to any fed-
eral, state, county or local income tax return for any period.
In addition, (i) proper and accurate amounts have been withheld
by CBI and its Subsidiaries from their employees for all prior
periods in compliance in all material respects with the tax
withholding provisions of applicable federal, state and local
laws, except where failure to do so would not have a Material
Adverse Effect on CBI, (ii) federal, state, county and local
returns that are accurate and complete in all material respects
have been filed by CBI and its Subsidiaries for all periods for
which returns were due with respect to income tax withholding,
Social Security and unemployment taxes, except where failure to
do so would not have a Material Adverse Effect on CBI, (iii)
the amounts shown on such federal, state, local or county re-
turns to be due and payable have been paid in full or adequate
provision therefor has been included by CBI in its consolidated
financial statements as of December 31, 1995, except where
failure to do so would not have a Material Adverse Effect on
CBI and (iv) there are no tax liens upon any property or assets
of CBI or its Subsidiaries except liens for current taxes not
-14-<PAGE>
yet due. To the knowledge of CBI, no property of CBI or any of
its Subsidiaries is property that CBI or any of its Subsidiar-
ies is or will be required to treat as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the
Code (as in effect prior to its amendment by the Tax Reform Act
of 1986) or is "tax-exempt use property" within the meaning of
Section 169(h) of the Code. Neither CBI nor any of its Subsid-
iaries has been required to include in income any adjustment
pursuant to Section 481 of the Code by reason of a voluntary
change in accounting method initiated by CBI or any of its Sub-
sidiaries, and the Internal Revenue Service has not initiated
or proposed any such adjustment or change in accounting method.
Except as set forth in the financial statements described in
Section 3.6 hereof, neither CBI nor any of its Subsidiaries has
entered into a transaction which is being accounted for as an
installment obligation under Section 453 of the Code, which
would be reasonably likely to have a Material Adverse Effect on
CBI.
(b) As used in this Agreement, the term "Tax" or
"Taxes" means all federal, state, county, local and foreign
income, excise, gross receipts, ad valorem, profits, gains,
property, sales, transfer, use, payroll, employment, severance,
withholding, duties, intangibles, franchise, and other taxes,
charges, levies or like assessments together with all penalties
and additions to tax and interest thereon.
(c) Any amount that could be received (whether in
cash or property or the vesting of property) as a result of any
of the transactions contemplated by this Agreement by any em-
ployee, officer or director of CBI or any of its affiliates who
is a "Disqualified Individual" (as such term is defined in pro-
posed Treasury Regulation Section 1.280G-1) under any employ-
ment, severance or termination agreement, other compensation
arrangement or CBI Benefit Plan (as defined below) currently in
effect would not be characterized as an "excess parachute pay-
ment" (as such term is defined in Section 280G(b)(1) of the
Code).
(d) No disallowance of a deduction under Section
162(m) of the Code for employee remuneration of any amount paid
or payable by CBI or any Subsidiary of CBI under any contract,
plan, program, arrangement or understanding is reasonably
likely.
3.11. Employees. (a) The CBI Disclosure Schedule
sets forth a true and complete list of each material plan, ar-
rangement or agreement regarding compensation or benefits for
any employees, former employees, directors, or former directors
that is maintained as of the date of this Agreement (the "CBI
-15-<PAGE>
Benefit Plans") by CBI or any of its Subsidiaries or by any
trade or business, whether or not incorporated (an "ERISA Af-
filiate"), all of which together with CBI would be deemed a
"single employer" with the meaning of Section 4001 of the Em-
ployee Retirement Income Security Act of 1974, as amended
("ERISA").
(b) CBI has heretofore delivered to Bancorp true and
complete copies of each of the CBI Benefit Plans and all re-
lated documents, including but not limited to (i) the actuarial
report for such Plan (if applicable) for each of the last two
years, and (ii) the most recent determination letter from the
Internal Revenue Service (if applicable) for such Plan.
(c) (i) Each of the CBI Benefit Plans has been oper-
ated and administered in all material respects in compliance
with applicable laws, including but not limited to ERISA and
the Code, (ii) each of the CBI Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is
so qualified, (iii) with respect to each CBI Benefit Plan that
is subject to Title IV of ERISA, the present value of accrued
benefits under such CBI Benefit Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actu-
arial report prepared by such CBI Benefit Plan's actuary with
respect to such CBI Benefit Plan, did not, as of its latest
valuation date, exceed the then current value of the assets of
such CBI Benefit Plan allocable to such accrued benefits, (iv)
no CBI Benefit Plan provides benefits, including, without limi-
tation, death or medical benefits (whether or not insured),
with respect to current or former employees of CBI, its Subsid-
iaries or any ERISA Affiliate beyond their retirement or other
termination of service, other than (w) coverage mandated by
applicable law, (x) death benefits or retirement benefits under
any "employee pension plan," as that term is defined in Section
3(2) of ERISA, (y) deferred compensation benefits accrued as
liabilities on the books of CBI, its Subsidiaries or the ERISA
Affiliates or (z) benefits the full cost of which is borne by
the current or former employee (or his beneficiary), (v) no
liability under Title IV of ERISA has been incurred by CBI, its
Subsidiaries or any ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a material risk
to CBI, its Subsidiaries or any ERISA Affiliate of incurring a
material liability thereunder, (vi) no CBI Benefit Plan is a
"multiemployer pension plan," as such term is defined in Sec-
tion 3(37) of ERISA, (vii) all contributions or other amounts
payable by CBI or its Subsidiaries as of the Effective Time
with respect to each CBI Benefit Plan in respect of current or
prior plan years have been paid or accrued in accordance with
generally accepted accounting practices and Section 412 of the
-16-<PAGE>
Code, (viii) neither CBI, its Subsidiaries nor any ERISA Af-
filiate has engaged in a transaction in connection with which
CBI, its Subsidiaries or any ERISA Affiliate could be subject
to either a material civil penalty assessed pursuant to Section
409 or 502(i) of ERISA or a material tax imposed pursuant to
Section 4975 or 4976 of the Code, and (ix) to the best knowl-
edge of CBI there are no pending, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf
of or against any of the CBI Benefit Plans or any trusts re-
lated thereto.
(d) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any material payment (including,
without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or
any employee of CBI or any of its affiliates from CBI or any of
its affiliates under any CBI Benefit Plan or otherwise, (ii)
materially increase any benefits otherwise payable under any
CBI Benefit Plan or (iii) result in any acceleration of the
time of payment or vesting of any such benefits to any material
extent.
(e) CBI has previously delivered to Bancorp a sched-
ule setting forth for each management employee of CBI or its
Subsidiaries who is a party to any employment, golden para-
chute, or severance agreement, the approximate maximum amount
of payments and benefits other than vested retirement benefits
and previously deferred compensation to which each such em-
ployee will become entitled in the event that such employee's
employment is terminated following the consummation of the
Merger.
3.12. SEC Reports. CBI has previously made avail-
able, to Bancorp an accurate and complete copy of each (a) fi-
nal registration statement, prospectus, report, schedule and
definitive proxy statement filed since January 1, 1994 by CBI
with the SEC pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), or the Exchange Act (the "CBI Reports")
and prior to the date hereof and (b) communication mailed by
CBI to its shareholders since January 1, 1994, and no such reg-
istration statement, prospectus, report, schedule, proxy state-
ment or communication contained any untrue statement of a mate-
rial fact or omitted to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading, except that information as of a later
date shall be deemed to modify information as of an earlier
date. CBI has timely filed all CBI Reports and other documents
required to be filed by it under the Securities Act and the
-17-<PAGE>
Exchange Act, and, as of their respective dates, all CBI Re-
ports complied in all material respect with the published rules
and regulations of the SEC with respect thereto.
3.13. Compliance with Applicable Law. (a) CBI and
each of its Subsidiaries hold, and have at all times held, all
material licenses, franchises, permits and authorizations nec-
essary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not
in default in any material respect under any, applicable laws,
statutes, orders, rules, regulations of any Governmental Entity
relating to CBI or any of its Subsidiaries, except where the
failure to hold such license, franchise, permit or authoriza-
tion or such noncompliance or default would not, individually
or in the aggregate, have a Material Adverse Effect on CBI, and
neither CBI nor any of its Subsidiaries knows of, or has re-
ceived notice of, any material violations of any of the above.
(b) Except as would not have a Material Adverse Ef-
fect, (i) no real property presently or previously owned, oper-
ated, or leased by CBI or any of its Subsidiaries or, to the
best of their knowledge, securing any obligations owed to them
has been used as a storage or disposal site for hazardous sub-
stances within the meaning of any applicable federal, state, or
local statute, law, rule, or regulation, and no hazardous sub-
stances have been transferred from or to such real property,
(ii) no governmental entity has issued any citation or notice
of violation relating to any environmental matter concerning
any real property owned, operated, or leased by CBI or any of
its Subsidiaries or, to the best of their knowledge securing
any obligations owed to them, and neither CBI nor any of its
Subsidiaries has received any notice that any such real prop-
erty may or will be included on any list of areas affected by
any release of any hazardous substance or that it has or may be
named as a responsible or potentially responsible party with
respect to any hazardous substance site, and (iii) neither CBI
nor any of its Subsidiaries has received any notice of any
threatened investigation, proceeding, or litigation concerning
any such real property with respect to any environmental matter
or knows of any basis for any such investigation, proceeding,
or litigation.
3.14. Certain Contracts. (a) Neither CBI nor any
of its Subsidiaries is a party to or bound by any contract, ar-
rangement, commitment or understanding (whether written or
oral) (i) with respect to the employment of any directors, of-
ficers, employees or consultants, (ii) that, upon the consum-
mation of the transactions contemplated by this Agreement will
(either alone or upon the occurrence of any additional acts or
-18-<PAGE>
events) result in any payment (whether of severance pay or oth-
erwise) becoming due from Bancorp, CBI, the Surviving Corpora-
tion, or any of their respective Subsidiaries to any officer or
employee thereof, (iii) that is a material contract (as defined
in Item 601(b)(10) of Regulation S-K of the SEC) to be per-
formed after the date of this Agreement that has not been filed
or incorporated by reference in the CBI Reports, (iv) that ma-
terially restricts the conduct of any line of business by CBI,
(v) with or to a labor union or guild (including any collective
bargaining agreement) or (vi) (including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock
purchase plan) any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this
Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated
by this Agreement. CBI has delivered to Bancorp a complete
list as of the date of this Agreement of each contract to which
CBI or any of its Subsidiaries is a party that involves an
amount in excess of $100,000 or that has an unexpired term in
excess of one year from the date of this Agreement other than
loans, deposits, letters of credit, and similar transactions
entered into by CBI in the ordinary course of business. In
addition, CBI has previously delivered to Bancorp true and cor-
rect copies of all employment, consulting, and deferred com-
pensation agreements that are in writing and a written summary
of all such contracts that are material to CBI and not in writ-
ing. Each contract, arrangement, commitment or understanding
of the type described in Section 3.14(a), whether or not set
forth in the CBI Disclosure Schedule, is referred to herein as
a "CBI Contract." Neither CBI nor any of its Subsidiaries
knows of, or has received notice of, any violation of any CBI
Contract by any of the other parties thereto that, individually
or in the aggregate, would have a Material Adverse Effect on
CBI.
(b) (i) Each CBI Contract is valid and binding and
in full force and effect, (ii) CBI and each of its Subsidiaries
has in all material respects performed all obligations required
to be performed by it to date under each CBI Contract, except
where such noncompliance, individually or in the aggregate,
would not have a Material Adverse Effect on CBI, and (iii) no
event or condition exists that constitutes or, after notice or
lapse of time or both, would constitute, a material default on
the part of CBI or any of its Subsidiaries or, to the knowledge
of CBI, on the part of any other party under any such CBI Con-
tract, except where such default, individually or in the ag-
gregate, would not have a Material Adverse Effect on CBI.
-19-<PAGE>
3.15. Agreements with Regulatory Agencies. Neither
CBI nor any of its Subsidiaries is subject to any cease-and-
desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding
with, or is a party to any commitment letter or similar under-
taking to, or is subject to any order or directive by, or is a
recipient of any supervisory letter from, or has adopted any
resolutions at the request of (each, whether or not set forth
in the CBI Disclosure Schedule, a "Regulatory Agreement"), any
Regulatory Agency or other Governmental Entity that restricts
the conduct of its business or that in any manner relates to
its capital adequacy, its credit policies, its management or
its business, nor has CBI or any of its Subsidiaries been ad-
vised by any Regulatory Agency or other Governmental Entity
that it is considering issuing or requesting any Regulatory
Agreement.
3.16. Undisclosed Liabilities. Except for those li-
abilities that are fully reflected or reserved against on the
consolidated balance sheet of CBI as of December 31, 1995, and
for liabilities incurred in the ordinary course of business
consistent with past practice, since December 31, 1995, neither
CBI nor any of its Subsidiaries has incurred any liability of
any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due) that, either alone
or when combined with all similar liabilities, has had, or
could reasonably be expected to have, a Material Adverse Effect
on CBI.
3.17. State Takeover Laws. The Board of Directors
of CBI has taken such actions as are necessary such that the
provisions of Section 203 of the DGCL will not apply to this
Agreement or the CBI Option Agreement or any of the transac-
tions contemplated hereby or thereby.
3.18. Rights Agreement. CBI has taken all action
(including, if required, redeeming all of the outstanding pre-
ferred stock purchase rights issued pursuant to the CBI Rights
Agreement or amending or terminating the CBI Rights Agreement)
so that the entering into of this Agreement and the CBI Option
Agreement, the Merger, the acquisition of shares pursuant to
the CBI Option Agreement and the other transactions contem-
plated hereby and thereby do not and will not result in the
grant of any rights to any person under the CBI Rights Agree-
ment or enable or require the CBI Rights to be exercised, dis-
tributed or triggered.
3.19. Pooling of Interests. As of the date of this
Agreement, CBI has no reason to believe that the Merger will
not qualify as a pooling of interests for accounting purposes.
-20-<PAGE>
3.20. Interest Rate Risk Management Instruments; De-
rivatives. (a) CBI has heretofore delivered to Bancorp an
accurate and complete list of (A) all interest rate swaps,
caps, floors, option agreements, and other interest rate risk
management arrangements and other instruments generally known
as "derivatives" to which CBI or any of its Subsidiaries is a
party or to which any of their properties or assets may be sub-
ject and (B) all securities owned by CBI or its Subsidiaries
that are generally known as "structured note," "high risk mort-
gage derivatives," "capped floating rate notes," or "capped
floating rate mortgage derivatives" (instruments or agreements
of the type referred to in clauses (A) and (B), collectively,
"Derivative Securities"). Neither CBI nor any of its Subsid-
iaries has purchased any Derivative Security for, or invested
in any Derivative Security any assets of, any account or person
for which it or any such subsidiary acts as a trustee, fidu-
ciary, or investment advisor.
(b) All Derivative Securities to which CBI or any of
its Subsidiaries is a party or to which any of their properties
or assets may be subject were entered into in the ordinary
course of business and, to its knowledge, in accordance with
prudent banking practice and applicable rules, regulations, and
policies of the Regulatory Agencies and with counterparties
believed to be financially responsible at the time and are le-
gal, valid, and binding obligations enforceable in accordance
with their terms (except as may be limited by bankruptcy, in-
solvency, moratorium, reorganization, or similar laws affecting
the rights of creditors generally, and the availability of eq-
uitable remedies), and are in full force and effect. CBI and
each of its Subsidiaries has duly performed in all material
respects all of its obligations thereunder, and, to its knowl-
edge, there are no breaches, violations, or defaults or allega-
tions or assertions of such by any party thereunder.
3.21. Properties. (a) Except as would not have a
Material Adverse Effect on CBI, (i) except for assets disposed
of in the ordinary course of business, CBI and each of its Sub-
sidiaries possess good and marketable title to and own, free of
any encumbrances (other than liens for taxes not yet due,
statutory rights of redemption with respect to properties ac-
quired in the course of collecting loans, liens securing in-
debtedness of not more than $100,000, and easements or rights
of way of public utilities or similar encumbrances not materi-
ally interfering with the conduct of business), all of their
material real, personal, and intangible properties and other
assets; (ii) the leases pursuant to which CBI or any of its
Subsidiaries lease real or personal property are valid and ef-
fective in accordance with their respective terms and, to the
-21-<PAGE>
knowledge of CBI, there is not, under any such lease, any mate-
rial existing default or any event which, with the giving of
notice or lapse of time or otherwise, would constitute a de-
fault; (iii) the material properties owned or leased by CBI and
each of its Subsidiaries are in good condition, free from any
defects that would materially interfere with the continued use
thereof in the conduct of their normal operations; and (iv) CBI
and its Subsidiaries own or lease all property upon which their
continued business operations are materially dependent (except
for properties securing loans by CBI).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BANCORP
Except as set forth in the disclosure schedule of
Bancorp delivered to CBI concurrently herewith (the "Bancorp
Disclosure Schedule"), Bancorp hereby represents and warrants
to CBI as follows:
4.1. Corporate Organization. (a) Bancorp is a cor-
poration duly organized, validly existing under the laws of the
State of Oregon. Bancorp has the corporate power and authority
to own or lease all of its properties and assets and to carry
on its business as it is now being conducted, and is duly li-
censed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the charac-
ter or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except
where the failure to be so licensed or qualified would not have
a Material Adverse Effect on Bancorp. Bancorp is duly regis-
tered as a bank holding company under the BHC Act. The Ar-
ticles of Incorporation and Bylaws of Bancorp, copies of which
have previously been made available to CBI, are true, complete
and correct copies of such documents as in effect as of the
date of this Agreement.
(b) Each Bancorp Subsidiary (i) is duly organized
and validly existing as a bank, corporation or partnership un-
der the laws of its jurisdiction of organization, (ii) is duly
qualified to do business and in good standing in all jurisdic-
tions (whether federal, state, local or foreign) where its own-
ership or leasing of property or the conduct of its business
requires it to be so qualified and in which the failure to be
so qualified would have a Material Adverse Effect on Bancorp,
and (iii) has all requisite corporate power and authority to
own or lease its properties and assets and to carry on its
business as now conducted.
-22-<PAGE>
(c) The minute books of Bancorp accurately reflect
in all material respects all corporate actions since January 1,
1994, of its shareholders and Board of Directors (including
committees of the Board of Directors of Bancorp).
4.2. Capitalization. (a) The authorized capital
stock of Bancorp consists of (i) 250,000,000 shares of Bancorp
Common Stock, of which as of December 31, 1995, 150,592,468
shares were issued and outstanding and (ii) 50,000,000 shares
of Preferred Stock, no par value ("Bancorp Preferred Stock"),
of which as of December 31, 1995, 6,000,000 shares designated
as Series A were issued and outstanding. All of the issued and
outstanding shares of Bancorp Common Stock and Bancorp Pre-
ferred Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof.
As of the date of this Agreement, except for shares of Bancorp
Common Stock reserved for issuance pursuant to the Bancorp Ben-
efit Plans (as defined below), and (iii) Bancorp's dividend
reinvestment and stock purchase plan (the "Bancorp DRIP"), Ban-
corp does not have and is not bound by any outstanding sub-
scriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any
shares of Bancorp Common Stock or Bancorp Preferred Stock or
any other equity securities of Bancorp or any securities repre-
senting the right to purchase or otherwise receive any shares
of Bancorp Common Stock or Bancorp Preferred Stock. As of De-
cember 31, 1995, 12,277,723 shares of Bancorp Common Stock were
reserved for issuance pursuant to the Bancorp DRIP and Bancorp
Benefit Plans and no shares of Bancorp Preferred Stock were
reserved for issuance. As of the date of this Agreement, since
December 31, 1995, Bancorp has not issued any shares of its
capital stock or any securities convertible into or exercisable
for any shares of its capital stock, other than pursuant to (i)
the exercise of employee stock options granted prior to such
date, (ii) the Bancorp Option Agreement, (iii) the Bancorp
DRIP, (iv) the Bancorp Employee Investment Plan, and (v) the
grant of options to non-employee directors. The Shares of Ban-
corp Capital Stock to be issued pursuant to the Merger will be
duly authorized and validly issued and, at the Effective Time,
all such shares will be fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the
ownership thereof.
(b) Bancorp owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of each of the
Bancorp Subsidiaries, free and clear of any liens, charges,
encumbrances and security interests whatsoever, and all of such
shares are duly authorized and validly issued and are fully
-23-<PAGE>
paid, nonassessable and free of preemptive rights, with no per-
sonal liability attaching to the ownership thereof. No Bancorp
Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of
capital stock or any other equity security of such Subsidiary
or any securities representing the right to purchase or other-
wise receive any shares of capital stock or any other equity
security of such Subsidiary.
4.3. Authority; No Violation. (a) Bancorp has full
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly approved by the Board of Directors of Bancorp
and no other corporate proceedings on the part of Bancorp are
necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Bancorp and (assuming due
authorization, execution and delivery by CBI) constitutes a
valid and binding obligation of Bancorp, enforceable against
Bancorp in accordance with its terms, except as enforcement may
be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency
and similar laws affecting creditors' rights and remedies gen-
erally.
(b) Neither the execution and delivery of this
Agreement by Bancorp, nor the consummation by Bancorp of the
transactions contemplated hereby, nor compliance by Bancorp
with any of the terms or provisions hereof, will (i) violate
any provisions of the Articles of Incorporation or Bylaws of
Bancorp or (ii) assuming that the consents and approvals re-
ferred to in Section 4.4 are duly obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Bancorp or any of its
Subsidiaries or any of their respective properties or assets,
or (y) violate, conflict with, result in a breach of any provi-
sion of or the loss of any benefit under, constitute a default
(or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of
or a right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any
of the respective properties or assets of Bancorp or any of its
Subsidiaries under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which
Bancorp or any of its Subsidiaries is a party, or by which they
24-<PAGE>
or any of their respective properties or assets may be bound or
affected, except (in the case of clause (y) above) for such
violations, conflicts, breaches or defaults which either indi-
vidually or in the aggregate will not have or be reasonably
likely to have a Material Adverse Effect on Bancorp.
4.4. Consents and Approvals. Except for (i) the
filing of applications and notices, as applicable, with the
Federal Reserve Board under the BHC Act, (ii) the filing of any
requisite applications with the OCC or the FDIC in connection
with the merger of Subsidiaries of CBI and Bancorp, (iii) the
filing of the State Approvals, (iv) the filing with the SEC of
the Proxy Statement and the S-4, (v) the filing of the Articles
of Merger with the Oregon Secretary pursuant to the OBCA, (vi)
the filing of the Certificate of Merger with the Delaware Sec-
retary pursuant to the DGCL, (vii) such filings and approvals
as are required to be made or obtained under the securities or
"Blue Sky" laws of various states in connection with the issu-
ance of the shares of Bancorp Common Stock pursuant to this
Agreement, and (viii) the approval of this Agreement by the
requisite vote of the shareholders of CBI, no consents or ap-
provals of or filings or registrations with any Governmental
Entity or with any third party are necessary in connection with
(A) the execution and delivery by Bancorp of this Agreement and
(B) the consummation by Bancorp of the Merger and the other
transactions contemplated hereby.
4.5. Reports. Bancorp and each of its Subsidiaries
have timely and properly filed all material reports, registra-
tions and statements, together with any amendments required to
be made with respect thereto, that they were required to file
since January 1, 1994, with the Regulatory Agencies, and all
other material reports and statements required to be filed by
them since January 1, 1994, and have paid all fees and assess-
ments due and payable in connection therewith. Except for nor-
mal examinations conducted by a Regulatory Agency in the regu-
lar course of the business of Bancorp and its Subsidiaries, no
Regulatory Agency has initiated any proceeding or, to the best
knowledge of Bancorp, investigation into the business or opera-
tions of Bancorp or any of its Subsidiaries since January 1,
1994. There is no material unresolved violation, criticism, or
exception by any Regulatory Agency with respect to any report
or statement relating to any examinations of Bancorp or any of
its Subsidiaries.
4.6. Financial Statements. Bancorp has previously
delivered to CBI copies of (a) the consolidated balance sheets
of Bancorp and is Subsidiaries as of December 31, for the fis-
cal years 1993 and 1994, and the related consolidated state-
ments of income, changes in shareholders' equity and cash flows
-25-<PAGE>
for the fiscal years 1992 through 1994, inclusive, as reported
in Bancorp's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, filed with the SEC under the Exchange
Act, in each case accompanied by the audit report of Deloitte &
Touche LLP, independent auditors with respect to Bancorp, (b)
the unaudited consolidated balance sheet of Bancorp and its
subsidiaries as of December 31, 1995, and the related consoli-
dated statements of income, cash flows and changes in share-
holders' equity for the fiscal year ended December 31, 1995,
substantially in the form that is proposed to be reported in
Bancorp's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, filed with the SEC under the Exchange Act,
and (c) the unaudited consolidated balance sheets of Bancorp
and its Subsidiaries as of September 30, 1995, and September
30, 1994, and the related unaudited consolidated statements of
income, cash flows and changes in shareholders' equity for the
nine months then ended as reported in Bancorp's Quarterly Re-
port on Form 10-Q for the period ended September 30, 1995,
filed with the SEC under the Exchange Act. The financial
statements referred to in this Section 4.6 (including the re-
lated notes, where applicable) fairly present (subject, in the
case of the unaudited statements, to recurring audit adjust-
ments normal in nature and amount), the results of the consoli-
dated operations and changes in shareholders' equity and con-
solidated financial position of Bancorp and its Subsidiaries
for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the re-
lated notes, where applicable) complies in all material re-
spects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect
thereto, and each of such statements (including the related
notes, where applicable) has been prepared in accordance with
GAAP consistently applied during the periods involved, except
in each case as indicated in such statements or in the notes
thereto or, in the case of unaudited statements, as permitted
by Form 10-Q. The allowances for credit losses contained in
the financial statements referred to in this Section 4.6 were
adequate as of their respective dates to absorb reasonably an-
ticipated losses in the loan portfolio of Bancorp and its Sub-
sidiaries in view of the size and character of such portfolio,
the current economic conditions, and other pertinent factors
and no facts have subsequently come to the attention of manage-
ment of Bancorp that would cause management to restate in any
material way the level of such allowance for credit losses.
With respect to other real estate owned by Bancorp and its Sub-
sidiaries, the value attributed thereto for purposes of compil-
ing such financial statements does not exceed the aggregate
fair market value of such real estate as of the date of acqui-
sition of such real estate or as subsequently reduced, all in
-26-<PAGE>
accordance with regulations of the applicable Regulatory Agen-
cies. The books and records of Bancorp and its Subsidiaries
have been, and are being, maintained in all material respects
in accordance with GAAP and any other applicable legal and ac-
counting requirements and reflect only actual transactions.
4.7. Brokers' Fees. Neither Bancorp nor any Bancorp
Subsidiary nor any of their respective officers or directors
has employed any broker or finder or incurred any liability for
any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement or
the CBI Option Agreement.
4.8. Absence of Certain Changes or Events. (a) Ex-
cept as publicly disclosed in Bancorp Reports (as defined be-
low) filed prior to the date hereof, since December 31, 1994,
(i) as of the date of this Agreement, neither Bancorp nor any
of its Subsidiaries has incurred any material liability, except
in the ordinary course of their business consistent with their
past practices, and (ii) no event has occurred that has had, or
is reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on Bancorp.
(b) Except as publicly disclosed in Bancorp Reports
filed prior to the date hereof, from December 31, 1994, through
the date of this Agreement, Bancorp and its Subsidiaries have
carried on their respective businesses in the ordinary and
usual course consistent with their past practices.
(c) Since January 1, 1995, neither Bancorp nor any
of its Subsidiaries has (i) suffered any strike, work stoppage,
slowdown, or other labor disturbance or (ii) been the subject
of any organizing activities.
4.9. Legal Proceedings. (a) Except as publicly
disclosed in Bancorp Reports filed prior to the date hereof,
neither Bancorp nor any of its Subsidiaries is a party to any
and there are no pending or, to the best of Bancorp's knowl-
edge, threatened, material legal, administrative, arbitral or
other proceedings, claims, actions or governmental or regu-
latory investigations of any nature (i) against Bancorp or any
of its Subsidiaries as to which there is a reasonable possibil-
ity of an adverse determination and which, if adversely deter-
mined, would, individually or in the aggregate, have a Material
Adverse Effect on Bancorp or (ii) challenging the validity or
propriety of the transactions contemplated by this Agreement.
(b) There is no injunction, order, judgment, decree,
or regulatory restriction imposed upon Bancorp, any of its Sub-
sidiaries or the assets of Bancorp or any of its Subsidiaries
-27-<PAGE>
that has had, or might reasonably be expected to have, a Mate-
rial Adverse Effect on Bancorp or the Surviving Corporation.
4.10. Taxes and Tax Returns. (a) Each of Bancorp
and its Subsidiaries has duty filed all material federal, state
and, to the best of Bancorp's knowledge, material local infor-
mation returns and tax returns required to be filed by it on or
prior to the date hereof (all such returns being accurate and
complete in all material respects) and has duly paid or made
provisions for the payment of all material Taxes (as defined
below) and other governmental charges which have been incurred
or are due or claimed to be due from it by federal, state,
county or local taxing authorities on or prior to the date of
this Agreement (including, without limitation, if and to the
extent applicable, those due in respect of its properties, in-
come, business, capital stock, deposits, franchises, licenses,
sales and payrolls) other than Taxes or other charges (1) that
are not yet delinquent or are being contested in good faith and
(2) have not been finally determined. The income tax returns
of Bancorp and its Subsidiaries have been examined by the In-
ternal Revenue Service (the "IRS") and any liability with re-
spect thereto has been satisfied for all years to and including
1985, and no material deficiencies were asserted as a result of
such examination or all such deficiencies were satisfied. To
the best of Bancorp's knowledge, there are no material disputes
pending, or claims asserted for, Taxes or assessments upon Ban-
corp or any of its Subsidiaries, nor has Bancorp or any of its
Subsidiaries been requested to give any currently effective
waivers extending the statutory period of limitation applicable
to any federal, state, county or local income tax return for
any period. In addition, (i) proper and accurate amounts have
been withheld by Bancorp and its Subsidiaries from their em-
ployees for all prior periods in compliance in all material
respects with the tax withholding provisions of applicable fed-
eral, state and local laws, except where failure to do so would
not have a Material Adverse Effect on Bancorp, (ii) federal,
state, county and local returns that are accurate and complete
in all material respects have been filed by Bancorp and its
Subsidiaries for all periods for which returns were due with
respect to income tax withholding, Social Security and unem-
ployment taxes, except where failure to do so would not have a
Material Adverse Effect on Bancorp, (iii) the amounts shown on
such federal, state, local or county returns to be due and pay-
able have been paid in full or adequate provision therefor has
been included by Bancorp in its consolidated financial state-
ments as of December 31, 1995, except where failure to do so
would not have a Material Adverse Effect on Bancorp and (iv)
there are no Tax liens upon any property or assets of the Ban-
corp or its Subsidiaries except liens for current taxes not yet
due. To the knowledge of Bancorp, no property of Bancorp or
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any of its Subsidiaries is property that Bancorp or any of its
Subsidiaries is or will be required to treat as being owned by
another person pursuant to the provisions of Section 168(f)(8)
of the Code (as in effect prior to its amendment by the Tax
Reform Act of 1986) or is "tax-exempt use property" within the
meaning of Section 169(h) of the Code. Neither Bancorp nor any
of its Subsidiaries has been required to include in income any
adjustment pursuant to Section 481 of the Code by reason of a
voluntary change in accounting method initiated by Bancorp or
any of its Subsidiaries, and the Internal Revenue Service has
not initiated or proposed any such adjustment or change in ac-
counting method. Except as set forth in the financial state-
ments described in Section 4.6 hereof, neither Bancorp nor any
of its Subsidiaries has entered into a transaction which is
being accounted for as an installment obligation under Section
453 of the Code, which would be reasonably likely to have a
Material Adverse Effect on Bancorp.
(b) Any amount that could be received (whether in
cash or property or the vesting of property) as a result of any
of the transactions contemplated by this Agreement by any em-
ployee, officer or director of Bancorp or any of its affiliates
who is a "Disqualified Individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any em-
ployment, severance or termination agreement, other compensa-
tion arrangement or Bancorp Benefit Plan currently in effect
would not be characterized as an "excess parachute payment" (as
such term is defined in Section 280G(b)(1) of the Code).
(c) No disallowance of a deduction under Section
162(m) of the Code for employee remuneration of any amount paid
or payable by Bancorp or any Subsidiary of Bancorp under any
contract, plan, program, arrangement or understanding is rea-
sonably likely.
4.11. Employees. (a) The Bancorp Disclosure Sched-
ule sets forth a true and complete list of each material plan,
arrangement or agreement regarding compensation or benefits for
any employees, former employees, directors, or former directors
that is maintained as of the date of this Agreement (the "Ban-
corp Benefit Plans") by Bancorp, any of its Subsidiaries or by
any trade or business; whether or not incorporated (a "Bancorp
ERISA Affiliate"), all of which together with Bancorp would be
deemed a "single employer" within the meaning of Section 4001
of ERISA.
(b) Bancorp has heretofore delivered to CBI true and
complete copies of each of the Bancorp Benefit Plans and all
related documents, including but not limited to (i) the actu-
arial report for such Bancorp Benefit Plan (if applicable) for
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each of the last two years, and (ii) the most recent deter-
mination letter from the Internal Revenue Service (if applica-
ble) for such Bancorp Benefit Plan.
(c) (i) Each of the Bancorp Benefit Plans has been
operated and administered in all material respects in compli-
ance with applicable laws, including but not limited to ERISA
and the Code, (ii) each of the Bancorp Benefit Plans intended
to be "qualified" within the meaning of Section 401(a) of the
Code is so qualified, (iii) with respect to each Bancorp Ben-
efit Plan that is subject to Title IV of ERISA, the present
value of accrued benefits under such Bancorp Benefit Plan based
upon the actuarial assumptions used for funding purposes in the
most recent actuarial report prepared by such Bancorp Benefit
Plan's actuary with respect to such Bancorp Benefit Plan, did
not, as of its latest valuation date, exceed the then current
value of the assets of such Bancorp Benefit Plan allocable to
such accrued benefits, (iv) no Bancorp Benefit Plan provides
benefits, including without limitation death or medical ben-
efits (whether or not insured), with respect to current or
former employees of Bancorp, its Subsidiaries or any Bancorp
ERISA beyond their retirement or other termination of service,
other than (w) coverage mandated by applicable law, (x) death
benefits or retirement benefits under any "employee pension
plan," as that term is defined in Section 3(2) of ERISA, (y)
deferred compensation benefits accrued as liabilities on the
books of Bancorp, its Subsidiaries or the Bancorp ERISA Affili-
ates or (z) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), (v) no li-
ability under Title IV of ERISA has been incurred by Bancorp,
its Subsidiaries or any Bancorp ERISA Affiliate that has not
been satisfied in full, and no condition exists that presents a
material risk to Bancorp, its Subsidiaries or any Bancorp ERISA
Affiliate of incurring a material liability thereunder, (vi) no
Bancorp Benefit Plan is a "multiemployer pension plan," as such
term is defined in Section 3(37) of ERISA, (vii) all contribu-
tions or other amounts payable by Bancorp or its Subsidiaries
as of the Effective Time with respect to each Bancorp Benefit
Plan in respect of current or prior plan years have been paid
or accrued in accordance with GAAP and Section 412 of the Code,
(viii) neither Bancorp, its Subsidiaries nor any Bancorp ERISA
Affiliate has engaged in a transaction in connection with which
Bancorp, its Subsidiaries or any Bancorp ERISA Affiliate could
be subject to either a material civil penalty assessed pursuant
to Section 409 or 502(i) of ERISA or a material tax imposed
pursuant to Section 4975 or 4976 of the Code, and (ix) to the
best knowledge of Bancorp there are no pending, threatened or
anticipated claims (other than routine claims for benefits) by,
on behalf of or against any of the Bancorp Benefit Plans or any
trusts related thereto.
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(d) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any material payment (including,
without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or
any employee of Bancorp or any of its affiliates from Bancorp
or any of its affiliates under any Bancorp Benefit Plan or oth-
erwise, (ii) materially increase any benefits otherwise payable
under any Bancorp Benefit Plan, or (iii) result in any ac-
celeration of the time of payment or vesting of any such ben-
efits to any material extent.
4.12. SEC Reports. Bancorp has previously made
available to CBI an accurate and complete copy of each (a) fi-
nal registration statement, prospectus, report, schedule and
definitive proxy statement filed since January 1, 1994, by Ban-
corp with the SEC pursuant to the Securities Act or the Ex-
change Act (the "Bancorp Reports") and prior to the date hereof
and (b) communication mailed by Bancorp to its shareholders
since January 1, 1994, and prior to the date hereof, and no
such registration statement, prospectus, report, schedule,
proxy statement or communication contained any untrue statement
of a material fact or omitted to state any material fact re-
quired to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, except that information as of a
later date shall be deemed to modify information as of an ear-
lier date. Bancorp has timely filed all Bancorp Reports and
other documents required to be filed by it under the Securities
Act and the Exchange Act, and, as of their respective dates,
all Bancorp Reports complied in all material respects with the
published rules and regulations of the SEC with respect
thereto.
4.13. Compliance with Applicable Law. (a) Bancorp
and each of its Subsidiaries hold, and have at all times held,
all material licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not
in default in any material respect under any, applicable laws,
statutes, orders, rules, or regulations of any Governmental
Entity relating to Bancorp or any of its Subsidiaries, except
where the failure to hold such license, franchise, permit or
authorization or such noncompliance or default would not, indi-
vidually or in the aggregate, have a Material Adverse Effect on
Bancorp, and neither Bancorp nor any of its Subsidiaries knows
of, or has received notice of, any material violations of any
of the above.
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(b) Except as would not have a Material Adverse Ef-
fect, (i) no real property presently or previously owned, oper-
ated, or leased by Bancorp or any of its Subsidiaries or, to
the best of their knowledge, securing any obligations owed to
them has been used as a storage or disposal site for hazardous
substances within the meaning of any applicable federal, state,
or local statute, law, rule, or regulation, and no hazardous
substances have been transferred from or to such real property,
(ii) no governmental entity has issued any citation or notice
of violation relating to any environmental matter concerning
any real property owned, operated, or leased by Bancorp or any
of its Subsidiaries or, to the best of their knowledge securing
any obligations owed to them, and neither Bancorp nor any of
its Subsidiaries has received any notice that any such real
property may or will be included on any list of areas affected
by any release of any hazardous substance or that it has or may
be named as a responsible or potentially responsible party with
respect to any hazardous substance site, and (iii) neither Ban-
corp nor any of its Subsidiaries has received any notice of any
threatened investigation, proceeding, or litigation concerning
any such real property with aspect to any environmental matter
or knows of any basis for any such investigation, proceeding,
or litigation.
4.14. Certain Contracts. (a) As of the date of
this Agreement, neither Bancorp nor any of its Subsidiaries is
a party to or bound by any contact, arrangement, commitment or
understanding (whether written or oral) (i) with respect to the
employment of any directors, officers, employees or consult-
ants, (ii) that, upon the consummation of the transactions con-
templated by this Agreement will (either alone or upon the oc-
currence of any additional acts or events) result in any pay-
ment (whether of severance pay or otherwise) becoming due from
Bancorp, CBI, the surviving Corporation, or any of their re-
spective Subsidiaries to any officer or employee thereof, (iii)
that is a material contract (as defined in Item 601(b)(10) of
Regulation S-K of the SEC) to be performed after the date of
this Agreement that has not been filed or incorporated by ref-
erence in the Bancorp Reports, (iv) that materially restricts
the conduct of any line of business by Bancorp, (v) with or to
a labor union or guild (including any collective bargaining
agreement), or (vi) (including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock pur-
chase plan) any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this
Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated
by the Agreement. Each contract, arrangement, commitment or
understanding of the type described in this Section 4.14(a),
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whether or not set forth in the Bancorp Disclosure Schedule, is
referred to herein as a "Bancorp Contract." Neither Bancorp
nor any of its Subsidiaries knows of, or has received notice
of, any violation of any violation of any Bancorp Contract by
any of the other parties thereto that, individually or in the
aggregate, would have a Material Adverse Effect on Bancorp.
(b) (i) Each Bancorp Contract is valid and binding
and in full force and effect, (ii) Bancorp and each of its Sub-
sidiaries has in all material respects performed all obliga-
tions required to be performed by it to date under each Bancorp
Contract, except where such noncompliance, individually or in
the aggregate, would not have a Material Adverse Effect on Ban-
corp, and (iii) no event or condition exists that constitutes
or, after notice, or lapse of time, or both, would constitute,
a material default on the part of Bancorp or any of its Subsid-
iaries or, to the knowledge of Bancorp, on the part of any
other party under any such Bancorp Contract, except where such
default, individually or in the aggregate, would not have a
Material Adverse Effect on Bancorp.
4.15. Agreements with Regulatory Agencies. Neither
Bancorp nor any of its Subsidiaries is subject to any cease-
and-desist or other order issued by, or is a party to any writ-
ten agreement, consent agreement or memorandum of understanding
with, or is a party to any commitment letter or similar under-
taking to, or is subject to any order or directive by, or is a
recipient of any supervisory letter from, or has adopted any
board resolutions at the request of (each, whether or not set
forth in the Bancorp Disclosure Schedule, a "Bancorp Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity
that restricts the conduct of its business or that in any man-
ner relates to its capital adequacy, its credit policies, its
management or its business, nor has Bancorp or any of its Sub-
sidiaries been advised by any Regulatory Agency or other Gov-
ernmental Entity that it is considering issuing or requesting
any Regulatory Agreement.
4.16. Undisclosed Liabilities. As of the date of
this Agreement, except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet
of Bancorp dated as of December 31, 1995, and for liabilities
incurred in the ordinary course of business consistent with
past practice, since December 31, 1995, neither Bancorp nor any
of its Subsidiaries has incurred any liability of any nature
whatsoever (whether absolute, accrued, contingent or otherwise
and whether due or to become due) that, either alone or when
combined with all similar liabilities, has had, or could rea-
sonably be expected to have, a Material Adverse Effect on Ban-
corp.
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4.17. Pooling of Interests. As of date of this
Agreement, Bancorp has no reason to believe that the Merger
will not qualify as a pooling of interests for accounting pur-
poses.
4.18. Interest Rate Risk Management Instruments; De-
rivatives. (a) Bancorp has heretofore delivered to CBI an
accurate and complete list of all Derivative Securities to
which Bancorp or any of its Subsidiaries is a party or any of
their properties may be subject, or that are owned by Bancorp
or any of its Subsidiaries. Neither Bancorp nor any of its
Subsidiaries has purchased any Derivative Security for, or in-
vested in any Derivative Security any assets of, any account or
person for which it or any such Subsidiary acts as a trustee,
fiduciary, or investment advisor.
(b) All Derivative Securities to which Bancorp or
any of its Subsidiaries is a party or to which any of their
properties or assets may be subject were entered into in the
ordinary course of business and, to its knowledge, in ac-
cordance with prudent banking practice and applicable rules,
regulations, and policies of the Regulatory Agencies and with
counterparties believed to be financially responsible at the
time and are legal, valid, and binding obligations enforceable
in accordance with their terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization, or similar
laws affecting the rights of creditors generally, and the
availability of equitable remedies), and are in full force and
effect. Bancorp and each of its Subsidiaries has duly per-
formed in all material respects all of its obligations thereun-
der, and, to its knowledge, there are no breaches, violations,
or defaults or allegations or assertions of such by any party
thereunder.
4.19. State Takeover Laws. The Board of Directors
of Bancorp has taken such actions as are necessary such that
the provisions of Sections 60.825 to 60.845 of the Oregon Busi-
ness Corporation Act regarding business combinations and the
Oregon Control Share Act (Sections 60.801 to 60.813) will not
apply to this Agreement or to any of the transactions contem-
plated hereby or thereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1. Conduct of CBI Businesses Prior to the Effec-
tive Time. During the period from the date of this Agreement
to the Effective Time, except as expressly contemplated or per-
mitted by this Agreement or the CBI Option Agreement, CBI
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shall, and shall cause its Subsidiaries to, (i) conduct its
business in the usual, regular and ordinary course consistent
with past practice, (ii) use reasonable best efforts to main-
tain and preserve intact its business organization, employees
and advantageous business relationships and retain the services
of its officers and key employees and (iii) take no action that
would adversely affect or delay the ability of CBI or Bancorp
to obtain any necessary approvals of any Regulatory Agency or
other governmental authority required for the transactions con-
templated hereby or to perform its covenants and agreements
under this Agreement or the CBI Option Agreement.
5.2. CBI Forbearances. During the period from the
date of this Agreement to the Effective Time, except as ex-
pressly contemplated or permitted by this Agreement or the CBI
Option Agreement, CBI shall not, and shall not permit any of
its Subsidiaries to, without the prior written consent of Ban-
corp:
(a) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for
borrowed money (other than short-term indebtedness in-
curred to refinance short-term indebtedness and indebt-
edness of CBI or any of its Subsidiaries to CBI or any of
its Subsidiaries; it being understood and agreed that in-
currence of indebtedness in the ordinary course of busi-
ness shall include, without limitation, the creation of
deposit liabilities, purchases of federal funds, sales of
certificates of deposit and entering into repurchase
agreements), assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of
any other individual, corporation or other entity, or make
any loan or advance;
(b) adjust, split, combine or reclassify any capital
stock; make, declare or pay any dividend or make any other
distribution on, or directly or indirectly redeem, pur-
chase or otherwise acquire, any shares of its capital
stock or any securities or obligations, convertible into
or exchangeable for any shares of its capital stock, or
grant or issue any stock appreciation rights or grant or
issue to any individual, corporation or other entity any
right to acquire any shares of its capital stock (except
for regular quarterly cash dividends at the rate not in
excess of the rate being paid at the date of this Agree-
ment as such rate may be increased at times and in amounts
as are consistent with past practice and except for divi-
dends paid by any of its wholly owned Subsidiaries or any
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of their wholly owned Subsidiaries); or issue any addi-
tional shares of capital stock or securities or obliga-
tions convertible into or exchangeable for shares of its
capital stock except pursuant to (A) the exercise of stock
options outstanding as of the date hereof, (B) the CBI
Option Agreement, (C) the CBI Rights Agreement; or (D) the
CBI DRIP until the CBI DRIP is terminated, which shall
occur as soon as practicable after the date hereof;
(c) sell, transfer, mortgage, encumber or otherwise
dispose of any of its properties or assets to any indi-
vidual, corporation or other entity other than a direct or
indirect wholly owned Subsidiary, or cancel, release or
assign any indebtedness to any such person or any claims
held by any such person, except in the ordinary course of
business consistent with past practice or pursuant to con-
tracts or agreements in force at the date of this Agree-
ment;
(d) except for transactions in the ordinary course
of business consistent with past practice, make any mate-
rial investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase
of any property or assets of any other individual, corpo-
ration or other entity other than a wholly owned Subsid-
iary thereof;
(e) except for loans, deposits, letters of credit,
and similar transactions in the ordinary course of busi-
ness consistent with past practice, (i) enter into any
contract or agreement that involves an amount in excess of
$100,000 or that will have a term in excess of one year or
(ii) terminate or materially modify any contract or agree-
ment that involves an amount in excess of $100,000 or that
has a remaining term in excess of one year, or (iii) com-
mit to any capital expenditure, or make any capital expen-
diture not committed to prior to the date of this Agree-
ment, in excess of $10,000;
(f) increase in any manner the compensation or
fringe benefits of any of its employees other than in-
creases for employees in the ordinary course of business
consistent with past practice or pay any pension or re-
tirement allowance not required by any existing plan or
agreement to any such employees or become a party to,
amend or commit itself to any pension, retirement, profit-
sharing or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee other
than amendments required to comply with applicable legal
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requirements or accelerate the vesting of any stock op-
tions or other stock-based compensation;
(g) solicit, encourage or authorize any individual,
corporation or other entity to solicit from any third
party any inquiries or proposals relating to the disposi-
tion of its business or assets, or the acquisition of its
voting securities, or the merger of it or any of its Sub-
sidiaries with any corporation or other entity other than
as provided by this Agreement (and CBI shall promptly no-
tify Bancorp of all of the relevant details relating to
all inquiries and proposals which it may receive relating
to any of such matters) or unless CBI shall have deter-
mined based upon the written advice of counsel that fidu-
ciary duties under applicable law require otherwise, par-
ticipate in any negotiations concerning or otherwise fa-
cilitate any such transaction;
(h) settle any claim, action or proceeding involving
material money damages, except in the ordinary course of
business consistent with past practice;
(i) take any action that would prevent or impede the
Merger from qualifying (i) for pooling of interests ac-
counting treatment or (ii) as a reorganization within the
meaning of Section 368 of the Code;
(j) amend its certificate of incorporation or its
bylaws;
(k) other than in prior consultation with Bancorp,
restructure or materially change its investment securities
portfolio or its gap position, through purchases, sales or
otherwise, or the manner in which the portfolio is classi-
fied or reported;
(l) take any action that is intended or may reason-
ably be expected to result in any of its representations
and warranties set forth in this Agreement being or becom-
ing untrue in any material respect at any time prior to
the Effective Time, or in any of the conditions to the
Merger set forth in Article VII not being satisfied or in
a violation of any provision of this Agreement, except, in
every case, as may be required by applicable law; or
(m) agree to, or make any commitment to, take any of
the actions prohibited by this Section 5.2.
5.3. Bancorp Forbearances. During the period from
the date of this Agreement to the Effective Time, except as
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expressly contemplated or permitted by this Agreement, Bancorp
shall not, and shall not permit any of its Subsidiaries to,
without the prior written consent of CBI:
(a) reclassify any of its capital stock or make,
declare, or pay any dividend or make any other distribu-
tion on, any shares of its capital stock or any securities
or obligations, convertible into or exchangeable for any
shares of its capital stock (except for regular quarterly
cash dividends at a rate not in excess of such rate as
Bancorp from time to time adopts as its regular quarterly
dividend rate and except for dividends paid by any of its
wholly owned Subsidiaries or any of their wholly owned
Subsidiaries);
(b) take any action that would prevent or impede the
Merger from qualifying (i) for pooling of interests ac-
counting treatment or (ii) as a reorganization within the
meaning of Section 368 of the Code; provided, however,
that nothing contained herein shall limit the ability of
Bancorp to exercise its rights under the CBI Option Agree-
ment;
(c) take any action that is intended or may reason-
ably be expected to result in any of its representations
and warranties set forth in this Agreement being or becom-
ing untrue in any material respect at any time prior to
the Effective Time, or in any of the conditions of the
Merger set forth in Article VII not being satisfied or in
a violation of any provision of this Agreement, except, in
every case, as may be required by applicable law;
(d) take any action that would adversely affect or
delay its ability to obtain any necessary approvals of any
Regulatory Agency or other governmental authority required
for the transactions contemplated hereby or to perform its
covenants and agreements under this Agreement;
(e) amend its articles of incorporation except with
respect to the establishment of one or more series of pre-
ferred stock; or
(e) agree to, or make any commitment to, take any of
the actions prohibited by this Section 5.3.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1. Regulatory Matters. (a) Bancorp and CBI shall
promptly prepare and file with the SEC the Proxy Statement and
Bancorp shall promptly prepare and file with the SEC the S-4,
in which the Proxy Statement will be included as a prospectus.
Each of Bancorp and CBI shall use all reasonable efforts to
have the S-4 declared effective under the Securities Act as
promptly as practicable after such filing, and Bancorp and CBI
shall thereafter mail the Proxy Statement to their respective
shareholders. Bancorp shall also use all reasonable efforts to
obtain all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the transactions contem-
plated by this Agreement, and CBI shall furnish all information
concerning CBI and the holders of CBI Common Stock as may be
reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each
other and use their reasonable best efforts to promptly prepare
and file all necessary documentation, to effect all applica-
tions, notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations
of all third parties and Governmental Entities which are neces-
sary or advisable to consummate the transactions contemplated
by this Agreement (including, without limitation, the Merger),
and to comply with the terms and conditions of all such per-
mits, consents, approvals and authorizations of all such Gov-
ernmental Entities. Bancorp and CBI shall have the right to
review in advance, and to the extent practicable each will con-
sult the other on, in each case subject to applicable laws re-
lating to the exchange of information, all the information re-
lating to CBI or Bancorp, as the case may be, and any of their
respective Subsidiaries, which appear in any filing made with,
or written materials submitted to, any third party or any Gov-
ernmental Entity in connection with the transactions contem-
plated 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 con-
sult with each other with respect to the obtaining of all per-
mits, consents, approvals and authorizations of all third par-
ties and Governmental Entities necessary or advisable to con-
summate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of mat-
ters relating to completion of the transactions contemplated
herein.
(c) Bancorp and CBI shall, upon request, furnish
each other with all information concerning themselves, their
Subsidiaries, directors, officers and shareholders and such
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other matters as may be reasonably necessary or advisable in
connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf
of Bancorp, CBI or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement.
(d) Bancorp and CBI shall promptly advise each other
upon receiving any communication from any Governmental Entity
whose consent or approval is required for consummation of the
transactions contemplated by this Agreement which causes such
party to believe that there is a reasonable likelihood that any
Requisite Regulatory Approval will not be obtained or that the
receipt of any such approval will be materially delayed.
6.2. Access to Information. (a) Upon reasonable
notice and subject to applicable laws relating to the exchange
of information, each of Bancorp and CBI shall, and shall cause
each of their respective Subsidiaries to, afford to the offic-
ers, employees, accountants, counsel and other representatives
of the other party, access, during normal business hours during
the period prior to the Effective Time, to all its proprties,
books, contracts, commitments and records and, during such pe-
riod, each of Bancorp and CBI shall, and shall cause their re-
spective Subsidiaries to, make available to the other party (i)
a copy of each report, schedule, registration statement and
other document filed or received by it during such period pur-
suant to the requirement of federal securities laws or federal
or state banking laws, savings and loan or savings association
laws (other than reports or documents which Bancorp or CBI, as
the case may be, is not permitted to disclose under applicable
law) and (ii) all other information concerning its business,
properties and personnel as such party may reasonably request.
Neither Bancorp nor CBI nor any of their respective Subsidiar-
ies shall be required to provide access to or to disclose in-
formation where such access or disclosure would violate or
prejudice the rights of Bancorp's or CBI's, as the case may be,
customers, jeopardize the attorney-client privilege of the in-
stitution in possession or control of such information or con-
travene any law, rule, regulation, order, judgment, decree,
fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make appropri-
ate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
(b) Each of Bancorp and CBI shall hold all informa-
tion furnished by the other party or any of such party's Sub-
sidiaries or representatives pursuant to Section 6.2(a) in con-
fidence to the extent required by, and in accordance with, the
provisions of the confidentiality agreements, dated December
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13, 1995, between Bancorp and CBI (the "Confidentiality Agree-
ments").
(c) No investigation by either of the parties or
their respective representatives shall affect the representa-
tions and warranties of the other set forth herein.
6.3. Shareholder Approval. CBI shall call a meeting
of its shareholders to be held as soon as practicable for the
purpose of voting upon the requisite shareholder approval re-
quired in connection with this Agreement and the Merger. Sub-
ject to fiduciary requirements under applicable law, the board
of directors of CBI shall recommend such approval to its share-
holders and shall use reasonable efforts to solicit such ap-
proval.
6.4. Legal Conditions to Merger. Each of Bancorp and
CBI shall, and shall cause its Subsidiaries to, use their rea-
sonable best efforts (a) to take, or cause to be taken, all
actions necessary, proper, or advisable to comply promptly with
all legal requirements which may be imposed on such party or
its Subsidiaries with respect to the Merger or the Subsidiary
Merger and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this
Agreement and (b) to obtain (and to cooperate with the other
party to obtain) any consent, authorization, order or approval
of, or any exemption by, any Governmental Entity and any other
third party which is required to be obtained by CBI or Bancorp
or any of their respective Subsidiaries in connection with the
Merger and the Subsidiary Merger and the other transactions
contemplated by this Agreement.
6.5. Affiliates; Publication of Combined Financial
Results. (a) Each of Bancorp and CBI shall use its best ef-
forts to cause each director, executive officer and other per-
son who is an "affiliate" (for purposes of Rule 145 under the
Securities Act and for purposes of qualifying the Merger for
"pooling-of-interests" accounting treatment) of such party to
deliver to the other party hereto, as soon as practicable after
the date of this Agreement, and prior to the date of the share-
holder meeting called by CBI to approve this Agreement, a writ-
ten agreement, in the form of Exhibit 6.5(a) hereto, providing
that such person will not sell, pledge, transfer or otherwise
dispose of any shares of Bancorp Common Stock or CBI Common
Stock held by such "affiliate" and, in the case of the "affili-
ates" of CBI, the shares of Bancorp Common Stock to be received
by such "affiliate" in the Merger: (1) in the case of shares
of Bancorp Common Stock to be received by "affiliates" of CBI
in the Merger, except in compliance with the applicable provi-
sions of the Securities Act and the rules and regulations
-41-<PAGE>
thereunder; and (2) during the period commencing 30 days prior
to the Merger and ending at the time of the publication of fi-
nancial results covering at least 30 days of combined opera-
tions of Bancorp and CBI. Notwithstanding any other provision
of this Agreement, no certificate for Bancorp Common Stock
shall be delivered in exchange for CBI Certificates held by any
such "affiliate" who shall not have executed and delivered such
an agreement.
(b) Bancorp shall use its best efforts to publish no
later than ninety (90) days after the end of the first month
after the Effective Time in which there are at least thirty
(30) days of post-Merger combined operations (which month may
be the month in which the Effective Time occurs), combined
sales and net income figures as contemplated by and in accor-
dance with the terms of SEC Accounting Series Release No. 135.
6.6. Stock Exchange Listing of Shares. Bancorp shall
use its best efforts to cause the shares of Bancorp Common
Stock to be issued in the Merger to be approved for listing on
the NASDAQ Stock Market National Market System, subject to of-
ficial notice of issuance, prior to the Effective Time.
6.7. Employee Benefit Plans. (a) Within a reason-
able time after the Effective Time, and subject to applicable
law, Bancorp shall provide to the employees of Bancorp and its
Subsidiaries who formerly were employees of CBI and its Subsid-
iaries employee benefits, including but not limited to pension
plans, thrift plans, management incentive plans, group life
plans, accidental death and dismemberment plans, travel ac-
cident plans, medical and hospitalization plans and long term
disability plans, substantially the same as those provided to
similarly situated employees of Bancorp and its Subsidiaries.
From and after the Effective Time, and until Bancorp has accom-
plished the actions contemplated by the preceding sentence,
employees of Bancorp or its Subsidiaries who were employees of
CBI or its Subsidiaries immediately prior to the Effective Time
shall be provided with employee benefits under employee benefit
plans of CBI, employee benefit plans of Bancorp, or some combi-
nation thereof, as Bancorp shall reasonably deem appropriate in
order to accomplish an orderly transition of benefits. From
and after the Effective Time, employees of Bancorp or its Sub-
sidiaries who were employees of CBI and its Subsidiaries im-
mediately prior to the Effective Time shall receive full credit
for all purposes under such plans, except the accrual of ben-
efits, for their length of service prior to the Effective Time
with CBI or any of its Subsidiaries (and any predecessors
thereto) to the extent such service would be recognized under
such plans, if such service was with Bancorp and its Subsidiar-
ies.
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(b) Bancorp agrees to honor in accordance with their
terms (i) all CBI Benefit Plans and (ii) all contracts, ar-
rangements, commitments, or understandings described in Section
3.14(a)(i) disclosed on the CBI Disclosure Schedule, and (iii)
all benefits vested thereunder as of the Effective Time; pro-
vided, however, that nothing in this sentence shall be inter-
preted as preventing Bancorp from amending, modifying or termi-
nating any CBI Benefit Plans, contracts, arrangements, commit-
ments or understandings, in accordance with their terms. The
provisions of this Section 6.7 are intended to be for the ben-
efit for, and enforceable by, each of the beneficiaries of or
parties to such plans, contracts, arrangements, commitments,
and understandings.
(c) CBI shall cause each outstanding option to pur-
chase CBI Common Stock held by directors or employees of CBI
and its Subsidiaries (and any related stock appreciation right)
to be amended at or prior to the Effective Time so that at the
Effective Time, there shall be exchanged and substituted for
each such option (or stock appreciation right) an option to
purchase (or the right to receive appreciation in market value
of) shares of Bancorp Common Stock, rather than CBI Common
Stock, in a form substantially as provided in the Bancorp 1993
Stock Incentive Plan. The number of shares of Bancorp Common
Stock covered by the substituted option (and stock appreciation
right) shall be computed by applying the Exchange Ratio to the
shares of CBI Common Stock covered by the option (or stock ap-
preciation right), with any resulting fractional shares to be
rounded down to the next whole share. The exercise price per
share of the substituted option shall be equal to the exercise
price per share of CBI Common Stock under the original option
divided by the Exchange Ratio with the result rounded up to the
next cent. All such options (and stock appreciation rights)
shall remain in full force and effect with the same remaining
term and without any acceleration of exercisability or confer-
ring any right to receive cash by reason of the Merger, except
as provided by their terms as in effect prior to the date of
this Agreement. Bancorp shall cooperate as necessary to permit
the taking of the actions specified in this paragraph (c).
6.8. Indemnification; Directors' and Officers' Insur-
ance. (a) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, crim-
inal or administrative, including, without limitation, any such
claim, action, suit, proceeding or investigation in which any
person who is now, or has been at any time prior to the date of
this Agreement, or who becomes prior to the Effective Time, a
director or officer of CBI or any of its Subsidiaries (the "In-
demnified Parties") is, or is threatened to be, made a party
based in whole or in part on, or arising in whole or in part
-43-<PAGE>
out of, or pertaining to (i) the fact that he is or was a di-
rector or officer of CBI, any of the CBI Subsidiaries or any of
their respective predecessors or (ii) this Agreement, the CBI
Option Agreement, or any of the transactions contemplated
hereby or thereby, whether in any case asserted or arising be-
fore or after the Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend against and re-
spond thereto. It is understood and agreed that after the Ef-
fective Time, Bancorp shall indemnify and hold harmless, as and
to the fullest extent permitted by law, each such Indemnified
Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses in
advance of the final disposition of any claim, suit, proceeding
or investigation to each Indemnified Party to the fullest ex-
tent permitted by law upon receipt of any undertaking required
by applicable law), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation and in the
event of any such threatened or actual claim, action, suit,
proceeding, or investigation (whether asserted or arising be-
fore or after the Effective Time), the Indemnified Parties may
retain counsel reasonably satisfactory to them after consulta-
tion with Bancorp; provided, however, that (1) Bancorp shall
have the right to assume the defense thereof and upon such as-
sumption Bancorp shall not be liable to any Indemnified Party
for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection
with the defense thereof, except that if Bancorp elects not to
assume such defense or counsel for the Indemnified Parties rea-
sonably advises the Indemnified Parties that there are issues
which raise conflicts of interest between Bancorp and the In-
demnified Parties, the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with Ban-
corp, and Bancorp shall pay the reasonable fees and expenses of
such counsel for the Indemnified Parties, (2) Bancorp shall be
obligated pursuant to this paragraph to pay for only one firm
of counsel for all Indemnified Parties, unless an Indemnified
Party shall have reasonably concluded, based on the advice of
counsel, that in order to be adequately represented, separate
counsel is necessary for such Indemnified Party, in which case,
Bancorp shall be obligated to pay for such separate counsel,
(3) Bancorp shall not be liable for any settlement effected
without its prior written consent (which consent shall not be
unreasonably withheld) and (4) Bancorp shall have no obligation
hereunder to any Indemnified Party when and if a court of com-
petent jurisdiction shall ultimately determine, and such deter-
mination shall have become final and nonappealable, that indem-
nification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim Indemnification under this Section 6.8, upon
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learning of any such claim, action, suit, proceeding or inves-
tigation, shall notify Bancorp thereof, provided that the fail-
ure to so notify shall not affect the obligations of Bancorp
under this Section 6.8 except to the extent such failure to
notify materially prejudices Bancorp. Bancorp's obligations
under this Section 6.8 continue in full force and effect for a
period of six (6) years from the Effective Time; provided, how-
ever, that all rights to indemnification in respect of any
claim (a "Claim") asserted or made within such period shall
continue until the final disposition of such Claim and provided
further that Bancorp shall have the right of set-off against
any payments required to be made by Bancorp to an Indemnified
Party pursuant to this Section 6.8(a) to the extent that such
Indemnified Party shall have received the indemnification to
which such Indemnified Party is entitled from an insurer under
a directors' and officers' liability insurance policy main-
tained by CBI or Bancorp. Notwithstanding the foregoing provi-
sions of this Section 6.8(a), Bancorp shall have no obligation
to indemnify the Indemnified Parties (or advance expenses to
them) except to the extent they would be entitled to such in-
demnification (or advance) under the provisions of Bancorp's
Articles of Incorporation or Bylaws or any agreement to which
Bancorp is a party as in effect on the date of this Agreement
if such Indemnified Parties had been officers or directors of
Bancorp at the time of the event giving rise to such indemnifi-
cation.
(b) Bancorp shall use its best efforts to cause the
persons serving as officers and directors of CBI immediately
prior to the Effective Time to be covered for a period of six
(6) years from the Effective Time by the directors' and offic-
ers' liability insurance policy maintained by Bancorp, if any
(provided that Bancorp may substitute therefor policies of at
least the same coverage and amounts containing terms and condi-
tions that are not less advantageous than such policy) with
respect to acts or omissions occurring prior to the Effective
Time which were committed by such officers and directors in
their capacity as such; provided, however, that in no event
shall Bancorp be required to expend more than 200 percent of
the current amount expended by CBI (the "Insurance Amount") to
maintain or procure insurance coverage pursuant hereto and fur-
ther provided that if Bancorp is unable to maintain or obtain
the insurance called for by this Section 6.8(b), Bancorp shall
use its best efforts to obtain as much comparable insurance as
is available for the Insurance Amount.
(c) In the event Bancorp or any of its successors or
assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or
entity of such consolidation or merger, or (ii) transfers or
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conveys all or substantially all of its properties and assets
to any person, then, and in each such case, to the extent nec-
essary, proper provision shall be made so that the successors
and assigns of Bancorp assume the obligations set forth in this
section.
(d) The provisions of this Section 6.8 are intended
to be for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.
6.9. Additional Agreements. In case at any time af-
ter the Effective Time any further action is necessary or de-
sirable to carry out the purposes of this Agreement (including,
without limitation, any merger between a Subsidiary of Bancorp
and a Subsidiary of CBI) or to vest the Surviving Corporation
with full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the Merger,
the proper officers and directors of each party to this Agree-
ment and their respective Subsidiaries shall take all such nec-
essary action as may be reasonably requested by, and at the
sole expense of, Bancorp. Pending the Effective Time, Bancorp
and CBI shall consult with one another and cooperate as reason-
ably requested by Bancorp to facilitate the integration of
their respective operations as promptly as practicable after
the Effective Time. Such cooperation shall include, if re-
quested, the entering into of merger agreements between or
among their respective Subsidiaries and the filing of appropri-
ate regulatory applications with respect thereto (conditioned
upon the effectiveness of the Merger), communicating with em-
ployees, consultation regarding material contracts, renewals,
and capital commitments to be entered into by CBI and its Sub-
sidiaries, coordination regarding third-party service agree-
ments with a view to providing common products and services as
expeditiously as practicable following the Effective Time, mak-
ing arrangements for employee training prior to the Effective
Time and taking action to facilitate an orderly conversion of
data processing operations to occur promptly following the Ef-
fective Time, provided that the cooperation required under this
Section 6.9 shall not be deemed to require actions that would
materially delay or impede the Merger.
6.10. Advice of Changes. Bancorp and CBI shall
promptly advise the other party of any change or event having,
or that would be reasonably likely to have, a Material Adverse
Effect on it or which it believes would or would be reasonably
likely to cause or constitute a material breach of any of its
representations, warranties or covenants contained herein.
6.11. Dividends. After the date of this Agreement,
each of Bancorp and CBI shall coordinate with the other the
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declaration of any dividends in respect of Bancorp Common Stock
and CBI Common Stock and the record dates and payment dates
relating thereto, it being the intention of the parties hereto
that holders of Bancorp Common Stock or CBI Common Stock shall
not receive two dividends, or fail to receive one dividend, for
any single calendar quarter with respect to their shares of
Bancorp Common Stock and/or CBI Common Stock and any shares of
Bancorp Common Stock any such holder receives in exchange
therefor in the Merger.
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect
the Merger shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved
and adopted by the requisite affirmative vote of the hold-
ers of CBI Common Stock entitled to vote thereon.
(b) Nasdaq Listing. The shares of Bancorp Common
Stock that shall be issued to the shareholders of CBI upon
consummation of the Merger shall have been authorized for
listing on the Nasdaq Stock Market National Market System
subject to official notice of issuance.
(c) Other Approvals. All regulatory approvals re-
quired to consummate the transactions contemplated hereby
shall have been obtained without the imposition of any
conditions that are in Bancorp's reasonable judgment un-
duly burdensome and shall remain in full force and effect
and all statutory waiting periods in respect thereof shall
have expired (all such approvals and the expiration of all
such waiting periods being referred to herein as the "Req-
uisite Regulatory Approvals"), and all other material con-
sents or approvals of any third party required in connec-
tion with the consummation of the Merger as set forth in
the CBI Disclosure Schedule or Bancorp Disclosure Schedule
shall have been obtained. For purposes of this paragraph,
a divestiture required as a condition to any regulatory
approval shall not be unduly burdensome if such divesti-
ture is consistent with Department of Justice and Federal
Reserve Board guidelines, policies, and practices regard-
ing the merger of bank holding companies that have been
utilized in transactions that have recently been reviewed
prior to the date of this Agreement.
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(d) Form S-4. The S-4 shall have become effective
under the Securities Act and no stop order suspending the
effectiveness of the S-4 shall have been issued and no
proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No
order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or pro-
hibition (an "Injunction") preventing the consummation of
the Merger or any of the other transactions contemplated
by this Agreement shall be in effect. No statute, rule,
regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Govern-
mental Entity which prohibits, restricts or makes illegal
consummation of the Merger.
(f) Federal Tax Opinions. Bancorp shall have re-
ceived an opinion of Miller, Nash, Wiener, Hager &
Carlsen, counsel to Bancorp, and CBI shall have received
an opinion of Wachtell, Lipton, Rosen & Katz, counsel to
CBI, in form and substance reasonably satisfactory to Ban-
corp and CBI, dated as of the Effective Time, substan-
tially to the effect that, on the basis of facts, rep-
resentations and assumptions set forth in such opinion
which are consistent with the state of facts existing at
the Effective Time, the Merger will be treated for Federal
income tax purposes as part of one or more reorganizations
within the meaning of Section 368 of the Code and that
accordingly:
(a) No gain or loss will be recognized by Ban-
corp or CBI as a result of the Merger;
(b) No gain or loss will be recognized by the
shareholders of CBI who exchange their CBI Common
Stock solely for Bancorp Common Stock pursuant to the
Merger (except with respect to cash received in lieu
of a fractional share interest in Bancorp Common
Stock); and
(c) The tax basis of the Bancorp Common Stock
received by shareholders who exchange all of their
CBI Common Stock solely for Bancorp Common Stock in
the Merger will be the same as the tax basis of the
CBI Common Stock surrendered in exchange therefor
(reduced by any amount allocable to a fractional
share interest for which cash is received).
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In rendering such opinion, counsel may require
and rely upon representations contained in certifi-
cates of officers of Bancorp, CBI and others.
(g) Pooling of Interests. Bancorp and CBI shall
each have received letters from Deloitte & Touche LLP and
KPMG Peat Marwick LLP, respectively, addressed to Bancorp
and CBI, respectively, to the effect that the Merger will
qualify for "pooling of interests" accounting treatment.
7.2. Conditions to Obligations of Bancorp. The obli-
gation of Bancorp to effect the Merger is also subject to the
satisfaction or waiver by Bancorp at or prior to the Effective
Time of the following conditions:
(a) Representations and Warranties. The representa-
tions and warranties of CBI set forth in this Agreement
shall be true and correct in all material respects as of
the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of
the Closing Date. Bancorp shall have received a certifi-
cate signed on behalf of CBI by the Chief Executive Of-
ficer and the Chief Financial Officer of CBI to the fore-
going effect.
(b) Performance of Obligations of CBI. CBI shall
have performed in all material respects all obligations
required to be performed by it under this Agreement at or
prior to the Closing Date, and Bancorp shall have received
a certificate signed on behalf of CBI by the Chief Execu-
tive Officer and the Chief Financial Officer of CBI to
such effect.
(c) CBI Rights Agreement. The rights issued pursu-
ant to the CBI Rights Agreement shall not have been become
nonredeemable, exercisable, distributed or triggered pur-
suant to the terms of such agreement.
7.3. Conditions to Obligations of CBI. The obliga-
tion of CBI to effect the Merger is also subject to the satis-
faction or waiver by CBI at or prior to the Effective Time of
the following conditions:
(a) Representations and Warranties. The representa-
tions and warranties of Bancorp set forth in this Agree-
ment shall be true and correct in all material respects as
of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of
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the Closing Date. CBI shall have received a certificate
signed on behalf of Bancorp by the Chief Executive Officer
and the Chief Financial Officer of Bancorp to the forego-
ing effect.
(b) Performance of Obligations of Bancorp. Bancorp
shall have performed in all material respects all obliga-
tions required to be performed by it under this Agreement
at or prior to the Closing Date, and CBI shall have re-
ceived a certificate signed on behalf of Bancorp by the
Chief Executive Officer and the Chief Financial Officer of
Bancorp to such effect.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1. Termination. This Agreement may be terminated
at any time prior to the Effective Time, whether before or af-
ter approval of the matters presented in connection with the
Merger by the shareholders of CBI:
(a) by mutual consent of Bancorp and CBI in a writ-
ten instrument, if the Board of Directors of each so de-
termines by a vote of a majority of the members of its
entire Board;
(b) by either the Board of Directors of Bancorp or
the Board of Directors of CBI (i) if any Governmental En-
tity which must grant a Requisite Regulatory Approval has
denied approval of the Merger and such denial has become
final and nonappealable or (ii) any Governmental Entity of
competent jurisdiction shall have issued a final nonap-
pealable order enjoining or otherwise prohibiting the con-
summation of the transactions contemplated by this Agree-
ment;
(c) by either the Board of Directors of Bancorp or
the Board of Directors of CBI if the Merger shall not have
been consummated on or before January 31, 1997, unless the
failure of the Closing to occur by such date shall be due
to the breach by the party seeking to terminate this
Agreement of any representation, warranty, covenant, or
other agreement of such party set forth herein;
(d) by either the Board of Directors of Bancorp or
the Board of Directors of CBI (provided that the termi-
nating party is not then in material breach of any repre-
sentation, warranty, covenant or other agreement contained
herein) if there shall have been a material breach of any
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of the covenants or agreements or any of the representa-
tions or warranties set forth in this Agreement on the
part of the other party, which breach is not cured within
forty-five (45) days following written notice to the party
committing such breach, or which breach, by its nature,
cannot be cured prior to the Closing; or
(e) by either Bancorp or CBI if any approval of the
shareholders of CBI required for the consummation of the
Merger shall not have been obtained by reason of the fail-
ure to obtain the required vote at a duly held meeting of
shareholders or at any adjournment or postponement
thereof.
8.2. Effect of Termination. In the event of termi-
nation of this Agreement by either Bancorp or CBI as provided
in Section 8.1, this Agreement shall forthwith become void and
have no effect, and none of Bancorp, CBI, any of their respec-
tive Subsidiaries or any of the officers or directors of any of
them shall have any liability of any nature whatsoever hereun-
der, or in connection with the transactions contemplated
hereby, except (i) Sections 6.2(b), 8.2, 9.2 and 9.3, shall
survive any termination of this Agreement, and (ii) notwith-
standing anything to the contrary contained in this Agreement,
neither Bancorp nor CBI shall be relieved or released from any
liabilities or damages arising out of its intentional or will-
ful breach of any provision of this Agreement.
8.3. Amendment. Subject to compliance with applica-
ble law, this Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters
presented in connection with the Merger by the shareholders of
CBI; provided, however, that after any approval of the transac-
tions contemplated by this Agreement by CBI's shareholders,
there may not be, without further approval of such sharehold-
ers, any amendment of this Agreement that reduces the amount or
changes the form of the consideration to be delivered to the
CBI shareholders hereunder other than as contemplated by this
Agreement. This Agreement may not be amended except by an in-
strument in writing signed on behalf of each of the parties
hereto.
8.4. Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action taken or autho-
rized by their respective Board of Directors, may, to the ex-
tent legally allowed, (a) extend the time for the performance
of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and
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warranties contained herein or in any document delivered pursu-
ant hereto, and (c) waive compliance with any of the agreements
or conditions contained herein; provided, however, that after
any approval of the transactions contemplated by this Agreement
by CBI's shareholders, there may not be, without further ap-
proval of such shareholders, any extension or waiver of this
Agreement or any portion thereof which reduces the amount or
changes the form of the consideration to be delivered to the
CBI shareholders hereunder other than as contemplated by this
Agreement. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance
with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subse-
quent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1. Closing. Subject to the terms and conditions of
this Agreement and the Merger Agreement, the closing of the
Merger (the "Closing") will take place at 10 a.m. on a date to
be specified by the parties, which shall be no later than five
business days after the satisfaction or waiver (subject to ap-
plicable law) of the latest to occur of the conditions set
forth in Article VII hereof (the "Closing Date").
9.2. Nonsurvival of Representations, Warranties, and
Agreements. None of the representations, warranties, cov-
enants, and agreements in this Agreement or in any instrument
delivered pursuant to this Agreement (other than pursuant to
the CBI Option Agreement, which shall terminate in accordance
with its terms), including any rights arising out of any breach
of such representations, warranties, covenants, and agreements,
shall survive the Effective Time, except for those covenants
and agreements contained herein and therein that by their terms
apply in whole or in part after the Effective Time.
9.3. Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contem-
plated hereby shall be paid by the party incurring such ex-
pense.
9.4. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if de-
livered personally, telecopied (with confirmation), mailed by
registered or certified mail (return receipt requested), or
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delivered by an express courier (with confirmation) to the par-
ties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to U.S. Bancorp, to:
U.S. Bancorp
111 S.W. Fifth Avenue, T-31
Portland, Oregon 97204
Facsimile: (503) 275-3452
Attention: Gerry B. Cameron
with copies to:
U.S. Bancorp
111 S.W. Fifth Avenue, T-31
Portland, Oregon 97204
Facsimile: (503) 275-3452
Attention: Dwight V. Board
Miller, Nash, Wiener, Hager & Carlsen
111 S.W. Fifth Avenue
Portland, Oregon 97204
Facsimile: (503) 224-0155
Attention: John J. DeMott
and
(b) if to California Bancshares, Inc., to:
California Bancshares, Inc.
100 Park Place, Suite 140
San Ramon, California 94583
Facsimile: (510) 838 3990
Attention: Joseph P. Colmery
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd
New York, New York 10019
Facsimile: (212) 403-2000
Attention: Edward D. Herlihy
9.5. Interpretation. When a reference is made in
this Agreement to Sections, Exhibits, or Schedules, such refer-
ence shall be to a Section of or Exhibit or Schedule to this
Agreement unless otherwise indicated. The table of contents
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and headings contained in this Agreement are for reference pur-
poses only and shall not affect in any way the meaning or in-
terpretation of this Agreement. Whenever the words "include,"
"includes," and "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limita-
tion." No provision of this Agreement shall be construed to
require CBI, Bancorp, or any of their respective Subsidiaries
or affiliates to take any action that would violate any ap-
plicable law, rule, or regulation. Any exception to the repre-
sentations and warranties of CBI or Bancorp, respectively, con-
tained in the CBI Disclosure Schedule or Bancorp Disclosure
Schedule, as the case may be, shall be effective only as to the
particular sections of this Agreement specifically referenced
in such exception.
9.6. Counterparts. This Agreement may be executed
in counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts
have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not
sign the same counterpart.
9.7. Entire Agreement. This Agreement (including
the documents and the instruments referred to herein) consti-
tutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties
with respect to the subject matter hereof other than the CBI
Option Agreement and the Confidentiality Agreements.
9.8. Governing Law. This Agreement shall be gov-
erned and construed in accordance with the laws of the State of
Oregon, without regard to any applicable conflicts of law rules
thereof.
9.9 Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other juris-
diction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
9.10. Publicity. Except as otherwise required by
applicable law or the rules of the Nasdaq Stock Market, neither
Bancorp nor CBI shall, or shall permit any of its Subsidiaries
to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make
-54-<PAGE>
any public statement concerning, the transactions contemplated
by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld.
9.11. Assignment. Neither this Agreement nor any of
the rights, interests, or obligations shall be assigned by any
of the parties hereto (whether by operation of law or other-
wise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be bind-
ing upon, inure to the benefit of, and be enforceable by the
parties and their respective successors and assigns. Except as
otherwise specifically provided in Section 6.7(b) and Section
6.8 hereof, this Agreement (including the documents and instru-
ments referred to herein) is not intended to confer upon any
person other than the parties hereto any rights or remedies
hereunder.
IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed by its respective officers there-
unto duly authorized as of the date first above written.
U.S. BANCORP
/s/ John J. DeMott By /s/ Gerry B. Cameron
Attest: Title Chairman & CEO
CALIFORNIA BANCSHARES, INC.
/s/ Diane Mietzel By /s/ Joseph P. Colmery
Attest: Title President & CEO
-55-
Exhibit 3
STOCK OPTION AGREEMENT
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated February 12, 1996, be-
tween CALIFORNIA BANCSHARES, INC., a Delaware corporation ("Is-
suer"), and U.S. BANCORP, an Oregon corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an
Agreement and Plan of Merger dated February 11, 1996 (the
"Merger Agreement"); and
WHEREAS, as a condition to Grantee's entering into
the Merger Agreement and in consideration therefor, Issuer has
agreed to grant Grantee the Option (as hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements set forth herein and in the
Merger Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an uncondi-
tional, irrevocable option (the "Option") to purchase, subject
to the terms hereof, up to 2,002,076 fully paid and nonassess-
able shares of Issuer's Common Stock, $2.50 par value per share
("Common Stock"), at a price of $25.75 per share (the "Option
Price"); provided further that in no event shall the number of
shares of Common Stock for which this Option is exercisable
exceed 19.9 percent of the Issuer's issued and outstanding
shares of Common Stock. The number of shares of Common Stock
that may be received upon the exercise of the Option and the
Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Com-
mon Stock are issued or otherwise become outstanding after the
date of this Agreement (other than pursuant to this Agreement),
the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, it equals 19.9
percent of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or is-
sued pursuant to the Option. Nothing contained in this Section
1(b) or elsewhere in this Agreement shall be deemed to autho-
rize Issuer or Grantee to breach any provision of the Merger
Agreement.<PAGE>
2. (a) The Holder (as hereinafter defined) may
exercise the Option, in whole or in part, and from time to
time, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occur-
rence of an Exercise Termination Event (as hereinafter de-
fined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this
Section 2) within 90 days following such Subsequent Triggering
Event. Each of the following shall be an Exercise Termination
Event: (i) the Effective Time of the Merger; (ii) termination
of the Merger Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of
an Initial Triggering Event except a termination by Grantee
pursuant to Section 8.1(d) of the Merger Agreement (unless the
breach by Issuer giving rise to such right of termination is
non-volitional); (iii) the passage of 12 months after termina-
tion of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a termination
by Grantee pursuant to Section 8.1(d) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of ter-
mination is non-volitional) (provided that if an Initial Trig-
gering Event continues or occurs beyond such termination and
prior to the passage of such 12-month period, the Exercise Ter-
mination Event shall be 12 months from the expiration of the
Last Triggering Event but in no event more than 18 months after
such termination) or (iv) the third anniversary of the date
hereof. The "Last Triggering Event" shall mean the last Ini-
tial Triggering Event to expire. The term "Holder" shall mean
the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean
any of the following events or transactions occurring after the
date hereof:
(i) Issuer or any of its Subsidiaries
(each an "Issuer Subsidiary"), without having
received Grantee's prior written consent,
shall have entered into an agreement to engage
in an Acquisition Transaction (as hereinafter
defined) 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 Securities Exchange Act of
1934, as amended (the "1934 Act"), and the
rules and regulations thereunder) other than
Grantee or any of its Subsidiaries (each a
"Grantee Subsidiary") or the Board of Direc-
tors of Issuer shall have recommended that the
stockholders of Issuer approve or accept any
- 2 -<PAGE>
such Acquisition Transaction. For purposes of
this Agreement, "Acquisition Transaction"
shall mean (w) a merger or consolidation, or
any similar transaction, involving Issuer or
any Significant Subsidiary (as defined in Rule
1-02 of Regulation S-X promulgated by the Se-
curities and Exchange Commission (the "SEC"))
of Issuer, (x) a purchase, lease, or other
acquisition of all or a substantial portion of
the assets of Issuer or any Significant Sub-
sidiary of Issuer, (y) a purchase or other
acquisition (including by way of merger, con-
solidation, share exchange or otherwise) of
securities representing 10 percent or more of
the voting power of Issuer, or any Significant
Subsidiary of Issuer, or (z) any substantially
similar transaction; provided, however, that
in no event shall any (i) merger, consolida-
tion, or similar transaction involving Issuer
or any Significant Subsidiary in which the
voting securities of Issuer outstanding imme-
diately prior thereto continue to represent
(by either remaining outstanding or being con-
verted into the voting securities of the sur-
viving entity of any such transaction) at
least 65 percent of the combined voting power
of the voting securities of the Issuer or the
surviving entity outstanding immediately after
the consummation of such merger, consolida-
tion, or similar transaction, or (ii) any mer-
ger, consolidation, purchase, or similar
transaction involving only the Issuer and one
or more of its Subsidiaries or involving only
any two or more, of such Subsidiaries, be
deemed to be an Acquisition Transaction, pro-
vided any such transaction is not entered into
in violation of the terms of the Merger Agree-
ment;
(ii) Issuer or any Issuer Subsidiary,
without having received Grantee's prior writ-
ten consent, shall have authorized, recom-
mended, proposed, or publicly announced its
intention to authorize, recommend, or propose,
to engage in an Acquisition Transaction with
any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Is-
suer shall have publicly withdrawn or modi-
fied, or publicly announced its intent to
withdraw or modify, in any manner adverse to
- 3 -<PAGE>
Grantee, its recommendation that the stock-
holders of Issuer approve the transactions
contemplated by the Merger Agreement;
(iii) Any person other than Grantee, any
Grantee Subsidiary, or any Issuer Subsidiary
acting in a fiduciary capacity in the ordinary
course of its business shall have acquired
beneficial ownership or the right to acquire
beneficial ownership of 15 percent or more of
the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of
this Option Agreement having the meaning as-
signed thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereun-
der);
(iv) Any person other than Grantee or any
Grantee Subsidiary shall have made a bona fide
proposal to Issuer or its stockholders by pub-
lic announcement or written communication that
is or becomes the subject of public disclosure
to engage in an Acquisition Transaction;
(v) After an overture is made by a third
party to Issuer or its stockholders to engage
in an Acquisition Transaction, Issuer shall
have breached any covenant or obligation con-
tained in the Merger Agreement and such breach
(x) would entitle Grantee to terminate the
Merger Agreement and (y) shall not have been
cured prior to the Notice Date (as defined
below); or
(vi) Any person other than Grantee or any
Grantee Subsidiary, other than in connection
with a transaction to which Grantee has given
its prior written consent, shall have filed an
application or notice with the Federal Reserve
Board, or other federal or state bank regula-
tory authority, which application or notice
has been accepted for processing, for approval
to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall
mean either of the following events or transactions occurring
after the date hereof:
- 4 -<PAGE>
(i) The acquisition by any person of
beneficial ownership of 25 percent or more of
the then outstanding Common Stock; or
(ii) The occurrence of the Initial Trig-
gering Event described in clause (i) of sub-
section (b) of this Section 2, except that the
percentage referred to in clause (y) shall be
25 percent.
(d) Issuer shall notify Grantee promptly in writing
of the occurrence of any Initial Triggering Event or Subsequent
Triggering Event (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not
be a condition to the right of the Holder to exercise the Op-
tion.
(e) In the event the Holder is entitled to and
wishes to exercise the Option, it shall send to Issuer a writ-
ten notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided that if prior notification to or ap-
proval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder
shall promptly file the required notice or application for ap-
proval and shall expeditiously process the same and the period
of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notifica-
tion periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of
this Section 2, the Holder shall pay to Issuer the aggregate
purchase price for the shares of Common Stock purchased pursu-
ant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a
bank account shall not preclude the Holder from exercising the
Option.
(g) At such closing, simultaneously with the deliv-
ery of immediately available funds as provided in subsection
(f) of this Section 2, Issuer shall deliver to the Holder a
certificate or certificates representing the number of shares
of Common Stock purchased by the Holder and, if the Option
- 5 - <PAGE>
should be exercised in part only, a new Option evidencing the
rights of the Holder thereof to purchase the balance of the
shares purchasable hereunder, and the Holder shall deliver to
Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this
Agreement.
(h) Certificates for Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend
that shall read substantially as follows:
"The transfer of the shares represented
by this certificate is subject to certain
provisions of an agreement between the
registered holder hereof and Issuer and
to resale restrictions arising under the
Securities Act of 1933, as amended. A
copy of such agreement is on file at the
principal office of Issuer and will be
provided to the holder hereof without
charge upon receipt by Issuer of a writ-
ten request therefor."
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as amended
(the "1933 Act"), in the above legend shall be removed by de-
livery of substitute certificate(s) without such reference if
the Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the 1933 Act;
(ii) the reference to the provisions to this Agreement in the
above legend shall be removed by delivery of substitute certi-
ficate(s) without such reference if the shares have been sold
or transferred in compliance with the provisions of this Agree-
ment and under circumstances that do not require the retention
of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and
(ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by Holder to Issuer of the writ-
ten notice of exercise of the Option provided for under subsec-
tion (e) of this Section 2 and the tender of the applicable
purchase price in immediately available funds, the Holder shall
be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that
certificates representing such shares of Common Stock shall not
- 6 -<PAGE>
then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state, and
local taxes and other charges that may be payable in connection
with the preparation, issue, and delivery of stock certificates
under this Section 2 in the name of the Holder or its assignee,
transferee, or designee.
3. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized
but unissued or treasury shares of Common Stock so that the
Option may be exercised without additional authorization of
Common Stock after giving effect to all other options, war-
rants, convertible securities, and other rights to purchase
Common Stock; (ii) that it will not, by charter amendment or
through reorganization, consolidation, merger, dissolution, or
sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants,
stipulations, or conditions to be observed or performed here-
under by Issuer; (iii) promptly to take all action as may from
time to time be required (including (x) complying with all pre-
merger notification, reporting, and waiting period requirements
specified in 15 USC Section 18 and regulations promulgated
thereunder and (y) in the event, under the Bank Holding Company
Act of 1956, as amended (the "BHCA"), or the Change in Bank
Control Act of 1978, as amended, or any state banking law,
prior approval of or notice to the Federal Reserve Board or to
any state regulatory authority is necessary before the Option
may be exercised, cooperating fully with the Holder in prepar-
ing such applications or notices and providing such information
to the Federal Reserve Board or such state regulatory authority
as they may require) in order to permit the Holder to exercise
the Option and Issuer duly and effectively to issue shares of
Common Stock pursuant hereto, and (iv) promptly to take all
action provided herein to protect the rights of the Holder
against dilution.
4. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of the Holder,
upon presentation and surrender of this Agreement at the prin-
cipal office of Issuer, for other Agreements providing for Op-
tions of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same condi-
tion as are set forth herein, in the aggregate the same number
of shares of Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any Stock Op-
tion Agreements and related Options for which this Agreement
(and the Option granted hereby) may be exchanged. Upon receipt
by Issuer of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of this Agreement, and
- 7 -<PAGE>
(in the case of loss, theft, or destruction) of reasonably sat-
isfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and de-
liver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not
the Agreement so lost, stolen, destroyed, or mutilated shall at
any time be enforceable by anyone.
5. In addition to the adjustment in the number of
shares of Common Stock that are purchasable upon exercise of
the Option pursuant to Section 1 of this Agreement, the number
of shares of Common Stock purchasable upon the exercise of the
Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of
any change in, or distributions in respect of, the Common Stock
by reason of stock dividends, split-ups, mergers, recapitaliza-
tions, combinations, subdivisions, conversions, exchanges of
shares, distributions on or in respect of the Common Stock that
would be prohibited under be terms of the Merger Agreement, or
the like, the type and number of shares of Common Stock pur-
chasable upon exercise hereof and the Option Price shall be
appropriately adjusted in such manner as shall fully preserve
the economic benefits provided hereunder and proper provision
shall be made in any agreement governing any such transaction
to provide for such proper adjustment and the full satisfaction
of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering
Event that occurs prior to an Exercise Termination Event, Is-
suer shall, at the request of Grantee delivered within 90 days
of such Subsequent Triggering Event (whether on its own behalf
or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file, and keep current a shelf reg-
istration statement under the 1933 Act covering this Option and
any shares issued and issuable pursuant to this Option and
shall use its reasonable best efforts to cause such registra-
tion statement to become effective and remain current in order
to permit the sale or other disposition of this Option and any
shares of Common Stock issued upon total or partial exercise of
this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its reason-
able best efforts to cause such registration statement first to
become effective and then to remain effective for such period
not in excess of 180 days from the date such registration
statement first becomes effective or such shorter time as may
be reasonably necessary to effect such sales or other disposi-
tions. Grantee shall have the right to demand two such regis-
trations. The foregoing notwithstanding, if, at the time of
- 8 -<PAGE>
any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with re-
spect to an underwritten public offering of shares of Common
Stock, and if in the good faith judgment of the managing under-
writer or managing underwriters, or, if none, the sole under-
writer or underwriters, of such offering the inclusion of the
Holder's Option or Option Shares would interfere with the suc-
cessful marketing of the shares of Common Stock offered by Is-
suer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction
the number of Option Shares to be included in such offering for
the account of the Holder shall constitute at least 25 percent
of the total number of shares to be sold by the Holder and Is-
suer in the aggregate; and provided further, however, that if
such reduction occurs, then the Issuer shall file a registra-
tion statement for the balance as promptly as practical and no
reduction shall thereafter occur. Each such Holder shall pro-
vide all information reasonably requested by Issuer for inclu-
sion in any registration statement to be filed hereunder. If
requested by any such Holder in connection with such registra-
tion, Issuer shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties,
indemnities, and other agreements customarily included in such
underwriting agreements for the Issuer. Upon receiving any
request under this Section 6 from any Holder, Issuer agrees to
send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each
case by promptly mailing the same, postage prepaid, to the ad-
dress of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in
no event shall Issuer be obligated to effect more than two reg-
istrations pursuant to this Section 6 by reason of the fact
that there shall be more than one Grantee as a result of any
assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a
Repurchase Event (as defined below), (i) following a request of
the Holder, delivered prior to an Exercise Termination Event,
Issuer (or any successor thereto) shall repurchase the Option
from the Holder at a price (the "Option Repurchase Price")
equal to the amount by which (A) the market/offer price (as
defined below) exceeds (B) the Option Price, multiplied by the
number of shares for which this Option may then be exercised
and (ii) at the request of the owner of Option Shares from time
to time (the "Owner"), delivered within 90 days of such occur-
rence (or such later period as provided in Section 10), Issuer
shall repurchase such number of the Option Shares from the
Owner as the Owner shall designate at a price (the "Option
- 9 -<PAGE>
Share Repurchase Price") equal to the market/offer price multi-
plied by the number of Option Shares so designated. The term
"market/offer price" shall mean the highest of the following
amounts with respect to the six-month period immediately pre-
ceding the date the Holder gives notice of the required repur-
chase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be: (i) the price
per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Com-
mon Stock to be paid by any third party pursuant to an agree-
ment with Issuer, (iii) the highest closing price for shares of
Common Stock, or (iv) in the event of a sale of all or a sub-
stantial portion of Issuer's assets, the sum of the price paid
in such sale for such assets and the current market value of
the remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or
the Owner, as the case may be, divided by the number of shares
of Common Stock of Issuer outstanding at the time of such sale.
In determining the market/offer price, the value of consider-
ation other than cash shall be determined by a nationally rec-
ognized investment banking firm selected by the Holder or
Owner, as the case may be, and reasonably acceptable, to Is-
suer. Notwithstanding the foregoing, if the same person who
has participated in a Triggering Event has entered, or after
such Triggering Event has occurred enters, into any agreement
or understanding with Grantee relating to Grantee's rights un-
der this Option or with respect to the Option Shares or di-
rectly or indirectly relating to Issuer, Grantee shall, not-
withstanding the terms of such agreement or understanding, at
any time upon the occurrence of a Subsequent Triggering Event
of the type set forth in Section 3(d)(i) without Issuer's ap-
proval, recommendation or consent, promptly request that Issuer
repurchase the Option and any Option Shares held by Grantee as
provided in this Section 8 and Issuer shall do so.
(b) The Holder and the Owner, as the case may be,
may exercise its right to require Issuer to repurchase the Op-
tion and any Option Shares pursuant to this Section 7 by sur-
rendering for such purpose to Issuer, at its principal office,
a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to
require Issuer to repurchase this Option and/or the Option
Shares in accordance with the provisions of this Section 7.
Within the latter to occur of (x) five business days after the
surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating
thereto and (y) the time that is immediately prior to the oc-
currence of a Repurchase Event, Issuer shall deliver or cause
to be delivered to Holder the Option Repurchase Price, and/or
- 10 -<PAGE>
to the Owner the Option Share Repurchase Price therefor or the
portion thereof that Issuer is not then prohibited under ap-
plicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option and/
or the Option Shares in full, Issuer shall immediately so no-
tify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or
the Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that
it is no longer prohibited from delivering, within five busi-
ness days after the date on which Issuer is no longer so pro-
hibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of
this Section 7 is prohibited under applicable law or regulation
from delivering to the Holder and/or the Owner, as appropriate,
the Option Repurchase Price and the Option Share Repurchase
Price, respectively, in full (and Issuer hereby undertakes to
use its best efforts to obtain all required regulatory and le-
gal approvals and file any required notices as promptly as
practicable in order to accomplish such repurchase), the Holder
or Owner may revoke its notice of repurchase of the Option or
the Option Shares either in whole or to the extent of the pro-
hibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate,
that portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a
new Stock Option Agreement evidencing the right of the Holder
to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time
of delivery of the notice of repurchase by a fraction, the nu-
merator of which is the Option Repurchase Price less the por-
tion thereof theretofore delivered to the Holder and the de-
nominator of which is the Option Repurchase Price, or (B) to
the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase
Event shall be deemed to have occurred (i) upon the consumma-
tion of any merger, consolidation, or similar transaction in-
volving Issuer or any purchase, lease, or other acquisition of
all or a substantial portion of the assets of Issuer, other
than any such transaction which would not constitute an Acqui-
sition Transaction pursuant to the proviso to Section 2(b)(i)
hereof or (ii) upon the acquisition by any person of beneficial
ownership of 50 percent or more of the then outstanding shares
of Common Stock, provided that no such event shall constitute a
- 11 -<PAGE>
Repurchase Event unless a Subsequent Triggering Event shall
have occurred prior to an Exercise Termination Event. The par-
ties hereto agree that Issuer's obligations to repurchase the
Option or Option Shares under this Section 7 shall not termi-
nate upon the occurrence of an Exercise Termination Event un-
less no Subsequent Triggering Event shall have occurred prior
to the occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Ter-
mination Event, Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee
or one of its Subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiar-
ies, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the
then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50
percent of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or other-
wise transfer all or substantially all of its assets to any
person, other than Grantee or one of its Subsidiaries, then,
and in each such case, the agreement governing such transaction
shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged
for, an option (the "Substitute Option"), at the election of
the Holder, of either (x) the Acquiring Corporation (as herein-
after defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i)
the continuing or surviving corporation of a con-
solidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is
the continuing or surviving person, and (iii) the
transferee of all or substantially all of Issuer's
assets.
(2) "Substitute Common Stock" shall mean the
common stock issued by the Issuer of the Substitute
Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the market/
offer price, as defined in Section 7.
- 12 -<PAGE>
(4) "Average Price" shall mean the average
closing price of a share of the Substitute Common
Stock for the one year immediately preceding the
consolidation, merger, or sale in question, but in
no event higher than the closing price of the
shares of Substitute Common Stock on the date pre-
ceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Op-
tion, the Average Price shall be computed with re-
spect to a share of common stock issued by the per-
son merging into Issuer or by any company which
controls or is controlled by such person, as the
Holder may elect.
(c) The Substitute Option shall have the same terms
as the Option, provided, that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option,
such terms shall be as similar as possible and in no event less
advantageous to the Holder. The issuer of the Substitute Op-
tion shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form
as this Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for
such number of shares of Substitute Common Stock as is equal to
the Assigned Value multiplied by the number of shares of Common
Stock for which the Option is then exercisable, divided by the
Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the
Option Price multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock for which the
Option is then exercisable and the denominator of which shall
be the number of shares of Substitute Common Stock for which
the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall be Substitute Option be exercisable for more
than 19.9 percent of the shares of Substitute Common Stock out-
standing prior to the exercise of the Substitute Option. In
the event that the Substitute Option would be exercisable for
more than 19.9 percent of the shares of Substitute Common Stock
outstanding prior to exercise but for this clause (c), the is-
suer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i)
the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Sub-
stitute Option after giving effect to the limitation in this
clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the
- 13 -<PAGE>
Holder or the Owner, as the case may be, and reasonably accept-
able to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction de-
scribed in subsection (a) of this Section 8 unless the Acquir-
ing Corporation and any person that controls the Acquiring Cor-
poration assume in writing all the obligations of Issuer here-
under.
9. (a) At the request of the holder of the Substi-
tute Option (the "Substitute Option Holder"), the issuer of the
Substitute Option (the "Substitute Option Issuer") shall repur-
chase the Substitute Option from the Substitute Option Holder
at a price (the "Substitute Option Repurchase Price") equal to
the amount by which (i) the Highest Closing Price (as hereinaf-
ter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common
Stock for which the Substitute Option may then be exercised,
and at the request of the owner (the "Substitute Share Owner")
of shares of Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute
Shares at a price (the "Substitute Share Repurchase Price")
equal to the Highest Closing Price multiplied by the number of
Substitute Shares so designated. The term "Highest Closing
Price" shall mean the highest closing price for shares of Sub-
stitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of
the required repurchase of the Substitute Option or the Substi-
tute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute
Share Owner, as the case may be, may exercise its respective
rights to require the Substitute Option Issuer to repurchase
the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substi-
tute Option Issuer, at its principal office, the agreement for
such Substitute Option (or, in the absence of such an agree-
ment, a copy of this Agreement) and certificates for Substitute
Shares accompanied by a written notice or notices stating that
the Substitute Option Holder or the Substitute Share Owner, as
the case may be, elects to require the Substitute Option Issuer
to repurchase the Substitute Option and/or the Substitute
Shares in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or cer-
tificates representing Substitute Shares and the receipt of
such notice or notices relating thereto, the Substitute Option
Issuer shall deliver or cause to be delivered to the Substitute
Option Holder the Substitute Option Repurchase Price and/or to
- 14 -<PAGE>
the Substitute Share Owner the Substitute Share Repurchase
Price therefor or the portion thereof which the Substitute Op-
tion Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer
is prohibited under applicable law or regulation from repur-
chasing the Substitute Option and/or the Substitute Shares in
part or in full, the Substitute Option Issuer shall immediately
so notify the Substitute Option Holder and/or the Substitute
Share Owner and thereafter deliver or cause to be delivered,
from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Sub-
stitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days
after the date on which the Substitute Option Issuer is no
longer so prohibited; provided, however, that if the Substitute
Option Issuer is at any time after delivery of a notice of re-
purchase pursuant to subsection (b) of this Section 9 prohib-
ited under applicable law or regulation from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and
the Substitute Option Issuer shall use its best efforts to re-
ceive all required regulatory and legal approvals as promptly
as practicable in order to accomplish such repurchase), the
Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Sub-
stitute Shares either in whole or to the extent of the prohibi-
tion, whereupon, in the latter case, the Substitute Option Is-
suer shall promptly (i) deliver to the Substitute Option Holder
or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Re-
purchase Price that the Substitute Option Issuer is not prohib-
ited from delivering; and (ii) deliver, as appropriate, either
(A) to the Substitute Option Holder, a new Substitute Option
evidencing the right of the Substitute Option Holder to pur-
chase that number of shares of the Substitute Common Stock ob-
tained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Substitute Option
Repurchase Price less the portion thereof theretofore delivered
to the Substitute Option Holder and the denominator of which is
the Substitute Option Repurchase Price, or (B) to the Substi-
tute Share Owner, a certificate for the Substitute Option
Shares it is then so prohibited from repurchasing.
10. The 90-day period for exercise of certain rights
under Sections 2, 6, 7, and 13 shall be extended: (i) to the
- 15 -<PAGE>
extent necessary to obtain all regulatory approvals for the
exercise of such rights and for the expiration of all statutory
waiting periods; and (ii) to the extent necessary to avoid li-
ability under Section 16(b) of the 1934 Act by reason of such
exercise.
11. Issuer hereby represents and warrants to Grantee
as follows:
(a) Issuer has full corporate power and author-
ity to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions con-
templated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agree-
ment has been duly and validly executed and delivered by Is-
suer.
(b) Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and
at all times from the date hereof through the termination of
this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of
Common Stock at any time and from time to time issuable hereun-
der, and all such shares, upon issuance pursuant hereto, will
be duly authorized, validly issued, fully paid, nonassessable,
and will be delivered free and clear of all claims, liens, en-
cumbrances, and security interests and not subject to any pre-
emptive rights.
12. Grantee hereby represents and warrants to Issuer
that:
(a) Grantee has all requisite corporate power
and authority to enter into this Agreement and, subject to any
approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions con-
templated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of
Common Stock or other securities acquired by Grantee upon exer-
cise of the Option will not be, acquired with a view to the
- 16 -<PAGE>
public distribution thereof and will not be transferred or oth-
erwise disposed of except in a transaction registered or exempt
from registration under the Securities Act.
13. Neither of the parties hereto may assign any of
its rights or obligations under this Option Agreement or the
Option created hereunder to any other person, without the ex-
press written consent of the other party, except that in the
event a Subsequent Triggering Event shall have occurred prior
to an Exercise Termination Event, Grantee, subject to the ex-
press provisions hereof, may assign in whole or in part its
rights and obligations hereunder within 90 days following such
Subsequent Triggering Event (or such later period as provided
in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board approves
an application by Grantee under the BHCA to acquire the shares
of Common Stock subject to the Option, Grantee may not assign
its rights under the Option except in (i) a widely dispersed
public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2 percent of
the voting shares of Issuer, (iii) an assignment to a single
party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Re-
serve Board.
14. Each of Grantee and Issuer will use its best
efforts to make all filings with, and to obtain consents of,
all third parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agree-
ment, including without limitation making application to list
the shares of Common Stock issuable hereunder on the NASDAQ
Stock Market National Market System upon official notice of
issuance and applying to the Federal Reserve Board under the
BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking au-
thorities for approval to acquire the shares of Common Stock
issuable hereunder until such time, if ever, as it deems ap-
propriate to do so.
15. Notwithstanding anything to the contrary herein,
in the event that the Holder or Owner or any Related Person (as
hereinafter defined) thereof is a person making an offer or
proposal to engage in an Acquisition Transaction (other than
the transaction contemplated by the Merger Agreement), then (i)
in the case of a Holder or any Related Person thereof, the Op-
tion held by it shall immediately terminate and be of no fur-
ther force or effect, and (ii) in the case of an Owner or any
Related Person thereof, the Option Shares held by it shall be
immediately repurchasable by Issuer at the Option Price. A
- 17 -<PAGE>
"Related Person" of a Holder or Owner means any "affiliate" (as
defined in Rule 12b-2 of the rules and regulations under the
1934 Act) of the Holder or Owner and any person that is the
beneficial owner of 25% or more of the voting power of the
Holder or Owner, as the case may be.
16. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by
either party hereto and that the obligations of the parties
hereto shall be enforceable by either party hereto through in-
junctive or other equitable relief.
17. If any term, provision, covenant, or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be in-
valid, void, or unenforceable, the remainder of the terms, pro-
visions, and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in
no way be affected, impaired, or invalidated. If for any rea-
son such court or regulatory agency determines that the Holder
is not permitted to acquire, or Issuer is not permitted to re-
purchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pur-
suant to Section 1(b) or 5 hereof), it is the express intention
of Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands, and
other communications hereunder shall be deemed to have been
duly given when delivered in person, by cable, telegram, tele-
copy, or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses
of the parties set forth in the Merger Agreement.
19. This Agreement shall be governed by and con-
strued in accordance with the laws of the State of Oregon, re-
gardless of the laws hat might otherwise govern under appli-
cable principles of conflicts of laws thereof.
20. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
21. Except as otherwise expressly provided herein,
each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and ex-
penses of its own financial consultants, investment bankers,
accountants, and counsel.
- 18 -<PAGE>
22. Except as otherwise expressly provided herein or
in the Merger Agreement, this Agreement contains the entire
agreement between the parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The
terms and conditions of this Agreement shall inure to the ben-
efit of and be binding upon the parties hereto and their re-
spective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective suc-
cessors except as assigns, any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as
expressly provided herein.
23. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the
Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the date first above writ-
ten.
CALIFORNIA BANCSHARES, INC.
Attest: /s/ Diane Mietzel By: /s/ Joseph P. Colmery
Title: President & CEO
U.S. BANCORP
Attest: /s/ John J. DeMott By: /s/ Gerry B. Cameron
Title: Chairman & CEO
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