<PAGE> 1
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 FEBRUARY 26, 1997
CU BANCORP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 0-11008 95-3657044
(STATE OR OTHER COMMISSION IRS TAX
JURISDICTION OF FILE NUMBER IDENTIFICATION NO.
INCORPORATION)
16030 Ventura Boulevard, Encino, California 91436
(Address of Principal Executive Offices) (Zip Code)
N/A
(former name or former address if changed since last report)
Registrant's telephone number, including area code (818) 907-9122
1
<PAGE> 2
Item 1. Changes In Control of Registrant.
Not Applicable
Item 2. Acquisition or Disposition of Assets.
Not Applicable
Item 3. Bankruptcy or Receivership
Not Applicable
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable
Item 5. Other Events
a)
On February 24, 1997, the Registrant and Bancorp Hawaii, Inc., entered into an
Agreement and Plan of Reorganization (the "Merger Agreement"), providing for the
merger of the Registrant, CU Bancorp with and into Bancorp Hawaii, Inc., ("BHI")
with BHI to be the surviving company. The transaction is subject to, among other
customary conditions, regulatory approval and approval of the shareholders of
Registrant. CU Bancorp is the parent of California United Bank which will
become a subsidiary of BHI as a result of the transaction.
The transaction is intended to be tax-free to CU Bancorp shareholders with
respect to the BHI stock received. In the merger CU Bancorp common stock ("CU
Stock") will be converted into rights to receive $15.34 per share in cash and/or
BHI common stock ("BHI Stock"), as more fully described below. Pursuant to an
election procedure set forth in the Merger Agreement shareholders shall have the
ability to elect cash or stock or some combination thereof. At least 60% and not
more than 80% of the CU Stock must be converted into BHI Stock.
Pursuant to the Merger Agreement, each outstanding share of CU Stock (other than
dissenting shares and CU Stock held by BHI under certain circumstances) shall be
converted into the right to receive, at the election of the holder thereof,
either (i) a fraction of a share of BHI Stock equal to the quotient (the
"Exchange Ratio") of: (a) $15.34 divided by the (b) the average price of BHI
Stock over a 20 day trading period prior to the merger and ending three
trading days before the merger; provided in the event the price so calculated
shall be more than $51.03125, the Exchange Ratio shall be .3006
2
<PAGE> 3
and in the event that the price so calculated shall be less than $37.71875, the
Exchange Ratio shall be .4067; or (ii) cash in the amount of $15.34.
To the extent that elections for BHI Stock or cash are made for more or less
than the maximums/minimums set forth above, shares of BHI Stock and the cash
consideration will be distributed on a pro rata basis, except that holders of
less than 100 shares of CU Stock may be required to accept cash only.
The transaction is terminable upon a number of events more completely described
in the Merger Agreement. Among those conditions, the Agreement is terminable by
CU Bancorp or BHI if the Closing Price of BHI Stock for any period of ten
consecutive trading days prior to the merger is less than $35.50. It is a
condition to completion of the transaction that California United Bank's "core"
deposits (total deposits less certain Certificates of Deposit) do not decline to
less than $605 Million.
The foregoing description of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, which is attached hereto as Exhibit 2.1
and incorporated herein by reference.
Additional Information concerning the Merger Agreement and the transactions
contemplated thereby is contained in the press release dated February 24, 1997,
attached hereto as Exhibit 99.2 and incorporated herein by reference.
b)
In connection with the Merger Agreement, the Registrant and BHI have entered
into a Stock Option Agreement dated as of February 24, 1997, pursuant to which
the Registrant has granted BHI the right to purchase up to 19.9% of CU Bancorp's
outstanding stock at a purchase price of $13 per share. This option is
exercisable upon the occurrence of certain events described therein relating
generally to the acquisition of the Registrant by a third party.
The foregoing description is qualified in its entirety by reference to the Stock
Option Agreement a copy of which is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
c)
It is a condition to BHI's obligations under the Merger Agreement, that the
directors of the Registrant shall have delivered to BHI Shareholder's Agreements
acceptable to BHI in substantially the form of Exhibit 99.3 attached hereto and
made a part hereof.
3
<PAGE> 4
The statements in the preceding paragraph constitute forward-looking statements
(within the meaning of the Private Securities Litigation Reform Act of 1995).
These and any other forward-looking statements made by the Registrant as to the
transaction involve significant risks and uncertainties. Actual results may
differ materially from the anticipated results or other expectations expressed
in any such forward-looking statements. Factors that might cause such
differences include general economic conditions, legislation or regulatory
changes that adversely affect the businesses of the Registrant or BHI,
significant increase of competitive pressure among depository institutions,
market or other factors which could adversely impact the market price of BHI
Stock or CU Stock, or changes in economic, marketing or other factors which
could negatively affect the Registrant's deposit base. Further information on
other factors which could affect the future financial results of the Registrant
is included in other filings by the Registrant with the Securities and Exchange
Commission.
Item 7. Financial Statements and Exhibits
(a) Financial Statements
Not Applicable
(b) Pro Forma Financial Statements
Not Applicable
(c) Exhibits
2.1 Agreement and Plan of Reorganization dated February 24, 1997
99.1 Stock Option Agreement dated February 24, 1997
99.2 Press Release Dated February 24, 1997.
99.3 Form of Shareholder's Agreement
Item 8. Change in Fiscal Year.
Not Applicable
Item 9. Sales of Equity Securities Pursuant to Regulation S.
Not Applicable
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 26, 1997
CU BANCORP
/s/ ANITA Y. WOLMAN
--------------------------------------------------------
Anita Y. Wolman, Senior Vice President and
General Counsel
5
<PAGE> 6
EXHIBIT INDEX TO 8-K
EXHIBIT NO. EXHIBIT
2.1 Agreement and Plan of Reorganization dated February 24, 1997
99.1 Stock Option Agreement dated February 24, 1997
99.2 Press Release dated February 24, 1997
99.3 Form of Shareholder's Agreement
6
<PAGE> 1
EXHIBIT 2.1
AGREEMENT
AND
PLAN OF REORGANIZATION
BANCORP HAWAII, INC.
CU BANCORP
February 24, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II THE MERGER AND RELATED MATTERS . . . . . . . . . . . . . . . . 9
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Conversion of CU Stock . . . . . . . . . . . . . . . . . 10
2.3 Election and Proration Procedures . . . . . . . . . . . . 11
2.4 Adjustments for Dilution and Other Matters . . . . . . . 14
2.5 Conversion of Dissenting Shares . . . . . . . . . . . . . 15
2.6 Exchange Procedures . . . . . . . . . . . . . . . . . . . 15
2.7 Voting and Dividends . . . . . . . . . . . . . . . . . . 16
2.8 No Liability . . . . . . . . . . . . . . . . . . . . . . 17
2.9 Withholding Rights . . . . . . . . . . . . . . . . . . . 17
2.10 Effects of Merger . . . . . . . . . . . . . . . . . . . . 17
2.11 Articles of Incorporation and Bylaws of Surviving Company 17
2.12 Directors and Officers of Surviving Company . . . . . . . 17
2.13 Options. . . . . . . . . . . . . . . . . . . . . . . . . 17
2.14 CU Stock Option Agreement . . . . . . . . . . . . . . . . 19
ARTICLE III THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
i.
<PAGE> 3
<TABLE>
<S> <C> <C>
3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.2 Filings . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.3 Documents to be Delivered . . . . . . . . . . . . . . . . 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CU . . . . . . . . . . . . . 20
4.1 Incorporation, Standing and Power . . . . . . . . . . . . 20
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . 21
4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Financial Statements . . . . . . . . . . . . . . . . . . 22
4.5 SEC/Regulatory Filings . . . . . . . . . . . . . . . . . 22
4.6 Authority of CU . . . . . . . . . . . . . . . . . . . . . 22
4.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 23
4.8 Title to Assets . . . . . . . . . . . . . . . . . . . . . 24
4.9 Real Estate . . . . . . . . . . . . . . . . . . . . . . . 24
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . 24
4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.12 Compliance with Laws and Regulations . . . . . . . . . . 26
4.13 Performance of Obligations . . . . . . . . . . . . . . . 26
4.14 Employees . . . . . . . . . . . . . . . . . . . . . . . . 27
4.15 Brokers and Finders . . . . . . . . . . . . . . . . . . . 28
4.16 Material Contracts . . . . . . . . . . . . . . . . . . . 28
4.17 Absence of Material Change . . . . . . . . . . . . . . . 29
</TABLE>
ii.
<PAGE> 4
<TABLE>
<S> <C> <C>
4.18 Licenses and Permits . . . . . . . . . . . . . . . . . . 30
4.19 No Material Liabilities; Environmental . . . . . . . . . 30
4.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . 32
4.21 Corporate Records . . . . . . . . . . . . . . . . . . . . 35
4.22 Offices and ATMs . . . . . . . . . . . . . . . . . . . . 35
4.23 Operating Losses . . . . . . . . . . . . . . . . . . . . 35
4.24 Loan Portfolio . . . . . . . . . . . . . . . . . . . . . 36
4.25 Power of Attorney . . . . . . . . . . . . . . . . . . . . 36
4.26 Disclosure Documents, Reports and Applications . . . . . 36
4.27 Accuracy of Information Furnished . . . . . . . . . . . . 37
4.28 Loan Servicing Portfolio . . . . . . . . . . . . . . . . 37
4.29 Certain Interests . . . . . . . . . . . . . . . . . . . . 37
4.30 Investment Securities . . . . . . . . . . . . . . . . . . 37
4.31 Community Reinvestment Act . . . . . . . . . . . . . . . 38
4.32 Knowledge as to Conditions . . . . . . . . . . . . . . . 38
4.33 Allowance for Possible Loan Losses . . . . . . . . . . . 38
4.34 Listing of Loans . . . . . . . . . . . . . . . . . . . . 38
4.35 Derivative Transactions . . . . . . . . . . . . . . . . . 38
4.36 Trust Administration . . . . . . . . . . . . . . . . . . 38
4.37 Accounting Records . . . . . . . . . . . . . . . . . . . 39
</TABLE>
iii.
<PAGE> 5
<TABLE>
<S> <C>
4.38 Intellectual Property Rights . . . . . . . . . . . . . . 39
4.39 1996 Financial Statements . . . . . . . . . . . . . . . . 40
4.40 Pooling of Interests . . . . . . . . . . . . . . . . . . 40
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BHI . . . . . . . . . . . . . 40
5.1 Incorporation, Standing and Power . . . . . . . . . . . . 40
5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . 40
5.3 Financial Statements . . . . . . . . . . . . . . . . . . 40
5.4 SEC/Regulatory Filings . . . . . . . . . . . . . . . . . 41
5.5 Authority of BHI . . . . . . . . . . . . . . . . . . . . 41
5.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . 42
5.7 Compliance with Laws and Regulations . . . . . . . . . . 42
5.8 Brokers and Finders . . . . . . . . . . . . . . . . . . . 43
5.9 Absence of Material Change . . . . . . . . . . . . . . . 43
5.10 Disclosure Documents, Reports and Applications . . . . . 43
5.11 Accuracy of Information Furnished . . . . . . . . . . . . 44
5.12 Capital Stock . . . . . . . . . . . . . . . . . . . . . . 44
5.13 Knowledge as to Conditions . . . . . . . . . . . . . . . 44
ARTICLE VI COVENANTS OF CUPENDING EFFECTIVE TIME OF THE MERGERS . . . . . 44
6.1 Limitation on CU's and CU Bank's Conduct Prior
to Effective Time . . . . . . . . . . . . . . . . . . . . 44
6.2 No Solicitation, etc. . . . . . . . . . . . . . . . . . . 47
6.3 Affirmative Conduct of CU and CU Bank Prior
to Effective Time . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
iv.
<PAGE> 6
<TABLE>
<S> <C> <C>
6.4 Access to Information . . . . . . . . . . . . . . . . . . 49
6.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . 50
6.6 CU Shareholders' Meeting . . . . . . . . . . . . . . . . 50
6.7 D&O Coverage . . . . . . . . . . . . . . . . . . . . . . 51
6.8 Certain Loans and Other Extensions of Credit . . . . . . 51
6.9 Termination of CU Stock Plan . . . . . . . . . . . . . . 51
6.10 Coordination of Dividends . . . . . . . . . . . . . . . . 52
6.11 Certain Reserves . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VII COVENANTS OF BHI . . . . . . . . . . . . . . . . . . . . . . . 52
Limitation on BHI's Conduct Prior to Effective Time . . . 52
7.2 Affirmative Conduct of BHI Prior to Effective Time . . . 53
7.3 Access to Information . . . . . . . . . . . . . . . . . . 53
7.4 Notices; Reports . . . . . . . . . . . . . . . . . . . . 53
7.5 BHI Option Plan Amendment . . . . . . . . . . . . . . . . 54
ARTICLE VIII ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . 54
8.1 Regulatory Matters . . . . . . . . . . . . . . . . . . . 54
8.2 Legal Conditions to Merger . . . . . . . . . . . . . . . 55
8.3 Customer Calls . . . . . . . . . . . . . . . . . . . . . 56
8.4 Certain Filings, Consents and Arrangements . . . . . . . 56
8.5 Additional Agreements; Parties . . . . . . . . . . . . . 56
</TABLE>
v.
<PAGE> 7
<TABLE>
<S> <C> <C>
8.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . 57
8.7 Pre-Closing Adjustments . . . . . . . . . . . . . . . . . 57
8.8 Director Resignations . . . . . . . . . . . . . . . . . . 57
8.9 [Reserved.] . . . . . . . . . . . . . . . . . . . . . . . 57
8.10 [Reserved.] . . . . . . . . . . . . . . . . . . . . . . . 57
8.11 Notices and Communications . . . . . . . . . . . . . . . 58
8.12 Insurance Policies Assignment . . . . . . . . . . . . . . 58
8.13 Affiliates and Five Percent Shareholders . . . . . . . . 58
8.14 Letters of CU's Accountants . . . . . . . . . . . . . . . 58
8.15 Shareholders' Agreement . . . . . . . . . . . . . . . . . 58
8.16 Cooperation of CU Bank . . . . . . . . . . . . . . . . . 59
ARTICLE IX CONDITIONS PRECEDENT TO THE MERGER . . . . . . . . . . . . . . 59
9.1 Shareholder Approval . . . . . . . . . . . . . . . . . . 59
9.2 No Judgments or Orders . . . . . . . . . . . . . . . . . 59
9.3 Regulatory Approvals . . . . . . . . . . . . . . . . . . 59
9.4 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . 59
9.5 S-4 and Proxy Statement . . . . . . . . . . . . . . . . . 60
9.6 NYSE Listing . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE X CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CU . . . . . . . . . 60
10.1 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . 60
10.2 Representations and Warranties; Performance of Covenants 60
</TABLE>
vi.
<PAGE> 8
<TABLE>
<S> <C> <C>
10.3 Absence of Certain Changes . . . . . . . . . . . . . . . 60
10.4 Officers' Certificate . . . . . . . . . . . . . . . . . . 61
ARTICLE XI CONDITIONS PRECEDENT TO OBLIGATIONS OF BHI . . . . . . . . . . 61
11.1 Legal Opinion . . . . . . . . . . . . . . . . . . . . . . 61
11.2 Representations and Warranties; Performance of Covenants 61
11.3 Authorization of Mergers . . . . . . . . . . . . . . . . 61
11.4 Absence of Regulatory Conditions . . . . . . . . . . . . 61
11.5 Third Party Consents . . . . . . . . . . . . . . . . . . 62
11.6 Absence of Certain Changes . . . . . . . . . . . . . . . 62
11.7 Officers' Certificate . . . . . . . . . . . . . . . . . . 62
11.8 Blue Sky Matters . . . . . . . . . . . . . . . . . . . . 62
11.9 Affiliate Agreements . . . . . . . . . . . . . . . . . . 62
11.10 Shareholder's Agreements . . . . . . . . . . . . . . . . 62
11.11 Comfort Letters . . . . . . . . . . . . . . . . . . . . . 62
11.12 CU Stock Option Agreement . . . . . . . . . . . . . . . . 62
11.13 Resignations . . . . . . . . . . . . . . . . . . . . . . 62
11.14 Payment of Expenses . . . . . . . . . . . . . . . . . . . 63
11.15 Dissenters . . . . . . . . . . . . . . . . . . . . . . . 63
11.16 Deposits . . . . . . . . . . . . . . . . . . . . . . . . 63
11.17 Audit Opinion . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
vii.
<PAGE> 9
<TABLE>
<S> <C> <C>
ARTICLE XII EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . 63
12.1 Employee Benefits . . . . . . . . . . . . . . . . . . . . 63
12.2 Prior Service Credit . . . . . . . . . . . . . . . . . . 64
12.3 Management Retention and Other Agreements . . . . . . . . 64
12.4 Grant of BHI Options . . . . . . . . . . . . . . . . . . 64
12.5 Payment of Accrued Bonuses . . . . . . . . . . . . . . . 64
12.6 Indemnification of Directors and Officers . . . . . . . . 65
ARTICLE XIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 65
13.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 65
13.2 Effect of Termination . . . . . . . . . . . . . . . . . . 66
ARTICLE XIV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 67
14.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 67
14.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 67
14.3 Successors and Assigns . . . . . . . . . . . . . . . . . 68
14.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . 68
14.5 Effect of Representations and Warranties . . . . . . . . 68
14.6 Third Parties . . . . . . . . . . . . . . . . . . . . . . 68
14.7 Schedules; Exhibits; Integration . . . . . . . . . . . . 68
14.8 Knowledge; Materialty. . . . . . . . . . . . . . . . . . 69
14.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . 69
14.10 Schedules . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
viii.
<PAGE> 10
<TABLE>
<S> <C> <C>
14.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . 69
14.12 Severability . . . . . . . . . . . . . . . . . . . . . . 69
14.13 Waiver and Modification . . . . . . . . . . . . . . . . . 69
14.14 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . 70
14.15 Jury Waiver . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
ix.
<PAGE> 11
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is
made and entered into as of the 24th day of February, 1997, by and between
Bancorp Hawaii, Inc., a Hawaii corporation ("BHI"), and CU Bancorp, a
California corporation ("CU").
R E C I T A L S:
WHEREAS, BHI and CU desire to effect a merger (the "Merger")
in accordance with the terms of this Agreement.
WHEREAS, the respective Boards of Directors of BHI and CU
believe that the proposed Merger, on the terms and conditions set forth herein,
is in the best interests of their respective corporations and shareholders.
WHEREAS, BHI and CU Bancorp desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated by this Agreement.
WHEREAS, the parties intend that for federal income tax
purposes the Merger qualify as a "reorganization" within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, on the basis of the foregoing recitals and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, BHI and CU hereby agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise expressly provided for in this Agreement,
or unless the context otherwise requires, as used throughout this Agreement the
following terms shall have the respective meanings specified below:
1.1 "Affiliate" of, or a Person "Affiliated" with, a
specific Person is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified.
<PAGE> 12
1.2 "Agreement of Merger" means the Agreement and Plan of
Merger to be entered into by and between BHI and CU substantially in the form
of Exhibit A hereto, but subject to any changes that may be necessary to
conform to any requirements of any regulatory agency having authority over the
Merger.
1.3 "Alternative Transaction" means any of the following
involving CU or CU Bank (other than transactions with BHI contemplated by this
Agreement): any merger, consolidation, share exchange or other business
combination; a sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets of CU or CU Bank (as applicable) representing 10% or more
of CU's consolidated assets; a sale of shares of capital stock (or securities
convertible or exchangeable into or otherwise evidencing, or any agreement or
instrument evidencing, the right to acquire capital stock), representing 10% or
more of the voting power of CU or CU Bank; a tender offer or exchange offer for
at least 10% of the outstanding shares of CU; a bona fide solicitation of
proxies in opposition to approval of the Merger by CU's shareholders; or a
public announcement of a proposal, plan, or intention to do any of the
foregoing.
1.4 "ATM" has the meaning set forth in Section 4.22.
1.5 "Average Price of BHI Stock" means the average of the
Closing Price of BHI Stock for the 20 consecutive trading days ending on the
third trading day immediately prior to the Closing Date (subject to adjustment
as provided below). The term "trading day" shall mean a day on which trading
generally takes place on the NYSE and on which trading in BHI Stock has not
been halted or suspended. In the event BHI pays, declares or otherwise effects
a stock split, reverse stock split, reclassification or stock dividend or
distribution with respect to the BHI Stock between the date of this Agreement
and the Effective Time, appropriate adjustments will be made to the Average
Price of BHI Stock.
1.6 "BHC Act" means the Bank Holding Company Act of 1956,
as amended.
1.7 "BHI Option Plan Amendment" means the amendment to
the BHI Stock Option Plan contemplated by Section 2.13.
1.8 "BHI Options" means options to purchase BHI Stock
granted by BHI.
1.9 "BHI Schedules" means the schedules prepared and
delivered by BHI pursuant to this Agreement.
1.10 "BHI Stock" means the common stock, $2.00 par value,
of BHI.
2.
<PAGE> 13
1.11 "BHI Stock Option Plan" means the Bancorp Hawaii,
Inc. Stock Option Plan of 1994.
1.12 "BHI Supplied Information" has the meaning set forth
in Section 5.10.
1.13 "Business Day" means any day other than Saturday,
Sunday or a day on which commercial banks in either of California or Hawaii are
authorized or required to be closed.
1.14 "California Secretary" means the Secretary of State
of the State of California.
1.15 "Cash Election" has the meaning set forth in Section
2.3(a).
1.16 "Cash Proration Factor" has the meaning set forth in
Section 2.3(c).
1.17 "Closing" has the meaning set forth in Section 3.1.
1.18 "Closing Date" means the date on which the Closing is
to be conducted, as provided by Section 3.1.
1.19 "Closing Price of BHI Stock" means the closing price
of BHI Stock on the NYSE as reported in The Wall Street Journal.
1.20 "Code" means the Internal Revenue Code of 1986, as
amended.
1.21 "Combination Cash Election" and "Combination Stock
Election" have the meanings set forth in Section 2.3(a).
1.22 "Commissioner" means the Commissioner of Financial
Institutions of the State of Hawaii.
1.23 "Covered Loan" has the meaning set forth in Section
4.24.
1.24 "CU Bank" means California United Bank, a
California-chartered commercial bank.
1.25 "CU Bank Stock" means the common stock, $5.00 par
value, of CU Bank.
1.26 "CUBNA" means California United Bank, National
Association.
3.
<PAGE> 14
1.27 "CU Employee Plans" has the meaning set forth in
Section 4.20.
1.28 "CU Option Plan" means, collectively, each plan
included in the CU Stock Plan that provides for the issuance of options to
acquire CU Stock.
1.29 "CU Options" means options, rights or warrants to
purchase CU Stock granted by CU (other than the CU Stock Option Agreement).
1.30 "CU Real Property" has the meaning set forth in
Section 4.9.
1.31 "CU Scheduled Contracts" has the meaning set forth in
Section 4.16.
1.32 "CU Schedules" means the Schedules prepared and
delivered by CU pursuant to this Agreement.
1.33 "CU Shareholders' Meeting" means the meeting of CU's
shareholders referred to in Section 6.6 hereof, including any adjournments or
postponements thereof.
1.34 "CU Stock" means the common stock, no par value, of
CU (including certificates representing securities of any Predecessor entitled
to be converted into or exchanged for certificates for CU common stock).
1.35 "CU Stock Option Agreement" or "Stock Option
Agreement" means the Stock Option Agreement entered into between CU and BHI and
attached hereto as Exhibit B.
1.36 "CU Stock Plan" means, collectively, the following CU
plans: (i) the 1983 Employee Stock Option Plan, (ii) 1985 Employee Stock
Option Plan, (iii) 1987 Special Stock Option Plan, (iv) 1993 Employee Stock
Option Plan, (v) 1994 Non-Employee Director Stock Option Plan, (vi) 1995
Restricted Stock Plan, (vii) 1996 Non-Employee Director Stock Option Plan,
(viii) 1996 Employee Stock Option Plan, (ix) 1996 Restricted Stock Plan, and
(x) the CU Bancorp 1996 Conversion Option Plan.
1.37 "CU Supplied Information" has the meaning set forth
in Section 4.26.
1.38 "DCCA" means the Director of the Department of
Commerce and Consumer Affairs of the State of Hawaii.
1.39 "Dissenting Shares" means any shares of CU Stock
issued and outstanding immediately prior to the Effective Time of the Merger
that are "dissenting shares" as that term is defined in Section 1300(b) of the
California Corporations Code.
4.
<PAGE> 15
1.40 "Effective Time" means the date and time of filing of
Articles of Merger and the Agreement of Merger with DCCA or such later
effective time as may be agreed by the parties and set forth in such Articles.
1.41 "Election Deadline" has the meaning set forth in
Section 2.3(b).
1.42 "Election Form" has the meaning set forth in Section
2.3(a).
1.43 "Election Form Record Date" has the meaning set forth
in Section 2.3(a).
1.44 "Employee Benefit Plan" has the meaning set forth in
Section 4.20(a).
1.45 "Employee Pension Benefit Plan" has the meaning set
forth in Section 4.20(b).
1.46 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.47 "Environmental Law" means any federal, state,
provincial or local statute, law, ordinance, rule, regulation, order, consent
decree, judicial or administrative decision or directive of the United States
or other jurisdiction whether now existing or as hereinafter promulgated,
issued or enacted relating to: (A) pollution or protection of the environment,
including natural resources; (B) exposure of Persons, including employees, to
Hazardous Substances or other products, materials or chemicals; (C) protection
of the public health or welfare from the effects of products, by-products,
wastes, emissions, discharges or releases of chemical or other substances; or
(D) regulation of the manufacture, use or introduction into commerce of
substances, including, without limitation, their manufacture, formulation,
packaging, labeling, distribution transportation, handling, storage and
disposal. For the purposes of this definition the term "Environmental Law"
shall include, without limiting the foregoing, the following statutes, as
amended from time to time: (1) the Clean Air Act, as amended, 42 U.S.C. Section
7401 et seq.; (2) the Federal Water Pollution Control Act, as amended, 33
U.S.C. Section 1251 et seq.; (3) the Resource Conservation and Recovery Act of
1976, as amended, 42 U.S.C. Section 6901 et seq.; (4) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
(including the Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C.
Section 2601 et seq.; (5) the Toxic Substances Control Act, as amended, 15
U.S.C. Section 2601 et seq.; (6) The Occupational Safety and Health Act, as
amended, 29 U.S.C. Section 651; (7) the Emergency Planning and Community
Right-To-Know Act of 1986, 42 U.S.C. Section 1101 et seq.; (8) the Mine Safety
and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; (9) the Safe
Drinking Water Act, 42 U.S.C. Section 300f et seq.; and (10) all comparable
state and local laws, laws of other jurisdictions or
5.
<PAGE> 16
orders and regulations including, but not limited to, the
Carpenter-Presley-Tanner Hazardous Substance Account Act, Cal. Health & Safety
Code Section 25300 et seq.
1.48 "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.49 "Exchange Agent" means the financial institution
appointed by BHI, with the consent of CU, to effect the exchange contemplated
by Article II hereof.
1.50 "Exchange Ratio" has the meaning set forth in Section
2.2(a).
1.51 "FDIC" means the Federal Deposit Insurance
Corporation.
1.52 "FDIC Filings of CU" means all reports, registration
statements, proxy statements or other filings made by CU or CU Bank with the
FDIC during the time period from January 1, 1994 through the date of this
Agreement.
1.53 "Financial Statements of BHI" means (i) the audited
consolidated financial statements and notes thereto of BHI and the related
opinions thereon included in BHI's Annual Reports on Form 10-K for the years
ended December 31, 1993, 1994 and 1995 and (ii) the unaudited consolidated
interim financial statements and notes thereto of BHI included in BHI's
Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and
September 30, 1996.
1.54 "Financial Statements of Corporate Bank" means the
audited consolidated financial statements of Corporate Bank for the years ended
December 31, 1993 and 1994, the unaudited statements of operations of Corporate
Bank for the nine months ended September 30, 1995 and 1994, and the unaudited
balance sheets of Corporate Bank as of September 30, 1995 and 1994.
1.55 "Financial Statements of CU" means (i) the audited
consolidated financial statements and notes thereto of CU and the related
opinions thereon included in CU's Annual Reports on Form 10-K for the years
ended December 31, 1993, 1994 and 1995 and (ii) the unaudited consolidated
interim financial statements and notes thereto of CU included in CU's Quarterly
Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30,
1996.
1.56 "Financial Statements of Home" mean (i) the audited
consolidated financial statements and notes thereto of Home Interstate Bancorp
and the related opinions thereon included in its Annual Reports on Form 10-K
for the years ended December 31, 1993, 1994 and 1995 and (ii) the unaudited
consolidated interim financial statements and notes thereto
6.
<PAGE> 17
of Home Interstate Bancorp included in its Quarterly Reports on Form 10-Q for
the quarters ended March 31 and June 30, 1996.
1.57 "FRB" means the Board of Governors of the Federal
Reserve System.
1.58 "FRB Filings of CU" means all reports, registration
statements, proxy statements or other filings made by CU or CU Bank with the
FRB during the time period from January 1, 1994 through the date of this
Agreement.
1.59 "Hazardous Substances" means (i) substances that are
defined or listed in, or otherwise classified pursuant to, or the use or
disposal of which are regulated by, any Environmental Law as "hazardous
substances," "hazardous materials," "hazardous wastes," "toxic substances," or
any other formulation intended to define, list, or classify substances by
reason of deleterious properties such as ignitability, corrosivity, reactivity,
toxicity, carcinogenicity, or reproductive toxicity; (ii) oil, petroleum or
petroleum derived from substances and drilling fluids, produced waters, and
other wastes associated with the exploration, development, or production of
crude oil, natural gas, or geothermal resources; (iii) any flammable substances
or explosives, any radioactive materials, any hazardous wastes or substances,
any toxic wastes or substances or any other materials or pollutants which pose
a hazard to any property or to Persons on or about such property; and (iv)
asbestos in any form or electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of 50
parts per million.
1.60 "Home" means Home Interstate Bancorp, a California
corporation.
1.61 "Immediate Family" means a Person's spouse, parents,
in-laws, children and siblings.
1.62 "IRS" means the Internal Revenue Service.
1.63 "Maximum Stock Amount" and "Minimum Stock Amount"
have the meanings set forth in Section 2.3(c).
1.64 "Non-Performing Loans" means loans or investments
held by CU Bank which are (i) more than ninety (90) days past due with respect
to any scheduled payment of principal or interest, (ii) classified as "loss,"
"doubtful," "substandard," "other assets especially mentioned" or "special
mention," or (iii) on non-accrual status in accordance with CU Bank's loan
review procedures.
1.65 "NYSE" means the New York Stock Exchange.
7.
<PAGE> 18
1.66 "OCC" means the Office of the Comptroller of the
Currency.
1.67 "OCC Filings of CU" means all reports, registration
statements, proxy statements or other filings made by CU or CU Bank with the
OCC during the time period from January 1, 1994 through the date of this
Agreement.
1.68 "Operating Loss" has the meaning set forth in Section
4.23.
1.69 "Other Real Estate Owned" means any real property
owned or acquired by foreclosure or otherwise, in the ordinary course of
collecting a debt previously contracted for in good faith.
1.70 "Per Share Cash Consideration" has the meaning set
forth in Section 2.2(a).
1.71 "Person" means any individual, corporation,
association, partnership, joint venture, other entity, government or
governmental department or agency.
1.72 "Predecessors" means such corporations and banks as
heretofore have been merged into either of CU or CU Bank (including without
limitation, in the case of CU, Home Interstate Bancorp, a California
corporation, and in the case of CU Bank, CUBNA and Corporate Bank, a California
state-chartered bank).
1.73 "Proxy Statement" means the Proxy Statement and
Prospectus that is used to solicit proxies for the CU Shareholders' Meeting and
to offer and sell the shares of BHI Stock to be issued in connection with the
Merger.
1.74 "Ratification Date" has the meaning set forth in
Section 2.13(d).
1.75 "Related Group of Persons" means Affiliates, members
of an Immediate Family or Persons the obligations of whom would be attributed
to another Person pursuant to the regulations promulgated by the SEC (as
defined herein).
1.76 "S-4" means the registration statement on Form S-4 to
be filed with the SEC relating to the registration under the Securities Act of
the BHI Stock to be issued in connection with the Merger.
1.77 "SEC" means the Securities and Exchange Commission.
8.
<PAGE> 19
1.78 "SEC Filings of BHI" means all reports, registration
statements, proxy statements or other filings made by BHI with the SEC during
the time period from January 1, 1994 through the date of this Agreement.
1.79 "SEC Filings of CU" means all reports, registration
statements, proxy statements or other filings made by CU with the SEC during
the time period from January 1, 1994 through the date of this Agreement.
1.80 "Secured Loan" has the meaning set forth in Section
4.24.
1.81 "Securities Act" means the Securities Act of 1933, as
amended.
1.82 ASenior Management Group@ means the following senior
officers of CU and its subsidiaries: Stephen Carpenter, David Rainer, Anne
Williams, Anita Wolman, Patrick Hartman, Doug Goddard, Emily Hamilton and James
P. Staes.
1.83 "Stock Election" has the meaning set forth in Section
2.3(a).
1.84 "Stock Proration Factor" has the meaning set forth in
Section 2.3(c).
1.85 "Superintendent" means the Superintendent of Banks of
the State of California or the successor thereto.
1.86 "Surviving Company" means the corporation surviving
the Merger.
1.87 "Taxes" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
business, occupation, premium, windfall profits, environmental (including taxes
under Section 59A of the Code), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, workers'
compensation, disability, Pension Guaranty Benefit Corporation premium, real
property, personal property, ad valorem, sales, use, transfer, conveyance,
registration, value added, alternative or add-on minimum, estimated, or other
taxes, or assessments in the nature of taxes, of any kind whatsoever and
however denominated, including any interest, penalty, or addition thereto,
whether disputed or not.
1.88 "Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to or required to
be filed in connection with any Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
9.
<PAGE> 20
1.89 "Understanding" means any contract, agreement,
understanding, commitment or offer, whether written or oral, which is or to the
knowledge of CU is reasonably likely to become a binding obligation if accepted
by another Person.
1.90 "Undesignated Shares" has the meaning set forth in
Section 2.3(a).
ARTICLE II
THE MERGER AND RELATED MATTERS
2.1 The Merger. The Merger shall become effective at the
date and time of filing of Articles of Merger and the Agreement of Merger with
DCCA (or at such later effective time as may be agreed by the parties and set
forth in the Articles of Merger) in accordance with applicable provisions of
Hawaii law. At the Effective Time, the following transactions will be deemed
to have occurred simultaneously:
(a) CU shall be merged with and into BHI with BHI being
the Surviving Company, the separate corporate existence of CU shall cease, and
BHI shall continue its existence under the laws of the State of Hawaii.
(b) Each share of BHI Stock issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of common stock of the Surviving Company and shall not be converted or
otherwise affected by the Merger.
(c) Subject to Sections 2.1(d), 2.1(e) and 2.3(e), each
share of CU Stock issued and outstanding immediately prior to the Effective
Time shall, on and after the Effective Time, be automatically canceled and
cease to be an issued and outstanding share of CU Stock and shall be converted
into the right to receive BHI Stock or cash as provided in Section 2.2(a).
(d) Each Dissenting Share of CU Stock shall not be
converted into or represent a right to receive BHI Stock or cash hereunder
unless and until such shares have lost their status as dissenting shares under
Chapter 13 of the California Corporations Code, at which time such shares shall
be converted either into cash or BHI Stock pursuant to Section 2.5.
(e) Any shares of CU Stock held by BHI (or any of its
wholly owned subsidiaries) or CU (or any of its wholly owned subsidiaries),
other than those held in a fiduciary capacity or as a result of debts
previously contracted, shall be canceled and retired at the Effective Time and
no consideration shall be issued in exchange therefor.
2.2 Conversion of CU Stock.
10.
<PAGE> 21
(a) Subject to the other provisions of this Article II,
each share of CU stock issued and outstanding immediately prior to the
Effective Time (other than Dissenting Shares and CU Stock described in Section
2.1(e) ) shall, by virtue of the Merger, be converted into the right to
receive, at the election of the holder thereof as provided in Section 2.3,
either:
(i) a fraction of a share of BHI Stock equal to
the quotient (such quotient, the "Exchange Ratio") of (i) $15.34 divided by
(ii) the Average Price of BHI Stock; provided, in the event that the Average
Price of BHI Stock shall be more than $51.03125, the Exchange Ratio shall be
.3006 and in the event that the Average Price of BHI Stock shall be less than
$37.71875, the Exchange Ratio shall be .4067; or
(ii) cash in the amount of $15.34 (such amount,
the "Per Share Cash Consideration").
(b) At the Effective Time, the stock transfer books of CU
shall be closed as to holders of CU Stock immediately prior to the Effective
Time and no transfer of CU Stock by any such holder shall thereafter be made or
recognized. If, after the Effective Time, certificates are properly presented
in accordance with Section 2.6 of this Agreement to the Exchange Agent, such
certificates shall be canceled and exchanged for certificates representing the
number of whole shares of BHI Stock, if any, and/or a check representing the
amount of cash, if any, into which the CU Stock represented thereby was
converted in the Merger, plus any payment for a fractional share of BHI Stock.
2.3 Election and Proration Procedures.
(a) Election Forms and Types of Election. An election
form and other appropriate and customary transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of CU Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent) in such form as BHI
and CU shall mutually agree ("Election Form") shall be mailed no less than
thirty-five days prior to the anticipated Closing Date or on such other date as
BHI and CU shall mutually agree ("Mailing Date") to each holder of record of CU
Stock as of five Business Days prior to the Mailing Date ("Election Form Record
Date"). CU shall make available one or more Election Forms as may be
reasonably requested by all Persons who become holders (or beneficial owners)
of CU Stock after the Election Form Record Date and prior to the Election
Deadline (as defined herein), and CU shall provide to the Exchange Agent all
information reasonably necessary for it to perform its obligations as specified
herein. Each Election Form shall permit the holder (or the beneficial owner
through appropriate and customary documentation and instructions) to elect (an
"Election") to receive either (i) BHI Stock (a "Stock Election") with respect
to all of such holder's CU Stock, or (ii) cash (a "Cash Election") with respect
to all of such holder's CU Stock, or (iii) a specified number of shares of CU
Stock to receive BHI Stock (a "Combination Stock
11.
<PAGE> 22
Election") and a specified number of shares of CU Stock to receive cash (a
"Combination Cash Election"). Any CU Stock (other than Dissenting Shares) with
respect to which the holder (or the beneficial owner, as the case may be) shall
not have submitted to the Exchange Agent, an effective, properly completed
Election Form received prior to the Election Deadline shall be deemed to be
"Undesignated Shares" hereunder.
(b) Proper and Timely Election. Any Election shall have
been properly made and effective only if the Exchange Agent shall have actually
received a properly completed Election Form by 5:00 p.m. on the later of the
30th day following the Mailing Date or the 31st day following the mailing of
any notice required by Section 1301 of the California Corporations Code (or
such other time and date as BHI and CU may mutually agree) (the "Election
Deadline"). An Election Form shall be deemed properly completed only if an
Election is indicated for each share of CU Stock covered by such Election Form
and if accompanied by one or more certificates (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of CU Stock
covered by such Election Form, together with duly executed transmittal
materials included in or required by the Election Form. Any Election Form may
be revoked or changed by the Person submitting such Election Form at or prior
to the Election Deadline. In the event an Election Form is revoked prior to
the Election Deadline, the shares of CU Stock represented by such Election Form
shall automatically become Undesignated Shares unless and until a new Election
is properly made with respect to such shares on or before the Election
Deadline, and BHI shall cause the certificates representing such shares of CU
Stock to be promptly returned without charge to the Person submitting the
revoked Election Form upon written request to that effect from the holder who
submitted such Election Form. Subject to the terms of this Agreement and of
the Election Form, the Exchange Agent shall have reasonable discretion to
determine whether any election, revocation or change has been properly or
timely made and to disregard immaterial defects in the Election Forms, and any
decisions of BHI and CU required by the Exchange Agent and made in good faith
in determining such matters shall be binding and conclusive. Neither BHI nor
the Exchange Agent shall be under any obligation to notify any Person of any
defect in an Election Form.
(c) Proration. As promptly as practicable but not later
than ten calendar days after the Effective Time, BHI shall cause the Exchange
Agent to effect the allocation among the holders of CU Stock of rights to
receive BHI Stock or cash in the merger in accordance with the Election Forms
as follows:
(i) if the aggregate number of shares of CU Stock
as to which Stock Elections and Combination Stock Elections shall have
effectively been made exceeds, and is not approximately equal to, 80% of the
issued and outstanding shares of CU Stock as of the Effective Time (the
"Maximum Stock Amount"), then:
12.
<PAGE> 23
(A) All Undesignated Shares and
Dissenting Shares shall be deemed to have made Cash Elections; and
(B) the Exchange Agent shall select by
lot some or all of the Persons who hold of record 100 or less shares of CU
Stock who effectively made Stock Elections or Combination Stock Elections and
shall treat them for purposes of this Section 2.3(c) as having made a Cash
Election, to the extent necessary to reach the Maximum Stock Amount. If the
remaining shares of CU Stock as to which Stock Elections and Combination Stock
Elections have been effectively made (the ARemaining Stock Election Shares@)
exceeds, and is not approximately equal to, the Maximum Stock Amount, then:
(C) a stock proration factor (the "Stock
Proration Factor") shall be determined by dividing the Maximum Stock Amount by
the Remaining Stock Election Shares. Each holder of such Remaining Stock
Election Shares shall be entitled to receive in respect thereof:
(I) the number of shares of BHI
Stock equal to the product of (x) the Exchange Ratio, multiplied by (y) the
number of such Remaining Stock Election Shares held by such holder multiplied
by (z) the Stock Proration Factor; and
(II) cash in an amount equal to the
product of (x) the Per Share Cash Consideration, multiplied by (y) the number
of Remaining Stock Election Shares held by such holder, multiplied by (z) one
minus the Stock Proration Factor.
(ii) if the aggregate number of shares of CU
Stock as to which Stock Elections and Combination Stock Elections shall have
effectively been made shall be less than, and not approximately equal to, 60%
of the issued and outstanding shares of CU Stock as of the Effective Time (the
"Minimum Stock Amount"), then:
(A) the Exchange Agent shall select by
lot some or all of the Persons who hold of record Undesignated Shares and shall
treat them for purposes of this Section 2.3(c) as having made a Stock Election,
to the extent necessary to reach the Minimum Stock Amount. All Undesignated
Shares so selected shall be converted into the right to receive BHI Stock (and
if it is not necessary to select all Undesignated Shares to reach the Minimum
Stock Amount, Undesignated Shares not so selected shall be converted into the
right to receive cash). If thereafter the total number of shares of CU Stock
as to which Stock Elections and Combination Stock Elections have been
effectively made or deemed made is less than, and not approximately equal to,
the Minimum Stock Amount, then:
(B) a cash proration factor (the "Cash
Proration Factor") shall be determined by dividing the Minimum Stock Amount
(less the shares for which a Stock
13.
<PAGE> 24
Election or Combination Stock Election has been effectively made or deemed
made) by the total number of shares of CU Stock as to which Cash Elections and
Combination Cash Elections have been effectively made (the ACash Election
Shares@). Each holder of such Cash Election Shares shall be entitled to
receive in respect thereof:
(I) cash equal to the product of
(x) the Per Share Cash Consideration, multiplied by (y) the number of Cash
Election Shares held by such holder, multiplied by (z) one minus the Cash
Proration Factor; and
(II) the number of shares of BHI
Stock equal to the product of (x) the Exchange Ratio, multiplied by (y) the
number of Cash Election Shares held by such holder, multiplied by (z) the Cash
Proration Factor.
(iii) if the aggregate number of shares of CU Stock
as to which Stock Elections and Combination Stock Elections shall have
effectively been made is approximately equal to or exceeds the Minimum Stock
Amount and is also less than or approximately equal to the Maximum Stock
Amount, then:
(A) all Undesignated Shares and
Dissenting Shares shall be deemed to have made Cash Elections; and
(B) each holder of CU Stock who made an
effective Stock Election or Combination Stock Election shall be entitled to
receive BHI Stock with respect to the number of shares of CU Stock covered by
such Stock Election or Combination Stock Election; and
(C) each holder of CU Stock who made an
effective Cash Election or Combination Cash Election shall be entitled to
receive cash with respect to the number of shares of such holder's CU Stock
covered by such Cash Election or Combination Cash Election.
(d) Calculations. The calculations required by Section
2.2(a)(i) shall be prepared by BHI prior to the anticipated Effective Time and
shall be set forth in a certificate executed by the Chief Financial Officer of
BHI and furnished to CU two Business Days prior to the Closing Date showing the
manner of calculation in reasonable detail, which shall be conclusive absent
manifest error. Any calculation of a portion of a share of BHI Stock shall be
rounded to the nearest ten-thousandth of a share, and any cash payment shall be
rounded to the nearest cent. For purposes of this Section 2.3, the shares of
CU Stock for which BHI Stock is to be issued as consideration in the Merger
shall be deemed to be "approximately equal" to the Minimum or Maximum Stock
Amount if such number is within 25,000 shares (of CU Stock) of such amount.
14.
<PAGE> 25
(e) No Fractional Shares. Notwithstanding any other
provisions of this Agreement, each holder of shares of CU Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of BHI Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of BHI Stock
multiplied by the Average Price of BHI Stock. No holder will be entitled to
dividends, voting rights or any other rights as a stockholder in respect of any
fractional share of BHI Stock.
2.4 Adjustments for Dilution and Other Matters. If prior
to the Effective Time, (a) CU shall declare a stock dividend or distribution on
the CU Stock, or subdivide, split up, reclassify or combine the CU Stock, or
declare a dividend, or make a distribution, on the CU Stock, in any security
convertible into CU Stock (provided that no such action may be taken by CU
without BHI's prior written consent as provided in Section 6.1) or (b) the
outstanding shares of BHI Stock shall have been increased, decreased, changed
into or exchanged for a different number or kind of shares or securities, in
each case as a result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other similar change in
BHI's capitalization, then an appropriate adjustment or adjustments will be
made to the Exchange Ratio (including the Average Price of BHI Stock and the
Average Price of BHI Stock below and above which the Exchange Ratio is a
specified amount pursuant to Section 2.2).
2.5 Conversion of Dissenting Shares.
(a) CU shall give BHI prompt notice upon receipt by CU of
any written demands for appraisal rights, withdrawal of such demands, and any
other documents received or instruments served pursuant to Chapter 13 of the
California Corporations Code and shall give BHI the opportunity to direct all
negotiations and proceedings with respect to such demands. CU shall not
voluntarily make any payment with respect to any demands for appraisal rights
and shall not, except with the prior written consent of BHI, settle or offer to
settle such demands. Each holder of CU Stock who becomes entitled, pursuant to
provisions of said Chapter 13 of the California Corporations Code, to payment
for his or her Dissenting Shares under the provisions of said Chapter shall
receive payment therefor directly or indirectly from BHI and such shares of CU
Stock shall be canceled.
(b) If prior to the Election Deadline any shareholder of
CU shall fail to perfect, or shall effectively withdraw or lose, his or her
rights under Chapter 13 of the California Corporations Code, the Dissenting
Shares of such holder shall be treated for purposes of this Article II as any
other shares of outstanding CU Stock. If, after the Election Deadline, any
holder of CU Stock shall fail to perfect, or shall effectively withdraw or
lose, his or her right to appraisal of and payment for his or her Dissenting
Shares under Chapter 13 of the California
15.
<PAGE> 26
Corporations Code, each Dissenting Share of such holder shall be converted into
the right to receive the Per Share Cash Consideration pursuant to this Article
II.
2.6 Exchange Procedures.
(a) Exchange Agent. No later than the Effective Time,
BHI shall deposit with the Exchange Agent the number of shares of BHI Stock
issuable in the Merger and the amount of cash payable in the Merger. The
Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to BHI Stock held by it from time to time hereunder,
except that it shall receive and hold all dividends or other distributions paid
or distributed with respect to such shares for the account of the Persons
entitled thereto.
(b) Exchange of Certificates and Cash. After completion
of the allocation procedure set forth in Section 2.3, each holder of a
certificate formerly representing CU Stock (other than Dissenting Shares) who
surrenders or has surrendered such certificate (or customary affidavits and
indemnification regarding the loss or destruction of such certificate),
together with duly executed transmittal materials included in or required by
the Election Form, to the Exchange Agent shall, upon acceptance thereof, be
entitled to a certificate representing BHI Stock and/or cash to which such
holder would otherwise be entitled. The Exchange Agent shall accept such CU
certificate upon compliance with such reasonable and customary terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal practices. Until surrendered as contemplated
by this Section 2.6, each certificate representing CU Stock shall be deemed
from and after the Effective Time to evidence only the right to receive cash
and/or BHI Stock, as the case may be, upon such surrender. BHI shall not be
obligated to deliver the consideration to which any former holder of CU Stock
is entitled as a result of the Merger until such holder surrenders his
certificate or certificates representing shares of CU Stock (or customary
affidavits and indemnification regarding the loss or destruction of such
certificate) for exchange as provided in this Section 2.6. If any certificate
for shares of BHI Stock, or any check representing cash and/or declared but
unpaid dividends, is to be issued in a name other than that in which a
certificate surrendered for exchange is issued, the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and the
Person requesting such exchange shall affix any requisite stock transfer tax
stamps to the certificate surrendered or provide funds for their purchase or
establish to the satisfaction of the Exchange Agent that such taxes are not
payable.
(c) Affiliates. Certificates surrendered for exchange by
any Person constituting an "affiliate" of CU for purposes of Rule 145 under the
Securities Act shall not be exchanged for certificates representing whole
shares of BHI Stock until BHI has received a written agreement from such Person
as contemplated by Section 8.13(a).
16.
<PAGE> 27
2.7 Voting and Dividends. Former shareholders of record
of CU shall be entitled to vote after the Effective Time at any meeting of BHI
stockholders the number of whole shares of BHI Stock into which their
respective shares of CU Stock are converted, regardless of whether such holders
have exchanged their certificates representing CU Stock for certificates
representing BHI Stock in accordance with the provisions of this Agreement.
Until surrendered for exchange in accordance with the provisions of Section 2.6
of this Agreement, each certificate theretofore representing shares of CU Stock
(other than shares to be canceled pursuant to Section 2.1(e) of this Agreement)
shall from and after the Effective Time represent for all purposes only the
right to receive shares of BHI Stock, cash in lieu of fractional shares and/or
cash, as set forth in this Agreement. No dividends or other distributions
declared or made after the Effective Time with respect to BHI Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered certificate of CU Stock with respect to the shares of BHI Stock
represented thereby, until the holder of such certificate of CU Stock shall
surrender such certificate. Subject to the effect of applicable laws,
following surrender of any such certificates of Stock for which shares of BHI
Stock are to be issued, there shall be paid to the holder of the certificates,
without interest, (i) the amount of any cash payable with respect to a
fractional share of BHI Stock to which such holder is entitled pursuant to
Section 2.3(e) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole
shares of BHI Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of BHI Stock.
2.8 No Liability. Neither BHI, CU nor the Exchange Agent
shall be liable to any holder of shares of CU Stock for any shares of BHI Stock
(or dividends or distributions with respect thereto) or cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
2.9 Withholding Rights. BHI or the Exchange Agent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of CU Stock such amounts as
BHI or the Exchange Agent is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by BHI or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of CU Stock in
respect of which such deduction and withholding was made by BHI or the Exchange
Agent.
2.10 Effects of Merger. At and after the Effective Time,
the Merger will have the effects set forth in the Hawaii Business Corporation
Act and the California Corporations Code.
17.
<PAGE> 28
2.11 Articles of Incorporation and Bylaws of Surviving
Company. At the Effective Time, the Articles of Incorporation and Bylaws of
BHI as in effect immediately prior to the Effective Time shall continue to be
the Articles of Incorporation and Bylaws of the Surviving Company.
2.12 Directors and Officers of Surviving Company. At the
Effective Time, the directors and officers of BHI immediately prior to the
Effective Time shall be the directors and officers of the Surviving Company.
2.13 Options.
(a) Subject to Sections 2.13(a) through 2.13(d), the
unexercised CU Options held by each Person who is at the Effective Time an
employee of CU Bank shall be assumed, or replaced with a comparable substituted
option, by the Surviving Company as of the Effective Time. Such assumption
shall be accomplished pursuant to the BHI Option Plan Amendment to be adopted
prior to the Closing Date (subject to subsequent approval or ratification by
the holders of a majority of the outstanding BHI Stock) and pursuant to new
option agreements with each optionee. Each CU Option so assumed or replaced
shall at the Effective Time be deemed to be an option (a "Replacement Option")
granted by the Surviving Company to acquire BHI Stock. Subject to Section
2.13(d), the per share exercise price for the Replacement Options granted to
each optionee shall be equal to the exercise price of such optionee's CU
Options which are converted into such Replacement Options divided by the
Exchange Ratio, and shall be for such number of shares of BHI Stock as are
equal to the product of the Exchange Ratio multiplied by the number of shares
of CU Stock subject to such CU Options (except that no option shall be deemed
granted by the Surviving Company to acquire a fractional share of BHI Stock).
The new option agreements contemplated by this Section 2.13(a) shall be
distributed to CU employees who then hold unexercised CU Options no later than
20 calendar days prior to the anticipated Closing Date, which new option
agreements as executed by the employees must be returned to BHI no later than
10 calendar days prior to the anticipated Closing Date in order for such
assumption or replacement to be effective.
(b) Assumption of such CU Options shall be contingent
upon (i) the Closing, (ii) the execution prior to the Closing Date by the
particular optionee, BHI and CU of a new option agreement providing for the
assumption or replacement of such optionee's unexercised CU Options and (iii)
the employment by CU Bank of the optionee at the Effective Time.
(c) To the extent that the assumption or replacement of a
CU Option by the Surviving Company would result in the issuance of an option to
purchase a fractional share of BHI Stock, such fractional share option shall be
canceled, and the aggregate exercise price of the optionee's Replacement
Options shall be reduced by the proportionate amount of the aggregate exercise
price attributable to the fractional share.
18.
<PAGE> 29
(d) The assumption or replacement by the Surviving
Company of CU Options pursuant to the BHI Option Plan Amendment and the new
option agreements shall (unless otherwise agreed by BHI and CU) be subject to
the following limitations:
(i) The excess of the aggregate fair market value
of the shares of BHI Stock subject to a Replacement Option immediately after
the assumption over the aggregate option exercise price for such shares of BHI
Stock shall not be greater than the excess of the aggregate fair market value
of the shares subject to the CU Option immediately before the assumption over
the aggregate option exercise price for such shares of CU Stock.
(ii) For any option, on a share by share
comparison, the ratio of the option exercise price to the fair market value of
the BHI Stock subject to the Replacement Option immediately after the
assumption shall not be more favorable to the optionee than the ratio of the CU
Option exercise price to the fair market value of the CU Stock subject to the
option immediately before the assumption.
(iii) The optionee shall not receive additional
benefits under the Replacement Option which he did not have under the CU
Option.
(iv) Replacement Options shall not be exercisable
prior to the date ("Ratification Date") on which the BHI Option Plan Amendment
is approved or ratified by the holders of a majority of the outstanding shares
of BHI Stock. However, in the event that the exercise period for a Replacement
Option would otherwise expire during the period from the Effective Time through
the Ratification Date (including expiration of the exercise period following
termination of employment), such Replacement Option shall be deemed to be a
nonqualified stock option not described in Code Section 422 (if not otherwise
already designated a nonqualified stock option) and the exercise period for
such Replacement Option shall be extended to the date that is 90 days following
the Ratification Date.
(e) Each CU Option issued pursuant to the CU Stock Plan
that is outstanding and unexercised at the Effective Time and that is not
assumed or replaced pursuant to Sections 2.13(a) to 2.13(d) (including any such
CU Option as to which an optionee has executed a new option agreement as
contemplated by Section 2.13(b) but has ceased to be an employee of CU Bank at
the Effective Time) shall automatically terminate at the Effective Time.
(f) If approval or ratification of BHI's shareholders is
not received on or prior to June 30, 1998, each Replacement Option shall be
void, and BHI shall pay the holder thereof the amount provided by this Section
2.13(f), which amount shall be calculated by reference to the Closing Price of
BHI Stock on the earlier of the date of disapproval or June 30, 1998 (the
"Determination Date"), and paid within five (5) Business Days thereafter in
cash or cash
19.
<PAGE> 30
equivalent or, at the election of BHI in its sole discretion, by delivery of
such number of shares of BHI Stock as equals the amount to be paid hereunder
divided by the Closing Price of BHI Stock on the Determination Date, rounded
down to a whole share, plus cash for any fractional share. Any payment
required by this Section 2.13(f) shall be in an amount equal to difference
between (a) the product of the number of shares of BHI Stock covered by such
optionee's Replacement Options multiplied by the Closing Price of BHI Stock on
the relevant date, less (b) the aggregate exercise price for all such
Replacement Options held by the optionee.
(g) Except for CU Options assumed as provided herein:
(i) CU shall cause the CU Stock Plan and any other plan, program or arrangement
pursuant to which CU is or may be required to issue CU Stock or compensation
based on CU Stock, and all rights thereunder to purchase shares of CU Stock or
BHI Stock, to be terminated as of the Effective Time, and (ii) CU shall ensure
that following the Effective Time no holder of CU Options or any participant in
any CU Stock Plan shall have any right thereunder to acquire any equity
securities of CU or of BHI.
(h) Each BHI Option issued and outstanding immediately
prior to the Effective Time shall not be affected by the Merger.
2.14 CU Stock Option Agreement. Concurrently with the
execution of this Agreement, BHI and CU have executed the CU Stock Option
Agreement, pursuant to which agreement CU has granted the right to purchase up
to 19.9% of the issued and outstanding shares of capital stock of CU on the
terms and subject to the conditions set forth in such agreement.
ARTICLE III
THE CLOSING
3.1 Closing. The closing of the Merger (the "Closing")
will take place at 9:00 a.m. Pacific time, on the first Friday (unless such
date is not a Business Day, in which case it will be the preceding Business
Day), that is both (a) after satisfaction of each of the conditions set forth
in Articles IX, X and XI; and (b) no less than four Business Days after the
occurrence of the Election Deadline. The Closing will be conducted at 555
South Flower Street, 25th Floor, Los Angeles, California 90071-2326 or such
other location as the parties may agree.
3.2 Filings. Concurrently with execution of this
Agreement, the parties have executed the Agreement of Merger, and shall
promptly reexecute the Agreement of Merger if any changes thereto are necessary
to conform to any requirements of any regulatory agency having authority over
the Merger. On the Closing Date, or as soon as practicable thereafter, the
parties shall cause to be duly filed with DCCA, as required by applicable law
and regulations, duly executed Articles of Merger with the Agreement of Merger,
together with all requisite
20.
<PAGE> 31
certificates. BHI and CU shall each execute, deliver and/or certify each and
every document, certificate or other instrument required under California law
to be filed with the California Secretary in order for the effectiveness of the
merger to be recognized in California. BHI shall file such items no later than
three Business Days following the Effective Time.
3.3 Documents to be Delivered. At the Closing, the
parties hereto shall deliver, or cause to be delivered, such documents or
certificates as may be necessary, in the reasonable opinion of counsel for any
of the parties, to effectuate the transactions contemplated by this Agreement.
From and after the Effective Time, each of the parties hereto hereby covenants
and agrees, without the necessity of any further consideration whatsoever, to
execute, acknowledge and deliver any and all other documents and instruments
and take any and all such other action as may be reasonably necessary or
desirable to effectuate the transactions set forth herein or contemplated
hereby, and the officers and directors of the parties hereto shall execute and
deliver, or cause to be executed and delivered, all such documents as may
reasonably be required to effectuate such transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CU
CU represents and warrants to BHI as follows:
4.1 Incorporation, Standing and Power. CU has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the State of California and is registered as a bank holding company
under the BHC Act. CU Bank has been duly incorporated and is validly existing
as a state chartered bank under the laws of the State of California and is a
member of the Federal Reserve System, and its deposits are insured by the FDIC
in the manner and to the fullest extent provided by law. CU and CU Bank have
all requisite corporate power and authority to own, lease and operate their
respective properties and assets and to carry on their respective businesses as
presently conducted. Neither the scope of the business of CU or CU Bank nor the
location of any of their respective properties requires that CU or CU Bank be
licensed to do business in any jurisdiction other than the State of California
where the failure to be so licensed would, individually or in the aggregate,
have a material adverse effect on the business, financial condition or results
of operations of CU and its subsidiaries taken as a whole.
4.2 Capitalization.
(a) As of the date of this Agreement, the authorized
capital stock of CU consists of 24,000,000 shares of CU Stock, of which
11,358,898 shares were outstanding on February 21, 1997, and 10,000,000 shares
of serial preferred stock, none of which is outstanding.
21.
<PAGE> 32
All of the outstanding shares of CU Stock are duly authorized, validly issued,
fully paid and nonassessable, and are not subject to preemptive rights. As of
the date of this Agreement, except for CU Options covering 1,025,488 shares of
CU Stock granted pursuant to the CU Option Plan, outstanding warrants dated
February 1, 1994 covering 7,500 shares of CU Stock at an aggregate exercise
price of $53,475 (the form of which has been furnished to BHI) and 2,260,421
shares covered by the CU Stock Option Agreement, there are no outstanding
options, warrants or other rights in or with respect to the unissued shares of
CU Stock or CU serial preferred stock nor any securities convertible into such
stock, and CU is not obligated to issue any additional shares of CU Stock or
preferred stock or any additional options, warrants or other rights in or with
respect to the unissued shares of such stock or any other securities
convertible into such stock. Schedule 4.2 sets forth the name of each holder of
a CU Option, the number of shares of CU Stock covered by each such CU Option,
the exercise price per share and the expiration date of each such CU Option.
(b) As of the date of this Agreement, the authorized
capital stock of CU Bank consists of 4,000,000 shares of CU Bank Stock, of
which 1,938,746 shares are outstanding and all of which are owned of record and
beneficially by CU. All the outstanding shares of CU Bank Stock are duly
authorized, validly issued, fully paid and nonassessable (except for
assessments that may be made by order of the Superintendent pursuant to the
Section 662 of the California Finance Code) and are not subject to preemptive
rights. There are no outstanding options, warrants or other rights in or with
respect to the unissued shares of CU Bank Stock or any other securities
convertible into such stock, and CU Bank is not obligated to issue any
additional shares of its common stock or any options, warrants or other rights
in or with respect to the unissued shares of its common stock or any other
securities convertible into such stock.
4.3 Subsidiaries. Except for CU Bank, a wholly owned
subsidiary of CU, CU does not own, directly or indirectly (except as pledgee
pursuant to loans or upon acquisition in satisfaction of debt previously
contracted), any outstanding stock of or other equity or voting interest in any
corporation, partnership, joint venture or other entity.
4.4 Financial Statements. CU has previously made
available to BHI copies of the Financial Statements of Home, the Financial
Statements of Corporate Bank, and the Financial Statements of CU. Each of the
Financial Statements of Home, the Financial Statements of Corporate Bank and
the Financial Statements of CU (as well as the financial statements of CU
included in any of its subsequent Annual Reports on Form 10-K or Quarterly
Reports on Form 10-Q): (a) present or will present fairly the consolidated
financial condition of such entity and its subsidiaries as of the respective
dates indicated and their consolidated results of operations and changes in
financial position/cash flow, as applicable, for the respective periods then
ended (subject, in the case of the unaudited consolidated interim financial
statements, to normal recurring adjustments and the absence of certain footnote
information); (b) have been or will be prepared in accordance with generally
accepted accounting principles consistently applied
22.
<PAGE> 33
(except as otherwise indicated in such financial statements for periods ended
prior to the date of this Agreement); (c) did or will set forth as of the
respective dates indicated adequate reserves for all foreseeable loan losses
and other contingencies; and (d) are or will be in accordance with the books
and records of such entity and its subsidiaries.
4.5 SEC/Regulatory Filings. Since January 1, 1994, CU,
CU Bank, CUBNA and Home have each filed all material reports, registrations and
statements that were required to be filed with the (i) FDIC; (ii) the FRB;
(iii) the OCC; (iv) the SEC; (v) any other applicable federal, state or local
governmental or regulatory authority; and (vi) any self-regulatory
organization, and have paid all fees and assessments due and payable in
connection therewith. CU has previously furnished to BHI a copy of the SEC
Filings, FDIC Filings, OCC Filings and FRB Filings of CU, CU Bank, CUBNA and
Home. As of their respective dates, the SEC Filings, FDIC Filings, OCC Filings
and FRB Filings of CU, CU Bank, CUBNA and Home complied in all material
respects with the requirements of their respective forms, the information
contained therein was true and correct in all material respects and, in the
case of such filings with the SEC, did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6 Authority of CU. The execution and delivery by CU of
this Agreement and the Agreement of Merger and, subject to the requisite
approval of the shareholders of CU, the consummation of the transactions
contemplated hereby, have been duly and validly authorized by all necessary
corporate action on the part of CU, including without limitation approval by a
vote of the board of directors of CU (which approval includes a resolution
recommending that this Agreement and the transactions contemplated hereby be
approved by the shareholders of CU), and this Agreement is, and the Agreement
of Merger will be, a valid and binding obligation of CU, enforceable in
accordance with their respective terms, except as the enforceability thereof
may be limited by bankruptcy, liquidation, receivership, conservatorship,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally and by general equitable principles and by applicable laws and
regulations affecting bank holding companies. Except as set forth in Schedule
4.6, neither the (i) execution and delivery by CU of this Agreement or the
Agreement of Merger; (ii) the consummation of the Merger or the transactions
contemplated herein; nor (iii) compliance by CU or CU Bank with any of the
provisions hereof, will: (a) conflict with or result in a breach of any
provision of the Articles of Incorporation, as amended, or Bylaws, as amended,
of CU or CU Bank; (b) constitute a breach of or result in a default (or give
rise to any rights of termination, cancellation or acceleration, or any right
to acquire any securities or assets) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, franchise, license, permit,
agreement or other instrument or obligation to which CU or CU Bank is a party,
or by which CU or CU Bank or any of their respective properties or assets is
bound, if in any such circumstances, such event could have consequences
materially adverse to CU and its subsidiaries taken as a whole; or (c) violate
any
23.
<PAGE> 34
order, writ, injunction, decree, statute, rule or regulation applicable to CU
or CU Bank or any of their respective properties or assets, if such violation
could have consequences materially adverse to CU and its subsidiaries taken as
a whole. Except as set forth in the CU Schedules, no consent of, approval of,
notice to or filing with any regulatory agency or governmental authority having
jurisdiction over any aspect of the business or assets of CU or CU Bank, and no
consent of, approval of or notice to any other Person that if not obtained or
given would have consequences materially adverse to CU and its subsidiaries
taken as a whole, is required in connection with the execution and delivery by
CU of this Agreement or the Agreement of Merger, or the consummation by CU of
the Merger or the transactions contemplated hereby, except (i) the approval of
this Agreement and the transactions contemplated hereby by the shareholders of
CU; (ii) such approvals as may be required by the FRB, the Superintendent and
the Commissioner; (iii) the filings with DCCA, the California Franchise Tax
Board and the California Secretary pursuant to Section 3.2; and (iv) such
filings, approvals, consents, or waivers as are required under federal or state
securities laws.
4.7 Insurance. CU and CU Bank have policies of insurance
and bonds with respect to their respective assets and businesses against such
casualties and contingencies and in such amounts, types and forms as are
appropriate for their respective businesses, operations, properties and assets.
All such insurance policies and bonds are in full force and effect. To the
knowledge of CU and except as set forth on Schedule 4.7, no insurer under any
such policy or bond has canceled or indicated an intention to cancel or not to
renew or to materially amend any such policy or bond or generally disclaimed
liability thereunder. To the knowledge of CU and except as set forth on
Schedule 4.7, neither CU nor CU Bank is in default under any such policy or
bond and all material claims thereunder have been filed in a timely fashion.
Set forth on Schedule 4.7 is a list of all bonds and all policies of insurance
carried and owned by CU or CU Bank, showing the name of the issuer or insurance
company, the nature of the coverage, limits, the annual premiums and the
expiration dates. CU has made available to BHI copies of all such policies of
insurance and bonds.
4.8 Title to Assets. CU and CU Bank have good and
marketable title to all their respective material properties and assets, other
than real property, owned or stated to be owned by CU or CU Bank (including
without limitation all personal and intangible properties reflected in CU's
September 30, 1996 Quarterly Report on Form 10-Q or acquired thereafter and in
either case not subsequently disposed of for fair value in the ordinary course
of business). All such properties and assets are free and clear of all
mortgages, liens, encumbrances, pledges or charges of any kind or nature
except: (a) as set forth in the SEC Filings of CU; (b) for liens or
encumbrances for current taxes not yet due; (c) for liens or encumbrances
incurred in the ordinary course of business; (d) for liens that are not
substantial in character, amount or extent or that do not materially detract
from the value, or interfere with present use, of the property subject thereto
or affected thereby, or otherwise materially impair the conduct of business of
CU on a consolidated basis; or (e) as set forth on Schedule 4.8.
24.
<PAGE> 35
4.9 Real Estate. Schedule 4.9 sets forth a list of real
property, including leaseholds, owned or leased by CU or CU Bank (the "CU Real
Property"). CU or CU Bank has good and marketable title to the CU Real
Property, and valid leasehold interests in the leaseholds, described on
Schedule 4.9, free and clear of all mortgages, covenants, conditions,
restrictions, easements, liens, security interests, charges, claims,
assessments and encumbrances, except (a) for rights of lessors, co-lessees or
sublessees in such matters that are reflected in the lease; (b) for current
taxes not yet due and payable; (c) for liens and encumbrances of public record;
(d) for such imperfections of title, liens and encumbrances, if any, as do not
materially detract from the value of or materially interfere with the present
use of such property; and (e) as described in the SEC Filings of CU or set
forth on Schedule 4.9.
4.10 Litigation. Except as specifically identified in the
SEC Filings of CU or Schedule 4.10, there are no private or governmental suits,
claims, actions or proceedings pending, nor to CU's knowledge, threatened
against CU or CU Bank or against any of their respective directors, officers or
employees relating to the performance of their duties in such capacities or
against or affecting any properties of CU or CU Bank that individually or in
the aggregate has had or may reasonably be expected to have a material adverse
effect upon the business, financial condition or results of operations of CU
and its subsidiaries taken as a whole or to materially hinder or delay the
Merger or which may involve a payment by CU or CU Bank in excess of $100,000 of
applicable insurance coverage. Also, except as specifically identified in the
SEC Filings of CU or on Schedule 4.10, there are no material judgments,
decrees, stipulations or orders against CU or CU Bank enjoining either of them
or any of their respective directors, officers or employees in respect of, or
the effect of which is to prohibit, any business practice or the acquisition of
any property or the conduct of business in any area. Schedule 4.10 lists all
pending litigation in which CU, CU Bank, or a Predecessor is named as a
defendant, cross-defendant or third-party defendant.
4.11 Taxes.
(a) Each of CU and CU Bank has filed all Tax Returns
required to be filed by it or them on or before the date hereof and has paid
all Taxes, together with any interest and penalties owing in connection
therewith, shown on such Tax Returns to be due in respect of the periods
covered by such Tax Returns or which are required to be paid by them without
the filing of a Tax Return. Neither CU nor CU Bank has any known liability for
Taxes with respect to such periods in excess of the amounts so paid, except to
the extent accruals or reserves therefor are set forth in the CU Financial
Statements or as otherwise set forth in Schedule 4.11. Schedule 4.11 sets
forth a complete list of (i) all Tax Returns of CU and CU Bank for periods
ending before January 1, 1997 which have not yet been filed and the due dates
therefor; (ii) dates through which the Internal Revenue Service ("IRS"),
California Franchise Tax Board, and any other taxing authority has examined the
Tax Returns of CU and CU Bank; (iii) all Tax Returns of
25.
<PAGE> 36
CU and CU Bank for which the statute of limitations for the assessment of Taxes
has not yet expired, the expiration date(s) of such statutes of limitations and
whether such statutes of limitations have been requested to be extended; and
(iv) all Tax Returns of CU and CU Bank which have been examined by any taxing
authority since January 1, 1994 or are presently under examination by any
taxing authority and the results or status of such examinations. Except as set
forth on Schedule 4.11, neither the IRS nor any other taxing authority is now
asserting or to the knowledge of CU threatening or proposing to assert any
deficiency or claim for material additional Taxes of CU or CU Bank, nor is any
administrative or court proceeding pending with respect thereto. Except as set
forth in Schedule 4.11, neither CU nor CU Bank has entered into a closing
agreement or similar arrangement with the IRS or any other taxing authority
that is presently in effect. CU and CU Bank have delivered or made available
to BHI true and complete copies of all Tax Returns filed by CU and CU Bank for
all years for which the statute of limitations for the assessment of Taxes has
not yet expired. CU and CU Bank have complied with all information reporting
requirements under the Code. For purposes only of this Section 4.11(a) and the
first two sentences of Section 4.11(b), the terms "CU" and "CU Bank" shall
include all predecessor entities or transferors for whose Taxes CU and/or CU
Bank is responsible.
(b) As of the Effective Time, each of CU and CU Bank will
have timely filed all Tax Returns not due as of the date hereof but required to
be filed prior to the Effective Time (taking into account valid extensions) and
paid all Taxes, together with any interest and penalties owing in connection
therewith, shown on such Tax Returns to be due in respect of the periods
covered by such Tax Returns or which are required to be paid by them without
the filing of a Tax Return. The positions taken by CU and CU Bank in
connection with the Tax Returns described in the preceding sentence and in
Section 4.11(a) were (or in the case of the returns not yet filed, will be)
asserted with reasonable cause and in good faith. When available, CU and CU
Bank will deliver to BHI true and complete copies of their draft and final Tax
Returns for 1996. CU and CU Bank will not take any position on their 1996 Tax
Returns inconsistent with the federal income tax discussions in CU's SEC
Filings in 1996 with respect to any transactions described in such SEC Filings.
CU has no reason to believe that the tax opinions rendered in those
transactions were incorrect.
(c) Except as set forth in Schedule 4.11, Neither CU nor
CU Bank has agreed to or is required to make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise.
Except as set forth in Schedule 4.11 to the knowledge of CU or CU Bank, CU and
CU Bank have no liability for Taxes, including employment taxes, of any Person
other than CU or CU Bank under Treasury Regulation Section 1.1502-6, or as a
transferee or successor, or otherwise. Except as set forth in Schedule 4.11,
neither CU nor CU Bank has made, nor is either of them obligated to make, nor
is either of them a party to any agreement that could reasonably be expected to
obligate either of them to make, any payments
26.
<PAGE> 37
that are not deductible pursuant to Section 280G of the Code. Neither CU nor
CU Bank is a dealer within the meaning of Section 475 of the Code and the
applicable Treasury Regulations.
4.12 Compliance with Laws and Regulations. Neither CU nor
CU Bank is in default under or in breach of any provision of their respective
Articles of Incorporation or Bylaws, each as amended. Neither CU nor CU Bank
is in material violation of any law, ordinance, rule or regulation promulgated
by any governmental agency or regulatory authority having authority over either
of them, where such default, breach or violation would have a material adverse
effect on the business, financial condition or results of operations of CU and
its subsidiaries taken as a whole. Except for normal examinations conducted by
governmental agencies or regulatory authorities in the regular course of the
business of CU and CU Bank, or as set forth in SEC Filings of CU made prior to
the date hereof or in Schedule 4.12, (i) no governmental agency or regulatory
authority has initiated or, to the best knowledge of CU or CU Bank threatened,
any proceeding or investigation into the business or operations of CU, CU Bank
or any Predecessor since January 1, 1994 and (ii) neither CU nor CU Bank is
subject to any cease and desist order, written agreement, memorandum of
understanding or any similar regulatory action or order with any federal or
state governmental agencies or regulatory authorities, nor in receipt of any
extraordinary supervisory letter from, nor has it adopted any board resolution
at the request of, any of its regulators, nor been advised that any such
issuance or request is contemplated. Except as set forth in the Schedule 4.12,
there is no material unresolved violation, criticism or exception by any
government agency or regulatory authority with respect to any report or
statement relating to any examinations of CU, CU Bank or any Predecessor.
4.13 Performance of Obligations. CU and CU Bank have
performed in all material respects all of the obligations required to be
performed by them to date, are not in default under or in breach of any term or
provision of any material covenant, contract, lease, indenture or any other
covenant to which either of them is a party, is subject or is otherwise bound,
and no event has occurred that, with the giving of notice or the passage of
time or both, would constitute such default or breach, where such default or
breach would have a material adverse effect on the business, financial
condition or results of operations of CU and its subsidiaries taken as a whole.
Except for loans and leases made by CU Bank in the ordinary course of business,
to CU's knowledge, no party with whom CU or CU Bank has an agreement that is of
material importance to the business of CU and its subsidiaries taken as a whole
is in default thereunder.
4.14 Employees.
(a) There are no controversies pending or, to the
knowledge of CU threatened, between CU or CU Bank and any of their respective
employees that are likely to have a material adverse effect on the business,
financial condition or results of operations of CU and
27.
<PAGE> 38
its subsidiaries taken as a whole. Neither CU nor CU Bank is a party to any
collective bargaining agreement with respect to any of their respective
employees or any labor organization to which their respective employees or any
of them belong.
(b) Except as disclosed on Schedule 4.14 or as otherwise
specifically provided by this Agreement, there are no Understandings with
respect to the employment of any officer or employee of CU or CU Bank which are
not terminable by CU or CU Bank without liability on not more than thirty (30)
days' notice.
(c) Except as disclosed in the CU Financial Statements or
on Schedule 4.14, all material sums due for employee compensation have been
paid or accrued and all employer contributions for employee benefits, including
deferred compensation obligations, and any benefits under any CU Employee Plan
have been duly and adequately paid or provided for in accordance with plan
documents.
(d) Schedule 4.14 sets forth the name of each director,
officer, employee, agent or representative of CU or CU Bank and every other
Person entitled to receive any benefit, any increase in benefits, any
acceleration of vesting or benefits, or any payment of any amount under any
existing employment agreement, severance plan or other benefit plan or
Understanding as a result of the consummation of any transaction contemplated
in this Agreement (other than Montgomery Securities, Credit Suisse First Boston
Corporation, accountants, attorneys, proxy solicitors, information agents,
printers or other Persons providing services to CU or BHI of a type customarily
provided in connection with transactions like those contemplated by this
Agreement), and with respect to each such Person, the nature of such benefit,
increase or acceleration or the amount of such payment, the event triggering
the benefit increase, acceleration or payment, and the date of, and parties to,
such employment agreement, severance or other benefit plan or Understanding.
BHI has been provided with a complete and accurate listing of the names and
current annual salary rates of all Persons employed by CU or CU Bank showing
for each such Person the amounts paid or payable as salary, bonus payments and
any indirect compensation for the year ended December 31, 1996, the names of
all of the directors and officers of CU and CU Bank, and the names of all
Persons, if any, holding tax or other powers of attorney for CU or CU Bank.
4.15 Brokers and Finders. Except for financial advisory
services performed for CU by Montgomery Securities pursuant to an agreement
dated January 2, 1997, a copy of which has been furnished to BHI, neither CU
nor CU Bank nor any of its or their officers, directors, employees or agents,
has employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees in connection with
this Agreement or the transactions contemplated hereby.
28.
<PAGE> 39
4.16 Material Contracts. Except as set forth on Schedule
4.16 hereto (all items listed or required to be listed on Schedule 4.16 being
referred to herein as "CU Scheduled Contracts"), neither CU nor CU Bank is a
party or otherwise subject to:
(a) any employment, deferred compensation, bonus or
consulting contract that requires payment by CU or CU Bank of $100,000 or more
per annum;
(b) any advertising, brokerage, licensing, dealership,
representative or agency relationship or contract not terminable by CU or CU
Bank on 30 days' or less notice and which requires payment by CU or CU Bank of
$50,000 or more per annum;
(c) any contract or agreement that restricts CU (or would
restrict any Affiliate of CU after the Effective Time) from competing in any
line of business with any Person or using or employing the services of any
Person;
(d) any lease of real or personal property providing for
annual lease payments by or to CU or CU Bank in excess of $200,000 per annum
other than (i) financing leases entered into in the ordinary course of business
in which CU or CU Bank is lessor and (ii) leases of real property presently
used by CU Bank as banking offices;
(e) any mortgage, pledge, conditional sales contract,
security agreement, option, or any other similar agreement with respect to any
interest of CU or CU Bank (other than as mortgagor or pledgor in the ordinary
course of their banking business or as mortgagee, secured party or deed of
trust beneficiary in the ordinary course of their business) in personal
property having a value of $200,000 or more;
(f) any agreement to acquire equipment or any commitment
to make capital expenditures of $200,000 or more;
(g) other than agreements entered into in the ordinary
course of business, including sales of Other Real Estate Owned, any agreement
for the sale of any property or assets in which CU or CU Bank has an ownership
interest or for the grant of any preferential right to purchase any such
property or asset;
(h) any agreement for the borrowing of any money (other
than liabilities or interbank borrowings made in the ordinary course of their
banking business or reflected in the Financial Statements of CU);
(i) any guarantee or indemnification which involves the
sum of $200,000 or more, other than letters of credit or loan commitments
issued in the normal course of business;
29.
<PAGE> 40
(j) any supply, maintenance or landscape contracts not
terminable by CU or CU Bank without penalty on 30 days' or less notice and
which provide for payments in excess of $50,000 per annum;
(k) any material agreement which would be terminable
other than at the election of CU or CU Bank as a result of the consummation of
the transactions contemplated by this Agreement;
(l) any contract of participation with any other bank in
any loan entered into subsequent to December 31, 1995 in excess of $200,000 or
any sales with recourse of any kind to CU or CU Bank except the sale of
mortgage loans, Small Business Administration loans, servicing rights,
repurchase or reverse repurchase agreements, securities or other financial
transactions in the ordinary course of business;
(m) any other Understanding of any other kind not
terminable on 30 days' or less notice which involves future payments or
receipts or performances of services or delivery of items requiring payment of
$50,000 or more to or by CU or CU Bank other than payments made under or
pursuant to loan agreements, participation agreements and other agreements for
the extension of credit in the ordinary course of their business; or
(n) any Understanding that is otherwise material to the
business, financial condition or results of operations of CU and its
subsidiaries taken as a whole.
CU has made available to BHI copies of all CU Scheduled Contracts, including
all amendments and supplements thereto.
4.17 Absence of Material Change. Except as set forth in
CU's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, or
in other SEC Filings of CU, or Schedule 4.17, since December 31, 1995, the
businesses of CU and CU Bank have been conducted only in the ordinary course,
substantially in the same manner as theretofore conducted and there has not
occurred: (i) any event that has had or may reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operations of CU and its subsidiaries taken as a whole; (ii) any amendment to
the Articles of Incorporation or Bylaws of CU or CU Bank; (iii) any
declaration, setting aside or payment of any dividend or any other distribution
in respect of the capital stock of CU other than regular quarterly dividends;
or (iv) any change by CU or CU Bank in accounting principles or methods or tax
methods, except as required or permitted by the Financial Accounting Standards
Board or by any governmental agencies or regulatory authorities having
jurisdiction over CU or CU Bank.
4.18 Licenses and Permits. CU and CU Bank have all
material licenses and permits that are necessary for the conduct of their
respective businesses, and such licenses are in
30.
<PAGE> 41
full force and effect, except for any failure to be in full force and effect
that would not, individually or in the aggregate, have a material adverse
effect on the business, financial condition, or results of operations of CU and
its subsidiaries taken as a whole. The properties and operations of CU and CU
Bank are and have been maintained and conducted, in all material respects, in
compliance with all applicable laws and regulations.
4.19 No Material Liabilities; Environmental.
(a) Schedule 4.19 sets forth all material liabilities of
CU and CU Bank, including liabilities for Hazardous Substances or under any
Environmental Law, contingent or otherwise, that are not reflected or reserved
against in the CU Financial Statements, except for liabilities incurred or
accrued since September 30, 1996 in the ordinary course of business which have
not had and cannot reasonably be expected to have a material adverse effect on
the business, financial condition or results of operations of CU and its
subsidiaries taken as a whole. Except as set forth in Schedule 4.19, neither
CU nor CU Bank knows of any basis for the assertion against it of any
liability, obligation or claim that could reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operations of CU and its subsidiaries taken as a whole.
(b) To CU's knowledge, all of the properties and
operations of CU and CU Bank are in compliance in all material respects with
all material Environmental Laws applicable to such properties and operations.
(c) To CU's knowledge, CU and CU Bank have each obtained
all material permits, licenses, and authorizations which are required for its
and their operations under Environmental Laws.
(d) Except as set forth in Schedule 4.19 or except to the
extent that as a result thereof no material liability has been incurred or
could reasonably be expected to be incurred by CU or CU Bank, to CU's
knowledge, no Hazardous Substances exist on, about, or within or have been
used, generated, stored, transported, disposed of on, or released from, any of
the properties of CU or CU Bank except in accordance in all material respects
with Environmental Laws and there are no underground storage tanks or surface
impoundments on or in any such properties. Neither CU nor CU Bank has any
knowledge that any prior owners, occupants or operators of any such properties
ever deposited, disposed of, or allowed to be deposited or disposed of, in, on,
or under or handled or processed on, or released, emitted or discharged from,
such properties any Hazardous Materials except in accordance in all material
respects with Environmental Laws, or that any prior or present owners,
occupants or operators of any properties in which it holds a security interest,
mortgage or other lien or interest, deposited or disposed of, in, on or under
or handled and/or processed on, or released, emitted or discharged from, such
properties any Hazardous Material except in accordance in all material respects
with Environmental Laws, that
31.
<PAGE> 42
in any such case has caused or is reasonably likely to cause CU or CU Bank to
incur a material liability. The use which each of CU and CU Bank has made,
makes or intends to make of its properties will not result in the use,
generation, storage, transportation, accumulation, disposal, or release of any
Hazardous Substance on, in, or from any such properties except in accordance in
all material respects with applicable Environmental Laws.
(e) Except as set forth in Schedule 4.19, there is no
action, suit, proceeding, investigation, or inquiry before any court,
administrative agency or other governmental authority pending, or, to the
knowledge of CU, threatened against CU or CU Bank relating in any way to any
violation of any applicable Environmental Law. Except as set forth in Schedule
4.19: to the knowledge of CU, neither it nor CU Bank has any material liability
for remedial action with respect to an Environmental Law, nor has CU or CU Bank
received any written requests for information relating to any material
violation of any Environmental Law from any governmental authority with
respect to the condition, use, or operation of any of its properties nor has
either of them received any notice from any governmental authority or any
written notice from any other Person with respect to any material violation of
or material liability for any remedial action under any Environmental Law.
(f) CU has made available to BHI true copies of all
environmental assessments and reports obtained by CU or CU Bank with respect to
those properties of CU or CU Bank owned, operated or leased by CU or CU Bank as
of December 31, 1996, and will after the date of this Agreement upon request of
BHI make available to BHI environmental assessments and reports in the
possession of CU or CU Bank concerning other properties of CU and CU Bank.
(g) As used in this Section 4.19, the term "properties"
shall include: all real property now or previously owned, operated or leased
by CU or CU Bank or any Predecessor, all property as to which CU or CU Bank
holds any security interest, deed of trust, mortgage or other lien, and all
property of which CU or CU Bank could be deemed an "owner" or "operator" under
any applicable Environmental Law; provided that solely for purposes of
representations and warranties made in this Section 4.19 on the date of this
Agreement with respect to properties that are not presently owned, operated or
leased by CU or CU Bank and with respect to properties in which CU or CU Bank
holds any security interest, deed of trust, mortgage or other lien, the
"knowledge" of CU Bank as of the date of this Agreement shall be limited to the
actual knowledge of the members of CU's Senior Management Group, without
inquiry of such officers' subordinates. Such knowledge limitation shall not
apply with respect to the representations and warranties under this Section
4.19 to be made as of the Closing Date (and Schedule 4.19 shall be updated
accordingly within 30 days following execution of this Agreement), but (x) the
truth and accuracy of the representations made as of the date of this Agreement
and those made as of the Closing Date shall in each such case be determined by
reference to the knowledge standard applicable on such date and (y) any
variations between information disclosed pursuant to such
32.
<PAGE> 43
representations made as of the date of this Agreement as those made as of the
Closing Date that result from application of such alternate knowledge standards
shall not constitute a failure of a condition precedent under Article XI unless
such variations have or could reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of CU and
its subsidiaries taken as a whole.
4.20 Employee Benefit Plans.
(a) Schedule 4.20 sets forth all employee benefit plans
and any collective bargaining agreements or labor contracts in which CU or CU
Bank participates, or by which they are bound, including, without limitation;
(i) any profit sharing, stock bonus, employee stock ownership, deferred
compensation, bonus, stock option, stock appreciation rights, phantom stock,
stock purchase, pension, retainer, consulting, retirement, welfare or incentive
plan or agreement whether legally binding or not; (ii) any plan providing for
"fringe benefits" to its employees, including but not limited to vacation,
holiday, sick leave, disability, severance, medical, hospitalization, dental,
vision, counseling, life insurance and other insurance plans, personal leave,
employee discount, educational, and related benefits; (iii) any written
employment agreement and any other employment agreement not terminable at will;
or (iv) any other "employee benefit plan" (within the meaning of Section 3(3)
of ERISA) ("Employee Benefit Plan") (collectively, the "CU Employee Plans").
Except as set forth in Schedule 4.20, (i) CU is in compliance in all material
respects with the reporting and disclosure requirements of Part 1 of Subtitle
IB of ERISA and the corresponding provisions of the Code to the extent
applicable to all Employee Benefit Plans; (ii) CU has performed in all material
respects all of its obligations under all CU Employee Plans required to be
performed heretofore; and (iii) there are no actions, suits or claims pending
or, to the knowledge of CU or CU Bank, threatened against any CU Employee Plan
or the assets of such plans, and to the best knowledge of CU, no facts exist
which are likely to give rise to any material actions, suits or claims against
such plans or the assets of such plans. CU or CU Bank shall notify BHI in
writing of any such actions, suits or claims existing after the date of this
Agreement but before the Effective Time.
(b) The "employee pension benefit plans" (within the
meaning of Section 3(2) of ERISA) ("Employee Pension Benefit Plan") described
on Schedule 4.20 have been duly authorized by the Board of Directors of CU.
Except as set forth in Schedule 4.20, each such plan and associated trust
intended to be qualified under Section 401(a) and to be exempt from tax under
Section 501(a) of the Code, respectively, has either received a favorable
determination letter from the IRS, has applied for such a determination letter
(or will apply for such a determination letter) before the expiration of the
remedial amendment period set forth in Section 401(b) of the Code, as the IRS
may extend such period, and to the knowledge of CU no event has occurred that
will or is likely to give rise to disqualification of any such plan which is
intended to be qualified under Section 401(a) of the Code or loss of the
exemption from tax of any such trust which is intended to be exempt from tax
under Section 501(a) of the Code. Except
33.
<PAGE> 44
as disclosed in Schedule 4.20, no event has occurred that will or is likely to
subject any such plans to material tax under Section 511 of the Code. Except
as disclosed in Schedule 4.20, none of such plans has engaged in a merger or
consolidation with any other plan or transferred assets or liabilities from any
other plan. No prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) has occurred with respect to any of such
plans which could subject CU or CU Bank to material excise tax or penalty. All
costs of each Employee Pension Benefit Plan have been provided for on the basis
of consistent methods in accordance with sound actuarial assumptions and
practices. No Employee Pension Benefit Plan maintained by CU or CU Bank, or any
entity which is part of a group which includes CU or CU Bank and which is
treated as a single employer under Section 414 of the Code ("Controlled Group
Member") has incurred any "accumulated funding deficiency" (as defined in
Section 302(2) of ERISA), whether or not waived, taking into account
contributions made within the period described in Section 412(c)(10) of the
Code; nor has CU or CU Bank failed to make any contributions or pay any amount
due and owing as required by law or the terms of any Employee Benefit Plan or
employment agreement. No nondeductible contributions (within the meaning of
Section 4972 of the Code) have been made with respect to any Employee Pension
Benefit Plan which could subject CU or CU Bank to any excise tax or penalty.
Since the last valuation date for each Employee Pension Benefit Plan, there has
been no amendment or change to such plan that would increase the amount of
benefits thereunder.
(c) Except as set forth on Schedule 4.20, neither CU nor
CU Bank (nor any Controlled Group Member) sponsors or participates in, or has
sponsored or participated in, any Employee Pension Benefit Plan to which
Section 4021 of ERISA applies that would create a liability under Title IV of
ERISA.
(d) Neither CU nor CU Bank (nor any Controlled Group
Member) sponsors or participates in, or has sponsored or participated in, any
Employee Pension Benefit Plan that is a "multiemployer plan" (within the
meaning of Section 3(37) of ERISA) or "multiple employer plan" (within the
meaning of Section 413 of the Code).
(e) All group health plans of CU or CU Bank (including
any plans of Affiliates of CU that must be taken into account under Section
162(i) or (k) of the Code as in effect immediately prior to the Technical and
Miscellaneous Revenue Act of 1988 and Section 4980B of the Code) have been
operated in compliance in all material respects with the group health plan
continuation coverage requirements and notice requirements of Section 4980B of
the Code and Sections 601 through 608 of ERISA to the extent such requirements
are applicable.
(f) To the best knowledge of CU or CU Bank, there have
been no acts or omissions by CU or CU Bank that have given rise to or may give
rise to material fines, penalties,
34.
<PAGE> 45
or related charges under Sections 502(c) or (i) or 4071 of ERISA or Chapter 43
of the Code which could be imposed on CU or CU Bank.
(g) Except as described in Section 4.20(j), neither CU or
CU Bank maintains any Employee Benefit Plan or employment agreement pursuant to
which any benefit or other payment will be required to be made by CU or CU Bank
to, or pursuant to which any benefit or other payment will accrue or vest in,
any director, officer or employee of CU or CU Bank, in either case as a result
of the consummation of the transactions contemplated by the Agreement.
(h) No "reportable event," as defined in Section 4043 of
ERISA, has occurred with respect to any of the Employee Pension Benefit Plans.
(i) All amendments required to bring each of the Employee
Pension Benefit Plans into conformity with all of the applicable provisions of
Section 401(a) of the Code have been made, or will be made before the
expiration of the remedial amendment period, if applicable, as set forth under
Section 401(b) of the Code, as such period may be extended by the IRS.
(j) CU has furnished BHI with true and correct copies of
all documents with respect to the plans and agreements referred to in Schedule
4.20 delivered as of the date of the Agreement, including all amendments and
supplements thereto, and all related summary plan descriptions. For each of
the Employee Benefit Plans of CU and CU Bank referred to in Schedule 4.20
delivered as of the date of the Agreement, CU has furnished BHI with true and
correct copies of (i) to the extent required to be filed, the Form 5500, 5500-C
or 5500-R which was filed in each of the three most recent plan years,
including without limitation, all schedules thereto and all financial
statements with attached opinions of independent accountants to the extent
required; (ii) if applicable, the most recent determination letter from the
IRS; (iii) if applicable, the statement of assets and liabilities as of the
most recent valuation date; and (iv) if applicable, the statement of changes in
fund balance and in financial position or the statement of changes in net
assets available for benefits under each of said plans for the most recently
ended plan year. The documents referred to in subdivisions (iii) and (iv)
fairly present the financial condition of each of said plans as of and at such
dates and the results of operations of each of said plans, all in accordance
with generally accepted accounting principles or on the cash method of
accounting applied on a consistent basis.
(k) Except as set forth in Schedule 4.20, neither CU nor
CU Bank has any obligation to provide, or any liability with respect to, any
post-retirement benefits for any current or former employee under any "welfare
benefit plan" (within the meaning of Section 3(1) of ERISA).
35.
<PAGE> 46
(l) The written terms of each of the CU Employee Plans
and any related trust agreement, group annuity contract, insurance policy or
other agreement, have been administered in substantial compliance with the
applicable requirements of ERISA.
(m) All contributions to CU Employee Plans for all
periods ending prior to the Effective Time (including periods from the first
day of the current plan year to the Effective Time) will be made or accrued
prior to the Effective Time by CU or CU Bank, as applicable, in accordance with
prior practice.
(n) All material expenses and liabilities up to the
Effective Time with respect to all of the CU Employee Plans have been, or will
on the Effective Time, be fully and properly accrued on CU's books and records
(subject to normal recurring audit adjustments in the case of unaudited books,
records, and financial statements) to the extent required by generally accepted
accounted principles.
4.21 Corporate Records. The minute books of CU and CU
Bank accurately reflect (or in the case of meetings held between December 31,
1996 and the date of this Agreement will in due course so reflect) all material
actions taken by the respective shareholders, boards of directors and
committees of CU and CU Bank and contain true and complete copies of their
Articles of Incorporation, Bylaws and other charter documents, and all
amendments thereto.
4.22 Offices and ATMs. Schedule 4.22 sets forth the
headquarters of CU and CU Bank (identified as such) and each of the offices and
automated teller machines ("ATMs") maintained and operated by CU Bank
(including, without limitation, representative and loan production offices and
operations centers) and the location thereof. Except as set forth on Schedule
4.22, neither CU nor CU Bank maintains any other office or ATM nor conducts
business at any other location. Neither CU nor CU Bank has applied for or
received permission to open any additional branch or operate at any other
location.
4.23 Operating Losses. Schedule 4.23 sets forth a list of
any Operating Loss (as herein defined) which to the knowledge of CU or CU Bank
has occurred at CU Bank during the period after September 30, 1996, and any
other action or omission known to CU or CU Bank that might reasonably be
expected to result in the incurrence of any individual Operating Loss after
September 30, 1996, which, net of any insurance proceeds payable in respect
thereof, would exceed $100,000. For purposes of this Agreement "Operating Loss"
means any loss resulting from cash shortages, lost or misposted items, disputed
clerical and accounting errors, forged checks, payment of checks over stop
payment orders, merchant credit card processing, counterfeit money, wire
transfers made in error, theft, robberies, defalcations, check kiting,
fraudulent use of credit cards or electronic teller machines or other similar
acts or occurrences.
36.
<PAGE> 47
4.24 Loan Portfolio. All loans or other extensions of
credit, and guaranties, security agreements or other agreements supporting any
loans or extensions of credit, and investments of CU or CU Bank are, in all
material respects, legal, enforceable and authorized under applicable federal
and state laws and regulations, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and by general equitable principles. Except
as previously disclosed in writing to BHI, no loans or investments held by CU
Bank are, as of December 31, 1996 (i) more than ninety (90) days past due with
respect to any scheduled payment of principal or interest; (ii) classified by
any bank regulatory authority or any unit of CU or CU Bank as "Loss,"
"Doubtful," "Substandard," "Special Mention," or "Criticized" or any comparable
classification by any bank regulatory authority or any unit of CU or CU Bank;
or (iii) on a non-accrual status in accordance with CU Bank's loan review
procedures. No material amount of any such investments is subject to any
restrictions, contractual, statutory or other, that would materially impair the
ability of the entity holding such investment to dispose freely of any such
investments at any time, except restrictions on the public distribution or
transfer of any such investments under the Securities Act and the regulations
thereunder or state securities laws and pledges or security interests given in
connection with government deposits. Except as previously disclosed in writing
to BHI, CU Bank has no loans, leases or other extensions of credit outstanding,
or commitments to make any loans, leases or other extensions of credit to any
Affiliates of CU or CU Bank which are not on substantially the same terms
(including interest rates, repayment terms and collateral) as would be
available for comparable transactions with Persons of similar creditworthiness
who are not Affiliates of CU or CU Bank. For each outstanding loan or extension
of credit or commitment to make a loan or extension of credit where the
original principal amount is in excess of $100,000 and which by its terms is
either secured by collateral ("Secured Loan") or supported by a guaranty or
similar obligation ("Covered Loan"), in the case of each Secured Loan, to the
best knowledge of CU Bank, the security interest has been perfected and, in the
case of each Covered Loan, the guaranty or similar obligation has been executed
and delivered to CU Bank and is still in full force and effect.
4.25 Power of Attorney. Neither CU nor CU Bank has
granted any Person a power of attorney or similar authorization that is
presently in effect or outstanding other than in connection with a tax audit.
4.26 Disclosure Documents, Reports and Applications. None
of the information supplied or to be supplied by or on behalf of CU (the "CU
Supplied Information") for inclusion in the S-4 or the Proxy Statement, or
incorporated by reference therein, or any amendments or supplements thereto
will, at the respective times such documents are filed or become effective, and
in the case of the Proxy Statement or any amendment thereof or supplement
thereto at the date it is mailed to shareholders of CU and at the time of the
CU Shareholders' Meeting, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in
37.
<PAGE> 48
light of the circumstances under which they were made, not misleading. CU
represents, warrants and agrees that through the Effective Time of the Merger,
each of the reports, registrations, statements, applications and other filings
filed by it or CU Bank with the SEC, the FRB or any other governmental agency
or regulatory authority will be filed on a timely basis, will comply in all
material respects with all of the applicable statutes, rules and regulations
enforced or promulgated by the governmental agency or regulatory authority with
which it will be filed and that the information contained therein will be true
and correct in all material respects (and in the case of such filings with the
SEC will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they will be made, not
misleading). Any financial statement contained in any such report,
registration, statement, application or other filing that is intended to
present the financial position of CU and/or CU Bank will fairly present the
financial position of such entities or entity and will be prepared in
accordance with generally accepted accounting principles or applicable
regulatory accounting principles consistently applied during the periods
involved. Notwithstanding anything to the contrary set forth in this Section
4.26, CU makes no representation or warranty with respect to any information
supplied by and relating to BHI.
4.27 Accuracy of Information Furnished. The
representations and warranties made by CU or CU Bank hereby contain no
statements of material fact which are untrue or misleading, or omit to state
any material fact which is necessary under the circumstances to prevent the
statements contained herein from being misleading.
4.28 Loan Servicing Portfolio. Except as set forth on
Schedule 4.28, CU Bank services no loans owned in whole or in part by other
parties.
4.29 Certain Interests. Schedule 4.29 sets forth a
description of each instance in which an executive officer or director of CU or
CU Bank or any such Person's related interests (as defined under FRB Regulation
"O") (a) has any material interest in any property, real or personal, tangible
or intangible, used by or in connection with the business of CU or CU Bank; (b)
is indebted to CU or CU Bank except for normal business expense advances; or
(c) is a creditor (other than as a deposit holder of CU Bank) of CU or CU Bank
except for amounts due under normal salary and related benefits or
reimbursement of ordinary business expenses. Except as set forth in Schedule
4.29, all such arrangements are arm's length transactions pursuant to normal
commercial terms and conditions.
4.30 Investment Securities. All investment securities
held by CU or CU Bank are legal investments under applicable law and
regulations. Each of CU and CU Bank has good and marketable title to all
securities held by it (except securities sold under repurchase agreements or
held in any fiduciary or agency capacity), free and clear of any mortgage,
lien, pledge or encumbrance, except to the extent such securities are pledged
in the ordinary course of
38.
<PAGE> 49
business consistent with prudent banking practice to secure obligations of CU
or CU Bank. Such securities are valued on the books of CU in accordance with
generally accepted accounting principles.
4.31 Community Reinvestment Act. Each of CU Bank, Home
and Corporate Bank received a rating of "satisfactory" in its most recent
examination or interim review with respect to the Community Reinvestment Act.
CU Bank has not been advised of any supervisory concerns regarding CU Bank's
compliance with the Community Reinvestment Act.
4.32 Knowledge as to Conditions. CU knows of no reason
why the approvals, consents and waivers of governmental authorities referred to
in Section 9.3 should not be obtained without the imposition of any burdensome
condition of the type referred to in Section 11.4.
4.33 Allowance for Possible Loan Losses. The allowance
for loan and lease losses for CU Bank is adequate in accordance with generally
accepted accounting principles and regulatory accounting principles.
4.34 Listing of Loans. Copies, in writing, have been made
available to BHI of the detailed listing of all loans and notes receivable of
CU and CU Bank as of December 31, 1996, including participations, with the
outstanding principal balance of each such loan and note receivable, and the
past due status of any loan or note receivable, and such copies reflect
correctly the detail of trial balance totals in all material respects as of the
date of such reports.
4.35 Derivative Transactions. Except for repurchase
agreements and reverse repurchase agreements, and except as disclosed on
Schedule 4.35, neither CU nor CU Bank is a party to a transaction in or
involving forwards, futures, options on futures, swaps or other derivative
instruments.
4.36 Trust Administration. Neither CU nor CU Bank
presently exercises trust powers, including, but not limited to, trust
administration, and neither they nor any Predecessor has exercised such trust
powers for a period of at least 3 years prior to the date hereof. The term
"trusts" as used in this Section 4.36 includes (i) any and all common law or
other trusts between an individual, corporation or other entities and CU, CU
Bank or a Predecessor, as trustee or co-trustee, including, without limitation,
pension or other qualified or nonqualified employee benefit plans,
compensation, testamentary, inter vivos, and charitable trust indentures; (ii)
any and all decedents' estates where CU, CU Bank or a Predecessor is serving or
has served as a co-executor or sole executor, personal representative or
administrator, administrator de bonis non, administrator de bonis non with will
annexed, or in any similar fiduciary capacity; (iii) any and all guardianships,
conservatorships or similar positions where CU, CU Bank or a Predecessor is
serving or has served as a co-grantor or a sole grantor or a conservator or a
39.
<PAGE> 50
co-conservator of the estate, or any similar fiduciary capacity; and (iv) any
and all agency and/or custodial accounts and/or similar arrangements, including
plan administrator for employee benefit accounts, under which CU, CU Bank or
Predecessor is serving or has served as an agent or custodian for the owner or
other party establishing the account with or without investment authority.
4.37 Accounting Records.
(a) Each of CU and CU Bank maintains records that
accurately, validly and fairly reflect its transactions and dispositions of
assets and maintains a system of internal accounting controls, policies and
procedures sufficient to make it reasonable to expect that (i) such
transactions are executed in accordance with its management's general or
specific authorization, (ii) such transactions are recorded in conformity with
generally accepted accounting principles and in such a manner as to permit
preparation of financial statements in accordance with generally accepted
accounting principles and any other criteria applicable to such statements and
to maintain accountability for assets, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences, and (v) records of such transactions are retained, protected and
duplicated in accordance with prudent banking practices and applicable
regulatory requirements.
(b) The data processing equipment, data transmission
equipment, related peripheral equipment and software used by CU and CU Bank in
the operation of their businesses (including any disaster recovery facility) to
generate and retrieve such records (whether owned or leased by CU or CU Bank,
or provided under any agreement or other arrangement with a third party for
data processing services) are adequate for the needs of CU and CU Bank.
(c) CU has made available to BHI for inspection all
management letters and opinions and all reviews, correspondence, and other
documents in the files of CU and CU Bank, prepared by any certified public
accounting firm and delivered to CU, CU Bank or any of its Predecessors since
January 1, 1994.
4.38 Intellectual Property Rights. To CU's knowledge,
Schedule 4.38 contains a true, correct and complete list of all trademarks,
service marks and patents used by CU or CU Bank that are material to the
conduct of their respective businesses. To CU's knowledge, CU or CU Bank owns,
has the exclusive right to use, sell, license or dispose of, has the exclusive
right to bring actions for the infringement of, and has taken all appropriate
actions and made all applicable applications and filings pursuant to any
applicable laws to perfect or protect its interest in, all such trademarks,
services marks and patents. Neither the execution, delivery and performance of
this Agreement nor the consummation of the Merger or any of the other
40.
<PAGE> 51
transactions contemplated hereby will materially impair the right of CU, CU
Bank or the Surviving Company to use, sell, license or dispose of or to bring
any action for the infringement of, any such trademarks, service marks or
patents. CU and CU Bank have taken all reasonable steps necessary or
appropriate to safeguard and maintain their respective proprietary rights in
all such trademarks, service marks and patents.
4.39 1996 Financial Statements. The audited consolidated
financial statements of CU and its subsidiaries included in CU's Annual Report
on Form 10-K for the year ended December 31, 1996 will with respect to the
financial data reported thereon conform in all respects to the summary
consolidated statements of income, selected financial data and summary
consolidated statements of financial condition included in the CU news release
dated January 29, 1997 (except to the extent of reductions in net income not
exceeding $200,000 in the aggregate that result from normal recurring audit
adjustments).
4.40 Pooling of Interests. The merger of Home with CU has
been and will be accounted for on a pooling of interests basis, and no event
has occurred or is reasonably foreseeable (including any transaction
contemplated by this Agreement) that could alter such treatment.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BHI
BHI represents and warrants to CU as follows:
5.1 Incorporation, Standing and Power. BHI has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the State of Hawaii and is registered as a bank holding company
under the BHC Act. BHI has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as
presently conducted. BHI is licensed to do business in all jurisdictions where
such licensing is required, except where the failure to be so licensed would
not have a material adverse effect on the business, financial condition,
results of operations or prospects of BHI and its subsidiaries on a
consolidated basis.
5.2 Capitalization. As of the date of this Agreement,
the authorized capital stock of BHI consists of 100,000,000 shares of BHI
Stock, of which 39,750,880 shares were outstanding on February 21, 1997, and
20,000,000 shares of preferred stock, none of which are outstanding. All of the
outstanding shares of BHI Stock are duly authorized, validly issued, fully paid
and nonassessable, and are not subject to preemptive rights.
41.
<PAGE> 52
5.3 Financial Statements. BHI has previously furnished
to CU a copy of the Financial Statements of BHI. The Financial Statements of
BHI (as well as the financial statements of BHI included in any of its
subsequent Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q): (a)
present or will present fairly the consolidated financial condition of BHI and
its subsidiaries as of the respective dates indicated and their consolidated
results of operations and changes in financial position/cash flow, as
applicable, for the respective periods then ended (subject, in the case of the
unaudited consolidated interim financial statements, to normal recurring
adjustments and the absence of certain footnote information); (b) have been or
will be prepared in accordance with generally accepted accounting principles
consistently applied (except as otherwise indicated in such financial
statements for periods ended prior to the date of this Agreement); (c) did or
will set forth as of the respective dates indicated adequate reserves for all
foreseeable loan losses and other contingencies; and (d) are or will be in
accordance with the books and records of BHI and its subsidiaries, which books
and records are and will be complete and accurate in all material respects and
which have been and will have been maintained in accordance with good business
practices.
5.4 SEC/Regulatory Filings. Since January 1, 1994, BHI
has filed all material reports, registrations, and statements that were
required to be filed with the SEC and any other applicable federal, state or
local governmental agency or regulatory authority. BHI has previously furnished
to CU a copy of the SEC Filings of BHI. As of their respective dates, the SEC
Filings of BHI complied in all material respects with the requirements of their
respective forms and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
5.5 Authority of BHI. The execution and delivery by BHI
of this Agreement and the Agreement of Merger, and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of BHI, including without limitation
approval by a vote of the board of directors of BHI, and this Agreement is, and
the Agreement of Merger will be, a valid and binding obligation of BHI,
enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, liquidation, receivership,
conservatorship, insolvency, moratorium or other similar laws affecting the
rights of creditors generally and by general equitable principles and by
applicable law and regulations affecting bank holding companies. Except as set
forth in Schedule 5.5, neither the (i) execution and delivery by BHI of this
Agreement or the Agreement of Merger; (ii) the consummation of the Merger or
the transactions contemplated herein; nor (iii) compliance by BHI with any of
the provisions hereof, will: (a) conflict with or result in a breach of any
provision of its Articles of Incorporation, as amended, or Bylaws, as amended;
(b) constitute a breach of or result in a default (or give rise to any rights
of termination, cancellation or acceleration, or any right to acquire any
securities or assets) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, franchise, license, permit, agreement or
42.
<PAGE> 53
other instrument or obligation to which BHI or any BHI subsidiary is a party,
or by which BHI or any BHI subsidiary or any of their respective properties or
assets is bound, if in any such circumstances, such event could have
consequences materially adverse to BHI and its subsidiaries taken as a whole,
or (c) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to BHI or any BHI subsidiary or any of their respective properties
or assets, if such violation could have consequences materially adverse to BHI
and its subsidiaries taken as a whole. Except as set forth in the BHI
Schedules, no consent of, approval of, notice to or filing with any
governmental agency or regulatory authority having jurisdiction over any aspect
of the business or assets of BHI, and no consent of, approval of or notice to
any other Person that if not obtained or given would have consequences
materially adverse to BHI and its subsidiaries taken as a whole, is required in
connection with the execution and delivery by BHI of this Agreement or the
Agreement of Merger, or the consummation by BHI of the Merger and transactions
contemplated hereby, except (i) such approvals as may be required by the FRB,
the Superintendent and the Commissioner; (ii) the filings with DCCA, the
California Franchise Tax Board and the California Secretary pursuant to Section
3.2; and (iii) such filings, approvals, consents or waivers as are required
under federal or state securities laws.
5.6 Litigation. Except as specifically identified in the
SEC Filings of BHI or Schedule 5.6, there is no private or governmental suit,
claim, action or proceeding pending, nor to BHI's knowledge, threatened against
BHI or any BHI subsidiary or against any of their respective directors,
officers or employees relating to the performance of their duties in such
capacities or against or affecting any properties of BHI or its subsidiaries
that has had or may reasonably be expected to have a material adverse effect
upon the business, financial condition or results of operations of BHI and its
subsidiaries taken as a whole or to materially hinder or delay the Merger.
5.7 Compliance with Laws and Regulations. Neither BHI
nor any BHI subsidiary is in default under or in breach of any provision of its
Articles of Incorporation or Association, as amended, as the case may be, or
Bylaws, as amended. Neither BHI nor any BHI subsidiary is in material
violation of any law, ordinance, rule or regulation promulgated by any
governmental agency having authority over any of them, where such default,
breach or violation would have a material adverse effect on the business,
financial condition or results of operations of BHI and its subsidiaries taken
as a whole. Except for normal examinations conducted by governmental agencies
and regulatory authorities in the regular course of the business of BHI and its
subsidiaries, or as set forth in Schedule 5.7, (i) no governmental agency or
regulatory authority has initiated or, to the best knowledge of BHI threatened,
any proceeding or investigation into the business or operations of BHI or its
banking subsidiaries since January 1, 1994 and (ii) neither BHI nor any BHI
banking subsidiary is subject to any cease and desist order, written agreement,
memorandum of understanding or any similar regulatory action or order with any
federal or state governmental agencies or regulatory authorities, nor in
receipt of any extraordinary supervisory letter from, nor has it adopted any
board resolution at the request
43.
<PAGE> 54
of, any of its regulators, nor been advised that any such issuance or request
is contemplated. Except as set forth in Schedule 5.7, there is no material
unresolved violation, criticism or exception by any government agency or
regulatory authority with respect to any report or statement relating to any
examinations of BHI or any BHI banking subsidiary by any governmental agency or
regulatory authority with respect to any report or statement relating to any
examinations of BHI or such subsidiary.
5.8 Brokers and Finders. Other than financial advisory
services performed for BHI by Credit Suisse First Boston Corporation, neither
BHI nor any of its subsidiaries nor any of its or their officers, directors,
employees or agents, has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees in connection with this Agreement or the transactions
contemplated hereby.
5.9 Absence of Material Change. Except as set forth in
BHI's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996,
or in other SEC Filings of BHI, or in Schedule 5.9, since December 31, 1995
there has not occurred any event that has had or may reasonably be expected to
have a material adverse effect on the business, financial or results of
operations of BHI and its subsidiaries taken as a whole or any change by BHI in
accounting principles or methods or tax methods, except as required or
permitted by the Financial Accounting Standards Board or by any governmental
agencies or regulatory authorities having jurisdiction over BHI or its
subsidiaries.
5.10 Disclosure Documents, Reports and Applications. None
of the information supplied or to be supplied by or on behalf of BHI (the "BHI
Supplied Information") for inclusion in the S-4 or the Proxy Statement, or
incorporated by reference therein, or any amendments or supplements thereto
will, at the respective times such documents are filed or become effective, and
in the case of the Proxy Statement or any amendment thereof or supplement
thereto at the date it is mailed to shareholders of CU and at the time of the
CU Shareholders' Meeting, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. BHI represents, warrants and agrees that
through the Effective Time of the Merger, each of the reports, registrations,
statements, applications and other filings filed by it with the SEC, FRB or any
other governmental agency or regulatory authority will be filed on a timely
basis, will comply in all material respects with all of the applicable
statutes, rules and regulations enforced or promulgated by the governmental
agency or regulatory authority with which it will be filed, and that the
information contained therein will be true and correct in all material respects
(and in the case of such filings with the SEC will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they will be made, not misleading). Any financial
statement contained in any such report, registration, statement, application or
other filing that is
44.
<PAGE> 55
intended to present the financial position of BHI will fairly present the
financial position of BHI and will be prepared in accordance with generally
accepted accounting principles or applicable regulatory accounting principles
consistently applied during the periods involved. Notwithstanding anything to
the contrary set forth in this Section 5.10, BHI makes no representation or
warranty with respect to any information supplied by and relating to CU or CU
Bank.
5.11 Accuracy of Information Furnished. The
representations and warranties made by BHI hereby or in the schedules hereto
contain no statements of material fact which are untrue or misleading, or omit
to state any material fact which is necessary under the circumstances to
prevent the statements contained herein or in such schedules from being
misleading.
5.12 Capital Stock. The BHI Stock issuable to holders of
CU Stock upon consummation of the Merger will be duly authorized, validly
issued, fully paid and nonassessable at the Effective Time.
5.13 Knowledge as to Conditions. BHI knows of no reason
why the approvals, consents and waivers of governmental agencies and regulatory
authorities referred to in Section 9.3 should not be obtained without the
imposition of any burdensome condition of the type referred to in Section 11.4.
ARTICLE VI
COVENANTS OF CU
PENDING EFFECTIVE TIME OF THE MERGERS
CU covenants and agrees with BHI as follows:
6.1 Limitation on CU's and CU Bank's Conduct Prior to
Effective Time. Between the date hereof and the Effective Time, except as
contemplated by this Agreement, CU and CU Bank will conduct their respective
businesses only in the normal and customary manner and in accordance with sound
banking practices, and CU and CU Bank shall not, without the prior written
consent of BHI (which shall not be unreasonably withheld):
(a) issue any CU Stock (except pursuant to the exercise
of CU Options outstanding as of the date hereof and those warrants identified
in Section 4.2(a)), CU preferred stock, CU Bank Stock, CU Bank preferred stock,
any other securities (including long term debt) of CU or CU Bank or any rights,
options or securities to acquire any CU Stock, CU preferred stock, CU Bank
Stock, CU Bank preferred stock or any other securities (including long term
debt) of CU or CU Bank;
45.
<PAGE> 56
(b) except for paying regular quarterly dividends
(subject to Section 6.10) in an amount not to exceed $0.07 per share of CU
Stock, declare, set aside or pay any dividend or make any other distribution
upon, or purchase or redeem any shares of, CU Stock (but nothing in this
Agreement shall preclude payment of dividends by CU Bank to CU in the ordinary
course of business);
(c) amend their respective Articles of Incorporation or
its Bylaws;
(d) grant any general or uniform increase in the rate of
pay of employees or employee benefits except with respect to salary increases
permitted by subsection (e) below;
(e) grant any material increase in salary, incentive
compensation or employee benefits or pay any bonus to any Person (except for
(i) such salary increases as are made in the ordinary course of business
consistent with past practices; (ii) such other increases as are required by
any pre-existing contract, arrangement or plan disclosed on the CU Schedules;
and (iii) the bonus payments referred to in Section 12.5);
(f) make any capital expenditure in excess of $250,000,
except for ordinary repairs, renewals and replacements;
(g) compromise or otherwise settle or adjust any
assertion or claim of a deficiency in taxes (or interest thereon or penalties
in connection therewith) in excess of $200,000, extend the statute of
limitations with any tax authority or file any pleading in court in any tax
litigation or any appeal from an asserted deficiency in excess of $200,000;
(h) grant or commit to grant any new extension of credit
or amend the terms of any such credit outstanding on the date hereof to any
executive officer or director of CU or any holder of five percent (5%) or more
of the outstanding CU Stock, or to any corporation, partnership, trust or other
entity controlled by any such Person, except as consistent with practices and
policies in existence as of the date of this Agreement;
(i) close or open any offices at which business is
conducted except as disclosed to BHI prior to the date hereof;
(j) adopt or amend any CU Employee Plan or other benefit
plan or arrangement of any such type except for such amendments as are required
by law or do not materially increase the costs or benefits of such plan or
arrangement (other than previously approved amendments to CU's 401(k) Plan);
46.
<PAGE> 57
(k) change any of CU's or CU Bank's policies and
practices with respect to deposits, investments, or accounting, except such
changes as may be required by the rules of the American Institute of Certified
Public Accountants or the Financial Accounting Standards Board or by applicable
governmental authorities;
(l) grant any Person a power of attorney or similar
authority other than in connection with tax audits;
(m) make any material investment by purchase of stock or
securities, contributions to capital, property transfers or otherwise in any
other Person, except for investments made in the ordinary course of business
consistent with policies in effect on January 31, 1997;
(n) amend, modify or terminate, except in accordance with
its terms, any CU Scheduled Contract or enter into any agreement, contract or
Understanding that would be a CU Scheduled Contract under Section 4.16;
(o) create or incur or suffer to exist any mortgage,
lien, pledge, security interest, charge, encumbrance or restraint of any kind
against or in respect of any property or right of CU and/or CU Bank except:
(a) for liens or encumbrances for current taxes not yet due, (b) for liens or
encumbrances incurred in the ordinary course of business and (c) for liens that
are not substantial in character, amount or extent or that do not materially
detract from the value, or interfere with the conduct of business of CU on a
consolidated basis;
(p) sell, lease or otherwise dispose of any of its assets
which are material, individually or in the aggregate, to CU or CU Bank, except
in the ordinary course of business consistent with past practice or as
disclosed to BHI prior to the date hereof;
(q) make any extraordinary payment in excess of $25,000
to any Person;
(r) except as required by law, take or cause to be taken
any action which would prevent the transactions contemplated hereby from
qualifying as a tax free reorganization under Section 368 of the Code;
(s) take any action which would reasonably be expected to
adversely affect or delay the ability of BHI or CU to obtain any necessary
approvals, consents or waivers of any governmental agency or regulatory
authority or other parties required for the transactions contemplated by this
Agreement or to adversely affect the ability of CU to perform its covenants or
agreements under this Agreement on a timely basis;
47.
<PAGE> 58
(t) incur any indebtedness for borrowed money or assume,
guaranty, endorse or otherwise as an accommodation become responsible for the
obligations of any other Person, except for (i) in connection with banking
transactions with banking customers in the ordinary course of business, or (ii)
short-term borrowings not at any time exceeding $5,000,000 in the aggregate
made in the ordinary course of business consistent with past practice at
prevailing market rates and terms;
(u) become a party to any transaction (other than
repurchase agreements and reverse repurchase agreements) involving forwards,
futures, options on futures, swaps or other derivative instruments; or
(v) agree to, or make any commitment to, take any of the
actions prohibited by this Section 6.1.
For purposes of this Section 6.1, any consent required from
BHI, unless earlier given or denied, shall be deemed to have been given five
Business Days after the time CU shall have requested such consent in writing,
unless during such five-day period BHI shall have promptly requested further
information in writing reasonably necessary to allow the decision to be made,
in which case such consent, unless earlier given or denied, shall be deemed to
have been given five Business Days after the time such reasonably requested
information has been furnished.
6.2 No Solicitation, etc.
(a) CU and CU Bank shall not, and shall cause each of
their respective officers, directors, employees, agents, legal and financial
advisors and Affiliates not to, directly or indirectly, solicit, initiate,
recommend, endorse or enter into (or except to the extent permitted by Section
6.2(b) hereof encourage or entertain) any agreement or agreement in principle,
or announce any intention to do any of the foregoing, with respect to any
Alternative Transaction. CU will immediately cease and cause to be terminated
any activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than BHI with respect to any Alternative
Transaction.
(b) CU and CU Bank shall not, and shall cause each of its
officers, directors, employees, agents, legal and financial advisors and
Affiliates not to, directly or indirectly, participate in any negotiations or
discussions regarding, or furnish any information with respect to, or otherwise
cooperate in any way in connection with, or assist or participate in,
facilitate or encourage, any effort or attempt to effect, any Alternative
Transaction with or involving any Person other than BHI; provided that CU may
provide such information or undertake such discussions or negotiations if CU
shall have received an unsolicited, bona fide written offer from a Person other
than BHI to effect an Alternative Transaction and the Board of Directors of CU
48.
<PAGE> 59
reasonably and in good faith determines, based on advice of its outside
counsel, that the failure to provide such information to or undertake such
discussions or negotiations with the Person submitting such unsolicited written
offer could cause the members of CU's Board of Directors to breach their
fiduciary duties under applicable laws.
(c) CU will promptly communicate to BHI the terms of any
proposal which it may receive in respect of any Alternative Transaction and
will keep BHI informed as to the status of any actions, including negotiations
or discussions or the provision of information, taken pursuant to subsection
(b) of this Section 6.2.
6.3 Affirmative Conduct of CU and CU Bank Prior to
Effective Time. Between the date hereof and the Effective Time, CU and CU
Bank shall:
(a) use and devote their respective best efforts
consistent with this Agreement to maintain and preserve intact their respective
present business organizations and to maintain and preserve their respective
relationships and goodwill with account holders, borrowers, employees and
others having business relationships with CU or CU Bank;
(b) use their respective commercially reasonable efforts
to keep in full force and effect all of the existing material permits and
licenses of CU or CU Bank;
(c) use their respective commercially reasonable efforts
to maintain insurance coverage at least equal to that now in effect on all
properties for which they are responsible and on their respective business
operations;
(d) perform their respective material contractual
obligations and not become in material default on any thereof;
(e) duly and timely file all reports and returns required
to be filed with any federal, state or local governmental authority, unless any
extensions have been duly granted by such authority;
(f) duly observe and substantially comply with and
perform all material obligations and duties imposed by all federal and state
laws, and rules, regulations and orders imposed by federal or state
governmental authorities;
(g) maintain their respective assets and properties in
good condition and repair, normal wear and tear excepted;
(h) promptly advise BHI in writing of any event or any
other transaction within CU's or CU Bank's knowledge whereby any Person or
Related Group of Persons acquires,
49.
<PAGE> 60
directly or indirectly, record or beneficial ownership or control (as defined
in Rule 13d-3 promulgated by the SEC under the Exchange Act) of five percent
(5%) or more of the outstanding CU Stock prior to the record date fixed for the
CU Shareholders' Meeting or any adjourned meeting thereof to approve this
Agreement and the transactions contemplated herein;
(i) promptly notify BHI regarding receipt from any tax
authority of any notification of the commencement of an audit, any request to
extend the statute of limitations, any statutory notice of deficiency, any
revenue agent's report, any notice of proposed assessment, or any other similar
notification of potential adjustments to the tax liabilities of CU and/or CU
Bank, or any actual or threatened collection enforcement activity by any tax
authority with respect to tax liabilities of CU and/or CU Bank;
(j) furnish to BHI, as soon as practicable, and in any
event within fifteen days after it is prepared, (i) a copy of any report
submitted to the board of directors or any committee thereof of CU or CU Bank,
provided, however, that CU need not furnish to BHI communications of CU's legal
counsel regarding CU's rights and obligations under this Agreement or the
transactions contemplated hereby or books, records and documents covered by
confidentiality agreements or the attorney-client privilege, or which are
attorneys' work product, (ii) copies of all reports, filings, certificates,
correspondence and other documents filed with or received from the SEC, FRB,
FDIC, Superintendent or any other governmental agency or regulatory authority,
to the extent permitted by law (and CU and CU Bank shall use their reasonable
best efforts to obtain any waiver or consent necessary to provide such
materials under applicable law), (iii) monthly unaudited consolidated balance
sheets and consolidated statements of operations of CU, (iv) such other
existing reports as BHI may reasonably request relating to CU or CU Bank, and
(v) all proxy statements, information statements, financial statements,
reports, letters and communications sent by CU to its shareholders or other
security holders;
(k) promptly notify BHI of any fact or event that does or
could reasonably be expected to cause the CU Schedules to be incorrect in any
material respect as of the date of this Agreement or as of the Closing Date;
(l) use commercially reasonable efforts to obtain any
requisite third party consent with respect to any contract, agreement, lease,
license, amendment, permit or release that is material to the business of CU or
CU Bank or that is contemplated or required to be obtained by CU or CU Bank in
connection with this Agreement or the Merger;
(m) promptly notify BHI of the filing of any material
litigation, or the filing of any governmental or regulatory action, including
any investigation or notice of investigation, or similar proceeding or notice
of any claim against CU or CU Bank or any of their assets; and
50.
<PAGE> 61
(n) prepare and timely file all tax returns and
amendments thereto required to be filed by them on or before the Effective
Time. BHI shall have a reasonable opportunity to review all such returns and
amendments thereto on a pre-filing basis. CU and CU Bank shall each discharge
all taxes, assessments and governmental charges in the nature of taxes upon or
against it or any of its properties or assets, and all tax liabilities at any
time existing, before the same shall become delinquent and before penalties
accrue thereon, except to the extent and as long as: (i) the same are being
contested in good faith and by appropriate proceedings pursued diligently and
in such manner as not to cause any material adverse effect upon the condition
(financial or otherwise) or operations of CU or CU Bank; and (ii) CU and CU
Bank shall have set aside on their books appropriate reserves relating thereto,
if any.
6.4 Access to Information. CU and CU Bank will afford
BHI and its representatives, counsel, accountants, agents and employees access
during normal business hours to all of their respective businesses, operations,
properties, books, files and records and will do everything reasonably
necessary to enable BHI and its representatives, counsel, accountants, agents
and employees to make a complete examination of the financial statements,
businesses, assets and properties of CU and CU Bank and the condition thereof
and to update such examination at such intervals as BHI shall deem appropriate.
Such examination shall be conducted in cooperation with the officers of CU and
CU Bank and in such a manner as to minimize any disruption of, or interference
with, the normal business operations of CU and CU Bank. Upon the request of
BHI, CU will request that the independent auditors of CU, CU Bank and their
Predecessors and all predecessor firms of independent auditors of any of them,
provide reasonable access to auditors' work papers with respect to the
businesses and properties of CU and CU Bank, including tax accrual work papers
prepared for CU, CU Bank or their Predecessors during the preceding sixty (60)
months, other than (a) books, records and documents covered by the
attorney-client privilege, or that are attorneys' work product, and (b) books,
records and documents that CU or CU Bank is legally obligated to keep
confidential. No examination or review conducted by BHI under this Section 6.4
shall constitute a waiver or relinquishment on the part of BHI of the right to
rely upon the representations and warranties made by CU herein; provided, that
BHI shall disclose in writing to CU any fact or circumstance it may discover
which BHI believes renders any representation or warranty made by CU hereunder
incorrect in any respect. BHI covenants and agrees that it and its
representatives, counsel, accountants, agents and employees will hold in strict
confidence all documents and information concerning CU and CU Bank so obtained
(except to the extent that such documents or information are a matter of public
record or require disclosure in the S-4 or Proxy Statement or become publicly
available information by reason of applications required to be filed with any
governmental agency or regulatory authority to obtain the approvals and
consents required to effect the transactions contemplated hereby), and if the
transactions contemplated herein are not consummated, such confidence shall be
maintained and all such documents shall be returned to CU and CU Bank.
51.
<PAGE> 62
6.5 Notices. CU will promptly notify BHI of any event of
which CU or CU Bank obtains knowledge which has had or may reasonably be
expected to have a material adverse effect on the business, financial
condition, results of operations or prospects of CU or CU Bank or in the event
that CU determines that it is or is likely to become unable to fulfill any of
the conditions to the performance of BHI's obligations hereunder, as set forth
in Articles IX or XI herein.
6.6 CU Shareholders' Meeting. Promptly after the
execution of this Agreement, CU will take all action necessary in accordance
with applicable law and its Articles of Incorporation and Bylaws to convene a
meeting of its shareholders to consider and vote upon this Agreement and the
transactions contemplated hereby. The Board of Directors of CU shall, except
to the extent it is advised by its outside counsel that to do so could
constitute a violation of its fiduciary duties, recommend that CU's
shareholders approve this Agreement and the transactions contemplated hereby,
and the Board of Directors of CU shall, except to the extent it is advised by
its outside counsel that to do so could constitute a violation of its fiduciary
duties, use its reasonable best efforts (including if BHI so requests the
retention of a proxy solicitation firm and an information agent) to obtain the
requisite vote of the holders of CU Stock to approve this Agreement and the
transactions contemplated hereby.
6.7 D&O Coverage. If requested to do so by BHI prior to
June 30, 1997: CU shall use commercially reasonable efforts to obtain (i)
coverage for a period of at least 36 months following the Effective Time for
the directors and officers of CU and CU Bank under a directors' and officers'
liability insurance policy which is no less protective in terms of coverage or
limitations then now possessed by CU covering acts or omissions occurring prior
to the Effective Time and actions related to this Agreement and (ii) coverage
for a period of at least 36 months following the Effective Time under a
bankers' blanket bond which is no less protective in terms of coverage or
limitations then now possessed by CU which covers losses incurred prior to the
Effective Time and actions related to this Agreement. If no such request is
made, BHI shall provide the coverage contemplated by clause (i) of the
preceding sentence pursuant to directors' and officers' liability insurance
policies maintained by BHI.
6.8 Certain Loans and Other Extensions of Credit. CU
Bank will promptly inform BHI of the amounts and categories of any loans,
leases or other extensions of credit that have been classified by any bank
regulatory authority or by any unit of CU or CU Bank as "Criticized,"
"Specially Mentioned," "Substandard," "Doubtful," "Loss" or any comparable
classification ("Classified Credits"). CU Bank will furnish BHI, as soon as
practicable, and in any event within 30 days after the end of each calendar
month, schedules, including the following: (a) Classified Credits (including
with respect to each credit its classification category; (b) nonaccrual
credits; (c) accrual exception credits that are delinquent 90 or more days and
have not been placed on nonaccrual status; (d) credits delinquent as to payment
of principal or interest, including an aging into 30-89 and 90+ day categories;
(e) participating loans and leases, stating,
52.
<PAGE> 63
with respect to each, whether it is purchased or sold; (f) loans or leases
(including any commitments) by CU or CU Bank to any CU or CU Bank director,
officer at or above the senior vice president level, or shareholder holding
five percent (5%) or more of the capital stock of CU, including with respect to
each such loan or lease the identity and, to the knowledge of CU, the relation
of the borrower to CU or CU Bank, and the outstanding and undrawn amounts; (g)
letters of credit; (h) loans or leases wholly or partially charged off during
the previous month (including with respect to each loan or lease, the
originating amount and the write-off amount); and (i) other real estate or
assets acquired in satisfaction of debt.
6.9 Termination of CU Stock Plan. CU will take all steps
necessary to cause the CU Stock Plan to be terminated as of or prior to the
Effective Time, and for any CU Options eligible for assumption or replacement
pursuant to Section 2.13 and the terms of the BHI Option Plan Amendment, to
obtain at the earliest practicable date and prior to the Closing Date a revised
stock option contract with each holder of such unexercised options,
incorporating such terms as may be necessary in order to make such option
contracts consistent with the BHI Option Plan Amendment.
6.10 Coordination of Dividends. CU shall coordinate with
BHI the declaration of any dividends that may be allowed hereunder in respect
of CU and the record date and payment dates relating thereto, it being the
intention of the parties that holders of CU Stock shall not receive two
dividends, or fail to receive one dividend, for any single calendar quarter
with respect to their shares of CU Stock and any shares of BHI Stock any such
holder will receive in exchange therefor in the Merger.
6.11 Certain Reserves. CU represents, warrants and agrees
that neither CU nor CU Bank has applied, and will not apply prior to the
Effective Time, any portion of (x) any reserve existing on its books as of
December 31, 1996 (other than reserves for loan and lease losses) except with
respect to those specific items and in those specific amounts for which the
applicable portion of such reserve was created, and except to the extent that
the purpose of such reserve no longer exists and is required to be taken into
income under generally accepted accounting principles consistently applied in
accordance with prior practices of CU;or (y) any reserves for loan and lease
losses except for the purposes for which such reserves were created.
ARTICLE VII
COVENANTS OF BHI
PENDING EFFECTIVE TIME OF THE MERGER
BHI covenants and agrees with CU as follows:
53.
<PAGE> 64
7.1 Limitation on BHI's Conduct Prior to Effective Time.
Except as contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, BHI shall not (a) take any action which
would reasonably be expected to adversely affect or delay the ability of BHI or
CU to obtain any necessary approvals, consents or waivers of any governmental
agency or regulatory authority or other parties required for the transactions
contemplated by this Agreement or to adversely affect the ability of BHI to
perform its covenants or agreements under this Agreement on a timely basis, (b)
amend its Articles of Incorporation in any respect that materially and
adversely affects the rights and privileges attendant to the BHI Stock, (c)
except as required by law, take or cause to be taken any action which would
reasonably be expected to prevent the transactions contemplated hereby from
qualifying as a reorganization under Section 368 of the Code (provided it is
understood and acknowledged that although BHI has no present plan or intention
to reacquire from CU's shareholders the shares of BHI Stock to be issued
pursuant to the Merger, BHI does intend to repurchase shares of BHI Stock in
the open market from time to time before and after the Effective Time, and
nothing in this Agreement shall preclude BHI from such open market purchases of
BHI Stock), or (d) agree to, or make any commitment to, take any of the actions
prohibited by this Section 7.1.
7.2 Affirmative Conduct of BHI Prior to Effective Time.
Between the date hereof and the Effective Time, BHI shall:
(a) duly observe and conform to all lawful requirements
applicable to BHI and its subsidiaries that are material to their business on a
consolidated basis;
(b) promptly notify CU of any fact or event that does or
could reasonably be expected to cause the BHI Schedules to be incorrect in any
material respect as of the date of this Agreement or as of the Closing Date;
and
(c) use commercially reasonable efforts to obtain any
requisite third party consent with respect to any contract, agreement, lease,
license, amendment, permit or release that is material to the business of BHI
on a consolidated basis or that is contemplated or required to be obtained by
BHI in connection with the Merger.
7.3 Access to Information. Upon reasonable request by
CU, BHI shall (i) make its Chief Financial Officer and General Counsel
available to discuss with CU and its representatives BHI's operations and (ii)
shall provide CU with written information which is (a) similar to the written
information that CU reviewed in connection with this Agreement, and (b) related
to BHI's business condition, operations and prospects. No information provided
under this Section 7.3 shall constitute a waiver or relinquishment on the part
of CU of the right to rely upon the representations and warranties made by BHI
herein; provided, that CU shall disclose in writing to BHI any fact or
circumstance it may discover which CU believes renders any
54.
<PAGE> 65
representation or warranty made by BHI hereunder incorrect in any respect. CU
covenants and agrees that it and its representatives, counsel, accountants,
agents and employees will hold in strict confidence all documents and
information concerning BHI and its subsidiaries so obtained (except to the
extent that such documents or information are a matter of public record or
require disclosure in the S-4 or Proxy Statement or become publicly available
information by reason of any applications required to be filed with any
governmental agency or regulatory authority to obtain the approvals and
consents required to effect the transactions contemplated hereby), and if the
transactions contemplated herein are not consummated, such confidence shall be
maintained and all such documents shall be returned to BHI.
7.4 Notices; Reports. BHI will promptly notify CU of any
event of which BHI obtains knowledge which has had or may reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of BHI and its subsidiaries taken as a whole or in the
event that BHI determines that it is or is likely to become unable to fulfill
any of the conditions to the performance of CU's obligations hereunder, as set
forth in Articles IX or X herein, and BHI will furnish CU as soon as available,
all proxy statements, information statements, financial statements, reports,
letters and communications sent by BHI to its shareholders or other security
holders, and all reports filed by BHI with the SEC.
7.5 BHI Option Plan Amendment. BHI will take all steps
necessary to adopt the BHI Option Plan Amendment, subject to subsequent
approval or ratification by BHI's shareholders at BHI's 1998 annual
shareholders' meeting, and take any other actions necessary or appropriate to
effect the assumption of CU Options contemplated by Section 2.13(a). The Board
of Directors of BHI shall recommend that its shareholders approve or ratify the
BHI Option Plan Amendment and use its reasonable best efforts to obtain the
affirmative vote of the outstanding BHI Stock to approve or ratify the BHI
Option Plan Amendment. At or prior to the 1998 annual meeting of BHI's
shareholders, BHI shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of BHI Stock for delivery upon exercise
of CU Options assumed by it in accordance with Section 2.13(a). Within two
Business Days following such approval or ratification, BHI shall file a
registration statement on Form S-8 (or any successor or other appropriate form)
with respect to the CU Stock subject to such CU Options. BHI shall use its
reasonable best efforts to maintain the effectiveness of such registration
statement (and maintain the current status of the prospectus or prospectuses
related thereto) for so long as the CU Options remain outstanding.
ARTICLE VIII
ADDITIONAL COVENANTS
8.1 Regulatory Matters.
55.
<PAGE> 66
(a) BHI and CU shall promptly prepare and BHI shall file
with the SEC the S-4, in which the Proxy Statement will be included as a
prospectus. BHI shall use all reasonable efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such
filing, and CU shall promptly thereafter mail the Proxy Statement to its
shareholders. BHI shall also use all reasonable efforts to obtain any necessary
state securities law or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement, and obtain the approval for
listing on the NYSE of the shares of BHI Stock to be issued in the Merger. CU
shall furnish all information concerning CU and the holders of CU Stock as may
be reasonably requested in connection with any such action. Each party shall
immediately notify the other party in writing in the event that such party
becomes aware that the S-4 or Proxy Statement at any time contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading or that
the S-4 or the Proxy Statement otherwise is required to be amended or
supplemented, which notice shall specify, in reasonable detail, the
circumstances thereof.
(b) The parties hereto shall cooperate with each other
and use reasonable efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and governmental agencies and regulatory
authorities which are necessary or advisable to consummate the transactions
contemplated by this Agreement (including, without limitation, the Merger) and
(subject to Section 11.4) to comply with the terms and conditions of all such
permits, consents, approvals, and authorizations and to the extent practicable
each will consult the other on, in each case subject to applicable laws
relating to the exchange of information, all the information relating to BHI or
CU, 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 governmental authority in connection with the transactions contemplated by
this Agreement. In exercising the foregoing right, each of the parties hereto
shall act reasonably and as promptly as practicable. The parties hereto agree
that they will consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations of all third parties and
governmental authorities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other apprised of
the status of matters relating to completion of the transactions contemplated
herein.
(c) BHI and CU shall, upon request, furnish each other
with all information concerning themselves, their subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Proxy Statement or the S-4 or any other
statement, filing, notice or application made by or on behalf of BHI, CU or any
of their respective subsidiaries to any governmental authority in connection
with the transactions contemplated by this Agreement.
56.
<PAGE> 67
(d) BHI and CU shall promptly advise each other upon
receiving any communication from any governmental agency or regulatory
authority 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 the approval of any governmental
agency or regulatory authority required to consummate the transactions
contemplated as this Agreement will not be obtained or that the receipt of any
such approval will be materially delayed beyond August 31, 1997.
8.2 Legal Conditions to Merger.
(a) Each of BHI and CU shall, and shall cause each of its
subsidiaries to, use its reasonable best efforts (i) 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 and, subject to the conditions set forth in Articles IX,
X and XI hereof, to consummate the transactions contemplated by this Agreement
and (ii) to obtain (and to cooperate with the other party to obtain) any
consent, authorization, order or approval of, or any exemption by, any
governmental agency or regulatory authority which is required to be obtained by
CU or BHI or any of their respective subsidiaries in connection with the Merger
and the other transactions contemplated by this Agreement, and (subject to
Section 11.4) to comply with the terms and conditions of any such consent,
authorization, order or approval.
(b) Each of BHI and CU agrees to use reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make
effective, as soon as practicable after the date of this Agreement, the
transactions contemplated hereby, including, without limitation, using
reasonable efforts to lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby and using reasonable efforts to defend any
litigation seeking to enjoin, prevent or delay the consummation of the
transactions contemplated hereby or seeking material damages.
8.3 Customer Calls. Following regulatory and shareholder
approval and prior to the Effective Time, representatives of BHI will be
permitted to conduct joint calls, accompanied by representatives of CU Bank,
upon such of CU Bank's customers and upon such schedule as are agreed upon
between the parties; provided, however, that in the event that either party
terminates this Agreement in accordance with the terms hereof, BHI shall not,
for a period of one (1) year from the date of the termination of this Agreement
contact any customer of CU Bank contacted pursuant to this Section 8.3.
8.4 Certain Filings, Consents and Arrangements. BHI, CU
and CU Bank shall (a) promptly make any filings and applications required to be
filed in order to obtain all
57.
<PAGE> 68
requisite approvals, consents and waivers of the FRB, the Superintendent, the
Commissioner and any other governmental agencies or regulatory authorities
necessary or appropriate for the consummation of the transactions contemplated
hereby, (b) cooperate with one another (i) in promptly determining what filings
are required to be made or approvals, consents or waivers are required to be
obtained under any relevant Federal, state or foreign law or regulation, (ii)
in providing the other a reasonable opportunity to review and comment upon the
publicly available portions of such filings, and (iii) in promptly making any
such filings, furnishing information required in connection therewith and
seeking timely to obtain any such approvals, consents or waivers and (c)
deliver to the other copies of publicly available portions of all such filings
and applications promptly after they are filed.
8.5 Additional Agreements; Parties. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
commercially reasonable efforts to take promptly, or cause to be taken
promptly, all actions and to do promptly or cause to be done promptly, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
as promptly as practicable, including using commercially reasonable efforts to
obtain all necessary actions or nonactions, extensions, waivers, consents and
approvals from all applicable governmental authorities, effecting all necessary
registrations, applications and filings and obtaining any required contractual
consents (including consent to assignment of leases where required) and
regulatory approvals.
8.6 Publicity. The initial press release announcing this
Agreement shall be a joint press release or dual press releases, which in
either case shall (subject to the proviso in the last sentence of this section)
be issued only with the prior approval of the other party as to the content and
timing thereof. Thereafter BHI and CU shall consult with each other in issuing
any press releases or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any
governmental authority or with any national securities exchange with respect
thereto. Neither party shall issue any such press release or public statement
concerning the transactions contemplated hereby without the prior approval of
the other party, which shall not be unreasonably withheld or delayed; provided
that if either party hereto, on the advice of counsel, determines that a
disclosure is required by law, it may make such disclosure without the approval
of the other party, but only after affording such party a reasonable
opportunity to review and comment upon the disclosure.
8.7 Pre-Closing Adjustments. At or before the Closing,
CU and CU Bank shall make such accounting entries or adjustments, including
charge-offs of loans, as BHI shall direct in order to implement its plans for
CU Bank following the Closing or to reflect expenses and costs related to the
Merger; provided, however, that (a) CU and CU Bank shall not be required to
take such actions more than one day prior to the Closing Date or prior to the
time BHI agrees in writing that all of the conditions to its obligation to
close as set forth in Article XI
58.
<PAGE> 69
have been satisfied or waived, and (b) based upon consultation with counsel and
accountants for CU, no such adjustment shall (i) require any filing with any
governmental agency or regulatory authority, (ii) violate any law, rule or
regulation applicable to CU or CU Bank, or (iii) otherwise materially
disadvantage CU or CU Bank if the Merger were not consummated; provided that in
any event, no accrual or reserve made by CU or CU Bank pursuant to this Section
8.7, or any litigation or regulatory proceeding arising out of any such accrual
or reserve, shall constitute or be deemed to be a breach, violation of or
failure to satisfy any representation, warranty, covenant, condition or other
provision of this Agreement or otherwise be considered in determining whether
any such breach, violation or failure to satisfy shall have occurred. The
recording of such adjustments shall not be deemed to imply any misstatement of
previously furnished financial statements or information, shall not be
construed as concurrence of CU's or CU Bank's management with any such
adjustments, and shall not affect the Exchange Ratio or the Per Share Cash
Consideration.
8.8 Director Resignations. CU shall use reasonable
efforts to cause to be delivered to BHI at the Closing, the resignations of all
of the directors of CU and CU Bank (other than those directors of CU Bank
designated by BHI prior to the Closing Date to remain in office after the
Effective Time), to be effective at the Effective Time.
8.9 [Reserved.]
8.10 [Reserved.]
8.11 Notices and Communications. CU and CU Bank shall, if
requested to do so by BHI cooperate with BHI by sending necessary or
appropriate customer notifications and communications as drafted by BHI to
advise such customers of the impending transaction and of plans following the
Effective Time.
8.12 Insurance Policies Assignment. CU and CU Bank shall
make commercially reasonable efforts to obtain consent to partial or complete
assignments of any of their insurance policies if requested to do so by BHI, to
the extent necessary to maintain the benefits thereof to BHI and to CU Bank
after the Merger. CU and CU Bank shall also inform BHI no later than the
Closing Date of any material unfiled insurance claims of which they have
knowledge and for which they believe coverage exists.
8.13 Affiliates and Five Percent Shareholders.
(a) At least 40 days prior to the anticipated Closing
Date, CU after consulting with its counsel shall deliver to BHI a letter
identifying all Persons who are, at the time this Agreement is submitted for
approval to the stockholders of CU, "affiliates" of CU for purposes of Rule 145
under the Securities Act, and CU shall update that letter as of the Closing
Date. CU
59.
<PAGE> 70
shall use all reasonable efforts to cause each such affiliate to deliver to BHI
at or prior to the Closing Date a written "Affiliates" agreement, substantially
in the form of Exhibit C.
(b) Prior to the Closing Date, CU shall use all
reasonable efforts to cause each Person or group of Persons who holds five
percent (5%) or more of CU's Stock (regardless of whether such Person is an
"affiliate") to deliver to the firm delivering the opinion pursuant to Section
9.4 a letter stating that such shareholder(s) have no present intention to
dispose of the BHI Stock he or she or they will receive in the Merger, and
committing that he, she or they will not dispose of such BHI Stock in such a
manner as to cause a violation of the "continuity of shareholder interest"
requirements of Treasury Regulation 1.368-1.
8.14 Letters of CU's Accountants. CU shall use all
reasonable efforts to cause to be delivered to BHI letters of Arthur Andersen,
LLP, CU's independent auditors, dated as of the date on which the S-4 shall
become effective and as of the Closing Date and addressed to BHI and its
directors who sign the S-4, in form and substance reasonably satisfactory to
BHI, and in scope and substance consistent with applicable professional
standards for letters delivered by independent public accountants in connection
with registration statements similar to the S-4.
8.15 Shareholders' Agreement. CU will use all reasonable
efforts to cause all of the directors of CU who own CU Stock to execute and
deliver to BHI concurrently with execution of this Agreement one or more
shareholders' agreements substantially in the form of Exhibit D hereto,
committing such Persons, among other things, to vote their shares of CU Stock
in favor of the Merger at the CU Shareholders' Meeting held for that purpose,
and to comply with certain representations concerning the ownership and
disposition of CU Stock.
8.16 Cooperation of CU Bank. CU shall and shall cause CU
Bank to cooperate with BHI in all reasonable respects relevant to this
Agreement or the transactions contemplated hereby. Any provision of this
Agreement requiring CU Bank to take or refrain from taking any action shall be
construed as requiring CU to cause CU Bank's compliance therewith.
ARTICLE IX
CONDITIONS PRECEDENT TO THE MERGER
The obligations of each of the parties hereto to consummate
the transactions contemplated herein are subject to the satisfaction, on or
before the Closing Date, of the following conditions:
9.1 Shareholder Approval. The transactions contemplated
hereby shall have received all requisite approvals of the shareholders of CU.
60.
<PAGE> 71
9.2 No Judgments or Orders. No judgment, decree,
injunction, order or proceeding shall be outstanding by any governmental agency
or entity or any regulatory authority or court which prohibits, enjoins or
restrains consummation of the Merger or the other transactions contemplated by
this Agreement.
9.3 Regulatory Approvals. To the extent required by
applicable law or regulation, there shall have been obtained or granted all
approvals, waivers or consents of any governmental agency or regulatory
authority, including, without limitation, those of the FRB, necessary for
consummation of the Merger and the transactions contemplated hereby, all such
approvals, waivers or consents shall remain in full force and effect, and the
applicable waiting period under all laws shall have expired. All other
statutory or regulatory requirements for the valid completion of the
transactions contemplated hereby shall have been satisfied, and there shall be
in effect no statute, rule or regulation that prohibits or makes illegal
consummation of the Merger.
9.4 Tax Opinion. BHI and CU shall have received an
opinion dated the Closing Date from Carlsmith Ball Wichman Case & Ichiki,
counsel to BHI, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, which are consistent
with the state of facts existing at the Closing Date, (i) the Merger will
qualify as a reorganization under Section 368 of the Code, and (ii) BHI and CU
will each be a party to such reorganization within the meaning of Section
368(b) of the Code. The representations which will be required of BHI and of
CU in connection with the opinion shall include those set forth in Exhibit E
hereto, together with such other representations as may reasonably be requested
by such counsel.
9.5 S-4 and Proxy Statement. The S-4 shall have become
effective under the Securities Act and shall not be subject to any stop order
or proceeding seeking a stop order and copies of the Proxy Statement shall have
been timely mailed to the shareholders of record of CU on the record date.
9.6 NYSE Listing. The shares of BHI Stock issuable to
holders of CU Stock upon consummation of the Merger shall have been duly
authorized for listing on the NYSE, subject to official notice of issuance.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CU
61.
<PAGE> 72
All of the obligations of CU to effect the transactions
contemplated hereby shall be subject to the satisfaction, on or before the
Closing Date, of the following conditions, any of which may be waived in
writing by CU:
10.1 Legal Opinion. CU shall have received the opinion of
Carlsmith Ball Wichman Case & Ichiki, counsel to BHI, dated as of the Closing
Date, in substantially the form required by Exhibit F hereto.
10.2 Representations and Warranties; Performance of
Covenants. All covenants, terms and conditions of this Agreement to be
complied with and performed by BHI at or before the Closing Date shall have
been complied with and performed in all material respects; the representations
and warranties of BHI contained herein shall have been true and correct in all
material respects on and as of the date of this Agreement and on and as of the
Closing Date (or on the date when made in the case of a representation or
warranty which by its express provisions is made with respect to a date prior
to the date of this Agreement), with the same effect as though such
representations and warranties had been made on and as of the Closing Date.
10.3 Absence of Certain Changes. Between the date of this
Agreement and the Effective Time, there shall not have occurred any change or
event that has had or could reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of BHI and
its subsidiaries taken as a whole, whether or not such event, change or effect
is reflected in any amendment or supplement to the BHI Schedules delivered
after the date of this Agreement.
10.4 Officers' Certificate. There shall have been
delivered to CU on the Closing Date a certificate executed by the Chief
Executive Officer and the Chief Financial Officer of BHI certifying compliance
with all of the provisions of Sections 10.2 and 10.3.
10.5 BHI Option Plan Amendment. The Board of Directors of
BHI shall have adopted the BHI Option Plan Amendment, subject to subsequent
approval or ratification by BHI's shareholders.
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BHI
All of the obligations of BHI to effect the transactions
contemplated hereby shall be subject to the satisfaction, on or before the
Closing Date, of the following conditions, any of which may be waived in
writing by BHI:
62.
<PAGE> 73
11.1 Legal Opinion. BHI shall have received the opinion
of Sullivan & Cromwell, counsel to CU, or other counsel acceptable to BHI,
dated as of the Closing Date, in substantially the form required by Exhibit G
hereto.
11.2 Representations and Warranties; Performance of
Covenants. All the covenants, terms and conditions of this Agreement to be
complied with and performed by CU at or before the Closing Date shall have been
complied with and performed in all material respects; the representations and
warranties of CU contained herein shall have been true and correct in all
material respects on and as of the date of this Agreement and on and as of the
Closing Date (or on the date when made in the case of a representation or
warranty which by its express provisions is made with respect to a date prior
to the date of this Agreement), with the same effect as though such
representations and warranties had been made on and as of the Closing Date.
11.3 Authorization of Mergers. All actions necessary to
authorize the execution, delivery and performance of this Agreement and the
Agreement of Merger by CU, and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by the
Board of Directors and shareholders of CU, as required by applicable law, and
CU shall have full power and right to merge pursuant to this Agreement and the
Agreement of Merger.
11.4 Absence of Regulatory Conditions. There shall not be
any action taken by any governmental entity or agency or regulatory authority
in connection with the grant of any approval, waiver or consent referred to in
Section 9.3, or any statute, rule, regulation or order enacted, entered,
proposed or deemed applicable to the Merger, which does or would impose any
condition or restriction upon the Surviving Company or any of its subsidiaries
(including CU Bank after the Merger) that BHI reasonably determines in the good
faith exercise of its business judgment would be materially burdensome to BHI
or any such subsidiary in the context of the transactions contemplated by this
Agreement.
11.5 Third Party Consents. CU shall have obtained all
consents of other parties to its and CU Bank's material mortgages, notes,
leases, franchises, agreements, licenses and permits as may be necessary to
permit the Merger and the transactions contemplated herein to be consummated
without a material default, acceleration, breach or loss of rights or benefits
thereunder.
11.6 Absence of Certain Changes. Between the date of this
Agreement and the Effective Time, there shall not have occurred any change or
event that has had or could reasonably be expected to have a material adverse
effect on the business, financial condition, results of operations of CU and
its subsidiaries taken as a whole, whether or not such event, change or effect
is reflected in any amendment or supplement to the CU Schedules delivered after
the date of this Agreement.
63.
<PAGE> 74
11.7 Officers' Certificate. There shall have been
delivered to BHI on the Closing Date a certificate executed by the Chief
Executive Officer and the Chief Financial Officer of each of CU and CU Bank
certifying compliance with all of the provisions of Sections 11.2, 11.3, 11.5
and 11.6.
11.8 Blue Sky Matters. The issuance of the BHI Stock in
the Merger shall have been qualified or registered with the appropriate
governmental entity under any applicable state securities or Blue Sky laws, and
such qualifications or registrations shall be in effect on the Closing Date, if
required by such laws.
11.9 Affiliate Agreements. Each of those Persons
identified by CU pursuant to Section 8.13(a) shall have executed and delivered
to BHI agreements acceptable to BHI in substantially the form of Exhibit C.
11.10 Shareholder's Agreements.. The directors of CU shall
have executed and delivered to BHI shareholder's agreements acceptable to BHI
in substantially the form of Exhibit D.
11.11 Comfort Letters. BHI and its directors who sign the
S-4 shall have received from CU's independent auditors each of the letters
contemplated by Section 8.14.
11.12 CU Stock Option Agreement. Concurrently with the
execution of this Agreement, CU shall have executed and delivered to BHI the CU
Stock Option Agreement.
11.13 Resignations. BHI shall have received resignations
of all of the directors of CU and CU Bank, other than those directors of CU
Bank designated by BHI prior to the Closing Date to remain in office after the
Effective Time, which resignations shall be effective as of the Effective Time.
11.14 Payment of Expenses. At least three Business Days
prior to the Closing Date, all attorneys, accountants, investment bankers and
other advisors and agents for CU and CU Bank shall have submitted to CU (with a
copy to BHI) estimates of their fees and expenses for all services rendered or
to be rendered in any respect in connection with the transactions contemplated
hereby to the extent not already paid, and based on such estimates, CU shall
have prepared and submitted to BHI a summary of such fees and expenses for the
transaction. At the Closing Date (i) such advisors shall have submitted their
full final bills for such fees and expenses to CU and CU Bank for services
rendered and expenses incurred through the fifth Business Day preceding the
Closing Date, with a copy to be delivered to BHI, and based on such final
bills, CU shall have prepared and submitted to BHI a final calculation of such
fees and
64.
<PAGE> 75
expenses, (ii) CU and CU Bank shall have accrued and paid the amount of such
fees and expenses as calculated above, after BHI has been given an opportunity
to review and comment upon all such bills and calculation of such fees and
expenses, and (iii) such advisors shall have released BHI from liability for
all such fees and expenses. BHI shall not be liable for any such fees and
expenses. The foregoing provisions shall not preclude the subsequent payment
to any such advisor of fees and expenses incurred between the fifth Business
Day preceding the Closing Date and the Effective Time that are reasonably
consistent with the good faith estimate submitted by such advisor, and shall
not require the release by Montgomery Securities of its rights under its
indemnification agreement with CU included in the agreement referred to in
Section 4.15.
11.15 Dissenters. Dissenting Shares shall not exceed 10%
of the aggregate number of issued and outstanding shares of CU Stock.
11.16 Deposits. At the close of business on the last day
of the month preceding the Effective Time, total deposits (excluding CD Network
deposits) of CU Bank, calculated pursuant to regulatory accounting principles
and generally accepted accounting principles, shall be no less than $605
million.
11.17 Audit Opinion. CU's independent auditors shall have
issued an unqualified opinion with respect to the audited financial statements
of CU included in its Report on Form 10-K for the year ended December 31, 1996.
ARTICLE XII
EMPLOYEE MATTERS
12.1 Employee Benefits. Employee benefits provided to
employees of CU Bank following the Effective Time shall, in the aggregate, be
substantially equivalent to the employee benefits to which such employees were
entitled and which were in effect as of the date hereof. Notwithstanding the
foregoing, nothing herein contained shall require BHI or any subsidiary of BHI
(including CU Bank after the Merger) to maintain any particular plan, program,
policy or arrangement following the Effective Time. BHI will, and will cause
CU Bank after the Effective Time to perform its obligations existing as of the
Effective Time under those employee (or former employee) benefit obligations,
employment agreements and severance agreements that are listed on Schedule
12.1, each in accordance with its terms.
12.2 Prior Service Credit. Employees of CU Bank who
become participants in any employee benefit plan, practice or policy of BHI or
its subsidiaries shall be given credit thereunder for all service prior to the
Effective Time with CU or CU Bank, or any predecessor employer (to the extent
such credit was given by CU or its CU Bank), for purposes of eligibility and
vesting, for determination of benefits such as vacation and sick leave
allowances, and for
65.
<PAGE> 76
such other purposes, if any (other than benefit accrual) for which such service
is either taken into account or recognized by BHI or its subsidiaries.
12.3 Management Retention and Other Agreements. CU will
make cash payments to Stephen G. Carpenter and David I. Rainer at the Effective
Time in the amount of $265,000 and $212,000, respectively. In addition, CU
Bank shall at least eight days before the Closing Date enter into (i)
agreements in the form attached as Exhibit H with the CU Bank employees listed
on Exhibit I, providing for payment to such individuals of the respective
amounts set forth on Exhibit I and (ii) an agreement in the form attached as
Exhibit J with Patrick Hartman.
12.4 Grant of BHI Options. Within five (5) Business Days
following the Effective Time, BHI shall grant BHI Options pursuant to the BHI
Stock Option Plan to those individuals identified as option recipients on
Exhibit G (except that no such options shall be issued to any such person who
is not an employee of CU Bank at the Effective Time). Each such option shall
be for the number of shares of BHI Stock set forth on Exhibit G for such
employee, shall conform with the terms and conditions of the BHI Stock Option
Plan, and shall be an incentive stock option under Code Section 422 that (a)
has an exercise price equal to the fair market value of BHI Stock as of the
date of grant; (b) vests upon one (1) year of employment following the date of
grant; (c) has a ten (10) year term; (d) is exercisable for a period of no
longer than one (1) year following the death or disability of the optionee;
(e) is exercisable for a period of no longer than three (3) months following
any other termination of employment by optionee; (f) will be forfeited in the
event of termination of employment by optionee for "cause" (within the meaning
of the Plan); and (g) will be immediately exercisable in the event of a "change
in control" (within the meaning of the Plan) of BHI.
12.5 Payment of Accrued Bonuses. CU shall be entitled on
or prior to the Closing Date to pay employee bonuses accrued in the ordinary
course of business through the end of the month immediately preceding the
Closing Date pursuant to bonus arrangements which are disclosed on the CU
Schedules, in amounts that are consistent with CU's historical compensation
practices.
12.6 Indemnification of Directors and Officers. BHI
agrees that all rights to indemnification or exculpation existing as of January
31, 1997 in favor of the directors and officers of CU or CU Bank as provided in
their respective articles of incorporation, bylaws, or in any indemnification
agreements listed and identified as such on the CU Schedules shall, with
respect to matters occurring prior to the Effective Time, survive the Merger
and continue in full force and effect for a period of six years following the
Effective Time.
ARTICLE XIII
66.
<PAGE> 77
TERMINATION
13.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time of the Merger upon the occurrence of any of
the following:
(a) by the mutual consent of BHI and CU if the Board of
Directors of each so determines;
(b) by BHI or CU, if its Board of Directors so
determines, if any governmental authority or regulatory agency (including
without limitation the FRB) shall have denied any approval, waiver or consent
required for consummation of the Merger and such denial has become final and
nonappealable;
(c) by BHI, if its Board of Directors so determines, if
(i) CU's Board of Directors fails to recommend approval of the Agreement to the
shareholders of CU or withdraws, revokes or materially modifies its
recommendation in a manner adverse to BHI; (ii) the shareholders of CU fail to
approve the Agreement at the CU Shareholders' Meeting; or (iii) there occurs a
material breach by CU of any representation, warranty or agreement contained
herein which is not cured or not curable within thirty (30) days after written
notice of such breach is given to CU (but in the case of such event that is
curable within such 30-day period, this Agreement shall not be terminated
pursuant to this Section 13.1(c) or Section 13.1(e) unless such 30-day period
has first elapsed);
(d) by CU, if its Board of Directors so determines, in
the event of a material breach by BHI of any representation, warranty or
agreement contained herein which is not cured or not curable within thirty (30)
days after written notice of such breach is given to BHI (but in the case of
such event that is curable within such 30-day period this Agreement shall not
be terminated pursuant to this Section 13.1(d) or Section 13.1(e) unless such
30-day period has first elapsed);
(e) by BHI or CU if its Board of Directors so determines,
in the event that the Merger is not consummated on or prior to September 30,
1997 (except that such date shall be extended at the request of either party
for a period not to exceed ninety (90) days, if as of September 30, 1997,
there remain pending any applications for regulatory approvals other than
appeals of regulatory approvals which have been denied); provided that a party
shall not be entitled to terminate this Agreement pursuant to this Section
13.1(e) if the failure to consummate the Merger by such time is due to the
breach of any representation, warranty or agreement in this Agreement by the
party seeking to terminate;
(f) by BHI or CU if its Board of Directors so determines,
if any governmental or regulatory authority or agency, or court of competent
jurisdiction, shall have
67.
<PAGE> 78
issued a final and nonappealable permanent order or injunction enjoining, or
otherwise prohibiting the consummation of the Merger and the time for appeal or
petition for reconsideration of such order or injunction shall have expired
without such appeal or petition being granted;
(g) by CU, if its Board of Directors so determines, if
both: (i) the Closing Price of BHI Stock for any period of ten (10)
consecutive trading days prior to the Closing Date is less than $37.71875 and
(ii) for each such day the number obtained by dividing the Closing Price of BHI
Stock by $44.375 is less than 85% of the number obtained by dividing the Index
Price for that day by 524.05. For purposes of clause (ii), the results of each
required calculation shall be rounded to the nearest ten-thousandth. The
"Index Price" for any day shall mean the closing price of the Standard & Poor's
Bank Index (symbol: BIX);
(h) by BHI, if (i) CU shall have exercised a right
specified in the proviso set forth in Section 6.2(b) with respect to any
Alternative Transaction and shall, directly or through agents or
representatives, continue discussions with any third party concerning such
Alternative Transaction for more than ten (10) Business Days after the date CU
was first apprised of such Alternative Transaction; or (ii) a proposal to
effect an Alternative Transaction shall have been commenced, publicly announced
or communicated to CU which contains a proposal as to price (without regard to
the specificity of such price proposal) and CU shall not have rejected such
proposal within 10 Business Days of its receipt or the date its existence first
becomes publicly disclosed, if earlier; or
(i) by BHI or CU, if its Board of Directors so
determines, if the Closing Price of BHI Stock for any period of ten (10)
consecutive trading days prior to the Closing Date is less than $35.50.
Neither the Per Share Cash Consideration nor the Exchange Ratio determined
pursuant to Section 2.2(a)(i) shall be affected by the absence of a
determination by the Board of Directors of BHI or CU to exercise a termination
right under this subsection (i).
13.2 Effect of Termination. If this Agreement is
terminated pursuant to this Article XIII, this Agreement shall be void and have
no further effect, except that no termination of this Agreement under this
Article XIII for any reason or in any manner shall release, or be construed as
so releasing, CU or BHI from its or their respective obligations (a) under the
CU Stock Option Agreement (termination of which shall be governed by the terms
of that agreement), (b) under the last sentence of Section 6.4, the last
sentence of Section 7.3, or under Section 14.1 hereof, or (c) from any
liability or damage to the other party hereto arising out of in connection with
or otherwise relating to, directly or indirectly, said party's intentional
breach, default or failure to perform any of its covenants, agreements, duties
or obligations arising hereunder.
ARTICLE XIV
68.
<PAGE> 79
MISCELLANEOUS
14.1 Expenses. Each party hereto shall pay its own costs
and expenses, including but not limited to those of its attorneys and
accountants, in connection with this Agreement and the transactions
contemplated hereby.
14.2 Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another shall be in
writing and delivered personally or by facsimile transmission or sent by
registered or certified mail, postage prepaid, with return receipt requested,
addressed as follows:
To CU: 16030 Ventura Boulevard
Encino, California 91436-4487
Attention: Stephen G. Carpenter
Facsimile Number: (818) 907-5024
With copies to: Anita Wolman, Esq.
16030 Ventura Boulevard
Encino, California 91436-4487
Facsimile Number: (818) 907-5024
and Sullivan & Cromwell
444 South Flower Street
Los Angeles, CA 90071-2901
Attention: Stanley F. Farrar, Esq.
Facsimile Number: (213) 683-0457
To BHI: Bancorp Hawaii, Inc.
130 Merchant Street
Honolulu, Hawaii 96813
Attention: David A. Houle
Facsimile Number: (808) 537-8637
With copies to: Joseph T. Kiefer, Esq.
130 Merchant Street
Honolulu, Hawaii 96813
Facsimile Number: (808) 538-4346
and Carlsmith Ball Wichman Case & Ichiki
69.
<PAGE> 80
Pacific Tower, Suite 2200
1001 Bishop Street
Honolulu, Hawaii 96813
Attention: J. Thomas Van Winkle, Esq.
Facsimile Number: (808) 523-0842
Any such notice, request, instruction or other document shall
be deemed received on the date delivered personally or sent by facsimile
transmission, or on the fourth Business Day after it was sent by registered or
certified mail, postage prepaid. Any of the Persons shown above may change its
address for purposes of this Section by giving notice in accordance herewith.
14.3 Successors and Assigns. All terms and conditions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective transferees, successors and permitted
assigns; provided, however, that this Agreement and all rights, privileges,
duties and obligations of the parties hereto may not be assigned or delegated
by either party hereto without the prior written consent of the other party
hereto.
14.4 Counterparts. This Agreement may be executed in one
or more counterparts, all of which, taken together, shall constitute one
original document.
14.5 Effect of Representations and Warranties. The
representations and warranties of CU and BHI contained in this Agreement shall
terminate immediately after the Effective Time.
14.6 Third Parties. Except for the final sentence of
Section 12.1 and Sections 12.3, 12.4 and 12.6, or as provided in Exhibits H and
J, this Agreement shall not benefit or create any right or cause of action on
the part of any Person other than BHI and CU.
14.7 Schedules; Exhibits; Integration. Each Schedule,
exhibit and letter delivered pursuant to this Agreement shall be in writing and
shall constitute a part of the Agreement, although Schedules and letters need
not be attached to each copy of this Agreement. This Agreement, together with
such Schedules, exhibits and letters, and the CU Stock Option Agreement,
constitute the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior agreements and understandings of the
parties in connection therewith. The Confidentiality Agreement dated November
22, 1996 between CU and BHI is terminated as of the date of this Agreement,
except that the provisions of Section IX.A. shall remain in effect (it being
agreed that such provisions shall not apply to any acquisition of securities of
CU pursuant to the Stock Option Agreement).
14.8 Knowledge; Materialty.
70.
<PAGE> 81
(a) All references herein to the "knowledge" or "best
knowledge" of BHI or of CU shall mean facts and other information which an
executive vice president, chief financial officer, controller or senior vice
president (and any officer superior to any of the foregoing) of BHI or of CU
(and, in the case of CU, of any such officer of CU Bank whether or not
knowledge of CU Bank is expressly referred to), knows as a result of the
performance of his or her duties, or that such officer or a senior executive
officer of a bank or bank holding company similar to such party with similar
duties reasonably should know after diligent inquiry.
(b) All references herein to Amaterial adverse change@ or
Amaterial adverse effect@ shall not include the effect of any change in Federal
or state banking laws or regulations or any change in generally accepted
accounting principles, in each case affecting depository institutions or
depository institution holding companies generally.
14.9 Governing Law. This Agreement shall be governed by,
and interpreted in accordance with, the laws of the State of California
(however, not to the exclusion of any applicable Federal law), without regard
to California statutes or judicial decisions regarding choice of law questions.
14.10 Schedules. The Schedules are an integral part of
this Agreement, and each Schedule shall be applicable as if set forth in full
in the text hereof. In the event there is any absolute unconditional
representation contained in this Agreement, said representation shall be
modified by any contrary information specifically referring to said
representation that is set forth in any Schedule.
14.11 Captions. The captions contained in this Agreement
are for convenience of reference only and do not form a part of this Agreement
and shall not affect the interpretation hereof.
14.12 Severability. If any portion of this Agreement shall
be deemed by a court of competent jurisdiction to be unenforceable, the
remaining portions shall be valid and enforceable only if, after excluding the
portion deemed to be unenforceable, the remaining terms hereof shall provide
for the consummation of the transactions contemplated herein without a
materially adverse impact on the financial or business benefits to the parties
hereto that would otherwise be provided by this Agreement.
14.13 Waiver and Modification. Prior to the Effective
Time, any provision of this Agreement may be waived by the party benefitted by
that provision or by both parties. No waiver of any term, provision or
condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a further or continuing waiver of any such term, provision
or condition of this Agreement. Except as otherwise required by law, this
Agreement, may be modified or amended by action of the Boards of Directors of
CU and BHI, without action by
71.
<PAGE> 82
their respective shareholders. This Agreement may be modified or amended only
by an instrument of equal formality signed by the parties or their duly
authorized agents.
14.14 Attorney's Fees. In the event either party to this
Agreement brings an action or suit against the other party by reason of any
breach of any covenant, agreement, representation, warranty or other provision
hereof, or any breach by such other party of any duty or obligation created
hereunder, the prevailing party, as determined by the court or other body
having jurisdiction, shall be entitled to have and recover of and from the
losing party, as determined by the court or other body having jurisdiction, all
reasonable costs and expenses incurred or sustained by such prevailing party in
connection with such suit or action, including, without limitation, reasonable
legal fees and court costs (whether or not taxable as such).
14.15 JURY WAIVER. THE PARTIES HERETO WAIVE TRIAL BY JURY
IN ANY MATTER ARISING OUT OF THIS AGREEMENT OR RELATED TO THIS AGREEMENT OR IN
CONNECTION WITH ANY TRANSACTION OR MATTER CONTEMPLATED IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties to this Agreement have duly
executed this Agreement as of the day and year first above written.
CU BANCORP
By: S/S
--------------------------------
Name: Stephen G. Carpenter
Title: Chief Executive Officer
BANCORP HAWAII, INC.
By: S/S
--------------------------------
Name: Joseph T. Kiefer
Title: General Counsel
72.
<PAGE> 1
EXHIBIT 99.1
EXHIBIT B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated February 24, 1997, between Bancorp
Hawaii, Inc., a Hawaii corporation ("Buyer"), and CU Bancorp, a California
corporation ("Seller").
WITNESSETH:
WHEREAS, Buyer and Seller have entered into an Agreement and Plan of
Reorganization of even date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto immediately prior to this Agreement;
and
WHEREAS, as a condition to Buyer's entering into the Merger Agreement
and in consideration therefor, Seller has agreed to grant Buyer 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:
<PAGE> 2
2. (a) Seller hereby grants to Buyer an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 19.9% (or 2,260,421 fully paid and nonassessable shares) of Seller's Common
Stock, no par value ("Common Stock"), at a price of $13.00 per share, provided,
however, that in the event Seller issues or agrees to issue any shares of
Common Stock (other than as permitted under the Merger Agreement) at a price
less than $13.00 per share (as adjusted pursuant to subsection (b) of Section
5), such price shall be equal to such lesser price (such price, as adjusted if
applicable, the "Option Price"); provided further that in no event shall the
number of shares for which this Option is exercisable exceed 19.9% of the
Seller'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 Common
Stock are issued or otherwise become outstanding after the date hereof (or any
treasury shares held by Seller have been or are sold after the date hereof)
(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% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject to or issued pursuant
to the Option. Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize Seller or Buyer to breach any provision
of the Merger Agreement.
3. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time from and after the occurrence
of a Triggering Event (as hereinafter defined) and prior to the occurrence of
an Exercise Termination Event (as hereinafter defined). Each of the following
shall be an Exercise Termination Event: (i) the effective time of the Merger as
set forth in the Merger Agreement; (ii) termination of the Merger Agreement by
Seller pursuant to Section 13.l(g) or Section 13.1(i) of the Merger
Agreement; (iii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Triggering Event other than a termination pursuant to Section 13.1(c)(iii) or
Section 13.1(h); or (iv) the passage of 12 months after termination of the
Merger Agreement if such termination follows the occurrence of a Triggering
Event or is pursuant to Section 13.1(c)(iii) or Section 13.1(h) of the
Merger Agreement. The term "Holder" shall mean the holder or holders of the
Option.
(b) The term "Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Seller or any of its subsidiaries (each a
"Seller Subsidiary"), without having received Buyer'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
<PAGE> 3
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act, and the rules and regulations thereunder) other
than Buyer or any of its subsidiaries (each a "Buyer Subsidiary") or
the Board of Directors of Seller shall have recommended that the
stockholders of Seller approve or accept any Acquisition Transaction
or shall have failed to publicly oppose an Acquisition Transaction
with 10 business days of its receipt or the date its existence
becomes publicly disclosed, whichever is earlier. For purposes of
this Agreement, "Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving Seller or Seller
Subsidiary, (x) a purchase, lease or other acquisition representing
10% or more of the consolidated assets of Seller and its Subsidiaries,
(y) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing
10% or more of the voting power of Seller or any Seller Subsidiary,
or (z) any substantially similar transaction;
(ii) Seller or any Seller Subsidiary, without
having received Buyer's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to
authorize, recommend or propose, an agreement to engage in an
Acquisition Transaction with any person other than Buyer or a Buyer
Subsidiary, or the Board of Directors of Seller shall have withdrawn
or modified, or announced its intent to withdraw or modify, in any
manner adverse to Buyer, its recommendation that the stockholders of
Seller approve the transactions contemplated by the Merger Agreement;
(iii) Any person or group other than Buyer or any
Buyer Subsidiary shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" and "group"
for purposes of this Agreement have the meanings assigned thereto in
Section 13(d) of the Exchange Act, and the rules and regulations
thereunder);
(iv) Any person other than Buyer or any Buyer
Subsidiary shall have made a bona fide proposal to Seller or its
stockholders by public announcement or written communication that is
or becomes the subject of public disclosure to engage in an
Acquisition Transaction;
(v) After a proposal is made by a third party to
Seller or its stockholders to engage in an Acquisition Transaction,
Seller shall have breached any covenant or obligation contained in the
Merger Agreement and such breach (x) would entitle Buyer 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 Buyer or any Buyer
Subsidiary, other than in connection with a transaction to which Buyer
has given
<PAGE> 4
its prior written consent, shall have filed an application or notice
with the Federal Reserve Board, or other federal or state bank
regulatory authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition Transaction.
(c) Seller shall notify Buyer promptly in writing
of the occurrence of any Triggering Event, it being understood that the giving
of such notice by Seller shall not be a condition to the right of the Holder to
exercise the Option.
(d) In the event the Holder is entitled to and
wishes to exercise the Option, it shall send to Seller a written 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 30 business
days from the Notice Date for the closing of such purchase (the "Closing
Date"); provided, that if the closing of the purchase and sale pursuant to the
Option (the "Closing") cannot be consummated by reason of any applicable
judgment, decree, order, law or regulation, the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
such restriction on consummation has expired or been terminated; and provided
further, without limiting the foregoing, that if prior notification to or
approval 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 approval 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 notification 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.
Notwithstanding this subsection (d), in no event shall any Closing Date be more
than 12 months after the related Notice Date, and if the Closing Date shall not
have occurred within 12 months after the related Notice Date due to the failure
to obtain any such required approval, the exercise of the Option effected on
the Notice Date shall be deemed to have expired. In the event (i) Buyer
receives official notice that an approval of the Federal Reserve Board or any
other regulatory authority required for the purchase of Option Shares (as
hereinafter defined) would not be issued or granted, (ii) a Closing Date shall
not have occurred within 12 months after the related Notice Date due to the
failure to obtain any such required approval or (iii) Holder (or Substitute
Holder) shall have the right pursuant to the last sentence of Section 7 (or
Section 9) to exercise the Option (or Substitute Option), Buyer or Holder (or
Substitute Holder) shall nevertheless be entitled to exercise its right as set
forth in Section 7 (or Section 9) and Buyer or Holder (or Substitute Holder)
shall be entitled to exercise the Option (or Substitute Option) in connection
with the resale of Seller Common Stock or other securities pursuant to a
registration statement as provided in Section 6.
(e) At the Closing referred to in subsection (d)
of this Section 2, the Holder shall pay to Seller the aggregate purchase price
for the shares of Common Stock
<PAGE> 5
purchased pursuant to the exercise of the Option in immediately available funds
by wire transfer to a bank account designated by Seller, provided that failure
or refusal of Seller to designate such a bank account shall not preclude the
Holder from exercising the Option.
(f) At such Closing, simultaneously with the
delivery of immediately available funds as provided in subsection (e) of this
Section 2, Seller 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 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 Seller 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.
(g) 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 Seller 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 Seller and will be provided to the
holder hereof without charge upon receipt by Seller of a written
request therefor.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder shall have
delivered to Seller a copy of a letter from the staff of the SEC, or an opinion
of counsel, in form and substance reasonably satisfactory to Seller, to the
effect that such legend is not required for purposes of the Securities Act;
(ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement 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.
(h) Upon the giving by the Holder to Seller of
the written notice of exercise of the Option provided for under subsection (d)
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 Seller shall then be closed or
that certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder or the Seller shall have failed or refused to
designate the bank
<PAGE> 6
account described in subsection (e) of this Section 2. Seller 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, issuance
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
4. Seller agrees: (a) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or treasury shares
of Common Stock (and other securities issuable pursuant to Section 5(a)) so
that the Option may be exercised without additional authorization of Common
Stock (or such other securities) after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock (or
such other securities); (b) 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
hereunder by Seller; (c) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended ("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, to cooperate fully with the Holder in preparing
such applications or notices and to provide 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 the Seller 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.
5. 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 principal office of Seller, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions 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 Option Agreements and related Options for which
this Agreement (and the Option granted hereby) may be exchanged. Upon receipt
by Seller of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Seller will execute and deliver 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
Seller, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
<PAGE> 7
6. 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 shall be subject to adjustment from time to
time as provided in this Section 5.
(a) In the event of any change in Common Stock by reason
of stock dividends, split-ups, mergers, recapitalization, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and number
of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted so that Buyer shall receive upon exercise of the Option
and payment of the aggregate Option Price hereunder the number and class of
shares or other securities or property that Buyer would have received in
respect of Common Stock if the Option had been exercised in full immediately
prior to such event, or the record date therefor, as applicable.
(b) Whenever the number of shares of Common Stock
purchasable upon exercise hereof is adjusted as provided in this Section 5, the
Option Price shall be adjusted by multiplying the Option Price by a fraction,
the numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Common Stock purchasable after the adjustment.
7. (a) In the event the Option shall become exercisable in
accordance with Section 2 hereof, Seller shall, at the request of Buyer
(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 or other registration statement
under the Securities Act covering any shares issued and issuable pursuant to
this Option and shall use its best efforts to cause such registration statement
to become effective and remain current in order to permit the sale or other
disposition of 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 Buyer. Seller will use its 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 day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Buyer for a period of 24
months following such first demand for registration under this Section 6(a)
shall have the right to demand a second such registration if reasonably
necessary to effect such sales or dispositions.
(b) If at any time Seller proposes to register any of its
Common Stock under the Securities Act, it will give written notice to Buyer of
its intention to do so. Upon the written request of Buyer, given within 15
calendar days after receipt of Seller's notice, Seller will use its best
efforts to cause to be included in the shares to be covered by the registration
statement proposed to be filed by Seller the Option Shares proposed to be sold
by Buyer; provided, however, that Seller need not include such Option Shares in
<PAGE> 8
such registration statement if Seller is advised by its investment banking firm
that the inclusion of such shares would materially interfere with the orderly
sale and distribution of the Seller shares being sold by Seller. Seller may in
its own discretion and without consent of Buyer, withdraw any such registration
statement and abandon the proposed offering in which Buyer shall have requested
to participate pursuant to this paragraph.
(c) Each such Holder shall provide all information
reasonably requested by Seller for inclusion in any registration statement to
be filed hereunder. If requested by any such Holder in connection with such
registration, Seller 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 Seller.
Upon receiving any request under this Section 6 from any Holder, Seller agrees
to send a copy thereof to any other person known to Seller to be entitled to
registration rights under this Section 6, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies.
8. (a) After the occurrence of a Triggering Event that occurs
prior to an Exercise Termination Event, (i) at the request of the Holder,
Seller (or any successor thereto) shall repurchase the Option from the Holder
at a price (the "Option Repurchase Price") equal to (x) 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
or (y) the Minimum Option Repurchase Price, whichever is greater, and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
Seller shall repurchase such number of the Option Shares from the Owner as the
Owner shall designate at a price (the "Option Share Repurchase Price") equal to
(x) the market/offer price multiplied by the number of Option Shares so
designated or (y) the Minimum Option Share Repurchase Price, whichever is
greater.
(b) The term "market/offer price" shall mean the highest
of (i) the highest price per share of Common Stock at which shares have been
purchased in a tender offer or exchange offer, (ii) the price per share of
Common Stock which has been paid by any third party pursuant to an agreement
with Seller, (iii) the highest closing price for shares of Common Stock quoted
in the New York Stock Exchange (or if Common Stock is not quoted in the New
York Stock Exchange, the highest bid price per share as quoted on the National
Association of Securities Dealers Automated Quotation Systems, or, if the
shares of Common Stock are not quoted thereon, on the principal trading market
on which such shares are traded as reported by a recognized source) within the
six-month period immediately preceding the date the Holder gives notice of the
required repurchase of Options or Option Shares, as the case may be, or (iv) in
the event of a sale of assets representing 15% or more of the consolidated
assets of Seller and its Subsidiaries, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Seller
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
<PAGE> 9
shares of Common Stock of Seller outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be. The term "Minimum Option
Repurchase Price" shall mean $5,000,000 multiplied by a fraction the numerator
of which is the total Option Shares which may then be purchased upon exercise
of the Option and the denominator of which is the total Option Shares which
could be purchased upon exercise of the Option assuming the Option had not been
previously exercised. The term "Minimum Option Share Repurchase Price" shall
mean $5,000,000 multiplied by a fraction the numerator of which is the number
of Option Shares designated for repurchase and the denominator of which is the
total Option Shares which could be purchased upon exercise of the Option
assuming the Option had not been previously exercised.
(c) The Holder or the Owner, as the case may be, may
exercise its right to require Seller to repurchase the Option and any Option
Shares pursuant to this Section 7 by surrendering for such purpose to Seller,
at its principal office, prior to an Exercise Termination Event, 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 Seller to repurchase this Option and/or the Option Shares
in accordance with the provisions of this Section 7. As promptly as
practicable, and in any event within 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, Seller shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof that Seller is
not then prohibited under applicable law and regulation from so delivering.
(d) To the extent that Seller is prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from repurchasing the Option and/or the Option Shares in full, Seller shall
immediately so notify 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 business days after the date on which Seller is no
longer so prohibited, provided, however, that if Seller at any time after
delivery of a notice of repurchase pursuant to paragraph (c) of this Section 7
is prohibited under applicable law or regulation, or as a consequence of
administrative policy, 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 Seller hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals and to 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 prohibition, whereupon, in the
latter case, Seller shall promptly (i) deliver to the Holder and/or the Owner,
as appropriate, that portion of the Option
<PAGE> 10
Repurchase Price or the Option Share Repurchase Price that Seller 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 numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator 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. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Seller
described in the first sentence of this subsection (d), or shall be scheduled
to occur at any time before the expiration of a period ending on the thirtieth
day after such date, the Holder shall nonetheless have the right to exercise
the Option until the expiration of such 30-day period.
9. (a) In the event that prior to an Exercise Termination Event,
Seller shall enter into an agreement (i) to consolidate with or merge into any
person, other than Buyer 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 Buyer or one of its subsidiaries, to merge into
Seller and Seller 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% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Buyer 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, issued by either (x) the Acquiring
Corporation (as hereinafter 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 consolidation or merger with
Seller (if other than Seller), (ii) Seller in a merger in which Seller
is the continuing or surviving person, and (iii) the transferee of all
or substantially all of Seller'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.
<PAGE> 11
(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 day preceding (or the value
attributed to shares of Substitute Common Stock in) such
consolidation, merger or sale, provided that if Seller is the issuer
of the Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by the person merging into
Seller 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 Option shall also enter into an agreement with the then Holder or
Holders of the Substitute Option in substantially the same form as this
Agreement (after giving effect for such purpose to the provisions of Section
9), which agreement 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 the Substitute Option be exercisable for more than 19.9% of
the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the shares of Substitute Common Stock
outstanding prior to exercise but for this clause (e), the issuer of the
Substitute Option (the "Substitute Option Seller") 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
Substitute 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 Holder.
(f) Seller shall not enter into any transaction described
in subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Seller hereunder.
<PAGE> 12
10. (a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the Substitute Option Seller shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to (x) the amount by which (i) the
Highest Closing Price (as hereinafter 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 or (y) the
Minimum Substitute Option Repurchase Price, whichever is greater, and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Seller shall
repurchase the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to (x) the Highest Closing Price multiplied by the number of
Substitute Shares so designated or (y) the Minimum Substitute Share Repurchase
Price, whichever is greater.
(b) The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute 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
Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable. The term "Minimum Substitute Option
Repurchase Price" shall mean $5,000,000 multiplied by a fraction the numerator
of which is the number of shares of Substitute Common Stock which may then be
purchased upon exercise of the Substitute Option and the denominator of which
is the number of shares of Substitute Common Stock which could be purchased
upon exercise of the Substitute Option assuming the Substitute Option or the
Option had not been previously exercised. The term "Minimum Substitute Share
Repurchase Price" shall mean $5,000,000 multiplied by a fraction the numerator
of which is the number of shares of Substitute Common Stock designated for
repurchase and the denominator of which is the number of shares of Substitute
Common Stock which could be purchased upon exercise of the Substitute Option
assuming the Substitute Option or the Option had not been previously exercised.
(c) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to require the
Substitute Option Seller to repurchase the Substitute Option and the Substitute
Shares pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Seller, at its principal office, prior to an Exercise
Termination Event, the agreement for such Substitute Option (or, in the absence
of such an agreement, 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 Seller to repurchase the Substitute Option and/or
the Substitute Shares in accordance with the provision 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 certificates representing Substitute
Shares and the receipt of such notice or notices relating thereto, the
Substitute Option Seller shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which
<PAGE> 13
the Substitute Option Seller is not then prohibited under applicable law and
regulation from so delivering.
(d) To the extent that the Substitute Option Seller is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Seller 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 Substitute Option Repurchase Price or the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Seller is no longer so prohibited; provided, however, that if the
Substitute Option Seller is at any time after delivery of a notice of
repurchase pursuant to subsection (c) of this Section 9 prohibited under
applicable law or regulation, or as a consequence of administrative policy,
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 Seller shall use its best efforts to receive 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 Substitute Shares
either in whole or to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Seller 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 Repurchase Price
that the Substitute Option Seller is not prohibited 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
purchase that number of shares of the Substitute Common Stock obtained 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 Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Seller described in the first sentence of this
subsection (d), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the
Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30 day period.
11. Any period for exercise of rights shall be extended: (a) to
the extent necessary to obtain all regulatory approvals for the exercise of
such rights, and for the
<PAGE> 14
expiration of all statutory waiting periods; and (b) to the extent necessary to
avoid liability under Section 16(b) of the Exchange Act by reason of such
exercise.
12. Seller hereby represents and warrants to Buyer as follows:
(a) Seller 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
authorized by the Board of Directors of Seller and no other corporate
proceedings on the part of Seller are necessary to authorize this Agreement or
to consummate the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by Seller. This Agreement is the valid and
legally binding obligation of Seller, enforceable against Seller in accordance
with its terms.
(b) Seller 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 hereunder, 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,
encumbrance and security interests and not subject to any preemptive rights.
(c) The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any breach pursuant to any provisions of the
Articles of Incorporation or by-laws of Seller or any Subsidiary of Seller or,
subject to obtaining any approvals or consents contemplated hereby or by the
Merger Agreement, result in any breach of any loan or credit agreement, note,
mortgage, indenture, lease, plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Seller or any Subsidiary of Seller
or their respective properties or assets.
13. Buyer hereby represents to Seller as follows:
(a) Buyer 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
authorized by the board of directors of Buyer and no other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement or
to consummate the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by Buyer. This Agreement is the valid and
<PAGE> 15
legally binding obligation of Buyer, enforceable against Buyer in accordance
with its terms.
(b) Buyer is acquiring the Option and, if and when it
exercises the Option, will be acquiring the Share issuable upon the exercise
thereof for its own account and not with a view to distribution or resale in
any manner which would be in violation of the Securities Act.
14. 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 express written consent of the other party, except
that in the event a Triggering Event shall have occurred prior to an Exercise
Termination Event, Buyer, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder, provided, however,
that until the date 30 days following the date on which the Federal Reserve
Board approves an application by Buyer under the BHCA to acquire the shares of
Common Stock subject to the Option, Buyer 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%
of the voting shares of Seller, (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 Buyer's behalf, or (iv) any other manner approved by the
Federal Reserve Board.
15. Immediately following a Triggering Event, each of Buyer and
Seller 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 Agreement, including
without limitation making application to list the shares of Common Stock
issuable hereunder on the NASDAQ\NMS upon official notice of issuance and
applying to the Federal Reserve Board under the BHCA for approval to acquire
the shares issuable hereunder, but Buyer shall not be obligated to apply to
state banking authorities for approval to acquire the shares of Common Stock
issuable hereunder until such time, if ever, as it deems appropriate to do so.
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 injunctive 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 invalid, void or unenforceable, the remainder of
the terms, provisions 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 reason such court or regulatory
agency determines that the Holder or Substitute Option Holder is not permitted
to acquire, or Seller or Substitute Option Seller is not permitted to
repurchase pursuant to
<PAGE> 16
Section 7 or Section 9, as the case may be, the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b)
or Section 5 hereof), it is the express intention of Seller to allow the Holder
to acquire or to require Seller 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, telecopy 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 construed in
accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable 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 or in the Merger
Agreement, 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 expenses of its own financial
consultants, investment bankers, accountants and counsel.
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 benefit of and be
binding upon the parties hereto and their respective 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
successors except as assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided herein. Any
provision of this Agreement may be waived at any time by the party that is
entitled to the benefits of such provision. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
23. In the event of any exercise of the Option by Buyer, Seller
and Buyer shall execute and deliver all other documents and instruments and
take all other action that may be reasonably necessary in order to consummate
the transactions provided for by such exercise.
<PAGE> 17
24. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
BANCORP HAWAII, INC.
By: /s/ JOSEPH T. KIEFER
---------------------------------
Joseph T. Kiefer, General Counsel
CU BANCORP
By: /s/ STEPHEN G. CARPENTER
---------------------------------
Stephen G. Carpenter,
Chief Executive Officer
<PAGE> 1
EXHIBIT 99.2
CONTACT:
Patrick Hartman
Chief Financial Officer
(818) 907-9122
CU BANCORP ANNOUNCES AGREEMENT
TO BE ACQUIRED BY BANCORP HAWAII, INC.
ENCINO, CALIFORNIA, February 24, 1997 -- CU Bancorp (Nasdaq: CUBN), the
holding company of California United Bank, announced that it has signed a
definitive agreement to merge CU Bancorp into Bancorp Hawaii, Inc., the parent
of Bank of Hawaii, at a price of $15.34 per share of CU Bancorp common stock.
The price is payable in a combination of Bancorp Hawaii, Inc. common stock and
cash with the stock portion being not more than 80% nor less than 60%. The
purchase price is subject to adjustment under certain circumstances. California
United Bank will continue to operate under its current leadership and management
structure, as a subsidiary of the Hawaiian holding company.
"This is a unique opportunity to provide exceptional value to our
shareholders while continuing to offer the same unparalleled business and retail
banking services to our customers," said Stephen G. Carpenter. "David I. Rainer
and I will remain as President and Chief Executive Officer, respectively, and no
major changes in operations or personnel are expected as a result of this
acquisition. Our customers should see no change; we expect the transition to be
seamless."
"We welcome this opportunity as bringing value to all of our
constituencies," commented Carpenter. "Our shareholders will benefit through the
increased value, as well as, for those receiving stock, participation in the
Bancorp Hawaii common stock which is traded on the New York Stock Exchange under
the symbol BOH. Our customers will continue to be served by what we believe to
be the best banking team in Southern California, and will have access to
sophisticated business and retail products of the Bancorp Hawaii family. The
management and employees will have the opportunity to continue in place as part
of a larger organization."
"Bancorp Hawaii has indicated that it is pursuing a strategy of
geographical diversification spanning the Asia-Pacific region and aimed at
capturing trade flows
<PAGE> 2
across the Pacific," noted President Rainer. "This acquisition will be their
first acquisition in California, which is an important part of that strategy. We
do not expect any significant changes in California United Bank's business
strategy from this acquisition. Customers should know that our recent systems
conversion has been completed and we expect to continue to utilize those systems
as part of the Bancorp Hawaii family."
"We are pleased to welcome the management and staff of California
United Bank to Bancorp Hawaii," said Lawrence M. Johnson, Chairman and Chief
Executive Officer of Bancorp Hawaii. "We are confident that this important
acquisition will provide additional value to Bancorp Hawaii and CU Bancorp
shareholders and provide new opportunities for California United Bank."
Thomas C. Leppert, Bancorp Hawaii's Vice Chairman in charge of the U.S.
Mainland market noted, "To realize the full potential of Bancorp Hawaii's strong
Pacific network we need a strong Mainland platform focused on medium size and
middle market companies, such as California United Bank. We view this as an
incremental step, and we will-over time-continue to build our Mainland
platform."
Bancorp Hawaii is a regional bank holding company with more than 160
locations spanning nearly 12,000 miles from Singapore to New York. Bancorp
Hawaii and its subsidiaries provide varied financial services to businesses,
governments and individuals in Hawaii, the Asia-Pacific region and in selected
markets on the U.S. Mainland. Bancorp Hawaii is the largest Hawaii-based
financial organization, and its principal subsidiary, Bank of Hawaii, is the
state's largest commercial bank.
The transaction is subject to the approval of the shareholders of CU
Bancorp and regulatory approvals. Subject to those approvals and the
satisfaction of customary conditions, it is expected that the transaction will
close no later than the third quarter of 1997.
CU Bancorp is the holding company of California United Bank, among the
largest independent banks headquartered in Southern California. It serves middle
market businesses and consumers throughout Southern California from 21 branches
in Westwood, the San Gabriel and San Fernando valleys, the South Bay, and
Ventura and Orange counties. In addition to a comprehensive range of commercial
and personal banking products and services, the Bank also offers specialty
banking expertise in the areas of SBA lending, international trade services,
entertainment finance, investment services and private banking services.
#####
<PAGE> 1
EXHIBIT 99.3
EXHIBIT D
SHAREHOLDER'S AGREEMENT
This SHAREHOLDER'S AGREEMENT (this "Agreement"), dated as of February
24, 1997, is entered into among Bancorp Hawaii, Inc., a Hawaii corporation
("BHI"), ________________________________________________________ (the
"Shareholder"), and CU Bancorp, a California corporation ("CU").
RECITALS
A. BHI and CU entered into that certain Agreement and Plan of
Reorganization dated as of February 24, 1997 (the "Reorganization Agreement").
B. The Shareholder is a beneficial shareholder of shares of common
stock, no par value, of CU (the "CU Stock").
C. The Shareholder is a director of CU.
D. Unless otherwise provided in this Agreement, capitalized terms shall
have the meanings ascribed to such terms in the Reorganization Agreement.
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties and covenants, agreements and conditions contained
herein and in the Reorganization Agreement, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
SHAREHOLDER'S AGREEMENT
1.1 Agreement to Vote. At any meeting of shareholders of CU to approve
the Reorganization Agreement, the Merger and the transactions contemplated
thereby (the "CU Shareholders' Meeting"), Shareholder shall vote or cause to be
voted in favor of, and to approve, the Reorganization Agreement, the Merger and
the transactions contemplated thereby, all of the
<PAGE> 2
shares of CU Stock as to which Shareholder has sole or shared voting power (the
"Shares"). Shareholder further agrees to vote or cause to be voted all the
Shares, except with the prior written consent of BHI, against the following
actions (other than the Merger and the transactions contemplated by the
Reorganization Agreement): (a) any extraordinary corporate transactions, such as
a merger, consolidation or other business combination involving CU or its
subsidiaries; (b) any sale, lease or transfer of a material amount of the assets
of CU or its subsidiaries; (c) any change in the majority of the board of
directors of CU; (d) any material change in the present capitalization of CU;
(e) any amendment of CU's Articles of Incorporation; (f) any other material
change in CU's corporate structure or business; or (g) any other action which is
intended, or could reasonably be expected to, impede, interfere with, delay,
postpone, discourage or materially adversely affect the contemplated economic
benefits to BHI of the Merger or the transactions contemplated by the
Reorganization Agreement or the CU Stock Option Agreement.
1.2 Legend. The Shareholder agrees that the following legend may be
stamped, printed or typed on the face of his certificates of CU Stock evidencing
the Shares:
"THE VOTING, SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER
ENCUMBRANCE OR DISPOSITION OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO A SHAREHOLDER'S AGREEMENT DATED AS OF THE
24TH DAY OF FEBRUARY, 1997 BY AND BETWEEN BANCORP HAWAII, INC. AND (THE
RECORD OWNER HEREOF), COPIES OF WHICH ARE ON FILE AT THE OFFICES OF
BANCORP HAWAII, INC."
CU agrees to issue stop transfer instructions to CU's transfer agent with
respect to Shareholder's CU Stock, to maintain such instructions in effect until
termination of this Agreement, and to use its reasonable best efforts to prevent
a transfer of Shareholder's CU Stock contrary to the terms of this Agreement.
1.3 Restrictions on Dispositions. The Shareholder agrees that, from and
after the date of this Agreement and during the term of this Agreement, the
Shareholder will not take any action that will alter or affect in any way the
right to vote the Shares, except (i) with the prior written consent of BHI or
(ii) to change such right from that of a shared right of the Shareholder to vote
the Shares to a sole right of the Shareholder to vote the Shares. The
Shareholder agrees that he will not pledge or otherwise encumber, nor sell,
assign, transfer or otherwise dispose of or reduce his risk of ownership or
investment in, any of the Shares currently owned or acquired by such Shareholder
after the date of this Agreement, except (i) with the prior written consent of
BHI (which shall not be unreasonably withheld); (ii) pursuant to the Merger; or
(iii) for any Shares
<PAGE> 3
acquired by Shareholder after the record date for the CU Shareholders' Meeting
upon exercise of options presently held by Shareholder.
1.4 Cooperation. Shareholder agrees that he/she will not directly or
indirectly solicit any inquiries or proposals from any person relating to any
proposal or transaction for the disposition of the business or assets of CU or
any of its subsidiaries, or the acquisition of voting securities of CU or any
subsidiary of CU or any business combination between CU or any subsidiary of CU
and any person other than BHI.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
The Shareholder represents and warrants to BHI that the statements set
forth below are true and correct as of the date of this Agreement, except those
that are specifically as of a different date:
2.1 Ownership and Related Matters.
(a) Schedule 2.1(a) hereto correctly sets forth the number of Shares
beneficially owned by Shareholder and the nature of Shareholder's voting power
with respect thereto. The Shareholder has good title to all of the Shares
indicated as owned by such Shareholder in the capacity set forth on Schedule
2.1(a), and such Shares are so owned free and clear of any liens, security
interest, charges or other encumbrances, except as set forth in such Schedule
2.1(a). Within five Business Days after the record date for the CU Shareholder's
Meeting (the "Record Date"), the Shareholder shall amend said Schedule 2.1(a) to
correctly reflect the number of Shares and the nature of Shareholder's voting
power with respect thereto as of the Record Date.
(b) There are no proxies, voting trusts or other agreements or
understandings to or by which the Shareholder or the Shareholder's spouse is a
party or bound or that expressly requires that any of the Shares be voted in any
specific manner other than as provided in this Agreement.
2.2 Authorization and Binding Agreement. The Shareholder has the legal
right, power, capacity and authority to execute, deliver and perform this
Agreement, and this Agreement is the valid and binding obligation of the
Shareholder enforceable in accordance with its terms, except as the enforcement
thereof may be limited by general principles of equity.
2.3 Non-contravention. The execution, delivery and performance of this
Agreement by the Shareholder will not (a) conflict with or result in the breach
of, or default or actual or potential
<PAGE> 4
loss of any benefit under, any provision of any agreement, instrument or
obligation to which the Shareholder or the Shareholder's spouse is a party or by
which any of Shareholder's properties or the Shareholder's spouse's properties
are bound, or give any other party to any such agreement, instrument or
obligation a right to terminate or modify any term thereof; (b) require the
consent or approval of any third party; (c) result in the creation or imposition
of any lien, mortgage or encumbrance on any of the Shares or any other assets of
the Shareholder or the Shareholder's spouse; or (d) violate any law, rule or
regulation to which the Shareholder or the Shareholder's spouse is subject.
ARTICLE III
GENERAL
3.1 Amendments. To the fullest extent permitted by law, this Agreement
and any schedule or exhibit attached hereto may be amended by agreement in
writing of the parties hereto at any time.
3.2 Integration. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter hereof and (except for
other documents to be executed pursuant to the Reorganization Agreement)
supersedes all prior agreements and understandings of the parties in connection
therewith.
3.3 Specific Performance. The Shareholder and BHI each expressly
acknowledge that, in view of the uniqueness of the obligations of the
Shareholder contemplated hereby, BHI would not have an adequate remedy at law
for money damages in the event that this Agreement has not been performed by the
Shareholder in accordance with its terms, and therefore the Shareholder and BHI
agree that BHI shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which it may be entitled at law or in equity.
3.4 Termination. This Agreement shall terminate automatically without
further action at the earlier of the Effective Time of the Merger (as defined in
the Reorganization Agreement) or the termination of the Reorganization Agreement
in accordance with its terms (except that the obligation set forth in clause (g)
of the last sentence of Section 1.1 shall survive until the CU Stock Option
Agreement has terminated or been fully performed). Upon such termination of this
Agreement, the respective obligations of the parties hereto shall immediately
become void and have no further force and effect.
3.5 No Assignment. Neither this Agreement nor any rights, duties or
obligations hereunder shall be assignable by BHI or the Shareholder, in whole or
in part. Any attempted assignment in
<PAGE> 5
violation of this prohibition shall be null and void. Subject to the foregoing,
all of the terms and provisions hereof shall be binding upon, and inure to the
benefit of, the successors of the parties hereto.
3.6 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
3.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to each party hereto.
3.8 Notices. Any notice or communication required or permitted
hereunder, shall be deemed to have been given if in writing and (a) delivered in
person, (b) delivered by confirmed facsimile transmission (c) sent by overnight
carrier, postage prepaid with return receipt requested or (d) mailed by
certified or registered mail, postage prepaid with return receipt requested,
addressed as follows:
If to BHI, addressed to:
Bancorp Hawaii, Inc.
111 S. King Street
Honolulu, HI 96813
Attn: David A. Houle
Fax. No. (808) 537-8637
With a copy addressed to:
Carlsmith Ball Wichman Case & Ichiki
2200 Pacific Tower
1001 Bishop Street
Honolulu, HI 96813
Attn: J. Thomas Van Winkle, Esq.
Fax. No. (808) 523-0842
If to Shareholder, addressed to:
<PAGE> 6
With a copy addressed to:
CU Bancorp
16030 Ventura Blvd.
Encino, CA 91436
Attn: Anita Y. Wolman, Esq.
Fax No. (818) 907-5024
or at such other address and to the attention of such other person as a party
may notice to the others in accordance with this Section 3.8. Any such notice or
communication shall be deemed received on the date delivered personally or
delivered by confirmed facsimile transmission, on the first Business Day after
it was sent by overnight carrier, postage prepaid with return receipt requested
or on the fourth Business Day after it was sent by certified or registered mail,
postage prepaid with return receipt requested.
3.9 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of California applicable to contracts between California parties made and
performed in such State.
3.10 Severability and the Like. If any provision of this Agreement
shall be held by a court of competent jurisdiction to be unreasonable as to
duration, activity or subject, it shall be deemed to extend only over the
maximum duration, range of activities or subjects as to which such provision
shall be valid and enforceable under applicable law. If any provisions shall,
for any reason, be held by a court of competent jurisdiction to be invalid,
illegal or unenforceable, such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
3.11 Expenses. Each party hereto shall pay its own costs and expenses,
including, but not limited to, those of its attorneys and accountants, in
connection with this Agreement and transactions covered and contemplated hereby.
3.12 Waiver of Breach. Any failure or delay by BHI in enforcing any
provision of his Agreement shall not operate as a waiver thereof. The waiver by
BHI of a breach of any provision of this Agreement by the Shareholder shall not
operate or be construed as a waiver of any
<PAGE> 7
subsequent breach or violation thereof. All waivers shall be in writing and
signed by the party to be bound.
3.13 Attorneys' Fees. In the event either of the parties to this
Agreement brings an action or suit against any other party by reason of any
breach of any covenant, agreement, representation, warranty or other provision
hereof, or any breach by such other party of any duty or obligation created
hereunder, the prevailing party in whose favor final judgment is entered shall
be entitled to have and recover of and from the losing party all reasonable
costs and expenses incurred or sustained by such prevailing party in connection
with such suit or action, including without limitation, legal fees and court
costs (whether or not taxable as such).
<PAGE> 8
3.14 JURY WAIVER. THE PARTIES HERETO AGREE TO WAIVE TRIAL BY JURY IN
ANY DISPUTE OVER THIS AGREEMENT OR RELATED THERETO IN ANY MANNER.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed
this Agreement as of the day and year first above written.
BANCORP HAWAII, INC. CU BANCORP
By: By:
------------------------------- ---------------------------------
Title: General Counsel Title:
By:
---------------------------------
Title:
SHAREHOLDER
Name:
<PAGE> 9
SPOUSAL CONSENT
I am the spouse of the Shareholder in the above Agreement. I understand
that I may consult independent legal counsel as to the effect of this Agreement
and the consequences of my execution of this Agreement and, to the extent I felt
it necessary, I have discussed it with legal counsel. I hereby confirm this
Agreement and agree that it shall bind my interest in the Shares, if any.
- ------------------------------
(Shareholder's Spouse's Name)
<PAGE> 10
SCHEDULE 2.1(a) TO SHAREHOLDER'S AGREEMENT
Dated _______________ , 1997
___________________
Name of Shareholder
Shares Held as of ____________
- --------------------------------------------------------------------------------
Number of Shares of CU Common
Stock as to which the Shareholder
had sole or shared voting or
dispositive power as of the above
date including the number of
shares which such person had the Common Shares Issuable Upon Total Common
right to acquire as of such date Owned Conversion Equivalent
- -------------------------------- ------------- -------------- ------------
- --------------------------------------------------------------------------------
