<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
First Hawaiian, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
First Hawaiian, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, without par value, of BancWest Corporation ("BancWest
Common Stock")
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
1,733,430 shares of BancWest Common Stock
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
The filing fee of $80,950 has been calculated in accordance with Rule
0-11 under the Exchange Act and is based on the book value of the
BankWest Common Stock, computed as of May 31, 1998.
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$404,750,000
------------------------------------------------------------------------
(5) Total fee paid:
$80,950, equaling one fiftieth of one percent of the proposed maximum
aggregate value of the transaction.
------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[FST HAWAIIAN LOGO]
July 17, 1998
Dear Stockholder:
The Board of Directors of First Hawaiian, Inc. has approved a merger
agreement that provides for the merger of BancWest Corporation, the owner of
Bank of the West, into our Company. As a result of the merger, our Company will
become the owner of Bank of the West. First Hawaiian, Inc. will change its name
to "BancWest Corporation" to reflect its expanded geographic scope. Also, Banque
Nationale de Paris ("BNP"), BancWest's existing shareholder, will own 45% of the
voting stock of the Company following the merger.
Your Board believes that this merger will be good for our customers, for
our employees and for you, our stockholders. The merger represents a unique
opportunity to transform the Company into a diversified regional financial
services institution large enough to offer the fine banking technology and
products that customers deserve. But the merger does nothing to alter our
primary focus: individual service for our customers, along with a tradition of
supporting the communities where we do business.
The terms of the new Class A common stock to be issued to BNP in the merger
will entitle BNP to be represented on your Board of Directors in proportion to
its 45% equity interest. BNP would also receive certain investor protections
which your Board believes would be commensurate with the size of BNP's
investment in the Company.
The merger, including the related amendments to the certificate of
incorporation of the Company, cannot be completed without the approval of our
stockholders. We have scheduled a special meeting of stockholders of First
Hawaiian for this vote. The date, time and place of the special meeting are:
Friday, August 28, 1998
9:30 o'clock A.M., local time
30th Floor Board Room
First Hawaiian Center
999 Bishop Street
Honolulu, Hawaii
The accompanying proxy statement provides detailed information about the
proposed transaction, including information about the businesses of BancWest.
Your Board of Directors has carefully considered the terms and conditions
of the proposed merger at meetings of the Board and believes that the merger is
in the best interests of First Hawaiian and its stockholders. ACCORDINGLY, YOUR
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO ADOPT THE MERGER
AGREEMENT.
Your vote is very important. Whether or not you plan to attend the special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card. If you attend the special meeting, you may vote in person if you
wish, even though you have previously returned your proxy card.
Very truly yours,
/s/ Walter A. Dods, Jr.
Walter A. Dods, Jr.
Chairman and Chief Executive Officer
<PAGE> 3
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF FIRST HAWAIIAN, INC.
A Special Meeting of Stockholders (the "Special Meeting") of First
Hawaiian, Inc. (the "Company" or "FHI") will be held in the 30th Floor Board
Room at First Hawaiian Center, 999 Bishop Street, Honolulu, Hawaii, on Friday,
August 28, 1998, at 9:30 o'clock A.M., local time, to consider and vote upon the
adoption of the Agreement and Plan of Merger, dated as of May 28, 1998 (the
"Merger Agreement"), between the Company and BancWest Corporation ("BancWest"),
pursuant to which, among other things, (i) BancWest will be merged with and into
the Company (the "Merger"), (ii) the outstanding shares of common stock, without
par value, of BancWest ("BancWest Common Stock"), all of which are currently
owned by Banque Nationale de Paris ("BNP"), will be converted into a number of
shares of the Company's Class A Common Stock, par value $1.00 per share (the
"Class A Common Stock"), equal to 45% of the total number of shares of Class A
Common Stock and Common Stock of the Company (the "Common Stock") that will be
outstanding after the Merger, and (iii) certain amendments will be made to the
Company's Certificate of Incorporation (the "FHI Certificate").
The foregoing proposal is more fully described in the Proxy Statement
accompanying this Notice. No other business is expected to be transacted at the
Special Meeting.
Only stockholders of record at the close of business on July 15, 1998 will
be entitled to notice of and to vote at the Special Meeting and any adjournments
thereof. A list of stockholders of record on such record date will be available
for examination by any stockholder for purposes germane to the Special Meeting
in the offices of the Company's Corporate Secretary located at 999 Bishop
Street, Honolulu, Hawaii during ordinary business hours for a period of at least
10 days prior to the Special Meeting and at the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Herbert E. Wolff
Senior Vice President and Secretary
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE SPECIAL MEETING. PLEASE
MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY WITHDRAW YOUR
PROXY AND VOTE IN PERSON IF YOU WISH TO DO SO.
This Proxy Statement is dated July 17, 1998
and was first mailed to stockholders on or
about July 20, 1998
<PAGE> 4
To find any of the principal sections identified below, simply bend the
document slightly to expose the black tabs and open the document to the tab
which corresponds to the title of the section you wish to read. For your
convenience, we have included an index of frequently used capitalized terms in
this Proxy Statement in an Index of Defined Terms towards the back of this Proxy
Statement.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER
SUMMARY; THE SPECIAL MEETING
THE MERGER, THE MERGER AGREEMENT AND OTHER AGREEMENTS
RELATED ARRANGEMENTS WITH BNP
THE COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
ADDITIONAL INFORMATION
FINANCIAL STATEMENTS OF BANCWEST CORPORATION
APPENDICES
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 3
The Companies............................................. 3
The Special Meeting....................................... 3
The Record Date for Voting................................ 4
Voting.................................................... 4
Reasons for the Merger.................................... 4
Board Recommendation...................................... 5
The Merger................................................ 5
Terms of the Class A Common Stock...................... 5
Election of Directors................................ 5
Voting Rights........................................ 5
Conversion into Common Stock......................... 5
Conditions to the Merger............................... 5
Termination of the Merger Agreement.................... 6
Fees and Expenses...................................... 6
Indemnification........................................ 7
Standstill and Governance Agreement....................... 7
Standstill Period...................................... 7
Early Release from Standstill Provisions............... 8
Post-Standstill Provisions............................. 8
Other Standstill Provisions............................ 8
Exceptions to Standstill Provisions.................... 9
Transfer Restrictions.................................. 9
Registration Rights.................................... 9
Charter Amendments........................................ 9
By-Law Amendments......................................... 9
Fairness Opinion.......................................... 10
Interests of Certain Persons in the Merger................ 10
Regulatory Approvals Required............................. 10
Accounting Treatment...................................... 10
Certain Federal Income Tax Consequences................... 11
No Appraisal Rights....................................... 11
First Hawaiian, Inc. Selected Historical Financial Data... 12
BancWest Corporation Selected Historical Financial Data... 14
Selected Unaudited Pro Forma Combined Financial
Information............................................ 16
Comparative Per Share Market Price and Dividend
Information............................................ 18
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS............ 19
THE SPECIAL MEETING......................................... 20
Date, Time and Place...................................... 20
Purpose of the Special Meeting............................ 20
Record Date; Quorum....................................... 20
Vote Required............................................. 20
Voting of Proxies......................................... 21
Revocability of Proxies................................... 21
Solicitation of Proxies................................... 21
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THE MERGER.................................................. 23
General................................................... 23
Background of the Merger.................................. 23
Recommendation of the Board; Reasons for the Merger....... 24
Opinion of the Financial Advisor.......................... 26
Regulatory Approvals Required............................. 31
Interests of Certain Persons in the Merger................ 32
Employee Benefits......................................... 33
Accounting Treatment...................................... 34
Certain Federal Income Tax Consequences................... 34
No Appraisal Rights....................................... 35
THE MERGER AGREEMENT........................................ 35
Structure of the Merger; Effective Time................... 35
Conversion of BancWest Capital Stock...................... 35
Representations and Warranties............................ 36
Conduct of Business Pending the Merger.................... 36
Other Acquisition Proposals............................... 37
Other Agreements.......................................... 38
Stockholders' Meeting.................................. 38
Filings and Other Actions.............................. 38
Indemnification of Directors and Officers of
BancWest.............................................. 38
Employee Benefit Plans................................. 39
Intercompany Matters................................... 39
Conditions to the Consummation of the Merger.............. 39
Termination............................................... 40
Fees and Expenses......................................... 42
Amendment................................................. 43
Extension; Waiver......................................... 43
OTHER AGREEMENTS............................................ 44
BNP Agreement............................................. 44
Representations and Warranties......................... 44
Certain Covenants...................................... 44
Survival and Indemnification........................... 44
Termination............................................ 45
Stockholder Agreement..................................... 45
RELATED ARRANGEMENTS WITH BNP............................... 47
Terms of the Class A Common Stock......................... 47
General................................................ 47
Dividends.............................................. 47
Liquidation Rights..................................... 47
Voting Rights.......................................... 47
Election of Directors.................................. 47
Conversion of Class A Common Stock..................... 48
Standstill and Related Provisions......................... 48
Standstill Period...................................... 48
Early Release from Standstill Provisions............... 49
Post-Standstill Provisions............................. 50
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Other Standstill Provisions............................ 51
Exceptions to Standstill Provisions.................... 53
Transfer Restrictions and Related Provisions.............. 53
Transfer Restrictions.................................. 53
Right of First Refusal................................. 54
Registration Rights.................................... 54
Other Governance Provisions............................... 55
Voting of Shares by BNP................................ 55
Committees............................................. 55
Agenda................................................. 55
Charter Amendments........................................ 55
Name Change............................................ 56
Increase in Number of Authorized Shares; Change in Par
Value................................................. 56
Creation of Class A Common Stock....................... 56
Stockholder Voting Requirements........................ 57
Number of Directors.................................... 58
Elimination of Preemptive Rights....................... 58
Classified Board....................................... 58
Nominating Committee................................... 58
Supermajority Vote to Amend By-Laws.................... 58
By-Law Amendments......................................... 58
DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER... 61
Directors Following the Merger............................ 61
Management Following the Merger........................... 61
Operations Following the Merger........................... 61
FIRST HAWAIIAN, INC......................................... 63
BANCWEST CORPORATION........................................ 64
General................................................... 64
Bank of the West.......................................... 64
General................................................ 64
History of the Bank.................................... 64
Operating Divisions.................................... 65
Community Banking.................................... 65
Commercial Banking................................... 66
Consumer Finance..................................... 66
Competition............................................ 67
Supervision and Regulation............................. 67
Bank Holding Company Act............................. 67
Bank Regulation and Supervision...................... 67
Capital Standards.................................... 69
Restrictions on Dividends and Other Distributions.... 69
Competition.......................................... 69
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 70
Selected Financial Data................................ 70
Results of Operations.................................. 71
Net Interest Income.................................... 71
Noninterest Income..................................... 72
Noninterest Expense.................................... 72
Provision for Credit Losses............................ 74
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Provision for Income Taxes............................. 75
Balance Sheet.......................................... 76
Loan Portfolio......................................... 76
Asset Quality.......................................... 77
Liabilities............................................ 78
Capital Management..................................... 79
Liquidity.............................................. 79
Quantitative and Qualitative Disclosures About Market
Risk.................................................. 80
Asset/Liability Management and Interest Rate Risk...... 80
Year 2000 Issues....................................... 81
Net Interest Margin.................................... 82
Changes in Net Interest Margin......................... 84
Summary of Quarterly Financial Data (Unaudited)........ 84
BANQUE NATIONALE DE PARIS................................... 85
General................................................... 85
History................................................... 85
Domestic and International Activities..................... 85
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 87
Unaudited Pro Forma Combined Balance Sheet and Selected
Ratios................................................. 88
Unaudited Pro Forma Combined Statement of Income and
Selected Ratios........................................ 89
Unaudited Pro Forma Combined Statement of Income and
Selected Ratios........................................ 90
Notes to Unaudited Pro Forma Combined Financial
Information............................................ 91
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT...... 93
INDEPENDENT ACCOUNTANTS..................................... 95
WHERE YOU CAN FIND MORE INFORMATION......................... 95
STOCKHOLDER PROPOSALS....................................... 96
OTHER MATTERS............................................... 96
INDEX OF DEFINED TERMS...................................... 97
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF BANCWEST
CORPORATION AND SUBSIDIARY................................ F-1
APPENDICES
Appendix I -- Agreement and Plan of Merger................ I-1
Exhibit A -- Certificate of Incorporation
Exhibit B -- By-Laws
Exhibit C -- Form of Standstill and Governance
Agreement
Exhibit D -- Form of Registration Rights Agreement
Appendix II -- BNP Agreement.............................. II-1
Appendix III -- Fairness Opinion of Goldman, Sachs & Co... III-1
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHO ARE THE PARTIES TO THIS MERGER?
A: BancWest Corporation, which we sometimes call "BancWest", will merge into
First Hawaiian, Inc., which we sometimes call "FHI" or the "Company."
BancWest is owned by Banque Nationale de Paris, which we call "BNP."
BancWest owns Bank of the West and FHI owns First Hawaiian Bank and Pacific
One Bank. In the merger, FHI will change its name to "BancWest Corporation."
Q: WHY HAS THE COMPANY PROPOSED TO MERGE WITH BANCWEST?
A: The Board of Directors of the Company recommends that you vote for this
merger because the Board members believe that it:
- allows the Company to spread its business over a larger geographic area
and avoids over-reliance on the economy of Hawaii, which has been
stagnant since a 1991 recession;
- creates a bank that is large enough to compete effectively in modern
high-technology banking, while continuing to emphasize individual
services;
- positions the combined company for future growth;
- gives us the opportunity to reduce expenses by eliminating duplicative
operations;
- combines banks that share very similar strategies and philosophies, while
bringing additional products and important geographic markets to the
combined company; and
- gives us a unique opportunity for an entry into the California market,
creating a West Coast-Pacific regional banking company.
Q: HOW WILL I BE AFFECTED BY THE MERGER?
A: Each stockholder of FHI will continue to own the same number of shares of
Common Stock that he or she owned immediately before the transaction. BNP
will receive shares representing ownership of 45% of the combined company
and the shares held by FHI's stockholders will represent ownership of
approximately 55% of the combined company. Each share owned by existing
stockholders of FHI will represent an ownership interest in a much larger
company.
Q: WHY IS BNP RECEIVING A SEPARATE CLASS OF COMMON STOCK IN THE MERGER?
A: Creating a separate class of common stock that directly elects its own
nominees to the Company's Board assures BNP that it will have representation
on the Board in proportion to its ownership percentage as long as it holds
the Class A Common Stock.
Q: HOW MANY DIRECTORS WILL BNP BE ENTITLED TO ELECT?
A: Initially, 9 out of 20 directors, or 45% of the Board. This number will
decrease in proportion to certain decreases in BNP's ownership percentage.
Q: WILL BNP BE ABLE TO PURCHASE ADDITIONAL SHARES OF COMMON STOCK AFTER THE
MERGER?
A: There are substantial limitations on BNP's ability to purchase additional
shares. In connection with the merger, BNP has agreed to enter into a
"Standstill and Governance Agreement" which limits BNP's ability for an
initial four year period to acquire additional shares of Common Stock of the
Company. There are narrow exceptions to these restrictions. After the
initial four years, BNP will continue to be subject to less restrictive
limitations on purchasing additional shares. One of the most important of
these continuing restrictions is that BNP generally will be required to
offer to acquire 100% of the outstanding shares of the Company's Common
Stock if it wishes to purchase any additional shares. The Standstill and
1
<PAGE> 11
Governance Agreement specifies certain procedures to be followed by BNP and
the Company with respect to any proposal made by BNP to acquire such
additional shares.
Q: WHAT WILL HAPPEN TO THE COMPANY'S BANKING SUBSIDIARIES IN THE MERGER?
A: First Hawaiian Bank will continue as a separate bank after the merger.
Pacific One Bank will be merged with BancWest's bank subsidiary, Bank of the
West, concurrently with the merger. The merged bank will be known as "Bank
of the West", with branches in California, Oregon, Washington and Idaho.
Q: WHAT REGULATORY APPROVALS ARE REQUIRED?
A: The merger must be approved by the Federal Reserve Board as well as certain
state banking authorities. The merger of the Company's subsidiary, Pacific
One Bank, with BancWest's subsidiary, Bank of the West, must be approved by
the Federal Deposit Insurance Corporation as well as certain state banking
authorities.
Q: WHEN WILL THE MERGER TAKE EFFECT?
A: We expect the merger to become effective in the fourth quarter of 1998.
Q: WHAT DO I NEED TO DO NOW?
A: Please read this document carefully and then mail your signed proxy card in
the enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting. The special meeting will take place on
Friday, August 28, 1998.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before we vote your proxy at the
special meeting. You can do so in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy to the
Secretary of the Company at the address given below. Second, you can
complete a new proxy card and send it to the Secretary of the Company at the
address given below. Third, you can attend the special meeting and vote in
person. You should send any written notice or new proxy card to the
Secretary of the Company at 999 Bishop Street, Honolulu, Hawaii 96813. You
may request a new proxy card by calling MacKenzie Partners, Inc. at
1-800-322-2885.
Q: WHERE CAN I FIND MORE INFORMATION?
A: You may obtain more information from various sources as set forth under
"WHERE YOU CAN FIND MORE INFORMATION."
2
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SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger with BancWest and the related transactions fully and for a more complete
description of the legal terms of the merger and the related transactions, you
should carefully read this entire document and the documents we have referred
you to. See "WHERE YOU CAN FIND MORE INFORMATION" (Page 95). The Merger
Agreement and related documents, including the Standstill and Governance
Agreement, the Certificate of Incorporation (as proposed to be amended) and the
By-Laws (as proposed to be amended), are attached to this document as Appendix
I. We encourage you to read such documents since they are the legal documents
that govern the merger and the Company following the merger. An index of defined
terms appears on page 97 of this Proxy Statement.
THE COMPANIES (PAGE 63)
FHI
999 Bishop Street
Honolulu, Hawaii 96813
(808) 525-7000
FHI is a bank holding company. Through its subsidiaries, the Company
operates a general commercial banking business and other businesses related to
banking. Its principal subsidiary is First Hawaiian Bank, with 60 branches in
Hawaii, two in Guam and one in Saipan, an offshore branch in Grand Cayman,
British West Indies, and a representative office in Tokyo, Japan. Its Pacific
One Bank subsidiary, based in Portland, Oregon, has 38 branches in Oregon,
Washington and Idaho. At March 31, 1998, the Company had consolidated total
assets of $8.13 billion, total deposits of $6.14 billion and total stockholders'
equity of $736.25 million.
BANCWEST
180 Montgomery Street
San Francisco, California 94104
(415) 765-4800
BancWest is a bank holding company. BancWest owns Bank of the West, which
conducts a general commercial banking business, providing retail and corporate
banking and trust services to individuals, institutions and businesses and
governments through 105 branches and other commercial banking offices located
primarily in the San Francisco Bay area and elsewhere in the Northern and
Central Valley regions of California. At March 31, 1998, BancWest had
consolidated total assets of $5.77 billion, total deposits of $4.68 billion and
total stockholder's equity of $490.16 million.
BNP
16, Boulevard des Italiens
75009 Paris France
(011) (33) (1) 40.14.26.78
BNP, which owns all of the voting stock of BancWest, is a French
corporation which conducts retail banking activities in France and corporate and
private banking and other activities both in France and around the world. BNP
and its subsidiaries conduct business through 2,098 offices in France and an
additional 647 offices in 79 foreign countries. At December 31, 1997, BNP and
its subsidiaries had consolidated assets of French francs ("FF") 2,034.9 billion
($339.8 billion), consolidated gross customer loans of FF 929.5 billion ($155.2
billion), consolidated customer deposits (including retail and negotiable
certificates of deposit) of FF 904.6 billion ($151.1 billion) and stockholders'
equity of FF 59 billion ($9.9 billion).
THE SPECIAL MEETING (PAGE 20)
There will be a special meeting of stockholders of the Company held in the
30th Floor Board Room at First Hawaiian Center, 999 Bishop Street, Honolulu,
Hawaii, on Friday, August 28, 1998, at 9:30 o'clock
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<PAGE> 13
A.M., local time. At this meeting, FHI stockholders will be asked to adopt the
merger agreement, providing for the merger of BancWest with the Company, with
the Company continuing as the surviving corporation. In the merger, the
outstanding shares of BancWest Common Stock will be converted into a number of
shares of Class A Common Stock equal to 45% of the total number of shares of
Class A Common Stock and Common Stock of the Company that will be outstanding
after the merger and certain amendments will be made to the Company's
certificate of incorporation, including the name change of the Company to
"BancWest Corporation and by-laws."
THE RECORD DATE FOR VOTING (PAGE 20)
The close of business on July 15, 1998 was the record date for determining
which holders of Common Stock have the right to vote at the special meeting. At
the record date, there were 31,139,428 shares of Common Stock which have the
right to vote at the special meeting.
VOTING (PAGE 20)
You will have one vote for each share of Common Stock that you owned on the
record date. A majority of the outstanding shares of Common Stock must vote to
adopt the merger agreement in order for the merger to occur.
The Trustees under the Will and of the Estate of Samuel M. Damon (the
"Damon Estate") have agreed to vote the shares of Common Stock owned by the
Damon Estate in favor of adoption of the merger agreement. As of the record
date, these shares represented 25.37% of the outstanding Common Stock.
REASONS FOR THE MERGER (PAGE 24)
Your Board believes that the merger represents a unique opportunity to
transform the Company into a regional financial services institution large
enough to compete in the modern banking environment, yet able to retain its
community banking focus on individual service. In particular, the Board believes
that the merger will have the following potential benefits:
GEOGRAPHIC DIVERSIFICATION. Because Hawaii's economy has been
stagnant since its 1991 recession, over the past several years the Company
has expanded to the West Coast by acquiring branches in Oregon, Washington
and Idaho and creating its Pacific One Bank subsidiary. This merger is a
major, yet natural, extension of this strategy of geographically
diversifying our assets and income stream, offering an entry into the
contiguous Northern California market, which has been experiencing
above-average growth.
GOOD FIT. The Company and BancWest complement each other. The Company
and BancWest have similar strategies and philosophies; their geographic
markets adjoin each other, but do not overlap; and each brings products,
banking know-how and knowledge of local markets that the other does not
have. The combined company will be able to offer a broader range of
products and services to customers of each of the banks involved.
EARNINGS POTENTIAL. The merger is expected to immediately add to cash
earnings and to add to reported earnings by the year 2000. By adopting the
"best practices" of each institution, by achieving economies of scale and
by realizing cost savings, the combined company will have the potential to
increase future earnings.
COST SAVINGS. Merging Pacific One Bank into Bank of the West,
integrating data processing and back-office operations and consolidating
wholesale operations present opportunities to produce annual cost savings
of an estimated $41 million (pre-tax) by the year 2000.
IMPACT ON CUSTOMERS. The Company's and BancWest's branch systems do
not overlap. Therefore, the merger will not dislocate customers from the
existing First Hawaiian Bank, Bank of the West and Pacific One Bank branch
networks. This is a key advantage, given the emphasis of the combined
company on providing personal service and building relationships.
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STOCKHOLDER PROTECTIONS. The terms of the Standstill and Governance
Agreement, including limits on additional stock purchases by BNP and the
general requirement that if after four years BNP wishes to acquire
additional shares it must offer to purchase all outstanding shares of
Common Stock, limit the ability of BNP to obtain majority ownership of the
Company without offering a fair price to the Company's other stockholders.
The Board recognizes, however, that BNP's 45% interest may give BNP
substantial influence over Company policies and actions and may discourage
third parties from seeking control of the Company.
BOARD RECOMMENDATION (PAGE 24)
Your Board of Directors has, by unanimous vote of all directors present,
determined that the merger agreement and the transactions it covers are fair to,
and in the best interests of, the Company and its stockholders and recommends
that the stockholders of the Company vote to adopt the merger agreement.
THE MERGER (PAGE 23)
The merger agreement is the legal document that governs the merger. In the
merger, BancWest will merge into the Company and the Company will continue as
the surviving corporation, but will change its name to "BancWest Corporation."
BNP, the existing shareholder of BancWest, will receive a number of shares of
Class A Common Stock in the merger equal to 45% of the total number of shares of
Class A Common Stock and Common Stock of the Company that will be outstanding
after the merger.
TERMS OF THE CLASS A COMMON STOCK (PAGE 47)
- Election of Directors. A share of Class A Common Stock is generally
the same in all respects as a share of Common Stock except that the
holders of the Class A Common Stock will have the right to elect a
separate class of directors. The number of Class A directors will
generally be comparable to the percentage of the total outstanding
shares of Common Stock and Class A Common Stock of the Company
represented by the outstanding shares of Class A Common Stock.
Immediately after the closing of the merger, BNP will have the right
to elect nine out of 20 directors (45% of the total Board). The
Class A directors will generally have the same powers and duties as
the Company's other directors, except for certain cases in which a
vote of the Class A directors as a separate class is required.
- Voting Rights. On all matters other than the election of directors
the holders of Class A Common Stock will vote with the holders of
the Common Stock, except that the Class A stockholders will vote as
a separate class on certain major corporate transactions which have
not been approved by two-thirds of the directors.
- Conversion into Common Stock. Shares of Class A Common Stock may
automatically convert into shares of Common Stock. This conversion
will happen if such shares are transferred by BNP to a third party
(other than affiliates of BNP or certain specified third parties who
are approved by your Board and who agree to be bound by the
standstill restrictions applicable to BNP described below). This
conversion will also happen if the number of outstanding shares of
Class A Common Stock no longer equals at least 10% of the total
number of outstanding shares of Common Stock and Class A Common
Stock. BNP also may choose to convert its shares of Class A Common
Stock into Common Stock upon the occurrence of certain events.
CONDITIONS TO THE MERGER (PAGE 39)
The Company and BancWest will not complete the merger unless a number of
conditions are met. These include:
- adoption of the merger agreement by the stockholders of the Company;
- receipt of required regulatory approvals;
5
<PAGE> 15
- absence of any court order prohibiting the merger;
- receipt of opinions of counsel to both FHI and BancWest that the
merger will qualify as a tax-free reorganization for Federal income
tax purposes; and
- concurrent closing of the merger of Pacific One Bank and Bank of the
West.
The Company or BancWest may waive, or give up, some of these conditions.
TERMINATION OF THE MERGER AGREEMENT (PAGE 40)
The Company and BancWest can mutually agree to terminate the merger
agreement at any time.
Either the Company or BancWest can terminate the merger agreement if:
- the merger is not completed by March 31, 1999;
- the Federal Reserve Board does not approve the merger or a
governmental entity issues an order permanently prohibiting the
merger or imposing a condition that would have a material adverse
effect on the Company following the merger;
- the other party materially breaches its representations, warranties
or agreements in the merger agreement and fails to cure such breach
within a specified time;
- the Company's Board withdraws its approval of the merger or amends
or modifies its approval in a way that is materially adverse to
BancWest;
- the Company's stockholders fail to adopt the merger agreement; or
- the other party materially breaches its agreement not to solicit
proposals from third parties for an acquisition by any such third
party.
The Company can terminate the merger agreement if, after receiving an
unsolicited takeover proposal from a third party, the Company's Board determines
that failure to terminate the merger agreement would violate its fiduciary
duties under Delaware law. BancWest can terminate the merger agreement if a
third party begins a tender offer for 50% or more of the Common Stock of the
Company and the Company's Board recommends or fails to reject such offer within
a specified time. BancWest can also terminate the merger agreement if the
Company exercises its rights to furnish nonpublic information or access to or
negotiate with a third party who has requested such information or access or has
made an unsolicited takeover proposal, and the Company has not terminated such
activities within 15 days.
FEES AND EXPENSES (PAGE 42)
The Company is required to pay BancWest a termination fee of $10 million
and to reimburse BancWest for certain out-of-pocket expenses up to $3 million
if:
- the Company terminates the merger agreement because the Company's
Board, after receiving an unsolicited takeover proposal from a third
party, determines that failure to terminate the merger agreement
would violate its fiduciary duties under Delaware law; or
- BancWest terminates the merger agreement because the Company
materially breaches its agreement not to solicit third party
proposals for the acquisition of the Company or continues for more
than 15 days to exercise its right to furnish nonpublic information
or access to or negotiate with a third party who has requested such
information or access or has made an unsolicited takeover proposal
for the Company and, in either case, within one year of such
termination, the Company enters into an agreement with respect to an
acquisition transaction which is thereafter consummated.
6
<PAGE> 16
The Company is required to reimburse BancWest for certain out-of-pocket
expenses up to $3 million if:
- BancWest terminates the merger agreement because the Company's Board
withdraws its approval of the merger or amends or modifies its
approval in a way that is materially adverse to BancWest;
- BancWest terminates the merger agreement because a third party
begins a tender offer for 50% or more of the Common Stock of the
Company and the Company's Board recommends or fails to reject such
offer within a specified time; or
- either party terminates the merger agreement because the Company's
stockholders fail to adopt the merger agreement and either (i) at
such time there is an offer from a third party to enter into an
acquisition transaction with the Company or (ii) prior to the
meeting of stockholders a court determines that the agreement of the
Damon Estate trustees to vote their shares in favor of adopting the
merger agreement is invalid and the trustees do not vote their
shares for the adoption of the merger agreement.
The Company is required to reimburse BancWest for certain out-of-pocket
expenses up to $3 million if the merger agreement is terminated by BancWest
because of a material breach by the Company of its representations, warranties
or agreements in the merger agreement which goes uncured for a specified period
of time. The Company is entitled to similar reimbursement from BancWest if the
merger agreement is terminated by the Company because of material breaches by
BancWest.
INDEMNIFICATION (PAGE 44)
At the same time the Company and BancWest signed the merger agreement, the
Company and BNP entered into a side agreement which provides for indemnification
by each party of the other in the event certain representations and warranties
contained in the merger agreement or the side agreement are breached or if
either party fails to perform certain agreements contained in the merger
agreement or the side agreement. In the side agreement, BNP also agrees to
indemnify the Company for certain taxes which may be payable by BancWest.
STANDSTILL AND GOVERNANCE AGREEMENT (PAGE 48)
The Standstill and Governance Agreement is the legal document that will
govern most aspects of the relationship between the Company and BNP following
the merger. It is attached to this document as Exhibit C to Appendix I. We
encourage you to read it carefully.
STANDSTILL PERIOD (PAGE 48)
Under the Standstill and Governance Agreement, during the four-year period
immediately following the closing of the merger, BNP is prohibited from
acquiring additional voting stock of the Company if such acquisition would
result in BNP owning more than 45% of the outstanding capital stock of the
Company. This standstill percentage will generally be reduced if BNP transfers
or sells any Company stock. If BNP's ownership percentage decreases because the
Company issues stock, BNP may purchase additional stock of the Company in the
open market or in privately-negotiated transactions to maintain the ownership
percentage it had before the Company issued additional stock. BNP does not have
any rights to purchase additional shares directly from the Company.
Alternatively, if BNP's ownership percentage increases above the then-applicable
standstill percentage limitation because the Company repurchases stock, BNP will
be required to sell shares of Company stock to the Company or in a registered
public offering or in a sale pursuant to Rule 144 under the Securities Act of
1933.
BNP will be entitled to acquire additional capital stock in excess of the
then-applicable standstill percentage limitation if:
- BNP puts new capital into the Company either in response to the
requirements of applicable regulatory authorities or because the
Company ceases to be "well-capitalized" under Federal banking
regulations and such status is not restored in a twelve-month
period, or
7
<PAGE> 17
- the Company is directed by a regulatory agency to increase its
capital or becomes an institution in a "troubled" condition under
Federal banking regulations.
Following any purchase of shares pursuant to this exception, BNP may only
purchase additional shares through a business combination proposal to acquire
all outstanding shares at a price that is determined to be fair to the
stockholders of the Company by an independent investment banking firm.
EARLY RELEASE FROM STANDSTILL PROVISIONS (PAGE 49)
The initial four-year standstill period could end early in certain cases,
including if:
- a third party begins a tender or exchange offer to buy more than 50%
of the total voting power of the Company and the Company's Board
does not both reject such offer and adopt a shareholder rights plan
in response to such offer,
- a third party becomes the owner of 25% of the total voting power of
the Company, or
- a third party becomes the owner of 20% of the total voting power of
the Company and publicly discloses an intention to seek control of
the Company.
If BNP wishes to acquire additional shares of Common Stock because one of
those events occurs, it may only do so by a tender or exchange offer to buy all
outstanding shares of Common Stock or a confidential business combination
proposal for all outstanding shares of Common Stock delivered to the Executive
Committee of the Company's Board. The standstill restrictions will go back into
effect if the circumstances described above no longer exist and BNP has not yet
begun its own tender or exchange offer or submitted a business combination
proposal.
POST-STANDSTILL PROVISIONS (PAGE 50)
The Standstill and Governance Agreement provides that after the initial
four-year standstill period and until either BNP owns less than 10% of the total
outstanding shares of Common Stock and Class A Common Stock or BNP has become
the owner of substantially all of the outstanding Common Stock, BNP may not:
- take any action resulting in a majority of the Company's Board being
made up of persons nominated by BNP,
- acquire ownership of securities that would cause its ownership
percentage to be greater than the ownership percentage in effect at
the end of the initial four-year standstill period, or
- take any other action that would result in an increase in its
ownership percentage or in a material transaction with the Company,
except by a transaction approved by the Company's Board after
following certain procedures spelled out in the Standstill and
Governance Agreement.
OTHER STANDSTILL PROVISIONS (PAGE 51)
During the initial four-year standstill period, BNP may not take certain
actions, including: (i) initiating, or soliciting Company stockholders for the
approval of, any stockholder proposals, (ii) seeking the election of any person
to the Company's Board (other than Class A directors) or the removal from the
Board of any non-Class A director, (iii) proposing, assisting any person in
connection with, or publicly announcing its willingness to engage in, a merger
or other business combination or change of control transaction relating to the
Company, (iv) attempting to exercise control over the Company or the Company's
Board (other than through its representation on the Board), (v) forming or
participating in a "group" (as defined in the Securities Exchange Act of 1934)
in order to purchase, vote or sell Company securities, or (vi) requesting the
Company to waive or amend any provisions of the Standstill and Governance
Agreement.
After the initial four-year standstill period, BNP may contact or respond
to contacts from other stockholders of the Company about the business of the
Company on a confidential basis but, during the first four years after the end
of the initial four-year standstill period, BNP may not: (i) solicit proxies for
the election of directors or for stockholder proposals that are not recommended
by the Company's Board,
8
<PAGE> 18
(ii) make or submit any proposal to the stockholders of the Company that is
opposed by the Company's Board, (iii) make certain types of public statements
about plans inconsistent with its standstill agreements or of its intention to
dispose of or purchase additional Company stock (except if legally required),
(iv) form a group to cause a change of control of the Company, or (v) publicly
request the Company to give up rights under the Standstill and Governance
Agreement.
EXCEPTIONS TO STANDSTILL PROVISIONS (PAGE 53)
The Standstill and Governance Agreement allows BNP to make a business
combination proposal for the Company on a confidential basis to the Executive
Committee of the Company's Board. The Standstill and Governance Agreement also
specifies certain procedures to be followed with respect to the evaluation by
the Company of such proposal. In addition, if the Company's Board determines to
sell the Company, BNP will have the right to participate in the process as a
potential bidder.
TRANSFER RESTRICTIONS (PAGE 53)
The Standstill and Governance Agreement limits BNP's ability to transfer
Class A Common Stock to another party, other than BNP's affiliates. These
restrictions remain in place for eighteen months after the closing. During the
following six months, BNP may only transfer shares in limited amounts pursuant
to Rule 144 under the Securities Act of 1933. After the second anniversary of
the closing, the only permitted transfers will be transfers (i) pursuant to a
registered public offering, (ii) pursuant to Rule 144 under the Securities Act
of 1933, (iii) in a tender or exchange offer approved by the Company's Board,
(iv) of up to 4.9% of the total outstanding equity securities of the Company to
certain institutional investors (but no more than once every twelve months), (v)
to certain institutional investors approved by the Company's Board and who agree
to be bound by the limitations contained in the Standstill and Governance
Agreement applicable to BNP, and (vi) pursuant to certain pledges to certain
institutional investors to secure BNP's borrowings.
REGISTRATION RIGHTS (PAGE 54)
At the closing of the merger, the Company and BNP will enter into a
registration rights agreement. BNP will have the right to require the Company to
register the Company shares owned by BNP for sale under the Securities Act of
1933 on up to five occasions. BNP will also generally have the right to
"piggy-back" registration of its shares whenever the Company registers Company
shares under the Securities Act of 1933. BNP will be limited as to the frequency
with which it may exercise such rights. The agreement will also contain other
provisions that are customary for such agreements.
CHARTER AMENDMENTS (PAGE 55)
In the merger, certain amendments will be made to the Company's certificate
of incorporation. Such amendments include: (i) changing the name of the Company
to "BancWest Corporation," (ii) increasing the number of authorized shares of
capital stock of the Company and changing the par value of such shares of
capital stock, (iii) establishing the terms of the Class A Common Stock which
include the right to elect a number of directors to the Board of Directors of
the Company and class voting rights under certain circumstances, (iv) increasing
the minimum number of directors from three to seven and providing that the
Company's Board set the number of directors, (v) eliminating the preemptive
rights provisions of the certificate of incorporation, (vi) moving to the
certificate of incorporation (from the by-laws of the Company) certain
provisions relating to the classified Board of Directors, (vii) providing for
certain nominating procedures with respect to successors to the chief executive
officer and chief operating officer of the Company, and (viii) requiring a
two-thirds vote of the entire Board of Directors of the Company to amend certain
parts of the by-laws (mainly those about the governance arrangements with BNP).
BY-LAW AMENDMENTS (PAGE 58)
In the merger, certain amendments will be made to the by-laws of the
Company, including: (i) moving the provisions regarding a classified board to
the certificate of incorporation (where they typically are located)
9
<PAGE> 19
and eliminating the provisions regarding removal of directors by stockholders
without cause or by other directors; (ii) reflecting the establishment of the
Class A Common Stock and the Class A directors; (iii) requiring that directors
be notified at least five days in advance of all Board or committee meetings,
unless such requirement is waived by a majority of each of the Class A directors
and the non-Class A directors (in which case 24 hours' notice would be
required); (iv) requiring that stockholder nominations for non-Class A directors
and other proposals by Company stockholders for consideration at the Company's
annual meetings be received between 70 and 90 days in advance of each annual
meeting; (v) granting to the Company's Board or to the Chairman of the Company's
Board full discretion to set the date of each annual meeting; (vi) increasing
the vote required to call a special meeting of stockholders to not less than a
majority of the outstanding shares of the Company's voting stock and providing
that no business may be brought before such meeting except as set forth in the
notice of such meeting; (vii) providing that the Chairman of the Company's Board
may adjourn any meeting held for the purpose of electing directors; (viii)
permitting the Company's Board to establish rules and regulations for the
conduct of stockholder meetings as it deems appropriate; (ix) requiring that a
quorum of the Company's Board, in addition to the requirements of Delaware law,
include a majority of the non-Class A directors; (x) providing that no action
may be taken at a board meeting with respect to an item not on an agenda
distributed in advance of the meeting if a majority of either the Class A or
non-Class A directors present at such meeting objects to the taking of such
action; (xi) requiring that any action taken by the Executive Committee of the
Company's Board must have the unanimous approval of all members of the
committee; and (xii) revising the indemnification provisions and the provisions
regarding the setting of a record date to conform with various Delaware law
changes. In addition, the by-laws will be amended to provide that certain
distributions or dividends of securities or other property, repurchases of
shares and decisions to consent to or enter into any cease and desist order or
other agreements with regulatory authorities will require the vote of two-thirds
of the directors constituting the authorized number of directors.
FAIRNESS OPINION (PAGE 26)
In deciding to approve the merger, the Board of Directors considered the
opinion of Goldman, Sachs & Co. as to the fairness from a financial point of
view to the holders of the Company's Common Stock of the conversion of the
shares of common stock of BancWest into Class A Common Stock representing 45% of
the common equity of the Company following the merger. The written opinion of
Goldman Sachs, dated the date of this Proxy Statement, is attached as Appendix
III to this document and a summary of such opinion and the presentation made to
the Company's Board is contained in this document.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 32)
When considering the Board's recommendation that the Company's stockholders
adopt the merger agreement, you should be aware that the merger will create
certain rights and financial benefits under the Company's long-term incentive
plan for a number of the Company's officers, including some officers who are
directors. The Company has amended its long-term incentive plan to reduce the
benefits that would otherwise be awarded because of the merger, subject to
obtaining the consent of the participants in the plan. Also, the merger will
create rights for certain officers under certain of the Company's other employee
benefit plans.
REGULATORY APPROVALS REQUIRED (PAGE 31)
The merger requires the prior approval of the Federal Reserve Board and
approvals by, or notices to, the banking authorities of California, Hawaii,
Oregon and Washington. The merger of Pacific One Bank and Bank of the West
requires the prior approval of the Federal Deposit Insurance Corporation and the
banking authorities of California and Oregon. The merger of these two banking
subsidiaries is a condition to the closing of the merger of the Company and
BancWest.
ACCOUNTING TREATMENT (PAGE 34)
The merger will be accounted for using the purchase method of accounting.
10
<PAGE> 20
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (PAGE 34)
The merger is intended to be a tax-free reorganization so that no gain or
loss will be recognized by either the Company or BancWest or their respective
stockholders for Federal income tax purposes.
NO APPRAISAL RIGHTS (PAGE 35)
Under the Delaware General Corporation Law the Company's stockholders are
not entitled to appraisal rights in connection with the merger and the issuance
of the shares of Class A Common Stock to BNP.
11
<PAGE> 21
FIRST HAWAIIAN, INC.
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth certain selected historical financial data
of the Company and is based on the consolidated financial statements of the
Company, including the respective notes thereto, incorporated by reference in
this Proxy Statement and should be read in conjunction therewith. See "WHERE YOU
CAN FIND MORE INFORMATION". Interim unaudited data for the three months ended
March 31, 1998 and 1997 reflect, in the opinion of management of the Company,
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of such data. Results for the three months ended March 31,
1998 are not necessarily indicative of results which may be expected for any
other interim period or for the year as a whole.
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS
ENDED MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
INCOME STATEMENTS:
Total interest income.............. $151,323 $145,395 $592,483 $574,140 $559,957 $475,760 $428,931
Total interest expense............. 65,745 62,881 258,011 252,795 265,297 179,688 150,709
-------- -------- -------- -------- -------- -------- --------
Net interest income................ 85,578 82,514 334,472 321,345 294,660 296,072 278,222
Provision for loan losses.......... 4,396 3,752 17,211 23,627 38,107 22,922 13,262
Total noninterest income........... 25,607 23,854 98,513 87,455 82,106 75,512 69,845
Total noninterest
expense.................. 73,637 73,010 292,210 269,339 216,521 237,161 215,700
-------- -------- -------- -------- -------- -------- --------
Income before income taxes and
cumulative effect of a change in
accounting principle............. 33,152 29,606 123,564 115,834 122,138 111,501 119,105
Income taxes....................... 11,924 9,090 39,303 35,538 45,133 38,990 40,898
-------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of
a change in accounting
principle........................ 21,228 20,516 84,261 80,296 77,005 72,511 78,207
Cumulative effect of a change in
accounting principle............. -- -- -- -- -- -- 3,650
-------- -------- -------- -------- -------- -------- --------
Net income......................... $ 21,228 $ 20,516 $ 84,261 $ 80,296 $ 77,005 $ 72,511 $ 81,857
======== ======== ======== ======== ======== ======== ========
COMMON STOCK DATA:
Per share:
Basic:
Income before cumulative effect
of a change in accounting
principle.................... $ .68 $ .65 $ 2.66 $ 2.56 $ 2.43 $ 2.25 $ 2.41
Earnings....................... .68 .65 2.66 2.56 2.43 2.25 2.52
Cash earnings(1)............... .73 .69 2.85 2.74 2.55 2.37 2.61
Diluted:
Income before cumulative effect
of a change in accounting
principle.................... .68 .64 2.64 2.55 2.43 2.25 2.41
Earnings....................... .68 .64 2.64 2.55 2.43 2.25 2.52
Cash earnings(1)............... .73 .69 2.83 2.74 2.55 2.37 2.61
Cash dividends................... .31 .31 1.24 1.20 1.18 1.18 1.14
Book value (at period end)....... 23.64 22.52 23.34 22.22 20.86 19.61 18.69
Market price (at period end)..... 40.00 31.12 39.75 35.00 30.00 23.75 24.75
Average shares outstanding (in
thousands)....................... 31,176 31,776 31,726 31,399 31,735 32,259 32,505
</TABLE>
12
<PAGE> 22
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS
ENDED MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
BALANCE SHEETS:
Average balances:
Total assets..................... $ 8,013 $ 7,993 $ 7,918 $ 7,755 $ 7,528 $ 7,200 $ 6,755
Total earning assets............. 7,231 7,177 7,128 7,071 6,876 6,558 6,106
Loans............................ 6,212 5,860 5,980 5,510 5,461 5,172 4,619
Deposits......................... 6,045 5,869 5,903 5,618 5,178 5,282 5,069
Long-term debt and capital
securities..................... 318 222 270 249 230 213 128
Stockholders' equity............. 731 710 726 676 640 618 584
At period end:
Total assets..................... $ 8,131 $ 8,095 $ 8,093 $ 8,002 $ 7,565 $ 7,535 $ 7,269
Loans............................ 6,294 5,947 6,239 5,807 5,260 5,534 5,067
Deposits......................... 6,138 5,950 6,089 5,937 5,358 5,152 5,220
Long-term debt and capital
securities..................... 317 246 319 206 239 219 222
Stockholders' equity............. 736 716 732 706 650 628 608
SELECTED RATIOS: (ANNUALIZED)
Return on average:
Total assets..................... 1.07% 1.04% 1.06% 1.04% 1.02% 1.01% 1.21%
Total stockholders' equity....... 11.78 11.72 11.61 11.88 12.03 11.73 14.01
Dividend payout ratio.............. 45.59 47.69 46.62 46.68 48.56 52.44 45.04
Average stockholders' equity to
average total assets............. 9.12 8.88 9.17 8.72 8.50 8.58 8.65
Net interest margin................ 4.80 4.68 4.70 4.57 4.36 4.63 4.69
At period end:
Risk-based capital ratios:
Tier 1......................... 9.54 8.41 9.51 8.42 9.03 9.31 9.80
Total.......................... 11.83 11.20 11.81 11.26 11.56 12.06 12.84
Tier 1 leverage ratio............ 9.13 7.50 9.14 7.32 7.72 7.51 7.45
Allowance for loan losses to
total loans.................... 1.32 1.43 1.32 1.47 1.50 1.11 1.23
Nonperforming assets to total
loans and other real estate
owned.......................... 1.41 1.83 1.38 1.68 1.75 1.14 1.44
Allowance for loan losses to
nonperforming loans............ 1.44x 1.00x 1.49x 1.18x .95x 1.04x 1.03x
</TABLE>
- ---------------
(1) Cash earnings per share (which is unaudited) is defined as earnings per
share in accordance with generally accepted accounting principles plus the
after-tax amortization of intangibles that are deducted from regulatory
capital for risk-based capital purposes.
13
<PAGE> 23
BANCWEST CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth certain selected historical financial data
of BancWest and is based on the consolidated financial statements of BancWest,
including the respective notes thereto, included elsewhere herein and should be
read in conjunction therewith. See "CONSOLIDATED FINANCIAL STATEMENTS OF
BANCWEST CORPORATION AND SUBSIDIARY" included elsewhere herein. Interim
unaudited data for the three months ended March 31, 1998 and 1997 reflect, in
the opinion of management of BancWest, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of such data.
Results for the three months ended March 31, 1998 are not necessarily indicative
of results which may be expected for any other interim period or for the year as
a whole.
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS
ENDED MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
------------------ ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
INCOME STATEMENTS:
Total interest income............... $105,928 $95,434 $405,522 $352,947 $307,719 $272,336 $260,229
Total interest expense.............. 43,180 37,606 163,022 139,090 124,854 88,908 81,883
-------- ------- -------- -------- -------- -------- --------
Net interest income................. 62,748 57,828 242,500 213,857 182,865 183,428 178,346
Provision for loan and lease
losses............................ 5,000 4,000 19,750 16,500 14,500 12,950 17,550
Total noninterest income............ 13,664 9,481 45,353 36,240 32,237 32,238 38,313
Total noninterest expense........... 43,957 38,953 160,531 164,655 146,575 151,438 158,614
-------- ------- -------- -------- -------- -------- --------
Income before income taxes and
cumulative effect of a change in
accounting principle.............. 27,455 24,356 107,572 68,942 54,027 51,278 40,495
Income taxes........................ 10,387 10,141 44,714 25,139 21,970 20,742 16,334
-------- ------- -------- -------- -------- -------- --------
Income before cumulative effect of a
change in accounting principle.... 17,068 14,215 62,858 43,803 32,057 30,536 24,161
Cumulative effect of a change in
accounting principle.............. -- -- -- -- -- -- 1,900
-------- ------- -------- -------- -------- -------- --------
Net income.......................... $ 17,068 $14,215 $ 62,858 $ 43,803 $ 32,057 $ 30,536 $ 26,061
======== ======= ======== ======== ======== ======== ========
COMMON STOCK DATA:
Per share:
Basic:
Income before cumulative effect
of a change in accounting
principle..................... $ 8.89 $ 7.69 $ 33.29 $ 25.15 $ 21.61 $ 20.59 $ 16.11
Earnings........................ 8.89 7.69 33.29 25.15 21.61 20.59 17.45
Cash earnings(1)................ 9.57 8.29 35.75 27.47 23.79 22.57 19.19
Diluted:
Income before cumulative effect
of a change in accounting
principle..................... 8.89 7.69 33.29 25.15 21.61 20.59 16.11
Earnings........................ 8.89 7.69 33.29 25.15 21.61 20.59 17.45
Cash earnings(1)................ 9.57 8.29 35.75 27.47 23.79 22.57 19.19
Cash dividends.................... -- -- 11.30 -- 7.71 -- --
Book value (at period end)........ 227.96 216.81 219.27 209.94 207.56 195.87 192.65
Market price (at period end)...... N/A N/A N/A N/A N/A N/A N/A
Average shares outstanding (in
thousands)........................ 1,733 1,632 1,687 1,545 1,426 1,424 1,424
</TABLE>
14
<PAGE> 24
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS
ENDED MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
------------------ ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
BALANCE SHEETS:
Average balances:
Total assets...................... $ 5,649 $ 5,055 $ 5,317 $ 4,687 $ 4,121 $ 3,859 $ 3,665
Total earning assets.............. 5,293 4,721 4,968 4,335 3,793 3,513 3,297
Loans and leases.................. 4,419 3,799 4,057 3,429 2,786 2,503 2,349
Deposits.......................... 4,576 4,170 4,333 3,861 3,402 3,172 3,078
Long-term debt.................... 310 162 247 70 51 71 72
Stockholder's equity.............. 485 444 456 393 317 305 281
At period end:
Total assets...................... $ 5,769 $ 5,277 $ 5,643 $ 5,072 $ 4,382 $ 4,069 $ 3,691
Loans and leases.................. 4,474 3,858 4,344 3,772 3,002 2,642 2,383
Deposits.......................... 4,678 4,341 4,573 4,182 3,624 3,388 3,159
Long-term debt.................... 310 162 310 162 50 50 70
Stockholder's equity.............. 490 449 475 438 327 299 294
SELECTED RATIOS: (ANNUALIZED)
Return on average:
Total assets...................... 1.23% 1.14% 1.18% .93% .78% 79% .71%
Total stockholder's equity........ 14.27 12.99 13.77 11.14 10.12 10.00 9.28
Total common equity............... 16.06 14.63 15.57 12.08 10.33 10.27 9.54
Dividend payout ratio............... -- -- 33.94 -- 35.68 -- --
Average stockholder's equity to
average total assets.............. 8.59 8.78 8.58 8.39 7.69 7.91 7.66
Net interest margin................. 4.81 4.97 4.88 4.94 4.83 5.23 5.41
At period end:
Risk-based capital ratios:
Tier 1.......................... 8.97 9.66 8.88 9.56 8.20 8.34 8.76
Total........................... 10.88 12.00 10.80 11.93 10.78 11.04 12.17
Tier 1 leverage ratio............. 7.50 7.84 7.42 7.70 6.45 6.31 6.86
Allowance for loan and lease
losses to total loans and
leases.......................... 1.18 1.24 1.19 1.24 1.26 1.23 1.15
Nonperforming assets to total
loans and leases and other real
estate owned.................... .60 .91 .82 .91 1.39 1.54 3.74
Allowance for loan and lease
losses to nonperforming loans
and leases...................... 2.80x 1.82x 1.98x 1.85x 1.20x 1.26x .49x
</TABLE>
- ---------------
(1) Cash earnings per share (which is unaudited) is defined as earnings per
share in accordance with generally accepted accounting principles plus the
after-tax amortization of intangibles that are deducted from regulatory
capital for risk-based capital purposes.
15
<PAGE> 25
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following tables set forth selected unaudited pro forma combined
financial information for the Company and BancWest giving effect to the merger.
The pro forma amounts included in the table below assume completion of the
merger and are based on the purchase method of accounting, a preliminary
determination and allocation of the total purchase price and the assumptions
described under "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION." The
information set forth below should be read in conjunction with the historical
financial information and the unaudited pro forma combined financial statements
and respective notes thereto appearing elsewhere in this Proxy Statement or
incorporated herein by reference. See "WHERE YOU CAN FIND MORE INFORMATION" and
"CONSOLIDATED FINANCIAL STATEMENTS OF BANCWEST CORPORATION AND SUBSIDIARY"
included elsewhere herein. The pro forma financial information does not give
effect to the anticipated cost savings and revenue enhancements in connection
with the merger. See "DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE
MERGER -- Operations Following the Merger." The pro forma financial information
may not be indicative of the combined results that actually would have occurred
had the merger been consummated on the dates indicated or which may be obtained
in the future.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
1998 1997
--------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
COMBINED STATEMENT OF INCOME:
Net interest income......................................... $148,326 $576,972
Provision for loan losses................................... 9,396 36,961
Noninterest income.......................................... 39,271 143,866
Noninterest expense......................................... 125,070 483,267
-------- --------
Income before income taxes................................ 53,131 200,610
Income taxes................................................ 22,311 84,017
-------- --------
Net Income................................................ $ 30,820 $116,593
======== ========
PERFORMANCE RATIOS:
Return on average total assets.............................. .88% .85%
Return on average stockholders' equity...................... 7.18% 6.83%
Net interest margin......................................... 4.81% 4.77%
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
COMBINED BALANCE SHEET:
ASSETS:
Investment securities....................................... $ 1,576,776
Loans, net of allowance..................................... 10,631,621
Other earning assets........................................ 315,662
Cash and due from banks..................................... 524,375
Other assets................................................ 1,354,899
-----------
Total Assets.............................................. $14,403,333
===========
</TABLE>
16
<PAGE> 26
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits.................................................... $10,816,573
Short-term borrowings....................................... 881,386
Other liabilities........................................... 379,805
Long-term debt.............................................. 626,680
-----------
Total Liabilities......................................... 12,704,444
Total Stockholders' Equity.................................. 1,698,889
-----------
Total Liabilities and Stockholders' Equity................ $14,403,333
===========
CAPITAL RATIOS:
Risk-based capital ratios:
Tier 1.................................................... 8.45%
Total Capital............................................. 10.61%
Tier 1 leverage ratio....................................... 7.66%
ASSET QUALITY RATIOS:
Allowance for loan losses to total loans.................... 1.26%
Nonperforming assets to total loans and other real estate
owned..................................................... 1.08%
Allowance for loan losses to nonperforming loans............ 1.77x
</TABLE>
17
<PAGE> 27
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
The Common Stock is listed on the Nasdaq Stock Market ("Nasdaq") under the
symbol "FHWN". The table below sets forth, for the calendar quarters indicated,
the reported high and low sale prices of the Common Stock as reported by Nasdaq,
in each case based on published financial sources, and the cash dividends paid
on such stock.
<TABLE>
<CAPTION>
MARKET PRICE DIVIDENDS PAID
------------- --------------
HIGH LOW
----- ----
<S> <C> <C> <C>
1995
First Quarter............................................... $27 $23 $.295
Second Quarter.............................................. 28 24 1/2 .295
Third Quarter............................................... 31 1/4 24 3/4 .295
Fourth Quarter.............................................. 30 1/4 27 7/8 .295
1996
First Quarter............................................... 30 26 .295
Second Quarter.............................................. 29 3/4 26 1/2 .295
Third Quarter............................................... 31 25 3/4 .295
Fourth Quarter.............................................. 36 3/4 29 1/4 .310
1997
First Quarter............................................... 36 30 1/2 .310
Second Quarter.............................................. 35 3/4 28 5/8 .310
Third Quarter............................................... 40 3/4 33 5/8 .310
Fourth Quarter.............................................. 43 7/8 36 .310
1998
First Quarter............................................... 42 34 5/8 .310
Second Quarter.............................................. 41 34 5/16 .310
Third Quarter (through July 16)............................. 38 35 5/8 --
</TABLE>
On May 27, 1998, the last full trading day prior to the execution and
delivery of the merger agreement and the public announcement thereof, the Common
Stock closed at $36 3/4 per share. On July 16, 1998, the last trading day before
the date of this Proxy Statement, the Common Stock closed at $37 per share.
Management expects no changes in the Company's dividend policies before the
merger. The current quarterly dividend rate on the Common Stock is $0.31 per
share.
18
<PAGE> 28
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements with respect to
the financial conditions, results of operations and businesses of the Company
and BancWest and, assuming the consummation of the merger, the combined company
following the merger including statements relating to: (a) the cost savings and
accretion/dilution to reported earnings that are expected to be realized from
the merger; (b) the anticipated impact on revenues of the merger, and (c) the
restructuring charges expected to be incurred in connection with the merger.
These forward-looking statements involve certain risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities: (1) expected cost savings from the merger cannot be
fully realized or realized within the expected time frame; (2) revenues
following the merger are lower than expected or deposit attrition, operating
costs or customer loss and business disruption following the merger may be
greater than expected; (3) competitive pressures among depository and other
financial services companies increase significantly; (4) costs or difficulties
related to the integration of the businesses of the Company and BancWest are
greater than expected; (5) changes in the interest rate environment reduce
interest margins, cause an increase in the prepayment rate on mortgages and
other loans or reduce the demand for new loans; (6) general economic or business
conditions, either internationally or nationally or in the states in which the
combined company will be doing business, are less favorable than expected
resulting in, among other things, a deterioration in credit quality or a reduced
demand for credit; (7) legislation or regulatory requirements or changes
adversely affect the businesses in which the combined company would be engaged;
or (8) technology-related changes may be harder to make or more expensive than
expected.
19
<PAGE> 29
THE SPECIAL MEETING
DATE, TIME AND PLACE
A special meeting (the "Special Meeting") of the stockholders of First
Hawaiian, Inc. (the "Company") will be held in the 30th Floor Board Room at
First Hawaiian Center, 999 Bishop Street, Honolulu, Hawaii, on Friday, August
28, 1998, at 9:30 o'clock A.M., local time.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, holders of shares of common stock, par value $5.00
per share, of the Company (the "Common Stock") will consider and vote upon the
adoption of the Agreement and Plan of Merger, dated as of May 28, 1998 (the
"Merger Agreement"), between the Company and BancWest Corporation ("BancWest")
providing for, among other things, the merger (the "Merger") of BancWest with
and into the Company, the conversion of the outstanding shares of common stock,
without par value, of BancWest (the "BancWest Common Stock"), all of which are
currently owned by Banque Nationale de Paris ( "BNP"), into shares of Class A
Common Stock, par value $1.00 per share, of the Company (the "Class A Common
Stock") equal to 45% of the total number of shares of Common Stock and Class A
Common Stock that will be outstanding after the Merger, and certain amendments
to the Certificate of Incorporation of the Company (the "FHI Certificate") and
by-laws (the "By-Laws"). See "THE MERGER" and "THE MERGER AGREEMENT."
THE BOARD OF DIRECTORS OF THE COMPANY HAS, BY UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT, APPROVED THE MERGER AGREEMENT AND RECOMMENDS A VOTE FOR
ADOPTION OF THE MERGER AGREEMENT.
RECORD DATE; QUORUM
Only holders of record of Common Stock at the close of business on July 15,
1998 (the "Record Date") are entitled to notice of and will be entitled to vote
at the Special Meeting. As of the Record Date, there were 31,139,428 shares of
Common Stock issued and outstanding and entitled to vote at the Special Meeting
and held by approximately 4,782 holders of record.
The required quorum for the transaction of business at the Special Meeting
is a majority of the outstanding shares of Common Stock issued and outstanding
on the Record Date, which shares may be present in person or represented by
proxy.
VOTE REQUIRED
The adoption of the Merger Agreement will require the affirmative vote of
the holders of record of a majority of the outstanding shares of Common Stock on
the Record Date.
Holders of record of Common Stock on the Record Date are each entitled to
one vote per share on each matter to be voted on at the Special Meeting.
Pursuant to a stockholder agreement between the Trustees of the Damon
Estate and BNP (the "Stockholder Agreement"), the Trustees of the Damon Estate
have agreed to vote the shares of Common Stock held by the Damon Estate in favor
of the adoption of the Merger Agreement. As of the Record Date, such shares
represented 25.37% of the total voting power of the Company. See "OTHER
AGREEMENTS -- Stockholder Agreement."
As of the Record Date, directors and executive officers of the Company
beneficially owned and were entitled to vote 8,595,945 shares of Common Stock
(including shares held by the Trustees of the Damon Estate), representing
approximately 27.60% of the outstanding shares of Common Stock on the Record
Date. Each director has indicated his or her present intention to vote the
Common Stock so owned by him or her for the adoption of the Merger Agreement. In
addition, as of the Record Date, the Company's banking subsidiaries, as
fiduciaries, custodians or agents, held a total of 2,498,708 shares of Common
Stock, representing approximately 8.02% of the outstanding shares of Common
Stock on the Record Date.
20
<PAGE> 30
VOTING OF PROXIES
The proxy accompanying this proxy statement (this "Proxy Statement") is
solicited on behalf of the Board of Directors of the Company (the "Board" or the
"Board of Directors") for use at the Special Meeting. Please complete, date and
sign the accompanying proxy and promptly return it in the accompanying envelope
or otherwise mail it to the Company. All proxies that are properly executed and
returned, and that are not revoked, will be voted at the Special Meeting in
accordance with the instructions indicated on the proxies. IF NO INSTRUCTIONS
ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR ADOPTION OF THE MERGER AGREEMENT.
For voting purposes at the Special Meeting, only shares affirmatively voted
in favor of adoption of the Merger Agreement will be counted as favorable votes
for such adoption. THE FAILURE TO SUBMIT A PROXY (OR TO VOTE IN PERSON) OR THE
ABSTENTION FROM VOTING WITH RESPECT TO ADOPTION OF THE MERGER AGREEMENT WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST SUCH ADOPTION. Any "broker nonvotes"
(i.e., shares held by a broker or nominee which are represented at the Special
Meeting, but with respect to which such broker or nominee is not empowered to
vote on a particular proposal), like abstentions, will be counted as a vote
against adoption of the Merger Agreement.
The management of the Company is not aware of any matters to be voted on at
the Special Meeting other than the adoption of the Merger Agreement. If other
matters should properly come before the Special Meeting, the proxy holders will
vote on such matters in accordance with their judgment.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the Special Meeting to permit further solicitations of
proxies in favor of any proposal; provided, however, that no proxy which is
voted against the adoption of the Merger Agreement will be voted in favor of any
such adjournment.
REVOCABILITY OF PROXIES
Any holder of Common Stock of the Company may revoke a proxy at any time
before it is voted by filing with the Secretary of the Company a duly executed
revocation of proxy, by submitting a duly executed proxy bearing a later date,
or by attending the Special Meeting and voting in person. Attendance at the
Special Meeting will not by itself constitute revocation of a proxy.
SOLICITATION OF PROXIES
All expenses of the Company's solicitation of proxies, including the cost
of mailing this Proxy Statement to the Company stockholders, will be borne by
the Company. In addition to solicitation by use of the mails, proxies may be
solicited from the Company stockholders by directors, officers and employees of
the Company in person or by telephone, telegram or other means of communication.
Such directors, officers and employees will not be additionally compensated, but
may be reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. The Company has retained MacKenzie Partners, Inc., a proxy
solicitation firm, for assistance in connection with the solicitation of proxies
for the Special Meeting at a cost of approximately $5,000 plus reimbursement of
reasonable out-of-pocket expenses. Arrangements will also be made with brokerage
houses, custodians, nominees and fiduciaries for the forwarding of proxy
solicitation materials to beneficial owners of shares held of record by such
brokerage houses, custodians, nominees and fiduciaries, and the Company will
reimburse such brokerage houses, custodians, nominees and fiduciaries for their
reasonable expenses incurred in connection therewith.
21
<PAGE> 31
22
<PAGE> 32
THE MERGER
GENERAL
The Board of Directors has approved the Merger Agreement, which provides
for the Merger, with the Company as the surviving corporation (the "Surviving
Corporation"). This section of the Proxy Statement describes certain aspects of
the Merger, including the background of the Merger and the Company's reasons for
the Merger.
BACKGROUND OF THE MERGER
Since the early 1990's, the Company has pursued a strategy focused on
expanding and diversifying its operations both geographically and by product
line. The Company believes that this strategy is key to enhancing long-term
stockholder value by diversifying geographic risk (particularly in light of the
slow and inconsistent recovery of the Hawaii economy from its 1991 recession),
spreading the increasing costs of technology over a larger asset and customer
base, and providing opportunities for cost savings and efficiency gains through
elimination of overlapping operating functions. As part of this strategy, in
1996 the Company acquired 31 branches and nearly $700 million in deposits in the
Pacific Northwest from U.S. Bancorp and West One Bancorp (which were being
divested in connection with the merger of those companies), and also acquired
ANB Financial Corporation, a bank holding company headquartered in Kennewick,
Washington, thereby giving the Company a significant operational base on the
West Coast from which to expand its mainland operations. In addition, the
Company established indirect auto loan centers in Southern California and Oregon
in order to expand its operations in this product line.
During the course of 1997 management of the Company, with the assistance of
Goldman, Sachs & Co. ("Goldman Sachs"), its financial advisor, actively reviewed
a variety of possible business combination transactions with a number of
mainland West Coast financial institutions, including Bank of the West, as well
as the other strategic alternatives likely to be available to the Company. The
Company's analysis indicated that Bank of the West and the Company were
comparable in size, performance and business strategies with contiguous, but not
overlapping, geographic markets, and that a business combination could result in
increased value to the stockholders of each. The Company, through its financial
advisor, contacted the management of BNP to ascertain BNP's interest as sole
stockholder of BancWest in discussing a sale or a strategic business combination
between Bank of the West and the Company. However, BNP decided not to pursue
discussions at that time.
In late 1997 and early 1998, BNP and BancWest conducted their own review of
strategic alternatives. Based on this review and the Company's previous
expression of interest in a strategic alliance with BancWest, Don J. McGrath,
president and chief executive officer of BancWest, contacted Walter A. Dods,
Jr., chairman and chief executive officer of the Company, in February 1998 to
discuss the possibility of a transaction between the Company and BancWest. As a
result of these discussions, Mr. Dods and Mr. McGrath concluded that in light of
the compatibility of strategic direction, size, culture and business focus of
the two companies, it would be in the best interests of their respective
stockholders to pursue further discussions regarding a possible strategic
business combination.
During the next three months, detailed discussions took place between the
managements of the Company and BancWest and their respective legal and financial
advisors regarding a possible business combination between the two companies,
including the operational and strategic benefits that could be realized as a
result of such a transaction and the terms and conditions on which such a
transaction could be effected, including terms related to the ownership interest
that BNP would have in the combined company.
During the period between May 8th and May 11th, each of BancWest's and the
Company's senior management and representatives of its legal and financial
advisors conducted on-site financial and legal due diligence reviews of the
other company.
On May 21, 1998, the Company's Board met to discuss the proposed Merger.
Board members were briefed on the discussions to date with BancWest and BNP and
reviewed management's due diligence findings
23
<PAGE> 33
concerning BancWest and management's evaluation of the possible strategic and
financial benefits of the proposed Merger as well as the alternatives to the
Merger likely to be available to the Company. The Board also received a
presentation by Goldman Sachs on the financial aspects of the proposed
combination with BancWest and a review by the Company's legal advisors of the
terms of the Merger Agreement, the Standstill and Governance Agreement and
related matters, as well as the legal standards applicable to the Board's
decision to approve the Merger. Following a lengthy discussion regarding the
proposed transaction, the Board authorized Mr. Dods and senior management of the
Company to continue discussions with BancWest and BNP with a view to finalizing
a proposed transaction for consideration by the Company at a subsequent meeting.
During the next week, representatives of the Company, BancWest, BNP and
their respective legal counsel had numerous telephonic discussions to negotiate
the terms of the Merger Agreement, the Standstill and Governance Agreement and
the related transaction agreements (including the FHI Certificate and the
By-Laws).
The boards of directors of BNP and BancWest met to consider the proposed
Merger on May 28, 1998. At such meetings, the board of directors of BNP
unanimously approved the proposed Merger and the board of directors of BancWest
unanimously approved the proposed Merger and the terms of the Merger Agreement.
Also, on May 28, 1998, the Board of Directors of the Company met to
consider the proposed Merger. At the Board meeting, members of the Company's
senior management and its legal and financial advisors made further
presentations and reviewed the matters set forth under "-- Recommendation of the
Board; Reasons for the Merger." The terms of the definitive Merger Agreement
were reviewed with the directors, including any significant changes in the terms
since the May 21 Board meeting. Goldman Sachs rendered its oral opinion,
confirmed by a subsequent written opinion dated May 28, 1998, that as of that
date, the conversion of the BancWest Common Stock into shares of Class A Common
Stock equal to 45% of the outstanding common equity of the Company following the
Merger was fair from a financial point of view to the Company's stockholders.
After discussion and consideration, the Company's Board of Directors voted
unanimously (with one director not present) to approve the Merger and the Merger
Agreement. The director who was not able to attend the May 28 Board meeting
subsequently indicated to the Company his approval of the Merger and the Merger
Agreement.
The Merger Agreement was signed by the parties later on May 28, 1998 and
then was publicly announced.
RECOMMENDATION OF THE BOARD; REASONS FOR THE MERGER
At a special meeting on May 28, 1998, the Company's Board determined that
the Merger Agreement and the transactions contemplated thereby were fair to, and
in the best interests of, the Company and its stockholders. Accordingly, at such
meeting the Board, by a unanimous vote of all directors present, approved the
Merger Agreement and directed that the Merger Agreement be submitted to the
Company's stockholders for adoption.
The Board believes that the Merger represents a unique opportunity to
transform the Company into a diversified regional financial services institution
large enough to compete in the modern banking environment, yet able to retain
its community banking focus on individual service.
In reaching its conclusions, the Board considered, among other things, the
following material factors:
(i) the financial performance and condition, business operations,
capital levels, asset quality and prospects of the Company and BancWest and
their projected future results and prospects as separate entities and on a
combined basis;
(ii) current industry and market conditions and trends, including the
likelihood of continued consolidation and increasing competition in the
banking and financial services industries, the growing importance of
financial resources, market position and economies of scale to a banking
institution's ability
24
<PAGE> 34
to compete successfully in this changing environment, and the need for
continuing substantial investments in technology in order to remain
competitive;
(iii) current economic conditions and trends in the respective banking
markets in which the Company and Bank of the West operate, including the
fact that the Hawaii economy has been generally stagnant since its 1991
recession and is not expected to experience significant improvement in the
near term while the California economy has been experiencing substantial
growth in the past several years and is expected to continue over the next
several years to experience above-average growth;
(iv) the possibility of achieving significant cost savings, operating
efficiencies, revenue enhancements and synergies as a result of the Merger
(including the estimates of the Company's management that the merger of the
Company's Pacific One Bank subsidiary with BancWest's Bank of the West
subsidiary, the integration of data processing and back office operations
and consolidation of wholesale operations are expected to produce combined
pre-tax cost savings and revenue enhancements of $29.5 million and $50.8
million in 1999 and 2000, respectively);
(v) the Board's assessment that the Merger would substantially advance
the Company's strategic goals of expanding and diversifying its operations
geographically, particularly in the attractive banking markets on the West
Coast, and thereby reduce the Company's exposure to regional economic
risks, especially the currently stagnant Hawaii economy, and provide a
platform for further growth and expansion in higher-growth banking markets;
(vi) the attractive pricing to the Company of the proposed
transaction, which is expected to be immediately accretive to cash earnings
and accretive to reported financial earnings by the year 2000 (see
"DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER -- Operations
Following the Merger");
(vii) the other strategic alternatives likely to be available to the
Company, given its size and geographic location;
(viii) the Board's assessment that the Company and Bank of the West
were comparable in size, performance and business strategies and operated
in contiguous, but not overlapping, banking markets; in addition, the Board
noted that the Merger would expand the Company's operations into profitable
business lines, such as recreational vehicle and marine loans, in which the
Company did not currently have a significant presence, while strengthening
Bank of the West's business lines with products and services now offered
only by the Company;
(ix) the terms of the Merger Agreement, including the ability of the
Company to terminate the Merger Agreement if, after receipt of an
unsolicited takeover proposal, the Board determines, in good faith after
having consulted with and considered the advice of its financial advisors
and outside counsel, that recommending the Merger Agreement (or failing to
withdraw, modify or amend any previous recommendation thereof) would be
reasonably likely to constitute or result in a breach of its fiduciary duty
under applicable law;
(x) the terms of the Standstill and Governance Agreement, including
the restriction (with limited exceptions) on additional acquisitions of
Common Stock by BNP for four years and the requirement (with limited
exceptions) that BNP offer to acquire all outstanding shares of Common
Stock if it thereafter wishes to acquire any additional shares;
(xi) the opinion of Goldman Sachs described below as to the fairness
from a financial point of view to stockholders of the Company of the
conversion of the BancWest Common Stock into shares of the Company's Class
A Common Stock equal to 45% of the outstanding common equity following the
Merger, and the various analyses performed by Goldman Sachs in connection
with rendering its opinion, considered as a whole;
(xii) the likelihood of obtaining required regulatory approvals on a
timely basis;
25
<PAGE> 35
(xiii) the expectation that the Merger would be tax-free to the
Company and its stockholders for U.S. federal income tax purposes;
(xiv) the implications of a single large minority stockholder of the
Company, including the effect on other potential transactions that might
result from such stockholding, balanced against the restrictions imposed on
such stockholder by the terms of the Standstill and Governance Agreement,
including those described above that restrict BNP's ability to obtain
majority ownership of the Company without offering a fair price to the
Company's other stockholders; and
(xv) the effect of the Merger on depositors, employees, customers and
communities served by the Company and the expected ability of the combined
company to offer a broader range of products and services to its
depositors, customers and communities on a more efficient basis.
In reaching its decision to approve the Merger Agreement, the Board did not
assign any relative or specific weights to the various factors considered, and
individual directors may have given differing weights to different factors.
OPINION OF THE FINANCIAL ADVISOR
Goldman Sachs was retained by the Company to act as its financial advisor
and to render an opinion as to the fairness from a financial point of view of
the conversion of all of the outstanding shares of BancWest Common Stock into
the Conversion Number (as defined under "THE MERGER AGREEMENT -- Conversion of
BancWest Capital Stock") of shares of Class A Common Stock (the "Conversion") to
the holders of the Common Stock, all in connection with the proposed Merger. At
a meeting of the Board held on May 21, 1998, Goldman Sachs made a presentation
on financial aspects of the Merger and at a meeting of the Board held on May 28,
1998, delivered to the Board its oral opinion (which opinion was subsequently
delivered to the Board in written form dated May 28, 1998) to the effect that,
as of the date of such opinion, based on the matters set forth in such opinion,
the proposed Conversion pursuant to the Merger Agreement was fair from a
financial point of view to the holders of the Common Stock. Goldman Sachs has
confirmed its May 28, 1998 opinion by delivery of its written opinion to the
Board, dated the date of this Proxy Statement, stating that, as of the date
hereof and based on the matters set forth in such opinion, the proposed
Conversion pursuant to the Merger Agreement is fair from a financial point of
view to the holders of the Common Stock.
Goldman Sachs has consented to the inclusion of its opinion, dated the date
hereof, in this Proxy Statement (the "Goldman Sachs Opinion").
THE FULL TEXT OF THE GOLDMAN SACHS OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX III TO THIS PROXY STATEMENT AND IS
INCORPORATED HEREIN BY REFERENCE. THE GOLDMAN SACHS OPINION, WHICH IS ADDRESSED
TO THE BOARD, IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF
THE CONVERSION TO THE HOLDERS OF THE COMMON STOCK AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY COMPANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE
WITH RESPECT TO THE PROPOSED MERGER. THE DESCRIPTION OF THE GOLDMAN SACHS
OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX
III. THE GOLDMAN SACHS OPINION IS SUBSTANTIALLY IDENTICAL TO THE OPINION
DELIVERED TO THE BOARD DATED MAY 28, 1998. STOCKHOLDERS ARE URGED TO READ THE
GOLDMAN SACHS OPINION IN ITS ENTIRETY.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. The Company selected
Goldman Sachs as its financial advisor because Goldman Sachs is a nationally
recognized investment banking firm that has substantial
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experience in investment banking in general, including transactions similar to
the Merger, and because of its familiarity with, and prior work for, the
Company.
In connection with rendering its opinions dated May 28, 1998 and the date
hereof, Goldman Sachs, among other things: (i) reviewed the Merger Agreement
(including the Exhibits thereto); (ii) reviewed the Annual Reports to
Stockholders and Annual Reports on Form 10-K of the Company for the five years
ended December 31, 1997; (iii) reviewed certain interim reports to stockholders
and Quarterly Reports on Form 10-Q of the Company through March 31, 1998; (iv)
reviewed income statements and balance sheets of BancWest for the three years
ended December 31, 1997; (v) reviewed Annual Reports of Bank of the West for the
five years ended December 31, 1997; (vi) reviewed certain unaudited income
statements of BancWest and Bank of the West through March 31, 1998; (vii)
reviewed certain internal financial analyses and forecasts for the Company and
Bank of the West prepared by their respective managements; (viii) reviewed
certain forecasts of the projected cost savings, operating synergies and revenue
increases expected to be derived from the Merger prepared jointly by the
respective managements of the Company and the Bank of the West; (ix) held
discussions with members of the senior managements of the Company and Bank of
the West regarding the strategic rationale for, and the potential benefits of,
the transaction contemplated by the Merger Agreement and the past and current
business operations, financial condition and future prospects of their
respective companies and of the companies as combined pursuant to the Merger
Agreement; (x) considered the view of the senior management of the Company that
the Merger represents a significant business opportunity for the Company and
that certain strategic and operational benefits will be derived from the Merger;
(xi) reviewed the reported price and trading activity for the Common Stock;
(xii) compared certain financial information for the Company and Bank of the
West and stock market information for the Company with similar information for
certain other companies the securities of which are publicly traded; (xiii)
reviewed the financial terms of certain recent business combinations in the
commercial banking industry specifically and in other industries generally; and
(xiv) performed such other studies and analyses as Goldman Sachs deemed
appropriate.
In connection with rendering the Goldman Sachs Opinion, as set forth
therein, Goldman Sachs relied upon the accuracy and completeness of all the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of such opinion. With the Company's consent, Goldman
Sachs assumed that the financial forecasts of the Company and Bank of the West,
including, without limitation, projected cost savings, operating synergies and
revenue increases resulting from the Merger and projections regarding
under-performing and non-performing assets and net charge-offs, were reasonably
prepared on a basis reflecting the best currently available judgments and
estimates of the Company and Bank of the West, and that such forecasts would be
realized in the amounts and at the times contemplated thereby. Goldman Sachs is
not an expert in the evaluation of loan and lease portfolios for purposes of
assessing the adequacy of the allowances for losses with respect thereto, and
assumed, with the Company's consent, that such allowances for each of the
Company and Bank of the West are in the aggregate adequate to cover all such
losses. In addition, Goldman Sachs has not reviewed individual credit files nor
has it made an independent evaluation or appraisal of the assets and liabilities
of the Company and Bank of the West and has not been furnished with any such
evaluation or appraisal. The Goldman Sachs Opinion addresses the ownership
position in the Company to be held by the holders of the Common Stock after
giving effect to the Merger and does not address the future trading or
acquisition value of the Company. In connection with the Goldman Sachs Opinion,
Goldman Sachs reviewed the analyses used to render its May 28, 1998 opinion to
the Board by performing procedures to update certain of such analyses and by
reviewing the assumptions upon which such analyses were based and the factors
considered in connection therewith. In addition, in connection with rendering
the Goldman Sachs Opinion, Goldman Sachs reviewed this Proxy Statement.
The following is a summary of the material financial analyses presented by
Goldman Sachs to the Board in connection with providing its opinion to the Board
on May 28, 1998, and does not purport to be a complete description of the
analyses performed by Goldman Sachs. Goldman Sachs used substantially the same
types of financial analyses in preparing its written opinion dated as of the
date of this Proxy Statement as it used in providing its opinion dated as of May
28, 1998.
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Selected Companies Analysis. Goldman Sachs reviewed and compared certain
financial and stock market information of the Company with (i) Pacific Century
Financial Corporation ("PCFC"), (ii) a group of five West Coast large and
mid-cap bank holding companies (BankAmerica Corporation/NationsBank Corporation,
Wells Fargo & Company, U.S. Bancorp, First Security Corporation and Zions
Bancorporation) (the "West Coast Banks") and five California mid-cap bank
holding companies (UnionBanCal Corporation, City National Corporation,
Westamerica Bancorporation, Imperial Bancorp and Silicon Valley Bancshares) (the
"California Banks"). This analysis indicated that (i) the price to earnings
multiple, based on estimates by the Institutional Brokerage Estimate System, a
data service that compiles estimates of securities research analysts ("IBES"),
of 1998 earnings per share, was 13.8x for the Company as compared to 14.6x for
PCFC and medians of 19.1x and 18.9x, respectively, for the West Coast Banks and
the California Banks, (ii) the price to earnings multiple, based on IBES
estimates of 1999 earnings per share, was 13.1x for the Company as compared to
13.7x for PCFC and medians of 15.9x and 16.1x, respectively, for the West Coast
Banks and the California Banks, (iii) the estimated five-year growth rates,
based on IBES estimates, were 8.0% for the Company and PCFC, as compared with
medians of 13.0% and 15.0%, respectively, for the West Coast Banks and the
California Banks, (iv) the multiple of price to book value per share was 1.7x
for the Company as compared to 1.8x for PCFC and medians of 2.9x and 3.2x,
respectively, for the West Coast Banks and the California Banks, (v) the
multiple of price to tangible book value was 2.0x for the Company as compared to
1.8x for PCFC and medians of 3.9x and 3.2x, respectively, for the West Coast
Banks and the California Banks and (vi) dividend yields were 3.2% for the
Company as compared to 2.6% for PCFC and medians of 1.8% and 1.5%, respectively,
for the West Coast Banks and California Banks.
In addition, Goldman Sachs reviewed and compared certain asset quality and
profitability ratios with the same banks as well as with Bank of the West. This
analysis indicated that (i) non-performing assets as a percentage of total loans
and other real estate owned was 1.38% for the Company as compared to 1.00% for
PCFC, 0.70% for Bank of the West and medians of 0.55% and 0.82%, respectively,
for the West Coast Banks and the California Banks, (ii) the allowance for loan
and lease losses as a percentage of nonperforming loans was 92% for the Company
as compared to 150% for PCFC, 170% for Bank of the West and medians of 283% and
244%, respectively, for the West Coast Banks and the California Banks, (iii) the
provision for loan and lease losses as a percentage of average loans was 0.29%
for the Company as compared to 0.34% for PCFC, 0.49% for Bank of the West, and
medians of 0.63% and 0.34%, respectively, for the West Coast Banks and the
California Banks, (iv) the return on average assets was 1.07% for the Company as
compared to 0.96% for PCFC, 1.19% for Bank of the West and medians of 1.18% and
1.51%, respectively, for the West Coast Banks and the California Banks, (v) the
return on average common equity was 11.62% for the Company as compared to 12.29%
for PCFC, 15.90% for Bank of the West and medians of 15.42% and 17.16%,
respectively, for the West Coast Banks and the California Banks, (vi) the ratio
of non-interest income to total revenue was 22.4% for the Company as compared to
25.6% for PCFC, 16.6% for Bank of the West and medians of 37.9% and 17.1%,
respectively, for the West Coast Banks and the California Banks, (vii) the
efficiency ratio (non-interest expense, excluding amortization of goodwill,
divided by the sum of net interest income and non-interest income) was 63.9% for
the Company as compared to 65.5% for PCFC, 57.5% for Bank of the West and
medians of 55.0% and 54.4%, respectively, for the West Coast Banks and the
California Banks, (viii) the net interest margin was 4.7% for the Company as
compared to 4.1% for PCFC, 4.9% for Bank of the West and medians of 4.4% and
5.7%, respectively, for the West Coast Banks and the California Banks and (ix)
tangible common equity as a percentage of tangible assets was 7.8% for the
Company as compared to 7.7% for PCFC, 4.2% for Bank of the West and medians of
6.7% and 8.2%, respectively, for the West Coast Banks and the California Banks.
Unless otherwise indicated, the financial data employed for the percentages in
(i) - (iii) of this paragraph were as of December 31, 1997 and the remaining
percentages in this and the preceding paragraph were as of or for the 12 months
ended March 31, 1998.
Contribution Analysis. Goldman Sachs analyzed and compared respective
contributions of each of the Company and Bank of the West to the Surviving
Corporation based on a comparison of projected earnings for each of 1998, 1999
and 2000. This analysis indicated that the Company would contribute to the
Surviving Corporation (i) from between 54% and 58% of earnings before
adjustments, (ii) from between 53% and 57% of earnings after adjusting for
repayment of outstanding Bank of the West preferred stock and refinancing with
debt, and (iii) from between 55% and 59% on a cash earnings basis. In addition,
this analysis indicated that as
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of March 31, 1998, the Company would have contributed to the Surviving
Corporation approximately 58% of total assets, 58% of total loans, 57% of total
deposits, 60% of total equity, 64% of each of common equity and tangible common
equity and 61% of tangible common equity adjusted to reflect an allowance for
loan and lease loss ratio at the Company conforming to that of Bank of the West.
Historical Operating Performance. Goldman Sachs compared five operating
performance standards for each of the Company and Bank of the West as of and for
each of the five years ended December 31, 1997. The percentages set forth below
are for the years 1993, 1994, 1995, 1996 and 1997, respectively. The Company's
return on average assets for such years was 1.21%, 1.01%, 1.02%, 1.04% and
1.06%, as compared to 0.70%, 0.86%, 0.78%, 0.94% and 1.19% for Bank of the West.
The Company's return on average common equity was 14.01%, 11.73%, 12.03%, 11.88%
and 11.61% as compared to 8.79%, 11.58%, 10.53%, 12.07% and 15.66% for Bank of
the West. The Company's efficiency ratio was 61.91%, 63.68%, 57.45%, 64.66% and
65.62% as compared to 72.79%, 69.10%, 66.70%, 60.43% and 54.19% for Bank of the
West. The Company's net interest margin was 4.69%, 4.63%, 4.36%, 4.57% and 4.70%
as compared to 5.43%, 5.10%, 4.83%, 4.94% and 4.88% for Bank of the West.
Finally, the non-performing assets of the Company at year end as a percentage of
its total year end loans plus other real estate owned was 1.44%, 1.14%, 1.75%,
1.68% and 1.38% as compared to the non-performing assets at year end of Bank of
the West as a percentage of its total year end loans plus other real estate
owned of 3.70%, 1.50%, 1.35%, 0.85% and 0.70%.
Net Income Growth Analysis. Goldman Sachs compared the net income growth
of the Company and Bank of the West for the five year period ending December 31,
1997, which evidenced an average compound annual growth rate for the Company of
0.7% and for Bank of the West of 23.7%. Goldman Sachs also compared management's
estimates of net income growth of the Company and Bank of the West for the
three-year period ending December 31, 2000, which projected an average compound
annual growth rate for the Company of 5.2% and for Bank of the West of 14.5%.
Discounted Cash Flow Analysis. Goldman Sachs performed a discounted cash
flow analysis to determine a range of present values per share of the Common
Stock on a stand-alone basis and the Common Stock of the Surviving Corporation
following the Merger. The earnings projections which formed the basis for the
analysis were consistent with projections prepared by the management of the
Company and Bank of the West, respectively. The range was determined by adding
(i) the present value of the estimated future dividend stream that the Company
and the Surviving Corporation, as the case may be, could generate over the five
year period beginning July 1, 1998 and ending on June 30, 2003 and (ii) the
"terminal values" of the Common Stock on June 30, 2003 on a stand-alone basis
and following the Merger. To determine a projected dividend stream, Goldman
Sachs assumed a dividend payout ratio for the Company and the Surviving
Corporation of 45% of projected net income. The terminal values of the Common
Stock and the Common Stock of the Surviving Corporation at the end of the five
year period were determined by applying cash earnings per share multiples (from
12.0x to 18.0x) to projected cash earnings for the year ending December 31,
2003, using discount rates of 11.0%, 13.0% and 15.0%, which Goldman Sachs viewed
as appropriate for companies with the risk characteristics of the Company and
Bank of the West. For the Company, this analysis resulted in terminal values
ranging from $28.94 to $48.22 per share of Common Stock, which compared with
terminal values of the Surviving Corporation ranging from $36.28 to $60.89 per
share of Common Stock. Goldman Sachs also performed a sensitivity analysis based
on various net income growth rates. The analysis assumed, among other things,
that the Merger closes on December 31, 1998, that there would be annual cost
savings beginning in 1999 and that a restructuring reserve of approximately $56
million would be required.
Pro Forma Combination Analysis. Goldman Sachs analyzed the pro forma
impact of the Merger on the earnings per share of the Common Stock. Based on
estimates of the Company and Bank of the West including, without limitation, the
refinancing of $75 million of Bank of the West preferred stock and the earnings
on cost savings and revenue enhancements for 1999, the Merger will be dilutive
to holders of the Common Stock by 6.3% (before restructuring charges) on a
reported earnings basis and accretive by 6.4% on a cash earnings basis. The pro
forma impact to holders of the Common Stock on reported and cash earnings per
share for the years 2000, 2001 and 2002 were also analyzed and found to be
accretive.
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Selected Transaction Analysis. Goldman Sachs reviewed certain information
relating to six selected bank mergers in California announced since January 1,
1996 and prior to May 20, 1998 in which the aggregate consideration paid was in
excess of $250 million (the "California Selected Bank Mergers"). The California
Selected Bank Mergers consisted of: NationsBank Corporation/BankAmerica
Corporation; Zions Bancorporation/Sumitomo Bank of California; First Security
Corporation/California State Bank; Westamerica Bancorp/ValliCorp Holdings; US
Bancorp/California Bancshares; and Wells Fargo & Company/First Interstate
Bancorp.
In addition, Goldman Sachs reviewed various characteristics associated with
the following examples of mergers of equals in the financial services industry:
Canadian Imperial Bank of Commerce/Toronto Dominion Bank; Travelers Group,
Inc./Citicorp; NationsBank Corporation/BankAmerica Corporation; Banc One
Corporation/First Chicago NBD; Royal Bank of Canada/Bank of Montreal; Chemical
Banking Corporation/ The Chase Manhattan Corporation; Chemical Banking
Corporation/Manufacturers Hanover Corporation; NBD Bancorp, Inc./First Chicago
Corp.; Southern National Corporation/BBXT Financial Corporation; Key
Corp/Society; and Comerica, Inc./Manufacturers National Corporation. Goldman
Sachs also reviewed cost savings projections in certain transactions announced
since January 1995.
Other Analyses. Goldman Sachs also reviewed, among other things, selected
investment research reports on, and earnings estimates for, the Common Stock.
Goldman Sachs examined the implied premiums to market price and to core
deposits. In addition, Goldman Sachs examined the price impact on the Common
Stock if the Surviving Corporation were to trade at a multiple to earnings
closer to the higher multiples to earnings at which the California Banks trade.
Goldman Sachs prepared a summary of the historical financial performance of the
Company and Bank of the West and summarized estimates by the respective
managements of the Company and Bank of the West of financial performance in
1998, 1999 and 2000.
The summary set forth above describes the material analyses that Goldman
Sachs performed and presented to the Company Board on May 21, 1998, and does not
purport to be a complete description of such analyses. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or a summary description. Goldman Sachs believes that its
analyses must be considered as a whole and that selecting portions of its
analyses without considering all factors and analyses would create an incomplete
view of the analyses and processes underlying its opinion. In its analyses,
Goldman Sachs relied upon numerous assumptions made by the Company and Bank of
the West with respect to industry performance, general business and economic
conditions, and other matters, many of which are beyond the control of the
Company or Bank of the West. Analyses based upon forecasts of future results are
not necessarily indicative of actual values, which may be significantly more or
less favorable than suggested by such analyses. No company or transaction used
as a comparison in the analyses is identical to the Company or Bank of the West
or to the Merger. Additionally, estimates of the value of businesses do not
purport to be appraisals or necessarily reflective of the prices at which
businesses actually may be sold. Because such estimates are inherently subject
to uncertainty, being based upon numerous factors or events beyond the control
of the Company, BancWest or Bank of the West, none of the Company, BancWest,
Bank of the West, Goldman Sachs or any other person assumes responsibility if
future results or actual values are materially different from these forecasts or
assumptions. Goldman Sachs' analyses were prepared solely for purposes of its
opinions rendered May 28, 1998 and the date of this Proxy Statement provided to
the Board regarding the fairness of the Conversion from a financial point of
view to holders of the Common Stock, and do not purport to be appraisals or
necessarily reflect the prices at which the Company or its securities actually
may be sold.
For the services of Goldman Sachs as financial advisor to the Company in
connection with the Merger, pursuant to an engagement letter dated May 8, 1998,
the Company has agreed to pay Goldman Sachs a transaction fee equal to the
amount determined by multiplying (i) the average of the last sales prices for
the Common Stock on the five trading days ending five days prior to the
consummation of the Merger times (ii) the aggregate number of shares of the
Class A Common Stock to be issued by the Company in the Merger times (iii)
0.50%. Of this fee, $2,500,000 was paid upon the execution of the Merger
Agreement. The Company has also agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of its counsel, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities arising under the federal securities
laws. Goldman Sachs has provided
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certain investment banking and advisory services to the Company from time to
time, for which it has received, and will receive, customary compensation. In
addition, Goldman Sachs has provided, and may provide in the future, certain
investment banking services to BNP, for which it has received, and will receive,
customary compensation.
Goldman Sachs has advised the Company that, in the ordinary course of its
business as a full-service securities firm, Goldman Sachs may, from time to
time, effect transactions, for its own account or for the account of customers,
and hold positions in securities or options on securities of the Company,
BancWest, Bank of the West and BNP.
REGULATORY APPROVALS REQUIRED
The Merger is subject to the approval of the Federal Reserve Board under
Sections 3 and 4 of the Bank Holding Company Act of 1956, as amended (the
"BHCA"), and the approval of the banking authorities of the States of
California, Oregon and Hawaii. The contemplated merger of Pacific One Bank and
Bank of the West (the "Bank Merger") is subject to the approval of the Federal
Deposit Insurance Corporation ("FDIC") under Section 18(c) of the Federal
Deposit Insurance Act (the "Bank Merger Act") and the approval of the banking
authorities of the states of California and Oregon. Aspects of the Merger will
require notifications to, and/or approvals from, certain other federal
authorities and banking authorities in certain other states.
Under Section 3 of the BHCA and under the Bank Merger Act, the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") or the
FDIC must withhold approval of the Merger or the Bank Merger, as the case may
be, if it finds that the transaction would tend to create a monopoly or would in
any other manner be in restraint of trade, unless it finds that any such
anti-competitive effects of the Merger or the Bank Merger are clearly outweighed
in the public interest by the probable effects of the Merger or the Bank Merger
in meeting the convenience and needs of the communities to be served. Also, the
Merger and the Bank Merger may not be consummated for 30 days from the date of
approval by the Federal Reserve Board and the FDIC, during which time it could
be challenged by the United States Department of Justice (the "Department of
Justice") on antitrust grounds. With the approval of the Department of Justice,
however, this waiting period may be reduced to no less than 15 days. The
commencement of an antitrust action by the Department of Justice would stay the
effectiveness of Federal Reserve Board approval of the Merger unless a court
specifically ordered otherwise. However, inasmuch as the banking operations of
the Company, BancWest and BNP do not overlap in any banking market, as defined
by the Federal Reserve Board, the Company and BancWest do not expect the Merger
or the Bank Merger to raise antitrust issues.
In deciding whether to approve the Merger and the Bank Merger, the Federal
Reserve Board and the FDIC will also take into consideration the financial and
managerial resources and future prospects of the banking subsidiaries following
the transactions. The Federal Reserve Board and the FDIC have indicated that
they will not approve a significant acquisition unless the resulting institution
has sufficient capitalization, taking into account, among other things, asset
quality. Prior to approving the Merger the Federal Reserve Board is also
required to determine that BNP is subject to comprehensive supervision on a
consolidated basis by the appropriate authorities in France. The Federal Reserve
Board determined that BNP satisfied this standard in a previous case.
In addition, under the Community Reinvestment Act of 1977, as amended (the
"CRA"), the Federal Reserve Board must take into account the record of
performance of each insured depository institution subsidiary of the Company and
of BancWest in meeting the credit needs of the entire community, including low
and moderate income neighborhoods, served by each company. As part of the review
process for the Merger and the Bank Merger, the Federal Reserve Board and the
FDIC will solicit public comments regarding the applications. The Federal
Reserve Board and the FDIC frequently receive, in merger transactions, protests
from community groups and others regarding various aspects of the proposal and,
in particular, the extent to which the applicants are complying with CRA and
fair lending laws. All of the banking subsidiaries of the Company and BancWest
have received either an "outstanding" or a "satisfactory" CRA rating in their
most recent CRA examinations by their respective federal regulators.
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The regulators are also authorized (but generally not required) to hold a
public hearing or meeting in connection with an application if they determine
that such a hearing or meeting would be appropriate. A decision by the
regulators to hold a public hearing or meeting regarding the applications could
prolong the period during which the application is subject to review by the
Federal Reserve Board and the FDIC.
Under Section 4 of the BHCA and related regulations, the Federal Reserve
Board must consider whether the performance of the Company's and BancWest's
nonbanking activities on a combined basis can reasonably be expected to produce
benefits to the public (such as greater convenience, increased competition and
gains in efficiency) that outweigh possible adverse effects (such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest and unsound banking practices). This consideration includes an
evaluation of the financial and managerial resources of BNP, the Company and
BancWest and the effect of the proposed transaction on those resources.
The Merger and Bank Merger will be subject to the prior approval of the
California State Banking Department. The factors that the California State
Banking Department will consider in determining whether to grant its approval
include the competitive effects of the Merger and the Bank Merger, the
principles of sound banking and the public interest and the needs of the
communities served by Pacific One Bank and Bank of the West.
In addition, the Merger will require certain approvals in Hawaii, Oregon
and certain of the other states where the Company and BancWest are engaged in
business. The Company and BancWest do not currently anticipate any significant
difficulties in obtaining such approvals or any material impact on the
operations of the combined entity if any such approvals are not obtained.
The Company, BNP and Bank of the West, as applicable, expect to file
applications for approval of the Merger with the Federal Reserve Board, the
FDIC, the banking authorities of the states of California, Oregon and Hawaii and
certain other banking authorities as soon as practicable.
There can be no assurance as to whether or when any of the above-described
regulatory approvals required for consummation of the Merger will be obtained or
as to any conditions that may be imposed in connection with the granting of such
approvals. See "THE MERGER AGREEMENT -- Conditions to the Consummation of the
Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Merger constitutes a "Change in Control" within the definition of the
Company's Long-Term Incentive Plan (the "Plan"). Upon the occurrence of a Change
in Control, the Plan provides that the maximum target value attainable under all
awards will be deemed to have been fully earned for the entire performance
period as of the effective date of the Change in Control, regardless of the
Company's actual financial performance. Based on actual performance to date, it
does not currently appear that any payments would be made for either of the
three-year performance periods that began in 1996 and 1997. Implementation of
the Change in Control provisions, on the other hand, would result in payments
under the Plan aggregating approximately $9 million for the three-year
performance periods that began in 1996, 1997 and 1998 to approximately 75
employees, even though the Company will be the Surviving Corporation in the
Merger. At the same time, the Company recognizes that because of the Merger, the
performance goals that were established for the Plan for the three-year
performance period that began in 1998 are no longer appropriate. As a
consequence, the Company has amended the Plan and intends to revise the
performance goals to do the following: (i) specify that the Merger will not be
considered a Change in Control for purposes of the Plan, (ii) pay the maximum
target value attainable for one year (based on 1998 compensation levels) for the
three-year performance period that began in 1998, and (iii) grant new awards
based on new performance goals for the years commencing January 1, 1999 and
ending on December 31, 2000 to reflect the consummation of the Merger. These
changes will result in payments aggregating approximately $1 million to
approximately 65 employees under the Plan for the original three-year
performance period that began in 1998. (No payments would be made for the
three-year performance periods that began in 1996 and 1997.) Such payments will
be made as soon as practicable after the Closing. Since no amendment can
adversely affect awards previously granted under the Plan without the consent of
the participant holding such award, such amendment will only
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be effective with respect to those participating employees who consent to such
amendment. Each employee has discretion as to whether to so consent. The Company
has asked each covered employee for his or her consent. Actual payments from the
Plan will vary depending upon the number of covered employees who provide
consent. As of the date of this Proxy Statement, employees entitled to
approximately 94% of such payments have consented to the amendment.
The Merger constitutes a "Change in Control" within the definition of the
Company's Supplemental Executive Retirement Plan (the "SERP"), which covers
approximately 70 officers of the Company. If a participant is "involuntarily
terminated" as defined in such SERP within 36 months of the Change in Control,
then an employee's rights under the SERP are changed as follows: the employee is
granted three extra years of credited service; the retirement benefit is based
on the greater of compensation over the 12 month period prior to termination or
the final average compensation otherwise provided under the SERP; and the
supplemental retirement payment commences at the later of reaching age 55 or the
employee's date of termination. An "involuntary termination" under the SERP is a
discharge or resignation in response to a (i) change in day-to-day duties; (ii)
reduction in compensation or benefits; (iii) downward change of title; or (iv)
relocation requested by the employer.
The Merger also constitutes a "Change in Control" under the Company's Stock
Incentive Plan (1991) and 1998 Stock Incentive Plan (the "Stock Plans"). Under
the Stock Plans a Change in Control results in the following: (i) any and all
awards held by a participant for at least six months become immediately
exercisable, (ii) any period of restrictions and other restrictions on
restricted stock lapse, and (iii) within ten business days after the occurrence
of the Change in Control, the stock certificates representing shares of
restricted stock are delivered to the participant without any restrictions or
legends thereon (except such restrictions or legends as are required by Federal
or state securities laws). The Stock Plans provide that the administrative
committee may modify an award as it deems appropriate prior to the effective
date of the Change in Control, but the Stock Plans also provide that no
amendment, modification, or termination of the Stock Plans shall in any manner
adversely affect any award previously granted without the written consent of the
affected participant.
EMPLOYEE BENEFITS
Pursuant to the Merger Agreement, BancWest and Bank of the West have agreed
to offer to enter into a waiver agreement with each employee who has been
awarded stock appreciation rights ("SARs") under the Bank of the West Senior
Management Long Term Incentive Plan, pursuant to which such employee waives all
rights he or she has with respect to such SARs and consents to the cancellation
of such SARs in consideration for the issuance by the Company immediately after
the Effective Time of shares of restricted Common Stock with an aggregate value
(based on the per share value initially assigned by the parties to the Class A
Common Stock) equal to the gross value of the cash payout such employee would
have been entitled to pursuant to such plan upon the Closing in the absence of
such waiver agreement, rounded down to the nearest whole share. The Company must
issue such shares to each such employee who delivers to the Company an
acceptable waiver agreement which results in the effective cancellation of such
employee's SARs. The Company may be required to issue up to 470,000 shares of
Common Stock in respect of the SARs. Such shares will become 100% vested on the
second anniversary of the Closing, provided the employee does not voluntarily
terminate his or her employment with Bank of the West or the Company prior to
such time (or have his or her employment terminated by Bank of the West or the
Company for cause). Immediately after the Effective Time, the Company will also
issue to such employees, in the aggregate, options to purchase up to 150,000
shares of Common Stock with an exercise price equal to the fair market value of
such shares at the Closing. Such options will vest at the same time and under
the same conditions as the optionee's shares of restricted Common Stock.
The Merger Agreement provides that, following the Effective Time, the
employees of BancWest and its subsidiaries who continue employment with the
Surviving Corporation or its subsidiaries will receive benefits which, in the
aggregate, are comparable to the benefits provided by the Surviving Corporation
and its subsidiaries to the employees of the Company and its subsidiaries who
continue employment with the
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Surviving Corporation or its subsidiaries. Amounts payable as of the Effective
Time under the terms of the BancWest benefit plans then in effect will be paid
in accordance with the terms of such plans.
The Company has entered into an employment agreement (the "Agreement"),
effective upon the consummation of the Merger, with Don J. McGrath, President
and Chief Executive Officer of Bank of the West, pursuant to which Mr. McGrath
will serve as President and Chief Operating Officer of the Company and President
and Chief Executive Officer of Bank of the West, commencing at the Effective
Time (provided the Merger is consummated) with his principal business office in
the San Francisco Bay Area. Either party may terminate Mr. McGrath's employment
upon 30 days' advance notice. Under the Agreement, Mr. McGrath is entitled to:
receive a base salary at the annual rate of at least $650,000; receive at least
four weeks of paid vacation per year; and participate in all of the Company's
employee benefit plans and executive compensation programs. In addition, if (1)
he voluntarily resigns his employment for "Good Reason" (as defined in the
Agreement), or (2) the Company terminates his employment at any time for any
reason other than "Cause" (as defined in the Agreement) or "Disability" (as
defined in the Agreement), then he will be entitled to a severance payment equal
to 300% of the sum of his then-current annual rate of "Base Compensation" (as
defined in the Agreement), plus the mean of the annual bonuses awarded to him
for the three years ending immediately prior to the date of his termination. He
would also be entitled to continue participation in the Company's group
insurance plans for one year and he would be credited with an additional year of
service for purposes of determining the vested portion of his stock options. If
a "Change in Control" (as defined in the Agreement) has occurred, all of the
stock options he held at termination would become 100% vested upon such Change
in Control and would remain exercisable for 18 months following termination of
employment. The Company would also be obligated to provide Mr. McGrath with a
tax restoration payment in the event any such payments or benefits caused an
excise tax to be imposed upon him. If he receives such severance benefits, then
he will be subject to a non-competition covenant for three years following the
termination of his employment (provided a Change in Control has not occurred).
He is also subject, under all circumstances and at all times, to a
confidentiality covenant. As of the Effective Time, Mr. McGrath will also be
appointed to the Board of Directors of the Company and of Bank of the West.
In accordance with the currently vested benefits under the Bank of the West
excess-benefit plan, the Company has agreed to provide each of Douglas C.
Grigsby, Chief Financial Officer of Bank of the West, Richard J. McGoldrick,
Executive Vice President of Bank of the West, Stephen C. Glenn, Executive Vice
President of Bank of the West, and Mr. McGrath with a minimum monthly retirement
benefit upon retirement from the Company in accordance with the minimum benefit
provisions of the Bank of the West excess-benefit plan (as currently in effect),
provided each of them satisfies the age and service requirements set forth
therein.
ACCOUNTING TREATMENT
For U.S. accounting and financial reporting purposes, the Merger is
intended to be treated as a purchase of BancWest by the Company under generally
accepted accounting principles. Under the purchase method of accounting, the
assets and liabilities of the corporation not surviving a merger are, as of the
effective date of the merger, recorded at their respective fair values and added
to those of the surviving corporation. Financial statements of the surviving
corporation issued after consummation of the merger reflect such values and are
not restated retroactively to reflect the historical financial position or
results of operations of the corporation not surviving.
The unaudited pro forma combined financial information contained in this
Proxy Statement have been prepared using the purchase method of accounting to
account for the Merger. See "SUMMARY -- Selected Unaudited Pro Forma Combined
Financial Information" and "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following describes the principal federal income tax consequences of
the Merger under the Internal Revenue Code of 1986, as amended (the "Code"),
assuming that the Merger is consummated as
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contemplated herein. This discussion is based on current laws and
interpretations thereof, which are subject to change.
The obligations of the Company and of BancWest to consummate the Merger are
subject to the receipt of the opinions of tax counsel outlined below, unless
waived. The opinions of counsel will be based in part upon representations made
as of the Effective Time by the Company and BancWest which counsel will assume
to be true, correct and complete. If the representations are inaccurate, the
opinions of counsel could be adversely affected. Neither the Company nor
BancWest has requested or will request an advance ruling from the Internal
Revenue Service as to the tax consequences of the Merger.
As of the date of this Proxy Statement, Simpson Thacher & Bartlett, counsel
to the Company, and Pillsbury, Madison & Sutro LLP, counsel to BancWest, have
orally advised the Company and BancWest, respectively, that in their opinion,
based on certain facts, representations and assumptions referred to in such
opinions, (i) the Merger will be treated for federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Code, and (ii) the
Company and BancWest will each be a party to the reorganization within the
meaning of Section 368(b) of the Code. In addition, neither the Company nor
BancWest will recognize gain or loss as a result of the Merger. Consummation of
the Merger is conditioned upon the receipt by the Company and BancWest in
writing of the opinions described above dated as of the Closing Date. See "THE
MERGER AGREEMENT -- Conditions to the Consummation of the Merger."
NO APPRAISAL RIGHTS
Holders of Common Stock will not have any appraisal rights under Delaware
law in connection with the Merger or the consummation of the transactions
contemplated thereby.
THE MERGER AGREEMENT
This section of the Proxy Statement describes the principal terms of the
Merger Agreement. A copy of the Merger Agreement is attached to this Proxy
Statement as Appendix I and is incorporated herein by reference. The description
set forth below of the terms of the Merger Agreement is qualified in its
entirety by reference thereto. All stockholders are urged to read the Merger
Agreement in its entirety.
STRUCTURE OF THE MERGER; EFFECTIVE TIME
The Merger Agreement contemplates the merger of BancWest with and into the
Company. The Company will be the Surviving Corporation in the Merger and will
continue its corporate existence under Delaware law under the name "BancWest
Corporation." The Merger will become effective upon both the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware, and
the filing of an Agreement of Merger with the Secretary of State of the State of
California, or at such time thereafter as is provided in the Certificate of
Merger and the Agreement of Merger (the "Effective Time"). The closing of the
Merger (the "Closing") will take place at 10:00 a.m. on a date to be specified
by the parties, which will be the second business day after satisfaction or
waiver (subject to applicable law) of the conditions (excluding conditions that,
by their terms, cannot be satisfied until the Closing) set forth in the Merger
Agreement (the "Closing Date"), unless another time or date is agreed to in
writing by the Company and BancWest. The Merger Agreement may be terminated by
either party if, among other reasons, the Merger shall not have been consummated
on or before March 31, 1999. See "-- Conditions to the Consummation of the
Merger" and "-- Termination" below.
CONVERSION OF BANCWEST CAPITAL STOCK
As of the Effective Time, each issued and outstanding share of BancWest
Common Stock (other than shares owned by BancWest as treasury stock or by any
subsidiary of BancWest which will be cancelled and retired and will cease to
exist without any payment being made for such shares) will be converted into the
Conversion Number (as hereinafter defined) of fully paid and nonassessable
shares of Class A Common Stock. The "Conversion Number" means the number of
shares of Class A Common Stock (rounded upward
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to the nearest whole number) equal to the excess of (i) the quotient of (A) the
aggregate number of shares of Common Stock issued and actually outstanding at
the close of business on the business day immediately preceding the Effective
Time plus the number of shares of Common Stock to be issued upon surrender and
cancellation of the stock appreciation rights described under "THE
MERGER -- Employee Benefits", divided by (B) 0.55, over (ii) the number of
shares specified in clause (i)(A). Based on the number of outstanding shares of
Common Stock on the Record Date and assuming that the maximum possible number of
restricted shares of Common Stock are issued in exchange for the SARs, BNP would
receive 25,862,259 shares of Class A Common Stock in the Merger. For a
description of the Class A Common Stock to be issued to BNP in the Merger, see
"RELATED ARRANGEMENTS WITH BNP -- Terms of the Class A Common Stock."
The shares of Fixed/Adjustable Rate Noncumulative Preferred Stock Series A,
without par value, of BancWest (the "BancWest Preferred Stock"), issued and
outstanding immediately prior to the Effective Time will be cancelled and
retired and will cease to exist without any payment being made for such shares.
See "OTHER AGREEMENTS -- BNP Agreement -- Certain Covenants."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary mutual representations and
warranties by each of the Company and BancWest relating to, among other things,
(i) corporate organization and existence, (ii) capitalization, (iii) corporate
power and authority to enter into, and due authorization, execution, delivery,
performance and enforceability of, the Merger Agreement, (iv) required
governmental and third party consents and approvals and that neither the Merger
Agreement nor the transactions contemplated thereby violate either party's
organizational documents, applicable law and certain material agreements, (v)
financial statements, (vi) the accuracy of the information provided by each of
the Company and BancWest for inclusion in this Proxy Statement, (vii) compliance
with applicable laws, (viii) the absence of material litigation, (ix) filing of
tax returns, payment of taxes and related matters, (x) certain material
contracts, (xi) each of the Company's and BancWest's employee benefit plans and
agreements, (xii) subsidiaries, (xiii) certain bank regulatory matters, (xiv)
the absence of certain material changes or events since December 31, 1997, (xv)
the absence of undisclosed liabilities, (xvi) timely filing of all material
regulatory reports, (xvii) the absence of material environmental liability,
(xviii) title to properties, (xix) brokers' and finders' fees, and (xx)
intellectual property.
In the Merger Agreement, BancWest also makes representations and warranties
to the Company concerning the ownership of Common Stock and affiliate
transactions.
In the Merger Agreement, the Company also makes representations and
warranties to BancWest concerning documents and reports filed with the
Securities and Exchange Commission (the "Commission") and the accuracy and
completeness of the information contained therein, the required vote of the
holders of the Common Stock to adopt the Merger Agreement and the receipt of a
fairness opinion from its financial advisor.
Except as set forth under "OTHER AGREEMENTS -- BNP Agreement -- Survival
and Indemnification" below, the representations and warranties of the Company
and BancWest terminate as of the Effective Time.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, BancWest and the Company have each agreed
that, prior to the Effective Time, except as expressly contemplated or permitted
by the Merger Agreement or as set forth in a schedule to the Merger Agreement or
to the extent that the other party otherwise consents in writing, it will and
will cause each of its respective subsidiaries to, carry on its business in the
usual, regular and ordinary course in substantially the same manner as conducted
prior to the execution of the Merger Agreement and use all reasonable efforts to
preserve intact its present business organizations, maintain the rights and
franchises of, and preserve the relationships with its customers, suppliers and
others having business dealings with it to the
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end that their goodwill and ongoing businesses will not be impaired in any
material respect at the Effective Time.
In addition to the foregoing, during the period from the date of the Merger
Agreement to the Effective Time, except as set forth in a schedule to the Merger
Agreement, each of BancWest and the Company has agreed that it will not, and
will not permit any of its subsidiaries to, without the prior written consent of
the other party, among other things: (i) declare or pay any dividends on its
capital stock (other than, in the case of the Company, regular quarterly cash
dividends not in excess of $.31 per share, and in the case of BancWest,
dividends on its preferred stock and the preferred stock of Bank of the West in
accordance with the terms of such securities and a dividend in the amount of $28
million on the BancWest Common Stock (plus an additional pro rata amount if the
Closing occurs after December 31, 1998) and in the case of either party,
dividends by a wholly owned subsidiary); (ii) split, combine or reclassify any
of its capital stock or issue any securities in lieu of shares of its capital
stock; (iii) issue or sell any additional shares of its capital stock (subject
to certain exceptions, including, in the case of the Company, issuances of
options and restricted stock pursuant to employee benefit plans) or repurchase,
redeem or otherwise acquire (subject to certain exceptions) any shares of its
capital stock; (iv) amend its organizational documents (other than the proposed
amendments to the FHI Certificate and the By-Laws described herein); (v) enter
into any new material line of business or materially change its lending,
investment, liability management and other material banking policies, except as
required by law or by policies imposed by a bank regulator; (vi) incur or commit
to any capital expenditures or any obligations or liabilities in connection
therewith, except in the ordinary course of business consistent with past
practice; (vii) make any acquisition or enter into any merger, except pursuant
to certain limited exceptions; (viii) sell, lease, encumber or otherwise dispose
of, any material assets, except in the ordinary course of business consistent
with past practice or pursuant to certain other limited exceptions; (ix) incur
or guarantee any long-term indebtedness or issue or sell any long-term debt
securities or guarantee any long-term debt securities of others except in the
ordinary course of business consistent with past practice or for renewals or
extensions of existing long-term indebtedness; (x) intentionally take any action
that would, or reasonably might be expected to, have a material adverse effect
on the Surviving Corporation, or in any of the conditions to the Closing not
being satisfied, or (unless such action is required by applicable law or sound
banking practice) adversely affect the parties' ability to obtain any of the
required regulatory approvals without imposition of a burdensome condition; (xi)
subject to certain exceptions, change its methods of accounting; (xii) subject
to certain exceptions, enter into or amend any employee benefit plans or
agreements or increase the compensation or fringe benefits of any director,
officer or employee; (xiii) subject to certain exceptions, enter into any
material contract or renew or terminate any material contract; (xiv) except in
the ordinary course of business consistent with past practice, make, acquire or
issue a commitment for any loan or issue or agree to issue any letters of credit
or otherwise guarantee the obligations of any other persons; (xv) engage or
participate in any material transaction or incur or sustain any material
obligation not in the ordinary course of business consistent with past practice;
(xvi) settle any material claims, actions or proceedings involving money
damages, except in the ordinary course of business consistent with past
practice; (xvii) change or make any tax elections or settle or compromise any
material tax liability; or (xviii) agree to, or make any commitment to, take any
of the actions described above.
OTHER ACQUISITION PROPOSALS
In the Merger Agreement, BancWest and the Company have each agreed,
subject, in the case of the Company, to the provisions of the next succeeding
paragraph, that, from the date of the Merger Agreement until the earlier of the
Effective Time or the termination of the Merger Agreement neither it, nor any of
its respective subsidiaries, affiliates or agents will, nor will it authorize or
permit any of its officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative or agent
(collectively, "Representatives") retained by it or any of its subsidiaries,
affiliates or agents to, solicit, initiate or knowingly encourage the submission
of, or enter into discussions or negotiations with or provide information to any
person or group of persons (other than the respective parties to the Merger
Agreement) concerning, any "Takeover Proposal" (as defined below) or enter into
any agreement with a third party relating to a Takeover Proposal or assist,
participate in, facilitate or encourage any effort or attempt by any other
person to do or seek to do any of the foregoing. "Takeover Proposal" means any
proposal for the acquisition of a 15% or
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greater equity interest in, or a merger, consolidation, liquidation, dissolution
or other disposition of 15% or more of the assets (other than in the ordinary
course of business) of, BancWest or the Company or any significant subsidiary of
BancWest or the Company, or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% or more of any
class of equity securities of BancWest or the Company or any significant
subsidiary of BancWest or the Company (other than pursuant to the transactions
contemplated by the Merger Agreement or the BNP Agreement, the Standstill
Agreement or the Registration Rights Agreement (collectively, the "Transaction
Agreements")).
Notwithstanding the foregoing, at any time prior to the time that the
Company's stockholders shall have voted to adopt the Merger Agreement, the
Company may, and may authorize and permit its Representatives to, (i) provide
third parties with nonpublic information and access in response to a request for
such information or access which was not solicited, encouraged or initiated by
the Company or any of its Representatives after the date of the Merger
Agreement, (ii) participate in discussions and negotiations with any third party
relating to any Takeover Proposal, upon receipt by the Company of an unsolicited
Takeover Proposal, or (iii) terminate the Merger Agreement (and concurrently
with or after such termination, enter into any agreement with respect to a
Takeover Proposal), in each case if the Board of Directors of the Company
determines in good faith, after having consulted with and considered the advice
of its financial advisors and outside counsel, that the failure to take any such
action would be reasonably likely to constitute or result in a breach of
fiduciary duty by the Board of Directors under applicable law.
OTHER AGREEMENTS
Stockholders' Meeting. In the Merger Agreement, the Company has agreed to
call a meeting of its stockholders to be held as promptly as practicable for the
purpose of voting upon the adoption of the Merger Agreement. The Company is
required to, through its Board of Directors, recommend to its stockholders
adoption of the Merger Agreement unless the Board of Directors determines in
good faith, after having consulted with and considered the advice of its
financial advisors and outside counsel, that making such recommendation, or
failing to withdraw, modify or amend any previously made recommendation, would
be reasonably likely to constitute or result in a breach of fiduciary duty by
the Board under applicable law. The Company has agreed to, upon the request of
BancWest, postpone or recess such stockholders' meeting for such period as
BancWest shall reasonably request, if for any reason, the Trustees of the Damon
Estate have failed in any material respect to comply with their obligations
under the Stockholder Agreement at or prior to the date of such meeting, or have
indicated to BancWest their intention so to do, in order to afford BNP an
opportunity to enforce its rights under the Stockholder Agreement, including by
way of court action, unless it is reasonably likely that the Merger Agreement
will be adopted by the requisite vote of the stockholders of the Company at such
meeting.
Filings and Other Actions. In the Merger Agreement, each party has agreed
to use all reasonable efforts (i) to take, or cause to be taken, all actions
necessary to comply promptly with all legal requirements which may be imposed on
such party or its subsidiaries with respect to the transactions contemplated by
the Merger Agreement and to consummation thereof as promptly as practicable,
subject to the adoption of the Merger Agreement by the Company's stockholders,
and (ii) to obtain (and to cooperate with the other party to obtain) any
required consent of any governmental authority and or any other public or
private third party in connection with the Merger and the other transactions
contemplated by the Merger Agreement. Each of BancWest and the Company has
agreed to use all reasonable best efforts to (i) lift or rescind any injunction
or restraining order adversely affecting the ability of the parties to
consummate the transactions contemplated by the Merger Agreement, (ii) defend
any action or proceeding seeking to enjoin or prevent the consummation of the
transactions contemplated by the Merger Agreement or seeking material damages,
and (iii) provide to tax counsel to the other party representations and
certifications as to such matters as such counsel may reasonably request in
order to render the opinions referred to under "-- Conditions to the
Consummation of the Merger."
Indemnification of Directors and Officers of BancWest. The Merger
Agreement provides that the Surviving Corporation will maintain all rights of
indemnification existing in favor of the directors, officers and employees of
BancWest to the full extent BancWest would have been permitted under applicable
law and its articles of incorporation to indemnify such persons and will cause
to be maintained for five years after the
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Effective Time directors' and officers' liability insurance on terms not
materially less advantageous than those contained in policies maintained by BNP
for BancWest; provided that if the annual premium payments for such insurance
exceed 150% of the premiums agreed to be paid between BancWest and Bank of the
West and BNP in respect of 1997 for such insurance ( "BancWest's Current
Premium"), the Surviving Corporation is required to maintain the maximum
coverage available at an annual premium equal to 150% of BancWest's Current
Premium.
Employee Benefit Plans. For a description of the effect of the Merger on
the BancWest employee benefit plans, see "THE MERGER -- Employee Benefits."
Intercompany Matters. Pursuant to the Merger Agreement, BancWest has
agreed to take any necessary action to ensure that any arrangements, contracts,
agreements or transactions between BancWest or any of its subsidiaries, on the
one hand, and BNP and any of its affiliates, on the other hand, may be
terminated by the Surviving Corporation upon not more than 30 days' notice
following the Effective Time without the payment of any financial penalty or
fee, subject to certain exceptions.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each party's obligation to effect the Merger is subject to various
conditions which include, in addition to other customary closing conditions, the
following:
(i) the Merger Agreement shall have been adopted by the required vote
of the holders of the Common Stock;
(ii) all necessary governmental approvals for the Merger (other than
immaterial approvals) shall have been obtained, including that of the
Federal Reserve Board, and any waiting periods imposed by any governmental
entity with respect to the Merger shall have expired;
(iii) there shall not be any injunction or restraining order
preventing the consummation of the Merger or the transactions contemplated
by the Transaction Agreements, nor shall the Merger or the transactions
contemplated by the Transaction Agreements be illegal under any applicable
law; and
(iv) all conditions precedent to the consummation of the merger of
Pacific One Bank with Bank of the West shall have been satisfied and such
merger shall be consummated concurrently with the Effective Time.
In addition, each party's obligation to effect the Merger is subject to the
following additional conditions (any of which may be waived by such party):
(i) the representations and warranties of the other party set forth in
the Merger Agreement shall be true and correct as of the date of the Merger
Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date, subject to such
exceptions as would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the Surviving Corporation (and,
in the case of the condition to BancWest's obligations, BNP);
(ii) the other party shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement;
(iii) such party shall have obtained all necessary consents to the
Merger and the related transactions other than consents from governmental
entities and other than those which, if not obtained, would not have a
material adverse effect on the Surviving Corporation (and, in the case of
the condition to BancWest's obligations, BNP);
(iv) such party shall have received an opinion of its counsel dated
the Closing Date that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code and the Company and BancWest will each be a party to that
reorganization within the meaning of Section 368(b) of the Code;
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(v) the Company shall have been advised by the National Association of
Securities Dealers, Inc. (the "NASD") that the Common Stock will continue
to be designated as a "Nasdaq National Market System security" (as defined
for purposes of Schedule D to the By-Laws of the NASD) after the issuance
and sale of the shares of Class A Common Stock in the Merger and the
effectiveness of the provisions of the Merger Agreement and the Transaction
Agreements relating to BNP and the Company;
(vi) each party shall have provided to the other party review reports
prepared in accordance with the provisions of Statement of Accounting
Standards No. 71, "Interim Financial Information", by such party's
independent accountants covering quarterly financial reports for the most
recent quarter ending at least 45 days prior to the Closing Date;
(vii) each party shall have received a copy of the resolution or
resolutions duly adopted by the other party's Board of Directors and
stockholders authorizing the execution, delivery and performance by the
other party of the Merger Agreement, certified by the Secretary or an
Assistant Secretary of the other party;
(viii) in approving the Merger, no governmental authority shall have
imposed a burdensome condition or restriction upon such party or its
subsidiaries which would reasonably be expected to (1) have a material
adverse effect after the Effective Time on the present or prospective
consolidated financial condition, business or operating results of the
Surviving Corporation (and, in the case of the condition to BancWest's
obligations, any other material operations, business or assets of BNP or
its affiliates) (including, without limitation, any requirement to dispose
of any material assets or businesses or restrict in any significant way any
material operations or activities), (2) prevent the parties from realizing
all or a substantial portion of the economic benefits of the transactions
contemplated by the Merger Agreement, or (3) materially impair such party's
ability to exercise and enforce its rights under the Transaction
Agreements, the FHI Certificate and the By-Laws; and
(ix) the Transaction Agreements shall have been duly executed and
delivered and shall be in full force and effect and the representations and
warranties contained in any such agreement shall be true and correct in all
material respects and each party shall have performed in all material
respects all obligations required to be performed by it thereunder at or
prior to the Closing Date.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, by action taken or authorized by the Board of Directors of the terminating
party or parties, whether before or after adoption of the Merger Agreement by
the stockholders of the Company:
(i) by mutual consent of the Company and BancWest in a written
instrument;
(ii) by either the Company or BancWest upon written notice to the
other party if the Federal Reserve Board shall have issued an order denying
approval of the Merger and the other material aspects of the transactions
contemplated by the Merger Agreement and the Transaction Agreements or if
any governmental entity of competent jurisdiction shall have issued a final
permanent order enjoining or otherwise prohibiting the consummation of the
transactions contemplated by the Merger Agreement and the Transaction
Agreements or imposing a burdensome condition, and in any such case the
time for appeal or petition for reconsideration of such order shall have
expired without such appeal or petition being granted;
(iii) by either the Company or BancWest if the Merger shall not have
been consummated on or before March 31, 1999; except that if the Merger
shall not have been consummated on or before such date due to the act or
omission of a party, then that party may not terminate the Merger Agreement
pursuant to this clause;
(iv) by the Company in the event of a breach by BancWest of any
representation, warranty or covenant contained in the Merger Agreement
(other than the covenant described in the first paragraph under "-- Other
Acquisition Proposals") or in the event of a breach by BNP of any
representation,
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warranty or covenant contained in the BNP Agreement (other than BNP's
comparable covenant relating to acquisition proposals), which breach (1)
either is not cured within 30 days after the giving of written notice to
BancWest or BNP, as the case may be, or is of a nature which cannot be
cured prior to the Closing and (2) would entitle the Company to elect not
to consummate the transactions contemplated by the Merger Agreement
pursuant to the provisions described under "-- Conditions to the
Consummation of the Merger;"
(v) by BancWest in the event of a breach by the Company of any
representation, warranty or covenant contained in the Merger Agreement
(other than the covenant described in the first paragraph under "-- Other
Acquisition Proposals") or in the BNP Agreement which breach (1) either is
not cured within 30 days after the giving of written notice to the Company
or is of a nature which cannot be cured prior to the Closing and (2) would
entitle BancWest to elect not to consummate the transactions contemplated
by the Merger Agreement pursuant to the provisions described under
"-- Conditions to the Consummation of the Merger;"
(vi) by either the Company or BancWest if, in accordance with the
terms of the Merger Agreement, the Board of Directors of the Company fails
to recommend adoption of the Merger Agreement by the stockholders of the
Company, or amends or modifies such recommendation in a manner materially
adverse to BancWest or withdraws its recommendation to the stockholders of
the Company;
(vii) by the Company or BancWest, if the stockholders of the Company
fail to adopt the Merger Agreement by the requisite vote at a duly held
meeting of such stockholders held for such purpose or at any adjournment,
postponement or continuation thereof;
(viii) by the Company, in accordance with the covenant described in
the second paragraph under "-- Other Acquisition Proposals;"
(ix) by BancWest if a tender or exchange offer to acquire at least 50%
of the outstanding shares of the Common Stock is commenced by any person
(other than BNP, BancWest or any of their respective affiliates) and the
Board of Directors of the Company recommends that the stockholders of the
Company tender their shares in such tender or exchange offer or otherwise
fails to recommend that such stockholders reject such tender or exchange
offer within ten business days after the commencement thereof (which, in
the case of an exchange offer, will be the effective date of the
registration statement relating to such exchange offer);
(x) by BancWest if either (1) the Company shall have materially
breached its obligations under the covenant described in the first
paragraph under "-- Other Acquisition Proposals," and shall not have cured
such breach within 24 hours after the giving of written notice thereof to
the Company (provided that no cure period will apply if such breach shall
have been wilful), or (2) the Company shall have exercised its rights under
the covenant described in the second paragraph under "-- Other Acquisition
Proposals" to provide nonpublic information or access to, or participate in
discussions or negotiations with a third party that has made an unsolicited
request for nonpublic information or access or has made an unsolicited
Takeover Proposal, and in either such case the Company has not terminated
such activities with such third party within 15 days after the commencement
thereof; or
(xi) by the Company if BancWest shall have materially breached its
obligations under the covenant described in the first paragraph under
"-- Other Acquisition Proposals" or BNP shall have breached its obligations
under the comparable covenant contained in the BNP Agreement, and shall not
have cured such breach within 24 hours after the giving of written notice
thereof to BancWest or BNP, as the case may be (provided that no cure
period will apply if such breach shall have been wilful).
In the event of termination of the Merger Agreement by either the Company
or BancWest based upon any of the foregoing reasons, the Merger Agreement will
become void and there will be no liability or obligation on the part of the
Company or BancWest or their respective officers or directors other than under
certain specified provisions of the Merger Agreement dealing with broker's and
finder's fees and indemnification therefor, confidentiality agreements and the
payment of expenses and fees described in "-- Fees and
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Expenses," and other than any liabilities or damages incurred as a result of the
wilful breach by a party of any of its representations, warranties, covenants or
agreements set forth in the Merger Agreement.
FEES AND EXPENSES
The Merger Agreement provides that except as otherwise expressly provided
therein, whether or not the transactions contemplated by the Merger Agreement
are consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby will be paid by the party
incurring such expense.
In the Merger Agreement, the Company and BancWest agree that:
(a) the Company will pay BancWest a fee of $10 million (the
"Termination Fee") and reimburse BancWest for all actual, documented and
reasonable out-of-pocket fees and expenses (the "Expenses") incurred by
BancWest relating to the transactions contemplated by the Merger Agreement,
up to a maximum of $3 million, if the Merger Agreement is terminated by the
Company under the covenant described in the second paragraph under
"-- Other Acquisition Proposals;" the Termination Fee and Expenses are
required to be paid pursuant to this provision not later than five business
days following termination of the Merger Agreement (or, in the case of
Expenses, five business days after submission of statements therefor);
(b) the Company will pay BancWest the Termination Fee if (x) the
Merger Agreement is terminated by BancWest as a result of a material breach
by the Company of its obligations under the covenant described in the first
paragraph under "-- Other Acquisition Proposals" that has not been cured
within the applicable cure period or the exercise by the Company of its
rights under the covenant described in the second paragraph under "-- Other
Acquisition Proposals" to furnish nonpublic information or access to, or to
participate in discussions or negotiations with, a third party in response
to an unsolicited request for such information and access or a Takeover
Proposal and has not ceased to exercise such rights within the applicable
time period, (y) on or prior to the first anniversary of the date of such
termination, the Company enters into a definitive agreement with respect to
a transaction of the type described under the definition of Acquisition
Proposal (as defined below) and (z) such transaction is thereafter
consummated; the Termination Fee is required to be paid pursuant to this
provision within one business day following the consummation of any such
transaction;
(c) the Company will reimburse BancWest (not later than five business
days after submission of statements therefor) for its Expenses, up to a
maximum of $3 million, if the Merger Agreement is terminated by BancWest as
a result of (i) a material breach by the Company of any of its
representations, warranties or covenants contained in the Merger Agreement
(including its agreements under the covenant described in the first
paragraph under "-- Other Acquisition Proposals") or the BNP Agreement
which is not cured within any applicable cure period, (ii) the failure of
the Board of Directors of the Company to recommend adoption of the Merger
Agreement by the Company's stockholders or the Board of Directors amending
or modifying such recommendation in a manner that is materially adverse to
BancWest or withdrawing such recommendation, (iii) the Board of Directors
recommending that stockholders tender their shares in a tender or exchange
offer for 50% or more of the outstanding shares of Common Stock or failing
to reject such offer within the applicable time period or (iv) the exercise
by the Company of its rights under the covenant described in the second
paragraph under "-- Other Acquisition Proposals" to furnish nonpublic
information or access to or to participate in discussions or negotiations
with a third party in response to an unsolicited request for nonpublic
information or access or an unsolicited Takeover Proposal and has not
ceased to exercise such rights within the applicable time period;
(d) the Company will reimburse BancWest (not later than five business
days after submission of statements therefor) for its Expenses, up to a
maximum of $3 million, if (i) the Merger Agreement is terminated by the
Company or by BancWest as a result of the failure of the stockholders of
the Company to adopt the Merger Agreement by the requisite vote and (ii)
either (A) at any time after the date of the Merger Agreement, a bona fide
Acquisition Proposal is publicly commenced, publicly disclosed or
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publicly communicated to the Company and not withdrawn unconditionally
prior to the date of the Special Meeting or (B) (1) prior to the Special
Meeting a court of competent jurisdiction shall have issued a permanent
order invalidating the Stockholder Agreement or otherwise prohibiting
performance by the Trustees of the Damon Estate of their obligations
thereunder with respect to the voting of the shares covered thereby and (2)
at the Special Meeting, such shares were not voted in favor of the adoption
of the Merger Agreement; and
(e) BancWest will reimburse the Company (not later than five business
days after submission of statements therefor) for its Expenses, up to a
maximum of $3 million, if the Merger Agreement is terminated by the Company
as a result of a material breach by BancWest or BNP of any of its
representations, warranties or covenants (including the covenant described
under "-- Other Acquisition Proposals") contained in the Merger Agreement
or the BNP Agreement which is not cured within any applicable cure period.
"Acquisition Proposal" means any of (i) a transaction or series of
transactions pursuant to which any person (other than BNP, BancWest or their
respective affiliates) acquires or would acquire more than 50% of the
outstanding Common Stock, (ii) any acquisition or proposed acquisition of the
Company or any of its significant subsidiaries by a merger or other business
combination or (iii) any other transaction pursuant to which any third party
acquires or would acquire all or substantially all of the assets of the Company
and its subsidiaries.
AMENDMENT
The Merger Agreement may be amended by the parties at any time before or
after adoption of the Merger Agreement by the stockholders of the Company, but,
after any such approval, no amendment may be made which by law requires further
approval by such stockholders without such further approval. The Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.
EXTENSION; WAIVER
At any time prior to the Closing Date, the parties, by action taken or
authorized by their respective boards of directors, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other parties, (ii) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant to it and (iii) waive compliance with any of the
agreements or conditions contained in the Merger Agreement. Any agreement on the
part of a party to the Merger Agreement to any such extension or waiver will be
valid only if set forth in a written instrument signed on behalf of such party.
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OTHER AGREEMENTS
BNP AGREEMENT
Concurrently with the execution of the Merger Agreement, the Company and
BNP entered into an agreement (the "BNP Agreement") the principal terms of which
are described below. A copy of the BNP Agreement is attached to this Proxy
Statement as Appendix II and is incorporated herein by reference. The
description set forth below of the terms of the BNP Agreement is qualified in
its entirety by reference thereto. All stockholders are urged to read the BNP
Agreement in its entirety.
Representations and Warranties. The BNP Agreement contains customary
representations and warranties by each of the Company and BNP relating to, among
other things, (i) corporate power and authority to enter into, and due
authorization, execution, delivery, performance and enforceability of, each of
the Transaction Agreements, (ii) required governmental and third party consents
and approvals and that neither the Transaction Agreements nor the transactions
contemplated thereby violate either party's organizational documents, applicable
law and certain material agreements, and (iii) absence of material litigation.
In the BNP Agreement, BNP also makes representations and warranties to the
Company concerning (i) ownership of BancWest Common Stock, (ii) ownership of
capital stock of the Company, (iii) its investment intent with respect to the
shares of Class A Common Stock to be received in the Merger, (iv) the accuracy
of information provided by it for inclusion in this Proxy Statement, and (v)
certain bank regulatory matters.
Certain Covenants. In the BNP Agreement, BNP has agreed: (i) to comply
with the covenant described in the first paragraph under "THE MERGER
AGREEMENT -- Other Acquisition Proposals", (ii) to waive any right to any
dividend payable to it by the Company in the fourth quarter of 1998 (if the
Effective Time occurs on or prior to December 31, 1998) or the first quarter of
1999 (if the Effective Time occurs after December 31, 1998 and on or prior to
March 31, 1999) as a result of its being a record holder of shares of Class A
Common Stock on the record date for the payment of such dividend, (iii) not to
take any action to prevent BancWest from performing its covenants and agreements
contained in the Merger Agreement, (iv) to take, and to cause Bank of the West
to take, such action as is necessary to ensure that any arrangements, contracts,
agreements or transactions between BancWest or any of its subsidiaries, on the
one hand, and BNP and any of its affiliates, on the other hand (subject to
certain exceptions) may be terminated by the Surviving Corporation upon not more
than 30 days' notice following the Effective Time without the payment of any
financial penalty or fee and (v) to exercise or cause one of its affiliates to
exercise the purchase option with respect to the outstanding preferred stock of
BancWest, acquire, or cause such affiliate to acquire, beneficial ownership of
the outstanding shares of such preferred stock and vote all such shares in favor
of the approval of the Merger Agreement, and to transfer all of the shares of
such preferred stock to the Surviving Corporation effective on or before the
Closing Date, in exchange for a payment by the Surviving Corporation of an
amount equal to the aggregate price paid by BNP or such affiliate upon exercise
of the purchase option.
Survival and Indemnification. The BNP Agreement provides that the
representations of the Company, BancWest and BNP in the Merger Agreement and the
BNP Agreement relating to certain corporate matters and broker's and finders'
fees and expenses will survive the Effective Time without limitation as to time
and the representations of BancWest and the Company relating to subsidiaries and
of BancWest relating to affiliate transactions contained in the Merger Agreement
will survive the Effective Time for eighteen months after the Effective Time.
Each of BNP and the Company agree to indemnify the other from, all losses,
liabilities and expenses (including, but not limited to, reasonable fees and
expenses of counsel and expenses of investigation) (collectively, "Losses")
incurred directly or indirectly because or resulting from or arising out of the
fact that any matter which is the subject of a representation or warranty of
BancWest or BNP, on the one hand, or the Company, on the other hand, referred to
in the preceding paragraph is not as represented or warranted (without regard to
any materiality qualification or limitation contained in the Merger Agreement or
the BNP Agreement) to the extent that the aggregate amount, if any, by which
such Losses payable by such party
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exceed in total $10 million, in which event such party will be liable for all
Losses in excess of $10 million up to a maximum of $175 million.
In addition, in the BNP Agreement, BNP agrees to pay and indemnify the
Company and its affiliates against (i) taxes of any member (other than BancWest
or any of its subsidiaries) of a consolidated, combined or unitary group of
which BancWest or any of its subsidiaries (or any predecessor) is or was a
member on or prior to the Effective Time by reason of the liability of BancWest
or any of its subsidiaries pursuant to certain treasury regulations (or any
analogous or similar state, local or foreign law or regulation), as a transferee
or successor, by contract, or otherwise; (ii) taxes payable to the California
Franchise Tax Board arising out of a proceeding to which Bank of the West is
currently a party to the extent such taxes exceed any reserves therefor on the
books of Bank of the West at the date of the Merger Agreement (provided that the
Company will be required to pay to BNP an amount equal to the amount, if any, by
which the reserves for such taxes exceed the taxes actually paid to such
Franchise Tax Board); and (iii) any payments required to be made after the
Closing Date under any tax sharing, tax indemnity, tax allocation or similar
contracts (whether or not written) to which BancWest and its subsidiaries was
obligated, or was a party, on or prior to the Closing Date other than agreements
to which the only parties are one or more of BancWest and any of its
subsidiaries. The Company may make a claim for indemnification with respect to
any such taxes at any time prior to 60 days after the expiration of the
applicable tax statute of limitations with respect to the relevant taxable
period (including all periods of extension, whether automatic or permissive).
Each of the Company and BNP agree that the indemnification described above
will be the sole and exclusive remedy of the Company or BNP, as the case may be,
with respect to any and all Losses incurred directly or indirectly because or
resulting from or arising out of the BNP Agreement and the transactions
contemplated thereby (other than claims of, or causes of action arising from,
the wilful breach by the other party or parties of any of its representations,
warranties, covenants or agreements set forth in the BNP Agreement).
Termination. The BNP Agreement terminates automatically and without any
additional action by BNP or the Company, upon the termination of the Merger
Agreement in accordance with its terms. See "THE MERGER
AGREEMENT -- Termination."
STOCKHOLDER AGREEMENT
Concurrently with the execution of the Merger Agreement, BNP and the
Trustees of the Damon Estate entered into the Stockholder Agreement. Pursuant to
the Stockholder Agreement, the Trustees of the Damon Estate have agreed, among
other things, to vote all of the shares of the Company beneficially owned by the
Damon Estate in favor of the adoption of the Merger Agreement and the
transactions contemplated thereby and against any other merger or business
combination or other action which is intended, or could reasonably be expected,
to materially impede, interfere with, delay, postpone or adversely affect the
consummation of the Merger on the terms set forth in the Merger Agreement or the
consummation of the other transactions contemplated thereby or by the
Stockholder Agreement. The Damon Estate owned 7,900,000 (or approximately 25% of
the outstanding) shares of Common Stock as of the Record Date.
In the Stockholder Agreement, the Trustees of the Damon Estate also agreed
not to, directly or indirectly, solicit or respond to any inquiries or the
making of any proposal by any person or entity (other than BNP or any affiliate
of BNP) with respect to the Company that constitutes or could reasonably be
expected to lead to a Takeover Proposal (as defined in "THE MERGER
AGREEMENT -- Other Acquisition Proposals").
The Stockholder Agreement terminates upon the earlier of the consummation
of the Merger and the termination of the Merger Agreement pursuant to its terms.
Notwithstanding anything in the Stockholder Agreement to the contrary, the
covenants and agreements set forth therein shall not prevent any designee of the
Damon Estate (including each of the Trustees of the Damon Estate who signed the
Stockholder Agreement on behalf of the Damon Estate) who serves on the Board
from taking any action, subject to applicable provisions of the Merger
Agreement, while acting in such designee's capacity as a director of the
Company.
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RELATED ARRANGEMENTS WITH BNP
This section of the Proxy Statement describes certain aspects of the
relationship between the Company and BNP following the Merger, including the
principal terms of the Class A Common Stock to be issued to BNP in the Merger,
the Standstill and Governance Agreement and the Registration Rights Agreement to
be entered into by the Company and BNP and the amendments to the FHI Certificate
and the By-Laws of the Company. Copies of the FHI Certificate (as proposed to be
amended), the By-Laws (as proposed to be amended), the Standstill and Governance
Agreement and the Registration Rights Agreement are attached to this Proxy
Statement as Exhibits A, B, C and D, respectively, to the Merger Agreement
attached hereto as Appendix I and are incorporated herein by reference. The
descriptions set forth below are qualified in their entireties by reference
thereto. All stockholders are urged to read such documents in their entireties.
TERMS OF THE CLASS A COMMON STOCK
General. In the Merger, BNP will be issued a number of shares of Class A
Common Stock equal to 45% of the outstanding common equity of the Company
following the Merger. The Class A Common Stock is equivalent on a per share
basis to the existing Common Stock in all respects other than voting rights and
conversion rights. BNP will be issued shares of Class A Common Stock rather than
Common Stock primarily to enable BNP to elect directly its designees to the
Board of Directors of the Company, thereby assuring BNP its proportionate
representation on the Board as long as it owns Class A Common Stock. See
"-- Election of Directors," "-- Voting Rights" and "-- Charter
Amendments -- Stockholder Voting Requirements." No shares of Class A Common
Stock may be issued except pursuant to, or in accordance with the terms of, the
Merger Agreement and the Standstill and Governance Agreement between the Company
and BNP (the "Standstill Agreement"), to be entered into on or before the
Closing Date.
Dividends. The holders of shares of Class A Common Stock will be entitled
to receive, when, as and if declared by the Board dividends in an amount per
share equal to the per share amount of any dividend paid on the Common Stock,
payable on the same date of payment as the corresponding dividend on the Common
Stock. If the Company pays any dividend on the Common Stock in shares of Common
Stock or in options, warrants or other securities exercisable for or convertible
into shares of Common Stock or effects a subdivision, combination or
consolidation of the outstanding shares of Common Stock into a greater or lesser
number of shares of Common Stock, then the Company will declare and pay an
equivalent dividend per share on the Class A Common Stock payable in shares of
Class A Common Stock or in options, warrants or other securities exercisable for
or convertible into shares of Class A Common Stock or effect an equivalent
subdivision or combination or consolidation of the outstanding shares of Class A
Common Stock into a greater or lesser number of shares of Class A Common Stock.
Liquidation Rights. After distribution in full of any preferential amount
to be distributed to the holders of preferred stock of the Company, in the event
of any voluntary or involuntary liquidation, dissolution or winding-up of the
Company, the holders of Class A Common Stock are, subject to the right, if any,
of the holders of the preferred stock to participate therein, entitled together
with the holders of the Common Stock to receive all the remaining assets of the
Company available for distribution to stockholders, ratably in proportion to the
number of shares held by such holder.
Voting Rights. Except as may otherwise be required by law, and except in
connection with the election of directors or certain class voting rights as set
forth below, each share of Class A Common Stock will be entitled to one vote on
each matter in respect of which the holders of the Common Stock are entitled to
vote, and the holders of the Class A Common Stock will vote together with the
holders of the Common Stock as one class. So long as any shares of Class A
Common Stock are outstanding, certain fundamental corporate actions by the
Company will require the consent or affirmative vote of the holders of a
majority of the outstanding shares of Class A Common Stock, voting separately as
a class, if such actions have not been approved by the affirmative vote of
two-thirds of the entire Board of Directors of the Company. See "-- Charter
Amendments -- Stockholder Voting Requirements."
Election of Directors. The holders of the Class A Common Stock will have
the right, voting separately as a class, to elect that number of directors of
the Company (the "Class A Directors") equal to the product
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(rounded to the nearest whole number) of (x) the Class A Multiplier (as defined
below) and (y) the total number of directors constituting the authorized number
of directors; provided that the number of directors entitled to be elected by
holders of Class A Common Stock cannot constitute a majority of the total number
of directors constituting the authorized number of directors. The holders of
shares of Common Stock will not be entitled to vote with respect to the election
of the Class A Directors. The "Class A Multiplier" is equal to .45, if the
percentage of the outstanding Common Stock and Class A Common Stock represented
by shares of Class A Common Stock beneficially owned by the holders of the Class
A Common Stock, determined in accordance with the FHI Certificate (the "Class A
Interest"), is greater than or equal to 40% and less than or equal to 45%; .35,
if the Class A Interest is greater than or equal to 35% and less than 40%; .30,
if the Class A Interest is greater than or equal to 30% and less than 35%; .25,
if the Class A Interest is greater than or equal to 25% and less than 30%; .20,
if the Class A Interest is greater than or equal to 20% and less than 25%; .15,
if the Class A Interest is greater than or equal to 15% and less than 20%; and
.10, if the Class A Interest is greater than or equal to 10% and less than 15%.
The directors of the Company other than the Class A Directors (the "Non-Class A
Directors") will be elected by the holders of the class or classes or series of
stock entitled to vote therefor (which, immediately after the consummation of
the Merger, will consist only of the Common Stock), but excluding the Class A
Common Stock.
A person who is not an officer of BNP or any of its affiliates may not be a
nominee for a Class A directorship unless such person is reasonably satisfactory
to the Board of Directors of the Company as evidenced by a resolution duly
adopted by a majority of the directors constituting the authorized number of
directors prior to the time such person is nominated for a Class A directorship.
The Class A Directors will be apportioned by a majority vote of a committee
comprised of the Class A Directors among the three classes of the Board of
Directors to maintain the number of Class A Directors in each class as nearly
equal as practicable.
Conversion of Class A Common Stock. If (i) beneficial ownership of any
share of Class A Common Stock is sold, transferred, assigned, pledged,
encumbered or otherwise disposed of (each such act a "Transfer") to any person
other than an (A) affiliate of the transferring holder, (B) a Qualified
Transferee (as defined below under "-- Transfer Restrictions and Related
Provisions -- Transfer Restrictions") or (C) a Qualified Pledgee (as defined
below under "-- Transfer Restrictions and Related Provisions -- Transfer
Restrictions"), then each such share of Class A Common Stock will automatically
be converted into one share of Common Stock. In addition, if the Class A
Interest decreases to less than 10%, then each outstanding share of Class A
Common Stock will automatically be converted into one share of Common Stock.
Shares of Class A Common Stock may also be converted into Common Stock at the
option of BNP following the commencement of a tender or exchange offer or a
Business Combination Proposal by BNP under the circumstances described under
"-- Standstill and Related Provisions -- Early Release from Standstill
Provisions."
STANDSTILL AND RELATED PROVISIONS
Standstill Period. The Standstill Agreement provides that, subject to
certain limited exceptions described below, during the four year period
commencing on the Closing Date (the "Standstill Period"), neither BNP nor any of
its affiliates, directors or executive officers may acquire beneficial ownership
of additional shares of any class of capital stock or other securities of the
Company which are then entitled to vote generally in the election of directors
("Voting Securities") such that BNP and its affiliates would beneficially own
more than 45% of all Voting Securities outstanding (such percentage or such
other percentage as may be in effect at any time in accordance with the
provisions described below, the "Permitted Ownership Percentage" and such
restrictions, the "Acquisition Restrictions"). The Permitted Ownership
Percentage will decrease as a result of a Transfer by BNP of any capital stock
of the Company, including securities convertible into, or exchangeable for, such
stock, and options, warrants or other rights to acquire such stock ("Equity
Securities") (other than Transfers by BNP to its affiliates or certain Transfers
pursuant to a Public Offering or Rule 144 Sale (each as defined below). If BNP's
and its affiliates' percentage ownership of the Company's Equity Securities
determined in accordance with the Standstill Agreement (the "Ownership
Percentage") decreases by an aggregate of less than 10% from the Ownership
Percentage on the
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same date of the prior year (the "Transfer Measurement Date") as a result of a
Transfer or series of Transfers of any Equity Securities pursuant to a
Commission-registered public offering in which no more than 2% of the
outstanding Common Stock and Class A Common Stock (collectively, the "Company
Common Shares") is Transferred to any person or group (a "Public Offering") or
pursuant to the restrictions of Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act") applicable to sales of securities by affiliates
of an issuer (regardless of whether BNP or its affiliates is deemed at such time
to be an affiliate of the Company) (a "Rule 144 Sale"), BNP will be permitted to
acquire additional Equity Securities in open market purchases or in
privately-negotiated transactions to maintain the Permitted Ownership Percentage
that was in effect on the Transfer Measurement Date. If BNP's Ownership
Percentage decreases as a result of an issuance by the Company of Common Stock
or other Equity Securities (whether in a public offering, in connection with an
acquisition, upon exercise of employee stock options or otherwise), BNP and its
affiliates will be permitted to purchase additional Equity Securities in the
open market or in privately-negotiated transactions so long as, after giving
effect to such purchases, its Ownership Percentage will not exceed the
then-applicable Permitted Ownership Percentage. If BNP's Ownership Percentage
increases to an amount in excess of the then-applicable Permitted Percentage
Ownership as the result of a repurchase or redemption of Equity Securities by
the Company, then BNP will be required to dispose of such excess securities
through either a sale of such securities to the Company or pursuant to a Public
Offering or a Rule 144 Sale.
Notwithstanding the foregoing acquisition restrictions, BNP will be
entitled at any time to acquire additional shares of Common Stock if (i) BNP
makes a capital infusion into the Company (A) in response to the requirements of
applicable U.S. bank regulatory authorities, as advised in writing to the
Company by such authority, or (B) because the Company ceases to be a
"well-capitalized" bank holding company within the meaning of applicable bank
regulatory guidelines and is not restored to the status of a "well-capitalized"
bank holding company within twelve months after the date on which it ceased to
be a "well-capitalized" bank holding company, or (ii) the Company becomes
subject to any regulatory capital directive or becomes an institution in
"troubled" condition under applicable bank regulatory definitions. If BNP wishes
to acquire additional shares of Common Stock following any such acquisition of
shares, such acquisition may only be effected through a Business Combination
Proposal (as defined under "-- Early Release from Standstill Provisions") which
provides for a price per share that is determined by an independent investment
banking firm to be fair from a financial point of view to the holders of the
Common Stock.
Early Release from Standstill Provisions. The Acquisition Restrictions
will not apply if:
(i) a third party who is not an affiliate of BNP or any of its
affiliates (a "Third Party") commences a bona fide tender or exchange offer
for more than 50% of the outstanding Company Common Shares and the Board
does not both (x) recommend against the tender or exchange offer within ten
business days after the commencement thereof (which, in the case of an
exchange offer, shall be deemed to be the effective date of the
registration statement relating to the securities offered in such exchange
offer) or such longer period as shall then be permitted under the
Commission's rules and (y) adopt a stockholders' rights plan (if the
Company does not then have one in effect) which does not contain an
exception from the definition of "Acquiring Person", "Triggering Event" or
similar terms for such Third Party or its affiliates (it being understood
that, notwithstanding the foregoing, the Board will not be required to
adopt such a plan if such plan is opposed by any of the Class A Directors),
(ii) a Third Party acquires beneficial ownership of 25% of the
outstanding Company Common Shares (other than as a result of purchases of
such securities from the Company) and at such time the Ownership Percentage
is equal to at least 25%, or
(iii) a Third Party acquires beneficial ownership of 20% of the
outstanding Company Common Shares (other than as a result of purchases of
such securities from the Company) and publicly discloses a possible
intention to seek control of the Company or to engage in a transaction that
would result in a "Change of Control" (as defined in the Standstill
Agreement) of the Company and at such time, the Ownership Percentage is
equal to at least 20%;
provided that if the Acquisition Restrictions terminate as a result of any of
(i), (ii) or (iii) above, BNP may only acquire shares of Company Common Stock
pursuant to (x) a tender or exchange offer for any and all
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outstanding shares of Company Common Stock or (y) a Business Combination
Proposal (as defined below) for the Company so long as (A) such proposal is made
in writing delivered only to the Executive Committee of the Board of Directors
(the "Executive Committee") and (B) BNP and its representatives keep
confidential and refrain from disclosing to any other person the fact that they
have made any such proposal or any of the terms thereof. If (x) the foregoing
tender or exchange offer referred to in clause (i) has been terminated, (y) the
Third Party referred to in clauses (ii) or (iii) has reduced its beneficial
ownership below 25% or 20%, respectively, of the outstanding Company Common
Shares or (z) the Third Party referred to in clause (iii) has publicly altered
or modified its prior public disclosure to provide that it intends to hold the
shares acquired for investment purposes and not with the intention to seek
control of the Company or to engage in a transaction that would result in a
Change of Control of the Company, in each case without BNP having made a bona
fide tender or exchange offer or a bona fide Business Combination Proposal, then
the Acquisition Restrictions will be reinstated at the Permitted Ownership
Percentage in effect prior to the termination of the Acquisition Restrictions.
"Business Combination Proposal" means any proposal with respect to a merger or
consolidation in which the Company is a constituent corporation or a sale,
lease, exchange or mortgage of all or substantially all of the assets of the
Company and its subsidiaries taken as a whole and pursuant to any of which
transactions all of the Company Common Shares (other than those, if any, which
are beneficially owned by BNP and its affiliates) would be exchanged for cash,
securities or other property and, in certain circumstances, a tender or exchange
offer for any and all of the outstanding Company Common Shares. Any Business
Combination Proposal submitted by BNP pursuant to the Standstill Agreement is
required to be a proposal for the acquisition of not less than 100% of the
issued and outstanding Company Common Shares (other than those which are
beneficially owned by BNP and its affiliates).
BNP may exchange, at its option, any shares of Common Stock acquired by it
pursuant to the provisions described above for shares of Class A Common Stock.
Post-Standstill Provisions. The Standstill Agreement provides that,
following the expiration of the Standstill Period and until either (i) the
Ownership Percentage is less than 10% or (ii) BNP has consummated a Business
Combination Proposal pursuant to the procedures described in the following
paragraph or any other tender or exchange offer in which BNP and its affiliates
have acquired at least 90% of the outstanding Company Common Shares not
beneficially owned by BNP and its affiliates (the "Post-Standstill Period"),
neither BNP nor any of its affiliates may (except as provided below) (i) take
any action resulting in a majority of the Board being BNP nominees or otherwise
not constituting Independent Directors (as defined below), (ii) increase its
beneficial ownership of Equity Securities so that its Ownership Percentage
becomes greater than its Permitted Ownership Percentage on the date the
Standstill Period terminated, or (iii) take any other action that could result
in an increase in the Ownership Percentage or other material transactions
between the Company and BNP or its affiliates.
Notwithstanding the foregoing restrictions, during the Post-Standstill
Period, BNP may submit a Business Combination Proposal (including a tender or
exchange offer for all the outstanding Company Common Shares) to the Executive
Committee on a confidential basis, whereupon the Executive Committee must
promptly retain an independent investment banking firm and outside legal counsel
(whose fees will be borne by the Company) to assist the Executive Committee in
its review of the proposal. If the independent investment banking firm is unable
to conclude within a reasonable period of time (not exceeding 60 days) following
submission of such Business Combination Proposal to the Executive Committee that
such Business Combination Proposal is fair from a financial point of view to the
stockholders of the Company (other than BNP and its affiliates), or concludes
that it is inadequate, then BNP will be required to withdraw such Business
Combination Proposal and may not submit another Business Combination Proposal to
the Company pursuant to this provision of the Standstill Agreement for a period
of twelve months from the date on which such independent investment banking firm
reached such conclusion. See "-- Exceptions to Standstill Provisions." If the
independent investment banking firm concludes that the Business Combination
Proposal is fair and adequate, then the Executive Committee will cause the
proposal to be submitted to the full Board of Directors for consideration. If a
majority of the Independent Directors (as hereinafter defined) on the Board
conclude, after considering the advice of such financial and legal advisors as
such Independent Directors consider relevant and material in the circumstances,
that the transaction contemplated by such Business
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Combination Proposal is not in the best interests of all of the Company's
stockholders at that time, then BNP will be required to withdraw such Business
Combination Proposal and may not submit another Business Combination Proposal to
the Company pursuant to this provision for a period of twelve months from the
date on which the Independent Directors made such conclusion. See "-- Exceptions
to Standstill Provisions." Approval of such Business Combination Proposal by the
Board will require the affirmative vote of a majority of the Independent
Directors then on the Board of Directors (in addition to any other vote required
by applicable law) and may be subject to any "market check" procedures for a
reasonable period of time (not exceeding 90 days) (the "Market Check Period") as
the Board (including a majority of the Independent Directors of the Board of
Directors) may determine to be appropriate in the circumstances. If, within the
Market Check Period, the Company receives from a Third Party a superior proposal
(a "Superior Proposal") to the Business Combination Proposal submitted by BNP
(as determined in good faith by the Board of Directors (including a majority
vote of the Independent Directors)), the Company will be required to offer BNP a
reasonable period after delivery to BNP of notice of such Superior Proposal (but
no more than five business days) to revise its Business Combination Proposal so
that the terms thereof, as so revised, are superior to the Superior Proposal (as
determined in good faith by the Board of Directors (including a majority vote of
the Independent Directors)). If BNP does not submit, within such five business
day period, a revised proposal which is determined in accordance with the
preceding sentence to be superior to the Superior Proposal, the Board of
Directors may cause the Company to enter into an agreement for such Superior
Proposal and recommend acceptance thereof to the stockholders of the Company. In
such event, BNP has agreed that it will, and will cause each of its affiliates
to, in connection with any vote or action by written consent of the stockholders
of the Company with respect to such agreement, vote or cause to be voted (or
execute or cause to be executed a written consent in respect of) all Voting
Securities, if any, beneficially owned by BNP and its affiliates in favor of the
Superior Proposal (or, if such Superior Proposal is a tender or exchange offer,
tender and cause each of its affiliates to tender, its Equity Securities) unless
the Board of Directors withdraws its recommendation of such Superior Proposal
prior to the date on which such vote is held or such action by written consent
becomes effective or the consummation of such tender or exchange offer occurs,
as the case may be. If the Company does not receive a Superior Proposal during
the Market Check Period, then the Company and BNP may enter into a definitive
agreement (containing customary terms and conditions, including customary
"fiduciary out" provisions) to consummate BNP's Business Combination Proposal;
provided that the Board has received a reaffirmation as of such date of the
fairness opinion described above in form and substance reasonably and in good
faith satisfactory to a majority of the Independent Directors. If the
independent investment banking firm is unable to reaffirm such fairness opinion,
the Company will give notice thereof to BNP which will have 15 days to improve
its proposal so that such opinion may be reaffirmed and if, after submission of
an improved proposal, if any, such opinion is still not reaffirmed, then the
proposed transaction will terminate and BNP may not submit another such proposal
under this provision for twelve months following the date such proposal is first
submitted by the Executive Committee to the Board for consideration. The
Standstill Agreement provides that following the execution of a definitive
agreement between BNP and the Company, BNP is not required to vote its shares in
favor of any alternative proposal or tender its shares in any alternative tender
or exchange offer which is thereafter entered into by the Company or made by any
Third Party. "Independent Director" means any Non-Class A Director who is not an
affiliate or a past or present officer, director or employee of, and was not
nominated by, BNP or any of its affiliates, and is not associated with an entity
that performs substantial services for any of the foregoing.
Other Standstill Provisions. In addition to the limitations on
acquisitions of securities, in the Standstill Agreement, BNP has agreed that
during the Standstill Period, except as otherwise permitted under the Standstill
Agreement as described herein, neither it nor any of its affiliates will:
(i) initiate, propose or otherwise solicit securityholders of the
Company for the approval of one or more securityholder proposals or induce
or attempt to induce any other person to initiate any securityholder
proposal, or seek election to or seek to place a representative or other
affiliate or nominee on the Board (other than a nominee for a Class A
Directorship (a "Class A Nominee")) or seek removal of any member of the
Board (other than a Class A Director);
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(ii) (A) propose or seek to effect a merger, consolidation,
recapitalization, reorganization, sale, lease, exchange or other
disposition of substantially all assets or other business combination
involving, or a tender or exchange offer for securities of, the Company or
any of its subsidiaries or any material portion of its or such subsidiary's
business or assets or any other type of transaction that would otherwise
result in a Change of Control of the Company or in any increase in the
Ownership Percentage beyond the then existing Ownership Percentage (any
such action described in this clause (A), a "Company Transaction
Proposal"), (B) seek to exercise any control or influence over the
management of the Company or the Board or any of the businesses, operations
or policies of the Company (other than solely by virtue of representation
on the Board and participation in meetings and other actions of the Board
and any duly constituted committee thereof or by informal meetings or
consultations with members of the Board or management), (C) advise, assist
or encourage or finance (or assist or arrange financing to or for) any
other person in connection with any of the matters restricted by, or to
otherwise seek to circumvent the limitations of, the Standstill Agreement,
or (D) present to the Company, its stockholders or any third party any
proposal constituting or that can reasonably be expected to result in a
Company Transaction Proposal or in an increase in the Ownership Percentage;
(iii) publicly suggest or announce its willingness or desire to engage
in a transaction or group of transactions or have another person engage in
a transaction or group of transactions that constitute or could reasonably
be expected to result in a Company Transaction Proposal or in an increase
in the Ownership Percentage or take any action that might require the
Company to make a public announcement regarding any such Company
Transaction Proposal;
(iv) initiate, request, induce, encourage or attempt to induce or give
encouragement to any other person to initiate, or otherwise provide
assistance to any person who has made or is contemplating making, or enter
into discussions or negotiations with respect to, any proposal constituting
or that can reasonably be expected to result in a Company Transaction
Proposal or in an increase in the Ownership Percentage;
(v) solicit proxies (or written consents) or assist or participate in
any other way, directly or indirectly, in any solicitation of proxies (or
written consents), or otherwise become a "participant" in a "solicitation,"
or assist any "participant" in a "solicitation" (as such terms are defined
in Rule 14a-1 of Regulation 14A and Instruction 3 of Item 4 of Schedule
14A, respectively, under the Securities Exchange Act of 1934 (the "Exchange
Act")) in opposition to the recommendation or proposal of the Board, or
recommend or request or induce or attempt to induce any other person to
take any such actions, or seek to advise, encourage or influence any other
person with respect to the voting of (or the execution of a written consent
in respect of) Voting Securities or, except as otherwise expressly
required, permitted or contemplated by the Standstill Agreement or the FHI
Certificate, as amended, execute any written consent in lieu of a meeting
of the holders of Voting Securities or grant a proxy with respect to the
voting of Voting Securities to any person other than an officer or agent of
BNP or the Company;
(vi) form, join in or in any other way (including by deposit of Equity
Securities) participate in a partnership, pooling agreement, syndicate,
voting trust or other "group" (as defined in the Exchange Act) with respect
to Equity Securities, or enter into any agreement or arrangement or
otherwise act in concert with any other person, for the purpose of
acquiring, holding, voting or disposing of Equity Securities;
(vii) take any other actions, alone or in concert with any other
person, to seek to effect a Change of Control of the Company or an increase
in the Ownership Percentage or otherwise seek to circumvent any of the
limitations set forth in (i)-(vi) above; or
(viii) request, or induce or encourage any other person to request,
that the Company amend or waive any of the provisions of the Standstill
Agreement.
The obligations of BNP and its affiliates described in the foregoing paragraph
will terminate upon the termination of the Acquisition Restrictions as described
under "-- Early Release from Standstill Provisions" in order to permit BNP to
make the Business Combination Proposal or the tender or exchange offer described
therein.
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During the Post-Standstill Period, BNP may contact or respond to contacts
from other stockholders of the Company regarding the business and affairs of the
Company on a confidential basis, but, for the first four years of the
Post-Standstill Period, BNP may not, and may not permit any of its affiliates
to, either directly or through others (i) solicit, finance or become a
participant in a solicitation of proxies or written consents, (A) for the
election of Non-Class A Directors of the Company, (B) for any stockholder
proposal opposed by the Board or (C) against any proposal submitted to the
stockholders and recommended by the Board, (ii) make or submit any proposal to
the Company's stockholders opposed by the Board, (iii) make any public statement
as to any intention or plan to take actions not consistent with the
then-applicable terms of the Standstill Agreement, (iv) publicly announce
(except as otherwise legally required) any intention to dispose of some or all
of its Equity Securities or acquire additional Equity Securities, (v) form or
join a group with the objective or effect of effecting a change of control of
the Company, (vi) take any action inconsistent with the procedures described in
"-- Post-Standstill Provisions" or (vii) publicly request or encourage others to
request that the Company waive any of the then-applicable provisions or
limitations contained in the Standstill Agreement.
Exceptions to Standstill Provisions. Notwithstanding the restrictions
described above, under the Standstill Agreement, BNP may at any time submit a
Business Combination Proposal for the Company so long as (i) such Business
Combination Proposal is made in writing delivered only to the Executive
Committee in a manner which does not require public disclosure thereof by the
Company and (ii) BNP and its representatives keep confidential and refrain from
disclosing to any other person the fact that they have made such a Business
Combination Proposal or any of the terms thereof. The Standstill Agreement
provides that the Executive Committee will be under no obligation to BNP or its
affiliates to accept such Business Combination Proposal or to cause such
Business Combination Proposal to be submitted to the full Board of Directors for
consideration.
In addition, (i) if part of the agenda of any meeting of the Board of
Directors or any committee thereof includes the review any proposal submitted by
a Third Party with respect to a Company Transaction Proposal which would result
in a change of control of the Company (other than any proposal included as a
result of action taken by BNP described under "-- Other Governance
Provisions -- Agenda"), or (ii) if the Board of Directors or any committee
thereof determines to solicit proposals for such a transaction from Third
Parties, the Company will be required to give prompt written notice of such
determination to BNP and provide BNP with a reasonable opportunity to, in the
case of clause (i), participate as a potential bidder prior to accepting such
Third Party proposal or, in the case of clause (ii), participate in the
solicitation process as a potential bidder.
TRANSFER RESTRICTIONS AND RELATED PROVISIONS
Transfer Restrictions. Under the Standstill Agreement, BNP has agreed
that, for a period of eighteen months after the Closing Date, neither BNP nor
its affiliates will Transfer any Equity Securities without the prior written
consent of the Company except Transfers to its affiliates or Transfers required
by the provisions described under "-- Standstill and Related
Provisions -- Standstill Period." After such eighteen month period and prior to
the second anniversary of the Closing Date, neither BNP nor its affiliates will
Transfer any Equity Securities except (i) to an affiliate or (ii) pursuant to a
Rule 144 Sale.
Following the second anniversary of the Closing Date, the Standstill
Agreement provides that neither BNP nor its affiliates will Transfer any Equity
Securities except for Transfers: (i) pursuant to a Public Offering, (ii)
pursuant to a Rule 144 Sale, (iii) to an affiliate of BNP which agrees in
writing with the Company to be bound by the Standstill Agreement as fully as if
it or they were an initial signatory thereto, (iv) pursuant to a tender or
exchange offer by a Third Party that is not rejected by the Board within the
time period prescribed by the Exchange Act and the rules and regulations
promulgated by the Commission thereunder, (v) of no more than 4.9% of the
outstanding Company Common Shares to any one institutional investor (a
"Privately-Negotiated Sale") which (A) purchases such shares in the normal
course of its investment business, for investment purposes only, and with no
intention of influencing control of the Company and which purchases such shares
pursuant to an exemption from the registration requirements of the Securities
Act, and (B) provides appropriate certification to the Company as to the
foregoing matters;
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provided that neither BNP nor any of its affiliates may exercise its right to
Transfer shares as described in this clause (v) on more than one occasion in any
12-month period, (vi) of any number of shares (a "Block Sale") to any one or
more institutional investors (but not more than 20% of the then-outstanding
Company Common Shares to any one bank holding company, as such term is defined
under applicable banking regulations, or foreign bank or foreign banking
organization, as such terms are defined under applicable banking regulations)
who are reasonably acceptable to the Board (such approval not to be unreasonably
withheld or delayed) and who agree in writing with the Company to be bound by
the then-applicable provisions of the Standstill Agreement as fully as if it or
they were an initial signatory thereto (a "Qualified Transferee"), or (vii)
pursuant to a bona fide pledge to secure money borrowed by BNP or any affiliate,
entered into in good faith and not for purposes of avoiding the restrictions set
forth in the Standstill Agreement; provided (x) that such pledge is made to a
person who is a Qualified Transferee pursuant to clause (vi) above (a "Qualified
Pledgee"), (y) the number of Equity Securities pledged complies with the
limitations as to amount set forth in clause (vi) above and (z) at the time such
pledge is made, such Qualified Pledgee agrees in writing to be bound by the
then-applicable provisions of the Standstill Agreement as fully as if it was an
initial signatory thereto. Any Transfer pursuant to clauses (i), (v) or (vi) of
the preceding sentence will be subject to the Company's right of first refusal
described below.
Right of First Refusal. The Standstill Agreement provides that, prior to
any Transfer that is subject to the Company's right of first refusal described
above, BNP and/or its affiliates proposing to effect such Transfer (the
"Transferring Party") is required to deliver written notice (the "Transfer
Notice") to the Company specifying (i) the person to whom the Transferring Party
proposes to make such Transfer (in the case of a Privately-Negotiated Sale or a
Block Sale) and the proposed manner of Transfer, (ii) the number or amount and
description of the Equity Securities to be Transferred, (iii) except in the case
of a Public Offering, the price per share or other security determined in the
manner set forth in the Standstill Agreement (the "Offer Price"), and (iv) all
other material financial and economic terms and conditions of the proposed
Transfer, including a description of any non-cash consideration sufficiently
detailed to permit valuation thereof. The Company may elect to purchase all (but
not less than all) the Equity Securities that are the subject of the Transfer
Notice for cash at the Offer Price and upon the other financial and economic
terms and conditions specified in the Transfer Notice. If the Company elects to
purchase the offered Equity Securities, it must give notice to the Transferring
Party within 15 business days of its receipt of the Transfer Notice of its
election, which notice must include the date set for the closing of such
purchase, which date may not be later than five business days following the
delivery of such election notice, or, if later, five business days after receipt
of all required regulatory approvals. The Company may assign its rights to
purchase the Equity Securities to another person, in certain circumstances, as
set forth in the Standstill Agreement. If the Company does not respond to the
Transfer Notice within the required response time period or elects not to
purchase the offered Equity Securities, the Transferring Party may complete the
proposed Transfer (to the same proposed transferee, in the case of a
Privately-Negotiated Sale or a Block Sale) on terms no less favorable to the
Transferring Party than those set forth in the Transfer Notice and such Transfer
must be completed within the time periods specified in the Standstill Agreement.
Registration Rights. Under the Merger Agreement, the Company and BNP have
agreed to enter into a registration rights agreement (the "Registration Rights
Agreement") at or prior to the Closing Date containing customary terms and
conditions and which will provide, among other things, that subject to the
transfer restrictions described above under "-- Transfer Restrictions," BNP will
have the right to require the Company to use its best efforts to register under
the Securities Act Registrable Securities (as defined below) for resale in up to
five demand registrations and an unlimited number of incidental registrations,
provided that the aggregate number of demand and incidental registration
requests by BNP may not exceed three in any 12-month period and no more than two
demand registrations may be requested in any 12-month period. For purposes of
the Registration Rights Agreement, "Registrable Securities" means: (x) the
shares of Common Stock issuable upon the transfer of the shares of Class A
Common Stock that may be owned from time to time by BNP and (y) any securities
which have been or may be issued or distributed in respect of Class A Common
Stock issued to BNP in the Merger or any other shares covered by clause (x) by
way of stock dividend, stock split or other distribution, recapitalization, or
reclassification, exchange offer, merger,
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consolidation or similar transaction. The Company will pay all registration
expenses in connection with each registration of Registrable Securities pursuant
to the Registration Rights Agreement.
BNP's registration rights will be subject to the following additional
limitations: (i) the Company may reduce the number of shares to be included in
any underwritten offering if, in the judgment of the managing underwriter for
such offering, the number of shares to be offered exceeds the number of shares
that can be offered without jeopardizing the success of the offering (provided
that any such reduction must be pro rata); (ii) the Company may defer filing a
registration statement (or suspend sales pursuant to an effective registration
statement) for up to 60 consecutive days (but not more than 120 days in any
twelve-month period) if it would require the Company to disclose confidential
information which, in the judgment of the Board, would be harmful to disclose,
or if such registration and distribution would adversely affect a share
repurchase program of the Company; and (iii) BNP will agree to suspend offers
and sales of the Common Stock following the commencement of a
Commission-registered offering of Common Stock by the Company for a period of
time not to exceed 120 days following the commencement of the offering. The
Company will be required to suspend its own sales of Common Stock for up to 45
days when BNP is selling shares pursuant to the demand registration rights
provisions.
OTHER GOVERNANCE PROVISIONS
Voting of Shares by BNP. The Standstill Agreement provides that BNP and
its affiliates may vote any Voting Securities beneficially owned by them as they
may elect in their sole discretion on all matters other than the election of
Non-Class A Directors, in which case, as long the Acquisition Restrictions have
not terminated as described under "-- Standstill and Related Provisions -- Early
Release from Standstill Provisions," BNP and its affiliates must vote any Voting
Securities beneficially owned by them and entitled to vote in the election of
Non-Class A Directors in the same proportion as the stockholders of the Company
other than BNP and its affiliates vote.
Under Delaware law, approval of most actions by stockholders requires a
majority vote of all outstanding shares. Because of the size of BNP's interest
in the Company following the Merger, BNP will have the ability to significantly
influence the outcome of most matters submitted to a stockholder vote following
the Merger. BNP's interests with respect to any matter which is subject to a
stockholder vote may diverge from or conflict with those of the Company and its
stockholders (other than BNP). In addition, although a merger of the Company in
the future will not generally require separate approval of the holders of the
Class A Common Stock voting as a separate class, it will likely be impracticable
(as long as BNP retains a 45% or similar ownership stake in the Company) for a
third party to acquire the combined company through a merger or similar business
combination without BNP's approval.
Committees. The Standstill Agreement requires the Company to cause each
committee of the Board of Directors to, subject to requirements under the
Exchange Act or applicable securities exchanges or markets, include at the
request of BNP a number of Class A Directors proportionate to the Ownership
Percentage for so long as the Ownership Percentage is at least 20%, except that
BNP will not be entitled to designate a majority of any committee.
Agenda. Pursuant to the terms of the Standstill Agreement, if BNP wishes
to include a matter on the agenda for any meeting of the Board of Directors, BNP
must communicate such matter to the Chief Operating Officer of the Company who
may communicate such matter to the Chief Executive Officer of the Company for
consideration. The Chief Executive Officer will be required to place such
matters on the agenda as soon as reasonably practicable, in his judgment,
subject to the terms of the Standstill Agreement.
CHARTER AMENDMENTS
In the Merger, the FHI Certificate will be amended and, as amended, will be
the Certificate of Incorporation of the Surviving Corporation. The following is
a summary of certain provisions of the amendments to the FHI Certificate that
will be effected in the Merger. A copy of the FHI Certificate, as proposed to be
amended, is set forth as Exhibit A to the Merger Agreement attached hereto as
Appendix I
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and is incorporated herein by reference. Stockholders are urged to read the
attached FHI Certificate in its entirety.
Name Change. The name of the Company will change to "BancWest
Corporation".
Increase in Number of Authorized Shares; Change in Par Value. The FHI
Certificate currently authorizes the Company to issue 150,000,000 shares of
capital stock, having a par value of $5.00 per share, 100,000,000 of which
shares are designated as Common Stock and 50,000,000 of which shares are
designated as preferred stock. Following the Merger, the Surviving Corporation
will be authorized to issue 325,000,000 shares of capital stock, having a par
value of $1.00 per share, which will be divided into three classes: 200,000,000
shares will be designated as Common Stock, 75,000,000 shares will be designated
as Class A Common Stock and 50,000,000 shares will be designated as preferred
stock.
Of the 100 million shares of Common Stock currently authorized, at the
Record Date 31,139,428 shares of Common Stock were outstanding. Each share of
Class A Common Stock is convertible into one share of Common Stock in certain
circumstances (see "-- Terms of the Class A Common Stock -- Conversion of Class
A Common Stock"). Therefore, the Company must at all times keep reserved for
issuance one share of Common Stock for issuance upon conversion of the Class A
Common Stock. Assuming the issuance of approximately 25.9 million shares of
Class A Common Stock to BNP in the Merger, the number of shares of the Company's
authorized but unissued shares of Common Stock available for issuance for other
purposes will be significantly reduced following the Closing.
The Board believes that the continued availability of shares of Common
Stock is advisable not only in connection with the Merger but to provide the
Company with the flexibility to take advantage of opportunities to issue Common
Stock to obtain capital, as consideration for possible acquisitions or for other
corporate purposes. See "THE MERGER -- Recommendation of the Board; Reasons for
the Merger." The Company currently has no plans, understandings, agreements or
arrangements concerning the issuance of additional shares of Common Stock,
except for the shares of Class A Common Stock to be issued in the Merger, the
shares of restricted Common Stock to be issued in exchange for the SARs held by
BancWest employees as described herein and the grants of stock options or
restricted shares of Common Stock pursuant to existing employee benefit plans to
newly-hired officers or employees consistent with past practice. If any plans,
understandings, arrangements or agreements are made concerning the issuance of
any such shares, holders of the then outstanding shares of the Company's capital
stock may or may not be given the opportunity to vote thereon, depending upon
the nature of any such transaction, the law applicable thereto, the policy of
any stock exchange on which the Common Stock may then be listed and the judgment
of the Board of Directors regarding the submission thereof to the Company's
stockholders. Under the FHI Certificate as so amended, after the Merger
stockholders of the Surviving Corporation will not have any preemptive rights to
subscribe for such shares. See "-- Elimination of Preemptive Rights" below.
Creation of Class A Common Stock. The FHI Certificate will be amended to
establish the terms of the Class A Common Stock which include the right to elect
a number of Class A Directors to the Board and class voting rights under certain
circumstances (see "-- Terms of the Class A Common Stock"). The terms of the
Common Stock will also be supplemented in order to set forth the rights of the
holders of the Common Stock in relation of those of the holders of the Class A
Common Stock. Specifically, the FHI Certificate will be amended to provide that
the payment of dividends to holders of the Common Stock will be subject to the
right of the holders of the Class A Common Stock to have the Company declare a
dividend on the Class A Common Stock in an amount per share equal to the per
share amount of the dividend paid on the Common Stock and that in the event of
the voluntary or involuntary liquidation, dissolution or winding-up of the
Company, the holders of the Class A Common Stock and Common Stock will
participate ratably in proportion to the number of shares held by each such
holder in any distribution of assets of the Company to such stockholders. See
"-- Terms of the Class A Common Stock". In addition, a new provision will be
added to the FHI Certificate which provides that in the event the Company
effects a subdivision or combination of shares of Class A Common Stock, then in
each such case the Company will effect an equivalent subdivision or combination
or consolidation of the outstanding shares of Common Stock into a greater or
lesser number of shares of Common Stock.
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Stockholder Voting Requirements. In the Merger, the FHI Certificate will
be amended to provide that, so long as any shares of Class A Common Stock are
outstanding, the affirmative vote of the holders of a majority of the shares of
Common Stock and Class A Common Stock at the time outstanding, voting together
as a class, will be required for each of the following actions (except in
respect of any actions described in clauses (i), (ii), (iii) or (ix), in which
case the holders of the Class A Common Stock will vote separately as a class);
unless any such action has been approved by the affirmative vote of two-thirds
of the authorized number of directors (in which case, only such vote, if any, of
the stockholders of the Company as is required under applicable law or otherwise
under the FHI Certificate or By-Laws will be required): (i) the amendment of the
FHI Certificate or By-Laws so as to materially and adversely affect the rights
of the holders of Class A Common Stock; (ii) (A) the issuance of any series or
class of capital stock having either (x) more than one vote per share or (y) a
class vote on any matter, except to the extent such class vote is required by
Delaware law or to the extent that holders of any series of preferred stock may
have the right, voting separately as a class, to elect a number of directors of
the Company upon the occurrence of a default in payment of dividends or
redemption price or (B) the adoption of any stockholder rights plan; (iii) the
issuance of any series of preferred stock which at the time of such issuance
would not constitute "non-voting shares" as defined in 12 C.F.R. sec.
225.2(q)(2) or any successor provision; (iv) the issuance of Voting Securities
to any person or entity (including the subsidiaries of the Company and, for this
purpose, irrespective of whether such subsidiaries are entitled to vote such
securities) representing voting power in excess of (i) 20% of the aggregate
voting power of the outstanding Voting Securities as of the date of such
issuance or (ii) 35% of the aggregate voting power of the average number of
Voting Securities outstanding over the previous twelve months (calculated based
on the number of Voting Securities issued and outstanding on the last day of
each of the twelve calendar months immediately preceding the month in which such
issuance occurs); provided that for purposes of this clause (iv), (A) the
issuance of options, warrants or other securities exercisable for or convertible
into Voting Securities (other than pursuant to dividends or other distributions
paid or distributed ratably to all stockholders of the Company) will be deemed
to be the issuance of Voting Securities for or into which such securities are
exercisable or convertible and if the Company enters into an agreement to issue
Voting Securities such Voting Securities will be deemed to be issued on the date
that the Company executes an agreement to issue such Voting Securities and (B)
such percentages will be calculated on a pro forma basis after giving effect to
the issuance or issuances in question; (v) any merger, consolidation or other
business combination in which the Company is a constituent company if the
Company is not the surviving or resulting entity in such transaction (or if the
Company is the surviving or resulting entity and such transaction results in a
change of control of the Company) or the sale, exchange, lease or mortgage of
all or substantially all of the Company's assets in one transaction or a series
of related transactions; (vi) any acquisition, directly or indirectly, by the
Company or any of its subsidiaries (except from the Company or a subsidiary of
the Company) of any assets or businesses, in one transaction or a series of
related transactions in any twelve-month period (whether by merger, tender or
exchange offer, asset purchase or otherwise), in which the consideration paid by
the Company (A) if in shares of Common Stock, will exceed 20% of the aggregate
voting power of the outstanding Voting Securities as of the date that the
Company or any such subsidiary enters into a definitive agreement to effect such
transaction or, in the case of a series of related transactions, as of the date
that the Company or any such subsidiary enters into a definitive agreement to
effect the last of such related transactions, or (B) if in cash, property or
other securities of the Company, has a fair market value (determined in
accordance with the FHI Certificate, as amended) at the time of the execution by
the Company or such subsidiary of a definitive agreement to effect such
transaction or, in the case of a series of related transactions, at the time of
the execution by the Company or such subsidiary of a definitive agreement to
effect the last of such related transactions, which will exceed one-fourth of
the market capitalization (determined in accordance with the FHI Certificate, as
amended) of the Company at such time; (vii) any disposition, directly or
indirectly, by the Company or any of its subsidiaries (except to the Company or
a subsidiary of the Company) of any assets or businesses, in one transaction or
a series of related transactions in any twelve-month period (whether by merger,
tender or exchange offer, asset purchase or otherwise) in which the book value
of the assets disposed of (as shown on the most recently available financial
statements of the Company) exceeds one-sixth of the total consolidated assets of
the Company (as shown on the Company's balance sheet contained in its most
recently filed annual or quarterly report) at the time of the execution by the
Company or such subsidiary of a definitive agreement to effect such disposition
or, in the case of a series of related transactions, at the time of the
execution by the Company or such subsidiary of a definitive agreement to effect
the last of such dispositions; (viii) the voluntary liquidation or dissolution
of the Company; or (ix) any merger, consolidation, recapitalization,
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reorganization, sale, acquisition, other business combination or other
transaction to which the Company is a party involving the issuance of Voting
Securities of the Company that does not result in a change of control of the
Company if, as a result of such transaction, any person (other than a holder of
shares of Class A Common Stock) would become the beneficial owner of 25% or more
of the total voting power of all Voting Securities of the Company outstanding
after such transaction or any three persons (other than holders of shares of
Class A Common Stock) would become the beneficial owners of 45% or more of the
total voting power of all Voting Securities of the corporation outstanding after
such transaction.
Number of Directors. The FHI Certificate will be amended in the Merger to
increase the minimum number of directors from three to seven and provide that
the Board (rather than the stockholders, as currently provided) shall set the
number of directors within the range set forth therein.
Elimination of Preemptive Rights. The FHI Certificate currently provides
that, upon any increase in the authorized capital stock of the Company, except
for stock issuances in connection with mergers or acquisitions or as otherwise
provided by resolution of the stockholders of the Company, the Board must first
offer the additional authorized stock pro rata to all current stockholders of
record. In the Merger, the FHI Certificate will be amended to eliminate the
preemptive rights provisions of the FHI Certificate. Complying with the
preemptive rights provision generally involves considerable delay and
substantial expense to the Company since the Company is required in most
situations either to complete a rights offering, or to obtain stockholder
consents to a waiver of the preemptive rights, before issuing any shares of
capital stock. Among other things, this may limit the Company's flexibility to
take advantage of opportunities to raise capital for business growth or to
finance acquisitions that may become available in the rapidly changing financial
markets. The purpose of preemptive rights, which originated when companies were
small and liquidity was limited, was to preserve the stockholders' proportionate
interests in a corporation. Today, however, there exists a broad base of
corporate ownership and a ready market for stock of corporations. Stockholders
wishing to maintain or increase their holdings in the Company can do so through
market purchases or through the Company's dividend reinvestment plan. The
Company believes that it is now one of the few remaining publicly-traded
companies in the United States to have a preemptive rights provision in its
charter. The elimination of preemptive rights from the FHI Certificate will also
give the Company the option to use unissued stock, rather than open market
purchases, for its benefit plans and its dividend reinvestment plan, thus
providing another vehicle for raising capital necessary to expand the Company's
business.
Classified Board. The FHI Certificate will be amended in the Merger to
include in the Company's charter (where they are typically located) certain
provisions relating to the classified Board that are currently in the Company's
By-Laws.
Nominating Committee. In the Merger, the FHI Certificate will be amended
to establish a nominating committee of Class A and Non-Class A Directors to
nominate successors to the chief executive officer and chief operating officer
of the Company. See "DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE
MERGER -- Management Following the Merger."
Supermajority Vote to Amend By-Laws. The FHI Certificate will be amended
in the Merger to require a two-thirds vote of the authorized number of directors
in order to alter or amend certain provisions of the By-Laws (principally those
relating to the governance arrangements with BNP).
BY-LAW AMENDMENTS
In the Merger, certain amendments will be made to the By-Laws, including:
(i) moving the provisions regarding a classified board from the By-Laws to the
certificate of incorporation (where they typically are located); (ii)
eliminating the provisions regarding removal of directors by stockholders
without cause or by other directors; (iii) reflecting the establishment of the
Class A Common Stock and the Class A Directors (see "-- Terms of the Class A
Common Stock"); (iv) requiring that directors be notified at least five days in
advance of all Board of Directors meetings or meetings of committees thereof,
unless such requirement is waived by a majority of each of the Class A Directors
and the Non-Class A Directors (in which case 24 hours' notice will be required);
(v) requiring that stockholder nominations for Non-Class A Directors at the
Company's annual meetings of stockholders or special meetings called for such
purpose and other proposals by Company
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stockholders for consideration at the Company's annual meetings of stockholders
be received between 70 and 90 days in advance of each such meeting (which
advance notice will afford management time to consider the qualifications of
proposed non-management nominees or the merits of any such proposals and, to the
extent deemed necessary or desirable by management, to inform stockholders about
such qualifications and merits in the Company's proxy statement for such
meeting); (vi) granting to the Board of Directors or to the Chairman of the
Board full discretion to set the date of each annual meeting of stockholders;
(vii) increasing the vote required to call a special meeting of stockholders
from 25% to not less than a majority of the voting power of the outstanding
shares of the Company's capital stock entitled to vote at such meeting on such
matter and providing that no business may be brought before such meeting except
as set forth in the notice of such meeting; (viii) providing that the Chairman
of the Board may adjourn without a stockholder vote any meeting; (ix) permitting
the Board to establish rules and regulations for the conduct of stockholder
meetings as it deems appropriate; (x) requiring that a quorum of the Board, in
addition to the requirements of Delaware law, include a majority of the
Non-Class A Directors; (xi) providing that no action may be taken at a meeting
of the Board of Directors with respect to an item not on an agenda distributed
in advance of the meeting if a majority of either the Class A Directors or
Non-Class A Directors present at such meeting objects to the taking of such
action; (xii) requiring that any action taken by the Executive Committee must
have the unanimous approval of all members of the committee; (xiii) requiring a
two-thirds vote of the directors constituting the authorized number of directors
to appoint or remove the Chief Executive Officer and the Chief Operating
Officer; and (xiv) revising the indemnification provisions and the provisions
regarding the setting of a record date to conform with various Delaware law
changes.
Certain of the By-Law amendments described above, such as the advance
notice requirement for stockholder proposals, the elimination of provisions
relating to removal of directors without cause by stockholders and the increased
vote required to call special meetings of stockholders may have certain
anti-takeover effects.
In addition to the amendments described above, the By-Laws will be amended
in the Merger to provide that, notwithstanding that a lesser vote or no vote of
the Board of Directors (or a committee thereof) may be required by law or the
FHI Certificate, and in addition to any other vote of the Board of Directors (or
a committee thereof) required by law or the FHI Certificate, the affirmative
vote of two-thirds of the directors constituting the authorized number of Board
of Directors will be required for approval of the following actions:
(i) any distributions or dividends of securities or other property
(other than cash and other than dividends payable in shares of Common Stock
or Class A Common Stock), if the fair market value (determined in
accordance with the By-Laws) thereof equals or exceeds 10% of the total of
all amounts that are included under stockholders' equity of the Company (as
shown on its most recent financial statements) as of the date of any such
action of the Board of Directors;
(ii) any repurchase or redemption of outstanding equity securities of
the Company if the gross consideration to be paid for such repurchase or
redemption, together with the gross consideration paid for all such
repurchases or redemptions in the preceding twelve month period but net of
the amount of the net proceeds from the issuance of other equity securities
in such period, equals or exceeds 10% of the total of all amounts that are
included under stockholders' equity of the Company (as shown on its most
recent financial statements) as of the date of any such action by the Board
of Directors; and
(iii) a decision by the Board of Directors to consent to or enter into
any cease and desist order or formal agreement with any bank regulatory
authority or other governmental agency which would adversely affect the
interests of the holders of the Class A Common Stock in the good faith
opinion of the Class A Directors (as set forth in a resolution duly adopted
by a majority of such Class A Directors).
As long as BNP continues to own a substantial amount of Class A Common
Stock, the taking of any action described above will require the concurrence of
at least some of the Class A Directors nominated by BNP.
A copy of the By-Laws, as proposed to be amended and restated, is set forth
as Exhibit B to the Merger Agreement attached hereto as Appendix I and is
incorporated herein by reference. Stockholders are urged to read such amended
and restated By-Laws in their entirety.
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DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
DIRECTORS FOLLOWING THE MERGER
As of the Closing Date, the Board of Directors of the Surviving Corporation
will consist of 20 members (including nine Class A Directors). The initial nine
Class A Directors will be apportioned equally among the three classes of
directors of the Board. Following the Closing, the size of the Board may be
increased or decreased in accordance with the FHI Certificate and By-Laws as in
effect from time to time.
MANAGEMENT FOLLOWING THE MERGER
After the Closing, Walter A. Dods, Jr., currently Chairman and Chief
Executive Officer of the Company, will continue to be Chairman and Chief
Executive Officer of the Surviving Corporation and First Hawaiian Bank, and Don
J. McGrath, currently President and Chief Executive Officer of Bank of the West,
will be President and Chief Operating Officer of the Surviving Corporation and
will remain President and Chief Executive Officer of Bank of the West. Each of
these officers will continue to serve in those respective capacities unless
removed by a vote of two-thirds of the Board or until their death, voluntary
retirement or resignation. Upon a vacancy occurring in either the position of
Chief Executive Officer or Chief Operating Officer for any reason, a nominating
committee of the Board will be formed consisting of two Class A Directors
(selected by the Class A Directors) and two Independent Directors (selected by
the Non-Class A Directors). Such nominating committee will nominate an
individual to fill the vacancy and will submit the nomination to the full Board
for approval by a two-thirds vote. If the initial four director nominating
committee cannot agree on a nomination, the members of the committee will
jointly select a fifth director, who must be a Non-Class A Director, to resolve
the disagreement by a majority vote of such nominating committee and will submit
the nomination to the full Board for approval by a two-thirds vote of the
directors then in office.
Additionally, other senior managers of the Surviving Corporation will be
John K. Tsui, who will continue as President of First Hawaiian Bank and also
become Chief Credit Officer of the Surviving Corporation; Howard H. Karr,
currently Executive Vice President, Chief Financial Officer and Treasurer of the
Company, who will be Chief Financial Officer of the Surviving Corporation;
Douglas C. Grigsby, currently Chief Financial Officer of Bank of the West, who
will be Treasurer and Director of Strategic Planning and Mergers and
Acquisitions of the Surviving Corporation; and Bernard Brasseur, currently Risk
Manager of Bank of the West, who will be Risk Manager of the Surviving
Corporation.
BNP will have the right to designate a deputy chief auditor of the
Surviving Corporation and any successor thereto from time to time, provided that
such individual (i) is or thereupon becomes an employee of the Company or First
Hawaiian Bank, and (ii) is reasonably acceptable to both the Chief Executive
Officer and the Chief Operating Officer of the Surviving Corporation.
OPERATIONS FOLLOWING THE MERGER
Although no assurance can be given either that any specific level of cost
savings will be achieved or as to the timing thereof, the Company currently
expects the Surviving Corporation to achieve approximately $23.2 million and
$41.0 million in pre-tax annual cost savings in 1999 and 2000, respectively, as
a result of the Merger. The cost savings are expected to be derived principally
by merging Pacific One Bank with Bank of the West, integrating data processing
and back-office operations, in particular, eliminating vendor costs relating to
BancWest's current outsourcing of back-office processing, eliminating
duplicative operations and consolidating certain retail and wholesale
operations.
It is also estimated that a one-time, pre-tax restructuring charge of
approximately $67.0 million will be incurred upon consummation of the Merger
principally as a result of employee separations, elimination of duplicative
facilities, employee relocations, and losses on asset impairments and
dispositions of assets. A portion of this restructuring charge relates to
exiting certain activities of Bank of the West which accordingly, will be
reflected as a purchase price adjustment rather than a charge to earnings. The
finalization of these plans could result in a material change to this estimate.
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The Company also expects that the Surviving Corporation will be able to
generate increased revenues as a result of the Merger. The Company expects that
pre-tax revenue enhancements will be approximately $6.3 million in 1999 and
approximately $9.8 million in 2000. The Company expects to achieve these
results, in part, from potential cross-selling of products and services to the
commercial and consumer customer bases of the combined company. Whether these
anticipated benefits are ultimately achieved will depend on a number of factors,
including the ability of the Surviving Corporation to successfully integrate the
businesses of the Company and BancWest.
The Surviving Corporation will be headquartered in Honolulu and will have
an administrative headquarters in San Francisco.
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FIRST HAWAIIAN, INC.
The Company is a registered bank holding company under the BHCA. As a bank
holding company, the Company is allowed to acquire or invest in the securities
of companies that are engaged in banking or in activities closely related to
banking as authorized by the Federal Reserve Board. The Company, through its
subsidiaries, operates a general commercial banking business and other
businesses related to banking. Its principal assets are its investments in First
Hawaiian Bank, a State of Hawaii chartered bank; FHL Lease Holding Company,
Inc., a financial services loan company; Pacific One Bank, a State of Oregon
chartered bank with authority to operate interstate branches in Washington and
Idaho; and First Hawaiian Capital I, a Delaware business trust. At March 31,
1998, the Company had consolidated total assets of $8.13 billion, total deposits
of $6.14 billion and total stockholders' equity of $736.25 million.
Based on total assets as of June 30, 1997, the Company was the 68th largest
bank holding company in the United States as reported in the American Banker.
The Company's principal executive offices are located at 999 Bishop Street,
Honolulu, Hawaii 96813, and its telephone number is (808) 525-7000.
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BANCWEST CORPORATION
GENERAL
BancWest is incorporated under the laws of California. All of the
outstanding BancWest Common Stock is owned by BNP, a limited liability banking
corporation organized under the laws of the Republic of France. On November 30,
1995, BancWest acquired all of the outstanding shares of common stock of Bank of
the West, a California state-chartered bank and, as a result thereof, serves as
the United States domestic holding company of Bank of the West. BancWest is a
registered bank holding company under the BHCA, and is subject to regulation
thereunder by the Federal Reserve Board. As of the date hereof, BancWest's only
activity consists of owning the shares of Bank of the West.
BancWest's principal executive offices are located at 180 Montgomery
Street, San Francisco, California 94104 and its telephone number is (415)
765-4800.
BANK OF THE WEST
GENERAL
BancWest's principal subsidiary is Bank of the West, the fifth largest bank
in the State of California, with total assets of approximately $5.769 billion
and total deposits of approximately $4.678 billion at March 31, 1998. Bank of
the West conducts a general commercial banking business, providing retail and
corporate banking and trust services to individuals, institutions, businesses
and governments through 105 branches and other commercial banking offices
located primarily in the San Francisco Bay Area and elsewhere in the Northern
and Central Valley regions of California. Bank of the West also generates
indirect automobile loans and leases, recreational vehicle loans, recreational
marine vessel loans, equipment leases and deeds of trust on single family
residences through a network of manufacturers, dealers, representatives and
brokers in all 50 states. Bank of the West's principal subsidiary is Essex
Credit Corporation ("Essex"), a Connecticut corporation. Essex is engaged
primarily in the business of originating and selling consumer loans on a
nationwide basis, such loans being made for the purpose of acquiring or
refinancing pleasure boats or recreational vehicles. Essex generally sells the
loans that it makes to various banks and other financial institutions, which
banks and institutions thereafter service such loans. Essex has a network of
eleven regional direct lending offices located in the following states:
California, Connecticut, Florida, Maryland, Massachusetts, New Jersey, New York,
North Carolina, Texas and Washington. During the year ended December 31, 1997,
Essex originated $303 million principal amount of boat loans and $58 million of
recreational vehicle loans.
Bank of the West is a commercial banking corporation formed under the laws
of the State of California and its deposits are insured by the FDIC. The
predecessor of Bank of the West was chartered as a national banking association
124 years ago in San Jose, California. Until its acquisition by BNP in 1980,
Bank of the West operated as a community bank mainly in Santa Clara County and
elsewhere in the southern portion of the San Francisco Bay Area. During the
1990's, Bank of the West has expanded its market presence in the Northern and
Central Valley regions of California through a series of acquisitions of other
financial institutions and branches.
Bank of the West's principal executive offices are located at 1450 Treat
Boulevard, Walnut Creek, California 94596 and its telephone number is (925)
942-8300.
HISTORY OF THE BANK
Bank of the West was organized under the national banking laws on July 11,
1874, under the name "The Farmers National Gold Bank". Its name was changed to
"The First National Bank of San Jose" on February 27, 1880. Effective January 2,
1979, Bank of the West converted from a national bank to a California state
charter, and its corporate name was changed to "Bank of the West". On March 29,
1980, Bank of the West was acquired by BNP through the merger of Bank of the
West with BNP's wholly-owned subsidiary, French Bank of California, with the
resultant bank being named "Bank of the West". In 1990, Bank of the
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West acquired Central Bank, a California state bank. In 1991, Bank of the West
acquired certain assets and deposit liabilities of Imperial Federal Savings
Association, a federal savings association operating under the receivership of
the Resolution Trust Corporation (the "RTC"). In 1992, Bank of the West acquired
certain assets and deposit liabilities of eleven branches of Atlantic Financial
Federal Savings Bank, a federal savings bank operating under the conservatorship
of the RTC. In 1994, Bank of the West acquired certain assets and deposit
liabilities of 15 branches of Citibank, F.S.B., a federal savings bank. In 1996,
Bank of the West acquired Northbay Financial Corporation ("NFC"), a savings and
loan holding company, through the merger of an acquisition subsidiary of Bank of
the West with and into NFC; immediately thereafter, NFC and its principal
subsidiary, Northbay Savings Bank, F.S.B., a federal savings bank, were merged
with and into Bank of the West under the charter and title of the Bank. On
October 1, 1997, Bank of the West acquired all of the common stock of Essex.
OPERATING DIVISIONS
Bank of the West, at year end 1997, had approximately 2,000 employees and
served the financial needs of approximately 379,000 households and businesses.
Structurally, Bank of the West is organized into three principal divisions:
Community Banking, Commercial Banking and Consumer Finance. These divisions are
discussed in the following paragraphs.
Community Banking. The focus of Bank of the West's community banking
strategy is Northern California and, more specifically, the Northern California
counties comprising the San Francisco Bay Area and the Central Valley area of
California. This market area includes a population of approximately 14 million
residents, with approximately 7 million in the San Francisco Bay Area and
approximately 4 million in the Central Valley as of December 31, 1997. The San
Francisco Bay Area is one of the State of California's wealthiest regions, and
the Central Valley of California is an area which has been experiencing rapid
transition from a largely agricultural base to a mix of agricultural and
commercial enterprises.
Bank of the West utilizes its 105 branch network as its principal funding
source. A key element of Bank of the West's community banking strategy is to
seek to distinguish itself as the provider of the "best value" in community
banking services. To this end, Bank of the West seeks to position itself within
its markets as an alternative to both the higher priced, smaller "boutique"
commercial banks as well as the larger commercial banks, which may be perceived
as offering lower service and lower prices on a "mass market" basis.
In pursuing the Northern California community banking market, Bank of the
West seeks to serve a broad customer base by furnishing a range of retail and
commercial banking products. Through its branch network, Bank of the West
generates a variety of consumer loans, including direct vehicle loans, consumer
lines of credit and second mortgages. In addition, Bank of the West generates
and holds a small portfolio of first mortgage loans on one-to-four family
residences. Through its commercial banking operations conducted from its branch
network, Bank of the West offers a wide range of basic commercial banking
products that are intended to serve the needs of smaller community-based
businesses. These loan products include in-branch originations of standardized
products for businesses with relatively simple banking and financing needs. More
complex and customized commercial banking services are offered through Bank of
the West's regional banking centers which serve clusters of branches and provide
lending, deposit and cash management services to companies operating in the
relevant market areas. Bank of the West also provides, through an arrangement
with an independent marketing concern, a number of fee-based products and
services such as annuities, insurance and securities brokerage.
The Professional Banking and Trust & Investment areas within the Community
Banking division provide a wide range of products to targeted markets.
Professional Banking, located in San Francisco, serves the banking needs of
attorneys, doctors and other working professionals. The Trust & Investment
Services area, headquartered in San Jose, and with offices in San Francisco,
provides a full range of individual and corporate trust services.
Bank of the West has sought to utilize its acquisitions of savings and loan
branches as an opportunity to "cross-sell" the thrift customers of those
branches with a broader array of commercial banking products, including small
business loans, consumer lines of credit, installment loan products and trust
services.
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Another important element in Bank of the West's strategic plan for its
community banking operations is an effective promotion strategy which seeks to
position Bank of the West as "the Northern California Community Bank".
Television and radio advertising is an important component of developing Bank of
the West's community bank image and customer acceptance. In furtherance of this
objective, the Bank sponsors special events such as the "Bank of the West
Classic" professional women's tennis tournament held annually in Palo Alto,
California.
At March 31, 1998, the Community Banking division had total outstanding
loans of approximately $600 million and total outstanding deposits of
approximately $4.1 billion.
Commercial Banking. The Commercial Banking division provides targeted
corporate banking services throughout the Western United States, with particular
emphasis on the Northern California marketplace. The operating units that make
up this group consist of the Business Banking Division, the Specialty Lending
Division, and the Real Estate Industries Division.
The Business Banking division was organized in mid-1996 to support
commercial lending activities for larger business customers through six regional
lending centers located in Northern and Central California. Each regional office
provides a wide range of loan and deposit services to mid-sized companies with
borrowing needs of $500,000 to $25 million. Lending services include receivables
and inventory financing, equipment term loans, letters of credit, agricultural
loans and trade finance. Other banking services include cash management,
insurance products, trust, investment, foreign exchange and various
international banking services.
The Specialty Lending division seeks to provide focused banking services
and products to specifically targeted markets in which BancWest's management
believes that Bank of the West's resources, experience and technical expertise
give it a competitive advantage. Through operations conducted in this division,
Bank of the West has established a significant national market niche among those
commercial banks which are lenders to religious organizations. In addition,
leasing operations within Specialty Lending have made Bank of the West a
significant provider of equipment leasing financing, including both standard and
tax-oriented products, to a wide array of clients. To support the cash
management needs of both Bank of the West's corporate banking customers and
large private and public deposit relationships maintained with Bank of the West,
the Specialty Lending division operates a Cash Management Group which provides a
full range of innovative and relationship-focused cash management services.
The Real Estate Industries division, whose primary markets are Northern and
Central California and Nevada, originates and services construction, short-term
and permanent loans to residential developers, commercial builders and
investors. The division is particularly active in financing the construction of
detached residential subdivisions in Northern California. Other construction
lending activities include low-income housing, industrial development,
apartment, retail and office projects. The division also originates and services
single-family home loans sourced through the Bank's Community Bank branch
network.
At March 31, 1998, the Commercial Banking division had total outstanding
loans of approximately $1.5 billion.
Consumer Finance. The Consumer Finance division targets the production of
auto loans and leases in the Western United States, and recreational vehicle and
marine loans nationwide, with a business emphasis on originating credits at the
high end of the credit spectrum.
The Consumer Finance division originates recreational vehicle and marine
credits on a nationwide basis through sales representatives located throughout
the country servicing a network of over 1,700 recreational vehicle and marine
dealers and brokers.
During the fourth quarter of 1997, Bank of the West acquired Essex to
complement its dealer marine and recreational vehicle presence. Essex, which is
based in Connecticut and operates as a wholly-owned subsidiary of Bank of the
West, primarily focuses on the origination and sale of loans in the broker
marine market and also originates and sells loans to finance the acquisition of
recreational vehicles.
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The division's auto lending and leasing activity is primarily focused in
the Western United States. Bank of the West originates loans and leases to
finance the purchase of new and used autos, light trucks and vans through a
network of more than 2,000 dealers and brokers in California, Nevada and
Arizona.
At March 31, 1998, the Consumer Finance division had total outstanding
loans of approximately $2.3 billion.
COMPETITION
Banking is a highly competitive business. Northern California, with a
population of approximately 14 million, is Bank of the West's primary market. In
the San Francisco Bay Area and the Central Valley region, there are
approximately 978 depository institutions with approximately 4,811 branches and
over $305 billion in deposits. Bank of the West competes actively for general
banking business with a large number of state and national banks, major
foreign-affiliated or foreign banks, and many financial and nonfinancial firms
which offer services similar to or competitive with those offered by Bank of the
West, many of which have greater resources than Bank of the West. In addition,
Bank of the West seeks to generate indirect consumer finance loans through a
network of manufacturers, dealers, representatives and brokers in all 50 states
and competes with many larger banks, finance companies and other providers of
credit for such businesses. Competition within the California financial services
industry can be expected to increase.
The enactment of interstate banking legislation will likely increase
competition for banking services within California. Regulatory reform, as well
as other changes in federal and California law will also affect competition. See
"-- Supervision and Regulation."
SUPERVISION AND REGULATION
Bank Holding Company Act. BancWest presently is a bank holding company
subject to the BHCA and, as a result, reports to, is registered with, and is
subject to examination by, the Federal Reserve Board which also has authority to
examine the subsidiaries of BancWest, including Bank of the West. Upon
consummation of the Merger between the Company and BancWest, the Company will be
the Surviving Corporation and, therefore, BancWest will no longer exist as a
separate bank holding company subject to regulation by the Federal Reserve
Board. The Surviving Corporation will continue as a bank holding company subject
to supervision and regulation by the Federal Reserve Board under the BHCA and
Bank of the West, as a subsidiary of the Surviving Corporation, also will
continue to be subject to supervision and regulation by the Federal Reserve
Board. For additional information regarding the BHCA and the powers of the
Federal Reserve Board thereunder, reference should be made to the Company's
Annual Report to the Commission on Form 10-K for the year ended December 31,
1997, "Item 1. Business -- Supervision and Regulation -- Holding Company
Structure," which is incorporated by reference herein. See "WHERE YOU CAN FIND
MORE INFORMATION."
BancWest is also a bank holding company within the meaning of Section 3700
of the California Financial Code and as such, BancWest and Bank of the West are,
and upon consummation of the Merger the Surviving Corporation will be, subject
to examination by, and may be required to file reports with, the California
Commissioner of Financial Institutions (the "Commissioner") and the California
Department of Financial Institutions (the "DFI").
Bank Regulation and Supervision. Bank of the West, as a California
state-chartered bank which is not a member of the Federal Reserve System, is
subject to supervision and regulation by the DFI and the FDIC. The regulations
of these agencies affect most aspects of Bank of the West's business and
prescribe permissible types of loans and investments, the amount of required
reserves, requirements for branch offices, the permissible scope of Bank of the
West's activities and various other requirements. While Bank of the West is not
a member of the Federal Reserve Board, it is subject to certain regulations of
the Federal Reserve Board dealing primarily with check clearing activities,
establishment of banking reserves, Truth-in-Lending (Regulation Z),
Truth-in-Savings (Regulation DD), and Equal Credit Opportunity (Regulation B).
Bank of the West also is subject to the requirements of the CRA.
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Upon consummation of the Merger between the Company and BancWest and the
concurrent merger of Pacific One Bank into Bank of the West, Bank of the West
will continue as a California state-chartered bank and therefore will remain
subject to supervision and regulation by the DFI and the FDIC in essentially the
same manner as prior to the Merger. For information regarding the FDIC's powers
of supervision and examination with respect to insured banks, such as Bank of
the West, reference should be made to the Company's Annual Report to the
Commission on Form 10-K for the year ended December 31, 1997, "Item 1.
Business -- Supervision and Regulation," which is incorporated by reference
herein.
Under California law, Bank of the West is subject to various restrictions
on, and requirements regarding, its operations and administration including the
maintenance of branch offices and automated teller machines, capital and reserve
requirements, deposits and borrowings, and investment and lending activities.
Whenever it appears to the Commissioner that certain conditions exist with
respect to a California state-chartered bank, such as when the tangible
shareholders' equity of such bank is less than the greater of three percent of
such bank's total assets or $1,000,000, the Commissioner may take possession of
the property and business of such bank until such bank resumes business upon
such conditions as may be prescribed by the Commissioner or its affairs are
finally liquidated as provided by statute.
California law permits a state chartered bank to invest in the stock and
securities of other corporations, subject to receiving either general
authorization or, depending on the amount of the proposed investment, specific
authorization from the Commissioner. The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), however, imposes limitations upon the
activities and equity investments of state chartered, federally insured banks.
The FDIC rules on investments prohibit a state bank from acquiring equity
investments of a type, or in an amount, not permissible for a national bank.
FDICIA also prohibits a state bank from engaging as a principal in any activity
that is not permissible for a national bank, unless the bank is adequately
capitalized and the FDIC approves the activity after determining that such
activity does not pose a significant risk to the deposit insurance fund. The
FDIC rules on activities of state-chartered banks generally permit subsidiaries
of such banks, without prior FDIC authorization, to engage in those activities
that have been approved by the Federal Reserve Board for bank holding companies.
Bank of the West's finance company subsidiary, Essex Credit Corporation, engages
only in such permissible activities. Other activities which may be conducted by
state-chartered banks generally require specific FDIC prior approval, and the
FDIC may impose additional restrictions on such activities on a case-by-case
basis in approving applications to engage in otherwise impermissible activities.
The Federal Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Riegle-Neal Act") authorized banks to engage in "merger transactions"
(defined as mergers, consolidations or acquisitions of assets and liabilities)
across state lines, beginning June 1, 1997. Under such legislation, each state
had the opportunity to "opt out" of this provision, thereby prohibiting
interstate merger transactions in such states, or to "opt in" at an earlier
time, thereby allowing such transactions within that state prior to June 1,
1997. Furthermore, pursuant to such act, a bank is now able to open new branches
in a state in which it does not already have banking operations, if the laws of
such state permit such de novo branching.
California "opted in" to certain provisions of the Riegle-Neal Act
regarding interstate branching by enacting the Caldera, Weggeland, and Killea
California Interstate Banking and Branching Act of 1995 ("IBBA"). Under the
IBBA, California opted into the portion of the federal law allowing early
interstate merger transactions. However, California opted out of the provisions
of the federal law allowing interstate branching through the acquisition of a
branch located in California (without acquisition of the whole business unit of
the California bank) and also opted out of the provision of the federal law
allowing interstate branching through de novo establishment of California branch
offices. Further, no out of state bank that does not already maintain a
California branch office may merge as the surviving bank with a California bank
or purchase the whole of the business of the California bank unless the
California bank has been in existence for at least five years. The Commissioner
is also authorized to approve an interstate merger transaction involving a
California bank which would result in a deposit concentrating exceeding 30% of
the deposits in California if the Commissioner finds that the transaction is
consistent with the public convenience and advantage in California.
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Capital Standards. BancWest and Bank of the West, like the Company and
First Hawaiian Bank, are subject to risk-based capital adequacy guidelines
promulgated by the federal banking agencies. For additional information
regarding such capital adequacy guidelines, see the Company's Annual Report to
the Commission on Form 10-K for the year ended December 31, 1997, "Item 1.
Business -- Supervision and Regulation -- Capital Requirements," which is
incorporated by reference herein.
The following tables present the capital ratios for BancWest and Bank of
the West, compared to the standards promulgated by the federal banking agencies
for well-capitalized depository institutions, as of March 31, 1998 (amounts in
thousands except percentage amounts).
<TABLE>
<CAPTION>
BANCWEST
--------------------------------------------------
ACTUAL WELL MINIMUM
-------------------- CAPITALIZED CAPITAL
CAPITAL RATIO(1) RATIO REQUIREMENT
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Leverage........................................ $428,543 7.50% 5.0% 4.0%
Tier 1 Risk-Based............................... 428,543 8.97 6.0 4.0
Total Risk-Based................................ 519,741 10.88 10.0 8.0
</TABLE>
<TABLE>
<CAPTION>
BANK OF THE WEST
--------------------------------------------------
ACTUAL WELL MINIMUM
-------------------- CAPITALIZED CAPITAL
CAPITAL RATIO(1) RATIO REQUIREMENT
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Leverage........................................ $428,135 7.50% 5.0% 4.0%
Tier 1 Risk-Based............................... 428,135 8.96 6.0 4.0
Total Risk-Based................................ 519,333 10.87 10.0 8.0
</TABLE>
- ---------------
(1) Leverage ratio computed based upon total assets (less goodwill) at March 31,
1998. Tier 1 Risk-Based and Total Risk-Based ratios based upon total
risk-weighted assets at March 31, 1998.
Restrictions on Dividends and Other Distributions. The power of the board
of directors of an insured depository institution, such as Bank of the West, to
declare a cash dividend or other distribution with respect to capital is subject
to statutory and regulatory restrictions which limit the amount available for
such distribution depending upon the earnings, financial condition and cash
needs of the institution. FDICIA prohibits insured depository institutions from
paying management fees to any controlling persons or, with certain limited
exceptions, making capital distributions, including dividends, if, after such
transaction, the institution would be undercapitalized.
The FDIC also has the authority to prohibit an insured depository
institution from engaging in business practices which are considered to be
unsafe or unsound, including the payment of dividends under certain
circumstances even if such payments are not expressly prohibited by statute.
In addition to the restrictions imposed under federal law, California
state-chartered banks, such as Bank of the West, generally may only pay cash
dividends to the extent such payments do not exceed the lesser of retained
earnings of the bank or the bank's net income for its last three fiscal years
(less any distributions to shareholders during such period). In the event a
California bank desires to pay cash dividends in excess of such amount, the bank
may pay a cash dividend, with the prior approval of the DFI, in an amount not
exceeding the greatest of the bank's retained earnings, the bank's net income
for its last fiscal year, or the bank's net income for its current fiscal year.
Competition. The encouragement of interstate banking through the enactment
of various federal and state legislative measures during the 1990s, including
the Riegle-Neal Act in 1994 as well as the IBBA in California in 1995, have had
the effect of encouraging bank and financial institution mergers in California
and thereby increasing the size and scope of competitors of Bank of the West in
the California banking markets and can be expected to continue to have such
effect in the foreseeable future. Regulatory reform, as well as other changes in
federal and California law, will also affect competition. While the impact of
these changes, and of other proposed changes, cannot be predicted with
certainty, it is clear that the business of banking in California will remain
highly competitive.
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For information regarding possible future banking legislation which may
affect insured depository institutions, such as Bank of the West, reference is
made to the Company's Annual Report on Form 10-K for the year ended December 31,
1997, "Item 1. Business -- Future Legislation," which is incorporated by
reference herein.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain matters contained herein are forward-looking statements that
involve certain risks and uncertainties that could cause BancWest's actual
results to differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, global, national, state and local economic and market
conditions, the level and volatility of interest rates and currency values,
credit risks inherent in the lending process, loan and deposit demand in the
geographic regions in which BancWest conducts business, the impact of intense
competition in the rapidly evolving banking and financial services business, the
effect of current and pending government legislation and regulations, the
extensive regulation of BancWest's businesses at both the federal and state
levels and other matters discussed below and under "INFORMATION REGARDING
FORWARD-LOOKING STATEMENTS" contained herein.
BancWest expressly disclaims any obligation or undertaking to release any
update or revision to any forward-looking statement contained herein to reflect
any change in BancWest's expectations with regard thereto or any change in
events, conditions or circumstances on which any statement is based.
Data presented and discussed in this section are the consolidated data for
BancWest for the periods and at the dates indicated. Such data are virtually the
same for Bank of the West, the wholly-owned subsidiary of BancWest.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
3 MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- ------------------------------------
1998 1997 1997 1996 1995
----------- ----------- ---------- ---------- ----------
(unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Interest income.................. $ 105,928 $ 95,434 $ 405,522 $ 352,947 $ 307,719
Interest expense................. 43,180 37,606 163,022 139,090 124,854
---------- ---------- ---------- ---------- ----------
Net interest income............ 62,748 57,828 242,500 213,857 182,865
Provision for credit losses...... 5,000 4,000 19,750 16,500 14,500
Noninterest income............... 13,664 9,481 45,353 36,240 32,237
Noninterest expense.............. 42,766 37,963 156,388 161,070 143,464
Amortization of goodwill......... 1,191 990 4,143 3,585 3,111
---------- ---------- ---------- ---------- ----------
Income before income taxes..... 27,455 24,356 107,572 68,942 54,027
Provision for income taxes....... 10,387 10,141 44,714 25,139 21,970
---------- ---------- ---------- ---------- ----------
Net income..................... $ 17,068 $ 14,215 $ 62,858 $ 43,803 $ 32,057
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
(annualized)
<S> <C> <C> <C> <C> <C>
KEY RATIOS:
Return on Average Assets......... 1.23% 1.14% 1.18% 0.93% 0.78%
Return on Average Common Equity.. 16.06% 14.63% 15.57% 12.08% 10.33%
Efficiency*...................... 55.97% 56.40% 54.33% 60.57% 66.70%
BALANCE SHEET DATA AT PERIOD END:
Loans and leases................. $4,473,527 $3,858,184 $4,344,342 $3,772,291 $3,002,309
Total assets..................... 5,769,387 5,277,360 5,643,098 5,071,577 4,381,998
Deposits......................... 4,678,077 4,341,010 4,572,950 4,182,081 3,623,915
Preferred stock.................. 95,000 95,000 95,000 95,000 20,000
Common equity.................... 395,159 353,895 380,090 342,683 306,855
Total equity..................... 490,159 448,895 475,090 437,683 326,855
</TABLE>
- ---------------
* The efficiency ratio is calculated by dividing noninterest expense, excluding
goodwill amortization and the FDIC special assessment of approximately $9.6
million in 1996, by the sum of net interest income and noninterest income.
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<PAGE> 80
RESULTS OF OPERATIONS
BancWest recorded consolidated net income for the first three months of
1998 of $17.1 million, an increase of $2.9 million, or 20%, over the first three
months of 1997. The significant increase in consolidated net income is due
primarily to higher net interest income and substantial growth in noninterest
income with partially offsetting increases in the provision for credit losses
and noninterest expense.
On an annualized basis, BancWest's return on average total assets for the
first three months of 1998 was 1.23%, up from 1.14% for the same period in 1997,
and its return on average common shareholder's equity was 16.06% as compared to
14.63% for the same period in 1997.
For the year ended December 31, 1997, BancWest's net income increased 44%
to $62.9 million, up from $43.8 million for the year ended December 31, 1996.
This increase also was primarily attributable to higher net interest income and
increased noninterest income. These increases were partially offset by increases
in the provision for credit losses and noninterest expense. Return on total
average assets was 1.18% for 1997 compared to 0.93% for 1996. Return on average
common shareholder's equity for 1997 was 15.57%, compared to 12.08% for 1996.
For the year ended December 31, 1996, BancWest's net income increased 37%
to $43.8 million, up from $32.1 million for the year ended December 31, 1995.
This increase was primarily due to higher net interest income and increased
noninterest income, which were partially offset by increases in the provision
for credit losses and noninterest expense. These factors resulted in a return on
total average assets of 0.93% for 1996 compared to 0.78% for 1995. Return on
average common shareholder's equity for 1996 was 12.08%, up from 10.33% for
1995.
NET INTEREST INCOME
For the three-month period ended March 31, 1998, net interest income
increased 8.5% to $62.7 million, up from $57.8 million for the quarter ended
March 31, 1997. The increase resulted primarily from growth in average earning
assets, up 12.1% or $572 million, to $5,293 million as average loans and leases
grew 16.3%, or $620 million, while average investment securities declined 6.2%,
or $57 million. The earnings improvement achieved from the growth in average
earning assets was partially offset by a narrower margin on earning assets which
fell 16 basis points to 4.81% as the yield on earning assets declined 8 basis
points to 8.12% while the cost of interest-bearing liabilities increased 13
basis points to 4.24%. The narrower margin on average earning assets was
alleviated somewhat by an improved funding mix in which average net
noninterest-bearing funding grew 15%, or $152 million, representing 22.0% of
average earning assets for the first three months of 1998 compared to 21.4% for
the same period in 1997. The improved funding mix was primarily the result of
higher average noninterest-bearing demand deposits, up $106 million, or 13.0%,
and average shareholder's equity, up $41 million, or 9.3%.
For the year ended December 31, 1997, net interest income increased 13.4%
to $242.5 million, up from $213.9 million for the year ended December 31, 1996.
The increase resulted primarily from significant growth in average earning
assets, up 14.6% or $633 million, to $4,968 million as average loan and lease
balances grew 18.3%, or $628 million. Investment securities were unchanged at
$898 million in average outstandings representing 16.9% of average total assets
for 1997, compared to 19.2% of average total assets for 1996. The earnings
benefit derived from the growth in average earning assets was offset somewhat by
a decline in margin on earning assets which fell 6 basis points to 4.88%. The
yield on earning assets increased moderately to 8.16%, up one basis point, while
the cost of interest-bearing liabilities increased 18 basis points to 4.20%.
This reduction in margin resulted primarily from the higher cost of
interest-bearing liabilities partially offset by a $212 million, or 24.4%,
increase in net noninterest-bearing funding. Average net noninterest-bearing
funding was 21.8% of average earning assets in 1997, up from 20.1% in 1996. This
improvement was primarily due to the growth in average demand deposit balances,
up $120 million, or 15.7%, and average shareholder's equity, up $63 million, or
16.0%.
For the year ended December 31, 1996, net interest income increased 16.9%
to $213.9 million, from $182.9 million for the year ended December 31, 1995. The
increase resulted primarily from significant growth
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<PAGE> 81
in average earning assets, up 14.3%, or $542 million, to $4,335 million as
average loan and lease balances grew 23%, or $643 million, from both internal
generation and the acquisition of NFC with $330 million in commercial and
consumer real estate loans. Investment securities decreased 10%, or $99 million,
in average outstandings as maturities were used in funding the growth in higher
yielding loans and leases. The increase in net interest income was also due to
an improved margin on earning assets which rose 11 basis points to 4.94%. The
yield on earning assets rose moderately to 8.15%, up 3 basis points, while the
cost of interest-bearing liabilities was unchanged at 4.02%. The margin
improvement resulted primarily from a more favorable funding mix in which net
noninterest-bearing funding increased by $185 million, or 27%, representing 20%
of average earning assets, up from 18% last year. The improved funding mix was
primarily the result of growth in average demand deposit balances, up $109
million, or 17%, and shareholder's equity, up $76 million, or 24%.
The table under the heading "-- Net Interest Margin" below shows the yields
and costs of BancWest's earning assets and interest-bearing liabilities by
category for the three month periods ended March 31, 1998 and 1997 and the years
ended December 31, 1997, 1996 and 1995, respectively.
NONINTEREST INCOME
For the first three months of 1998, noninterest income increased 44% to
$13.7 million, up from $9.5 million for the same period in 1997. The increase
was primarily due to higher deposit-related fees, up 18% to $7.3 million, and
$1.9 million in gains on the sale of loans generated by Essex, a subsidiary of
Bank of the West acquired in the fourth quarter of 1997. Commissions and other
fees and trust fees were up 10% and 17%, respectively, while other noninterest
income increased 62% to $2.2 million on the sale of foreclosed and other bank
properties (up $265,000), increases in retail service fees (up $360,000), and
higher bank card fees (up $250,000).
Noninterest income increased 25% to $45.3 million for the year ended
December 31, 1997, up from $36.2 million in 1996. This increase was primarily
due to higher deposit-related fees, up 24% to $27.7 million, higher commissions
and other fees, up 29% to $4.5 million, an increase in trust fees, up 7% to $2.6
million and $1.6 million in gains on the sale of loans generated by Essex. Other
noninterest income increased 10% to $7.2 million with higher gains on the sale
of foreclosed and other bank properties (up $923,000), increases in retail
service fees (up $756,000), and higher bank card fees (up $771,000). These
increases were somewhat offset by a decline in loan servicing revenue, down $1.6
million.
Noninterest income increased 12.4% to $36.2 million for the year ended
December 31, 1996 from $32.2 million in 1995 primarily due to higher
deposit-related fees, up 4% to $22.4 million, commissions and other fees, up 93%
to $3.5 million, and trust fees, up 11% to $2.4 million. Other noninterest
income increased 23% to $6.6 million primarily due to a $1.7 million recovery
related to loans purchased from a third party servicer and higher retail service
fees (up $460,000), partially offset by lower revenue and gains from the sale of
foreclosed and other bank properties (down $455,000 and $719,000, respectively).
NONINTEREST EXPENSE
For the first three months of 1998, noninterest expense rose 12.9% to $44.0
million due in part to the incremental operating expense of approximately $1.4
million associated with the fourth quarter 1997 acquisition of Essex. Excluding
the expense of the new subsidiary, total operating expense increased 9.3%, or
$3.6 million, on higher employee compensation and benefits (up 6.2%, or $1.2
million), increased premises rent (up 6.5%, or $0.2 million), higher data
processing costs (up 10.3%, or $0.4 million), higher provision for losses on
foreclosed property (up $0.8 million) and a rise in other operating expense (up
21%, or $1.3 million) related to higher postage, telecommunications and
operating losses. Relative to balance sheet size, total operating expense
(including the expenses of the new subsidiary) was essentially unchanged from
the same period of 1997 at 3.16% of total average assets on an annualized basis.
For the year ended December 31, 1997, noninterest expense of $160.5 million
declined $4.1 million, or 2.5% from that recorded in 1996, principally as a
result of a $9.6 million one-time special assessment by the FDIC in 1996. This
assessment was imposed on all financial institutions with deposits insured by
the Savings Association Insurance Fund ("SAIF"), such as Bank of the West, in
order to capitalize the fund to a level at
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<PAGE> 82
which parity with the Bank Insurance Fund ("BIF") was achieved. (Bank of the
West's SAIF-insured deposits were attributable to its acquisition of the assets
and liabilities of several savings associations from the RTC.) Excluding this
special charge, noninterest expense rose 3.5%, or $5.5 million, due in part to
the incremental operating expense associated with the October 1, 1997
acquisition of Essex (approximately $1.4 million). Noninterest expense,
excluding the impact of the Essex acquisition in 1997 and the special FDIC
assessment in 1996, declined to 2.99% of total average assets in 1997 from 3.31%
in 1996. BancWest's efficiency ratio (noninterest expense, excluding goodwill
and the special FDIC assessment in 1996, divided by the sum of net interest
income and noninterest income) improved to 54.3% from 60.6% in 1996.
Salaries and employee benefits cost increased 6.7% to $74.8 million in
1997, due in part to increases in staffing in which average full-time equivalent
("FTE") staff rose to 1,819 during 1997, up from 1,798 in 1996. This increase
was primarily attributable to the Essex acquisition. Merit increases, higher
payroll taxes, insurance benefits and other employee compensation also
contributed to the increase.
Net occupancy expense increased 2.8% to $21.3 million, primarily due to the
cost of two branches opened and one acquired branch during 1997, expanding
BancWest's retail network to a total of 105 branches.
Contracted data processing expense increased 12.9%, to $14.3 million, on
higher transaction volumes in 1997. The number of deposit customer accounts
increased to 558,000, up 37,000, or 7.1%, and total customer loan and lease
accounts increased to 177,000, up 23,000, or 14.9%.
FDIC insurance premiums, excluding the one-time special assessment recorded
in 1996, declined $1.6 million due to reduced premium rates on both BIF and SAIF
deposits as the BIF and SAIF achieved or exceeded federally mandated
capitalization levels in 1997.
Legal and litigation expense declined $1.3 million, or 41%, due to reduced
litigation activities and professional fees from 1996. Advertising and marketing
expense was increased 9% to $4.6 million with particular focus on retail deposit
campaigns. Other expense was up $1.4 million, or 6%, primarily due to higher
business development costs (up $0.5 million, or 25%), postage (up $0.3 million,
or 13%), telecommunications (up $0.2 million, or 8%) and operational losses (up
$0.6 million, or 40%). Loan collection expense declined $0.3 million, or 33%,
due to a large recovery on an item expensed in a previous year.
For the year ended December 31, 1996, noninterest expense of $164.7 million
was up $18.1 million, or 12%, compared to 1995 principally as a result of the
$9.6 million one-time special assessment by the FDIC. Excluding this special
assessment, noninterest expense rose 6%, or $8.5 million, due in large part to
the incremental operating expense associated with the acquisition of NFC
(approximately $4.0 million). Noninterest expense relative to average total
assets, excluding the special FDIC assessment, declined to 3.31% of average
assets in 1996 from 3.56% in 1995. BancWest's efficiency ratio (noninterest
expense, excluding goodwill and the special assessment, divided by the sum of
net interest income and noninterest income) improved to 60.6% from 66.7% in
1995.
Salaries and employee benefits increased 9% to $70.1 million in 1996,
primarily due to increases in staffing in which average FTE rose to 1,798 during
1996, from 1,747 in 1995. The 51 FTE increase was due primarily to the NFC
acquisition (41 FTE) and from the formation of a new Business Banking division
at Bank of the West. Merit increases, higher payroll taxes, pension costs and
other employee compensation also contributed to the increase.
Net occupancy expense increased 2% to $20.7 million, primarily due to the
cost of five additional branches obtained in the NFC acquisition which brought
the Bank's retail network to a total of 104 branches.
Contracted data processing expense declined 8.6% to $12.7 million as
systems enhancement and conversion costs were higher in 1995. Other contracted
services increased $1.3 million, or 24%, due primarily to increased activities
in business customer services.
FDIC insurance premiums, excluding the 1996 one-time special assessment,
declined $2.5 million due to reduced premium rates on both BIF and SAIF
deposits.
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Legal and litigation expense rose $1.8 million, or 139%, due to reduced
recoveries relative to 1995. Advertising and marketing expense increased 19% to
$4.2 million with additional retail deposit campaigns. Other expense was up $1.2
million, or 6%, primarily on higher consumer loan origination and collection
costs.
PROVISION FOR CREDIT LOSSES
The provision for credit losses for the first three months of 1998 was $5.0
million, an increase of 25%, or $1 million, from the same period in 1997. The
increase is attributable to the inherent losses contained in the larger loan and
lease portfolio and management's judgment as to the overall adequacy of the
allowance for credit losses.
Net charge-offs were $3.9 million for the first three months of 1998, up
$0.9 million from the same period in 1997. On an annualized basis, net
charge-offs as a percentage of average loans and leases increased marginally to
0.36% for the first three months of 1998 in comparison to 0.32% for the same
period in 1997.
At March 31, 1998, the allowance for credit losses increased $1.1 million
from December 31, 1997 and $4.9 million from March 31, 1997 as a result of the
increase in the provisions for credit losses, partially offset by the increase
in loan and lease charge-offs.
The provision for credit losses for the year ended December 31, 1997 was
$19.75 million, an increase of $3.25 million from 1996. This increase was
attributable to increased loan and lease volume and management's judgment as to
the adequacy of the allowance for credit losses in consideration of continued
strong asset quality, current market conditions and future economic conditions
within Bank of the West's lending markets.
Net charge-offs, relative to average loans and leases, increased marginally
to 0.37% in 1997 from 0.29% in 1996, reflecting stable economic conditions. Net
charge-offs increased to $14.9 million in 1997, an increase of $5.0 million over
1996.
The increase in the provision for credit losses in 1997, offset partially
by the increase in loan and lease charge-offs, resulted in a higher allowance
for credit losses, up $4.9 million, or 10%, to $51.6 million at December 31,
1997. At this level, the allowance equaled 1.19% of 1997 year-end loans and
leases, compared to 1.24% at the end of 1996.
The provision for credit losses for the year ended December 31, 1996 was
$16.5 million, an increase of $2.0 million from 1995. This increase was
attributable to increased loan and lease volume and management's judgment as to
the adequacy of the allowance for credit losses.
Net charge-offs were up 6% to $9.9 million in 1996, an increase of $0.6
million over 1995. Relative to average loans and leases, net charge-offs
declined to 0.29% in 1996 from 0.33% in 1995, reflecting stable economic
conditions.
The higher level of provision for credit losses in 1996, combined with the
modest increase in loan and lease charge-offs and the allowance acquired in the
acquisition of NFC, resulted in a higher allowance for credit losses, up $9.0
million, or 24%, to $46.8 million at December 31, 1996, representing 1.24% of
1996 year-end loans and leases, compared to 1.26% at the end of 1995.
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<PAGE> 84
The following table sets forth the activity in the allowance for loan
losses for the periods indicated:
<TABLE>
<CAPTION>
3 MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period....... $51,608 $46,758 $46,758 $37,765 $32,553 $27,317 $25,324
Charge-offs:
Commercial, financial and
agricultural..................... 17 349 1,648 1,791 1,606 918 2,362
Real estate -- construction........ -- -- 35 221 1,368 41 5,021
Real estate -- mortgage............ 509 736 1,915 2,271 3,206 3,210 3,702
Consumer........................... 3,293 2,423 11,473 7,459 6,361 7,098 9,120
Lease financing.................... 1,730 870 4,049 2,738 1,964 2,506 2,171
------- ------- ------- ------- ------- ------- -------
Total charge-offs........... 5,549 4,378 19,120 14,480 14,505 13,773 22,376
Recoveries:
Commercial, financial and
agricultural..................... 711 93 829 1,611 1,665 1,734 2,407
Real estate -- construction........ -- 624 624 -- -- 55 15
Real estate -- mortgage............ 134 5 120 102 235 49 2
Consumer........................... 567 529 2,027 2,114 2,902 3,413 3,914
Lease financing.................... 189 122 620 801 415 808 481
------- ------- ------- ------- ------- ------- -------
Total recoveries............ 1,601 1,373 4,220 4,628 5,217 6,059 6,819
------- ------- ------- ------- ------- ------- -------
Net charge-offs...................... 3,948 3,005 14,900 9,852 9,288 7,714 15,557
------- ------- ------- ------- ------- ------- -------
Additions charged to operations...... 5,000 4,000 19,750 16,500 14,500 12,950 17,550
Acquired allowance for credit
losses............................. -- -- -- 2,345 -- -- --
------- ------- ------- ------- ------- ------- -------
Balance at end of the period....... $52,660 $47,753 $51,608 $46,758 $37,765 $32,553 $27,317
======= ======= ======= ======= ======= ======= =======
Ratio of net charge-offs during the
period to average loans outstanding
during the period.................. 0.36% 0.32% 0.37% 0.29% 0.33% 0.31% 0.66%
</TABLE>
BancWest has allocated a portion of the allowance for loan losses according
to the amount deemed by management to be reasonably necessary to provide for the
possibility of losses being incurred within the various loan categories as
follows at the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------ ------------------ ------------------
PERCENT PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS OF LOANS
TO TOTAL TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------- -------- ------- -------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural... $ 9,749 4.8% $10,644 5.0% $13,253 6.0% $12,664 7.3%
Real estate --
construction....... 2,233 3.7 2,547 4.3 2,437 3.1 2,651 2.9
Real estate --
mortgage........... 7,389 37.5 6,697 37.7 6,509 42.1 4,255 40.1
Consumer............. 10,411 36.2 9,136 35.7 3,154 34.7 1,623 36.3
Lease financing...... 6,008 17.8 4,334 17.3 1,719 14.1 1,341 13.4
General allowance.... 16,870 NA 18,250 NA 19,686 NA 15,231 NA
------- ----- ------- ----- ------- ----- ------- -----
Total........ $52,660 100.0% $51,608 100.0% $46,758 100.0% $37,765 100.0%
======= ===== ======= ===== ======= ===== ======= =====
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
------------------ ------------------
PERCENT PERCENT
OF LOANS OF LOANS
TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS
------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural... $ 9,566 8.1% $ 9,362 10.1%
Real estate --
construction....... 3,260 2.2 2,527 2.8
Real estate --
mortgage........... 5,479 41.7 5,967 41.5
Consumer............. 1,902 39.8 2,444 40.9
Lease financing...... 804 8.2 540 4.7
General allowance.... 11,542 NA 6,477 NA
------- ----- ------- -----
Total........ $32,553 100.0% $27,317 100.0%
======= ===== ======= =====
</TABLE>
PROVISION FOR INCOME TAXES
For the first three months of 1998, BancWest's effective tax rate was 37.8%
of pre-tax income, down from 41.6% for the same period in 1997. The rate
decrease was due to a $1 million reduction of deferred tax
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<PAGE> 85
liabilities to fully recognize the federal tax benefit of state franchise taxes
paid in the current period but not deductible until the following year.
In 1997, BancWest's effective tax rate increased to 41.6% of pre-tax income
compared to 36.5% for 1996. The rate increase was due to prior year adjustments
in both federal and state deferred tax liabilities resulting from changes in tax
laws, changes in the estimate of BancWest's apportionment of California state
franchise tax in accordance with the "waters-edge" computation and the
recognition in 1996 of acquired net operating losses associated with a prior
year's acquisition.
In 1996, BancWest's effective tax rate declined to 36.5% of pre-tax income
compared to 40.7% for 1995. The reduction was primarily due to adjustments in
both federal and state deferred tax liabilities attributable to changes in tax
laws and changes in the estimate of BancWest's apportionment of California state
franchise tax in the "waters-edge" computation. See Note 12 of the Notes to the
Consolidated Financial Statements of BancWest and Subsidiary included elsewhere
herein.
BALANCE SHEET
At March 31, 1998, BancWest's total assets were $5.77 billion, representing
an increase of $126 million or 2.2% over December 31, 1997 and an increase of
$492 million, or 9.3%, over March 31, 1997. The increase in total assets was
primarily attributable to growth in BancWest's loan and lease portfolio which
rose to $4.47 billion at March 31, 1998, up $129 million, or 3% over December
31, 1997 and up $615 million or 15.9% from the same date in 1997. BancWest's
holdings of investment securities were reduced to $851 million at March 31,
1998, down $8 million or 0.9% from December 31, 1997 and down $89 million or
9.5%, from the same date in 1997.
At December 31, 1997, BancWest's total assets were $5.64 billion, up from
$5.07 billion at December 31, 1996. The increase in total assets is primarily
attributable to growth in BancWest's loan and lease portfolio, which rose to
$4.344 billion at December 31, 1997, up $572 million from year-end 1996.
BancWest's holdings of investment securities was reduced from $932 million at
year-end 1996 to $859 million at December 31, 1997, with increases in customer
deposits, long-term borrowings and shareholders' equity providing the balance of
funding for the growth in total assets.
At December 31, 1996, BancWest's total assets were $5.07 billion, up from
$4.38 billion at December 31, 1995. The increase in total assets is primarily
attributable to growth in BancWest's loan and lease portfolio which increased to
$3.772 billion at December 31, 1996, up $770 million from year-end 1995 and the
NFC acquisition. Investment securities and federal funds sold both declined from
the previous year, with customer deposits, long-term borrowings and
shareholder's equity providing funding for the growth in total assets.
LOAN PORTFOLIO
The loan portfolio is the largest component of earning assets for BancWest
and is the source for the greatest portion of total interest income.
Real estate construction loans as of March 31, 1998 decreased $17 million,
or 9.5%, over December 31, 1997, but increased $43 million or 34.5% over March
31, 1997, reflecting seasonal borrowing patterns in the growing economy of
Northern California.
Real estate mortgage loans as of March 31, 1998 increased $37 million, or
2.3%, over December 31, 1997 and $87 million, or 5.4%, over March 31, 1997,
reflecting a period of active refinancings due to lower prevailing rates for
both residential and commercial borrowers. Consequently, this area of lending
has experienced both higher production volumes as well as higher pre-payment
activity.
Consumer loans as of March 31, 1998 increased $68 million, or 4.4%, over
December 31, 1997 and $258 million, or 18.9%, over March 31, 1997. The increase
was primarily due to an increase in both indirect recreational vehicle and
marine loans originated through Bank of the West's Consumer Finance division's
nationwide network of recreational vehicle and marine dealers and brokers.
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<PAGE> 86
Lease financing as of March 31, 1998 increased $45 million, or 5.9%, over
December 31, 1997 and $236 million, or 42.2%, over March 31, 1997, primarily due
to an increase in indirect vehicle leasing through Bank of the West's Consumer
Finance division in the western United States primarily through automobile
dealers.
Loans and leases outstanding to borrowers in California totalled $3.576
billion, or 80% of total loans and leases at March 31, 1998. No other
significant concentrations of credit to borrowers by industry or geographic
location existed at March 31, 1998.
At December 31, 1997, loans and leases net of unearned income totaled
$4.344 billion, up 15% from December 31, 1996. This increase included growth of
42% in lease financing, 18% growth in consumer loans, 55% growth in construction
loans and 3% growth in mortgage loans, offset somewhat by a 3% decline in
commercial lending.
The following table sets forth the composition of BancWest's loan and lease
portfolio at the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural........... $ 214,497 $ 222,716 $ 217,853 $ 225,295 $ 218,863 $ 213,072 $ 241,323
Real
estate -- construction... 167,093 124,234 184,535 118,712 87,326 57,696 67,184
Real
estate -- mortgage..... 1,675,929 1,589,416 1,638,529 1,587,503 1,203,304 1,103,538 988,116
Consumer................. 1,619,960 1,362,112 1,551,916 1,310,065 1,089,518 1,050,658 974,504
Lease financing.......... 796,048 559,706 751,509 530,716 403,298 216,630 111,899
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total loans.............. $4,473,527 $3,858,184 $4,344,342 $3,772,291 $3,002,309 $2,641,594 $2,383,026
========== ========== ========== ========== ========== ========== ==========
</TABLE>
The following table sets forth the contractual maturities of BancWest's
loan and lease portfolio by category at December 31, 1997:
<TABLE>
<CAPTION>
AFTER ONE
WITHIN BUT WITHIN AFTER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
-------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial, financial and agricultural..... $146,494 $ 62,315 $ 9,044 $ 217,853
Real estate -- construction................ 117,138 46,749 20,648 184,535
Real estate -- mortgage.................... 270,092 379,026 989,411 1,638,529
Consumer................................... 41,305 418,615 1,091,996 1,551,916
Lease financing............................ 63,881 604,937 82,691 751,509
-------- ---------- ---------- ----------
Total.................................... $638,910 $1,511,642 $2,193,790 $4,344,342
======== ========== ========== ==========
</TABLE>
ASSET QUALITY
At March 31, 1998, non-performing loans and leases totaled $18.8 million,
down $7.3 million from December 31, 1997 and down $7.4 million from March 31,
1997 as a result of declines in both non-accrual loans and leases and accruing
loans and leases past due 90 days or more. Total non-performing assets also
declined to $26.9 million from December 31, 1997, down $8.6 million, due to a
decline in foreclosed property, down $0.9 million to $3.4 million. Total
non-performing assets at March 31, 1998 declined $8.1 million from March 31,
1997, due to a $3.2 million decrease in foreclosed property, with a partially
offsetting increase in repossessed personal property, up $2.5 million to $4.7
million.
The ratio of non-performing loans and leases to total loans and leases
declined to 0.42% at March 31, 1998, from 0.60% at December 31, 1997 and from
0.68% at March 31, 1997. The ratio of total non-performing assets
(non-performing loans and leases plus foreclosed and repossessed property) to
total assets fell to 0.47% at March 31, 1998 from 0.63% at December 31, 1997 and
from 0.66% at March 31, 1997.
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<PAGE> 87
The allowance coverage of non-performing loans and leases was 280% at March
31, 1998, compared to 198% at December 31, 1997 and 182% at March 31, 1997 due
to both the decrease in non-performing loans and leases and the increase in the
allowance for credit losses.
Non-performing loans and leases increased to $26.0 million at year-end
1997, up $0.7 million from the $25.3 million at year-end 1996. The ratio of
non-performing loans and leases to total loans and leases declined to 0.60% at
year-end 1997, from 0.67% at year-end 1996.
The ratio of non-performing assets (non-performing loans and leases plus
foreclosed and repossessed property) to total assets fell to 0.63% at year-end
1997 from 0.68% at year-end 1996, primarily as the result of a decline in
foreclosed property, down $2.5 million, to $4.3 million, at year-end 1997.
The allowance coverage of non-performing loans and leases was 198% at
December 31, 1997, compared to 185% at December 31, 1996, due to the increase in
the allowance for credit losses, which exceeded the increase in non-performing
loans and leases.
The following table sets forth data as to BancWest's non-performing assets
at the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Non-accruing loans and
leases....................... $ 18,436 $ 23,473 $ 24,762 $ 22,852 $ 27,152 $ 23,935 $ 39,816
Loans and leases past due 90
days or more still
accruing..................... 360 2,720 1,284 2,471 4,258 1,864 16,100
Foreclosed property............ 3,390 6,549 4,329 6,800 9,133 14,127 33,773
Repossessed personal
property..................... 4,727 2,253 5,132 2,342 1,322 895 775
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total non-performing
assets................... $ 26,913 $ 34,995 $ 35,507 $ 34,465 $ 41,865 $ 40,821 $ 90,464
========== ========== ========== ========== ========== ========== ==========
Non-performing loans and leases
to total loans and leases.... 0.42% 0.68% 0.60% 0.67% 1.05% 0.98% 2.35%
Non-performing assets to total
assets....................... 0.47% 0.66% 0.63% 0.68% 0.96% 1.00% 2.45%
Allowance for credit losses.... $ 52,660 $ 47,753 $ 51,608 $ 46,758 $ 37,765 $ 32,553 $ 27,317
Total loans and leases......... $4,473,527 $3,858,184 $4,344,342 $3,772,291 $3,002,309 $2,641,594 $2,383,026
Total assets................... $5,769,387 $5,277,360 $5,643,098 $5,071,577 $4,381,998 $4,068,847 $3,691,033
</TABLE>
LIABILITIES
At March 31, 1998, deposits totaled $4.678 billion, up 2.3%, or $105
million, from December 31, 1997 and up 7.8%, or $337 million, from March 31,
1997. Core deposits consisting of noninterest-bearing demand (up 0.2%, or $2
million, from December 31, 1997 and up 8.5%, or $79 million, from March 31,
1997), interest-bearing checking, regular savings and money market deposit
accounts comprised 54% of total deposits at March 31, 1998 and December 31, 1997
and 55% of total deposits at March 31, 1997.
At December 31, 1997, deposits totaled $4.573 billion, up 9.3%, or $391
million, from year-end 1996. Core deposit categories consisting of
noninterest-bearing demand (which increased 18.1% to $1,002 million at year-end
1997), interest-bearing checking, regular savings, and money market deposit
accounts comprised 54% of total deposits at both December 31, 1997 and 1996.
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<PAGE> 88
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------ ------------------------
1998 1997 1997 1996
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest-bearing demand................ $1,003,485 $ 924,636 $1,001,550 $ 848,384
Interest-bearing checking................. 64,296 59,687 74,843 62,401
Regular savings........................... 562,825 538,550 545,928 534,456
Money market deposit accounts............. 882,126 863,674 862,155 820,428
TCDs G $100 thousand...................... 1,330,330 1,349,155 1,250,597 1,260,163
TCDs $100 thousand or more................ 835,015 605,308 837,877 656,249
---------- ---------- ---------- ----------
Total................................... $4,678,077 $4,341,010 $4,572,950 $4,182,081
========== ========== ========== ==========
</TABLE>
CAPITAL MANAGEMENT
At March 31, 1998 and 1997, total shareholder's equity was $490 million and
$449 million, respectively. As calculated under risk-based capital guidelines,
BancWest's Tier I and total risk-based capital ratios were 8.97% and 10.88%,
respectively, at March 31, 1998, in excess of the "well-capitalized" minimum
under the FDIC's guidelines. The leverage ratio of 7.50% at March 31, 1998 was
also above both the minimum guideline of 4% and the "well-capitalized" minimum
of 5%.
At December 31, 1997 and 1996, total stockholder's equity was $475 million
and $438 million, respectively. Included in this total is $75 million in
preferred stock which qualifies as Tier I capital for regulatory capital
purposes. As calculated under risk-based capital guidelines, BancWest's Tier I
and total risk-based capital ratios were 8.88% and 10.80%, respectively, at
December 31, 1997, as compared to the FDIC's "well-capitalized" minimum
requirements of 6% for Tier I capital and 10% for total risk-based capital. The
leverage ratio of 7.42% at December 31, 1997, was well above the minimum
guideline of 4% and also exceeded the regulatory "well-capitalized" minimum of
5%.
At December 31, 1996 and 1995, total shareholder's equity was $438 million
and $327 million, respectively. The increase in total shareholder's equity was
due in large part to the issuance of $75 million in preferred stock. As
calculated under risk-based capital guidelines, BancWest's Tier I and total
risk-based capital ratios were 9.56% and 11.93%, respectively, at December 31,
1996 as compared to the regulatory "well-capitalized" minimum requirement of
6.00% for Tier I capital and 10% for total risk-based capital. The leverage
ratio of 7.70% at December 31, 1996 was well above the minimum guideline of 4%
and also exceeded the FDIC's "well-capitalized" minimum of 5%.
LIQUIDITY
Liquidity refers to BancWest's ability to provide sufficient cash flows to
fund operations and to meet obligations and commitments on a timely basis at
reasonable costs. BancWest achieves its liquidity objectives from both assets
and liabilities.
BancWest, at March 31, 1998, adopted new liquidity and liability dependency
ratios in conformity with peer reporting practices. At March 31, 1998,
BancWest's net non-core funding dependency ratio (defined as the total of
potentially volatile liabilities, less short-term investments, divided by total
earning assets, less short-term investments) was 25.2% and thus below the 35%
maximum established by Bank of the West's board of directors. In addition, Bank
of the West's board established a maximum ratio of loans and leases, net of the
allowance for losses, to total assets of 80%. At March 31, 1998 this ratio was
76.6%, well below such maximum. Based on such guidelines, BancWest's net
non-core funding dependency ratio and ratio of loans and leases, net of
allowance for losses, to total assets were 24.2% and 76.1%, respectively, at
December 31, 1997.
At December 31, 1997 BancWest's liquidity ratio, defined as the sum of cash
and due from banks, net of required deposit reserves, marketable securities and
short-term investments, net of liabilities secured by any of these liquid
assets, divided by the sum of "core" deposit liabilities and other short-term
liabilities net of
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<PAGE> 89
liabilities secured by liquid assets, was 16.8%, in excess of the 15% minimum
established by Bank of the West's board of directors.
At December 31, 1997, BancWest's volatile liability dependency ratio was
20.6%, consistent with the maximum level established by the board of directors
of Bank of the West.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Derivative financial instruments include futures, forwards, interest rate
swaps, option contracts, and other financial instruments with similar
characteristics. BancWest currently does not enter into material futures,
forwards, swaps, or options contracts. BancWest is party to financial
instruments with off-balance sheet risk in the normal course of business to meet
the financing needs of its customers. These financial instruments include
commitments to extend credit and standby, commercial and other letters of
credit. These instruments involve to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the consolidated
balance sheets. Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates and may require
collateral from the borrower if deemed necessary by BancWest. Commitments to
extend credit and standby letters of credit are not recorded as an asset or
liability by BancWest until the instrument is exercised.
ASSET/LIABILITY MANAGEMENT AND INTEREST RATE RISK
The management and monitoring of interest rate risk is the responsibility
of Bank of the West's Asset and Liability Management Committee ("ALCO") composed
of Bank of the West executives. This process is conducted in conformity with
policies approved by Bank of the West's board of directors.
One method of analyzing interest rate risk is by measuring the interest
rate sensitivity gap, which is the difference between earning assets and
liabilities maturing or repricing within specified periods. The following table
sets forth such an analysis, which reflects certain assumptions made by ALCO as
to the rate sensitivity of deposits without contractual maturities or repricing
dates. Such deposits include noninterest-bearing demand deposits,
interest-bearing demand deposits, money market savings accounts and regular
savings accounts. Additional assumptions such as prepayment estimates for
consumer installment and real estate loans as well as mortgage and asset-backed
securities are made to reflect the probable behavior of these assets. The
effects of derivatives used for hedging, such as interest rate swaps, are also
taken into account in determining the interest rate sensitivity gap.
BancWest's assets that were rate-sensitive within one year were exceeded by
liabilities that were rate-sensitive within one year by $384 million
(liability-sensitive or negative gap) at December 31, 1997, representing 6.8% of
total assets, and within the ALCO policy limit of 10% (positive or negative
gap). Generally, a liability-sensitive gap indicates that the net interest
margin would decrease in a rising rate environment and increase in a falling
rate environment.
Gap analysis has significant limitations as a method for measuring interest
rate risk since changes in interest rates do not affect all categories of assets
and liabilities in the same way. As an augmentation to gap analysis, BancWest
uses a simulation model to quantify the impact of changing interest rates on net
interest income. Although the simulation model methodology is also subject to a
number of assumptions, it provides a more dynamic assessment of the impact of
changing interest rates as compared to the more static nature of gap analysis.
The amount of earnings at risk, defined as the potential negative change in net
interest income, is determined by using different interest rate scenarios. Both
rapidly rising and falling rate shocks and gradual increasing and decreasing
interest rate assumptions are used to measure and manage earnings at risk within
a limit established by Bank of the West's board of directors. At December 31,
1997, BancWest was within this limit.
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<PAGE> 90
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------
UNDER ONE YEAR OVER
TWELVE THROUGH FIVE
MONTHS FIVE YEARS YEARS TOTAL
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Federal funds sold/reverse repos.......... $ 17,000 $ -- $ -- $ 17,000
Investment securities and CDs............. 453,260 372,299 33,615 859,174
Loans and leases.......................... 1,961,755 1,777,051 559,685 4,298,491
---------- ---------- ---------- ----------
Total rate sensitive assets............... 2,432,015 2,149,350 593,300 5,174,665
Other assets.............................. -- -- 468,433 468,433
---------- ---------- ---------- ----------
Total assets.............................. $2,432,015 $2,149,350 $1,061,733 $5,643,098
========== ========== ========== ==========
LIABILITIES AND EQUITY:
Deposits.................................. $2,477,778 $2,095,023 $ 149 $4,572,950
Subordinated notes........................ -- 50,000 -- 50,000
Other borrowings and capital lease
obligations............................. 338,318 103,820 2,911 445,049
---------- ---------- ---------- ----------
Total rate sensitive liabilities.......... 2,816,096 2,248,843 3,060 5,067,999
Other liabilities and equity.............. -- -- 575,099 575,099
---------- ---------- ---------- ----------
Total liabilities and equity.............. $2,816,096 $2,248,843 $ 578,159 $5,643,098
========== ========== ========== ==========
Effective gap............................. $ (384,081) $ (99,493) $ 483,574 --
Effective cumulative gap.................. (384,081) (483,574) -- --
Cumulative gap as % of assets............. -6.8% -8.6% -- --
ALCO policy limit......................... + or -610.0%
</TABLE>
YEAR 2000 ISSUES
Many computer programs use only two digits to identify entries in the date
code field. If not corrected, these programs may fail or create erroneous
results because of the date change in the year 2000.
In 1997, Bank of the West's management commenced a comprehensive program to
address this problem and seek to ensure that Bank of the West's computer
software and hardware will continue to function properly in the year 2000 and
thereafter. Internal and external costs in connection with this program are not
anticipated to materially impact Bank of the West's operations. However, even
though Bank of the West's planned software modifications and system upgrades
should adequately address year 2000 issues, there can be no assurance that
unforeseen difficulties will not arise. Bank of the West's program includes the
identification of third-party service providers, customers and other external
parties upon which Bank of the West relies or with whom Bank of the West must
interface on mission critical systems or applications. The program also includes
determination of and coordination with the compliance efforts of such external
parties on year 2000 issues. There can be no assurance that the failure of any
such external party to resolve its year 2000 issues will not have an adverse
effect on BancWest and Bank of the West.
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<PAGE> 91
NET INTEREST MARGIN
(Dollars in Thousands)
<TABLE>
<CAPTION>
FOR THE 3 MONTHS ENDED FOR THE 3 MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
------------------------------- -------------------------------
INTEREST YIELD INTEREST YIELD
AVERAGE INCOME/ AND AVERAGE INCOME/ AND
BALANCE EXPENSE RATES BALANCE EXPENSE RATES
---------- -------- ----- ---------- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Securities
U.S. Treasury and agency.................................. $ 138,672 $ 2,209 6.48% $ 322,609 $ 4,912 6.19%
Mortgage-backed securities................................ 441,103 6,601 6.07 446,965 6,968 6.32
Asset-backed and other securities......................... 278,818 4,466 6.51 145,812 2,366 6.60
---------- -------- ----- ---------- ------- -----
Total securities.................................... 858,593 13,276 6.28 915,386 14,246 6.32
Short-term investments...................................... 15,322 275 7.28 7,037 152 8.76
Loans and leases
Commercial................................................ 977,791 22,060 9.15* 858,537 18,892 8.92*
Construction.............................................. 176,741 4,503 10.33 118,687 3,085 10.54
Real estate............................................... 513,273 9,723 7.68 526,555 10,018 7.72
Installment............................................... 1,808,075 36,980 8.29 1,568,764 32,506 8.40
Leases.................................................... 774,575 14,744 7.72 542,705 11,649 8.71
Revolving consumer credit................................. 164,684 3,815 9.39 179,425 4,275 9.66
Other..................................................... 4,008 19 1.92 4,287 3 0.28
---------- -------- ----- ---------- ------- -----
Total............................................... 4,419,147 91,844 8.43* 3,798,960 80,428 8.59*
Loan fees................................................... 544 628 --
---------- -------- ----- ---------- ------- -----
Total loans and leases, including loan fees......... 4,419,147 92,388 8.48* 3,798,960 81,056 8.65*
---------- -------- ----- ---------- ------- -----
Total Earning Assets........................................ 5,293,062 $105,939 8.12%* 4,721,383 $95,454 8.20%*
======== ===== ======= =====
Nonearning assets........................................... 356,368 333,965
---------- ----------
Total Assets........................................ $5,649,430 $5,055,348
========== ==========
Interest-Bearing Liabilities
Deposits
Savings, NOW and money market............................. $1,484,988 $ 7,455 2.04% $1,431,671 $ 7,011 1.99%
CDs under $100,000........................................ 219,590 2,841 5.25 253,698 3,289 5.26
CDs $100,000 and over..................................... 671,736 9,131 5.51 465,845 6,193 5.39
T-Bill CDs................................................ 1,115,855 14,576 5.30 1,094,609 14,501 5.37
Public Time............................................... 156,864 2,031 5.25 103,699 1,263 4.94
---------- -------- ----- ---------- ------- -----
Total deposits...................................... 3,649,033 36,034 4.00 3,349,522 32,257 3.91
Short-term borrowings....................................... 169,382 2,300 5.51 192,865 2,470 5.19
Long-term debt.............................................. 309,949 4,816 6.30 161,950 2,789 6.98
Other....................................................... 2,783 30 4.37 6,821 90 5.35
---------- -------- ----- ---------- ------- -----
Total Interest-Bearing liabilities.......................... 4,131,147 $ 43,180 4.24% 3,711,158 $37,606 4.11%
======== ===== ======= =====
Demand deposits............................................. 926,566 820,164
Other liabilities........................................... 106,569 80,121
Shareholders' equity........................................ 485,148 443,905
---------- ----------
Total Liabilities and Shareholders' equity.......... $5,649,430 $5,055,348
========== ==========
Net Interest Margin on Earning Assets
Interest income/Earning assets............................ $105,939 8.12%* $95,454 8.20%*
Interest expense/Earning assets........................... 43,180 3.31 37,606 3.23
-------- ----- ------- -----
Net Interest Margin/Earning Assets........................ $ 62,759 4.81%* $57,848 4.97%*
======== ===== ======= =====
</TABLE>
- ---------------
* Amounts are presented as if fully taxable, at a federal income tax rate of 35%
in all periods presented. Net interest margin includes a tax equivalent
adjustment of $11 thousand in the first 3 months of 1998, $20 thousand in the
first 3 months of 1997, and $73 thousand, $119 thousand and $163 thousand in
the years ended December 31, 1997, 1996 and 1995, respectively. Nonaccrual
loans are included in the computations of average loan balances for all
periods presented.
82
<PAGE> 92
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
----------------------------- ----------------------------- -----------------------------
INTEREST YIELD INTEREST YIELD INTEREST YIELD
AVERAGE INCOME/ AND AVERAGE INCOME/ AND AVERAGE INCOME/ AND
BALANCE EXPENSE RATES BALANCE EXPENSE RATES BALANCE EXPENSE RATES
---------- -------- ----- ---------- -------- ----- ---------- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 272,018 $ 16,930 6.22% $ 383,185 $ 23,191 6.05% $ 524,247 $ 32,116 6.13%
464,784 29,070 6.25 380,005 23,681 6.23 341,423 20,814 6.10
161,850 10,567 6.53 134,953 8,607 6.38 131,805 8,455 6.41*
---------- -------- ---- ---------- -------- ----- ---------- -------- -----
898,652 56,567 6.29 898,143 55,479 6.18 997,475 61,385 6.15
12,318 953 7.74 7,699 846 10.99 10,166 725 7.13
899,954 79,856 8.87* 793,253 71,879 9.06* 710,092 67,295 9.48*
155,158 15,177 9.78 107,411 9,848 9.17 63,724 5,740 9.01
515,268 39,144 7.60 463,558 35,247 7.60 242,779 17,983 7.41
1,679,813 141,293 8.41 1,411,609 119,176 8.44 1,290,417 109,694 8.50
627,977 52,186 8.31 468,211 40,737 8.70 298,710 27,282 9.13
174,079 16,800 9.65 181,219 17,511 9.66 175,901 17,699 10.06
4,500 -- -- 3,840 -- -- 4,042 -- --
---------- -------- ---- ---------- -------- ----- ---------- -------- -----
4,056,749 344,456 8.49* 3,429,101 294,398 8.59* 2,785,665 245,693 8.82*
-- 3,619 -- -- 2,343 -- -- 79 --
-------- ---- ---------- -------- ----- ---------- -------- -----
4,056,749 348,075 8.58* 3,429,101 296,741 8.65* 2,785,665 245,772 8.82*
-------- ---- ---------- -------- ----- ---------- -------- -----
4,967,719 $405,595 8.16% 4,334,943 $353,066 8.15%* 3,793,306 $307,882 8.12%*
======== ==== ======== ===== ======== =====
349,407 352,436 327,615
---------- ---------- ----------
$5,317,126 $4,687,379 $4,120,921
========== ========== ==========
$1,445,292 $ 29,365 2.03% $1,388,360 $ 27,711 2.00% $1,326,241 $ 26,139 1.97%
240,474 12,703 5.28 255,541 13,164 5.15 258,888 13,198 5.10
550,033 30,290 5.51 406,661 21,661 5.33 306,948 17,410 5.67
1,102,809 59,104 5.36 959,650 50,749 5.29 794,724 41,938 5.28
105,799 5,444 5.15 82,676 3,940 4.77 56,435 2,827 5.01
---------- -------- ---- ---------- -------- ----- ---------- -------- -----
3,444,407 136,906 3.97 3,092,888 117,225 3.79 2,743,236 101,512 3.70
183,155 9,784 5.34 291,870 15,294 5.24 305,523 17,724 5.80
247,339 15,663 6.33 69,620 4,982 7.16 51,068 3,842 7.52
8,100 669 8.26 8,257 1,589 19.24 6,327 1,776 28.07
---------- -------- ---- ---------- -------- ----- ---------- -------- -----
3,883,001 $163,022 4.20% 3,462,635 $139,090 4.02% 3,106,154 $124,854 4.02%
======== ==== ======== ===== ======== =====
888,542 768,128 659,183
89,201 63,320 38,689
456,382 393,296 316,895
---------- ---------- ----------
$5,317,126 $4,687,379 $4,120,921
========== ========== ==========
$405,595 8.16%* $353,066 8.15% $307,882 8.12%*
163,022 3.28 139,090 3.21 124,854 3.29
-------- ---- -------- ----- -------- -----
$242,573 4.88%* $213,976 4.94%* $183,028 4.83%*
======== ==== ======== ===== ======== =====
</TABLE>
83
<PAGE> 93
CHANGES IN NET INTEREST MARGIN
<TABLE>
<CAPTION>
1997 COMPARED TO 1996 -- 1996 COMPARED TO 1995 --
INCREASE (DECREASE) DUE TO: INCREASE (DECREASE) DUE TO:
---------------------------- ----------------------------
VOLUME RATE INC(DEC) VOLUME RATE INC(DEC)
------- ------- -------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest earned on
Securities................................... $ 32 $ 1,056 $ 1,088 $(6,136) $ 230 $(5,906)
Short-term investments....................... 357 (250) 107 (271) 392 121
Loans and leases............................. 53,853 (2,519) 51,334 55,680 (4,711) 50,969
------- ------- ------- ------- ------- -------
Total earning assets....................... 54,242 (1,713) 52,529 49,273 (4,089) 45,184
------- ------- ------- ------- ------- -------
Interest paid on:
Deposits..................................... 13,972 5,709 19,681 13,252 2,461 15,713
Short-term borrowings........................ (5,807) 297 (5,510) (715) (1,715) (2,430)
Long-term debt............................... 11,254 (573) 10,681 1,328 (188) 1,140
Other........................................ (13) (907) (920) 371 (558) (187)
------- ------- ------- ------- ------- -------
Total interest-bearing liabilities......... 19,406 4,526 23,932 14,236 -- 14,236
------- ------- ------- ------- ------- -------
Increase (decrease) in net interest income
(tax equivalent basis)................... $34,836 $(6,239) $28,597 $35,037 $(4,089) $30,948
======= ======= ======= ======= ======= =======
</TABLE>
SUMMARY OF QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of BancWest's unaudited quarterly financial data for 1997 and
1996 is presented below:
<TABLE>
<CAPTION>
QUARTER
----------------------------------------
FIRST SECOND THIRD FOURTH ANNUAL TOTAL
------- -------- -------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997
Interest income......................... $95,434 $100,298 $104,258 $105,532 $405,522
Interest expense........................ 37,606 40,223 42,581 42,612 163,022
------- -------- -------- -------- --------
Net interest income..................... 57,828 60,075 61,677 62,920 242,500
Provision for loan losses............... 4,000 5,000 5,250 5,500 19,750
Total noninterest income................ 9,481 11,119 11,133 13,620 45,353
Total noninterest expense............... 38,953 39,332 39,565 42,681 160,531
------- -------- -------- -------- --------
Income before income taxes.............. 24,356 26,862 27,995 28,359 107,572
Income taxes............................ 10,141 11,152 11,612 11,809 44,714
------- -------- -------- -------- --------
Net Income.............................. $14,215 $ 15,710 $ 16,383 $ 16,550 $ 62,858
======= ======== ======== ======== ========
1996
Interest income......................... $80,157 $ 86,761 $ 91,486 $ 94,543 $352,947
Interest expense........................ 32,221 34,227 35,454 37,188 139,090
------- -------- -------- -------- --------
Net interest income..................... 47,936 52,534 56,032 57,355 213,857
Provision for loan losses............... 3,000 4,500 4,500 4,500 16,500
Total noninterest income................ 7,573 8,658 10,733 9,276 36,240
Total noninterest expense............... 37,427 38,073 49,930 39,225 164,655
------- -------- -------- -------- --------
Income before income taxes.............. 15,082 18,619 12,335 22,906 68,942
Income taxes............................ 6,179 7,600 2,146 9,214 25,139
------- -------- -------- -------- --------
Net Income.............................. $ 8,903 $ 11,019 $ 10,189 $ 13,692 $ 43,803
======= ======== ======== ======== ========
</TABLE>
84
<PAGE> 94
BANQUE NATIONALE DE PARIS
GENERAL
BNP is a French corporation that conducts retail banking activities in
France and corporate and private banking and other financial activities both in
France and throughout the world. BNP also has numerous subsidiaries and
affiliates inside and outside of France that engage in banking and other
financial activities.
At December 31, 1997, BNP and its subsidiaries and affiliates (the "BNP
Group") had 2,098 offices (i.e., subsidiaries, branches, agencies, affiliates
and representative offices) in France, and an additional 647 offices in 79
foreign countries, as well as in six French overseas areas.
At December 31, 1997, the BNP Group had consolidated assets of French
francs 2,034.9 billion ($339.8 billion), consolidated gross customer loans of
French francs 929.5 billion ($155.2 billion), consolidated customer deposits
(including retail and negotiable certificates of deposit) of French francs 904.6
billion ($151.1 billion) and stockholders' equity (BNP Group's share) of French
francs 59 billion ($9.9 billion).
According to the ranking published in July 1997 by The Banker, based on
total assets at December 31, 1996, the BNP Group was the second largest banking
group in France, the sixth largest banking group in Europe and the fourteenth
largest banking group in the world, and based on Tier 1 capital, was the third,
eighth and twenty-first largest banking group in France, Europe and the world,
respectively, as of such date. At December 31, 1997 the Bank's total risk-based
capital ratio was 9.9% and its Tier 1 risk-based capital ratio was 5.9%.
HISTORY
BNP was formed in 1966 through the merger of Comptoir National d'Escompte
de Paris and Banque Nationale pour le Commerce et l'Industrie, each of which had
been nationalized along with other major French commercial banks in 1945.
The French government owned over 80% of the voting stock of BNP and its
predecessor banks from 1945 to 1982. In 1982, pursuant to a French law providing
for the nationalization of certain industrial companies and financial
institutions, the shares of BNP not already owned by the French Republic or
state-controlled entities were transferred to the government in exchange for
debentures issued by the Caisse Nationale des Banques. In 1993, BNP was
privatized through the offering of equity interests to the public in France and
internationally. As of December 31, 1997, the capital shares of BNP were held as
follows: 57.0% by the public, 11.2% by a group of stable shareholders, 11.1% by
French institutional investors, 9.7% by AXA/UAP, 7.8% by other French companies
and 3.2% by employees.
DOMESTIC AND INTERNATIONAL ACTIVITIES
The BNP Group is engaged in a broad range of banking and financial services
activities both in France and abroad, functionally organized in two divisions:
Domestic Banking and International Banking and Finance.
BNP's Domestic Banking Division provides a full range of banking services
through a network of 2,098 branches and an extensive home banking network. In
addition, BNP's European network consists of trans-European banking services
partnership with 10 European banks totaling 14,000 offices, plus the networks of
its subsidiaries Banque de Bretagne and Credit Universel and several specialized
subsidiaries such as Natio-Vie, BNP Bail and Banque de la Cite. BNP's domestic
customers include approximately one-third of France's small and medium-sized
companies, roughly 400,000 self-employed customers, private banking customers
and approximately 5.3 million retail customers. BNP offers its domestic
customers a comprehensive range of financial products and services designed to
cover a wide variety of needs, including electronic banking, conventional
lending, specialized finance, leasing, leveraged buyouts, factoring, credit
insurance, investment banking, mortgage and customer lending life/endowment
insurance, property/casualty insurance (as a broker), savings products and asset
management.
85
<PAGE> 95
BNP's International Banking and Finance Division conducts activities
internationally through 647 offices in 79 countries outside of France, as well
as in six French overseas areas (Guadeloupe, Martinique, New Caledonia, French
Guyana, Reunion and Wallis et Futuna). BNP conducts its international corporate
and private banking and finance activities (organized within the International
Banking and Finance Division) directly and through an international network of
foreign subsidiaries, branches, agencies, affiliates and representative offices.
BNP's international operations service four main categories of customers:
multinational companies, to which it offers general financing and advisory
services; companies, either French or local, to which it offers primarily
international trade financing services; individual customers, to whom it offers
private banking services; and banks and institutional investors, to which it
provides capital markets and correspondent banking services.
In the United States, BNP maintains offices in New York, Chicago, San
Francisco, Los Angeles, Houston, Miami and Dallas, and it owns French American
Banking Corporation, a New York finance subsidiary and, through BancWest
Corporation, Bank of the West. Through its United States network, BNP is
represented in the major US financial centers and is a significant participant
in international trade financing. In Canada, BNP exercises a full range of
banking activities through BNP Canada. In 1995, BNP established a subsidiary in
Mexico.
86
<PAGE> 96
UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION
The financial information below presents the unaudited pro forma combined
balance sheet and selected ratios of FHI and subsidiaries and of BancWest and
subsidiary at March 31, 1998, giving effect to the issuance by FHI of 25,864,355
shares of Class A Common Stock and to the Merger as if such transactions had
occurred on that date. Also presented are the unaudited pro forma combined
statements of income and selected ratios for the year ended December 31, 1997,
and the three months ended March 31, 1998, giving effect to the issuance of
Class A Common Stock and the Merger as if such transactions had occurred at
January 1, 1997. The pro forma financial information is based on historical
consolidated financial statements of FHI and subsidiaries and BancWest and
subsidiary, giving effect to the Merger pursuant to the purchase method of
accounting and the assumptions and adjustments described in the accompanying
notes.
Purchase accounting adjustments and the related pro forma adjustments of
income and expense accounts are based upon estimated fair market values and
valuations made by FHI's management prior to consummation of the Merger. The
fair value of the shares of Class A Common Stock to be issued to BNP was
initially determined using the market price of the Company's Common Stock for a
reasonable period before and after the date that the terms of the Merger were
publicly announced. The valuation of these shares of Class A Common Stock, and
thus the purchase price, may need to be discounted as of the acquisition date in
consultation with an independent third party to reflect the impact of
transferability and other restrictions placed upon the Class A Common Stock. The
actual purchase accounting adjustments will be based on information as of the
actual acquisition date. The pro forma financial information does not give
effect to the anticipated cost savings and revenue enhancements in connection
with the Merger. See "DIRECTORS, MANAGEMENT AND OPERATIONS FOLLOWING THE
MERGER -- Operations Following the Merger." The pro forma financial information
may not be indicative of the combined results that actually would have occurred
had the Merger been consummated on the dates indicated or which may be obtained
in the future.
87
<PAGE> 97
UNAUDITED PRO FORMA COMBINED BALANCE SHEET AND SELECTED RATIOS
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------------------------------------
FHI & BANCWEST & PRO FORMA COMBINED
SUBSIDIARIES SUBSIDIARY ADJUSTMENTS PRO FORMA
------------ ---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Interest-bearing deposits in other banks......... $ 142,353 $ -- $ -- $ 142,353
Federal funds sold and securities purchased under
agreements to resell........................... 160,000 13,309 -- 173,309
Investment securities............................ 725,688 851,088 -- 1,576,776
Loans, net of allowance.......................... 6,210,754 4,420,867 -- 10,631,621
Cash and due from banks.......................... 288,260 320,115 (9,000)(a) 524,375
(75,000)(a)
Premises and equipment........................... 242,170 35,657 -- 277,827
Core deposit premium............................. 24,464 -- -- 24,464
Goodwill......................................... 94,825 61,003 (61,003)(c) 742,798
647,973(c)
Other assets..................................... 242,462 67,348 -- 309,810
---------- ---------- -------- -----------
Total Assets............................. $8,130,976 $5,769,387 $502,970 $14,403,333
========== ========== ======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits......................................... 6,138,496 4,678,077 -- 10,816,573
Short-term borrowings............................ 695,660 185,726 -- 881,386
Other liabilities................................ 243,839 105,476 30,490(b) 379,805
Long-term debt................................... 316,731 309,949 -- 626,680
---------- ---------- -------- -----------
Total Liabilities........................ 7,394,726 5,279,228 30,490 12,704,444
---------- ---------- -------- -----------
Stockholders' Equity:
Common stock..................................... 165,952 8,667 (8,667)(c) 59,054
25,864(c)
(132,762)(d)
Preferred stock.................................. -- 95,000 (75,000)(a) --
(20,000)(c)
Surplus.......................................... 148,158 228,392 (228,392)(c) 1,217,695
936,775(c)
132,762(d)
Retained earnings................................ 485,233 157,520 (30,490)(b) 485,233
(9,000)(a)
(61,003)(c)
(57,027)(c)
Accumulated other comprehensive income........... 37 580 (580)(c) 37
Treasury stock................................... (63,130) -- -- (63,130)
---------- ---------- -------- -----------
Total Stockholders' Equity............... 736,250 490,159 472,480 1,698,889
---------- ---------- -------- -----------
Total Liabilities and Stockholders'
Equity................................. $8,130,976 $5,769,387 $502,970 $14,403,333
========== ========== ======== ===========
SELECTED RATIOS:
Average stockholders' equity to average total
assets......................................... 9.12% 8.59% N/A 12.28%
At period-end:
Book value per common share...................... $ 23.64 $ 227.96 N/A $ 29.80
Risk-based capital ratios:
Tier 1....................................... 9.54% 8.97% N/A 8.45%
Total........................................ 11.83% 10.88% N/A 10.61%
Tier 1 leverage ratio............................ 9.13% 7.59% N/A 7.66%
Allowance for loan losses to total loans......... 1.32% 1.18% N/A 1.26%
Nonperforming assets to total loans and other
real estate owned.............................. 1.41% .60% N/A 1.08%
Allowance for loan losses to nonperforming
loans.......................................... 1.44x 2.80x N/A 1.77x
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information
88
<PAGE> 98
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME AND SELECTED RATIOS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------
FHI & BANCWEST & PRO FORMA COMBINED
SUBSIDIARIES SUBSIDIARY ADJUSTMENTS PRO FORMA
------------ ---------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME:
Total interest income........................ $592,483 $405,522 $ -- $998,005
Total interest expense....................... 258,011 163,022 -- 421,033
-------- -------- -------- --------
Net interest income........................ 334,472 242,500 -- 576,972
Provision for loan losses.................... 17,211 19,750 -- 36,961
-------- -------- -------- --------
317,261 222,750 -- 540,011
Total noninterest income..................... 98,513 45,353 -- 143,866
Total noninterest expense.................... 292,210 160,531 30,526(e) 483,267
-------- -------- -------- --------
Income before income taxes................. 123,564 107,572 (30,526) 200,610
Income taxes................................. 39,303 44,714 84,017
-------- -------- -------- --------
Net income................................. 84,261 62,858 (30,526) 116,593
Preferred stock dividends.................... -- 6,692 (6,692)(f) --
-------- -------- -------- --------
Net income available to common
stockholders............................ $ 84,261 $ 56,166 $(23,834) $116,593
======== ======== ======== ========
Per common share:
Basic:
Earnings................................ $ 2.66 N/A N/A $ 2.02
Cash earnings(g)........................ 2.85 N/A N/A 2.73
Diluted:
Earnings................................ 2.64 N/A N/A 2.02
Cash earnings(g)........................ 2.83 N/A N/A 2.72
Cash dividends............................. 1.24 N/A N/A 1.24
SELECTED RATIOS:
Return on average total assets............... 1.06% 1.18% N/A .85%
Return on average stockholders' equity....... 11.61% 13.77% N/A 6.83%
Return on average common equity.............. 11.61% 15.57% N/A 6.83%
Net interest margin.......................... 4.70% 4.88% N/A 4.77%
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information
89
<PAGE> 99
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME AND SELECTED RATIOS
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1998
------------------------------------------------------
FHI & BANCWEST & PRO FORMA COMBINED
SUBSIDIARIES SUBSIDIARY ADJUSTMENTS PRO FORMA
------------ ---------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME:
Total interest income........................ $151,323 $105,928 $ -- $257,251
Total interest expense....................... 65,745 43,180 -- 108,925
-------- -------- ------- --------
Net interest income........................ 85,578 62,748 -- 148,326
Provision for loan losses.................... 4,396 5,000 -- 9,396
-------- -------- ------- --------
81,182 57,748 -- 138,930
Total noninterest income..................... 25,607 13,664 -- 39,271
Total noninterest expense.................... 73,637 43,957 7,476(e) 125,070
-------- -------- ------- --------
Income before income taxes................. 33,152 27,455 (7,476) 53,131
Income taxes................................. 11,924 10,387 -- 22,311
-------- -------- ------- --------
Net income................................. 21,228 17,068 (7,476) 30,820
Preferred stock dividends.................... -- 1,669 (1,669)(f) --
-------- -------- ------- --------
Net income available to common
stockholders............................ $ 21,228 $ 15,399 $(5,807) $ 30,820
======== ======== ======= ========
Per common share:
Basic:
Earnings................................ $ .68 N/A N/A $ .54
Cash earnings(g)........................ .73 N/A N/A .72
Diluted:
Earnings................................ .68 N/A N/A .54
Cash earnings(g)........................ .73 N/A N/A .72
Cash dividends............................... .31 N/A N/A .31
SELECTED RATIOS (ANNUALIZED):
Return on average total assets............... 1.07% 1.23% N/A .88%
Return on average stockholders' equity....... 11.78% 14.27% N/A 7.18%
Return on average common equity.............. 11.78% 16.06% N/A 7.18%
Net interest margin.......................... 4.80% 4.81% N/A 4.81%
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information
90
<PAGE> 100
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(a) Purchase of Fixed/Adjustable Rate Noncumulative Preferred Stock Series A,
without par value (the "BancWest Preferred Stock"), of BancWest, $75
million aggregate liquidation amount and payment of BancWest Preferred
Stock purchase premium of $9.0 million as a condition to consummation of
the Merger.
(b) Adjustment to record liabilities of BancWest at estimated fair values.
Amount consists primarily of unfunded postretirement benefit plan
obligations and estimated restructuring liabilities (consisting of employee
termination costs and other costs to exit certain BancWest activities).
Adjustment is a preliminary estimate. The final estimate could be
materially different from the preliminary estimate. Any difference between
the preliminary and final estimates will directly impact goodwill.
(c) Reflects the merger of the Company and BancWest for approximately $962.6
million:
- Issuance of 25,864,355 shares of Class A Common Stock by the
Company.
- Conversion of Series A Non-Cumulative Preferred Stock, without par
value (the "Bank of the West Preferred Stock"), of Bank of the West,
$20 million aggregate liquidation amount to Class A Common Stock.
- Elimination of goodwill of $61.0 million on the books of BancWest at
March 31, 1998.
- Goodwill of $648.0 million which is the excess of the purchase price
of BancWest over the fair values of identifiable net assets
acquired. A core deposit premium study will be conducted which may
result in reallocating a portion of goodwill to core deposit
premium.
(d) Change in par value of Company's common stock from $5.00 to $1.00.
(e) Amortization of goodwill over 20 years.
(f) Elimination of preferred stock dividend related to purchase of the BancWest
Preferred Stock and conversion of the Bank of the West Preferred Stock into
shares of Class A Common Stock.
(g) Cash earnings per share (which is unaudited) is defined as earnings per
share in accordance with generally accepted accounting principles plus the
after-tax amortization of intangibles that are deducted from regulatory
capital for risk-based capital purposes.
91
<PAGE> 101
92
<PAGE> 102
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of June 1, 1998 (31,140,015
outstanding shares) (except as otherwise noted in footnotes) by (i) each
stockholder known by the Company to own beneficially more than 5% of the
outstanding shares of the Common Stock, (ii) each director of the Company, (iii)
each of the named executive officers of the Company, and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
BENEFICIALLY OF CLASS
BENEFICIAL OWNER OWNED OUTSTANDING
- ---------------- ---------------- -----------
<S> <C> <C>
David M. Haig, Fred C. Weyand, Paul Mullin Ganley and Walter
A. Dods, Jr., as Trustees under the Will and of the Estate
of S.M. Damon, 999 Bishop Street, Honolulu, Hawaii
96813(1).................................................. 7,900,000 25.37
Trust and Investments Division, First Hawaiian Bank, P.O.
Box 3200, Honolulu, Hawaii 96847(2)....................... 2,515,680 8.08
Alexander & Baldwin, Inc., 822 Bishop Street, Honolulu,
Hawaii 96813(3)........................................... 1,692,894 5.44
The Capital Group Companies, Inc., 333 South Hope Street,
Los Angeles, California 90071(4).......................... 1,679,800 5.44
Walter A. Dods, Jr.(5)(6)................................... 8,274,930 26.57
David M. Haig(5)(7)......................................... 7,911,915 25.41
Fred C. Weyand(5)(8)........................................ 7,921,755 25.44
Paul Mullin Ganley(5)(9).................................... 7,936,122 25.49
John W.A. Buyers............................................ 2,012 *
John C. Couch(10)........................................... 9,929 *
Dr. Julia Ann Frohlich...................................... 1,200 *
John A. Hoag(11)............................................ 38,953 *
Bert T. Kobayashi, Jr.(12).................................. 4,656 *
Dr. Richard T. Mamiya....................................... 4,476 *
Dr. Fujio Matsuda........................................... 3,074 *
Dr. Roderick F. McPhee(13).................................. 13,485 *
George P. Shea, Jr.......................................... 2,545 *
John K. Tsui(14)............................................ 49,226 *
Robert C. Wo(15)............................................ 15,405 *
Donald G. Horner(16)........................................ 46,609 *
Howard H. Karr(17).......................................... 49,932 *
All executive officers and directors as a group (17
persons).................................................. 8,586,224 27.57%
</TABLE>
- ---------------
* The percentage of shares beneficially owned does not exceed 1% of the
shares currently outstanding, including shares that can be acquired within
60 days through the exercise of stock options.
(1) The Trustees have shared voting and investment power as to shares held by
the Damon Estate.
(2) Includes: 1,042,558 shares as to which it has sole voting power and 967,169
shares as to which it has sole investment power; 1,240,464 shares as to
which it has shared voting power and 1,303,513 shares as to which it has
shared investment power; 232,657 shares as to which sole voting power is
retained by the settlors of the trusts; and 244,998 shares as to which sole
investment power is held by outside investment advisors.
(3) Mr. John C. Couch, a director of the Company, is the Chairman of the Board
of Directors of Alexander & Baldwin, Inc. Alexander and Baldwin, Inc. has
sole voting and investment power as to shares shown in the table above.
(4) The Capital Group Companies, Inc. disclaims investment or voting power over
securities reported but may be deemed to "beneficially own" such securities
by virtue of Rule 13d-3 under the Investment Advisers Act of 1934.
93
<PAGE> 103
(5) Includes 7,900,000 shares held in capacity as a Trustee of the Damon
Estate, as to which voting and investment power is shared.
(6) Includes 924 shares held in his wife's individual retirement account as to
which Mr. Dods disclaims beneficial ownership, and 105,550 shares that Mr.
Dods has the right to acquire within 60 days through the exercise of stock
options. Mr. Dods is a Director of Alexander & Baldwin, Inc., which holds
1,692,894 shares of Common Stock, as to which Mr. Dods disclaims beneficial
ownership. Mr. Dods is a Trustee of Punahou School, which owns 105,136
shares of Common Stock, with respect to which he shares voting and
investment power and disclaims beneficial ownership.
(7) Mr. Haig is a beneficiary and a Trustee of the Damon Estate. Mr. Haig is
beneficiary of an HR-10 plan which holds 5,665 shares of the Common Stock
as to which he has sole voting and investment powers.
(8) Includes 11,755 shares in his wife's revocable living trust as to which Mr.
Weyand shares voting and investment powers.
(9) Includes 19,434 shares in Mr. Ganley's revocable living trust as to which
he has sole voting and investment powers, 12,336 shares in a money purchase
pension plan as to which he has sole voting and investment powers, 4,159
shares in an individual retirement account as to which he has sole voting
and investment powers, and 166 shares for which he has shared voting and
investment powers, as successor trustee.
(10) Mr. Couch is Chairman of the Board of Directors of Alexander & Baldwin,
Inc., which holds 1,692,894 shares of Common Stock. Mr. Couch disclaims
beneficial ownership as to such shares.
(11) Includes 19,020 shares in his wife's revocable living trust as to which Mr.
Hoag disclaims beneficial ownership and 1,795 shares held jointly with his
wife.
(12) Includes 594 shares held in his wife's individual retirement account and
1,325 shares held in his wife's revocable living trust as to which he
disclaims ownership.
(13) Dr. McPhee was President and ex-officio non-voting member of the Board of
Trustees of Punahou School, which owns 105,136 shares of Common Stock. Dr.
McPhee has no voting or investment powers with respect to such shares and
disclaims beneficial ownership thereof.
(14) Includes 37,160 shares that Mr. Tsui has the right to acquire within 60
days through the exercise of stock options and 250 shares as a Trustee of
his daughter's Trust.
(15) Includes 8,000 shares in the Betty and Bob Wo Foundation as to which Mr. Wo
shares voting and investment powers and 300 shares held jointly with his
wife.
(16) Includes 24,122 shares that Mr. Horner has the right to acquire within 60
days through the exercise of stock options.
(17) Includes 28,620 shares that Mr. Karr has the right to acquire within 60
days through the exercise of stock options, and 78 shares owned by his wife
directly or as custodian as to which he disclaims beneficial ownership.
94
<PAGE> 104
INDEPENDENT ACCOUNTANTS
The consolidated balance sheets of First Hawaiian, Inc. and its
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1997, included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, have been
audited by PricewaterhouseCoopers LLP, independent certified public accountants,
as stated in their reports, which are incorporated herein by reference.
Representatives of PricewaterhouseCoopers LLP are expected to be at the Special
Meeting and will be available to respond to questions and to make a statement if
they choose.
The consolidated balance sheets of BancWest and its subsidiary as of
December 31, 1997 and 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended included in this
Proxy Statement have been audited by PricewaterhouseCoopers LLP, independent
certified public accountants, as stated in their reports, which are included
herein. The consolidated statements of income, stockholders' equity and cash
flows of BancWest and its subsidiary for the year ended December 31, 1995
included in this Proxy Statement have been audited by Deloitte & Touche LLP,
independent certified public accountants, as stated in their report, which is
included herein.
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and current reports, proxy statements
and other information with the Commission. You may read and copy any reports,
statements or other information that the Company files at the Commission's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the Commission at (800) SEC-0330 for further information
on the public reference rooms. The Company's public filings are also available
to the public from commercial document retrieval services and at the Internet
World Wide Web site maintained by the Commission at "http://www.sec.gov."
Reports, proxy statements and other information concerning the Company also may
be inspected at the offices of the NASD, 1735 K Street, Washington, D.C. 20006.
The Commission allows the Company to "incorporate by reference" information
into this Proxy Statement, which means that the Company can disclose important
information to you by referring you to another document filed separately with
the Commission. The information incorporated by reference is deemed to be part
of this Proxy Statement, except for any information superseded by information
contained directly in the Proxy Statement. This Proxy Statement incorporates by
reference the documents set forth below that the Company has previously filed
with the Commission. These documents contain important information about the
Company and its financial condition.
<TABLE>
<CAPTION>
FIRST HAWAIIAN, INC.
COMMISSION FILINGS
(FILE NO. 0-7949) PERIOD
- -------------------- ------
<S> <C>
Annual Report on Form 10-K............... Year ended December 31, 1997
Quarterly Report on Form 10-Q............ Quarter ended March 31, 1998
Current Reports on Form 8-K.............. Dated May 28, 1998 (filed May 29, 1998)
and May 28, 1998 (filed June 1, 1998)
</TABLE>
The Company incorporates by reference additional documents that it may file
with the Commission between the date of this Proxy Statement and the date of the
Special Meeting. These include periodic reports, such as Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as
proxy statements.
The Company has supplied all information contained or incorporated by
reference in the Proxy Statement relating to the Company, BancWest has supplied
all such information relating to BancWest and Bank of the West and BNP has
supplied all such information relating to BNP.
95
<PAGE> 105
If you are a stockholder, the Company may have sent you some of the
documents incorporated by reference, but you can obtain any of them from the
Company or the Commission or the Commission's Internet World Wide Web site
described above.
Documents incorporated by reference are available from the Company without
charge, excluding all exhibits unless specifically incorporated by reference in
this Proxy Statement, by requesting them in writing or by telephone from the
Company at First Hawaiian, Inc., 999 Bishop Street, Honolulu, Hawaii 96813,
(808) 525-7000. If you would like to request documents from the Company, please
do so by August 21, 1998 to receive them before the Special Meeting. If you
request any incorporated documents from us, we will mail them to you by first
class mail, or other equally prompt means, within one business day of receipt of
your request.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the 1999 Annual Meeting of the Company must be received
by the Corporate Secretary of the Company on or prior to December 31, 1998.
OTHER MATTERS
At the date of this Proxy Statement, management does not know of any
business to be presented at the Special Meeting other than the matters set forth
above. If any other matters properly come before the Special Meeting, it is the
intention of the persons named in the accompanying form of proxy to vote in
accordance with their judgment on such matters.
96
<PAGE> 106
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Acquisition Proposal........................................ 43
Acquisition Restrictions.................................... 48
Agreement................................................... 34
ALCO........................................................ 80
BancWest.................................................... 20
BancWest Common Stock....................................... 20
BancWest Preferred Stock.................................... 36
BancWest's Current Premium.................................. 39
Bank Merger................................................. 31
Bank Merger Act............................................. 31
Bank of the West Preferred Stock............................ 91
BHCA........................................................ 31
BIF......................................................... 73
Block Sale.................................................. 54
BNP......................................................... 20
BNP Agreement............................................... 44
BNP Group................................................... 85
Board....................................................... 21
Board of Directors.......................................... 21
Business Combination Proposal............................... 50
By-Laws..................................................... 20
California Banks............................................ 28
California Selected Bank Mergers............................ 30
Class A Common Stock........................................ 20
Class A Directors........................................... 47
Class A Interest............................................ 48
Class A Multiplier.......................................... 48
Class A Nominee............................................. 51
Closing..................................................... 35
Closing Date................................................ 35
Code........................................................ 34
Commission.................................................. 36
Commissioner................................................ 67
Common Stock................................................ 20
Company..................................................... 20
Company Common Shares....................................... 49
Company Transaction Proposal................................ 52
Conversion.................................................. 26
Conversion Number........................................... 35
CRA......................................................... 31
Damon Estate................................................ 4
Department of Justice....................................... 31
DFI......................................................... 67
Effective Time.............................................. 35
Equity Securities........................................... 48
</TABLE>
97
<PAGE> 107
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Essex....................................................... 64
Exchange Act................................................ 52
Executive Committee......................................... 50
Expenses.................................................... 42
FDIC........................................................ 31
FDICIA...................................................... 68
Federal Reserve Board....................................... 31
FF.......................................................... 3
FHI......................................................... 1
FHI Certificate............................................. 20
FTE......................................................... 73
Goldman Sachs............................................... 23
Goldman Sachs Opinion....................................... 26
IBBA........................................................ 68
IBES........................................................ 28
Independent Director........................................ 51
Losses...................................................... 44
Market Check Period......................................... 51
Merger...................................................... 20
Merger Agreement............................................ 20
NASD........................................................ 40
Nasdaq...................................................... 18
NFC......................................................... 65
Non-Class A Directors....................................... 48
Offer Price................................................. 54
Ownership Percentage........................................ 48
PCFC........................................................ 28
Permitted Ownership Percentage.............................. 48
Plan........................................................ 32
Post-Standstill Period...................................... 50
Privately-Negotiated Sale................................... 53
Proxy Statement............................................. 21
Public Offering............................................. 49
Qualified Pledgee........................................... 54
Qualified Transferee........................................ 54
Record Date................................................. 20
Registrable Securities...................................... 54
Registration Rights Agreement............................... 54
Representatives............................................. 37
Riegle-Neal Act............................................. 68
RTC......................................................... 65
Rule 144 Sale............................................... 49
SAIF........................................................ 72
SARs........................................................ 33
Securities Act.............................................. 49
SERP........................................................ 33
Special Meeting............................................. 20
Standstill Agreement........................................ 47
</TABLE>
98
<PAGE> 108
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Standstill Period........................................... 48
Stock Plans................................................. 33
Stockholder Agreement....................................... 20
Superior Proposal........................................... 51
Surviving Corporation....................................... 23
Takeover Proposal........................................... 37
Termination Fee............................................. 42
Third Party................................................. 49
Transaction Agreements...................................... 38
Transfer.................................................... 48
Transfer Measurement Date................................... 49
Transfer Notice............................................. 54
Transferring Party.......................................... 54
Voting Securities........................................... 48
West Coast Banks............................................ 28
</TABLE>
99
<PAGE> 109
100
<PAGE> 110
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF BANCWEST
CORPORATION AND SUBSIDIARY
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BANCWEST CORPORATION AND
SUBSIDIARY FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997 AND
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BANCWEST CORPORATION AND SUBSIDIARY
FOR THE YEARS ENDED DECEMBER 31, 1997, DECEMBER 31, 1996 AND DECEMBER 31, 1995
<TABLE>
<S> <C>
Consolidated Balance Sheets............................... F-2
Consolidated Statements of Income......................... F-3
Consolidated Statements of Cash Flows..................... F-4
Notes to Consolidated Unaudited Financial Statements...... F-6
</TABLE>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BANCWEST CORPORATION AND SUBSIDIARY
FOR THE YEARS ENDED DECEMBER 31, 1997, DECEMBER 31, 1996 AND DECEMBER 31, 1995
<TABLE>
<S> <C>
Report of Independent Accountants on 1996 and 1997
Consolidated Financial Statements...................... F-8
Report of Independent Accountants on 1995 Consolidated
Statements of Income, Stockholders' Equity and Cash
Flows.................................................. F-9
Consolidated Balance Sheets............................... F-10
Consolidated Statements of Income......................... F-11
Consolidated Statements of Stockholders' Equity........... F-12
Consolidated Statements of Cash Flows..................... F-13
Notes to Consolidated Financial Statements................ F-14
</TABLE>
F-1
<PAGE> 111
BANCWEST CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------ ------------------------
1998 1997 1997 1996
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks............................ $ 320,115 $ 322,184 $ 311,392 $ 264,259
Funds sold......................................... 13,309 52,767 17,000 --
---------- ---------- ---------- ----------
Total cash and cash equivalents.......... 333,424 374,951 328,392 264,259
Investment securities:
Held-to-maturity................................. 305,227 263,422 313,114 270,742
Available-for-sale............................... 545,861 677,130 545,572 661,065
---------- ---------- ---------- ----------
Total investment securities.............. 851,088 940,552 858,686 931,807
Loans held for sale................................ 8,440 -- 5,757 --
Loans and leases held for investment:
Commercial, financial and agricultural........... 214,497 222,716 217,853 225,295
Real estate -- construction...................... 167,093 124,234 184,535 118,712
Real estate -- mortgage.......................... 1,675,929 1,589,416 1,638,529 1,587,503
Consumer......................................... 1,619,960 1,362,112 1,551,916 1,310,065
Lease financing.................................. 796,048 559,706 751,509 530,716
---------- ---------- ---------- ----------
Total loans and leases, net.............. 4,473,527 3,858,184 4,344,342 3,772,291
Allowance for credit losses...................... (52,660) (47,753) (51,608) (46,758)
---------- ---------- ---------- ----------
Loans and leases, net of allowance for credit
losses........................................ 4,420,867 3,810,431 4,292,734 3,725,533
Customers' acceptance liability.................. 66 1,291 37 717
Premises and equipment, net...................... 35,657 35,968 34,909 36,581
Foreclosed property, net......................... 3,390 6,549 4,329 6,800
Interest receivable and other assets............. 55,452 54,472 58,122 51,940
Goodwill, net.................................... 61,003 53,146 60,132 53,940
---------- ---------- ---------- ----------
Total Assets............................. $5,769,387 $5,277,360 $5,643,098 $5,071,577
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing.............................. $1,003,485 $ 924,636 $1,001,550 $ 848,384
Interest-bearing................................. 3,674,592 3,416,374 3,571,400 3,333,697
---------- ---------- ---------- ----------
Total deposits........................... 4,678,077 4,341,010 4,572,950 4,182,081
Short-term borrowings.............................. 185,075 245,941 184,418 216,379
Acceptances outstanding............................ 66 1,291 37 717
Interest payable and other liabilities............. 106,061 78,273 100,654 72,767
Long-term borrowings............................... 309,949 161,950 309,949 161,950
---------- ---------- ---------- ----------
Total Liabilities........................ 5,279,228 4,828,465 5,168,008 4,633,894
COMMITMENTS AND CONTINGENT LIABILITIES............. -- -- -- --
STOCKHOLDERS' EQUITY
Non-cumulative preferred stock -- no par value:
Series A of Bank of the West..................... 20,000 20,000 20,000 20,000
Series A of BancWest............................. 75,000 75,000 75,000 75,000
Common stock....................................... 8,667 8,161 8,667 8,161
Additional paid-in capital......................... 228,392 208,898 228,392 208,898
Retained earnings.................................. 157,520 137,559 142,121 125,013
Accumulated other comprehensive income, net of
taxes............................................ 580 (723) 910 611
---------- ---------- ---------- ----------
Total Stockholders' Equity............... 490,159 448,895 475,090 437,683
---------- ---------- ---------- ----------
Total Liabilities and Stockholders'
Equity................................. $5,769,387 $5,277,360 $5,643,098 $5,071,577
========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-2
<PAGE> 112
BANCWEST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
3 MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans and leases...................... $ 92,358 $ 81,026 $ 348,002 $ 296,622 $ 245,609
Investment securities................. 13,276 14,246 56,567 55,479 61,345
Other................................. 294 162 953 846 765
--------- --------- --------- --------- ---------
Total interest income....... 105,928 95,434 405,522 352,947 307,719
INTEREST EXPENSE
Deposits.............................. 36,034 32,257 136,906 117,225 101,512
Short-term borrowings................. 2,300 2,470 9,784 15,294 17,724
Long-term borrowings.................. 4,846 2,879 16,332 6,571 5,618
--------- --------- --------- --------- ---------
Total interest expense...... 43,180 37,606 163,022 139,090 124,854
--------- --------- --------- --------- ---------
Net interest income................... 62,748 57,828 242,500 213,857 182,865
Provision for credit losses........... 5,000 4,000 19,750 16,500 14,500
--------- --------- --------- --------- ---------
Net interest income after provision
for credit losses................... 57,748 53,828 222,750 197,357 168,365
OTHER INCOME
Service fees on deposit accounts...... 7,256 6,159 27,714 22,365 21,519
Commissions and other fees............ 1,125 1,020 4,488 3,486 1,803
Trust fees............................ 709 605 2,622 2,443 2,196
Gains on sale of securities, net...... 16 18 81 30 72
Gains on sale of loans, net........... 1,928 -- 1,629 -- --
Foreign exchange gains, net........... 431 323 1,615 1,360 1,309
Other................................. 2,199 1,356 7,204 6,556 5,338
--------- --------- --------- --------- ---------
Total other income.......... 13,664 9,481 45,353 36,240 32,237
OTHER EXPENSE
Salaries and employee benefits........ 20,516 18,462 74,830 70,130 64,095
Net occupancy expense................. 5,388 5,093 21,255 20,686 20,257
Furniture and equipment expenses...... 1,935 1,945 7,846 7,779 7,767
Contracted data processing............ 3,772 3,421 14,339 12,695 13,883
Other contracted services............. 1,835 1,700 6,808 6,737 5,441
FDIC insurance premiums and special
assessment.......................... 363 331 1,434 12,636 5,585
Legal and litigation expenses, net of
recoveries.......................... 276 416 1,832 3,106 1,300
Provision for losses on foreclosed
property............................ 812 60 60 1,085 767
Advertising and marketing............. 1,413 1,203 4,602 4,209 3,546
Amortization of goodwill.............. 1,191 990 4,143 3,585 3,111
Other................................. 6,456 5,332 23,382 22,007 20,823
--------- --------- --------- --------- ---------
Total other expense......... 43,957 38,953 160,531 164,655 146,575
Income before income taxes............ 27,455 24,356 107,572 68,942 54,027
Provision for income taxes............ 10,387 10,141 44,714 25,139 21,970
--------- --------- --------- --------- ---------
NET INCOME............................ $ 17,068 $ 14,215 $ 62,858 $ 43,803 $ 32,057
========= ========= ========= ========= =========
Basic earnings per common share....... $ 8.89 $ 7.69 $ 33.29 $ 25.15 $ 21.61
========= ========= ========= ========= =========
Cash dividends per share.............. $ -- $ -- $ 11.30 $ -- $ 7.71
========= ========= ========= ========= =========
Average shares outstanding............ 1,733,000 1,632,000 1,687,000 1,545,000 1,426,000
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-3
<PAGE> 113
BANCWEST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
3 MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................. $ 17,068 $ 14,215 $ 62,858 $ 43,803 $ 32,057
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses............... 5,000 4,000 19,750 16,500 14,500
Provision for losses on foreclosed
property................................ 812 60 60 1,085 767
(Gains) losses on sale of securities,
net..................................... 16 18 (81) (30) (72)
Gain on sale of branch.................... (212) -- -- -- --
Loans held for sale originated or
purchased, net.......................... (2,683) -- (5,210) -- --
Depreciation and amortization............. 2,789 2,589 10,589 10,158 9,466
Deferred income taxes..................... 3,312 4,434 23,564 15,951 13,585
(Increase) decrease in interest receivable
and other assets, net of effects of
acquisitions............................ 2,052 (3,106) (4,789) 465 1,132
Increase in interest payable and other
liabilities, net of effects of
acquisitions............................ 2,315 1,942 4,093 7,659 1,470
Other increases, net...................... (22) (196) 2,131 858 4,432
--------- --------- --------- --------- ---------
Net cash provided by operating activities... 30,447 23,956 112,965 96,449 77,337
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and paydowns of
investment securities held-to-maturity.... 7,888 7,320 34,430 41,110 45,514
Proceeds from sales, maturities and paydowns
of investment securities
available-for-sale........................ 75,417 32,937 349,498 241,295 184,033
Purchases of held-to-maturity securities.... -- -- (77,106) -- --
Purchases of available-for-sale investment
securities, net of effects of
acquisitions.............................. (76,273) (51,224) (235,236) (238,592) (162,711)
Loans and leases held for investment
originated or purchased, net of
collections, transfers to foreclosed
property, acquisitions and sales.......... (133,229) (89,501) (590,096) (447,968) (373,664)
Purchases of premises and equipment, net of
effects of acquisitions and sales......... (1,789) (986) (5,331) (7,082) (5,187)
Proceeds from sales of foreclosed property
and premises and equipment................ 812 794 5,572 7,038 9,156
Acquisitions -- cash received (paid) in
excess of cash and cash equivalents
acquired.................................. 24,510 -- 10,792 (34,229) --
Branch sale, cash paid, net of gain......... (10,767) -- -- -- --
--------- --------- --------- --------- ---------
Net cash used by investing activities....... (113,431) (100,660) (507,477) (438,428) (302,859)
--------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-4
<PAGE> 114
<TABLE>
<CAPTION>
3 MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------
1998 1997 1997 1996 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of preferred stock, net of issuance
costs..................................... -- -- -- 73,416 --
Net increase in deposits, net of effects of
acquisitions and sales.................... 88,999 158,929 369,453 278,203 236,064
Net (decrease) increase in short-term
borrowings, net of effects of
acquisitions.............................. 657 29,562 (31,961) (171,074) 28,952
Increase in long-term borrowings, net of
effects of acquisitions................... 29 574 146,903 100,000 --
Cash dividends.............................. (1,669) (1,669) (25,750) (3,576) (12,247)
--------- --------- --------- --------- ---------
Net cash provided by financing activities... 88,016 187,396 458,645 276,969 252,769
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents............................... 5,032 110,692 64,133 (65,010) 27,247
Cash and cash equivalents, beginning of
period.................................... 328,392 264,259 264,259 329,269 302,022
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of period.... $ 333,424 $ 374,951 $ 328,392 $ 264,259 $ 329,269
========= ========= ========= ========= =========
OTHER CASH FLOW INFORMATION
Interest paid............................... $ 44,649 $ 37,929 $ 161,358 $ 139,188 $ 122,825
Income taxes paid........................... 1,260 679 22,881 6,658 7,320
NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfer of investment securities from
held-to-maturity to available-for-sale.... $ -- $ -- $ -- $ -- $ 283,568
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-5
<PAGE> 115
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of BancWest Corporation and
Subsidiary (the "Company") conform with generally accepted accounting principles
and practices within the banking industry. The following is a summary of the
significant accounting policies:
Consolidation:
The consolidated financial statements of the Company include the accounts
of BancWest Corporation and its wholly-owned subsidiary Bank of the West (the
"Bank"). All significant intercompany balances and transactions have been
eliminated in consolidation. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary for a fair
presentation are reflected in the consolidated financial statements.
Reclassification:
Certain amounts in the consolidated financial statements for 1997 and 1996
have been reclassified to conform with the 1998 presentation. Such
reclassifications had no effect on the consolidated net income as previously
reported.
2. ACCOUNTING CHANGES
The provisions of Statement of Financial Accounting Standards ("SFAS") No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," that were deferred by SFAS No. 127, "Deferral
of the Effective Date of Certain Provisions of FASB Statement No. 125 -- An
Amendment of FASB Statement No. 125," became effective as to repurchase
agreements, dollar rolls, securities lending and certain other transactions
after December 31, 1997. The Company requires delivery of collateral of other
security as a condition to entering into repurchase or reverse-purchase
transactions.
SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal
years beginning after December 15, 1997. SFAS No. 130 establishes presentation
and disclosure requirements for comprehensive income; however, it does not
affect existing recognition or measurement standards. For the Company,
comprehensive income consists of net income and the change in unrealized gains
and losses on available-for-sale securities. Comprehensive income was
$16,738,000 and $12,881,000 for the three months ended March 31, 1998 and 1997,
respectively.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for fiscal years beginning after December 15, 1997.
SFAS No. 130 establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131 does
not affect existing recognition or measurement standards. The provisions of SFAS
No. 131 need not be applied to interim financial statements in the initial year
of its application. Accordingly, such disclosures have not been presented
herein.
Earlier this year, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 132, "Employers' Disclosure about Pensions and Other
Postretirement Benefits," which standardized the disclosure requirements for
pensions and other post-retirement benefits. The Company plans to implement SFAS
No. 132 (which does not impact existing measurement or recognition standards) in
its consolidated financial statements for the year ended December 31, 1998.
F-6
<PAGE> 116
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of BancWest Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
BancWest Corporation and subsidiary (the "Company") at December 31, 1997 and
1996, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
San Francisco, California
January 20, 1998
F-7
<PAGE> 117
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
BancWest Corporation:
We have audited the consolidated statements of income, stockholders'
equity, and cash flows of BancWest Corporation and subsidiaries (the "Company")
(pages F-11 through F-39) for the year ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of BancWest Corporation and subsidiaries for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
January 19, 1996
San Francisco, California
F-8
<PAGE> 118
BANCWEST CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Cash and due from banks................................... $ 311,392 $ 264,259
Funds sold................................................ 17,000 --
---------- ----------
Total cash and cash equivalents................... 328,392 264,259
Investment securities:
Held-to-maturity (market value -- $312,154 and $265,294
at December 31, 1997 and 1996)........................ 313,114 270,742
Available-for-sale..................................... 545,572 661,065
---------- ----------
Total investment securities....................... 858,686 931,807
Loans held for sale....................................... 5,757 --
Loans and leases held for investment:
Commercial, financial and agricultural................. 217,853 225,295
Real estate -- construction............................ 184,535 118,712
Real estate -- mortgage................................ 1,638,529 1,587,503
Consumer............................................... 1,551,916 1,310,065
Lease financing........................................ 751,509 530,716
---------- ----------
Total loans and leases, net....................... 4,344,342 3,772,291
Allowance for credit losses............................ (51,608) (46,758)
---------- ----------
Loans and leases, net of allowance for credit losses... 4,292,734 3,725,533
Customers' acceptance liability........................ 37 717
Premises and equipment, net............................ 34,909 36,581
Foreclosed property, net............................... 4,329 6,800
Interest receivable and other assets................... 58,122 51,940
Goodwill, net.......................................... 60,132 53,940
---------- ----------
Total Assets...................................... $5,643,098 $5,071,577
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing....................................... $1,001,550 $ 848,384
Interest-bearing....................................... 3,571,400 3,333,697
---------- ----------
Total deposits.................................... 4,572,950 4,182,081
Short-term borrowings..................................... 184,418 216,379
Acceptances outstanding................................... 37 717
Interest payable and other liabilities.................... 100,654 72,767
Long-term borrowings...................................... 309,949 161,950
---------- ----------
Total Liabilities................................. 5,168,008 4,633,894
COMMITMENTS AND CONTINGENT LIABILITIES (NOTES 2 & 15)..... -- --
STOCKHOLDERS' EQUITY
Non-cumulative preferred stock -- no par value:
Series A of Bank of the West; 1,000,000 shares
authorized; 200,000 outstanding....................... 20,000 20,000
Series A of BancWest; 1,000,000 shares authorized;
75,000 outstanding.................................... 75,000 75,000
Common stock -- $5 par value; 2,500,000 shares authorized
1,733,430 shares outstanding at December 31, 1997 and
1,632,262 outstanding at December 31, 1996................ 8,667 8,161
Additional paid-in capital................................ 228,392 208,898
Retained earnings......................................... 142,121 125,013
Net unrealized gains on investment securities
available-for-sale, net of taxes of $606 in 1997 and $390
in 1996................................................... 910 611
---------- ----------
Total Stockholders' Equity........................ 475,090 437,683
========== ==========
Total Liabilities and Stockholders' Equity........ $5,643,098 $5,071,577
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 119
BANCWEST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans and leases....................................... $ 348,002 $ 296,622 $ 245,609
Investment securities.................................. 56,567 55,479 61,345
Other.................................................. 953 846 765
---------- ---------- ----------
Total interest income........................ 405,522 352,947 307,719
INTEREST EXPENSE
Deposits............................................... 136,906 117,225 101,512
Short-term borrowings.................................. 9,784 15,294 17,724
Long-term and other borrowings......................... 16,332 6,571 5,618
---------- ---------- ----------
Total interest expense....................... 163,022 139,090 124,854
---------- ---------- ----------
Net interest income.................................... 242,500 213,857 182,865
Provision for credit losses............................ 19,750 16,500 14,500
---------- ---------- ----------
Net interest income after provision for credit
losses............................................... 222,750 197,357 168,365
OTHER INCOME
Service fees on deposit accounts....................... 27,714 22,365 21,519
Commissions and other fees............................. 4,488 3,486 1,803
Trust fees............................................. 2,622 2,443 2,196
Gains on sale of securities, net....................... 81 30 72
Gains on sale of loans, net............................ 1,629 -- --
Foreign exchange gains, net............................ 1,615 1,360 1,309
Other.................................................. 7,204 6,556 5,338
---------- ---------- ----------
Total other income........................... 45,353 36,240 32,237
OTHER EXPENSE
Salaries and employee benefits......................... 74,830 70,130 64,095
Net occupancy expense.................................. 21,255 20,686 20,257
Furniture and equipment expenses....................... 7,846 7,779 7,767
Contracted data processing............................. 14,339 12,695 13,883
Other contracted services.............................. 6,808 6,737 5,441
FDIC insurance premiums and special assessment......... 1,434 12,636 5,585
Legal and litigation expenses, net of recoveries....... 1,832 3,106 1,300
Provision for losses on foreclosed property............ 60 1,085 767
Advertising and marketing.............................. 4,602 4,209 3,546
Amortization of goodwill............................... 4,143 3,585 3,111
Other.................................................. 23,382 22,007 20,823
---------- ---------- ----------
Total other expense.......................... 160,531 164,655 146,576
Income before income taxes............................. 107,572 68,942 54,027
Provision for income taxes............................. 44,714 25,139 21,970
---------- ---------- ----------
NET INCOME............................................. $ 62,858 $ 43,803 $ 32,057
========== ========== ==========
Basic earnings per common share........................ $ 33.29 $ 25.15 $ 21.61
========== ========== ==========
Cash dividends per share............................... $ 11.30 $ -- $ 7.71
========== ========== ==========
Average shares outstanding............................. 1,687,000 1,545,000 1,426,000
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE> 120
BANCWEST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
NET
UNREALIZED
GAINS
BANK OF THE WEST BANCWEST (LOSSES) ON
SERIES A SERIES A INVESTMENT
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL SECURITIES
----------------- --------------- ----------------- PAID-IN RETAINED AVAILABLE-
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS FOR-SALE TOTAL
------- ------- ------ ------- --------- ------ ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1995........... 200,000 $20,000 -- -- 1,424,152 $7,121 $169,212 $108,655 $(6,071) $298,917
Stock dividend............ 54,250 271 11,229 (11,500) --
Common dividends.......... (11,000) (11,000)
Preferred dividends....... (1,247) (1,247)
Net change in unrealized
gains (losses) on
investment securities
available-for-sale
(Notes 1 and 4)......... 8,128 8,128
Net income................ 32,057 32,057
------- ------- ------ ------- --------- ------ -------- -------- ------- --------
DECEMBER 31, 1995......... 200,000 $20,000 -- -- 1,478,402 $7,392 $180,441 $116,965 $ 2,057 $326,855
Issuance of BancWest
Series A preferred
stock................... 75,000 $75,000 75,000
BancWest Series A
preferred stock issuance
cost.................... (1,584) (1,584)
Stock dividend............ 153,860 769 30,041 (30,810) --
Preferred dividends....... (4,945) (4,945)
Net change in unrealized
gains on investment
securities available-
for-sale (Notes 1 and
4)...................... (1,446) (1,446)
Net income................ 43,803 43,803
------- ------- ------ ------- --------- ------ -------- -------- ------- --------
DECEMBER 31, 1996......... 200,000 $20,000 75,000 $75,000 1,632,262 $8,161 $208,898 $125,013 $ 611 $437,683
Stock dividend............ 101,168 506 19,494 (20,000) --
Common dividends.......... (19,058) (19,058)
Preferred dividends....... (6,692) (6,692)
Net change in unrealized
gains on investment
securities available-
for-sale (Notes 1 and
4)...................... 299 299
Net income................ 62,858 62,858
------- ------- ------ ------- --------- ------ -------- -------- ------- --------
DECEMBER 31, 1997......... 200,000 $20,000 75,000 $75,000 1,733,430 $8,667 $228,392 $142,121 $ 910 $475,090
======= ======= ====== ======= ========= ====== ======== ======== ======= ========
</TABLE>
F-11
<PAGE> 121
BANCWEST CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 62,858 $ 43,803 $ 32,057
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses............................... 19,750 16,500 14,500
Provision for losses on foreclosed property............... 60 1,085 767
Gains on sale of securities, net.......................... (81) (30) (72)
Loans held for sale originated or purchased, net.......... (5,210) -- --
Depreciation and amortization............................. 10,589 10,158 9,466
Deferred income taxes..................................... 23,564 15,951 13,585
(Increase) decrease in interest receivable and other assets,
net of effects of acquisitions............................ (4,789) 465 1,132
Increase in interest payable and other liabilities, net of
effects of acquisitions................................... 4,093 7,659 1,470
Other increases, net...................................... 2,131 858 4,432
--------- --------- ---------
Net cash provided by operating activities................. 112,965 96,449 77,337
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and paydowns of investment
securities held-to-maturity............................. 34,430 41,110 45,514
Proceeds from sales, maturities and paydowns of investment
securities available-for-sale............................. 349,498 241,295 184,033
Purchases of held-to-maturity securities.................. (77,106) -- --
Purchases of available-for-sale investment securities, net
of effects of acquisitions................................ (235,236) (238,592) (162,711)
Loans and leases held for investment originated or
purchased, net of collections, transfers to foreclosed
property and acquisitions................................. (590,096) (447,968) (373,664)
Purchases of premises and equipment, net of effects of
acquisitions............................................ (5,331) (7,082) (5,187)
Proceeds from sales of foreclosed property and premises
and equipment........................................... 5,572 7,038 9,156
Acquisitions -- cash received (paid) in excess of cash and
cash equivalents acquired................................. 10,792 (34,229) --
--------- --------- ---------
Net cash used by investing activities..................... (507,477) (438,428) (302,859)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of preferred stock, net of issuance costs.......... -- 73,416 --
Net increase in deposits, net of effects of acquisitions.... 369,453 278,203 236,064
Net (decrease) increase in short-term borrowings, net of
effects of acquisitions................................... (31,961) (171,074) 28,952
Increase in long-term borrowings, net of effects of
acquisitions............................................ 146,903 100,000 --
Cash dividends............................................ (25,750) (3,576) (12,247)
--------- --------- ---------
Net cash provided by financing activities................. 458,645 276,969 252,769
--------- --------- ---------
Increase (decrease) in cash and cash equivalents.......... 64,133 (65,010) 27,247
Cash and cash equivalents, January 1...................... 264,259 329,269 302,022
--------- --------- ---------
Cash and cash equivalents, December 31.................... $ 328,392 $ 264,259 $ 329,269
========= ========= =========
OTHER CASH FLOW INFORMATION
Interest paid............................................... $ 161,358 $ 139,188 $ 122,825
Income taxes paid........................................... 22,881 6,658 7,320
NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfer of investment securities from held-to-maturity to
available-for-sale........................................ $ -- $ -- $ 283,568
See Note 2 relating to acquisitions.
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE> 122
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
BancWest Corporation (the "Company") is a bank holding company based in San
Francisco, California. All of the common stock of the Company is wholly-owned by
Banque Nationale de Paris ("BNP"), an international banking company organized
under the laws of the Republic of France. The Company serves as the United
States domestic holding company for Bank of the West (the "Bank"), a California
state chartered commercial bank. The Bank is community-oriented with 105
branches primarily in northern California providing a wide range of financial
services to both consumers and businesses. Lending and other services focus on
consumer and smaller middle market business, primarily in areas served by the
branch network, with the exception of consumer installment lending and leasing
which is national in scope.
In 1995, BNP approved a plan for the formation of the Company and the
conversion of each share of outstanding Bank of the West common stock into one
share of Company common stock. Effective December 1, 1995, the Company issued
1,424,152 shares of its common stock for all of the outstanding common stock of
Bank of the West. This transfer has been accounted for as a combination of
companies under common control, similar to a pooling of interests in that the
historical cost basis of the Bank has been carried forward.
The Company has two outstanding preferred stock issuances. The Bank of the
West Series A (the "Bank Series A") is non-voting and wholly-owned by French
American Banking Corporation ("FABC") which in turn is a wholly-owned subsidiary
of BNP. The BancWest Series A (the "Company Series A") preferred stock was
offered and sold to certain qualified institutions and accredited investors as
defined by Rule 144A and Rule 501(a) under the Securities Act of 1933.
The Bank Series A preferred stock accrues dividends at a rate adjusted
quarterly based on changes in rates on certain United States Government
securities. The dividend rate at December 31, 1997 was 6% of stated value. In no
event will the dividend rate be lower than 6% or greater than 13% of stated
value. Subsequent to December 31, 1998, the Bank Series A preferred stock is
redeemable at the option of Bank of the West, as a whole or in part, at $100 per
share plus accrued and unpaid dividends.
The Company Series A preferred stock accrues dividends at 7.30% of stated
value through July 1, 2006. Thereafter, dividends will accrue at a rate adjusted
quarterly based on certain indexes of United States Government securities.
Subsequent to July 1, 2006, in no event will the dividend rate be lower than
7.375% of stated value or greater value than 13.375% of stated value. The amount
of dividends payable is subject to adjustment in the event of certain amendments
to the Internal Revenue Code with respect to the dividends received deduction.
The Company Series A preferred stock is not redeemable by the Company prior to
July 1, 2006, at which time it will be redeemable, in whole or in part, at the
option of the Company at $1,000 per share, plus accrued and unpaid dividends.
The Series A preferred stock may also be redeemed prior to July 1, 2006, in
whole, at the Company's option, in the event of certain amendments to the
Internal Revenue Code relating to the dividends received deduction. The Series A
preferred stock is subject to purchase by BNP in whole, at BNP's option, if any
one or more of certain events are determined by the board of directors of the
Company to have occurred, including BNP's having provided funds to the Company
pursuant to a support agreement or any change of control with respect to the
Company.
Redemption of either the Bank Series A or Company Series A preferred stock
would be subject to regulatory review, and both issues have parity with respect
to dividend and liquidation preferences.
The Company's primary regulators are the Federal Reserve Bank (the "FRB"),
the Federal Deposit Insurance Corporation (the "FDIC") and the California State
Banking Department. The Company maintains insurance on its customer deposit
accounts with the FDIC, which requires quarterly payments of deposit insurance
premiums.
F-13
<PAGE> 123
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The accounting and reporting practices of the Company and its subsidiary
conform with generally accepted accounting principles and general practice in
the banking industry. All material intercompany transactions between the Company
and its subsidiary have been eliminated in consolidation. Below is a summary of
the more significant accounting policies and reporting methods used by the
Company. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Unless the context indicates otherwise, the term "Company" when used
herein, shall include the Bank.
Cash, Cash Equivalents and Statement of Cash Flows:
Cash and due from banks includes deposits with the Federal Reserve Bank.
Funds sold includes federal funds sold and securities purchased under agreements
to resell. The Company is required to maintain on deposit with the Federal
Reserve Bank noninterest-bearing cash reserves equal to a percentage of certain
deposits. The average reserve balances were $26.7 million and $47.3 million for
the years ended December 31, 1997 and 1996, respectively. At December 31, 1997,
the Company had balances on deposit with the Federal Reserve Bank of $6.2
million.
For purposes of reporting cash flows, cash and cash equivalents include
balances due from depository institutions, federal funds sold and securities
purchased under agreements to resell. Cash equivalents have remaining terms to
maturity of three months or less from the date of acquisition. Proceeds from and
repayments of short-term borrowings having an original term-to-maturity of three
months or less are netted in the accompanying consolidated statements of cash
flows.
Investment Securities:
Securities that are bought and held principally for the purpose of selling
them in the near term are classified as trading securities and are reported at
aggregate fair value. Unrealized gains or losses on trading securities are
included in other income.
Investment securities that the Company has the positive intent and ability
to hold to maturity are classified as held-to-maturity and are carried at cost,
adjusted for amortization of premiums and accretion of discounts to maturity.
Investment securities not classified as trading or held-to-maturity are
classified as available-for-sale securities and are reported at fair value, with
unrealized gains and losses excluded from earnings and reported net of taxes as
a separate component of stockholders' equity. Realized gains or losses, if any,
are included in other income.
The cost of investments sold in each category is determined using the
specific identification method.
Loans and Leases:
Loans held for sale are recorded at the lower of cost or fair value, net of
discounts and premiums, deferred costs and fees and unearned income. Gains on
loans held for sale are recognized at the time of transfer to the buyer and to
the extent that consideration for the transferred loans is received.
Loans and leases held for investment are recorded at cost, net of discounts
and premiums, commitments to extend credit, deferred costs and fees and unearned
income. The Company holds loans and leases receivable
F-14
<PAGE> 124
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
primarily for investment purposes and has the intent and believes it has the
ability to hold these loans and leases for the foreseeable future or until
maturity.
Interest income is accrued using methods which approximate a level yield on
the principal outstanding, based on the contractual terms of the loan or lease.
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan"
and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosure." These statements address the accounting and
reporting by creditors for impairment of certain loans. In general, a loan is
impaired when, based upon current information and events, it is probable that a
creditor will be unable to collect all amounts due according to the contractual
terms of the loan agreement. These statements are applicable to all loans,
uncollateralized as well as collateralized, except large groups of
smaller-balance homogeneous loans that are collectively evaluated for
impairment. Impairment is measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate, except that as a
practical expedient, the Company may measure impairment based on a loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. Loans are measured for impairment as part of the Company's
normal internal asset review process. The effect of adopting SFAS 114 and SFAS
118 was not material to the Company's 1995 financial position or results of
operations.
It is the Company's policy to place loans that are delinquent 90 days or
more as to principal or interest on nonaccrual status unless secured and in the
process of collection, and to reverse from current income accrued but
uncollected interest. Cash payments subsequently received on nonaccrual or
impaired loans are recognized as income only where the future collection of
principal is considered by management to be probable.
Loan Fees:
The Company generally charges fees for originating loans and leases, and
for commitments to extend credit. Origination fees, net of direct costs of
underwriting, closing costs and premiums, are deferred and amortized to interest
income using methods which approximate a level yield, adjusted for actual
prepayment experience. Unamortized fees and premiums on loans paid in full are
recognized as a component of interest income. The Company also charges other
loan fees consisting of delinquent payment charges and other common loan
servicing fees, including fees for servicing loans sold to third parties. Such
fees are recognized as income when earned.
Allowance for Credit Losses:
The Company charges current earnings with a provision for credit losses on
loans and leases receivable, guarantees and commitments to extend credit. The
provision considers both specifically identified problem loans and credit risks
not specifically identified in the portfolios. The determination of the
allowance for credit losses takes into consideration numerous factors including
the financial condition of the borrowers, the estimated fair value of the
collateral, recourse to guarantors, if any, the estimated net cost of holding
and maintaining properties and collateral prior to the anticipated date of sale,
analysis of delinquency trends, geographic and collateral-type concentrations,
past loss experience, and other factors affecting the adequacy of the allowance.
Losses are recognized through charges to the allowance and any subsequent
recoveries are credited to the allowance.
Foreclosed Property:
Foreclosed property consists of real estate acquired in settlement of loans
and is carried at the lower of cost or fair value less estimated selling costs.
Losses recognized at the time of foreclosure in full or partial
F-15
<PAGE> 125
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
satisfaction of loans are charged against the allowance for credit losses. The
Company charges current earnings with a provision for losses on foreclosed
property for any subsequent declines in fair value.
Premises and Equipment:
Premises, equipment, and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. Depreciation and amortization is
charged on a straight-line basis over the estimated useful lives of the various
classes of assets (generally 3 to 7 years), or, in the case of leasehold
improvements, the shorter of the estimated useful life of the leasehold
improvement or the remaining term of the lease. Maintenance and repairs are
charged to expense in the period incurred.
Interest Receivable and Other Assets:
Interest receivable and other assets include accrued interest receivable on
loans and investments, personal property acquired in settlement of installment
loans and leases, and other prepaid assets.
Goodwill:
Goodwill is the excess of the cost of acquisitions over the estimated fair
value of the net assets acquired. Goodwill is amortized on a straight-line basis
over the estimated period of benefit ranging from 7 to 40 years, depending upon
the acquisition.
Short-term Borrowings:
Short-term borrowings include federal funds purchased, securities sold
under agreements to repurchase, and treasury tax and loan deposits. Securities
sold under agreements to repurchase are treated as financings and the obligation
to repurchase these same securities is reflected as a liability in the
consolidated balance sheets. The securities underlying the repurchase agreements
have been delivered to securities dealers. These dealers may have loaned the
securities to other parties in the normal course of their operation, but all
agreements require the dealers to resell to the Company the identical securities
at the maturities of the agreements.
Trust Property:
Trust property, other than cash deposits held by the Company in fiduciary
or agency capacities for its customers, is not included in the accompanying
consolidated balance sheets because such items are not assets of the Company.
Foreign Exchange Activities and Translation:
The Company enters into commitments to purchase or sell foreign currencies
on behalf of its customers. These commitments are generally matched through
offsetting positions. Foreign exchange positions are valued monthly with the
resulting gain or loss included in foreign exchange gains as incurred. Assets
and liabilities denominated in foreign currencies are translated at current
rates of exchange. The resulting exchange gains and losses are reported in
income as incurred. The Company is subject to potential credit risk from the
possible inability of counterparties to meet the terms of their contracts and
from movements in foreign exchange values and interest rates.
F-16
<PAGE> 126
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interest Rate Swaps:
Interest rate swaps are agreements in which the Company and another party
agree to exchange interest payments (one at a variable rate, the other at a
fixed rate) on notional principal amounts. The Company enters into interest rate
swaps for purposes other than trading to assist in matching interest expense on
specific interest-bearing liabilities with the interest rate adjustments on
specific interest earning assets. The effect on interest expense from interest
rate swaps held for purposes other than trading is recognized as periodic net
cash settlements accrue.
Income Taxes:
The Company calculates income taxes under SFAS No. 109 -- "Accounting for
Income Taxes." Under SFAS 109, deferred taxes are determined based on the
liability method. Deferred taxes arise from the effect of temporary differences
between the tax basis of assets and liabilities and their reported amounts in
the financial statements based on currently enacted tax laws. These deferred tax
amounts are adjusted for tax rate changes and changes in tax laws as they occur.
The Company files a consolidated federal tax return with its subsidiaries.
The Company files a California franchise tax return on the basis of a combined
"waters-edge" election with BNP's United States affiliates. The provision for
state income taxes is calculated based on this waters-edge election.
Financial Instruments with Off-Balance-Sheet Risk:
The Company is party to financial instruments with off-balance-sheet risk
in the normal course of business and to meet the financial needs of its
customers. Financial instruments include commitments to extend credit, the
issuance of commercial and standby letters of credit, interest rate swaps, and
commitments to purchase or sell foreign currencies, investment securities and
loans and leases. These instruments may involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The contract or notional amounts of those
instruments reflect the extent of involvement the Company has in a particular
class of financial instrument.
The Company generally uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet instruments, which
may require that it obtain collateral that will reduce its exposure to credit
loss. The exposure to credit loss, in the event of nonperformance by a
counterparty to a financial instrument, for commitments to extend credit, and
for letters of credit, is represented by the difference between the contractual
commitment amount of those instruments and the estimated fair value of the
collateral.
If there is no collateral, or if the underlying collateral is determined to
have little or no value, or the Company is unable to obtain possession of the
collateral, the maximum exposure to credit loss is represented by the
contractual commitment. The type and nature of collateral held will vary and may
include, but is not limited to, accounts receivable, inventory, property, plant
and equipment, income producing properties and real estate. Standby letters of
credit and commitments to extend credit generally have fixed expiration dates or
other termination clauses. Because many of the standby letters of credit and
commitments to extend credit are expected to expire without being drawn upon,
total guarantee and commitment amounts do not necessarily represent future cash
requirements.
F-17
<PAGE> 127
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings Per Share:
On January 1, 1997, the Company adopted SFAS No. 128, "Earnings Per Share",
which specifies the computation presentation and disclosure requirements for
earnings per share ("EPS"). Prior period EPS have been expanded to comply with
these provisions. Basic EPS is computed by dividing net income available to
common shares outstanding (which excludes preferred stock dividends) by the
weighted average number of shares outstanding for the period. No differences
exist between the calculation of basic and diluted EPS for the Company.
New Pronouncements:
In 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income",
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 130 states that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS No. 131 requires disclosures regarding segments
of an enterprise and related information that reflects the different types of
business activities in which the enterprise engages and the different economic
environments in which it operates. The adoption of these standards is not
expected to have a material effect on the Company's consolidated financial
statements.
Reclassifications:
Certain 1996 and 1995 amounts were reclassified to conform to the 1997
presentation.
NOTE 2 -- ACQUISITIONS
On October 1, 1997, the Company, through its wholly-owned bank subsidiary,
Bank of the West, purchased the outstanding common stock of Essex Credit
Corporation ("Essex") for $10 million plus an obligation to make certain
contingent payments to the former stockholders of Essex depending on the
financial performance of Essex. Essex originates marine and recreational vehicle
loans through a nationwide network of sales offices and sells the loans to
various funding sources for a fee. The $8.7 million of purchase price over the
fair value of the net assets acquired was recorded as goodwill which is being
amortized on a straight-line basis over 15 years.
On June 13, 1997, the Company purchased a retail branch with deposits of
$21.5 million from Coast Federal Bank, F.S.B.. The $1.4 million of purchase
price over the fair value of net assets acquired was recorded as goodwill which
is being amortized on a straight-line basis over 15 years.
At December 31, 1995 the Company had entered into an Agreement and Plan of
Merger with Northbay Financial Corporation ("Northbay"), that called for the
Company to acquire through a merger with a merger subsidiary the outstanding
common stock of Northbay for approximately $43 million in cash. The transaction
was completed on April 26, 1996. Total assets acquired were valued at $377
million and total liabilities were valued at $349 million. The $15 million of
purchase price over the fair value of the net assets acquired was recorded as
goodwill which is being amortized on a straight-line basis over 15 years.
NOTE 3 -- TRANSACTIONS WITH AFFILIATES
The Company has participated and continues to participate in various
transactions with BNP and its affiliates. These transactions are subject to
review by the Federal Reserve Board, the FDIC and other regulatory authorities
and are required to be on terms at least as favorable to the Company as those
prevailing
F-18
<PAGE> 128
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 3 -- TRANSACTIONS WITH AFFILIATES (CONTINUED)
at the time for similar non-affiliate transactions. These transactions have
included the sales and purchases of assets, foreign exchange activities,
financial guarantees, international services, interest rate swaps and
intercompany deposits and borrowings. It is not practical to quantify all such
transactions. However, amounts due to and from affiliates at December 31, 1997
and 1996 were included in the balance sheet accounts as illustrated below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and due from banks..................................... $ 4,206 $11,217
Interest receivable and other assets........................ 92 656
Noninterest-bearing deposits................................ 2,767 1,920
Interest-bearing deposits................................... -- 50,000
Short-term borrowings....................................... 60,237 3,365
Interest payable and other liabilities...................... 2,687 3,469
Subordinated capital notes included in long-term
borrowings................................................ 50,000 50,000
Series A preferred stock.................................... 20,000 20,000
Off-balance-sheet transactions:
Notional amount of interest rate swap..................... -- 50,000
Standby letters of credit issued.......................... 9,892 5,000
</TABLE>
The subordinated capital notes were sold directly to BNP, are subordinated
to the claims of depositors and creditors, and qualify for inclusion as a
component of risk-based capital under current FDIC guidelines for assessing
capital adequacy. For further information regarding regulation and capital
adequacy, see Note 11 to the consolidated financial statements.
In connection with the sale of the Company Series A preferred stock, BNP
and the Company executed a Support Agreement (the "Agreement"). Pursuant to the
Agreement, BNP will provide the Company with sufficient funds to enable the
Company, at the time of any payment of dividends on the Series A preferred
stock, or any redemption thereof or any liquidation or dissolution of the
Company, to meet the minimum regulatory capital ratios applicable to the Company
and enable the Company to have the necessary funds to pay the full amount of
dividends declared on the Series A preferred stock. During 1997 there were no
payments made to the Company under the terms of the Agreement.
During 1995, the Company entered into an interest rate swap with a notional
amount of $50 million with BNP. The swap assisted in matching interest expense
on specific interest-bearing liabilities with interest rate adjustments on
certain interest-earning assets, and called for the Company to pay to BNP a
fixed rate of interest of 7.75%, and receive from BNP the 3-month London
Inter-bank Offered Rate ("LIBOR") on the notional amount until maturity in
January 1997, adjusted quarterly. There were no fees paid or received in this
transaction and no collateral was maintained.
F-19
<PAGE> 129
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 4 -- INVESTMENT SECURITIES
A comparison of amortized cost and estimated fair value of held-to-maturity
and available-for-sale investment securities as of December 31, 1997 and 1996,
by type, is illustrated below:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE AMOUNT
--------- ---------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
HELD-TO-MATURITY INVESTMENT
SECURITIES
U.S. Treasury....................... $ 80,597 $ 579 $ (9) $ 81,167 $ 80,597
Mortgage-backed and other
asset-backed securities........... 232,517 538 (2,068) 230,987 232,517
-------- ------ ------- -------- --------
Total Held-to-Maturity Investment
Securities........................ 313,114 1,117 (2,077) 312,154 313,114
-------- ------ ------- -------- --------
AVAILABLE-FOR-SALE INVESTMENT
SECURITIES
U.S. Treasury....................... 25,048 194 -- 25,242 25,242
U.S. Government agencies............ 32,115 140 -- 32,255 32,255
Mortgage-backed and other
asset-backed securities........... 464,359 1,942 (760) 465,541 465,541
FHLB stock.......................... 22,534 -- -- 22,534 22,534
-------- ------ ------- -------- --------
Total Available-for-Sale
Investment Securities.......... 544,056 2,276 (760) 545,572 545,572
-------- ------ ------- -------- --------
Total Investment
Securities.............. $857,170 $3,393 $(2,837) $857,726 $858,686
======== ====== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE AMOUNT
--------- ---------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
HELD-TO-MATURITY INVESTMENT
SECURITIES
U.S. Treasury....................... $ 81,020 $ 638 $ (267) $ 81,391 $ 81,020
Mortgage-backed and other
asset-backed securities........... 189,722 118 (5,937) 183,903 189,722
-------- ------ ------- -------- --------
Total Held-to-Maturity Investment
Securities........................ 270,742 756 (6,204) 265,294 270,742
-------- ------ ------- -------- --------
AVAILABLE-FOR-SALE INVESTMENT
SECURITIES
U.S. Treasury....................... 169,557 745 (106) 170,196 170,196
U.S. Government agencies............ 70,571 340 (30) 70,881 70,881
Mortgage-backed and other
asset-backed securities........... 405,406 1,694 (1,642) 405,458 405,458
FHLB stock.......................... 14,530 -- -- 14,530 14,530
-------- ------ ------- -------- --------
Total Available-for-Sale
Investment Securities.......... 660,064 2,779 (1,778) 661,065 661,065
-------- ------ ------- -------- --------
Total Investment
Securities.............. $930,806 $3,535 $(7,982) $926,359 $931,807
======== ====== ======= ======== ========
</TABLE>
F-20
<PAGE> 130
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 4 -- INVESTMENT SECURITIES (CONTINUED)
At December 31, 1997, the amortized cost and fair value of held-to-maturity
and available-for-sale investment securities have contractual maturities and
yields as illustrated below. Actual maturities of mortgage-backed and other
asset-backed securities will differ from contractual maturities because of the
right to call or prepay obligations with or without call or prepayment
penalties:
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------------------ ------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE YIELD COST VALUE YIELD
--------- -------- ----- --------- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Within one year $ 24,953 $ 25,067 6.72%
After one but within five
years......................... $ 80,597 $ 81,167 6.20% 78,176 78,748 6.49
After five but within ten
years......................... -- -- 29,104 29,156 6.53
After ten years................. 232,517 230,987 6.24 411,823 412,601 6.56
-------- -------- ---- -------- -------- ----
Total................. $313,114 $312,154 6.23% $544,056 $545,572 6.55%
======== ======== ==== ======== ======== ====
</TABLE>
The carrying value of securities pledged to secure public deposits,
securities sold under agreements to repurchase, and FHLB borrowings totaled $530
million and $488 million at December 31, 1997 and 1996, respectively.
During 1995, the FASB issued a Special Report, "A Guide to Implementation
of Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities." The Special Report provided a one-time opportunity to reassess the
appropriateness of designations of securities subject to the accounting and
reporting requirements of Statement 115, without calling into question the
intent to hold other debt securities to maturity in the future. In accordance
with this Special Report, in December 1995, the Company transferred the
following securities from Held-to-Maturity to Available-for-Sale:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED
COST GAIN (LOSS)
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
U.S. Treasury............................................... $170,763 $ 1,787
U.S. Government agencies.................................... 61,660 833
Mortgage-backed securities.................................. 51,145 (1,819)
-------- -------
Total............................................. $283,568 $ 801
======== =======
</TABLE>
NOTE 5 -- LOANS AND LEASES
The Company originates loans with customers through its branch network and
regional loan offices in northern California. Customers for certain installment
loans, and automobile and equipment leases are referred to the Company by
brokers, equipment dealers and automobile, recreational vehicle and marine
retailers for a fee. California customers represent the Company's major lending
market with approximately $3.5 billion and $3.2 billion of the outstanding loans
and leases at December 31, 1997 and 1996, respectively, made to borrowers
located within the state.
Unearned income and discounts on loans were $32.3 million and $38.0 million
at December 31, 1997 and 1996, respectively. Net deferred origination costs and
premiums on loans were $33.6 million and $27.9 million at December 31, 1997 and
1996, respectively.
The Company's leasing activities consist of leasing automobiles and various
types of commercial equipment. Lessees are responsible for all maintenance,
taxes and insurance on the leased property. The leases
F-21
<PAGE> 131
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 5 -- LOANS AND LEASES (CONTINUED)
are classified as direct financing leases, and are reported net of unearned
income of $168.1 million and $110.1 million, and deferred origination costs and
premiums of $13.0 million and $8.7 million at December 31, 1997 and 1996,
respectively. At December 31, 1997, minimum lease payments for the five
succeeding years are $220.4 million in 1998, $189.5 million in 1999, $176.3
million in 2000, $147.7 million in 2001 and $135.1 million in 2002.
Loans and leases on which accrual of interest has been discontinued
averaged $24.2 million and $25.1 million during 1997 and 1996, respectively. If
the contractual rate of interest had been accrued, interest income would have
increased approximately $2.1 million, $2.2 million and $2.3 million for the
years ended December 31, 1997, 1996 and 1995, respectively. The Company's total
recorded investment in impaired loans, as defined in SFAS 114 was $15.1 million
and $13.1 million for which there was a related allowance for credit losses of
$3.5 million and $3.8 million at December 31, 1997 and 1996, respectively. The
average recorded investment in impaired loans was $15.3 million, $16.5 million
and $19.7 million during 1997, 1996 and 1995, respectively, and the amount of
income recognized was not significant in any of those years. There were no
significant commitments to lend additional funds to borrowers whose loans were
classified as nonaccrual or impaired at December 31, 1997.
The Company acts as servicer for certain real estate and installment loans
on behalf of investors. The installment loan servicing agreements require the
Company to maintain credit enhancements in the form of letters of credit. The
Company was servicing real estate loans on behalf of others totaling $56.0
million and $62.9 million at December 31, 1997 and 1996, respectively. The
Company was servicing installment loans on behalf of others totaling $4.4
million and $15.4 million, with associated letters of credit from BNP totaling
$10.4 million and $20.1 million at December 31, 1997 and 1996, respectively. The
book value of loans pledged to secure FHLB borrowings totaled approximately $438
million at December 31, 1997.
NOTE 6 -- ALLOWANCE FOR CREDIT LOSSES
An analysis of activity in the allowance for credit losses is illustrated
below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1.......................................... $46,758 $37,765 $32,553
Acquired allowance for credit losses (Note 2)............... -- 2,345 --
Provision for credit losses................................. 19,750 16,500 14,500
Loans and leases charged off................................ (19,120) (14,480) (14,505)
Recoveries.................................................. 4,220 4,628 5,217
------- ------- -------
Balance, December 31........................................ $51,608 $46,758 $37,765
======= ======= =======
</TABLE>
F-22
<PAGE> 132
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 7 -- PREMISES AND EQUIPMENT
The components of premises and equipment are illustrated below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land and buildings.......................................... $ 22,497 $ 22,425
Leasehold improvements...................................... 28,620 29,478
Furniture and equipment..................................... 47,223 43,032
-------- --------
Total............................................. 98,340 94,935
Accumulated depreciation and amortization................... (63,431) (58,354)
-------- --------
Premises and equipment, net............................... $ 34,909 $ 36,581
======== ========
</TABLE>
Depreciation and amortization expense on premises and equipment was $6.4
million, $6.6 million and $6.4 million for the years ended December 31, 1997,
1996 and 1995, respectively.
The Company rents premises under long-term, non-cancelable leases. Minimum
rents may be adjusted for changes in the lessors' operating costs and/or changes
in the Consumer Price Index or other indices. In addition, the Company pays
common area maintenance, property taxes and insurance under certain premises
leases. Rental expense was $13.4 million, $12.6 million and $12.2 million for
the years ended December 31, 1997, 1996 and 1995, respectively. Rental income
from subleasing arrangements was $1.4 million for the year ended December 31,
1997 and $1.1 million for both years ended December 31, 1996 and 1995.
Future minimum lease commitments under non-cancelable operating leases at
December 31, 1997 are as illustrated below:
<TABLE>
<CAPTION>
NON-CANCELABLE
OPERATING SUBLEASE
LEASES AMOUNTS TOTAL
-------------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1998....................................................... $14,097 $ 679 $13,418
1999....................................................... 12,951 630 12,321
2000....................................................... 12,268 640 11,628
2001....................................................... 11,511 607 10,904
2002....................................................... 10,436 608 9,828
Thereafter................................................. 34,763 1,590 33,173
------- ------ -------
Total minimum lease payments..................... $96,026 $4,754 $91,272
======= ====== =======
</TABLE>
F-23
<PAGE> 133
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 8 -- DEPOSITS
Interest-bearing deposits include certificates of deposit in amounts of
$100 thousand or more. These certificates and their remaining maturities are
illustrated below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Three months or less........................................ $447,885 $424,489
Over three, through six months.............................. 198,643 120,208
Over six, through twelve months............................. 130,998 76,161
Over twelve months.......................................... 60,351 35,391
-------- --------
Total............................................. $837,877 $656,249
======== ========
</TABLE>
NOTE 9 -- SHORT-TERM BORROWINGS
Short-term borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1997 1996
-------------------- --------------------
AVERAGE AVERAGE
INTEREST INTEREST
BALANCE RATE BALANCE RATE
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Federal funds purchased............................ $143,224 6.16% $ 38,247 5.67%
Securities sold under agreements to repurchase..... 39,614 5.72 171,102 6.34
Other.............................................. 1,580 6.01 7,030 5.59
-------- --------
Total.................................... $184,418 6.06% $216,379 6.20%
======== ========
</TABLE>
Federal funds purchased generally mature within one to four days from the
transaction date. Securities sold under agreements to repurchase generally
mature within three months of the transaction date.
Information concerning securities sold under agreements to repurchase and
federal funds purchased is summarized below:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Average daily balance during the year.................. $146,790 $187,285
Average interest rate during the year.................. 5.31% 5.22%
Maximum month-end balance during the year.............. $253,583 $276,227
FEDERAL FUNDS PURCHASED
Average daily balance during the year.................. $ 36,365 $104,581
Average interest rate during the year.................. 5.37% 5.20%
Maximum month-end balance during the year.............. $210,925 $236,200
</TABLE>
F-24
<PAGE> 134
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 10 -- LONG-TERM BORROWINGS
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1997 1996
-------------------------------- --------
FLOATING FIXED
RATE RATE TOTAL TOTAL
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FHLB borrowings:
Due in 1997.................................... $ 2,000
Due in 1998.................................... $50,900 $102,000 $152,900 102,900
Due in 1999.................................... -- 1,000 1,000 1,000
Due in 2000.................................... 1,000 2,058 3,058 3,058
Due in 2001.................................... -- 670 670 670
Due in 2002.................................... -- 100,093 100,093 --
Thereafter..................................... -- 2,228 2,228 2,322
------- -------- -------- --------
Total FHLB borrowings.................. 51,900 208,049 259,949 111,950
Subordinated capital notes, 7.50%, interest only,
due August 2002................................ -- 50,000 50,000 50,000
------- -------- -------- --------
Total long-term borrowings............. $51,900 $258,049 $309,949 $161,950
======= ======== ======== ========
</TABLE>
At December 31, 1997 fixed rate FHLB borrowings had interest rates ranging
from 5.78% to 9.23%, with a weighted average interest rate of 5.92%. At December
31, 1997 floating rate FHLB borrowings had interest rates ranging from 5.48% to
5.99%, with a weighted average interest rate of 5.50%. The floating rates are
based on either the Eleventh District Cost of Funds Index, LIBOR or the prime
rate. At the option of the Company, FHLB borrowings can be repaid prior to
maturity by paying a prepayment fee.
The Company is required to pledge loans and/or investments with a
collateral value determined by the FHLB to be at least equal to its outstanding
FHLB borrowings. At December 31, 1997, the Company had pledged loans and
investments that would collateralize an additional $230 million in FHLB
borrowings.
NOTE 11 -- REGULATORY MATTERS AND CAPITAL ADEQUACY
The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory -- and possibly additional
discretionary -- actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company must meet specific capital guidelines that involve quantitative measures
of the Company's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Company's capital amounts
and classifications are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by the Federal Deposit Insurance
Corporation Improvement Act ("FDICIA") to ensure capital adequacy require the
Company to maintain minimum amounts and ratios (set forth in the following
table) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to total
assets (as defined). To be categorized as adequately capitalized under FDICIA,
the Company must maintain total risk-based, Tier I risk-based and Tier I
leverage ratios of 8%, 4% and 4%, respectively. To be categorized as
well-capitalized, the Company must maintain total
F-25
<PAGE> 135
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 11 -- REGULATORY MATTERS AND CAPITAL ADEQUACY -- (CONTINUED)
risk-based, Tier I risk-based and Tier I leverage ratios of 10%, 6% and 5%,
respectively. Set forth in the following table are the Company's actual capital
amounts and ratios as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
REGULATORY CAPITAL REGULATORY CAPITAL
------------------------------ ------------------------------
TOTAL TOTAL
CAPITAL/ TIER I/ CAPITAL/ TIER I/
RISK- RISK- TIER I/ RISK- RISK- TIER I/
BASED BASED TANGIBLE BASED BASED TANGIBLE
ASSETS ASSETS ASSETS ASSETS ASSETS ASSETS
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity per
consolidated financial
statements....................... $475,090 $475,090 $475,090 $437,683 $437,683 $437,683
Capital adjustments, as defined:
Goodwill...................... (60,132) (60,132) (60,132) (53,940) (53,940) (53,940)
Allowance for loan and lease
losses...................... 51,608 -- -- 46,758 -- --
Qualifying portion of
subordinated capital
notes....................... 40,000 -- -- 50,000 -- --
Net unrealized gains on
investment securities
available-for-sale, net of
taxes....................... (910) (910) (910) (611) (611) (611)
Other......................... (1,998) (36) (36) (1,943) (102) (102)
-------- -------- -------- -------- -------- --------
Regulatory capital............... $503,658 $414,012 $414,012 $477,947 $383,030 $383,030
Adequately-capitalized, as defined
by FDICIA........................ 372,995 186,509 223,255 320,410 160,205 199,103
-------- -------- -------- -------- -------- --------
Excess........................ $130,663 $227,503 $190,757 $157,537 $222,825 $183,927
======== ======== ======== ======== ======== ========
At December 31, 1997, and 1996 the
Company had regulatory capital
ratios, as defined, of:.......... 10.80% 8.88% 7.42% 11.93% 9.56% 7.70%
</TABLE>
As illustrated, the Company's capital ratios were in excess of the
well-capitalized minimums as defined by FDICIA. The capital ratios of the Bank
are substantially equal to those of the Company presented above.
As of the most recent notification, the Federal Reserve Bank categorized
the Company as well-capitalized under the regulatory framework for prompt
corrective action. There are no conditions or events since that notification
that management believes have changed the institution's category.
The Federal Reserve Board generally prohibits a bank holding company from
declaring or paying a cash dividend which would impose undue pressure on the
capital of subsidiary banks or would be funded only through borrowing or other
arrangements that might adversely affect a bank holding company's financial
position. The Federal Reserve's policy is that a bank holding company should not
continue its existing rate of cash dividends on its common stock unless its
income is sufficient to fully fund cash dividends and its prospective rate of
earnings retention appears consistent with its capital needs, asset quality and
overall financial condition. State banking regulations also impose certain
restrictions on the payment of dividends by the Bank. Retained earnings of $95
million were not restricted and are available for the payment of dividends at
December 31, 1997.
F-26
<PAGE> 136
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 12 -- INCOME TAXES
The components of the provision for income taxes are illustrated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CURRENT
Federal..................................................... $14,595 $ 7,602 $ 5,967
State....................................................... 6,555 1,586 2,418
DEFERRED
Federal..................................................... 21,403 16,123 12,239
State....................................................... 2,161 (172) 1,346
------- ------- -------
Provision for income taxes.................................. $44,714 $25,139 $21,970
======= ======= =======
</TABLE>
The following analysis reconciles the federal statutory income tax rate to
the effective income tax rate:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax rate........................... 35.0% 35.0% 35.0%
State and local income and franchise taxes, net of federal
tax benefit............................................... 5.3 4.2 4.5
Goodwill amortization....................................... 1.0 1.4 1.5
Effect of tax law changes and prior year adjustments........ .2 (4.0) (.7)
Other....................................................... .1 (.1) .4
---- ---- ----
Effective income tax rate................................... 41.6% 36.5% 40.7%
==== ==== ====
</TABLE>
The provision for deferred income taxes and the balances of deferred income
tax assets and liabilities result principally from differing methods in
reporting the provision for credit losses, lease financing income, state
franchise taxes, loan origination fees and costs, and the provision for losses
on anticipated sale of foreclosed property.
F-27
<PAGE> 137
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 12 -- INCOME TAXES (CONTINUED)
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1997 and 1996 are presented below:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSETS:
Provision for credit losses and taxable accrued interest
on non-performing loans................................ $21,277 $18,845
Deferred compensation expenses............................ 1,974 1,865
Deferred income and expenses, principally due to loan fee
income and accrued expenses to foreign parent.......... 4,434 5,112
Book depreciation greater than tax depreciation........... 2,932 2,543
Amortization of intangible assets and purchase accounting
valuation adjustments.................................. 748 1,022
Foreclosed and repossessed property, principally due to
valuation reserves..................................... 458 1,820
State taxes............................................... 2,283 2,384
Credits, principally alternative minimum tax credits...... 402 4,542
Other..................................................... 335 448
------- -------
Total deferred income tax assets.......................... 34,843 38,581
======= =======
DEFERRED TAX LIABILITIES:
Leases.................................................... 79,830 58,040
Deferred loan origination costs........................... 11,608 12,785
Tax depreciation greater than book depreciation........... 2,724 3,018
Investments, principally due to FHLB stock dividends and
unrealized gain on securities available for sale....... 1,778 1,510
Other..................................................... 3,812 3,631
------- -------
Total deferred income tax liabilities..................... 99,752 78,984
------- -------
NET DEFERRED TAX LIABILITY.................................. $64,909 $40,403
======= =======
</TABLE>
Net deferred income tax liabilities are included in other liabilities on
the consolidated balance sheet. There were no valuation adjustments at December
31, 1997 or 1996. Deferred income tax liabilities include $.6 million and $.4
million at December 31, 1997 and 1996, respectively, related to the tax effect
of unrealized gains on investment securities available for sale.
At December 31, 1997, the Company has federal and California alternative
minimum tax credit carryforwards of approximately $323,000 and $79,000,
respectively, which may be used to offset future income tax liabilities. Such
credits have no expiration date. Management expects to generate sufficient
regular tax liability to utilize all credit carryforwards.
The Taxpayer Relief Act of 1997 had no material impact on the Company's
deferred tax assets or liabilities.
The Company has filed its California franchise tax return on the basis of a
combined "waters-edge" report with BNP's United States affiliates since 1992. In
1991 and prior years, the Company filed its California franchise tax returns on
a separate entity basis and the California Franchise Tax Board ("FTB") asserted
that the Company and BNP were engaged in a worldwide "unitary" business. The use
of the FTB's method of apportionment and its determination of worldwide income
could result in significant additional taxes due for years prior to 1992.
Management of the Company and BNP vigorously dispute and are protesting the
FTB's
F-28
<PAGE> 138
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 12 -- INCOME TAXES (CONTINUED)
assertion of a worldwide unitary business and its method of determining and
apportioning worldwide income. Although the United States Supreme Court ruled in
favor of the FTB in a similar matter, management believes, with the advice of
its legal counsel, that the Company and BNP's factual situation is sufficiently
different so as to allow management to conclude that the ultimate resolution of
this matter will not be material to the Company's consolidated financial
statements.
NOTE 13 -- EMPLOYEE BENEFIT PLANS
The Company participates with certain other U.S. subsidiaries and agencies
of BNP in a noncontributory, defined benefit pension plan covering substantially
all employees. Contributions from all subsidiaries are commingled and can be
used to satisfy the vested obligations of any participant. The benefits are
based on years of service and the employees' compensation over their years of
employment. The Company's funding policy is to contribute annually such amounts
as are necessary on an actuarially determined basis to provide the plan with
assets sufficient to meet the participants' vested benefits. Contributions are
intended to provide for benefits attributable to both service to date and for
that expected to be earned in the future. Plan assets consist principally of
investments in insurance contracts, equities, bonds and other investments.
Pension cost is allocated to the participating entities based on demographic
data and actuarial assumptions.
Net pension expense allocated to the Company included the following
components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost -- benefits earned............................. $1,167 $1,454 $1,180
Interest cost on projected benefit obligation............... 1,971 2,241 2,098
Less return on plan assets.................................. (2,552) (2,752) (2,261)
Net amortization and deferral............................... 125 149 149
------ ------ ------
Net pension expense......................................... $ 711 $1,092 $1,166
====== ====== ======
</TABLE>
For 1997, 1996 and 1995, the projected benefit obligation was actuarially
determined using a discount rate of 7.4%, an assumed increase in future
compensation levels of 4%, with an expected long-term rate of return on plan
assets of 9.5%.
The Company is the sponsor of a non-qualified, defined benefit pension plan
which became effective in 1987 for certain employees whose base compensation
exceeds the limit imposed by the Employee Retirement Income Security Act for
inclusion in the qualified pension plan. Pension expense attributable to this
plan was $.5 million in both 1997 and 1996 (none in 1995).
Salaried employees who have completed one year of service are eligible to
participate in the Company's defined contribution plan, which provides
tax-deferred investment opportunities. The Company's contribution to the plan,
based on participants' contributions and salaries, was $1.1 million in 1997 and
$.5 million in both 1996 and 1995.
The Company provides certain health care benefits for employees who meet
age, participation and length of service requirements at retirement. The Plan
pays stated percentages of covered expenses after annual deductibles have been
met. Benefits paid take into consideration payments by Medicare. The Plan is not
prefunded and the Company has the right to modify or terminate the plan.
During 1993, the Company adopted SFAS No. 106, "Employers' Accounting for
Postretirements Benefits Other Than Pensions". SFAS 106 requires accrual of the
expected cost of provided postretirement
F-29
<PAGE> 139
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 13 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
health care benefits during the years that employees provide service.
Previously, retiree health care benefits were expensed as incurred. In adopting
this standard, the Company elected the delayed recognition method of recording
the accumulated postretirement benefit obligation ("APBO"). Postretirement
health care expense was $.6 million for the year ended 1997 and $.4 million in
both 1996 and 1995. The unamortized balance of the transition obligation was
$1.7 million, $1.9 million and $2.0 million at December 31, 1997, 1996 and 1995,
respectively.
The APBO was $3.4 million and $3.6 million as of December 31, 1997 and
1996, respectively. The assumed health care cost trend rate used in measuring
the 1997 and 1996 APBO was 7%, gradually declining to 4.25% in 2001 and
thereafter. A one percentage point increase in the trend rates would increase
the December 31, 1997 and 1996 APBO $.2 million and would not significantly
impact the expense in either year. The discount rate used to determine the APBO
was 7.40% in 1997 and 7.50% in 1996.
The Company has purchased life insurance policies that increase in value
while also providing life insurance benefits for its key executives. The
executives vest in these insurance benefits after attaining certain requirements
or in the event of a change in control of the Company. The vested benefits in
such policies have been accrued and related compensation expense was $.6 million
for the year ended December 31, 1997 (none in 1996 or 1995).
Under the Company's Long-Term Incentive Plan ("LTIP") certain key
executives have been issued stock appreciation rights, the value of which are
based on the premium, if any, received by the Company's common shareholder upon
the sale of the Company. The stock appreciation rights have no value unless and
until there is a change of control of 50% or more of the common stock of the
Company, thus no compensation expense has been recorded related to these rights.
NOTE 14 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosure About Fair Value of Financial Instruments". The estimated fair value
amounts have been determined by using available market information and
appropriate valuation methodologies. However, considerable judgment is required
to interpret market data to develop the estimates of fair value. Accordingly,
the estimates presented are not necessarily indicative of the amounts that could
be realized in a current market exchange. The use of different market
assumptions and/or estimation techniques may have a material effect on the
estimated fair value amounts.
F-30
<PAGE> 140
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 14 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents (a)........... $ 328,392 $ 328,392 $ 264,259 $ 264,259
Investment securities (b)............... 858,686 857,726 931,807 926,359
Loans held for sale (c)................. 5,757 5,857 -- --
Loans and leases, net of allowance for
credit losses (d)..................... 4,292,734 4,347,690 3,725,533 3,745,135
Customers' acceptance liability (e)..... 37 37 717 717
LIABILITIES
Deposits: (f)
Non-interest bearing demand
deposits........................... 1,001,550 1,001,550 848,384 848,384
Interest bearing deposits without
fixed maturity dates............... 1,482,926 1,482,926 1,417,284 1,417,284
---------- ----------- ---------- -----------
Total deposits without fixed
maturity dates................... 2,484,476 2,484,476* 2,265,668 2,265,668*
Interest bearing deposits with fixed
maturity dates........................ 2,088,474 2,091,821 1,916,413 1,921,643
---------- ----------- ---------- -----------
Total deposits................ 4,572,950 4,576,297 4,182,081 4,187,311
Short-term borrowings (g)............... 184,418 184,418 216,379 216,379
Acceptances outstanding (e)............. 37 37 717 717
Long-term borrowings (h)................ 309,949 311,788 161,950 162,196
OFF-BALANCE-SHEET INSTRUMENTS,
[UNREALIZED GAINS AND (LOSSES)] (i)
Interest rate swap...................... -- -- -- (71)
Commitments to extend credit............ -- -- -- --
Standby letters of credit............... -- -- -- --
Commercial letters of credit............ -- -- -- --
Commitments to purchase foreign
currencies............................ (109) (109) (399) (399)
Commitments to sell foreign
currencies............................ 833 833 616 616
</TABLE>
- ---------------
* As required by SFAS 107, the estimated fair value of deposits without fixed
maturity dates is the amount payable upon demand at the reporting date, and,
as such, may not represent the true market value of these liabilities.
(a) Cash and cash equivalents:
The carrying amount is a reasonable estimate of fair value.
(b) Investment securities:
Fair values of investment securities are based on quoted market prices or
dealer quotes.
(c) Loans held for sale:
Fair values of loans held for sale are based on observable market values.
F-31
<PAGE> 141
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 14 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
(d) Loans and leases, net of allowance for credit losses:
Fair values were estimated for portfolios of performing loans and leases
with similar financial characteristics. For certain performing variable rate
loans that reprice frequently, estimated fair values are based on carrying
values, adjusted for credit quality, if no significant changes in credit
standing have occurred since origination and the interest rate adjustment
characteristics of the loan effectively adjust the interest rate to maintain a
market rate of return.
Fair values for certain performing fixed rate commercial, construction,
real estate, revolving credit and other loans and leases were estimated by
discounting the future cash flows using current rates at which similar loans
would be made to borrowers with similar credit ratings and maturities, adjusted
for the allowance for credit losses.
(e) Customers' acceptance liability and acceptances outstanding:
The carrying value is a reasonable estimate of fair value.
(f) Deposits:
The fair value of noninterest-bearing and adjustable rate deposits is the
amount payable upon demand at the reporting date. The fair value of fixed-rate
interest-bearing deposits with fixed maturity dates was estimated by discounting
the cash flows using rates currently offered for deposits of similar remaining
maturities.
(g) Short-term borrowings:
The carrying value is a reasonable estimate of fair value.
(h) Long-term borrowings:
The fair value was estimated by discounting the cash flows using rates
currently offered for borrowings of similar types and maturities.
(i) Off-balance-sheet instruments:
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present credit-worthiness of the
counterparties, reduced by the remaining net deferred income associated with
such commitments. The fair values of standby and commercial letters of credit
are based on fees currently charged for similar agreements or on the estimated
cost to terminate them or otherwise settle the obligations with the
counterparties reduced by the remaining net deferred income associated with such
obligations.
The fair value of the interest rate swap is the estimated amount that the
Company would pay to an unrelated third party to terminate the swap agreement at
the reporting date, taking into account current interest rates.
The fair value of commitments to purchase or sell foreign currencies is
based on quoted market prices.
F-32
<PAGE> 142
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 15 -- COMMITMENTS AND CONTINGENT LIABILITIES
The following is a summary of the contractual or notional amount of
financial instruments with off-balance-sheet risk:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CONTRACTUAL AMOUNTS WHICH REPRESENT CREDIT RISK
Commitments to extend credit................................ $692,195 $607,638
Standby letters of credit................................... 40,068 39,951
Commercial and other letters of credit...................... 5,563 5,910
NOTIONAL OR CONTRACTUAL AMOUNTS WHICH DO NOT REPRESENT
CREDIT RISK
Commitments to purchase foreign currencies.................. 22,286 39,699
Commitments to sell foreign currencies...................... 23,671 37,688
Interest rate swap.......................................... -- 50,000
</TABLE>
The Company is obligated under agreements with an independent provider of
certain data processing and other support services. The agreements, which expire
in August 1999, require monthly payments for both data processing and other
support services. The Company has the option to terminate these agreements by
paying a termination fee. As presently structured, minimum average monthly
payments through August 1999 are $.7 million for data processing services and
$.3 million for other support services. Minimum monthly payments may vary
depending upon the nature and volume of services provided, scheduled fee
increases and decreases, and other factors.
The Company maintains insurance on its customer deposits with the FDIC. The
FDIC manages the Bank Insurance Fund ("BIF"), which insures deposits of
commercial banks, and the Savings Association Insurance Fund ("SAIF"), which
insures deposits of savings associations. FDICIA mandated that the two funds
maintain reserves at 1.25% of their respective federally insured deposits.
During 1995, the FDIC announced that the BIF had reached its mandated reserve
level, reducing insurance premiums on BIF-insured deposits, and subsequently
announced that deposit insurance premiums on BIF-insured deposits would be
further reduced at December 31, 1995. At that time, the SAIF fund had not yet
met its mandated reserve level. As a result, deposit insurance premiums
attributable to BIF-insured deposits were less than those attributable to
SAIF-insured deposits.
At December 31, 1995, there were numerous regulatory proposals before
Congress to address the deposit insurance premium differential between BIF- and
SAIF-insured deposits. During 1996, Congress passed legislation resulting in a
one-time insurance premium charge attributable to SAIF insured deposits
sufficient to bring the SAIF fund up to its mandated reserve level. As a result,
the Company recorded a one-time deposit insurance premium expense of $9.6
million and at December 31, 1997 the disparity in premiums between BIF and SAIF
insured deposits has been reduced.
There are various legal actions pending against the Company arising from
the normal course of business. In the opinion of management, these legal actions
are expected to be resolved with no material adverse effect on the Company's
consolidated financial statements.
F-33
<PAGE> 143
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 16 -- CONDENSED FINANCIAL INFORMATION OF BANCWEST (PARENT ONLY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 53 $ 61
Funds sold.................................................. 350 500
Premises and equipment, net................................. -- 4
Interest receivable and other assets........................ 1,408 1,423
Investment in subsidiary (Bank of the West)................. 454,594 416,942
-------- --------
Total Assets...................................... $456,405 $418,930
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Interest payable and other liabilities...................... $ 1,315 $ 1,247
-------- --------
Total Liabilities................................. 1,315 1,247
STOCKHOLDERS' EQUITY
Non-cumulative preferred stock -- no par value; Series A
1,000,000 shares authorized; 75,000 outstanding........... 75,000 75,000
Common stock -- no par value; 2,500,000 shares authorized;
1,733,430 outstanding at December 31, 1997 and 1,632,262
outstanding at December 31, 1996.......................... 8,667 8,161
Additional paid-in capital.................................. 228,392 208,898
Retained earnings........................................... 142,121 125,013
Net unrealized gains on subsidiary's available-for-sale
investment securities..................................... 910 611
-------- --------
Total Stockholders' Equity........................ 455,090 417,683
-------- --------
Total Liabilities and Stockholders' Equity........ $456,405 $418,930
======== ========
</TABLE>
F-34
<PAGE> 144
BANCWEST CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NOTE 16 -- CONDENSED FINANCIAL INFORMATION OF BANCWEST (PARENT ONLY) (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
INCOME STATEMENTS -----------------------------
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME
Investment securities....................................... $ 25 $ 31 $ --
------- ------- -------
Total interest income....................................... 25 31 --
Equity in earnings of subsidiary............................ 61,886 42,784 30,810
------- ------- -------
Total income...................................... 61,911 42,815 30,810
OTHER EXPENSE
Salaries and employee benefits.............................. 283 243
Occupancy expenses.......................................... 25 25
Furniture, equipment and other.............................. 113 87
------- ------- -------
Total other expense............................... 421 355 --
------- ------- -------
Income before income taxes.................................. 61,490 42,460 30,810
Income tax benefit.......................................... 151 123 --
------- ------- -------
NET INCOME.................................................. $61,641 $42,583 $30,810
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
STATEMENTS OF CASH FLOWS --------------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income................................................. $ 61,641 $ 42,583 $ 30,810
Adjustments to reconcile net income to net cash provided by
operating activities:
Excess of equity in earnings of subsidiary over dividends
received................................................. (37,353) (39,117) (30,810)
Other increases (decreases), net......................... 237 (1,274) (775)
-------- -------- --------
Net cash provided (used) by operating activities........... 24,525 2,192 (775)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of preferred stock, net of issuance costs......... 73,416
Cash dividends paid........................................ (24,533) (2,356)
Capital contribution (made) received....................... (73,416) 1,000
-------- -------- --------
Net cash provided (used) by financing activities........... (24,533) (2,356) 1,000
-------- -------- --------
Increase (decrease) in cash and cash equivalents........... (8) (164) 225
Cash and cash equivalents, January 1....................... 61 225 --
-------- -------- --------
Cash and cash equivalents, December 31..................... $ 53 $ 61 $ 225
======== ======== ========
OTHER CASH FLOW INFORMATION
Interest paid.............................................. $ -- $ -- $ --
Income tax refunds received................................ 123 -- --
</TABLE>
During 1997, 1996 and 1995, the Company's principal activity consisted of
owning shares of the Bank.
F-35
<PAGE> 145
<PAGE> 146
APPENDIX I
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 28, 1998
BETWEEN
BANCWEST CORPORATION
AND
FIRST HAWAIIAN, INC.
- --------------------------------------------------------------------------------
<PAGE> 147
<PAGE> 148
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
THE MERGER.................................................. 1
1.1. Effective Time of the Merger........................... 1
1.2. Closing................................................ 1
1.3. Effects of the Merger.................................. 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES.................... 2
2.1. Effect on Capital Stock................................ 2
(a) Cancellation of Treasury Stock..................... 2
(b) Conversion of BancWest Common Stock................ 2
(c) Conversion of BancWest Preferred Stock............. 2
2.2. No Further Ownership Rights in BancWest Common Stock... 3
2.3. Absence of Control..................................... 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES.............................. 3
3.1. Representations and Warranties of BancWest............. 3
(a) Organization, Standing and Power................... 4
(b) Capital Structure; Ownership of FHI Common Stock... 5
(c) Authority; No Violation............................ 6
(d) Financial Statements............................... 6
(e) Information Supplied............................... 6
(f) Compliance with Applicable Laws.................... 6
(g) Litigation......................................... 6
(h) Taxes.............................................. 7
(i) Certain Agreements................................. 7
(j) Benefit Plans...................................... 8
(k) Subsidiaries....................................... 9
(l) Agreements with Bank Regulators.................... 10
(m) Absence of Certain Changes or Events............... 10
(n) Undisclosed Liabilities............................ 10
(o) Reports............................................ 10
(p) Environmental Liability............................ 10
(q) Properties......................................... 11
(r) Transactions with Affiliates....................... 11
(s) Brokers or Finders................................. 11
(t) Intellectual Property.............................. 12
3.2. Representations and Warranties of FHI.................. 12
(a) Organization, Standing and Power................... 12
(b) Capital Structure.................................. 12
(c) Authority; No Violation............................ 13
(d) SEC Documents...................................... 14
(e) Information Supplied............................... 14
(f) Compliance with Applicable Laws.................... 14
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
(g) Litigation......................................... 15
(h) Taxes.............................................. 15
(i) Certain Agreements................................. 15
(j) Benefit Plans...................................... 16
(k) Subsidiaries....................................... 17
(l) Agreements with Bank Regulators.................... 17
(m) Absence of Certain Changes or Events............... 18
(n) Vote Required...................................... 18
(o) Undisclosed Liabilities............................ 18
(p) Reports............................................ 18
(q) Environmental Liability............................ 18
(r) Properties......................................... 19
(s) Brokers or Finders................................. 19
(t) Opinion............................................ 19
(u) Intellectual Property.............................. 19
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS................... 19
4.1. Covenants of BancWest.................................. 19
4.2. Covenants of FHI....................................... 22
ARTICLE V
ADDITIONAL AGREEMENTS....................................... 24
5.1. Preparation of the Proxy Statement..................... 24
5.2. Access to Information.................................. 24
5.3. Stockholders' Meeting.................................. 24
5.4. No Solicitations....................................... 25
5.5. Legal Conditions....................................... 25
5.6. Series A Preferred Stock............................... 26
5.7. Employee Benefit Plans................................. 26
5.8. Intercompany Matters................................... 26
5.9. Charter Amendment; By-Law Amendment.................... 27
5.10. Indemnification; Directors' and Officers' Insurance... 27
5.11. Additional Agreements................................. 28
5.12. Fees and Expenses..................................... 28
5.13. Cooperation........................................... 28
ARTICLE VI
CONDITIONS PRECEDENT........................................ 29
6.1. Conditions to Each Party's Obligation.................. 29
(a) Stockholder Approval............................... 29
(b) Other Approvals.................................... 29
(c) No Injunctions or Restraints; Illegality........... 29
(d) Bank Merger........................................ 29
6.2. Conditions to Obligations of FHI....................... 29
(a) Representations and Warranties..................... 29
(b) Performance of Obligations......................... 29
(c) Consents Under Agreements.......................... 29
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
(d) Corporate Action................................... 30
(e) Tax Opinion........................................ 30
(f) NASD Approval...................................... 30
(g) Burdensome Condition............................... 30
(h) Transaction Agreements............................. 30
(i) SAS 71 Review Letter............................... 30
6.3. Conditions to Obligations of BancWest.................. 30
(a) Representations and Warranties..................... 30
(b) Performance of Obligations......................... 30
(c) Consents Under Agreements.......................... 31
(d) Tax Opinion........................................ 31
(e) Burdensome Condition............................... 31
(f) NASD Approval...................................... 31
(g) Corporate Action................................... 31
(h) Transaction Agreements............................. 31
(i) SAS 71 Review Letter............................... 31
ARTICLE VII
TERMINATION AND AMENDMENT................................... 31
7.1. Termination............................................ 31
7.2. Effect of Termination.................................. 32
7.3. Amendment.............................................. 33
7.4. Extension; Waiver...................................... 33
ARTICLE VIII
GENERAL PROVISIONS.......................................... 34
8.1. Nonsurvival of Representations and Warranties.......... 34
8.2. Notices................................................ 34
8.3. Interpretation......................................... 34
8.4. Counterparts........................................... 35
8.5. Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership.............................................. 35
8.6. Governing Law; Consent to Jurisdiction................. 35
8.7. Severability........................................... 35
8.8. Assignment............................................. 36
</TABLE>
EXHIBIT A Charter Amendments
EXHIBIT B By-Law Amendment
EXHIBIT C Standstill and Governance Agreement
EXHIBIT D Registration Rights Agreement
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<PAGE> 152
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Acquisition Proposal........................................ 33
Agreement................................................... 1
Agreement of Merger......................................... 1
BancWest.................................................... 1
BancWest Benefit Plans...................................... 8
BancWest Common Stock....................................... 1
BancWest Disclosure Schedule................................ 4
BancWest Financial Statements............................... 6
BancWest Intellectual Property.............................. 12
BancWest Permits............................................ 6
BancWest Preferred Stock.................................... 2
BancWest Preferred Stock Approval........................... 5
BancWest's Current Premium.................................. 28
Bank Merger................................................. 1
Bank of the West............................................ 1
Bank of the West Common Stock............................... 1
Bank of the West Preferred Stock............................ 4
Bank Regulators............................................. 6
Benefit Plans............................................... 8
BHC Act..................................................... 3
BIF......................................................... 3
BNP......................................................... 1
Burdensome Condition........................................ 30
Business Day................................................ 2
By-Law Amendments........................................... 27
Certificate of Merger....................................... 1
Charter Amendments.......................................... 27
Closing..................................................... 1
Closing Date................................................ 1
Code........................................................ 7
Confidentiality Agreements.................................. 24
Consents.................................................... 29
Constituent Corporations.................................... 2
Conversion Number........................................... 2
DGCL........................................................ 2
Effective Time.............................................. 1
Environmental Laws.......................................... 11
ERISA....................................................... 8
Exchange Act................................................ 8
Expenses.................................................... 33
FABC........................................................ 2
FDIA........................................................ 9
FDIC........................................................ 3
Federal Reserve............................................. 5
FHI......................................................... 1
FHI Benefit Plans........................................... 16
FHI Class A Common Stock.................................... 2
FHI Common Stock............................................ 12
</TABLE>
I-iv
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FHI Disclosure Schedule..................................... 12
FHI Intellectual Property................................... 19
FHI Permits................................................. 14
FHI Preferred Stock......................................... 12
FHI SEC Documents........................................... 14
FHI Stock Plans............................................. 12
FHI Stockholder Approval.................................... 18
FRA......................................................... 5
GAAP........................................................ 3
Goldman Sachs............................................... 19
Governmental Entity......................................... 5
HSR Act..................................................... 5
Indemnified Liabilities..................................... 27
Indemnified Parties......................................... 27
Injunction.................................................. 29
insured bank................................................ 9
Litigation.................................................. 6
material.................................................... 3
material adverse effect..................................... 3
Merger...................................................... 1
NASD........................................................ 5
Nasdaq National Market System security...................... 30
Outstanding Bank of the West Preferred Stock................ 4
PBGC........................................................ 9
Proxy Statement............................................. 5
Registration Rights Agreement............................... 1
Representatives............................................. 25
Requisite Regulatory Approvals.............................. 29
SARs........................................................ 26
SAS 71...................................................... 30
SEC......................................................... 4
Series A Preferred Stock.................................... 4
Series B Preferred Stock.................................... 4
Side Agreement.............................................. 1
Significant Subsidiary...................................... 4
Standstill Agreement........................................ 1
State Banking Approvals..................................... 5
State Takeover Approvals.................................... 5
Stockholders Agreement...................................... 24
Stockholders' Meeting....................................... 6
Subsidiary.................................................. 3
Surviving Corporation....................................... 2
Takeover Proposal........................................... 25
tax......................................................... 7
Tax return.................................................. 7
taxable..................................................... 7
Termination Fee............................................. 33
Transaction Agreements...................................... 1
Violation................................................... 5
</TABLE>
I-v
<PAGE> 154
AGREEMENT AND PLAN OF MERGER dated as of May 28, 1998 (this "Agreement")
between FIRST HAWAIIAN, INC., a Delaware corporation ("FHI"), and BANCWEST
CORPORATION, a California corporation ("BancWest") and a subsidiary of Banque
Nationale de Paris, a societe anonyme, or limited liability banking corporation,
organized under the laws of the Republic of France ("BNP").
WHEREAS, BNP is the beneficial and record owner of all of the issued and
outstanding common stock, without par value, of BancWest (the "BancWest Common
Stock");
WHEREAS, BancWest is the beneficial and record owner of 1,733,430 shares of
the issued and outstanding common stock, $5 par value per share (the "Bank of
the West Common Stock"), of Bank of the West, a California state chartered
commercial bank ("Bank of the West"), constituting all of the issued and
outstanding shares of Bank of the West Common Stock;
WHEREAS, the Board of Directors of FHI has approved the Agreement, declared
it advisable and deems it advisable and in the best interests of the
stockholders of FHI to consummate the transaction provided for herein in which
BancWest would merge with and into FHI (the "Merger");
WHEREAS, the Board of Directors of BancWest has approved and deems it
advisable and in the best interests of BNP, as the sole stockholder of BancWest,
to consummate the Merger, and BNP, in such capacity, has approved the Merger;
WHEREAS, concurrently with the execution and delivery hereof, FHI and BNP
are entering into an agreement, dated of even date herewith (the "Side
Agreement") and on or prior to the Closing (as defined herein), FHI and BNP will
enter into a Standstill and Governance Agreement (the "Standstill Agreement"),
substantially in the form of Exhibit C hereto, and a Registration Rights
Agreement (the "Registration Rights Agreement" and, together with the Side
Agreement and the Standstill Agreement, the "Transaction Agreements"),
substantially in the form of Exhibit D hereto;
WHEREAS, it is the intention of the parties that the Merger qualify as a
tax-free reorganization pursuant to Section 368(a) of the Code (as defined
herein);
WHEREAS, it is the intention of the parties that concurrently with the
consummation of the Merger, Bank of the West shall be merged with Pacific One
Bank, a subsidiary of FHI (the "Bank Merger") and the resulting bank, which
shall be Bank of the West, shall continue as a wholly-owned Subsidiary (as
defined herein) of FHI; and
WHEREAS, the Boards of Directors of FHI and BancWest have each determined
that the Merger, the Bank Merger and the other transactions contemplated by this
Agreement are consistent with, and will contribute to the furtherance of, their
respective business strategies and goals.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. Effective Time of the Merger. Subject to the provisions of this
Agreement, the Merger shall become effective upon the occurrence of both (i) the
filing of a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, and (ii) the filing of an agreement
of merger (the "Agreement of Merger") with the Secretary of State of the State
of California, or at such time thereafter as is provided in the Certificate of
Merger and the Agreement of Merger (the "Effective Time").
1.2. Closing. The closing of the Merger (the "Closing") will take place
at 10:00 a.m. on a date to be specified by the parties, which shall be the
second Business Day after satisfaction or waiver (subject to applicable law) of
the conditions (excluding conditions that, by their terms, cannot be satisfied
until the Closing) set forth in Article VI (the "Closing Date"), unless another
time or date is agreed to in writing by the parties hereto. The Closing shall be
held at such location as is agreed to in writing by the parties hereto. As
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<PAGE> 155
used in this Agreement, "Business Day" shall mean any day that is not a
Saturday, Sunday or other day on which banks are required or authorized by law
to be closed in Honolulu, Hawaii, San Francisco, California or Paris, France.
1.3. Effects of the Merger. (a) At the Effective Time (i) BancWest shall
be merged with and into FHI and the separate corporate existence of BancWest
shall cease, (ii) the Certificate of Incorporation of FHI as in effect
immediately prior to the Effective Time shall be amended so as to read in its
entirety as set forth in Exhibit A hereto, and as so amended shall be the
Certificate of Incorporation of the Surviving Corporation and (iii) the By-laws
of FHI as in effect immediately prior to the Effective Time shall be amended so
as to read in their entirety as set forth in Exhibit B hereto, and as so amended
shall be the By-laws of the Surviving Corporation.
(b) As used in this Agreement, "Constituent Corporations" shall mean each
of FHI and BancWest, and "Surviving Corporation" shall mean FHI, at and after
the Effective Time, as the surviving corporation in the Merger.
(c) At and after the Effective Time, the Merger will have the effects set
forth in the General Corporation Law of the State of Delaware (the "DGCL") and
the California Corporations Code.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1. Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of
BancWest or FHI capital stock:
(a) Cancellation of Treasury Stock. All shares of BancWest Common
Stock that are owned by BancWest as treasury stock or by any Subsidiary of
BancWest shall be cancelled and retired and shall cease to exist and no
stock of FHI or other consideration shall be delivered in exchange
therefor.
(b) Conversion of BancWest Common Stock. The shares of BancWest
Common Stock issued and outstanding immediately prior to the Effective
Time, including shares issued to French American Banking Corporation, a New
York corporation ("FABC"), in exchange for all of the outstanding shares of
Series A Preferred Stock (as hereinafter defined) pursuant to Section 5.6
(other than shares to be cancelled in accordance with Section 2.1(a)) shall
be converted into the Conversion Number (as hereinafter defined) of fully
paid and nonassessable shares of Class A Common Stock, $1 par value per
share (the "FHI Class A Common Stock"), of FHI. All such shares of BancWest
Common Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each certificate
previously representing any such shares shall thereafter represent the
shares of FHI Class A Common Stock into which such BancWest Common Stock
has been converted. Certificates previously representing shares of BancWest
Common Stock shall be exchanged for certificates representing whole shares
of FHI Class A Common Stock issued in consideration therefor upon the
surrender of such certificates on the Closing Date. For purposes of this
Agreement, the "Conversion Number" means the number of shares of FHI Class
A Common Stock (rounded upward to the nearest whole number) equal to the
excess of (i) the quotient of (A) the aggregate number of shares of FHI
Common Stock (as hereinafter defined) issued and actually outstanding at
the close of business on the Business Day immediately preceding the
Effective Time plus the number of shares of FHI Common Stock to be issued
upon surrender and cancellation of SARs (as defined in Section 5.7)
pursuant to Section 5.7, divided by (B) 0.55, over (ii) the number of
shares specified in clause (i)(A).
(c) Conversion of BancWest Preferred Stock. The shares of
Fixed/Adjustable Rate Noncumulative Preferred Stock Series A, without par
value, of BancWest (the "BancWest Preferred Stock"), issued and outstanding
immediately prior to the Effective Time shall be cancelled and retired and
shall cease to exist and no stock of FHI or other consideration shall be
delivered in exchange therefor.
I-2
<PAGE> 156
2.2. No Further Ownership Rights in BancWest Common Stock. All shares of
FHI Class A Common Stock issued upon conversion of shares of BancWest Common
Stock in accordance with the terms hereof shall be deemed to represent all
rights pertaining to such shares of BancWest Common Stock, and, after the
Effective Time, there shall be no further registration of transfers on the stock
transfer books of BancWest of the shares of BancWest Common Stock, which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates formerly representing shares of BancWest Common Stock are
presented to FHI for any reason, they shall be cancelled and, if applicable,
exchanged as provided in this Article II.
2.3. Absence of Control. Subject to any specific provisions of this
Agreement, it is the intent of the parties hereto that neither FHI nor BancWest
by reason of this Agreement shall be deemed (until consummation of the
transactions contemplated hereby) to control, directly or indirectly, the other
party hereto and shall not exercise, or be deemed to exercise, directly or
indirectly, a controlling influence over the management or policies of such
other party.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of BancWest. BancWest represents and
warrants to FHI as follows:
(a) Organization, Standing and Power. BancWest is a bank holding
company registered under the Bank Holding Company Act of 1956, as amended
(the "BHC Act"). Bank of the West is a Subsidiary of BancWest and is a
California banking association chartered under the laws of the State of
California. The deposit accounts of Bank of the West are insured by the
Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation
("FDIC") to the fullest extent permitted by law, and all premiums and
assessments required in connection therewith have been paid when due.
BancWest and each of its Significant Subsidiaries (as defined below),
including Bank of the West, is a bank or corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now
being conducted and is duly qualified and in good standing to do business
in each jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification necessary, other than
in such jurisdictions where the failure so to qualify would not, either
individually or in the aggregate, have a material adverse effect on
BancWest. The Articles of Incorporation and By-laws of each of BancWest and
Bank of the West, copies of which were previously furnished to FHI, are
true, complete and correct as in effect on the date of this Agreement. As
used in this Agreement, (i) the term "Subsidiary" when used with respect to
any party means any corporation or other organization, whether incorporated
or unincorporated, (x) of which such party or any other Subsidiary of such
party is a general partner (excluding partnerships, the general partnership
interests of which held by such party or any Subsidiary of such party do
not have a majority of the voting interests in such partnership), or (y) at
least a majority of the securities or other interests of which having by
their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by
such party and one or more of its Subsidiaries, (ii) any reference to any
event, change or effect being "material" with respect to any entity means
an event, change or effect which is material in relation to the condition
(financial or otherwise), properties, assets, liabilities, businesses,
results of operations or prospects of such entity and its Subsidiaries
taken as a whole and (iii) the term "material adverse effect" means, with
respect to any entity, a material adverse effect (whether or not required
to be accrued or disclosed under Statement of Financial Accounting
Standards No. 5) (A) on the condition (financial or otherwise), properties,
assets, liabilities, businesses, results of operations or prospects of such
entity and its Subsidiaries taken as a whole (but does not include any such
effect resulting from or attributable to (1) any change in banking or other
similar laws, rules or regulations or interpretations thereof by courts or
governmental authorities, or any changes in United States generally
accepted accounting principles ("GAAP") or regulatory
I-3
<PAGE> 157
accounting principles, in any such case applicable generally to banks and
their holding companies, (2) any action or omission by BancWest, BNP or FHI
or any Subsidiary of any of them taken with the prior written consent of
the other parties hereto, in contemplation of the transactions contemplated
hereby or (3) any expenses incurred by such party in connection with this
Agreement or the transactions contemplated hereby, but only to the extent
set forth in Section 3.1(a) of the BancWest Disclosure Schedule (as defined
herein), with respect to BancWest, and in Section 3.2(a) of the FHI
Disclosure Schedule (as defined herein, with respect to FHI), or (B) on the
ability of such entity to perform its obligations hereunder on a timely
basis. A "Significant Subsidiary" means any Subsidiary of a person that
would constitute a Significant Subsidiary of such person within the meaning
of Rule 1-02 of Regulation S-X of the Securities and Exchange Commission
(the "SEC").
(b) Capital Structure; Ownership of FHI Common Stock. (i) The
authorized capital stock of BancWest consists of 3,500,000 shares of
BancWest Common Stock and 1,000,000 shares of preferred stock, of which (A)
1,733,430 shares of BancWest Common Stock and (B) 75,000 shares of BancWest
Preferred Stock, are outstanding as of the date of this Agreement. All
outstanding shares of BancWest Common Stock and BancWest Preferred Stock
have been duly authorized and validly issued and are fully paid and
non-assessable and not subject to preemptive rights. All shares of BancWest
Common Stock issued and outstanding as of the date of this Agreement are
owned by BNP, free and clear of any lien or other encumbrance.
(ii) The authorized capital stock of Bank of the West consists of
2,500,000 shares of Bank of the West Common Stock and 1,000,000 shares of
non-cumulative preferred stock, no par value (the "Bank of the West
Preferred Stock"), of which (A) 1,733,430 shares of Bank of the West Common
Stock, (B) 200,000 shares of Series A Non-Cumulative Preferred Stock, no
par value (the "Series A Preferred Stock"), and (C) 75,000 shares of Series
B Non-Cumulative Preferred Stock, no par value (the "Series B Preferred
Stock" and, together with the Series A Preferred Stock, the "Outstanding
Bank of the West Preferred Stock"), are outstanding. All outstanding shares
of Bank of the West Common Stock and Outstanding Bank of the West Preferred
Stock have been duly authorized and validly issued and are fully paid and
non-assessable and not subject to preemptive rights. All of the outstanding
shares of Series A Preferred Stock are owned by FABC and, as of the date of
this Agreement, all of the outstanding shares of Series B Preferred Stock
are owned by BancWest in each case, free and clear of any lien or other
encumbrance.
(iii) Except for this Agreement, (i) there are no options, warrants,
calls, rights, commitments or agreements of any character to which BancWest
or any of its Subsidiaries or affiliates is a party or by which any of the
foregoing are bound obligating BancWest or any of its Subsidiaries or
affiliates to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of BancWest or any of its
Subsidiaries or obligating BancWest or any of its Subsidiaries or
affiliates to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement, (ii) there are no outstanding contractual
obligations of BancWest or any of its Subsidiaries or affiliates to
repurchase, redeem or otherwise acquire any shares of capital stock of
BancWest or any of its Subsidiaries and (iii) there are no outstanding
securities of any kind convertible into or exchangeable for the capital
stock of BancWest or any of its Subsidiaries (or any interest therein).
Except as set forth in Section 3.1(b)(iii) of the disclosure schedule of
BancWest delivered to FHI on the date hereof (the "BancWest Disclosure
Schedule"), there is no agreement of any kind that gives any person any
right to participate in the equity, value or income of, or to vote (i) in
the election of directors or officers of or (ii) otherwise with respect to
the affairs of, BancWest or any of its Subsidiaries.
(iv) Neither BancWest nor any of its Subsidiaries beneficially owns,
directly or indirectly, any shares of capital stock of FHI, securities of
FHI convertible into, or exchangeable for, such shares, or options,
warrants or other rights to acquire such shares (regardless of whether such
securities, options, warrants or other rights are then exercisable or
convertible), nor is BancWest or any of such Subsidiaries a party to any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of shares of capital stock of FHI or any such
other securities, options, warrants or other rights.
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<PAGE> 158
(c) Authority; No Violation. (i) BancWest has all requisite corporate
power and authority to enter into this Agreement and, subject to the filing
of the Certificate of Merger and the Agreement of Merger, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
BancWest, including the approval thereof by the sole common shareholder of
BancWest, other than the BancWest Preferred Stock Approval which will be
obtained prior to the Closing. BancWest has taken all necessary corporate
action so that the provisions of Section 1203 of the California
Corporations Code do not and will not apply to the execution and delivery
of this Agreement and the consummation of the transactions contemplated
thereby. The approval of this Agreement and the consummation of the
transactions contemplated hereby require the affirmative vote of the
holders of a majority of the outstanding shares of BancWest Preferred Stock
(the "BancWest Preferred Stock Approval"), voting separately as a class.
This Agreement has been duly executed and delivered by BancWest and
(assuming due authorization, execution and delivery by FHI) constitutes the
valid and binding obligation of BancWest, enforceable against it in
accordance with its terms.
(ii) Except as set forth in Section 3.1(c) of the BancWest Disclosure
Schedule, the execution and delivery by BancWest of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or constitute a default (with
or without notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or the loss
of a material benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on any assets (any such conflict,
violation, default, right of termination, cancellation or acceleration,
loss or creation, a "Violation") pursuant to, (x) any provision of the
articles of incorporation or by-laws or comparable organizational documents
of BancWest or any Subsidiary of BancWest, or (y) subject to obtaining or
making the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below, any loan or
credit agreement, note, mortgage, indenture, lease, BancWest Benefit Plan
(as defined in Section 3.1(j)) or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to BancWest or any Subsidiary
of BancWest or its properties or assets, which Violation, in the case of
clause (y), individually or in the aggregate, would have a material adverse
effect on BancWest or on the ability of BancWest to perform its obligations
hereunder on a timely basis.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality, domestic
or foreign (a "Governmental Entity"), is required by or with respect to
BNP, BancWest or any of their respective Subsidiaries in connection with
the execution and delivery of this Agreement or the consummation by
BancWest of the transactions contemplated hereby, the failure to make or
obtain which would have a material adverse effect on BancWest or on the
ability of BancWest to perform its obligations hereunder on a timely basis,
or on FHI's ability to own, possess or exercise the rights of an owner with
respect to the business and assets of BancWest and its Subsidiaries, except
for (A) the filing of applications and notices with the Board of Governors
of the Federal Reserve System (the "Federal Reserve") under the BHC Act and
the Federal Reserve Act (the "FRA") and approval of same, (B) the filing by
FHI with the SEC of a proxy statement in definitive form relating to the
meeting of FHI's stockholders to be held to approve and adopt this
Agreement and the transactions contemplated hereby (the "Proxy Statement"),
(C) the filing of applications with the California State Banking
Department, and Hawaii and Oregon banking authorities, and such other
applications, filings, authorizations, orders and approvals as may be
required under the banking laws of other states or jurisdictions, and
approval thereof (collectively, the "State Banking Approvals") and pursuant
to any applicable state takeover laws ("State Takeover Approvals"), (D)
notification of the proposed issuance of the shares of FHI Class A Common
Stock to the Nasdaq National Market pursuant to Schedule D to the By-Laws
of the National Association of Securities Dealers, Inc. (the "NASD"), (E)
notices under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (F) the filing with the Secretary of State of
the State of Delaware of the Certificate of Merger and with the Secretary
of State of the State of California of the Agreement of Merger.
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(d) Financial Statements. BancWest has delivered to FHI (i) audited
consolidated balance sheets of BancWest at December 31, 1997 and 1996, and
related consolidated statements of income, stockholders' equity and cash
flows for each of the three years ended December 31, 1997 and (ii)
unaudited consolidated balance sheets of BancWest at March 31, 1998 and
1997 and related consolidated statements of income, stockholders' equity
and cash flows for each of the three month periods then ended
(collectively, including the notes thereto, the "BancWest Financial
Statements"). The BancWest Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of
BancWest and its consolidated Subsidiaries as at the dates shown and the
consolidated results of operations, changes in stockholders' equity and
cash flows of such companies for the periods then ended (subject, in the
case of the unaudited statements, to normal year-end audit adjustments,
none of which are expected to be material).
(e) Information Supplied. None of the information supplied or to be
supplied by BNP or by BancWest for inclusion in the Proxy Statement will,
at the date of mailing to stockholders of FHI and at the time of the
meeting of stockholders of FHI (the "Stockholders' Meeting") to be held in
connection with obtaining the FHI Stockholder Approval (as defined in
Section 3.2(n)), (i) 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 or (ii) at the time and in the
light of the circumstances under which it is made, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not false or misleading
or necessary to correct any statement in any earlier communication with
respect to the solicitation of a proxy for the Stockholders' Meeting which
has become false or misleading.
(f) Compliance with Applicable Laws. BancWest and its Subsidiaries
hold, and at all relevant times have held, all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
which are material to the operation of the businesses of BancWest and its
Subsidiaries, taken as a whole (the "BancWest Permits"). BancWest and its
Subsidiaries are in compliance and have complied with the terms of the
BancWest Permits, except where the failure so to comply, individually or in
the aggregate, would not have a material adverse effect on BancWest. The
businesses of BancWest and its Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity,
except for possible violations which, individually or in the aggregate, do
not, and, insofar as reasonably can be foreseen, in the future will not,
have a material adverse effect on BancWest. Except as set forth in Section
3.1(f) of the BancWest Disclosure Schedule and except for routine
examinations by Federal or state Governmental Entities charged with the
supervision or regulation of banks or bank holding companies or engaged in
the insurance of bank deposits ("Bank Regulators"), to the best knowledge
of BancWest, no investigation by any Governmental Entity with respect to
BancWest or any of its Subsidiaries is pending or threatened, other than,
in each case, those the outcome of which, individually or in the aggregate,
as far as reasonably can be foreseen, would not have a material adverse
effect on BancWest, and no proceedings by any Bank Regulator are pending or
threatened which seek to revoke or materially limit any of the BancWest
Permits.
(g) Litigation. Except as set forth in Section 3.1(g) of the BancWest
Disclosure Schedule, there is no suit, action, proceeding, arbitration or
investigation ("Litigation") pending to which BancWest or any Subsidiary of
BancWest is a party or by which any of such persons or their respective
assets may be bound or, to the best knowledge of BancWest, threatened,
against or affecting BancWest or any Subsidiary of BancWest which could
reasonably be expected, individually or in the aggregate, to have a
material adverse effect on BancWest or on the ability of BancWest to
perform its obligations under this Agreement on a timely basis, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against BancWest or any Subsidiary of
BancWest having, or which, insofar as reasonably can be foreseen, in the
future could have, individually or in the aggregate, any such effect.
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(h) Taxes. BancWest and each of its Subsidiaries have timely filed
all tax returns required to be filed by any of them and all such tax
returns are correct and complete in all material respects. BancWest and
each of its Subsidiaries have timely paid (or BancWest has paid on their
behalf), or have set up an adequate reserve for the payment of, all taxes
required to be paid (whether or not shown as due on such returns), and the
most recent financial statements that have been made available to FHI
reflect an adequate reserve (other than reserves for deferred taxes
established to reflect differences between tax and book basis of assets and
liabilities) for all taxes accrued but not yet due and owing, by BancWest
and its Subsidiaries accrued through the date of such financial statements.
BancWest and its Subsidiaries file tax returns in all jurisdictions where
required to file tax returns. No material deficiencies for any taxes have
been proposed, asserted or assessed against BancWest or any of its
Subsidiaries that are not adequately reserved for (other than reserves for
deferred taxes established to reflect differences between tax and book
basis of assets and liabilities). Except as set forth in Section 3.1(h) of
the BancWest Disclosure Schedule: (i) there are no liens with respect to
taxes upon any of the assets or properties of BancWest and its
Subsidiaries, other than with respect to taxes not yet due and payable,
(ii) no material issue relating to taxes of BancWest and its Subsidiaries
has been raised in writing by any taxing authority in any audit or
examination which can result in a proposed adjustment or assessment by a
governmental authority in a taxable period (or portion thereof) ending on
or before the Closing Date, (iii) BancWest and its Subsidiaries have duly
and timely withheld from employee salaries, wages and other compensation
and paid over to the appropriate taxing authorities all amounts required to
be so withheld and paid over for all periods for which the statute of
limitations has not expired under all applicable laws and regulations, (iv)
as of the Closing, none of BancWest nor any of its Subsidiaries shall be a
party to, be bound by or have any obligation under, any tax sharing
agreement or similar contract or arrangement or any agreement that
obligates any of them to make any payment computed by reference to the
taxes, taxable income or taxable losses of any other person, (v) there is
no contract or agreement, plan or arrangement by BancWest or any of its
Subsidiaries covering any person that, individually or collectively, could
give rise to the payment of any amount that would not be deductible by
BancWest or any of its Subsidiaries by reason of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), (vi) BancWest and
its Subsidiaries have collected all material sales and use taxes required
to be collected, and has remitted, or will remit on a timely basis, such
amounts to the appropriate governmental authorities, or has been furnished
properly completed exemption certificates and has maintained all such
records and supporting documents in the manner required by all applicable
sales and use tax statutes and regulations for all periods for which the
statute of limitations has not expired, (vii) neither BancWest nor Bank of
the West has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code, and (viii) none of
BancWest nor any of its Subsidiaries (A) has been a member of an affiliated
group (other than the group to which they are currently members) filing a
consolidated federal income tax return or (B) has any liability for the
taxes of any person (other than the members of such current group) under
Treasury Regulation Section 1.1502-6(a) (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise. For the purpose of this Agreement, the term "tax" (including,
with correlative meaning, the terms "taxes" and "taxable") shall include,
except where the context otherwise requires, all Federal, state, local and
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, custom, duty,
capital stock, ad valorem, value added, estimated, stamp, alternative,
environmental, any taxes imposed under Subchapter H of Chapter 1 of
Subtitle A of the Code, and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts. As used in this Agreement, the term
"Tax return" shall mean any return, declaration, report, claim for refund
or information return or statement relating to taxes, including any
schedule or attachment thereto, and including any amendment thereof.
(i) Certain Agreements. Section 3.1(i) of the BancWest Disclosure
Schedule sets forth a listing of all of the following contracts and other
agreements, oral or written (which are currently in force or which may in
the future be operative in any respect) to which BancWest or its
Subsidiaries is a party or by or to which BancWest or its Subsidiaries or
any of their respective assets or properties are bound or subject:
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(i) consulting agreements not terminable on six months or less notice
involving the payment of more than $100,000 per annum, in the case of any
such agreement with an individual, or $250,000 per annum, in the case of
any other such agreement, or union, guild or collective bargaining
agreements covering any employees in the United States, (ii) agreements
with any officer or other key employee of BancWest or any of its
Subsidiaries (x) providing any term of employment or (y) the benefits of
which are contingent, or the terms of which are materially altered, upon
the occurrence of a transaction involving BancWest of the nature
contemplated by this Agreement, (iii) any agreement or plan, any of the
benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement, (iv) contracts and other agreements for the sale or lease
(other than where BancWest or any of its Subsidiaries is a lessor) of any
assets or properties (other than in the ordinary course of business) or for
the grant to any person (other than to BancWest or any of its Subsidiaries)
of any preferential rights to purchase any assets or properties, (v)
contracts and other agreements relating to the acquisition by BancWest or
any of its Subsidiaries of any operating business or entity or any interest
therein, (vi) contracts or other agreements under which BancWest or any of
its Subsidiaries agrees to indemnify any party, other than in the ordinary
course of business, consistent with past practice, or to share a tax
liability of any party, (vii) contracts and other agreements containing
covenants restricting BancWest or any of its Subsidiaries from competing in
any line of business or with any person in any geographical area or
requiring BancWest or any of its Subsidiaries to engage in any line of
business, (viii) contracts or other agreements (other than contracts in the
ordinary course of their banking business) relating to the borrowing of
money by BancWest or any of its Subsidiaries, or the direct or indirect
guaranty by BancWest or any of its Subsidiaries of any obligation for, or
an agreement by BancWest or any of its Subsidiaries to service, the
repayment of borrowed money, or any other contingent obligations of
BancWest or any of its Subsidiaries in respect of indebtedness of any other
person, and (ix) any other material contract or other agreement whether or
not made in the ordinary course of business, including any contract that
would be required to be filed by BancWest pursuant to Item 601(b)(10) of
Regulation S-K of the SEC if BancWest were subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
There have been delivered or made available to FHI true and complete
copies of all of the contracts and other agreements set forth in Section
3.1(i) of the BancWest Disclosure Schedule or in any other Section of the
BancWest Disclosure Schedule. Except as set forth in Section 3.1(i) of the
BancWest Disclosure Schedule, each such contract and other agreement is in
full force and effect and constitutes a legal, valid, and binding
obligation of BancWest or its Subsidiaries, as the case may be, and to the
best knowledge of BancWest, each other party thereto, enforceable in
accordance with its terms. Neither BancWest nor any Subsidiary of BancWest
has received any notice, whether written or oral, of termination or
intention to terminate from any other party to such contract or agreement.
None of BancWest or any of its Subsidiaries or (to the best knowledge of
BancWest) any other party to any such contract or agreement is in violation
or breach of or default under any such contract or agreement (or with or
without notice or lapse of time or both, would be in violation or breach of
or default under any such contract or agreement), which violation, breach,
or default has had or would have, individually or in the aggregate, a
material adverse effect on BancWest.
(j) Benefit Plans. (i) Section 3.1(j) of the BancWest Disclosure
Schedule contains a true and complete list of each "employee benefit plan"
(within the meaning of section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), including, without limitation,
multiemployer plans (within the meaning of ERISA section 3(37)), and all
stock purchase, stock option, severance, employment, change-in-control,
fringe benefit, collective bargaining, bonus, incentive, deferred
compensation and all other employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA, and
whether formal or informal, oral or written (all the foregoing being herein
called "Benefit Plans"), that are sponsored or are being maintained or
contributed to, or required to be contributed to, by BancWest or any of its
Subsidiaries (the "BancWest Benefit Plans"). No BancWest Benefit Plan is a
multiemployer plan or a collective bargaining agreement.
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(ii) With respect to each BancWest Benefit Plan, BancWest has
delivered to FHI a current, accurate and complete copy (or, to the extent
no such copy exists, an accurate description) thereof and, to the extent
applicable, (A) any related trust agreement or other funding instrument;
(B) the most recent determination letter; (C) any summary plan description
and other written communications (or a description of any oral
communications) by BancWest or any of its Subsidiaries to any of their
respective employees concerning the extent of the benefits provided under
any BancWest Benefit Plan; and (D) for the two most recent years (I) the
Form 5500 and attached schedules; (II) audited financial statements; and
(III) actuarial valuation reports.
(iii) (A) Each BancWest Benefit Plan has been established and
administered in accordance with its terms, and in compliance with the
applicable provisions of ERISA, the Code and other applicable laws, rules
and regulations; (B) each BancWest Benefit Plan which is intended to be
qualified within the meaning of Code section 401(a) is so qualified and has
received a favorable determination letter as to its qualification and
nothing has occurred, whether by action or failure to act, which would
cause the loss of such qualification; (C) with respect to any BancWest
Benefit Plan, no audits, actions, suits or claims (other than routine
claims for benefits in the ordinary course) are pending or threatened, and
no facts or circumstances exist which could give rise to any such audits,
actions, suits or claims; (D) neither BancWest nor any other party has
engaged in a prohibited transaction which could subject BancWest or any of
its Subsidiaries, or the Surviving Corporation to any taxes, penalties or
other liabilities under Code section 4975 or ERISA sections 409 or 502(i);
(E) no event has occurred and no condition exists that could subject
BancWest or any of its Subsidiaries, or the Surviving Corporation, either
directly or by reason of any such entity's affiliation with any member of
any such entity's Controlled Group (defined as any organization which is a
member of a controlled group of organizations within the meaning of Code
sections 414(b), (c), (m) or (o)), to any tax, fine, liability or penalty
imposed by ERISA, the Code or other applicable laws, rules and regulations;
(F) all insurance and Pension Benefit Guaranty Corporation ("PBGC")
premiums required to be paid with respect to BancWest Benefit Plans as of
the Closing Date have been or will be paid prior thereto and adequate
reserves have been provided for on BancWest's balance sheet for any
premiums (or portions thereof) attributable to service on or prior to the
Closing Date; (G) all contributions required to be made prior to the
Closing Date under the terms of each BancWest Benefit Plan, the Code, ERISA
or other applicable laws, rules and regulations have been or will be timely
made and adequate reserves have been provided for on BancWest's balance
sheet for all benefits attributable to service on or prior to the Closing
Date; and (H) no BancWest Benefit Plan has incurred any "accumulated
funding deficiency" as such term is defined in ERISA section 302 and Code
section 412 (whether or not waived).
(iv) Except as set forth in Section 3.1(j)(iv) of the BancWest
Disclosure Schedule, with respect to each of the BancWest Benefit Plans
which is subject to Title IV of ERISA, as of the Closing Date, the assets
of each such Plan are at least equal in value to the present value of the
accrued benefits (vested and unvested) of the participants in such Plan on
a termination and projected basis, based on the actuarial methods and
assumptions indicated in the most recent actuarial valuation reports.
(v) Except as set forth on Section 3.1(j) of the BancWest Disclosure
Schedule, no BancWest Benefit Plan exists which provides for an increase in
benefits on or after the Closing Date or could result in the payment to any
employee of BancWest or any of its Subsidiaries of any money or other
property or rights or accelerate or provide any other rights or benefits to
any such employee as a result of the transactions contemplated by this
Agreement, whether or not such payment would constitute a parachute payment
within the meaning of Code section 280G.
(k) Subsidiaries. Section 3.1(k) of the BancWest Disclosure Schedule
lists all the Significant Subsidiaries of BancWest. BancWest owns, directly
or indirectly, beneficially and of record 100% of the issued and
outstanding voting securities of each such Subsidiary. Each of the
Subsidiaries of BancWest that is a bank (as defined in the BHC Act) is an
"insured bank" as defined in the Federal Deposit Insurance Act ("FDIA") and
applicable regulations thereunder. All of the shares of capital stock of
each of the Subsidiaries held by BancWest or by another of its Subsidiaries
are fully paid and nonassessable
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and are owned by BancWest or one of its Subsidiaries free and clear of any
lien, claim or other encumbrance.
(l) Agreements with Bank Regulators. Except as set forth in Section
3.1(l) of the BancWest Disclosure Schedule, neither BancWest nor any
Subsidiary of BancWest is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of, any Bank Regulator which restricts
materially the conduct by BancWest and its Subsidiaries of their
businesses, or in any manner relates to their capital adequacy, credit
policies or management, nor has BancWest or any such Subsidiary been
advised by any Bank Regulator that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar submission,
or any such board resolutions.
(m) Absence of Certain Changes or Events. Since December 31, 1997,
there has not been any change, or any event involving a prospective change,
in the business, financial condition or results of operations of BancWest
or any of its Subsidiaries which has had, or would be reasonably likely to
have, a material adverse effect on BancWest. Except as set forth in Section
3.1(m) of the BancWest Disclosure Schedule, since December 31, 1997,
BancWest and each of its Subsidiaries have conducted their respective
businesses in the ordinary course consistent with their past practices and
neither BancWest nor any of its Subsidiaries has taken any action or
entered into any transaction, and no event has occurred, that would have
required FHI's consent pursuant to Section 4.1 of this Agreement if such
action had been taken, transaction entered into or event had occurred, in
each case, after the date of this Agreement, nor has BancWest or any of its
Subsidiaries entered into any agreement, plan or arrangement to do any of
the foregoing.
(n) Undisclosed Liabilities. Except (i) for those liabilities or
obligations that are fully reflected or reserved against on the audited
consolidated balance sheet at December 31, 1997 of BancWest included in the
BancWest Financial Statements or (ii) for liabilities or obligations
incurred in the ordinary course of business consistent with past practice
since December 31, 1997 and which are not material to BancWest, none of
BancWest or any of its Subsidiaries has incurred any liability or
obligation of any nature whatsoever (whether absolute, accrued or
contingent or otherwise and whether due or to become due) that, either
alone or when combined with all similar liabilities or obligations, has
had, or would have, a material adverse effect on BancWest.
(o) Reports. BancWest and each of its Subsidiaries have timely filed
all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since January 1, 1995 with any Governmental Entity and
have paid all fees and assessments due and payable in connection therewith.
Except as set forth in Section 3.1(o) of the BancWest Disclosure Schedule
and except for normal examinations conducted by a Governmental Entity in
the regular course of business of BancWest and its Subsidiaries, no
Governmental Entity has initiated any proceeding or, to the best knowledge
of BancWest, investigation into the business or operations of BancWest or
any of its Subsidiaries since January 1, 1995. Except as set forth in
Section 3.1(o) of the BancWest Disclosure Schedule, there is no material
unresolved violation, criticism or exception by any Governmental Entity
with respect to any report or statement relating to any examinations of
BancWest or any of its Subsidiaries.
(p) Environmental Liability. Except as set forth in Section 3.1(p) of
the BancWest Disclosure Schedule, there are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that is reasonably
likely to result in the imposition, on BancWest or any of its Subsidiaries
of any liability or obligation arising under common law standards relating
to environmental protections, human health or safety, or under any local,
state or federal environmental statute, regulation or ordinance, including,
without limitation, the Comprehensive Environmental
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Response, Compensation and Liability Act of 1980, as amended (collectively,
the "Environmental Laws"), pending or, to the best knowledge of BancWest,
threatened, against BancWest or any of its Subsidiaries, which liability or
obligation, individually or in the aggregate, would have or would be
reasonably likely to have a material adverse effect on BancWest. To the
best knowledge of BancWest, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation that would impose
any liability or obligation that would have or would be reasonably likely
to have a material adverse effect on BancWest. Except as set forth in
Section 3.1(p) of the BancWest Disclosure Schedule, to the best knowledge
of BancWest, during or prior to the period of (i) the ownership by BancWest
or any of its Subsidiaries of any of their respective current properties,
(ii) the participation by BancWest or any of its Subsidiaries in the
management of any property, or (iii) the holding by BancWest or any of its
Subsidiaries of a security interest or other interest in any property,
there were no releases or threatened release of hazardous, toxic,
radioactive or dangerous materials or other materials regulated under
Environmental Laws in, on, under or affecting any such property which,
individually or in the aggregate, would be reasonably likely to have a
material adverse effect on BancWest. Neither BancWest nor any Subsidiary of
BancWest or Bank of the West is subject to any agreement, order, judgment,
decree, letter or memorandum by or with any Governmental Entity or third
party imposing any material liability or obligation pursuant to or under
any Environmental Law that would be reasonably likely to have a material
adverse effect on BancWest.
(q) Properties. Except as set forth in Section 3.1(p) of the BancWest
Disclosure Schedule, BancWest or one of its Subsidiaries (i) has good and
marketable title to all the properties and assets reflected in the BancWest
Financial Statements as being owned by BancWest or one of its Subsidiaries
or acquired after the date thereof which are material to the business of
BancWest on a consolidated basis (except properties sold or otherwise
disposed of since the date thereof in the ordinary course of business),
free and clear of all claims, liens, charges, security interests or
encumbrances of any nature whatsoever except (A) statutory liens securing
payments not yet due, (B) liens on assets of Bank of the West securing
deposits incurred in the ordinary course of its banking business and (C)
such imperfections or irregularities of title, claims, liens, charges,
security interests or encumbrances as do not materially affect the use of
the properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties and (ii) is the
lessee of all leasehold estates reflected in the BancWest Financial
Statements or acquired after the date thereof which are material to its
business on a consolidated basis (except for leases that have expired by
their terms since the date thereof) and is in possession of the properties
purported to be leased thereunder, and each such lease is valid without
default thereunder by the lessee or, to the best knowledge of BNP and
BancWest, the lessor.
(r) Transactions with Affiliates. Except as set forth on Section
3.1(r) of the BancWest Disclosure Schedule and except for those
arrangements, contracts, agreements or transactions which either (A)
involve per annum payments by BancWest and its Subsidiaries of less than
$250,000 individually or $1,500,000 in the aggregate or (B) are terminable
by BancWest or such Subsidiary on 30 days or less notice with no financial
penalty, (i) since December 31, 1995, none of BancWest or any of its
Subsidiaries has engaged in any business arrangement or relationship with
BNP or any of its affiliates and (ii) there are no and since December 31,
1995, there have not been any, liabilities, contracts or other agreements
or other transactions between BancWest or any of its Subsidiaries, on the
one hand, and BNP or any of its affiliates or any officer, director or
employee of BNP or any such affiliate (or other entity in which BNP or any
such affiliate has a material equity interest, except, in the case of such
other entity, for liabilities, contracts or agreements with BancWest or its
Subsidiaries that arose or were entered into on terms and conditions not
less favorable to BancWest or such Subsidiaries than would be obtained in
arms' length transactions with an independent third party), on the other
hand.
(s) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in
connection with any of the transactions contemplated by this Agreement,
except for Merrill Lynch, Pierce, Fenner & Smith Incorporated, whose fees
and expenses will be paid by BancWest in accordance
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with BancWest's agreement with such firm (a copy of which agreement has
been delivered to FHI prior to the date of this Agreement).
(t) Intellectual Property. BancWest and its Subsidiaries own or have
a valid license to use all trademarks, service marks and trade names
(including any registrations or applications for registration of any of the
foregoing) (collectively, the "BancWest Intellectual Property") necessary
to carry on their business substantially as currently conducted, except for
such BancWest Intellectual Property the failure of which to own or validly
license individually or in the aggregate would not reasonably be expected
to have a material adverse effect on BancWest. Neither BancWest nor any
such Subsidiary has received any notice of infringement of or conflict
with, and, to BancWest's knowledge, there are no infringements of or
conflicts with, the rights of others with respect to the use of any
BancWest Intellectual Property that individually or in the aggregate, in
either such case, would reasonably be expected to have a material adverse
effect on BancWest.
3.2. Representations and Warranties of FHI. FHI represents and warrants
to BancWest as follows:
(a) Organization, Standing and Power. FHI is a bank holding company
registered under the BHC Act and organized under the laws of the State of
Delaware. First Hawaiian Bank is a wholly-owned Subsidiary of FHI and a
banking corporation organized under the laws of the State of Hawaii. The
deposit accounts of FHI's bank subsidiaries are insured by the BIF and the
Savings Association Insurance Fund of the FDIC to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due. Each of FHI and its
Significant Subsidiaries (as defined below) is a bank or corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not, either individually or in the aggregate, have a material adverse
effect on FHI. The Certificate of Incorporation and By-laws of FHI, copies
of which were previously furnished to BancWest, are true, complete and
correct copies of such documents as in effect on the date of this
Agreement.
(b) Capital Structure. (i) As of the date hereof, the authorized
capital stock of FHI consists of 100,000,000 shares of common stock, par
value $5.00 per share ("FHI Common Stock"), and 50,000,000 shares of
preferred stock, par value $5.00 per share ("FHI Preferred Stock"). As of
May 21, 1998 (A) 31,143,923 shares of FHI Common Stock were outstanding,
1,104,788 shares of FHI Common Stock were reserved for issuance upon the
exercise of outstanding stock options or awards under incentive plans (such
plans or programs, collectively, the "FHI Stock Plans"), and 2,046,451
shares of FHI Common Stock were held by FHI in its treasury or by its
Subsidiaries (other than shares held in trust, managed, custodial or
nominee accounts and the like, or held by mutual funds for which a
Subsidiary of FHI acts as investment advisor, that in any such case are
beneficially owned by third parties); and (B) no shares of FHI Preferred
Stock were outstanding. All outstanding shares of FHI Common Stock have
been duly authorized and validly issued and are fully paid and
non-assessable and, except to the extent provided in FHI's Certificate of
Incorporation (which will be amended at the Effective Time as set forth in
Exhibit A hereto), not subject to preemptive rights. Subject to obtaining
the FHI Stockholder Approval (as defined herein), at the Effective Time,
the FHI Class A Common Stock will be, when issued in accordance with the
terms hereof, duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights.
(ii) Except as set forth in Section 3.2(b) of the disclosure schedule
of FHI delivered to BancWest on the date hereof (the "FHI Disclosure
Schedule"), as of the date of this Agreement, except for this Agreement,
(A) there are no options, warrants, calls, rights, commitments or
agreements of any character to which FHI or any of its Subsidiaries (or to
the best knowledge of FHI, any of its Affiliates) is a party or by which
any of them are bound obligating FHI or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of FHI or of its Subsidiaries
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or obligating FHI or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, right, commitment or agreement, (B) there
are no outstanding contractual obligations of FHI or of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of FHI
or any of its Subsidiaries and (C) there are no outstanding securities of
any kind convertible into or exchangeable for the capital stock of FHI or
any of its Subsidiaries (or any interest therein). There is no agreement of
any kind that gives any person any right to participate in the equity,
value or income of, or to vote (i) in the election of directors or officers
of or (ii) otherwise with respect to the affairs of, FHI of any of its
Subsidiaries.
(iii) Except as set forth in Section 3.2(b) of the FHI Disclosure
Schedule, since May 21, 1998, FHI has not (A) issued or permitted to be
issued any shares of capital stock, or securities exercisable for or
convertible into shares of capital stock, of FHI or any of its
Subsidiaries, other than pursuant to and as required by the terms of the
FHI Stock Plans (or in the ordinary course of business as permitted by such
plans and consistent with past practice); (B) repurchased, redeemed or
otherwise acquired, directly or indirectly through one or more Subsidiaries
of FHI, any shares of capital stock of FHI or any of its Subsidiaries
(other than the acquisition of trust account shares); or (C) declared, set
aside, made or paid to the stockholders of FHI dividends or other
distributions on the outstanding shares of capital stock of FHI, other than
regular quarterly cash dividends on the FHI Common Stock at a rate not in
excess of the regular quarterly cash dividends most recently declared by
FHI prior to the date of this Agreement or a greater rate following an
increase in dividend rate consistent with past practice.
(c) Authority; No Violation. (i) FHI has all requisite corporate
power and authority to enter into this Agreement and, subject to obtaining
the FHI Stockholder Approval and the filing of the Charter Amendments, the
Certificate of Merger and the Agreement of Merger, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of FHI,
subject to obtaining the FHI Stockholder Approval. FHI has taken all
necessary corporate action so that the provisions of Section 203 of the
Delaware General Corporation Law do not and will not apply to the execution
and delivery of this Agreement and the Standstill Agreement (as defined in
Section 6.1(d)) and the consummation of the transactions contemplated
hereby and thereby. This Agreement has been duly executed and delivered by
FHI and (assuming due authorization, execution and delivery by BancWest)
constitutes the valid and binding obligation of FHI, enforceable against
FHI in accordance with its terms.
(ii) Except as set forth in Section 3.2(c) of the FHI Disclosure
Schedule, the execution and delivery by FHI of this Agreement do not, and
the consummation of the transactions contemplated hereby will not result in
any Violation pursuant to (x) any provision of the Certificate of
Incorporation or By-laws or comparable organizational documents of FHI or
any Subsidiary of FHI, or (y) subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in paragraph (iii) below, any loan or credit agreement, note,
mortgage, indenture, lease, FHI Benefit Plan (as defined in Section 3.2(j))
or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to FHI or any Significant Subsidiary of FHI or their
respective properties or assets which Violation (in the case of clause
(y)), individually or in the aggregate, would be reasonably likely to have
a material adverse effect on FHI.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is
required by or with respect to FHI or any Subsidiary of FHI in connection
with the execution and delivery by FHI of this Agreement and the other
Transaction Agreements or the consummation by FHI of the transactions
contemplated hereby and thereby, the failure to make or obtain which would
have a material adverse effect on FHI, or on FHI's ability to own, possess
or exercise the rights of an owner with respect to the Bank of the West
Common Stock or BancWest or its Subsidiaries, except for (A) the filing of
applications and notices with the Board of Governors of the Federal Reserve
under the BHC Act and the FRA and approval of same, (B) the filing by FHI
with the SEC of the Proxy Statement, (C) the State Banking Approvals and
any applicable State Takeover Approvals,
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(D) notification of the proposed issuance of the shares of FHI Class A
Common Stock to the Nasdaq National Market pursuant to Schedule D to the
By-Laws of the NASD, (E) notices under the HSR Act, and (F) the filing with
the Secretary of State of the State of Delaware of the Certificate of
Merger and with the Secretary of State of the State of California of the
Agreement of Merger.
(d) SEC Documents. FHI has made available to BNP a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by FHI with the SEC (other than reports filed pursuant to
Section 13(g) of the Exchange Act), since December 31, 1997 (as such
documents have since the time of their filing been amended, the "FHI SEC
Documents"), which are all the documents (other than preliminary material
and reports required pursuant to Section 13(g) of the Exchange Act) that
FHI was required to file with the SEC since such date. As of their
respective dates of filing with the SEC, the FHI SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such FHI SEC Documents, 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.
The financial statements of FHI included in the FHI SEC Documents complied
as to form, as of their respective dates of filing with the SEC, in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Form 10-Q of the SEC)
and fairly present in all material respects the consolidated financial
position of FHI and its consolidated Subsidiaries as at the dates thereof
and the consolidated results of operations, changes in stockholders' equity
and cash flows of such companies for the periods then ended. All material
agreements, contracts and other documents required to be filed as exhibits
to any of the FHI SEC Documents have been so filed.
(e) Information Supplied. None of the information supplied or to be
supplied by FHI for inclusion or incorporation by reference in the Proxy
Statement will, at the date of mailing to stockholders and at the time of
the Stockholders' Meeting, (i) 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 or (ii) at the
time and in the light of the circumstances under which it is made, be false
or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not false
or misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of a proxy for the
Stockholders' Meeting which has become false or misleading. The Proxy
Statement (except for such portions thereof furnished in writing to FHI by
BNP, BancWest or any Subsidiary of BancWest as to which no warranty is
made) will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations of the SEC thereunder.
(f) Compliance with Applicable Laws. FHI and its Subsidiaries hold,
and at all times have held, all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities which are material to the
operation of the businesses of FHI and its Subsidiaries, taken as a whole
(the "FHI Permits"). FHI and its Subsidiaries are in compliance and have
complied with the terms of the FHI Permits and all applicable laws and
regulations, except where the failure so to comply, individually or in the
aggregate, would not have a material adverse effect on FHI. Except as
disclosed in the FHI SEC Documents filed prior to the date of this
Agreement, the businesses of FHI and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations which, individually or
in the aggregate, do not, and, insofar as reasonably can be foreseen, in
the future will not, have a material adverse effect on FHI. Except for
routine examinations by Bank Regulators, to the best knowledge of FHI, no
investigation by any Governmental Entity with respect to FHI or any of its
Subsidiaries is pending or threatened, other than, in each case, those the
outcome of which, individually or in the aggregate, as far as reasonably
can be foreseen, would not have a
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material adverse effect on FHI, and no proceedings by any Bank Regulator
are pending or threatened which seek to revoke or materially limit any of
the FHI Permits.
(g) Litigation. Except as disclosed in the FHI SEC Documents filed
prior to the date of this Agreement, there is no Litigation pending or, to
the best knowledge of FHI, threatened, against or affecting FHI or any
Subsidiary of FHI which could reasonably be expected, individually or in
the aggregate, to have a material adverse effect on FHI, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against FHI or any Subsidiary of FHI having, or
which, insofar as reasonably can be foreseen, in the future could have,
individually or in the aggregate, any such effect.
(h) Taxes. FHI and each of its Subsidiaries have timely filed all tax
returns required to be filed by any of them and all such tax returns are
correct and complete in all material respects. FHI and each of its
Subsidiaries have timely paid, or have set up an adequate reserve for the
payment of, all taxes required to be paid (whether or not shown as due on
such returns), and the most recent financial statements that have been made
available to BancWest reflect an adequate reserve (other than reserves for
deferred taxes established to reflect differences between tax and book
basis of assets and liabilities) for all taxes accrued but not yet due and
owing, by FHI and its Subsidiaries accrued through the date of such
financial statements. FHI and its Subsidiaries file tax returns in all
jurisdictions where required to file tax returns. No material deficiencies
for any taxes have been proposed, asserted or assessed against FHI or any
of its Subsidiaries that are not adequately reserved for (other than
reserves for deferred taxes established to reflect differences between tax
and book basis of assets and liabilities). Except as set forth in Section
3.2(h) of the FHI Disclosure Schedule: (i) there are no liens with respect
to taxes upon any of the assets or properties of FHI and its Subsidiaries,
other than with respect to taxes not yet due and payable, (ii) no material
issue relating to taxes of FHI and its Subsidiaries has been raised in
writing by any taxing authority in any audit or examination which can
result in a proposed adjustment or assessment by a governmental authority
in a taxable period (or portion thereof) ending on or before the Closing
Date, (iii) FHI and its Subsidiaries have duly and timely withheld from
employee salaries, wages and other compensation and paid over to the
appropriate taxing authorities all amounts required to be so withheld and
paid over for all periods for which the statute of limitations has not
expired under all applicable laws and regulations, (iv) as of the Closing,
none of FHI nor any of its Subsidiaries shall be a party to, be bound by or
have any obligation under, any tax sharing agreement or similar contract or
arrangement or any agreement that obligates it to make any payment computed
by reference to the taxes, taxable income or taxable losses of any other
person, (v) there is no contract or agreement, plan or arrangement by FHI
or any of its Subsidiaries covering any person that, individually or
collectively, could give rise to the payment of any amount that would not
be deductible by FHI or any of its Subsidiaries by reason of section 280G
of the Code, (vi) FHI and its Subsidiaries have collected all material
sales and use taxes required to be collected, and have remitted, or will
remit on a timely basis, such amounts to the appropriate governmental
authorities, or have been furnished properly completed exemption
certificates and have maintained all such records and supporting documents
in the manner required by all applicable sales and use tax statutes and
regulations for all periods for which the statute of limitations has not
expired, (vii) FHI has not been a United States real property holding
corporation within the meaning of section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code, and
(viii) none of FHI nor any of its Subsidiaries (A) has been a member of an
affiliated group (other than the group to which they are currently members)
filing a consolidated federal income tax return or (B) has any liability
for the taxes of any person (other than the members of such current group)
under Treasury Regulation section 1.1502-6(a) (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract,
or otherwise.
(i) Certain Agreements. Section 3.2(i) of the FHI Disclosure Schedule
sets forth a listing of all of the following contracts and other
agreements, oral or written (which are currently in force or which may in
the future be operative in any respect) to which FHI or its Subsidiaries is
a party or by or to which FHI or its Subsidiaries or any of their
respective assets or properties are bound or subject: (i) consulting
agreements not terminable on six months or less notice involving the
payment of more than $100,000 per
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annum, in the case of any such agreement with an individual, or $250,000
per annum, in the case of any other such agreement, or union, guild or
collective bargaining agreements covering any employees in the United
States, (ii) agreements with any officer or other key employee of FHI or
any of its Subsidiaries (x) providing any term of employment or (y) the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving FHI of the nature
contemplated by this Agreement, (iii) any agreement or plan, any of the
benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement, (iv) contracts and other agreements for the sale or lease
(other than where FHI or any of its Subsidiaries is a lessor) of any assets
or properties (other than in the ordinary course of business) or for the
grant to any person (other than to FHI or any of its Subsidiaries) of any
preferential rights to purchase any assets or properties, (v) contracts and
other agreements relating to the acquisition by FHI or any of its
Subsidiaries of any operating business or entity or any interest therein,
(vi) contracts or other agreements under which FHI or any of its
Subsidiaries agrees to indemnify any party, other than in the ordinary
course of business, consistent with past practice, or to share a Tax
liability of any party, (vii) contracts and other agreements containing
covenants restricting FHI or any of its Subsidiaries from competing in any
line of business or with any person in any geographical area or requiring
FHI or any of its Subsidiaries to engage in any line of business, and
(viii) contracts or other agreements (other than contracts in the ordinary
course of their banking business) relating to the borrowing of money by FHI
or any of its Subsidiaries, or the direct or indirect guaranty by FHI or
any of its Subsidiaries of any obligation for, or an agreement by FHI or
any of its Subsidiaries to service, the repayment of borrowed money, or any
other contingent obligations of FHI or any of its Subsidiaries in respect
of indebtedness of any other person.
There have been delivered or made available to Bank of the West true
and complete copies of all of the contracts and other agreements set forth
in Section 3.2(i) of the FHI Disclosure Schedule or in any other Section of
the FHI Disclosure Schedule and all contracts that were required to be
filed by FHI as an exhibit to any of the FHI SEC Documents pursuant to Item
601(b)(10) of Regulation S-K of the SEC, except as set forth in Section
3.2(i) of the FHI Disclosure Schedule. Each such contract and other
agreement is in full force and effect and constitutes a legal, valid, and
binding obligation of FHI or its Subsidiaries, as the case may be, and to
the best knowledge of FHI, each other party thereto, enforceable in
accordance with its terms. Neither FHI nor any Subsidiary of FHI has
received any notice, whether written or oral, of termination or intention
to terminate from any other party to such contract or agreement. None of
FHI or any of its Subsidiaries or (to the best knowledge of FHI) any other
party to any such contract or agreement is in violation or breach of or
default under any such contract or agreement (or with or without notice or
lapse of time or both, would be in violation or breach of or default under
any such contract or agreement), which violation, breach, or default has
had or would have, individually or in the aggregate, a material adverse
effect on FHI.
(j) Benefit Plans. (i) Section 3.2(j)(i) of the FHI Disclosure
Schedule contains a true and complete list of the Benefit Plans that are
sponsored or are being maintained or contributed to, or required to be
contributed to, by FHI or any of its Subsidiaries (the "FHI Benefit
Plans"). No FHI Benefit Plan is a multiemployer plan or a collective
bargaining agreement.
(ii) With respect to each FHI Benefit Plan, FHI has delivered to
BancWest a current, accurate and complete copy (or, to the extent no such
copy exists, an accurate description) thereof and, to the extent
applicable, (A) any related trust agreement or other funding instrument;
(B) the most recent determination letter; (C) any summary plan description
and other written communications (or a description of any oral
communications) by FHI or any of its Subsidiaries to any of their
respective employees concerning the extent of the benefits provided under
any FHI Benefit Plan; and (D) for the two most recent years (I) the Form
5500 and attached schedules; (II) audited financial statements; and (III)
actuarial valuation reports.
(iii) (A) Each FHI Benefit Plan has been established and administered
in accordance with its terms, and in compliance with the applicable
provisions of ERISA, the Code and other applicable laws,
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rules and regulations; (B) each FHI Benefit Plan which is intended to be
qualified within the meaning of Code section 401(a) is so qualified and has
received a favorable determination letter as to its qualification and
nothing has occurred, whether by action or failure to act, which would
cause the loss of such qualification; (C) with respect to any FHI Benefit
Plan, no audits, actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or threatened, and no facts or
circumstances exist which could give rise to any such audits, actions,
suits or claims; (D) neither FHI nor any other party has engaged in a
prohibited transaction which could subject FHI, any of its Subsidiaries, or
the Surviving Corporation to any taxes, penalties or other liabilities
under Code section 4975 or ERISA sections 409 or 502(i); (E) no event has
occurred and no condition exists that could subject FHI, any of its
Subsidiaries, or the Surviving Corporation, either directly or by reason of
any such entity's affiliation with any member of any such entity's
Controlled Group (defined as any organization which is a member of a
controlled group of organizations within the meaning of Code sections
414(b), (c), (m) or (o)), to any tax, fine, liability or penalty imposed by
ERISA, the Code or other applicable laws, rules and regulations; (F) all
insurance and PBGC premiums required to be paid with respect to FHI Benefit
Plans as of the Closing Date have been or will be paid prior thereto and
adequate reserves have been provided for on FHI's balance sheet for any
premiums (or portions thereof) attributable to service on or prior to the
Closing Date; (G) all contributions required to be made prior to the
Closing Date under the terms of each FHI Benefit Plan, the Code, ERISA or
other applicable laws, rules and regulations have been or will be timely
made and adequate reserves have been provided for on FHI's balance sheet
for all benefits attributable to service on or prior to the Closing Date;
and (H) no FHI Benefit Plan has incurred any "accumulated funding
deficiency" as such term is defined in ERISA section 302 and Code section
412 (whether or not waived).
(iv) With respect to each of the FHI Benefit Plans which is subject to
Title IV of ERISA, as of the Closing Date, the assets of each such Plan are
at least equal in value to the present value of the accrued benefits
(vested and unvested) of the participants in such Plan on a termination and
projected basis, based on the actuarial methods and assumptions indicated
in the most recent actuarial valuation reports.
(v) Except as set forth on Section 3.2(i)(v) of the FHI Disclosure
Schedule, no FHI Benefit Plan exists which provides for an increase in
benefits on or after the Closing Date or could result in the payment to any
employee of FHI or any of its Subsidiaries of any money or other property
or rights or accelerate or provide any other rights or benefits to any such
employee as a result of the transactions contemplated by this Agreement,
whether or not such payment would constitute a parachute payment within the
meaning of Code section 280G.
(k) Subsidiaries. Exhibit 21 to FHI's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 includes all the Significant
Subsidiaries of FHI as of the date of this Agreement. FHI owns, directly or
indirectly, beneficially and of record 100% of the issued and outstanding
voting securities of each such Subsidiary (other than directors' qualifying
shares, if any). Each of FHI's Subsidiaries that is a bank (as defined in
the BHC Act) is an "insured bank" as defined in the FDIA and applicable
regulations thereunder. Except as provided in any provision of applicable
state law in the case of Subsidiaries of FHI that are state chartered
banks, all of the shares of capital stock of each of the Subsidiaries held
by FHI or by another Subsidiary of FHI are fully paid and nonassessable and
are owned by FHI or a Subsidiary of FHI free and clear of any claim, lien
or encumbrance.
(l) Agreements with Bank Regulators. Neither FHI nor any of its
Subsidiaries is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of, any Bank Regulator which restricts
materially the conduct by FHI and its Subsidiaries of their businesses, or
in any manner relates to their capital adequacy, credit policies or
management, nor has FHI or any such Subsidiary been advised by any Bank
Regulator that it is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar submission, or any such board resolutions.
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(m) Absence of Certain Changes or Events. Except as disclosed in the
FHI SEC Documents filed prior to the date of this Agreement and except as
set forth in Section 3.2(m) of the FHI Disclosure Schedule, since December
31, 1997, (i) there has not been any change, or any event involving a
prospective change, in the business, financial condition or results of
operations of FHI or any of its Subsidiaries which has had, or would be
reasonably likely to have, a material adverse effect on FHI, (ii) FHI and
its Subsidiaries have conducted their respective businesses in the ordinary
course consistent with their past practices, and (iii) neither FHI nor any
of its Subsidiaries has taken any action or entered into any transaction,
and no event has occurred, that would have required BancWest's consent
pursuant to Section 4.2 of this Agreement if such action had been taken,
transaction entered into or event had occurred, in each case, after the
date of this Agreement, nor has FHI or any of its Subsidiaries entered into
any agreement, plan or arrangement to do any of the foregoing.
(n) Vote Required. No vote of the holders of any securities of FHI is
required with respect to the adoption of this Agreement except for the
affirmative vote of the holders of a majority of the outstanding shares of
FHI Common Stock (the "FHI Stockholder Approval").
(o) Undisclosed Liabilities. Except (i) for those liabilities or
obligations that are fully reflected or reserved against on the unaudited
consolidated balance sheet of FHI included in its Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 or (ii) for liabilities or
obligations incurred in the ordinary course of business consistent with
past practice since March 31, 1998 and which are not material to FHI,
neither FHI nor any of its Subsidiaries has incurred any liability or
obligation of any nature whatsoever (whether absolute, accrued or
contingent or otherwise and whether due or to become due) that, either
alone or when combined with all similar liabilities or obligations, has
had, or is reasonably likely to have, a material adverse effect on FHI.
(p) Reports. FHI and each of its Subsidiaries have timely filed all
material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file since January 1, 1995 with any Governmental Entity and
have paid all fees and assessments due and payable in connection therewith.
Except as set forth in Section 3.2(p) of the FHI Disclosure Schedule and
except for normal examinations conducted by a Governmental Entity in the
regular course of business of FHI and its Subsidiaries, no Governmental
Entity has initiated any proceeding or, to the best knowledge of FHI,
investigation into the business or operations of FHI or any of its
Subsidiaries since January 1, 1995. Except as set forth in Section 3.2(o)
of the FHI Disclosure Schedule or in the FHI SEC Documents filed prior to
the date of this Agreement, there is no material unresolved violation,
criticism or exception by any Governmental Entity with respect to any
report or statement relating to any examinations of FHI or any of its
Subsidiaries.
(q) Environmental Liability. Except as set forth in Section 3.2(q) of
the FHI Disclosure Schedule or in the FHI SEC Documents filed prior to the
date of this Agreement, there are no legal, administrative, arbitral or
other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of
any nature seeking to impose, or that is reasonably likely to result in the
imposition, on FHI or any of its Subsidiaries of any liability or
obligation arising under common law standards relating to environmental
protections, human health or safety, or under any Environmental Law,
pending or, to the best knowledge of FHI, threatened, against FHI or any of
its Subsidiaries, which liability or obligation, individually or in the
aggregate, would have or would be reasonably likely to have a material
adverse effect on FHI. To the best knowledge of FHI, there is no reasonable
basis for any such proceeding, claim, action or governmental investigation
that would impose any liability or obligation that would have or would be
reasonably likely to have a material adverse effect on FHI. To the best
knowledge of FHI, during or prior to the period of (i) its or any of its
Subsidiaries' ownership or operation of any of their respective current
properties, (ii) its or any of its Subsidiaries' participation in the
management of any property, or (iii) its or any of its Subsidiaries'
holding of a security interest or other interest in any property, there
were no releases or threatened release of hazardous, toxic, radioactive or
dangerous materials or other materials regulated under Environmental Laws
in, on, under or affecting any such property which, individually or in the
aggregate, would be reasonably likely to have a material adverse effect on
FHI. Neither FHI nor any Subsidiary of FHI is
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subject to any agreement, order, judgment, decree, letter or memorandum by
or with any Governmental Entity or third party imposing any material
liability or obligation pursuant to or under any Environmental Law that
would be reasonably likely to have a material adverse effect on FHI.
(r) Properties. Except as disclosed in the FHI SEC Documents filed
prior to the date of this Agreement, FHI or one of its Subsidiaries (i) has
good and marketable title to all the properties and assets reflected in the
latest audited balance sheet included in such FHI SEC Documents as being
owned by FHI or one of its Subsidiaries or acquired after the date thereof
which are material to FHI's business on a consolidated basis (except
properties sold or otherwise disposed of since the date thereof in the
ordinary course of business), free and clear of all claims, liens, charges,
security interests or encumbrances of any nature whatsoever except (A)
statutory liens securing payments not yet due, (B) liens on assets of
Subsidiaries of FHI which are banks securing deposits incurred in the
ordinary course of their banking business and (C) such imperfections or
irregularities of title, claims, liens, charges, security interests or
encumbrances as do not materially effect the use of the properties or
assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties and (ii) is the lessee of all
leasehold estates reflected in the latest audited financial statements
included in such FHI SEC Documents or acquired after the date thereof which
are material to its business on a consolidated basis (except for leases
that have expired by their terms since the date thereof) and is in
possession of the properties purported to be leased thereunder and each
such lease is valid without default thereunder by the lessee or, to the
best of FHI's knowledge, the lessor.
(s) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in
connection with any of the transactions contemplated by this Agreement,
except for Goldman, Sachs & Co. ("Goldman Sachs"), whose fees and expenses
will be paid by FHI in accordance with FHI's agreement with such firm (a
copy of which agreement has been delivered by FHI to BancWest prior to the
date of this Agreement).
(t) Opinion. Prior to the execution of this Agreement, FHI received
an opinion from Goldman Sachs to the effect that, as of the date thereof
and based upon and subject to the matters set forth therein, the
consideration to be paid by FHI pursuant to this Agreement is fair from a
financial point of view to the stockholders of FHI. Such opinion has not
been amended or rescinded as of the date of this Agreement.
(u) Intellectual Property. FHI and its Subsidiaries own or have a
valid license to use all trademarks, service marks and trade names
(including any registrations or applications for registration of any of the
foregoing) (collectively, the "FHI Intellectual Property") necessary to
carry on its business substantially as currently conducted, except for such
FHI Intellectual Property the failure of which to own or validly license
individually or in the aggregate would not reasonably be expected to have a
material adverse effect on FHI. Neither FHI nor any such Subsidiary has
received any notice of infringement of or conflict with, and, to FHI's
knowledge, there are no infringements of or conflicts with, the rights of
others with respect to the use of any FHI Intellectual Property that
individually or in the aggregate, in either such case, would reasonably be
expected to have a material adverse effect on FHI.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Covenants of BancWest. During the period from the date of this
Agreement and continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement or as set forth in Section 4.1 of
the BancWest Disclosure Schedule or to the extent that FHI shall otherwise
consent in writing) BancWest agrees that it will and will cause each of its
Subsidiaries to carry on the business of BancWest and each of its Subsidiaries
in the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and use all reasonable efforts to preserve intact the
present business organizations of BancWest and each of its Subsidiaries,
maintain the rights and franchises of, and preserve the relationships
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with customers, suppliers and others having business dealings with, BancWest and
each of its Subsidiaries to the end that their goodwill and ongoing businesses
shall not be impaired in any material respect at the Effective Time. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, except as set forth in Section 4.1 of the
BancWest Disclosure Schedule, BancWest shall not, and shall not permit any of
its Subsidiaries to, without the prior consent of FHI in writing:
(a) (i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock, except (A) each of BancWest and Bank
of the West may continue the declaration and payment of regular cash
dividends as provided by and in accordance with the terms of the BancWest
Preferred Stock and Outstanding Bank of the West Preferred Stock as in
effect on the date of this Agreement as required by the terms of such
preferred stock, (B) for dividends by a wholly-owned Subsidiary of BancWest
to BancWest, and (C) BancWest may declare and pay a cash dividend in the
amount of up to $28 million with respect to the BancWest Common Stock and,
if the Closing occurs after December 31, 1998, a pro rata portion of $28
million based upon the number of days during 1999 elapsed prior to the
Closing, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock
or (iii) repurchase, redeem or otherwise acquire, or permit any Subsidiary
to purchase or otherwise acquire, any shares of its capital stock or the
capital stock of any other Subsidiary of BancWest or any securities
convertible into or exercisable for any shares of such capital stock except
as expressly provided in Section 5.6;
(b) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any class, any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares, or enter into any agreement with
respect to any of the foregoing, other than (A) issuances by a wholly-owned
Subsidiary of BancWest of its capital stock to BancWest and (B) issuances
of BancWest Common Stock to FABC in exchange for the issued and outstanding
shares of Series A Preferred Stock in accordance with Section 5.6;
(c) amend or propose to amend its Articles of Incorporation or its
By-laws or other organizational documents;
(d) (i) enter into any new material line of business, (ii) change its
lending, investment, liability management and other material banking
policies in any respect which is material to BancWest, except as required
by law or by policies imposed by a Bank Regulator, or (iii) incur or commit
to any capital expenditures or any obligations or liabilities in connection
therewith other than capital expenditures and obligations or liabilities
incurred or committed to in the ordinary course of business consistent with
past practice;
(e) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other means, any business or any corporation,
partnership, association or other business organization or division
thereof; provided, however, that the foregoing shall not prohibit (i)
internal reorganizations or consolidations involving existing Subsidiaries
of BancWest, or (ii) foreclosures and other debt-previously-contracted
acquisitions in the ordinary course of business consistent with past
practice.
(f) sell, lease, encumber or otherwise dispose of, or agree to sell,
lease, encumber or otherwise dispose of, any of its assets (including
capital stock of Subsidiaries of BancWest), which are material,
individually or in the aggregate, to BancWest, other than (i) internal
reorganizations or consolidations involving existing Subsidiaries of
BancWest, (ii) as may be required by law to consummate the transactions
contemplated hereby and (iii) other activities in the ordinary course of
business consistent with past practice;
(g) incur any long-term indebtedness for borrowed money or guarantee
any such long-term indebtedness or issue or sell any long-term debt
securities or warrants or rights to acquire any long-term debt securities
of BancWest or any of its Subsidiaries or guarantee any long-term debt
securities of others other than (i) indebtedness of any Subsidiary of
BancWest to BancWest or another Subsidiary of
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BancWest, (ii) in the ordinary course of business consistent with past
practice, or (iii) renewals or extensions of existing long-term
indebtedness;
(h) intentionally take any action that would, or reasonably might be
expected to, result in any of the representations and warranties set forth
in this Agreement being or becoming untrue, subject to such exceptions as
do not have, and would not reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the Surviving Corporation
following the Effective Time, or in any of the conditions to the Closing
set forth in Article VI not being satisfied, or (unless such action is
required by applicable law or sound banking practice) which would adversely
affect the ability of any of them to obtain any of the Requisite Regulatory
Approvals without imposition of a condition or restriction of the type
referred to in Section 6.3(e);
(i) change the methods of accounting of BancWest or any of its
Subsidiaries, except as required by changes in GAAP as concurred in by such
party's independent auditors;
(j) (i) enter into, adopt, amend (except for technical amendments and
such amendments as may be required by law) or terminate any BancWest
Benefit Plan or any other Benefit Plan or any agreement, arrangement, plan
or policy between BancWest or any of its Subsidiaries and one or more of
its directors or officers, other than entry into waiver agreements pursuant
to Section 5.7, (ii) except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to
BancWest or the Surviving Corporation, increase in any manner the
compensation or fringe benefits of any director, officer or employee of
BancWest or any of its Subsidiaries or pay or grant any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or
performance units or shares or any similar awards) or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing,
(iii) enter into or renew any contract, agreement, commitment or
arrangement providing for the payment to any director, officer or employee
of BancWest or any of its Subsidiaries of compensation or benefits
contingent, or the terms of which are materially altered, upon the
occurrence of any of the transactions contemplated by this Agreement, or
(iv) with respect to any BancWest Benefit Plan which is a defined benefit
or defined contribution pension plan, permit or cause (except pursuant to
Section 5.7(d)), (A) a consolidation or merger of any such Plan, (B) a
spin-off involving any such Plan, (C) a transfer of assets and/or
liabilities from or to any such Plan, or (D) any similar transaction
involving any such Plan;
(k) enter into any contract that would be required to be disclosed on
Section 3.1(i) of the BancWest Disclosure Schedule or renew or terminate
any contract listed in Section 3.1(i) of the BancWest Disclosure Schedule,
other than renewals of contracts or leases for a term of one year or less
without material adverse changes to the terms thereof;
(l) make or acquire any loan or issue a commitment for any loan except
for loans and commitments that are made in the ordinary course of business
consistent with past practice or issue or agree to issue any letters of
credit or otherwise guarantee the obligations of any other persons except
in the ordinary course of business consistent with past practice;
(m) engage or participate in any material transaction or incur or
sustain any material obligation not in the ordinary course of business
consistent with past practice;
(n) settle any claim, action or proceeding involving money damages
which are material to BancWest, except in the ordinary course of business
consistent with past practice;
(o) change or make any tax elections, change any method of accounting
with respect to taxes, file any amended tax return, or settle or compromise
any federal, state, local or foreign material tax liability; or
(p) agree to, or make any commitment to, take any of the actions
prohibited by this Section 4.1.
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4.2. Covenants of FHI. During the period from the date of this Agreement
and continuing until the Effective Time, FHI agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as set forth in Section 4.2 of the FHI Disclosure Schedule or to
the extent that BancWest shall otherwise consent in writing), FHI will and will
cause each of its Subsidiaries to carry on its business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted and
use all reasonable efforts to preserve intact its present business
organizations, maintain its rights and franchises and preserve its relationships
with customers, suppliers and others having business dealings with them to the
end that their goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, FHI shall not, and shall not permit any of its Subsidiaries to, without
the prior consent of BancWest in writing:
(a) (i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock, except (A) FHI may continue the
declaration and payment of regular quarterly cash dividends not in excess
of $.31 per share of FHI Common Stock, and (B) for dividends by a
wholly-owned Subsidiary of FHI to FHI, (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (iii) repurchase, redeem or otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire (except
for the acquisition of trust account shares), any shares of its capital
stock or any securities convertible into or exercisable for any shares of
its capital stock;
(b) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any class or any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares, or enter into any agreement with
respect to any of the foregoing, other than (i) the issuance of FHI Common
Stock pursuant to the exercise of stock options issued under any FHI Stock
Plan prior to the date of this Agreement, (ii) issuances by a wholly-owned
Subsidiary of FHI of its capital stock to FHI, (iii) grants of options to
purchase FHI Common Stock and grants of restricted shares of FHI Common
Stock pursuant to any FHI Stock Plan to newly hired officers or employees
consistent with past practice, (iv) if the Merger has not been consummated
by December 31, 1998, regular annual grants (consistent with past practice)
of options to purchase FHI Common Stock pursuant to any FHI Stock Plan in
fiscal 1999, (v) issuances of shares of restricted FHI Common Stock under
FHI's Incentive Plan for Key Executives in fiscal 1999 (consistent with
past practice), and (vi) issuances of shares of restricted FHI Common Stock
and grants of options to purchase FHI Common Stock immediately after the
Effective Time to certain officers of Bank of the West pursuant to Section
5.7;
(c) amend or propose to amend its Certificate of Incorporation or its
By-laws; provided, however, that effective on the Closing Date, FHI shall
amend its Certificate of Incorporation, subject to obtaining the FHI
Stockholder Approval, and its By-laws as contemplated by Section 5.9 of
this Agreement;
(d) (i) enter into any new material line of business, (ii) change its
or its Subsidiaries' lending, investment, liability management and other
material banking policies in any respect which is material to FHI, except
as required by law or by policies imposed by a Bank Regulator, or (iii)
incur or commit to any capital expenditures or any obligations or
liabilities in connection therewith other than capital expenditures and
obligations or liabilities incurred or committed to in the ordinary course
of business consistent with past practice;
(e) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets, in each case which are
material, individually or in the aggregate, to FHI; provided, however, that
the foregoing shall not prohibit (i) internal reorganizations, liquidations
or consolidations involving existing Subsidiaries, (ii) foreclosures and
other debt-previously-contracted acquisitions in the ordinary course of
business;
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(f) sell, lease, encumber or otherwise dispose of, or agree to sell,
lease, encumber or otherwise dispose of, any of its assets (including
capital stock of Subsidiaries), which are material, individually or in the
aggregate, to FHI other than (i) internal reorganizations, liquidations or
consolidations involving existing Subsidiaries of FHI, (ii) as may be
required by law to consummate the transactions contemplated hereby and
(iii) other activities in the ordinary course of business consistent with
past practice;
(g) incur any long-term indebtedness for borrowed money or guarantee
any such long-term indebtedness or issue or sell any long-term debt
securities or warrants or rights to acquire any long-term debt securities
of FHI or any of its Subsidiaries or guarantee any long-term debt
securities of others other than (i) indebtedness of any Subsidiary of FHI
to FHI or another Subsidiary of FHI, (ii) in the ordinary course of
business consistent with past practice or (iii) renewals or extensions of
existing long-term indebtedness;
(h) intentionally take any action that would, or reasonably might be
expected to, result in any of its representations and warranties set forth
in this Agreement being or becoming untrue, subject to such exceptions as
do not have, and would not reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the Surviving Corporation
following the Effective Time, or in any of the conditions to the Closing
set forth in Article VI not being satisfied, or (unless such action is
required by applicable law or sound banking practice) which would adversely
affect the ability of FHI or BancWest to obtain any of the Requisite
Regulatory Approvals without imposition of a condition or restriction of
the type referred to in Section 6.2(g);
(i) change its methods of accounting, except as required by changes in
GAAP as concurred in by such party's independent auditors;
(j) (i) enter into, adopt, amend (except for technical amendments and
such amendments as may be required by law) or terminate any FHI Benefit
Plan or any other Benefit Plan or any agreement, arrangement, plan or
policy between FHI or any of its Subsidiaries and one or more of its
directors or officers, other than amendments to the FHI Long-Term Incentive
Plan (with respect to the change in control-related provisions of such
Plan), related amendments to awards granted under such Plan, and/or entry
into related agreements pursuant to which participants in such Plan consent
to any such amendments, (ii) except for normal increases in the ordinary
course of business consistent with past practice that, in the aggregate, do
not result in a material increase in benefits or compensation expense to
FHI or the Surviving Corporation, increase in any manner the compensation
or fringe benefits of any director, officer or employee of FHI or any of
its Subsidiaries or pay or grant any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without
limitation, the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units or shares or
any similar awards) or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing or (iii) enter into or renew any
contract, agreement, commitment or arrangement providing for the payment to
any director, officer or employee of FHI or any of its Subsidiaries of
compensation or benefits contingent, or the terms of which are materially
altered, upon the occurrence of any of the transactions contemplated by
this Agreement;
(k) enter into any contract that would be required to be disclosed in
Section 3.2(i) of the FHI Disclosure Schedule or required to be filed as an
exhibit to the FHI SEC Documents pursuant to Item 601(b)(10) of Regulation
S-K or renew or terminate any such contract, other than renewals of
contracts or leases for a term of one year or less without material adverse
changes to the terms thereof;
(l) make or acquire any loan or issue a commitment for any loan except
for loans and commitments that are made in the ordinary course of business
consistent with past practice or issue or agree to issue any letters of
credit or otherwise guarantee the obligations of any other persons except
in the ordinary course of business consistent with past practice;
(m) engage or participate in any material transaction or incur or
sustain any material obligation not in the ordinary course of business
consistent with past practice;
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(n) settle any claim, action or proceeding involving money damages
which are material to FHI, except in the ordinary course of business
consistent with past practice;
(o) change or make any tax elections, change any method of accounting
with respect to taxes, file any amended tax return, or settle or compromise
any federal, state, local or foreign material tax liability; or
(p) agree to, or make any commitment to, take any of the actions
prohibited by this Section 4.2.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Preparation of the Proxy Statement. Promptly following the date of
this Agreement, FHI shall prepare and file with the SEC the Proxy Statement.
BancWest shall furnish all information concerning BancWest and the holders of
the BancWest Common Stock as may be reasonably requested in connection with any
such action. FHI shall use its reasonable best efforts as promptly as
practicable to have the Proxy Statement cleared by the SEC and thereafter to
cause the Proxy Statement to be mailed to FHI's stockholders as promptly as
practicable. Each of FHI and BancWest agree to correct any information provided
by it or their affiliates for use in the Proxy Statement which shall have become
false or misleading.
5.2. Access to Information. (a) Upon reasonable notice, BancWest and FHI
shall (and shall cause each of their respective Subsidiaries to) afford to the
Representatives (as defined in Section 5.4) of the other, access, during normal
business hours during the period prior to the Closing Date, to all the
properties, books, contracts, commitments and records of BancWest (in the case
of BancWest) and of FHI (in the case of FHI) and, during such period, each of
BancWest and FHI shall (and shall cause each of their respective Subsidiaries
to) make available to the other (a) a copy of each report, schedule,
registration statement and other document filed or received by BancWest or FHI,
as the case may be, during such period pursuant to the requirements of Federal
securities laws or Federal or state banking laws (other than reports or
documents which such party is not permitted to disclose under applicable law or
reports or documents which are subject to an attorney-client privilege or which
constitute attorney work product) and (b) all other information concerning the
business, properties and personnel of BancWest or of FHI, as the case may be, as
such other party may reasonably request. The parties will hold any such
information which is nonpublic in confidence to the extent required by, and in
accordance with, the provisions of each of the letters dated March 10, 1998,
between BancWest and FHI (the "Confidentiality Agreements"). No investigation by
either FHI, on the one hand, or BNP or BancWest, on the other hand, shall affect
the representations and warranties of the other, except to the extent such
representations and warranties are by their terms qualified by disclosures made
to such first party.
5.3. Stockholders' Meeting. FHI shall call a meeting of its stockholders
to be held as promptly as practicable for the purpose of voting upon the
adoption of this Agreement. FHI will, through its Board of Directors, recommend
to its stockholders adoption of this Agreement unless the Board of Directors of
FHI determines in good faith, after having consulted with and considered the
advice of its financial advisors and outside counsel, that making such
recommendation, or failing to withdraw, modify or amend any previously made
recommendation, would be reasonably likely to constitute or result in a breach
of fiduciary duty by FHI's Board of Directors under applicable law. FHI agrees
that it will, upon the request of BancWest, postpone or recess such
stockholders' meeting for such period as BancWest shall reasonably request, if,
for any reason the trustees under The Will and of the Estate of S.M. Damon shall
have failed in any material respect to have complied with their obligations
under the Stockholders Agreement, dated as of the date hereof, between BNP and
the trustees under The Will and of the Estate of S.M. Damon (the "Stockholders
Agreement") at or prior to the date of such meeting, or shall have indicated to
BancWest their intention so to do, in order to afford BNP an opportunity to
enforce its rights under the Stockholders Agreement, including by way of court
action, unless it is reasonably likely that the FHI Stockholder Approval will be
obtained at such meeting. In addition, nothing in this Section 5.3 or elsewhere
in this Agreement shall prohibit accurate disclosure by FHI of information that
is required to be disclosed in the Proxy Statement or any other
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document required to be filed with the SEC (including without limitation a
Solicitation/Recommendation Statement on Schedule 14D-9) or otherwise required
to be disclosed by applicable law or regulation or the rules of any securities
exchange or automated quotation system on which the securities of FHI may then
be traded.
5.4. No Solicitations. (a) Subject, in the case of FHI, to paragraph (b)
below, from the date hereof until the earlier of the Effective Time or the
termination of this Agreement, each of BancWest and FHI agree that neither it,
nor any of its respective Subsidiaries, affiliates or agents shall, nor shall it
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative or agent (collectively, "Representatives") retained by it or any
of its Subsidiaries, affiliates or agents to, solicit, initiate or knowingly
encourage the submission of, or enter into discussions or negotiations with or
provide information to any person or group of persons (other than the respective
parties to this Agreement) concerning, any Takeover Proposal (as defined below)
or enter into any agreement with a third party relating to a Takeover Proposal
or assist, participate in, facilitate or encourage any effort or attempt by any
other person to do or seek to do any of the foregoing. As used in this
Agreement, "Takeover Proposal" shall mean any proposal for the acquisition of a
15% or greater equity interest in, or a merger, consolidation, liquidation,
dissolution or other disposition of 15% or more of the assets (other than in the
ordinary course of business) of, BancWest or FHI or any Significant Subsidiary
of BancWest or FHI, or any tender offer or exchange offer that if consummated
would result in any person beneficially owning 15% or more of any class of
equity securities of BancWest or FHI or any Significant Subsidiary of BancWest
or FHI (other than pursuant to the transactions contemplated by this Agreement
or the other Transaction Agreements).
(b) Notwithstanding the foregoing, at any time prior to the time that FHI's
stockholders shall have voted to adopt this Agreement, FHI may, and may
authorize and permit its Representatives to, (i) provide third parties with
nonpublic information and access in response to a request for such information
or access which was not solicited, encouraged or initiated by FHI or any of its
Representatives after the date hereof, (ii) participate in discussions and
negotiations with any third party relating to any Takeover Proposal, upon
receipt by FHI of an unsolicited Takeover Proposal, or (iii) terminate this
Agreement (and concurrently with or after such termination, enter into any
agreement with respect to a Takeover Proposal), in each case if the Board of
Directors of FHI determines in good faith, after having consulted with and
considered the advice of its financial advisors and outside counsel, that the
failure to take any such action would be reasonably likely to constitute or
result in a breach of fiduciary duty by FHI's Board of Directors under
applicable law.
5.5. Legal Conditions. (a) Each of BancWest and FHI shall, and shall
cause its respective Subsidiaries to, use all reasonable efforts (i) to take, or
cause to be taken, all actions necessary to comply promptly with all legal
requirements which may be imposed on such party or its Subsidiaries with respect
to the transactions contemplated by this Agreement and to consummation thereof
as promptly as practicable, subject to the FHI Stockholder Approval, 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
Entity and or any other public or private third party which is required to be
obtained or made by such party or any of its Subsidiaries in connection with the
Merger and the other transactions contemplated by this Agreement. Each of
BancWest and FHI will promptly cooperate with and furnish information to the
other in connection with any such burden suffered by, or requirement imposed
upon, any of them or any of their Subsidiaries in connection with the foregoing.
(b) Each of BancWest and FHI agrees to use all reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary and proper or advisable to consummate, as soon as practicable
after the date of this Agreement, the transactions contemplated hereby,
including, without limitation, using all reasonable best efforts to (i) lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
(ii) defend any Litigation seeking to enjoin, prevent or delay the consummation
of the transactions contemplated hereby or seeking material damages, and (iii)
provide to counsel to the other party hereto representations and certifications
as to such matters as such counsel may reasonably request in order to render the
opinions referred to in Sections 6.2(f) and 6.3(d).
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5.6. Series A Preferred Stock. Prior to the Effective Time, (a) BancWest
shall acquire all of the issued and outstanding shares of the Series A Preferred
Stock owned by FABC in exchange for shares of BancWest Common Stock.
5.7. Employee Benefit Plans. (a) Bank of the West and BancWest shall
offer to enter into a waiver agreement with each employee who has been awarded
stock appreciation rights ("SARs") under the BancWest Senior Management Long
Term Incentive Plan, pursuant to which such employee waives all rights he or she
has with respect to such SARs and consents to the cancellation of such SARs in
consideration for the issuance by FHI immediately after the Effective Time of
shares of restricted FHI Common Stock with an aggregate value (based on the per
share value initially assigned by the parties to the FHI Class A Common Stock)
equal to the gross value of the cash payout such employee would have been
entitled to pursuant to such Plan upon the Closing in the absence of such waiver
agreement, rounded down to the nearest whole share. FHI shall issue such shares
to each such employee who delivers to FHI an acceptable waiver agreement which
results in the effective cancellation of such employee's SARs. Such shares will
become 100% vested on the second anniversary of the Closing, provided the
employee does not voluntarily terminate his or her employment with Bank of the
West or FHI prior to such time (or have his or her employment terminated by Bank
of the West or FHI for cause). Immediately after the Effective Time, FHI shall
also issue to such employees, in the aggregate, options to purchase up to
150,000 shares of FHI Common Stock with an exercise price equal to the fair
market value of such shares at the Closing. Such Options shall vest the same as
the optionee's shares of restricted FHI Common Stock.
(b) To the extent the Surviving Corporation assumes BancWest's (or any of
its Subsidiaries') liabilities with respect to any disabled employees, such
liabilities are currently being paid pursuant to an insured disability plan,
other than liabilities included as accrued sick or vacation leave on the books
of BancWest (or its Subsidiaries), in accordance with GAAP.
(c) BancWest and FHI shall ensure that, as of the Closing Date, full
payment has been made to each of their respective Benefit Plans of all
contributions required to be made under applicable law with respect to benefits
accrued on or prior to such date, and that adequate reserves have been provided
for on their respective balance sheets for all benefits, and all premiums (or
portions thereof), attributable to service on or prior to the Closing Date.
(d) Effective as of the Effective Time, or as soon as practicable
thereafter, BancWest shall amend, or cause to be amended, each BancWest Benefit
Plan such that employers who are not members of a controlled group of
organizations with BancWest (within the meaning of Code section 414(b), (c),
(m), or (o)) as of the Effective Time shall cease to be participating employers
in such BancWest Benefit Plans. Prior to the Effective Time, BancWest shall work
with BNP to establish successor plans with respect to members of BancWest's
controlled group (as defined above) who will cease to be members of such a group
as of the Effective Time. Amendments to the BancWest Benefit Plans may, subject
to the terms and conditions of an employee benefits agreement (that is consented
to by FHI) that sets forth the agreement of the parties regarding the
disposition of each BancWest Benefit Plan, provide for the transfer of assets
and accrued liabilities, subject to the consent of FHI, with respect to
participants in the BancWest Benefit Plans who continue to be employed by an
entity which will cease to be a member of BancWest's controlled group (as
defined above) as of the Effective Time. Following the Effective Time, the
former employees of BancWest and its subsidiaries who continue employment with
the Surviving Corporation or its subsidiaries shall receive benefits which, in
the aggregate, are comparable to the benefits provided by the Surviving
Corporation and its Subsidiaries to the former employees of FHI and its
Subsidiaries who continue employment with the Surviving Corporation or its
Subsidiaries. Amounts payable as of the Effective Time under the terms of the
BancWest Benefit Plans then in effect shall be paid in accordance with the terms
of such Plans.
5.8. Intercompany Matters. BancWest shall take such action as is
necessary to ensure that any arrangements, contracts, agreements or transactions
between BancWest or any of its Subsidiaries, on the one hand, and BNP and any of
its affiliates, on the other hand, may be terminated by the Surviving
Corporation upon not more than 30 days' notice following the Effective Time
without the payment of any financial penalty or fee.
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5.9. Charter Amendment; By-Law Amendment. On or before the Effective
Time, following the adoption by the stockholders of the Company at the
Stockholders' Meeting of this Agreement, the Company will cause the Certificate
of Incorporation, in the form of Exhibit A attached hereto (the "Charter
Amendments"), to be filed with the Secretary of State of the State of Delaware,
and the Board of Directors of the Company will cause the amendments to the
by-laws of the Company, in the form of Exhibit B attached hereto (the "By-Law
Amendments"), to be adopted; provided, however, that nothing contained in this
Agreement shall require such Charter Amendments to be filed on behalf of or by
the Company or such amendments to the by-laws to be adopted by the Board of
Directors of the Company prior to the time that all conditions set forth in
Article VI (other than those related to such filing or such adoptions) have been
satisfied or waived.
5.10. Indemnification; Directors' and Officers' Insurance. (a) From and
after the Effective Time, the Surviving Corporation shall indemnify, defend and
hold harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, an officer, director or
employee of BancWest or any of its Subsidiaries (the "Indemnified Parties")
against (i) all losses, claims, damages, costs, expenses, liabilities or
judgments or amounts of any nature whatsoever, governmental or non-governmental
(including but not limited to reasonable expenses of counsel and investigation)
that are paid in settlement of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer or
employee of BancWest or any Subsidiary of BancWest, whether pertaining to any
matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities") and (ii) all Indemnified Liabilities based in whole or in part on,
or arising in whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the full extent that BancWest
would have been permitted under applicable law and its Articles of
Incorporation, and the Surviving Corporation is permitted under Delaware law, to
indemnify such person (and the Surviving Corporation shall pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law with no bond or security
to be required upon receipt of any undertaking required by Section 145(e) of the
DGCL). Without limiting the foregoing, in the event any such claim, action,
suit, proceeding or investigation is brought against any Indemnified Parties
(whether arising before or after the Effective Time), (i) any counsel retained
by the Indemnified Parties for any period after the Effective Time shall be
reasonably satisfactory to the Surviving Corporation; (ii) after the Effective
Time, the Surviving Corporation shall pay all reasonable fees and expenses of
such counsel for the Indemnified Parties promptly as statements therefor are
received; and (iii) after the Effective Time, the Surviving Corporation will use
all reasonable efforts to assist in the vigorous defense of any such matter,
provided that the Surviving Corporation shall not be liable for any settlement
of any claim effected without its written consent, which consent, however, shall
not be unreasonably withheld or delayed. Any Indemnified Party wishing to claim
indemnification under this Section 5.10, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Surviving
Corporation (but the failure so to notify the Surviving Corporation shall not
relieve it from any liability which it may have under this Section 5.10 except
to the extent such failure materially prejudices the Surviving Corporation), and
shall deliver to the Surviving Corporation the undertaking, if any, required by
Section 145(e) of the DGCL. The Surviving Corporation shall be liable for the
fees and expenses hereunder with respect to only one law firm, in addition to
local counsel in each applicable jurisdiction, to represent the Indemnified
Parties as a group with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict between the positions
of any two or more Indemnified Parties that would preclude or render inadvisable
joint or multiple representation of such parties.
(b) For a period of five years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by BNP for BancWest and
its Subsidiaries (provided that the Surviving Corporation may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are not materially less advantageous in the aggregate) with
respect to claims arising from facts or events which occurred before the
Effective Time; provided, however, that the Surviving Corporation shall not be
obligated to make annual premium payments for such insurance to the extent such
premiums exceed 150% of the premiums agreed to
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be paid between BancWest and Bank of the West and BNP in respect of 1997 for
such insurance, as previously disclosed to FHI ("BancWest's Current Premium"),
and if such premiums for such insurance would at any time exceed 150% of
BancWest's Current Premium, then the Surviving Corporation shall cause to be
maintained policies of insurance which, in the Surviving Corporation's good
faith determination, provide the maximum coverage available at an annual premium
equal to 150% of BancWest's Current Premium.
(c) In the event FHI or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of FHI assume the
obligations set forth in this section.
(d) The provisions of this Section 5.10 (i) are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his heirs and
his representatives and (ii) are in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such person may
have by contract or otherwise.
(e) FHI shall reimburse any Indemnified Party for reasonable out-of-pocket
expenses incurred in connection with prosecuting any claim for indemnification
under this Section 5.10 with respect to which such Indemnified Party is
successful on the merits.
5.11. Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action.
5.12. Fees and Expenses. Except as otherwise expressly provided herein,
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense.
5.13. Cooperation. During the period from the date of this Agreement to
the Effective Time, each of BancWest and FHI shall, (i) confer on a regular and
frequent basis with the other, report on operational matters, policies and
banking practices and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen, could
have, a material adverse effect on BancWest or FHI, as the case may be, or which
would cause or constitute a material breach of any of the representations,
warranties or covenants of such party contained herein and (ii) cause each
Subsidiary of BancWest and FHI that is a bank to file all call reports with the
appropriate Bank Regulators and all other reports, applications and other
documents required to be filed with the applicable Governmental Entities between
the date hereof and the Effective Time and make available to the other party
copies of all such reports promptly after the same are filed; provided each of
BNP and BancWest, on the one hand, and FHI, on the other hand, shall have the
right to review in advance, and to the extent practicable will consult with the
other party, in each case subject to applicable laws relating to the exchange of
information, with respect to all the information relating to such other party
and any of its Subsidiaries, which appear in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of BancWest and FHI agree to act reasonably and as
promptly as practicable. Each of BancWest and FHI agrees that it shall, and
shall cause its respective Subsidiaries to, to the extent practicable, consult
with the other party with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and it will keep the other party apprised of the status of matters
relating to completion of the transactions contemplated hereby.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation. The respective obligations of
each party to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The FHI Stockholder Approval shall have
been obtained.
(b) Other Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any Governmental Entity (all the foregoing,
"Consents") which are necessary pursuant to the Merger, other than
immaterial Consents the failure to obtain which would have no material
adverse effect on the consummation of the transactions contemplated by this
Agreement or the other Transaction Agreements or on either BNP or the
Surviving Corporation, shall have been filed, have occurred or been
obtained (all such permits, approvals, filings and consents and the lapse
of all such waiting periods being referred to as the "Requisite Regulatory
Approvals") and all such Requisite Regulatory Approvals shall be in full
force and effect.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition (an "Injunction") preventing the consummation of the
transactions contemplated by this Agreement or the Transaction Agreements
shall be in effect. There shall not be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable
to the transactions contemplated by this Agreement or the Transaction
Agreements, by any Federal, state or foreign Governmental Entity of
competent jurisdiction which makes the consummation of the transactions
contemplated by this Agreement or the Transaction Agreements illegal.
(d) Bank Merger. All conditions precedent to the consummation of the
Bank Merger shall have been satisfied and the Bank Merger shall be
consummated concurrently with the Effective Time of the Merger.
6.2. Conditions to Obligations of FHI. The obligation of FHI to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions unless waived by FHI:
(a) Representations and Warranties. The representations and
warranties of BancWest set forth in this Agreement shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, subject to such
exceptions as would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the Surviving Corporation, and
FHI shall have received a certificate signed on behalf of BancWest by its
President and Chief Executive Officer and its Chief Financial Officer to
such effect.
(b) Performance of Obligations. BancWest shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and FHI shall have received a
certificate signed on behalf of BancWest by its Chairman and Chief
Executive Officer and its Chief Financial Officer to such effect.
(c) Consents Under Agreements. The consent or approval of each person
(other than the Governmental Entities referred to in Section 6.1(b)) whose
consent or approval shall be required in connection with the transactions
contemplated hereby and by the Transaction Agreements, under any loan or
credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to obtain such
consents and approvals would not, individually or in the aggregate, have a
material adverse effect after the Effective Time on the Surviving
Corporation shall have been obtained.
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(d) Corporate Action. FHI shall have received a copy of the
resolution or resolutions duly adopted by the Board of Directors (or a duly
authorized committee thereof) of BancWest and of the holders of the
BancWest Common Stock and the BancWest Preferred Stock authorizing the
execution, delivery and performance by BancWest of this Agreement,
certified by the Secretary or an Assistant Secretary of BancWest.
(e) Tax Opinion. FHI shall have received the opinion of Simpson
Thacher & Bartlett, counsel to FHI, dated the Closing Date, to the effect
that (i) the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and (ii)
FHI and BancWest will each be a party to that reorganization within the
meaning of Section 368(b) of the Code.
(f) NASD Approval. FHI shall have been advised by the NASD that the
FHI Common Stock will continue to be designated as a "Nasdaq National
Market System security" (as defined for purposes of Schedule D to the
By-Laws of the NASD) after the issuance and sale of the shares of FHI Class
A Common Stock in the Merger and the effectiveness of the provisions of
this Agreement and the Transaction Agreements relating to BNP and FHI.
(g) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation, order or decree enacted, entered, enforced or
deemed applicable to the Merger or the Transaction Agreements by any
Federal, state or foreign Governmental Entity which, in connection with the
grant of a Requisite Regulatory Approval or otherwise, imposes any
condition or restriction (a "Burdensome Condition") upon FHI or its
Subsidiaries which would reasonably be expected to (i) have a material
adverse effect after the Effective Time on the present or prospective
consolidated financial condition, business or operating results of the
Surviving Corporation (including, without limitation, any requirement to
dispose of any material assets or businesses or restrict in any significant
way any material operations or activities), (ii) prevent the parties from
realizing all or a substantial portion of the economic benefits of the
transactions contemplated by this Agreement, or (iii) materially impair
FHI's ability to exercise and enforce its rights under the Transaction
Agreements, the Charter Amendments and the By-Law Amendments.
(h) Transaction Agreements. The Transaction Agreements shall have
been duly executed and delivered by BNP and shall be in full force and
effect and the representations and warranties of BNP in any such
Transaction Agreement shall be true and correct in all material respects
and BNP shall have performed in all material respects all obligations
required to be performed by it thereunder at or prior to the Closing Date,
including, without limitation, its obligation to exercise or cause an
affiliate to exercise the Purchase Option (as defined in the Support
Agreement, dated as of April 25, 1996, among BNP and BancWest) with respect
to the BancWest Preferred Stock and to vote such shares in favor of the
Merger.
(i) SAS 71 Review Letter. BancWest shall have provided to FHI review
reports prepared in accordance with the provisions of Statement of
Accounting Standards No. 71 ("SAS 71"), Interim Financial Information, by
BancWest's independent accountants covering BancWest's quarterly financial
reports for the most recent quarter ending at least 45 days prior to the
Closing Date.
6.3. Conditions to Obligations of BancWest. The obligation of BancWest to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions unless waived by BancWest:
(a) Representations and Warranties. The representations and
warranties of FHI set forth in this Agreement shall be true and correct as
of the date of this Agreement and (except to the extent such
representations speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, subject to such exceptions as
would not reasonably be expected to have, individually or in the aggregate,
a material adverse effect on BNP or the Surviving Corporation, and BancWest
shall have received a certificate signed on behalf of FHI by its Chairman
and Chief Executive Officer and a Vice Chairman to such effect.
(b) Performance of Obligations. FHI shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and BancWest shall
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have received a certificate signed on behalf of FHI by its President and
Chief Executive Officer and a Vice Chairman to such effect.
(c) Consents Under Agreements. The consent or approval of each person
(other than the Governmental Entities referred to in Section 6.1(b)) whose
consent or approval shall be required in connection with the transactions
contemplated hereby and by the Transaction Agreements under any loan or
credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to obtain such
consents and approvals would not, individually or in the aggregate, have a
material adverse effect, after the Effective Time, on BNP or the Surviving
Corporation.
(d) Tax Opinion. BNP shall have received the opinion of Pillsbury
Madison & Sutro LLP, counsel to BNP, dated the Closing Date, to the effect
that (i) the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and (ii)
FHI and BancWest will each be a party to that reorganization within the
meaning of Section 368(b) of the Code.
(e) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation, order or decree enacted, entered, enforced or
deemed applicable to the Merger or the Transaction Agreements by any
Federal, state or foreign Governmental Entity which, in connection with the
grant of a Requisite Regulatory Approval or otherwise, imposes a Burdensome
Condition upon BNP which would reasonably be expected to (i) have a
material adverse effect after the Effective Time on (A) the present or
prospective consolidated financial condition, business or operating results
of the Surviving Corporation or (B) any other material operations, business
or assets of BNP or its affiliates (including, without limitation, any
requirement to dispose of any material assets or businesses or restrict in
any significant way any material operations or activities), (ii) prevent
such parties from realizing all or a substantial portion of the economic
benefits of the transactions contemplated by this Agreement, or (iii)
materially impair the ability of BNP to exercise and enforce its rights
under the Transaction Agreements, the Charter Amendments and the By-Law
Amendments.
(f) NASD Approval. The condition set forth in Section 6.2(g) hereof
shall have been satisfied.
(g) Corporate Action. BancWest shall have received a copy of the
resolution or resolutions duly adopted by the Board of Directors and
stockholders of FHI authorizing the execution, delivery or performance by
FHI of this Agreement and the Transaction Agreements, certified by the
Secretary or an Assistant Secretary of FHI.
(h) Transaction Agreements. The Transaction Agreements shall have
been duly executed and delivered by FHI and shall be in full force and
effect and the representations and warranties of FHI in any such
Transaction Agreement shall be true and correct in all material respects
and FHI shall have performed in all material respects all obligations
required to be performed by it thereunder at or prior to the Closing Date.
(i) SAS 71 Review Letter. FHI shall have provided to BancWest review
reports prepared in accordance with the provisions of SAS 71, by FHI's
independent accountants covering FHI's quarterly financial reports for the
most recent quarter ending at least 45 days prior to the Closing Date.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, by action taken or authorized by the Board of Directors of
the terminating party or parties, whether before or after adoption of the
Agreement by the stockholders of FHI:
(a) by mutual consent of FHI and BancWest in a written instrument;
(b) by either FHI or BancWest upon written notice to the other party
if the Federal Reserve shall have issued an order denying approval of the
Merger and the other material aspects of the transactions
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contemplated by this Agreement and the Transaction Agreements or if any
Governmental Entity of competent jurisdiction shall have issued a final
permanent order enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement and the Transaction Agreements
or imposing a Burdensome Condition, and in any such case the time for
appeal or petition for reconsideration of such order shall have expired
without such appeal or petition being granted;
(c) by either FHI or BancWest if the Merger shall not have been
consummated on or before March 31, 1999; provided that if the Merger shall
not been consummated on or before such date due to the act or omission of
FHI or BancWest, then that party may not terminate this Agreement pursuant
to this paragraph (c);
(d) by FHI in the event of a breach by BancWest of any representation,
warranty or covenant contained in this Agreement (other than Section
5.4(a)) or by BNP of any representation or warranty or covenant contained
in the Side Agreement (other than Section 2.3 thereof), which breach (i)
either is not cured within thirty days after the giving of written notice
to BancWest or BNP, as the case may be, or is of a nature which cannot be
cured prior to the Closing and (ii) would entitle the non-breaching party
to elect not to consummate the transactions contemplated hereby pursuant to
Article VI;
(e) by BancWest in the event of a breach by FHI of any representation,
warranty or covenant contained in this Agreement (other than Section
5.4(a)) or in the Side Agreement which breach (i) either is not cured
within thirty days after the giving of written notice to FHI or is of a
nature which cannot be cured prior to the Closing and (ii) would entitle
the non-breaching party to elect not to consummate the transactions
contemplated hereby pursuant to Article VI;
(f) by either FHI or BancWest if in accordance with Section 5.3, the
Board of Directors of FHI fails to recommend adoption of this Agreement by
the stockholders of FHI, or amends or modifies such recommendation in a
manner materially adverse to BancWest or withdraws its recommendation to
the stockholders of FHI;
(g) by FHI or BancWest, if the FHI Stockholder Approval shall not have
been obtained at a duly held meeting of stockholders of FHI held for such
purpose or at any adjournment, postponement or continuation thereof;
(h) by FHI, in accordance with Section 5.4(b)(iii);
(i) by BancWest if a tender or exchange offer to acquire at least 50%
of the outstanding shares of FHI Common Stock is commenced by any person
(other than BNP, BancWest or any of their respective affiliates) and the
Board of Directors of FHI recommends that the stockholders of FHI tender
their shares in such tender or exchange offer or otherwise fails to
recommend that such stockholders reject such tender or exchange offer
within ten Business Days after the commencement thereof (which, in the case
of an exchange offer, shall be the effective date of the registration
statement relating to such exchange offer);
(j) by BancWest if either (i) FHI shall have materially breached its
obligations under Section 5.4(a), and shall not have cured such breach
within twenty-four hours after the giving of written notice thereof to FHI
(provided that no cure period shall apply if such breach shall have been
wilful), or (ii) FHI shall have exercised its rights under clauses (i)
and/or (ii) of Section 5.4(b) with respect to a third party that has made
an unsolicited request for nonpublic information and access or has made an
unsolicited Takeover Proposal, and in either such case FHI has not
terminated such activities with such third party within fifteen days after
the commencement thereof; or
(k) by FHI if BancWest shall have materially breached its obligations
under Section 5.4(a) or BNP shall have breached its obligations under
Section 2.3 of the Side Agreement, and shall not have cured such breach
within twenty-four hours after the giving of written notice thereof to
BancWest or BNP, as the case may be (provided that no cure period shall
apply if such breach shall have been wilful).
7.2. Effect of Termination. (a) In the event of termination of this
Agreement by either BancWest or FHI as provided in Section 7.1, this Agreement
shall forthwith become void and there shall be no liability or
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obligation on the part of FHI or BancWest or their respective officers or
directors except (i) with respect to Sections 3.1(s) and 3.2(s), 7.2(b), 7.2(c),
7.2(d), 7.2(f), the penultimate sentence of Section 5.2, and (ii) with respect
to any liabilities or damages incurred or suffered by a party as a result of the
wilful breach by the other party or parties of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
(b) FHI shall reimburse BancWest (not later than five Business Days after
submission of statements therefor) for all actual, documented and reasonable
out-of-pocket fees and expenses (the "Expenses") incurred by BancWest relating
to the transactions contemplated by this Agreement, up to a maximum of $3
million, if (i) this Agreement shall have been terminated by BancWest pursuant
to Sections 7.1(e), 7.1(f), 7.1(i) or 7.1(j), or (ii) if (x) this Agreement
shall have been terminated by FHI or by BancWest pursuant to Section 7.1(g) and
(y) either (A) at any time after the date of this Agreement, a bona fide
Acquisition Proposal (as defined herein) is publicly commenced, publicly
disclosed or publicly communicated to FHI and not withdrawn unconditionally
prior to the date of the Stockholders' Meeting or (B) (1) prior to the
Stockholders' Meeting a court of competent jurisdiction shall have issued a
permanent order invalidating the Stockholders Agreement or otherwise prohibiting
performance by the trustees of their obligations thereunder with respect to the
voting of the shares covered thereby and (2) at the Stockholders' Meeting, such
shares were not voted in favor of the adoption of this Agreement.
(c) FHI shall pay BancWest a fee of $10 million (the "Termination Fee")
plus the Expenses if this Agreement shall have been terminated by FHI pursuant
to Section 7.1(h). The Termination Fee and Expenses pursuant to this Section
7.2(c) shall be paid not later than five Business Days following termination of
this Agreement (or, in the case of Expenses, five Business Days after submission
of statements therefor).
(d) FHI shall pay BancWest the Termination Fee if (x) this Agreement shall
have been terminated by BancWest pursuant to Section 7.1(j), (y) on or prior to
the first anniversary of the date of such termination, the Company enters into a
definitive agreement with respect to a transaction described in paragraph (e)
below and (z) such transaction is thereafter consummated. The Termination Fee
shall be paid pursuant to this Section 7.2(d) within one Business Day following
the consummation of any such transaction.
(e) For purposes of this Section 7.2, an "Acquisition Proposal" means any
of (i) a transaction or series of transactions pursuant to which any person
(other than BNP, BancWest or their respective affiliates) acquires or would
acquire more than 50% of the outstanding FHI Common Stock, (ii) any acquisition
or proposed acquisition of FHI or any of its Significant Subsidiaries by a
merger or other business combination or (iii) any other transaction pursuant to
which any third party acquires or would acquire all or substantially all of the
assets of FHI and its Subsidiaries.
(f) BancWest shall reimburse FHI (not later than five Business Days after
submission of statements therefor) for the Expenses incurred by FHI relating to
the transactions contemplated by this Agreement, up to a maximum of $3 million,
if this Agreement shall have been terminated by FHI pursuant to Sections 7.1(d)
or 7.1(k).
7.3. Amendment. This Agreement may be amended by the parties hereto at
any time before or after adoption of this Agreement by the stockholders of FHI,
but, after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
7.4. Extension; Waiver. At any time prior to the Closing Date, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
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ARTICLE VIII
GENERAL PROVISIONS
8.1. Nonsurvival of Representations and Warranties. None of the
representations or warranties in this Agreement shall survive the Effective
Time, except as set forth in the Side Agreement.
8.2. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first business day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third business day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice.
(a) if to FHI, to
First Hawaiian, Inc.
999 Bishop Street
Honolulu, Hawaii 96813
Attention: Howard H. Karr
Fax: (808) 533-7844
with a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, N.Y. 10017
Attention: Lee Meyerson, Esq.
Fax: (212) 455-2502
and
(b) if to BancWest, to
BancWest Corporation
1435 Treat Boulevard
Walnut Creek, California 94596
Attention: President
Fax: (925) 942-1224
with a copy to
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Attention: Rodney R. Peck, Esq.
Fax: (415) 983-1200
and
Cleary Gottlieb Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Robert L. Tortoriello, Esq.
Fax: (212) 225-3999
8.3. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not
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affect in any way the meaning or interpretation of this Agreement. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available. The phrases "the date of this Agreement", "the date hereof"
and terms of similar import, unless the context otherwise requires, shall be
deemed to refer to May 28, 1998.
8.4. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5. Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (including the documents and the instruments referred
to herein) (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, other than the Confidentiality Agreements,
which shall survive the execution and delivery of this Agreement and (b) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. The parties hereby acknowledge that, except as hereinafter
agreed to in writing, no party shall have the right to acquire or shall be
deemed to have acquired shares of common stock of the other party pursuant to
the Merger until consummation thereof. Except to the extent provided in Sections
5.7(a) and 5.10, no current or former employee of BancWest, FHI, or any of their
respective Subsidiaries, shall be construed as a third party beneficiary under
this Agreement, and no provision in this Agreement shall create any right in any
such employee (or his or her beneficiary or dependent) for any reason,
including, without limitation, in respect of employment, continued employment,
or resumed employment with the Surviving Corporation, BancWest or FHI (or any of
their respective affiliates) or in respect of any benefits that may be provided,
directly or indirectly, under any Benefit Plan maintained by the Surviving
Corporation, BancWest or FHI (or any of their respective affiliates).
8.6. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
non-exclusive jurisdiction of the courts of the State of New York and of the
United States of America, in each case located in the County of New York, for
any Litigation in any court or before any governmental authority arising out of
or relating to this Agreement and the transactions contemplated hereby. Each of
the parties hereto hereby irrevocably and unconditionally waives, and agrees not
to assert, by way of motion, as a defense, counterclaim or otherwise, in any
such Litigation, the defense of sovereign immunity, any claim that it is not
personally subject to the jurisdiction of the aforesaid courts for any reason
other than the failure to serve process in accordance with this Section 8.6,
that it or its property is exempt or immune from jurisdiction of any such court
or from any legal process commenced in such courts (whether through service of
notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise), and to the fullest extent
permitted by applicable law, that the Litigation in any such court is brought in
an inconvenient forum, that the venue of such Litigation is improper, or that
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts and further irrevocably waives, to the fullest extent permitted by
applicable law, the benefit of any defense that would hinder, fetter or delay
the levy, execution or collection of any amount to which the party is entitled
pursuant to the final judgment of any court having jurisdiction. Each of the
parties irrevocably and unconditionally waives, to the fullest extent permitted
by applicable law, any and all rights to trial by jury in connection with any
Litigation arising out of or relating to this Agreement or the transactions
contemplated hereby.
8.7. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability and, unless the
effect of such invalidity or unenforceability would prevent the parties from
realizing the major portion of the economic benefits of the Merger that they
currently anticipate obtaining therefrom, shall not render invalid or
unenforceable the remaining terms and provisions of this Agreement or affect the
validity or enforceability of any of the terms or provisions of this Agreement
in any other jurisdiction. If any provision of
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this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8.8. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by either of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party, and any attempt to make any such assignment without such
consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
IN WITNESS WHEREOF, FHI and BancWest have caused this Agreement to be
executed by their respective officers thereunto duly authorized, all as of date
first above written.
FIRST HAWAIIAN, INC.
By: /s/ Walter A. Dods, Jr.
--------------------------------------
Name: Walter A. Dods, Jr.
Title: Chairman and Chief Executive
Officer
BANCWEST CORPORATION
By: /s/ Don J. McGrath
--------------------------------------
Name: Don J. McGrath
Title: President and Chief Executive
Officer
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EXHIBIT A
FORM OF
CERTIFICATE OF INCORPORATION
OF
BANCWEST CORPORATION
First. The name of the corporation is "BancWest Corporation".
Second. The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle 19801. The name and address of its resident
agent is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware
19801.
Third. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
Fourth. The total number of shares of stock which the corporation shall
have authority to issue is Three Hundred Twenty-Five Million (325,000,000)
shares having a par value of One Dollar ($1.00) per share, divided into three
classes: Two Hundred Million (200,000,000) shares designated as Common Stock
(the "Common Stock"); Seventy-Five Million (75,000,000) shares designated as
Class A Common Stock (the "Class A Common Stock"); and Fifty Million
(50,000,000) shares designated as Preferred Stock (the "Preferred Stock").
(a) The Class A Common Stock.
(1) After the requirements, if any, with respect to preferential
dividends on the Preferred Stock shall have been met and after the
corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts in respect of the Preferred Stock, the holders of shares
of Class A Common Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, dividends payable on the same date fixed for payment of the
corresponding dividend on the Common Stock (other than a dividend payable
in shares of Common Stock, or in options, warrants or other securities
exercisable for or convertible into shares of Common Stock), in an amount
per share equal to the aggregate per share amount of any cash dividend and
the aggregate per share amount (payable in kind) of any non-cash dividend
(other than a dividend payable in shares of Common Stock or in options,
warrants or other securities exercisable for or convertible into shares of
Common Stock) paid on the Common Stock.
(2) In the event that the corporation shall at any time declare and
pay any dividend on the Common Stock payable in shares of Common Stock or
in options, warrants or other securities exercisable for or convertible
into shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock or in options, warrants or other securities exercisable for or
convertible into shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each case the corporation shall, as the
case may be, declare and pay an equivalent dividend per share on the Class
A Common Stock payable in shares of Class A Common Stock or in options,
warrants or other securities exercisable for or convertible into shares of
Class A Common Stock or effect an equivalent subdivision, combination or
consolidation of the outstanding shares of Class A Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Class A Common Stock or in options, warrants or other securities
exercisable for or convertible into shares of Class A Common Stock) into a
greater or lesser number of shares of Class A Common Stock.
(3) The corporation shall declare a dividend on the Class A Common
Stock as provided in subparagraph (1) and subparagraph (2) of this
paragraph (a) at the same time that it declares any dividend on the Common
Stock and shall effect a subdivision, combination or consolidation of the
outstanding shares of Class A Common Stock as provided in subparagraph (2)
of this paragraph (a) into
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a greater or lesser number of shares of Class A Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Class A Common Stock or in options, warrants or other securities
exercisable for or convertible into shares of Class A Common Stock) at the
same time that it effects any subdivision, combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock or in options,
warrants or other securities exercisable for or convertible into shares of
Common Stock) into a greater or lesser number of shares of Common Stock.
(4) Except as set forth in subparagraphs (1) through (3) and (5) of
this paragraph (a), holders of shares of Class A Common Stock shall not be
entitled to receive, and the corporation shall not declare or pay, any
dividend or distribution (whether in cash, property or securities) on the
Class A Common Stock. Subject to the requirements of applicable law and
this Certificate of Incorporation, no dividend shall be payable on the
shares of Common Stock unless an equivalent per share dividend is payable
on the shares of Class A Common Stock on the same date fixed for payment of
the corresponding dividend on the Common Stock (other than a dividend
payable in shares of Common Stock, or in options, warrants or other
securities exercisable for or convertible into shares of Common Stock).
(5) After distribution in full of the preferential amount, if any, to
be distributed to the holders of the Preferred Stock, in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the
corporation, the holders of Class A Common Stock shall, subject to the
right, if any, of the holders of the Preferred Stock to participate
therein, be entitled, together with the holders of the Common Stock, to
receive all the remaining assets of the corporation, tangible and
intangible, of whatever kind available for distribution to stockholders,
ratably in proportion to the number of shares held by such holder.
(6) Except as may otherwise be required by law or this Certificate of
Incorporation, each holder of the Class A Common Stock shall have one vote
in respect of each share of the Class A Common Stock held by such holder on
each matter in respect of which the holders of the Common Stock are
entitled to vote, and the holders of the Class A Common Stock shall vote
together with the holders of the Common Stock as a single class; provided,
however, that the holders of the Class A Common Stock shall not be entitled
to vote in the election of directors except as provided in subparagraph (7)
of this paragraph (a).
(7) (i) Subject to clause (ii) of this subparagraph (7), the holders
of the Class A Common Stock shall have the right, voting separately as a
class, at each meeting of the stockholders held for the purpose of electing
directors to elect that number of directors of the corporation, which
number, together with the number of Class A Directors in each of the other
two classes of directors (the directors in all three classes are
hereinafter referred to as the "Class A Directors"), shall equal the
product (rounded to the nearest whole number if such product is not a whole
number) of (x) the Class A Multiplier (as defined below) and (y) the total
number of directors constituting the authorized number of directors;
provided that in no event shall the number of directors entitled to be
elected by holders of Class A Common Stock constitute a majority of the
total number of directors constituting the authorized number of directors;
provided, further that no person who is not an officer of Banque Nationale
de Paris or any of its Affiliates shall be a nominee for a Class A
directorship unless such person shall be reasonably satisfactory to the
Board of Directors as evidenced by a resolution duly adopted by a majority
of the directors constituting the authorized number of directors prior to
the time such person is nominated for a Class A directorship. The holders
of shares of Common Stock shall not be entitled to vote with respect to the
election of the Class A Directors. The directors of the corporation other
than the Class A Directors shall be elected by the holders of the class or
classes or series of stock entitled to vote therefor, but excluding the
Class A Common Stock.
The "Class A Multiplier" shall be equal to:
.45, if the Class A Interest (as defined below) is greater than or
equal to 40% and less than or equal to 45%;
.35, if the Class A Interest is greater than or equal to 35% and
less than 40%;
.30, if the Class A Interest is greater than or equal to 30% and
less than 35%;
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.25, if the Class A Interest is greater than or equal to 25% and
less than 30%;
.20, if the Class A Interest is greater than or equal to 20% and
less than 25%;
.15, if the Class A Interest is greater than or equal to 15% and
less than 20%; and
.10, if the Class A Interest is greater than or equal to 10% and
less than 15%.
(ii) At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of at least a majority in
voting power of the then outstanding shares of Class A Common Stock shall
be required and be sufficient to constitute a quorum of such class for the
election of Class A Directors by such class. At any such meeting or
adjournment thereof (A) the absence of a quorum of the holders of Class A
Common Stock shall not prevent the election of directors other than Class A
Directors and the absence of a quorum or quorums of the holders of capital
stock entitled to elect such other directors shall not prevent the election
of Class A Directors and (B) in the absence of a quorum of the holders of
shares of Class A Common Stock a majority of such holders present in person
or by proxy shall have the power to adjourn the meeting for the election of
Class A Directors, from time to time, without notice (except as required by
law) other than an announcement at the meeting, until a quorum shall be
present.
(iii) Except as provided in this clause (iii), each Class A Director
shall serve for a three year term (except that the initial Class A
Directors shall serve for the remainder of the term of the class to which
they are assigned) and until such director's successor has been elected and
qualified, subject to such director's earlier death, resignation, removal
or retirement. Notwithstanding the foregoing, upon the conversion of all
outstanding shares of Class A Common Stock pursuant to clause (ii) of
subparagraph (9), the term of office of all Class A Directors then in
office shall thereupon terminate, the vacancy or vacancies resulting from
such termination shall be filled by the remaining directors then in office
acting by majority vote of such remaining directors, and the director or
directors so elected to fill such vacancy or vacancies shall not be treated
hereunder or under the by-laws of the corporation as Class A Directors. In
addition, notwithstanding the foregoing, if at any time the number of
directors that the holders of the Class A Common Stock have the right to
elect pursuant to clause (i) of this subparagraph (7) shall decrease other
than as set forth in the preceding sentence (whether upon the conversion of
shares of Class A Common Stock pursuant to clauses (i) or (viii) of
subparagraph (9) of this paragraph (a), upon the decrease in the number of
directors constituting the authorized number of directors or otherwise),
then the term of office of a number of Class A Directors then in office
equal to such decrease shall terminate effective at the close of business
on the fifteenth day following the event that resulted in such decrease
(the "Termination Date"); provided that if, prior to the Termination Date,
the holders of the Class A Common Stock shall not have removed or caused to
resign, in either case effective as of the Termination Date, a number of
Class A Directors equal to such decrease, then the terms of office of all
Class A Directors then in office shall terminate on the Termination Date.
The vacancy or vacancies resulting from the termination provided for in the
preceding sentence shall be filled as follows: (A) the vacancy or vacancies
equal to the number of directors that the holders of the Class A Common
Stock then have the right to elect pursuant to clause (i) of this
subparagraph (7) (after giving effect to the decrease referred to in the
preceding sentence) shall be filled as provided in clause (iv) of this
subparagraph (7), and the director or directors so elected to fill such
vacancy or vacancies shall be treated hereunder and under the by-laws of
the corporation as Class A Directors; provided that no person who is not an
officer of Banque Nationale de Paris or any of its Affiliates shall fill
any such vacancy unless such person shall be reasonably satisfactory to the
Board of Directors as evidenced by a resolution duly adopted by a majority
of the directors then in office prior to the time such person is nominated
to fill any such vacancy and (B) the remaining vacancy or vacancies shall
be filled by the remaining directors then in office acting by majority vote
of such remaining directors, and the director or directors so elected to
fill such vacancy or vacancies shall not be treated hereunder or under the
by-laws as Class A Directors.
(iv) Subject to clause (iii) of this subparagraph (7), in case of any
vacancy occurring among the Class A Directors, the remaining Class A
Director or Directors may appoint a successor by a majority vote of the
remaining Class A Directors to hold office for the unexpired term of the
Class A Director
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whose place shall be vacant; provided that no person who is not an officer
of Banque Nationale de Paris or any of its Affiliates shall fill any such
vacancy unless such person shall be reasonably satisfactory to the Board of
Directors as evidenced by a resolution duly adopted by a majority of the
directors constituting the authorized number of directors prior to the time
such person is nominated to fill any such vacancy. If at any time the
offices of all Class A Directors shall be vacant, then, subject to clause
(iii) of this subparagraph (7), the holders of Class A Common Stock then
outstanding voting separately as a class may elect successors to hold
office for the unexpired terms of the Class A Directors whose places shall
be vacant.
(v) The Class A Directors shall be apportioned by a majority vote of a
committee comprised of the Class A Directors among any classes of directors
established pursuant to paragraph (b) of Article Sixth (as such provision
hereafter may be amended or relettered or renumbered) so as to maintain the
number of Class A Directors in each class as nearly equal as practicable.
(8) Notwithstanding that a lesser or no vote of stockholders of the
corporation may be required by law, and in addition to any other vote of
stockholders of the corporation required by law, this Certificate of
Incorporation or the by-laws of the corporation, until the conversion of
all outstanding shares of Class A Common Stock pursuant to clause (ii) of
subparagraph (9), the corporation shall not take, and the corporation shall
not, directly or indirectly, engage in, any of the following actions
without the written consent or affirmative vote of the holders of a
majority of the shares of Common Stock and Class A Common Stock at the time
outstanding, voting together as a class (except in respect of any actions
described in clauses (i), (ii), (iii) or (ix), in which case the holders of
the Class A Common Stock shall not vote with the holders of the shares of
Common Stock but shall instead only vote separately as a class); provided
that if any such action has been approved by the affirmative vote of
two-thirds of the authorized number of directors of the corporation, only
such vote, if any, of the stockholders of the corporation as is required
under applicable law or otherwise under this Certificate of Incorporation
or the by-laws of the corporation shall be required:
(i) The amendment of this Certificate of Incorporation or the
by-laws of the corporation so as to materially and adversely affect the
rights of the holders of Class A Common Stock;
(ii) (A) The issuance of any series or class of capital stock
having either (x) more than one vote per share or (y) a class vote on
any matter, except to the extent such class vote is required by Delaware
law or to the extent that holders of any series of Preferred Stock may
have the right, voting separately as a class, to elect a number of
directors of the corporation upon the occurrence of a default in payment
of dividends or redemption price or (B) the adoption of any stockholder
rights plan;
(iii) The issuance of any series of Preferred Stock which at the
time of such issuance would not constitute "non-voting shares" as
defined in 12 C.F.R. ss. 225.2(q)(2) or any successor provision;
(iv) The issuance of Voting Securities (as defined in clause (xv)
of subparagraph (10) of this paragraph (a)) to any person or entity
(including the subsidiaries of the corporation and, for this purpose,
irrespective of whether such subsidiaries are entitled to vote such
securities) representing voting power in excess of (i) 20% of the
aggregate voting power of the outstanding Voting Securities as of the
date of such issuance or (ii) 35% of the aggregate voting power of the
average number of Voting Securities outstanding over the previous twelve
months (calculated for this purpose based on the number of Voting
Securities issued and outstanding on the last day of each of the twelve
calendar months immediately preceding the month in which such issuance
occurs); provided that for purposes of this clause (iv), (A) the
issuance of options, warrants or other securities exercisable for or
convertible into Voting Securities (other than pursuant to dividends or
other distributions paid or distributed ratably to all stockholders of
the corporation) shall be deemed to be the issuance of Voting Securities
for or into which such securities are exercisable or convertible and if
the corporation enters into an agreement to issue Voting Securities such
Voting Securities shall be deemed to be issued on the date that the
corporation executes an agreement to issue such Voting
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Securities and (B) such percentages shall be calculated on a pro forma
basis after giving effect to the issuance or issuances in question;
(v) Any merger, consolidation or other business combination in
which the corporation is a constituent company if the corporation is not
the surviving or resulting entity in such transaction (or if the
corporation is the surviving or resulting entity and such transaction
results in a Change of Control (as defined in clause (iii) of
subparagraph (10) of this paragraph (a)) of the corporation), or the
sale, exchange, lease or mortgage of all or substantially all of the
corporation's assets in one transaction or a series of related
transactions;
(vi) Any acquisition, directly or indirectly, by the corporation or
any of its subsidiaries (except from the corporation or a subsidiary of
the corporation) of any assets or businesses, in one transaction or a
series of related transactions in any twelve-month period (whether by
merger, tender or exchange offer, asset purchase or otherwise), in which
the consideration paid by the corporation (i) if in shares of Common
Stock, will exceed 20% of the aggregate voting power of the outstanding
Voting Securities as of the date that the corporation or any such
subsidiary enters into a definitive agreement to effect such transaction
or, in the case of a series of related transactions, as of the date that
the corporation or any such subsidiary enters into a definitive
agreement to effect the last of such related transactions, or (ii) if in
cash, property or other securities of the corporation, has a Fair Market
Value (as defined in clause (vi) of subparagraph (10) of this paragraph
(a)) at the time of the execution by the corporation or such subsidiary
of a definitive agreement to effect such transaction or, in the case of
a series of related transactions, at the time of the execution by the
corporation or such subsidiary of a definitive agreement to effect the
last of such related transactions, which will exceed one-fourth of the
Market Capitalization (as defined in clause (viii) of subparagraph (10)
of this paragraph (a)) of the corporation at such time;
(vii) Any disposition, directly or indirectly, by the corporation
or any of its subsidiaries (except to the corporation or a subsidiary of
the corporation) of any assets or businesses, in one transaction or a
series of related transactions in any twelve-month period (whether by
merger, tender or exchange offer, asset purchase or otherwise) in which
the book value of the assets disposed of (as shown on the most recently
available financial statements of the corporation) exceed one-sixth of
the Total Consolidated Assets (as defined in clause (xiii) of
subparagraph (10) of this paragraph (a)) of the corporation at the time
of the execution by the corporation or such subsidiary of a definitive
agreement to effect such disposition or, in the case of a series of
related transactions, at the time of the execution by the corporation or
such subsidiary of a definitive agreement to effect the last of such
dispositions;
(viii) The voluntary liquidation or dissolution of the corporation;
or
(ix) Any merger, consolidation, recapitalization, reorganization,
sale, acquisition, other business combination or other transaction to
which the corporation is a party involving the issuance of Voting
Securities of the corporation that does not result in a Change of
Control of the corporation if, as a result of such transaction, any
person (other than a holder of shares of Class A Common Stock) would
become the Beneficial Owner of 25% or more of the total voting power of
all Voting Securities of the corporation outstanding after such
transaction or any three persons (other than holders of shares of Class
A Common Stock) would become the Beneficial Owners of 45% or more of the
total voting power of all Voting Securities of the corporation
outstanding after such transaction.
(9)(i) If any issued and outstanding shares of Class A Common Stock
are Transferred (as defined in clause (xiv) of subparagraph (10) of this
paragraph (a)) to any person other than (A) an Affiliate (as defined in
clause (i) of subparagraph (10) of this paragraph (a)) of the transferring
holder, (B) a Qualified Transferee (as defined in clause (xi) of
subparagraph (10) of this paragraph (a)) or (C) a Qualified Pledgee (as
defined in clause (x) of subparagraph (10) of this paragraph (a)), each
share of Class A Common Stock so Transferred shall be automatically
converted, without any action on the part of the corporation or any action
on the part of the transferring holder or transferee, into one fully paid
and nonassessable share of the Common Stock on the date of such Transfer.
Notwithstanding the foregoing,
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shares of Class A Common Stock Transferred to a Qualified Pledgee shall be
automatically converted, without any action on the part of the corporation
or any action on the part of the pledgor or pledgee, into one fully paid
and nonassessable share of the Common Stock at such time as the holder of
the shares of Class A Common Stock who entered into such pledge no longer
has the sole power to vote or direct the voting of such shares of Class A
Common Stock.
(ii) Upon the occurrence of a Conversion Event (as defined in clause
(v) of subparagraph (10) of this paragraph (a)), without any action on the
part of the corporation or the holders of shares of Class A Common Stock,
each share of Class A Common Stock issued and outstanding immediately prior
to the Conversion Event shall automatically be converted into one fully
paid and nonassessable share of Common Stock. Upon the occurrence of a
Conversion Event, prompt written notice thereof and of the resulting
conversion of the Class A Common Stock shall be given by first class mail,
postage prepaid, to each person who immediately prior to the Conversion
Event was a holder of record of shares of Class A Common Stock, at such
person's address as the same appears on the stock register of the
corporation; provided, however, that no failure to give such notice nor any
defect therein shall affect the effectiveness of the conversion of any
shares of Class A Common Stock. Each such notice shall include a statement
setting forth the place or places where certificates formerly representing
shares of Class A Common Stock are to be surrendered in accordance with
clause (iv) of this subparagraph (9).
(iii) Conversion pursuant to clauses (i) or (ii) of this subparagraph
(9) shall be deemed to have been effected at the time of the Transfer or
the Conversion Event, as the case may be, that resulted in such conversion
(the "Conversion Time"). Immediately upon such conversion, the rights of
the holders of shares of Class A Common Stock so converted as such shall
cease and such holders shall be treated for all purposes as having become
the record owners of the shares of Common Stock issuable upon such
conversion; provided, however, that such persons shall be entitled to
receive when paid any dividends declared on the Class A Common Stock as of
a record date preceding the Conversion Time and unpaid as of the Conversion
Time.
(iv) As promptly as practicable after the Conversion Time, upon the
delivery to the corporation of the certificates formerly representing
shares of Class A Common Stock, the corporation shall deliver or cause to
be delivered, to or upon the written order of the record holder of the
surrendered certificates formerly representing shares of Class A Common
Stock, a certificate or certificates representing the number of fully paid
and nonassessable shares of Common Stock into which the shares of Class A
Common Stock formerly represented by such certificates have been converted
in accordance with the provisions of this subparagraph (9).
(v) The corporation will pay any and all documentary, stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on the conversion of shares of Class A Common Stock
pursuant to this subparagraph (9); provided, however, that the corporation
shall not be required to pay any tax which may be payable in respect of any
registration of transfer involved in the issue or delivery of shares of
Common Stock in a name other than that of the registered holder of Class A
Common Stock converted or to be converted, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid to
the corporation the amount of any such tax or has established, to the
satisfaction of the corporation, that such tax has been paid.
(vi) The corporation shall at all times reserve and keep available,
out of the aggregate of its authorized but unissued Common Stock and its
issued Common Stock held in its treasury, for the purpose of effecting the
conversion of the Class A Common Stock, the full number of shares of Common
Stock then deliverable upon the conversion of all outstanding shares of the
Class A Common Stock.
(vii) Shares of the Class A Common Stock may not be issued by the
corporation other than pursuant to, or in accordance with, the terms of
this Certificate of Incorporation, the Agreement and Plan of Merger, dated
as of May 28, 1998, between the corporation and BancWest Corporation, a
California corporation, and the Standstill and Governance Agreement (as
defined in clause (xii) of subparagraph (10) of this paragraph (a)).
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(viii) Shares of Class A Common Stock may, at the option of the holder
thereof, be irrevocably converted into shares of Common Stock at any time
following the commencement of a bona fide tender or exchange offer or the
making of a bona fide Business Combination Proposal (within the meaning of
the definition thereof set forth in the Standstill and Governance
Agreement), in either case by Banque Nationale de Paris following the
occurrence of an Acquisition Restrictions Termination Event (within the
meaning of the definition thereof set forth in the Standstill and
Governance Agreement) by delivery and surrender to the corporation of the
certificates representing the shares of Class A Common Stock. Conversion
pursuant to this clause (viii) of this subparagraph (9) shall be deemed to
have been effected at the time of such surrender. Upon surrender, the
corporation shall deliver or cause to be delivered, to or upon the written
order of the record holder of the surrendered certificates, a certificate
or certificates representing the number of fully paid and nonassessable
shares of Common Stock into which the shares of Class A Common Stock
represented by such certificates have been converted in accordance with the
provisions of this subparagraph (9).
(10) For purposes of this Article Fourth and of Article Sixth of this
Certificate of Incorporation:
(i) "Affiliate" means, with respect to any person, any other person
that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, such
specified person.
(ii) "Beneficial Ownership" by a holder of any securities includes
ownership by any holder who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or
shares (i) voting power which includes the power to vote, or to direct
the voting of, such security; and/or (ii) investment power which
includes the power to dispose, or to direct the disposition of, such
security; and shall otherwise be interpreted in accordance with the term
"beneficial ownership" as defined in Rule 13d-3 adopted by the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended (or any successor provision) (the "Exchange Act");
provided that for purposes of determining Beneficial Ownership, a holder
shall be deemed to be the Beneficial Owner of any securities which may
be acquired by such holder (irrespective of whether the right to acquire
such securities is exercisable immediately or only after the passage of
time, including the passage of time in excess of 60 days, the
satisfaction of any conditions, the occurrence of any event or any
combination of the foregoing) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise. A holder shall be deemed to
Beneficially Own any securities Beneficially Owned by its Affiliates or
any group (as defined in Section 13(d)(3) of the Exchange Act) of which
such holder of any of its Affiliates is or becomes a member.
(iii) "Change of Control" means a merger or consolidation of the
corporation with or into another person or the merger or consolidation
of another person into the corporation, as a result of which transaction
or series of related transactions (A) any person becomes the Beneficial
Owner of more than 50% of the total voting power of all Voting
Securities of the corporation (or, if the corporation is not the
surviving or transferee corporation of such transaction or transactions,
of such surviving or transferee corporation) outstanding immediately
after such transaction or transactions, or (B) the aggregate shares of
Class A Common Stock and Common Stock outstanding immediately prior to
such transaction or transactions do not represent a majority of the
voting power of all Voting Securities of the corporation (or such
surviving or transferee corporation, if not the corporation) outstanding
immediately after such transaction or transactions.
(iv) "Class A Interest" means, at any time, the ratio, expressed as
a percentage, of (i) the total number of outstanding shares of Class A
Common Stock Beneficially Owned by the holders of the Class A Common
Stock to (ii) the sum of (x) the total number of outstanding shares of
Common Stock and Class A Common Stock and (y) any shares of Common Stock
or Class A Common Stock that are issuable upon conversion, exchange or
exercise of any securities included in clause (i); provided that clause
(i) of this definition of the term "Class A Interest" shall not include
any shares of Class A Common Stock that are Beneficially Owned in excess
of the Permitted Ownership
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Percentage (as defined in the Standstill and Governance Agreement) in
effect at any time pursuant to the terms of the Standstill and
Governance Agreement (including, without limitation, any shares of Class
A Common Stock required to be disposed of in accordance with Sections
2.1(f), 2.1(g) or 2.1(h) of the Standstill and Governance Agreement) and
clause (ii)(x) of this definition of the term "Class A Interest" shall
not include any shares of Common Stock or Class A Common Stock held in
the corporation's treasury or belonging to any subsidiaries of the
corporation which are not entitled to be voted or counted for purposes
of determining the presence of a quorum pursuant to the requirements of
applicable law.
(v) "Conversion Event" means the Class A Interest becoming less
than 10%.
(vi) "Fair Market Value" means, as to any securities or other
property, the cash price at which a willing seller would sell and a
willing buyer would buy such securities or property in an arm's-length
negotiated transaction without time constraints. For purposes of this
Certificate of Incorporation, Fair Market Value shall be determined in
good faith by the affirmative vote of two-thirds of the directors
constituting the authorized number of directors, except that if such
vote is not obtained, the Fair Market Value shall be determined by an
investment banking firm selected by vote of a majority of the directors
constituting the authorized number of directors.
(vii) "Independent Director" means any Non-Class A Director;
provided that such Non-Class A Director is not an Affiliate or past or
present officer, director or employee of, and was not nominated by, any
holder of shares of Class A Common Stock or any of its Affiliates and is
not associated with an entity that performs substantial services for any
of the foregoing.
(viii) "Market Capitalization" means the product of (i) the average
of the daily closing prices for the Common Stock on the Nasdaq National
Market (or the principal exchange or market on which the Common Stock
may be listed or may trade) for the 20 consecutive trading days
commencing on the 22nd trading day prior to the date of determination
and (ii) the aggregate number of issued and outstanding shares of Common
Stock and Class A Common Stock at the time of execution of the
definitive agreement giving rise to the need for such calculation or, in
the case of a series of related transactions, at the time of the
execution of the last of such related definitive agreements giving rise
to the need for such calculation.
(ix) "Non-Class A Director" means any director other than a Class A
Director.
(x) "Qualified Pledgee" has the meaning set forth in the Standstill
and Governance Agreement.
(xi) "Qualified Transferee" has the meaning set forth in the
Standstill and Governance Agreement.
(xii) "Standstill and Governance Agreement" means the Standstill
and Governance Agreement, dated as of , 1998, between the
corporation and Banque Nationale de Paris, a societe anonyme or limited
liability banking corporation organized under the laws of the Republic
of France, as such agreement may be amended, supplemented or modified
from time to time.
(xiii) "Total Consolidated Assets" means the amount shown under the
heading "Total Assets" on the balance sheet of the corporation included
in its most recently published annual report on Form 10-K or quarterly
report on Form 10-Q filed with the Securities and Exchange Commission
(or any successor reports thereto).
(xiv) "Transferred" means the occurrence of any act pursuant to
which, directly or indirectly, including by operation of law or
otherwise, the Beneficial Ownership of shares of Class A Common Stock
shall have been sold, transferred, assigned, pledged, encumbered,
hypothecated or otherwise disposed.
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(xv) "Voting Securities" means at any time shares of any class of
capital stock or other securities of the corporation which are then
entitled to vote generally in the election of directors and not solely
upon the occurrence and during the continuation of certain specified
events.
(b) The Common Stock.
(1) After the requirements, if any, with respect to preferential
dividends on the Preferred Stock shall have been met and after the
corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts in respect of the Preferred Stock, and subject to the
right of the holders of Class A Common Stock to participate therein to the
extent provided in subparagraphs (1) and (3) of paragraph (a) of this
Article Fourth, then, but not otherwise, the holders of shares of Common
Stock shall be entitled to receive such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available for such purpose.
(2) In the event that the corporation shall at any time declare and
pay any dividend on the Class A Common Stock payable in shares of Class A
Common Stock or in options, warrants or other securities exercisable for or
convertible into shares of Class A Common Stock or effect a subdivision,
combination or consolidation of the outstanding shares of Class A Common
Stock (by reclassification or otherwise than by payment of a dividend in
shares of Class A Common Stock or in options, warrants or other securities
exercisable for or convertible into shares of Class A Common Stock) into a
greater or lesser number of shares of Class A Common Stock, then in each
such case the corporation shall, as the case may be, declare and pay an
equivalent dividend per share on the Common Stock payable in shares of
Common Stock or in options, warrants or other securities exercisable for or
convertible into shares of Common Stock or effect an equivalent
subdivision, combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock or in options, warrants or other
securities exercisable for or convertible into shares of Common Stock) into
a greater or lesser number of shares of Common Stock.
(3) After distribution in full of the preferential amount, if any, to
be distributed to the holders of the Preferred Stock, in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the
corporation, the holders of Common Stock shall be entitled, together with
the holders of the Class A Common Stock, to receive all the remaining
assets of the corporation, tangible and intangible, of whatever kind
available for distribution to stockholders, ratably in proportion to the
number of shares held by such holder.
(4) Except as set forth in subparagraphs (1) through (3) of this
paragraph (b), holders of shares of Common Stock shall not be entitled to
receive, and the corporation shall not declare or pay, any dividend or
distribution (whether in cash, property or securities) on the Common Stock.
Subject to the requirements of applicable law and this Certificate of
Incorporation, no dividend shall be payable on the shares of Class A Common
Stock unless an equivalent per share dividend is payable on the Common
Stock on the same date fixed for payment of the corresponding dividend on
the Class A Common Stock (other than a dividend payable in shares of Class
A Common Stock, or in options, warrants or other securities exercisable for
or convertible into shares of Class A Common Stock).
(5) Except as may otherwise be required by law or this Certificate of
Incorporation, each holder of the Common Stock shall have one vote in
respect of each share of the Common Stock held by such holder on each
matter voted upon by the stockholders; provided, however, that the holders
of the Common Stock shall not be entitled to vote in the election of
directors except as provided in subparagraph (6) of this paragraph (b).
(6) At each meeting of the stockholders held for the purpose of
electing directors, the holders of Common Stock shall have the right to
elect that number of directors equal to the excess of (i) the total number
of directors then constituting the authorized number of directors over (ii)
the sum of (x) the number of directors the holders of the shares of Class A
Common Stock are entitled to elect, (y) the number of directors elected by
the stockholders of the corporation (other than the holders of shares of
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Class A Common Stock or Preferred Stock) in each of the other two classes
and (z) the number of directors, if any, that the holders of the Preferred
Stock, voting separately by class or series, are entitled to elect. The
holders of shares of Class A Common Stock shall not be entitled to vote for
directors described under this subparagraph (6) of paragraph (b).
(c) The Preferred Stock. Subject to any other provision of this
Certificate of Incorporation, the Board of Directors is hereby expressly
authorized, by resolution or resolutions, to provide, out of the unissued shares
of Preferred Stock, for series of Preferred Stock and, with respect to each such
series, to fix the number of shares constituting such series and the designation
of such series, the voting powers (if any) of the shares of such series, and the
preferences and relative, participating, optional or other special rights, if
any, and any qualifications, limitations or restrictions thereof, of the shares
of such series. The powers, preferences and relative, participating, optional
and other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
Fifth. The name and mailing addresses of each incorporator is as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
- ---- -------
<S> <C>
John D. Bellinger.................................... 165 South King Street
Honolulu, Hawaii 96813
Hugh R. Pingree...................................... 165 South King Street
Honolulu, Hawaii 96813
G. Harry Hutaff...................................... 165 South King Street
Honolulu, Hawaii 96813
</TABLE>
Sixth. (a) The powers of the incorporators shall terminate upon the filing
of the Certificate of Incorporation. The names and mailing addresses of the
persons who are to serve as directors of the corporation until the first annual
meeting of shareholders or until their successors are elected and qualified are
as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
- ---- -------
<S> <C>
John D. Bellinger.................................... 165 South King Street
Honolulu, Hawaii 96813
Hugh R. Pingree...................................... 165 South King Street
Honolulu, Hawaii 96813
G. Harry Hutaff...................................... 165 South King Street
Honolulu, Hawaii 96813
</TABLE>
(b) Number and Identity.
(1) There shall be a Board of Directors of the corporation consisting
of not less than seven (7) nor more than twenty-five (25) members. Subject
to the foregoing limitation, the number of directors shall be fixed from
time to time solely by the Board of Directors, by the affirmative vote of
two-thirds of the directors constituting the authorized number of
directors.
(2) The directors shall be divided into classes, each class to consist
as nearly as practicable of one-third of the number of directors then
constituting the authorized number of directors. At each annual meeting,
the directors elected shall be elected for a full term of three years,
subject to clause (iii) of subparagraph (7) of paragraph (a) of Article
Fourth hereof, to succeed those whose terms expire. Notwithstanding the
foregoing, each director shall serve until his successor (if any) is duly
elected and qualified, or until his resignation, removal, or death. The
members of the Board of Directors shall be elected or appointed at such
times, in such manner, and for such terms as specified below or as may be
prescribed by this Certificate of Incorporation and the by-laws. This
subparagraph (2) of paragraph (b) may not be amended or repealed except
with the affirmative vote of the holders of three-fourths of the shares of
Common Stock and Class A Common Stock at the time outstanding, voting
together as a class.
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(3) Notwithstanding the second sentence of subparagraph (1) of this
paragraph (b) of Article Sixth, if at any time the holders of shares of
Class A Common Stock are entitled to elect a number of directors pursuant
to subparagraph (7) of paragraph (a) of Article Fourth that exceeds the sum
of the number of directors elected by the holders of shares of Class A
Common Stock then serving on the Board of Directors and the number of
vacancies on the Board of Directors which the directors elected by the
holders of shares of Class A Common Stock or the holders of shares of Class
A Common Stock are entitled to fill, the total number of directors shall
automatically and without further action be increased by the smallest
number necessary to permit the election of such number of Class A Directors
that the holders of shares of Class A Common Stock are entitled to elect
pursuant to subparagraph (7) of paragraph (a) of Article Fourth.
(4) All of the powers of the corporation, exercisable by authority of
law or under this Certificate of Incorporation, or otherwise, shall be
vested in and exercised by, or by the authority of, the Board of Directors,
except as limited by law, this Certificate of Incorporation or the by-laws
of the corporation. The Board of Directors may, by resolution or otherwise,
create, or the by-laws may provide for, such committees of the Board of
Directors as the Board shall see fit or the by-laws shall provide for, and
such committees shall have and may exercise any and all such powers,
subject to applicable law, as the Board of Directors, by resolution, or the
by-laws, may provide.
(c) Nominations. Each nominee for a directorship of the corporation, other
than a directorship to be filled with a Class A Director, nominated by the Board
of Directors of the corporation shall be nominated by a majority vote of a
committee comprised of all the Non-Class A Directors then in office.
(d) Vacancies.
(1) In case any Independent Director shall cease to serve as a
director for any reason, the vacancy resulting therefrom shall only be
filled by a majority vote of a committee comprised of the remaining
Independent Directors then in office or, if no Independent Directors shall
remain in office, then by a majority vote of the Non-Class A Directors then
in office, or if no Non-Class A Directors shall then be remaining in
office, then the holders of the shares of Common Stock may, at a special
meeting of such holders called in accordance with the by-laws of the
corporation, elect successors to hold office for the unexpired terms of the
Independent Directors whose places shall be vacant.
(2) In case any Non-Class A Director (other than an Independent
Director) shall cease to serve as a director for any reason, the vacancy
resulting therefrom shall only be filled by a majority vote of the
remaining Non-Class A Directors (whether or not they constitute Independent
Directors) then in office, or if no Non-Class A Directors shall then be
remaining in office, then the holders of the shares of Common Stock may, at
a special meeting of such holders called in accordance with the by-laws of
the corporation, elect successors to hold office for the unexpired terms of
the Non-Class A Directors whose places shall be vacant.
(3) Subject to clauses (iii) and (iv) of subparagraph (7) of paragraph
(a) of Article Fourth, in case any Class A Director shall cease to serve as
a director for any reason, the vacancy resulting therefrom shall only be
filled by majority vote of the remaining Class A Directors, or if no such
Class A Directors shall then be remaining in office, then the holders of
the shares of Class A Common Stock, voting separately as a class may, at a
special meeting of such holders called in accordance with the by-laws of
the corporation, elect successors to hold office for the unexpired terms of
the Class A Directors whose places shall be vacant.
(4) In case there is any unfilled newly created directorship that the
holders of the shares of Class A Common Stock are not entitled to fill, the
vacancy created thereby shall be filled by a majority vote of a committee
of the Board of Directors comprised of the Independent Directors then in
office.
(e) Quorum. In addition to the requirements under applicable law and the
by-laws of the corporation, a quorum for transaction of business at any meeting
of the directors shall require the presence of at least a majority of the
Non-Class A Directors.
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Seventh. (a) The officers of the corporation shall be a President, one or
more Vice Presidents (one or more of whom may be designated an Executive Vice
President and one or more of whom may be designated a Senior Vice President), a
Treasurer, a Secretary, a Chief Executive Officer, a Chief Operating Officer and
such other officers as may be authorized pursuant to the authority conferred by
the by-laws, all of whom shall be appointed by or by the authority of the Board
of Directors or the Executive Committee and serve at the pleasure of the Board
of Directors or the Executive Committee in accordance with and subject to the
provisions of the by-laws. There may be a Chairman of the Board of Directors who
shall be appointed by the Board of Directors from its own members and who shall
have such powers as may be prescribed by the bylaws or, if and to the extent
that the bylaws shall not so prescribe, by the Board of Directors.
(b) In the event that, at any time when there are shares of Class A Common
Stock outstanding, a vacancy shall occur in the office of the Chief Executive
Officer or the Chief Operating Officer of the corporation through death,
resignation, removal in accordance with the by-laws or otherwise following the
date of initial issuance of the Class A Common Stock, a nominating committee
shall be formed consisting of two Class A Directors (selected by a majority of
the Class A Directors then in office) and two Non-Class A Directors (selected by
a majority of the Non-Class A Directors then in office). Such nominating
committee shall nominate an individual to fill such vacancy and shall submit the
nomination to the full board of directors. In the event that such nominating
committee cannot agree on a nomination, the members of the committee shall
jointly select a fifth director, who must be a Non-Class A Director, to resolve
the disagreement by a majority vote of such nominating committee.
Eighth. The corporation is to have perpetual existence.
Ninth. No holder of shares of capital stock of any class of the
corporation or holder of any security or obligation convertible into shares of
capital stock of any class of the corporation shall have any preemptive right to
subscribe for, purchase or otherwise acquire shares of capital stock of any
class of the corporation, whether now or hereafter authorized.
Tenth. Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in law) outside the State of Delaware at
such place or places as may be designated from time to time by the Board of
Directors or in the bylaws of the corporation.
Eleventh. Subject to the provisions of this Certificate of Incorporation,
the Board of Directors shall have the authority to make, alter or repeal the
by-laws of the corporation; provided that the Board of Directors may not alter
or repeal Sections 2.2, 2.3, 2.6, 2.7, 3.4(c), 4.1 and Article X (unless, in the
case of Article X, such alteration or repeal affects all directors equally and
on the same terms) except by the affirmative vote of two-thirds of the
authorized number of directors.
Twelfth. To the fullest extent permitted by the Delaware General
Corporation Law as it exists or may hereafter be amended, a director of the
corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of a fiduciary duty as a director.
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EXHIBIT B
FORM OF
AMENDED AND RESTATED
BY-LAWS
OF
BANCWEST CORPORATION
ARTICLE I
MEETINGS OF THE STOCKHOLDERS
SECTION 1.1 The regular annual meeting of the stockholders of this
Corporation shall be held at such place and at such time as shall be fixed by
the Board of Directors or by the Chairman of the Board of Directors.
SECTION 1.2 Special meetings of the stockholders of the Corporation or of
the holders of any one or more classes of the capital stock of the Corporation
entitled to vote as a class or classes with respect to any matter, as required
by law or as provided in the Certificate of Incorporation, shall be called by
the Secretary at the request of the Chairman of the Board of Directors or a
majority of the Board of Directors or of stockholders representing not less than
a majority in voting power of the shares of capital stock issued and outstanding
and entitled to vote at such meeting on such matter.
SECTION 1.3 Unless otherwise required by applicable law, notice of every
regular annual and every special meeting of the stockholders shall be given by
first-class mail, postage prepaid, mailed at least ten days (but not more than
sixty days) prior to the date of such meeting to each stockholder of record, as
defined in Section 7.3, entitled to vote at such meeting at his address as shown
upon the books of the Corporation.
SECTION 1.4 Nominations of persons for election to the Board of Directors
of the Corporation (other than persons to be elected as a "Class A Director" (as
defined in the Certificate of Incorporation of the Corporation)) at an annual
meeting of stockholders or at a special meeting of stockholders called for such
purposes may be made by or at the direction of the Board of Directors by a
majority vote of a committee of the Board of Directors comprised of all the
"Non-Class A Directors" (as defined in the Certificate of Incorporation of the
Corporation) or may be made at a meeting of stockholders by any holder of Common
Stock entitled to vote for the election of Directors (other than Class A
Directors) at the meeting, in compliance with the notice procedures set forth in
this Section 1.4. Such nominations, other than those made by or at the direction
of the Board of Directors by a majority vote of a committee of the Board of
Directors comprised of all the Non-Class A Directors, shall be made by a
stockholder of record pursuant to timely notice in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than seventy days nor more than ninety days prior to the first anniversary
of the preceding year's annual meeting; provided, however, that in the event
that the date of the annual meeting is advanced by more than twenty days, or
delayed by more than seventy days, from such anniversary date, notice by the
stockholder to be timely must be so delivered or mailed and received not earlier
than the ninetieth day prior to such annual meeting and not later than the close
of business on the later of the seventieth day prior to such annual meeting or
the tenth day following the day on which public announcement of the date of such
meeting is first made. Such stockholder's notice to the Secretary shall set
forth (i) as to each person whom such stockholder proposes to nominate for
election or re-election as a director, (a) the name, age, business address and
residence address of the person, (b) the principal occupation or employment of
the person, (c) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the person and (d) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, including such person's
written consent to being named in the proxy statement as a nominee and to serve
as a Director if elected; and (ii) as to the stockholder giving the notice (a)
the name and record address of the stockholder, (b) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
stockholder and (c) whether the
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stockholder intends or is part of a group which intends to solicit proxies from
other stockholders in support of such nomination. The Corporation may require
any proposed nominee to furnish such other information as may reasonably be
required by the Corporation to determine the eligibility of such proposed
nominee to serve as a Director of the Corporation. No person shall be eligible
for election as a Director of the Corporation (other than a Class A Director) at
a meeting of stockholders unless such person has been nominated in accordance
with the procedures set forth herein. If the facts warrant, the Chairman of the
meeting shall determine and declare to the meeting that a nomination does not
satisfy the requirements set forth in the preceding sentences and the defective
nomination shall be disregarded.
SECTION 1.5 At any annual meeting of stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified in the
notice of meeting (or any supplement thereto) given by, or at the direction of,
the Board of Directors, (ii) otherwise properly brought before the meeting by,
or at the direction of, the Chairman of the meeting, or (iii) otherwise properly
brought before the meeting by a stockholder entitled to vote at such meeting.
For business to be properly brought before a meeting (other than business with
respect to which only the holders of the Class A Common Stock are entitled to
vote) by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and must have been a stockholder of
record at the time such notice is given. To be timely, a stockholder's notice
shall be delivered to or mailed and received at the principal executive offices
of the Corporation not less than seventy days nor more than ninety days prior to
the first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more than
twenty days, or delayed by more than seventy days, from such anniversary date,
notice by the stockholder to be timely must be so delivered or mailed and
received not earlier than the ninetieth day prior to such annual meeting and not
later than the close of business on the later of the seventieth day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice to the Secretary shall set forth (i) as to each matter the stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, and (ii) as to the stockholder giving the notice (a)
the name and record address of the stockholder, (b) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
stockholder, (c) any material interest of the stockholder in such business and
(d) whether the stockholder intends or is part of a group which intends to
solicit proxies from other stockholders in support of such proposal. Except for
matters on which only holders of shares of Class A Common Stock are entitled to
vote, no business shall be conducted at an annual meeting of stockholders unless
proposed in accordance with the procedures set forth herein. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
foregoing procedure and such business shall not be transacted. To the extent
this Section 1.5 shall be deemed by the Board of Directors or the Securities and
Exchange Commission, or finally adjudged by a court of competent jurisdiction,
to be inconsistent with the right of stockholders to request inclusion of a
proposal in the Corporation's proxy statement pursuant to Rule 14a-8 promulgated
under the Securities Exchange Act of 1934, as amended, such rule shall prevail.
SECTION 1.6 At any meeting held for the purpose of electing Directors, (i)
the presence in person or by proxy of the holders of at least a majority in
voting power of the then outstanding shares of Class A Common Stock shall be
required and be sufficient to constitute a quorum of such class for the election
of Class A Directors by such class and (ii) the presence in person or by proxy
of the holders of at least a majority in voting power of the then outstanding
shares of capital stock of the Corporation entitled to vote thereon at such
meeting (other than the shares of Class A Common Stock) shall be required and be
sufficient to constitute a quorum for the election of Directors other than Class
A Directors. At any such meeting or adjournment thereof the absence of a quorum
of the holders of Class A Common Stock shall not prevent the election of
Directors other than Class A Directors, and the absence of a quorum of the
holders of voting shares other than Class A Common Stock shall not prevent the
election of Class A Directors. At any meeting held for any purpose other than
the election of Directors, the holders of outstanding shares of capital stock of
the Corporation representing a majority of the votes entitled to be cast on such
matter, present in person or by proxy, shall constitute a quorum. The holders of
a majority of the shares present in person or by proxy at any
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meeting may adjourn from time to time without notice (except as required by law)
other than by announcement at the meeting, until a quorum shall be present. In
addition, the Chairman of the Board may adjourn any such meeting from time to
time without notice (except as required by law) other than by announcement at
the meeting, whether or not a quorum shall be present. At all meetings of
stockholders every stockholder of record, as provided in Section 7.3, entitled
to vote shall be entitled to vote in person or by proxy appointed by instrument
in writing subscribed by such stockholder or his duly authorized attorney.
Except as otherwise provided in the Certificate of Incorporation, each
stockholder owning shares of stock in the Corporation, duly registered in his or
her name in the stock books of the Corporation, shall be entitled in all
stockholders' meetings to one vote for each share of stock so held, subject,
however, to the provisions of Section 7.3 of these By-laws with respect to the
determination of stockholders entitled to vote. At all meetings of stockholders
for the election of Directors a plurality of the votes cast shall be sufficient
to elect. All other elections and questions shall, unless otherwise provided by
the Certificate of Incorporation, these By-laws, the rules and regulations of
any stock exchange applicable to the Corporation, as otherwise provided by law
or pursuant to any regulation applicable to the Corporation or its securities,
be decided by the affirmative vote of the holders of a majority in voting power
of the shares of stock of the Corporation which are present in person or by
proxy and entitled to vote thereon.
SECTION 1.7 Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting pursuant to Section 1.3 of these By-laws and
called in accordance with Section 1.2 of these By-laws.
SECTION 1.8 The date and time of the opening and the closing of the polls
for each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting by the person presiding over the meeting. The Board of
Directors may adopt by resolution such rules and regulations for the conduct of
the meeting of stockholders as it shall deem appropriate. Except to the extent
inconsistent with such rules and regulations as adopted by the Board of
Directors, the Chairman of any meeting of stockholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such Chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the Chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining
order at the meeting and the safety of those present; (iii) limitations on
attendance at or participation in the meeting to stockholders of record of the
Corporation, their duly authorized and constituted proxies or such other persons
as the Chairman of the meeting shall determine; (iv) restrictions on entry to
the meeting after the time fixed for the commencement thereof; and (v)
limitations on the time allotted to questions or comments by participants.
Unless and to the extent determined by the Board of Directors or the Chairman of
the meeting, meetings of stockholders shall not be required to be held in
accordance with the rules of parliamentary procedure.
ARTICLE II
DIRECTORS
SECTION 2.1* The management of all the affairs, business and property of
the Corporation shall be vested in the Board of Directors, consisting of not
less than seven nor more than twenty-five persons. The Directors are hereby
divided into classes, each class to consist of one-third of the number of
Directors then constituting the Board of Directors. The term of office of those
of the first class shall expire at the annual meeting next following the first
election held after the adoption of this By-law; the term of office of those of
the second class shall expire one year thereafter; and the term of office of
those of the third class shall expire two years thereafter. At each annual
meeting following the annual meeting at which this By-law shall be adopted, the
Directors elected shall be elected for a full term of three years, subject to
clause (iii) of subparagraph (7) of paragraph (a) of Article Fourth of the
Certificate of Incorporation, to succeed those
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* Section (other than the sixth sentence) shall be superseded by the Certificate
of Incorporation immediately after the Effective Time.
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whose terms expire. Notwithstanding the foregoing, each Director shall serve
until his successor is duly elected and qualified, or until his resignation,
removal, or death. It shall be the duty of the Board of Directors to cause a
complete record to be kept of all of its meetings and acts, and to present a
full statement at the annual meeting of the stockholders, showing in detail the
assets and liabilities of the Corporation and the general condition of its
affairs. Except as otherwise provided in the Certificate of Incorporation, and
notwithstanding any other term or provision of these Bylaws, this Section 2.1
may be amended or repealed by the stockholders at any annual or special meeting
of the stockholders, but only by the affirmative vote of the holders of
three-fourths of the shares issued and outstanding and entitled to vote.
SECTION 2.2 A meeting of the Board of Directors shall be held following the
annual meeting of the stockholders at the place of such annual meeting and as
soon as practicable thereafter, and no notice thereof shall be necessary.
Regular meetings of the Board of Directors shall be held on such days and at
such hours as shall from time to time be fixed by standing resolution of the
Board of Directors, and the meeting following the annual meeting of the
stockholders shall constitute a regular meeting. In the event that the day fixed
for any regular meeting of the Board of Directors shall fall on a legal holiday,
then such regular meeting shall be held at the same hour upon such day as the
Board of Directors may previously designate by resolution, and if no such day be
designated, then said meeting shall be held on the next succeeding day that is
not a holiday. Special meetings of the Board of Directors shall be called by the
Secretary when requested by the Chairman of the Board of Directors or by the
Chief Executive Officer (or by the Chief Operating Officer in the absence of the
Chairman of the Board and the Chief Executive Officer). Notice of the time and
place of each meeting (other than regular meetings) and each special meeting of
the Board of Directors or any committee thereof shall be sent to each Director
or member of such committee, as the case may be, by the Secretary, by facsimile
transmission or by electronic mail (if previously requested by such Director, in
accordance with the instructions provided by such Director or, in the case of
the Class A Directors, if no such instructions have been provided, to such Class
A Director in care of Citrus Parent at its principal executive offices), with a
copy delivered by mail or by recognized courier service, at least five days
prior to the date fixed for such meeting unless such notice requirement is
waived by a majority of the Class A Directors and a majority of the Non-Class A
Directors (as defined in the Certificate of Incorporation) who in each such case
are members of the Board of Directors or such committee, in which case such
notice shall be sent by the foregoing means or telephonically at least
twenty-four hours prior to the date and time fixed for such meeting. Each
meeting of the Board of Directors shall be held at the principal office of the
Corporation unless the Board of Directors, by standing resolution or otherwise,
shall designate some other place where such meeting shall be held.
SECTION 2.3 A majority of the members of the Board of Directors, including
a majority of the Non-Class A Directors, shall be necessary to constitute a
quorum for the transaction of business at each meeting of the Board of
Directors. Except in cases in which the Certificate of Incorporation or these
By-laws (including without limitation Section 2.7 hereof) otherwise provide, the
vote of a majority of the Directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
SECTION 2.4 Except as provided herein or in the Certificate of
Incorporation, each Director shall serve until the election and qualification of
his successor.
SECTION 2.5 The Board of Directors shall have the general supervision and
control of all of the business and affairs of the Corporation. Without prejudice
to the generality of such power the Board of Directors shall have power:
A. To appoint its own Chairman and, subject to Section 3.4 and the
Certificate of Incorporation of the Corporation, all officers and remove
them at pleasure, fix the compensation of all officers, review and control
the compensation of all employees, and require from any officers or
employees such bonds or other security as the Board of Directors may deem
advisable for the faithful performance of their duties;
B. To fill vacancies in the directorate, except as otherwise provided
in the Certificate of Incorporation;
C. To call meetings of stockholders whenever it shall deem the same
necessary;
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D. To make rules and regulations not inconsistent with law, the
Certificate of Incorporation or these By-laws for the guidance and
government of the officers and the management of the Corporation's affairs;
E. To declare and fix the rate of dividends to be paid to
stockholders, subject to applicable law and the Certificate of
Incorporation;
F. To borrow money and incur such indebtedness as may seem advisable
and to authorize the execution of the Corporation's note therefor and make
pledges of securities in connection therewith;
G. To appoint agents to act for the Corporation and to confer upon
them such powers or authority as it may deem best and fix the compensation
of such agents by salary or otherwise in its discretion, but it shall
always retain the right to suspend or remove such agents and annul any
power or authority which may have been granted to them;
H. To designate the principal place of business of the Corporation at
such place as the Board of Directors may deem advisable, and to establish
such branch offices, divisions, departments, or subsidiary corporations and
to enter any partnership, joint venture, trust or other association the
Board of Directors may deem advisable; and
I. To direct and control the voting of the shares of stock or other
voting interest held by the Corporation in any other corporation,
partnership, joint venture, trust or other association, by an officer of
the Corporation duly authorized by the Board of Directors or by a proxy so
duly authorized.
SECTION 2.6 Notwithstanding that a lesser vote or no vote of the Board of
Directors (or the executive committee thereof) may be required by law or the
Certificate of Incorporation, any transaction between the Corporation and any
stockholder who beneficially owns 10% or more of the total number of outstanding
shares of Common Stock and Class A Common Stock of the Corporation, or otherwise
relating to such stockholder, shall require the approval of, in addition to any
other vote of the Board of Directors (or the executive committee thereof)
required by law or the Certificate of Incorporation, a majority vote of a
committee of the Board of Directors of the Corporation comprised of all the
Independent Directors (as defined below) then in office. For purposes of this
Section 2.6, "Independent Director" means any director who is not an affiliate
or past or present officer, director or employee of, and was not nominated by,
such stockholder or any of its affiliates, and is not associated with an entity
that performs substantial services for any of the foregoing.
SECTION 2.7 Notwithstanding that a lesser vote or no vote of the Board of
Directors (or a committee thereof) may be required by law or the Certificate of
Incorporation, and in addition to any other vote of the Board of Directors (or a
committee thereof) required by law or the Certificate of Incorporation, the
affirmative vote of two-thirds of the Directors constituting the entire Board of
Directors of the Corporation shall be required for approval of the following
actions:
I. Any distributions or dividends of securities or other property
(other than cash and other than dividends payable in shares of Common Stock
or Class A Common Stock), if the Fair Market Value (as defined below)
thereof equals or exceeds 10% of the Consolidated Net Worth of the
Corporation (as defined below) as of the date of any such action of the
Board of Directors.
II. Any repurchase or redemption of outstanding equity securities of
the Corporation if the gross consideration to be paid for such repurchase
or redemption, together with the gross consideration paid for all such
repurchases or redemptions in the preceding twelve month period but net of
the amount of the net proceeds from the issuance of other equity securities
in such period, equals or exceeds 10% of the Consolidated Net Worth of the
Corporation as of the date of any such action by the Board of Directors.
III. A decision by the Board of Directors to consent to or enter into
any cease and desist order or formal agreement with any bank regulatory
authority or other governmental agency which would adversely affect the
interests of the holders of the Class A Common Stock in the good faith
opinion of the Class A Directors (as set forth in a resolution duly adopted
by a majority of such Class A Directors).
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For purposes of this Section 2.7:
"Consolidated Net Worth" as of any date means the total of all
amounts that are included under stockholders' equity as shown on the
most recently available consolidated financial statements of the
Corporation and its subsidiaries.
"Fair Market Value" means, as to any securities or other property,
the cash price at which a willing seller would sell and a willing buyer
would buy such securities or property in an arm's-length negotiated
transaction without time constraints. For purposes of these By-laws,
Fair Market Value shall be determined in good faith by the affirmative
vote of a majority of the Directors constituting the entire Board of
Directors of the Corporation.
SECTION 2.8 No action may be taken at a meeting of the Board of Directors
with respect to any matter that was not previously set forth on an agenda for
such meeting delivered to the Directors prior to such meeting if either a
majority of the Class A Directors present at such meeting or a majority of the
Non-Class A Directors present at such meeting oppose taking action at such
meeting with respect to such matter.
ARTICLE III
OFFICERS; DUTIES OF OFFICERS
SECTION 3.1 The officers of the Corporation shall be a President, and one
or more Vice Presidents, any one or more of whom may also be designated as
Executive or Senior Vice Presidents, a Secretary, a Treasurer, a Chief Executive
Officer, a Chief Operating Officer and such other officers as the Corporation
may require for the transaction of its business. All officers shall be elected
or appointed by the Board of Directors or the Executive Committee as these
By-laws further provide and by whom their several duties shall be prescribed and
who, subject to Section 3.4, shall hold their offices at the pleasure of the
Board of Directors or the Executive Committee, subject to the authority of the
Board of Directors if the Executive Committee was the appointing power. There
may be a Chairman of the Board of Directors who shall be appointed by the Board
of Directors from its own members and who shall have such powers as may be
prescribed by these By-Laws or, if and to the extent that these By-Laws shall
not so prescribe, by the Board of Directors.
SECTION 3.2 The Chairman of the Board of Directors shall preside at all
meetings of the stockholders and of the Board of Directors, and shall perform
such other duties and have such other powers as may be assigned to him by these
By-laws or the Board of Directors. If a Director other than the President shall
have been appointed Chairman of the Board of Directors, then in the absence of
the Chairman the President shall preside, and in the absence of both the
Chairman of the Board of Directors and the President, or in the absence of the
President if the President shall be the Chairman of the Board of Directors, any
other Director designated by the Board of Directors shall preside.
SECTION 3.3 The President shall exercise general supervision of the
property, affairs and business of the Corporation, and shall perform such duties
and exercise such power as may be assigned to him by these By-laws or the Board
of Directors. In the absence or disability of the President, his powers shall be
exercised and discharged by the Vice President designated by the Board of
Directors, or, in the absence or disability of him, by such other officer or
officers as the Board of Directors may designate.
SECTION 3.4 (a) The Board of Directors may from time to time designate the
Chairman of the Board of Directors or the President as the Chief Executive
Officer of the Corporation. If the Chairman of the Board of Directors shall have
been so designated as Chief Executive Officer, then in the absence or disability
of the Chairman of the Board of Directors, the President shall perform the
duties and have the power of Chief Executive Officer. If the Board of Directors
shall not have designated either the Chairman of the Board of Directors or the
President as Chief Executive Officer, then unless and until the Board of
Directors shall make such a designation, the President shall be the Chief
Executive Officer of the Corporation. The Chief Executive Officer shall be
responsible for the general direction of the property, business, affairs and
personnel of the Corporation, and shall have all requisite power and authority
to carry out such responsibility. He shall be responsible for carrying out and
effectuating, and shall have full power, directly or through such officers as he
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may designate, to carry out and effectuate such policies and procedures for the
governance and conduct of the affairs of the Corporation as are adopted by the
Board of Directors or prescribed by law.
(b) The Board of Directors may from time to time designate a Chief
Operating Officer of the Corporation. The Chief Operating Officer shall perform
the duties imposed upon him by these By-laws, the Board of Directors, the
Executive Committee or the Chief Executive Officer. If the Chief Executive
Officer is not the President, then the Chief Operating Officer shall be the
President. If the Chief Executive Officer shall be the President, then the Chief
Operating Officer shall be senior to all other Vice Presidents of the
Corporation.
(c) The persons so designated from time to time as the Chief Executive
Officer and the Chief Operating Officer shall continue to serve in such capacity
until such time as the Board of Directors of the Corporation, by a vote of
two-thirds of the Directors constituting the entire Board of Directors, votes to
terminate such designation or until such person's death, voluntary retirement or
resignation. In order to be elected to fill a vacancy in the office of Chief
Executive Officer or Chief Operating Officer, the person nominated pursuant to
the provisions of paragraph (b) of Article Seventh of the Certificate of
Incorporation shall be required to be approved by the affirmative vote of
two-thirds of the directors then in office.
SECTION 3.5 Each Vice President shall perform the duties imposed upon him
by these By-laws, the Board of Directors, the Executive Committee or the Chief
Executive Officer. The Vice President senior in rank to all other Vice
Presidents, including Executive and Senior Vice Presidents, shall be as
designated by the Board of Directors.
SECTION 3.6 The Secretary shall have charge and custody of the corporate
seal, records and minute books of the Corporation, and he shall keep correct
written minutes of all meetings of stockholders, the Board of Directors and the
Executive Committee. He shall give or cause to be given notice of all meetings
of the stockholders and of the Board of Directors in accordance with these
By-laws and as required by law, and shall perform such other duties as may be
imposed upon him by law, these By-laws, the Board of Directors, the Executive
Committee or by the Chief Executive Officer. The duties of the Secretary may be
performed by any Assistant Secretary appointed by the Board of Directors or by
the Executive Committee.
SECTION 3.7 The Treasurer shall be the chief financial officer of the
Corporation and exercise general supervision over the receipt, custody and
disbursement of corporate funds. He shall perform such other duties as may be
imposed upon him by law, these By-laws, the Board of Directors, the Executive
Committee or the Chief Executive Officer. The duties of the Treasurer may be
performed by any Assistant Treasurer appointed by the Board of Directors or by
the Executive Committee.
SECTION 3.8 Subject to the prior authority of the Board of Directors,
additional officers may be appointed by the Executive Committee and the salaries
of such officers may be fixed by the Executive Committee.
ARTICLE IV
COMMITTEES
SECTION 4.1 There may be a committee to be known as the Executive Committee
consisting of the following: the Chief Executive Officer (so long as he is a
Director, who shall be the Chairman of the Executive Committee), the Chief
Operating Officer (so long as he is a Director) and not less than three
additional Directors appointed by a committee comprised of the Chief Executive
Officer, all of such members of the Executive Committee shall continue to act
until succeeded. The members of the Executive Committee appointed pursuant to
the foregoing sentence shall include such number of Class A Directors as Citrus
Parent has the right to so request pursuant to Section 5.3 of the Standstill and
Governance Agreement (as defined in the Certificate of Incorporation of the
Corporation). The Executive Committee shall have, to the extent not specifically
restricted by law or by these By-laws, all of the powers of the Board of
Directors in the management of the property, business and affairs of the
Corporation during the intervals between meetings of the Board of Directors.
This Committee shall have the power to discount and purchase bills, notes and
other
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evidences of debt and to meet regularly each week; to confer with and advise the
officers of the Corporation; to act with them in its best judgment as to the
general management of the business and affairs of the Corporation and to adopt
such measures as may be deemed expedient. No action may be taken by the
Executive Committee without the affirmative vote of each of the members thereof.
This Committee shall, at each regular meeting of the Board of Directors, submit
in writing a report of all matters and things done by it since its last report.
The Board of Directors shall approve or disapprove such report, the action taken
to be recorded in the minutes of the meeting.
SECTION 4.2 Except as otherwise provided in the Certificate of
Incorporation of the Corporation or these By-Laws, the Board of Directors may
appoint, from time to time, from its own members, other committees of two or
more persons, for such purposes and with such powers as the Board of Directors
may determine.
ARTICLE V
SEAL
SECTION 5.1 The corporate seal of the Corporation shall be of such form and
device as may from time to time be designated by the Board of Directors. The
Board of Directors may determine that the Corporation shall have no seal.
ARTICLE VI
MINUTE BOOKS
SECTION 6.1 The Certificate of Incorporation, the proceedings of all
regular and special meetings of the Board of Directors and any committee
thereof, and of the stockholders, these By-laws and any amendments thereto and
reports of the committees of the Directors shall be recorded in the minute book;
and the minutes of each such meeting shall be signed by the presiding officer
and the Secretary or an Assistant Secretary or a secretary pro tempore.
ARTICLE VII
CERTIFICATES AND TRANSFERS OF STOCK
SECTION 7.1 Certificates and stock of the Corporation shall be in such form
as shall be approved by the Board of Directors. The certificates shall be sealed
with the corporate seal, if any, and signed by the President or a Vice President
and the Secretary or an Assistant Secretary; provided, that the Board of
Directors may provide that certificates shall be sealed only with the facsimile
seal of the Corporation and signed only with the facsimile signature of the
President or a Vice President and the Secretary or an Assistant Secretary. The
name of the person owning the shares represented by each certificate, with the
number of such shares and the date of issue, shall be entered upon the stock
records of the Corporation.
SECTION 7.2 Transfer of shares of stock may be made by delivery of the
certificates therefor, endorsed by the holder of record thereof, or accompanied
by a written assignment or power of attorney to sell, assign or transfer the
same, signed by the holder of record thereof; but no transfer shall affect the
right of the Corporation to pay any dividends upon the stock to the holder of
record thereof, or to treat the holder of record as the holder in fact thereof
for all purposes, and no transfer shall be valid, except between the parties
thereto, until such transfer shall have been made upon the books of the
Corporation.
SECTION 7.3 In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and
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which record date: (1) in the case of determination of stockholders entitled to
vote at any meeting of stockholders or adjournment thereof, shall, unless
otherwise required by law, not be more than sixty nor less than ten days from
the date of such meeting; (2) in the case of determination of stockholders to
express consent to action in writing without a meeting, shall not be less than
ten days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors; and (3) in the case of any other action,
shall not be more than sixty days prior to such action. If no record date is
fixed: (1) the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
of the Board of Directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation in accordance with applicable law, or if prior
action by the Board of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action; and (3) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 7.4 In case of the loss, mutilation or destruction of any
certificate of any share or shares of stock of the Corporation, a duplicate
certificate may be issued upon such terms as the Board of Directors may
prescribe.
SECTION 7.5 The Corporation shall not be obliged to issue any certificate
of stock evidencing, either singly or with other shares, any fractional part of
a share or any undivided interest in shares.
ARTICLE VIII
EMERGENCIES
SECTION 8.1 In the event of an emergency declared by the President of the
United States or the person performing his functions, or similar officials in
the state in which the Corporation has its principal place of business or the
persons performing their functions, the officers and employees of the
Corporation will continue to conduct the affairs of the Corporation under such
guidance from the Board of Directors as may be available except as to such
matters which by statute require specific approval by the Board of Directors and
subject to conformance with any governmental directives during the emergency.
ARTICLE IX
CONSTRUCTION
SECTION 9.1 Except where such construction would be repugnant to the
context, whenever used in these By-laws, the word "Corporation" shall mean
BancWest Corporation, the singular includes the plural, and vice versa; the
masculine gender includes the feminine gender; and the words "stockholder" and
"stockholders" shall mean the holder or holders of outstanding shares of capital
stock of the Corporation.
ARTICLE X
INDEMNIFICATION
SECTION 10.1 To the extent permitted by Delaware law from time to time in
effect, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action or suit by or in the right of the Corporation to procure a
judgment in its favor) by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or, while a director,
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officer, employee or agent of the Corporation, is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 10.2 To the extent permitted by Delaware law from time to time in
effect, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or, while a director, officer, employee or agent of
the Corporation, is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
SECTION 10.3 To the extent that a present or former director or officer or
an employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections
10.1 and 10.2, or in defense of any claim, issue or matter therein, such person
shall be indemnified by the Corporation against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith.
SECTION 10.4 Any indemnification under Sections 10.1 and 10.2 (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct set forth in said Sections
10.1 and 10.2. Such determination shall be made, with respect to a person who is
a director or officer at the time of such determination, (1) by a majority vote
of the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors designated by
majority vote of such directors, event though less than a quorum, or (3) if
there are no such directors, or if such directors so direct, by independent
legal counsel (compensated by the Corporation) in a written opinion, or (4) by
the stockholders.
SECTION 10.5 Expenses incurred by a present or former Director or officer
of the Corporation in defending a civil or criminal action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the Corporation as
authorized in this Article. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the employee or agent to repay such amount if it
shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article.
SECTION 10.6 The indemnification and advancement of expenses provided by
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may
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be entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
SECTION 10.7 The indemnification and advancement of expenses provided by or
granted pursuant to this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 10.8 The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation, or who is or was serving at the request of the Corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such liability under the provisions of this Article or of
Section 145 of the General Corporation Law of Delaware, as it may be amended or
substituted for.
SECTION 10.9 Notwithstanding Sections 10.1 and 10.2 hereof, except as
otherwise provided in Section 10.10, the Corporation shall be required to
indemnify an indemnitee in connection with any action, suit or proceeding (or
part thereof) commenced by such indemnitee only if the commencement of such
action, suit or proceeding (or part thereof) by the indemnitee was authorized by
the Board of Directors.
SECTION 10.10 If a claim for indemnification or advancement of expenses
under this Article is not paid in full within sixty days after a written claim
therefor by the indemnitee has been received by the Corporation, the indemnitee
may file suit to recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden of proving that
the indemnitee is not entitled to the requested indemnification or advancement
of expenses under applicable law.
SECTION 10.11 Any repeal or modification of the foregoing provisions of
this Article shall not adversely affect any right or protection hereunder of any
indemnitee in respect of any act or omission occurring prior to the time of such
repeal or modification.
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EXHIBIT C
- --------------------------------------------------------------------------------
FORM OF
STANDSTILL AND GOVERNANCE AGREEMENT
BETWEEN
FIRST HAWAIIAN, INC.
AND
BANQUE NATIONALE DE PARIS
DATED AS OF , 1998
- --------------------------------------------------------------------------------
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<PAGE> 216
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
DEFINITIONS............................................................... 1
SECTION 1.1 Certain Defined Terms....................................... 1
SECTION 1.2 Other Defined Terms......................................... 6
SECTION 1.3 Other Definitional Provisions............................... 6
SECTION 1.4 Methodology for Calculations................................ 7
STANDSTILL................................................................ 7
SECTION 2.1 Acquisition of Additional Voting Securities................. 7
SECTION 2.2 Certain Restrictions........................................ 11
SECTION 2.3 Notice of Certain Events; Press Releases, etc............... 12
SECTION 2.4 Post-Standstill Period...................................... 12
TRANSFER RESTRICTIONS..................................................... 14
SECTION 3.1 General Transfer Restrictions............................... 14
SECTION 3.2 Restrictions on Transfer.................................... 14
SECTION 3.3 Right of First Refusal...................................... 15
SECTION 3.4 Transferees................................................. 17
VOTING.................................................................... 17
SECTION 4.1 Voting on Certain Matters................................... 17
SECTION 4.2 Irrevocable Proxy........................................... 17
SECTION 4.3 Quorum...................................................... 18
CORPORATE GOVERNANCE...................................................... 18
SECTION 5.1 Composition of the Board.................................... 18
SECTION 5.2 Agenda...................................................... 19
SECTION 5.3 Committees.................................................. 19
SECTION 5.4 Certain Officers............................................ 19
SECTION 5.5 Regulatory Cooperation...................................... 19
MISCELLANEOUS............................................................. 20
SECTION 6.1 Conflicting Agreements...................................... 20
SECTION 6.2 Duration of Agreement....................................... 20
SECTION 6.3 Ownership Information....................................... 20
SECTION 6.4 Further Assurances.......................................... 20
SECTION 6.5 Amendment and Waiver........................................ 20
SECTION 6.6 Severability................................................ 21
SECTION 6.7 Entire Agreement............................................ 21
SECTION 6.8 Successors and Assigns...................................... 21
SECTION 6.9 Counterparts................................................ 21
SECTION 6.10 Remedies.................................................... 21
SECTION 6.11 Notices..................................................... 21
SECTION 6.12 Governing Law; Consent to Jurisdiction...................... 22
SECTION 6.13 Legends..................................................... 23
SECTION 6.14 Interpretation.............................................. 24
SECTION 6.15 Effectiveness............................................... 24
</TABLE>
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EXHIBIT C
FORM OF STANDSTILL AND GOVERNANCE AGREEMENT
FORM OF STANDSTILL AND GOVERNANCE AGREEMENT dated as of
, 1998 between First Hawaiian, Inc., a Delaware corporation (the
"Company"), and Banque Nationale de Paris, a societe anonyme or limited
liability banking corporation organized under the laws of the Republic of France
("BNP").
WHEREAS, the Company and BancWest Corporation, a corporation organized
under the laws of California and a subsidiary of BNP ("BancWest"), entered into
an Agreement and Plan of Merger, dated as of May 28, 1998 (the "Merger
Agreement"), pursuant to which and subject to the terms and conditions thereof,
among other things, BancWest will merge (the "Merger") with and into the Company
and all of the outstanding shares of common stock, without par value, of
BancWest will be converted into shares of Class A Common Stock (as defined
herein);
WHEREAS, upon the closing of the Merger (the "Closing"), BNP will
Beneficially Own (as defined herein), directly and through its Subsidiaries (as
defined herein) 45% of the issued and outstanding Company Common Shares (as
defined herein);
WHEREAS, it is a condition to the obligations of each of the Company and
BancWest to consummate the Merger pursuant to the Merger Agreement that this
Agreement shall have been duly executed and delivered by the Company and BNP;
and
WHEREAS, the parties hereto desire to enter into this Agreement to
establish certain arrangements with respect to the Company Common Shares to be
Beneficially Owned by BNP and its Affiliates following the closing of the
Merger, as well as restrictions on certain activities in respect of the Company
Common Shares, corporate governance and other related corporate matters.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used herein, the following terms
shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person;
provided, however, that solely for purposes of this Agreement,
notwithstanding anything to the contrary set forth herein, neither the
Company nor any of its Subsidiaries shall be deemed to be a Subsidiary or
Affiliate of BNP solely by virtue of BNP's ownership of the Class A Common
Stock or Common Stock, the election of Class A Directors nominated by it to
the Board or any other action taken by BNP or its Affiliates which is
permitted under this Agreement, in each case in accordance with the terms
and conditions of, and subject to the limitations and restrictions set
forth in, this Agreement (and irrespective of the characteristics of the
aforesaid relationships and actions under applicable law or accounting
principles).
"Agreement" means this Standstill and Governance Agreement as it may
be amended, supplemented, restated or modified from time to time.
"Beneficial Ownership" by a Person of any securities includes
ownership by any Person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares (i)
voting power which includes the power to vote, or to direct the voting of,
such security; and/or (ii) investment power which includes the power to
dispose, or to direct the disposition of, such security;
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and shall otherwise be interpreted in accordance with the term "beneficial
ownership" as defined in Rule 13d-3 adopted by the Commission under the
Exchange Act; provided that for purposes of determining Beneficial
Ownership, a Person shall be deemed to be the Beneficial Owner of any
securities which may be acquired by such Person (irrespective of whether
the right to acquire such securities is exercisable immediately or only
after the passage of time, including the passage of time in excess of 60
days, the satisfaction of any conditions, the occurrence of any event or
any combination of the foregoing) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise. For purposes of this Agreement, a Person
shall be deemed to Beneficially Own any securities Beneficially Owned by
its Affiliates or any Group of which such Person or any such Affiliate is
or becomes a member.
"BHC Act" means the Bank Holding Company Act of 1956, as amended (or
any successor statute), and the rules and regulations of the Board of
Governors of the Federal Reserve System promulgated thereunder (or under
any successor statute).
"Board" means the Board of Directors of the Company.
"Business Combination Proposal" means any proposal with respect to a
merger or consolidation in which the Company is a constituent corporation
or a sale, lease, exchange or mortgage of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole and pursuant to
any of which transactions all of the Company Common Shares (other than
those, if any, which are Beneficially Owned by BNP and its Affiliates)
would be exchanged for cash, securities or other property, and, solely for
purposes of Sections 2.1(c), 2.2(b), 2.2(c) and 2.4(b), a tender or
exchange offer for any and all of the outstanding Company Common Shares.
Any Business Combination Proposal submitted by BNP pursuant to this
Agreement shall be a proposal for the acquisition of not less than 100% of
the issued and outstanding Company Common Shares (other than those which
are Beneficially Owned by BNP and its Affiliates).
"Business Day" shall mean any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in
Honolulu, Hawaii, San Francisco, California or Paris, France.
"By-Laws" means the By-Laws of the Company, as amended or supplemented
from time to time.
"Capital Stock" means, with respect to any Person at any time, any and
all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of capital stock, partnership
interests (whether general or limited) or equivalent ownership interests in
or issued by such Person.
"Change of Control" means (i) any Person becomes the Beneficial Owner
of more than 50% of the total voting power of the outstanding Voting
Securities of the Company, (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Non-Class A
Directors (together with any new Non-Class A Directors whose election by
such Non-Class A Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
Non-Class A Directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Directors of the Company then in office, (iii) a merger or
consolidation of the Company with or into another Person or the merger or
consolidation of another Person into the Company, as a result of which
transaction or series of related transactions (A) any Person becomes the
Beneficial Owner of more than 50% of the total voting power of all Voting
Securities of the Company (or, if the Company is not the surviving or
transferee company of such transaction or transactions, of such surviving
or transferee company) outstanding immediately after such transaction or
transactions, or (B) the shares of Company Common Stock outstanding
immediately prior to such transaction or transactions do not represent a
majority of the voting power of all Voting Securities of the Company (or
such surviving or transferee company, if not the Company) outstanding
immediately after such transaction or transactions, (iv) the sale, lease,
exchange or mortgage of all or substantially all of the assets of the
Company and its
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Subsidiaries, or (v) the approval by the stockholders of the Company of a
plan of liquidation or dissolution of the Company.
"Class A Common Stock" means the class A common stock, par value $1.00
per share, of the Company and any securities issued in respect thereof, or
in substitution therefor, in connection with any stock split, dividend or
combination, or any reclassification, recapitalization, merger,
consolidation, exchange or other similar reorganization.
"Class A Director" means any Class A Nominee who is elected or
appointed as a Class A Director of the Company and is then serving in such
capacity.
"Class A Holders" means (i) BNP and (ii) any Affiliate of BNP or any
Qualified Transferee to which shares of Class A Common Stock have been
Transferred in accordance with Sections 3.2(c)(iii) and 3.2(c)(vi) hereof,
respectively.
"Class A Nominee" means any Person proposed by the Class A Holders for
election or appointment as a Class A Director pursuant to the Restated
Charter.
"Commission" means the United States Securities and Exchange
Commission.
"Company Common Shares" means, collectively, the Company Common Stock
and the Class A Common Stock.
"Company Common Stock" means the common stock, par value $1.00 per
share, of the Company (other than the Class A Common Stock) and any
securities issued in respect thereof, or in substitution therefor, in
connection with any stock split, dividend or combination, or any
reclassification, recapitalization, merger, consolidation, exchange or
other similar reorganization.
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or
more Persons, means the possession, directly or indirectly, of the power to
direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor,
by contract or any other means, or otherwise to control such Person within
the meaning of such term as used in Section 2(e) of Regulation Y; provided,
however, that solely for purposes of this Agreement, notwithstanding
anything to the contrary set forth herein, neither the Company nor any of
its Subsidiaries shall be deemed to be controlled by or under common
control with BNP or any of its Affiliates solely by virtue of BNP's
ownership of the Class A Common Stock or Common Stock, the election of
Class A Directors nominated by it to the Board or any other action taken by
BNP or its Affiliates which is permitted under this Agreement, in each case
in accordance with the terms and conditions of, and subject to the
limitations and restrictions set forth in, this Agreement (and irrespective
of the characteristics of the aforesaid relationships and actions under
applicable law or accounting principles).
"Current Market Value" means, with respect to any security, the
average of the daily closing prices on the Nasdaq National Market (or the
principal exchange or market on which such security may be listed or may
trade) for such security for the 20 consecutive trading days commencing on
the 22nd trading day prior to the date as of which the Current Market Value
is being determined. The closing price for each day shall be the closing
price, if reported, or, if the closing price is not reported, the average
of the closing bid and asked prices as reported by the Nasdaq National
Market (or such principal exchange or market) or a similar source
reasonably and in good faith selected from time to time by the Company for
such purpose. In the event such closing prices are unavailable, the Current
Market Value shall be the Fair Market Value of such security established by
an Independent Investment Banking Firm in accordance with the procedures
specified in Section 3.3(f).
"Director" means any member of the Board (other than any advisory,
honorary or other non-voting member of the Board).
"Equity Securities" means any and all shares of Capital Stock of the
Company, securities of the Company convertible into, or exchangeable for,
such shares, and options, warrants or other rights to
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acquire such shares (regardless of whether such securities, options,
warrants or other rights are then exercisable or convertible).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor statute).
"Executive Committee" means the Executive Committee of the Board, as
duly constituted from time to time (subject to Section 5.2).
"Fair Market Value" means, as to any securities or other property, the
cash price at which a willing seller would sell and a willing buyer would
buy such securities or property in an arm's-length negotiated transaction
without time constraints.
"Group" shall have the meaning assigned to it in Section 13(d)(3) of
the Exchange Act.
"Independent Director" means (except as set forth in the proviso
hereto) any Non-Class A Director who is not an Affiliate or a past or
present officer, director or employee of, and was not nominated by, BNP or
any of its Affiliates, and is not associated with an entity that performs
substantial services for any of the foregoing; provided that, solely when
used with respect to any action to be taken by the Board or the Executive
Committee relating to a transaction or proposed transaction with, or
otherwise relating to any other holder of 10% or more of the outstanding
Company Common Shares (or 10% or more of any other class of Voting
Securities of the Company), the term Independent Director shall mean any
director who is not an Affiliate or a past or present officer, director or
employee of, and was not nominated by, such stockholder (or other
securityholder) or any of its Affiliates, and is not associated with an
entity that performs substantial services for any of the foregoing.
"Independent Investment Banking Firm" means an investment banking firm
of nationally recognized standing that is, in the reasonable judgment of
the Person or Persons engaging such firm, independent of such Person or
Persons and qualified to perform the task for which it has been engaged.
"Initial Ownership Percentage" means the Ownership Percentage of BNP
and its Affiliates immediately following the Closing.
"Non-Class A Directors" means the Directors who are not Class A
Directors.
"Ownership Percentage" means, at any time, the ratio, expressed as a
percentage, (i) of the total Equity Securities Beneficially Owned by BNP
and its Affiliates to (ii) the sum of (x) the total number of outstanding
Company Common Shares and (y) any Company Common Shares that are issuable
upon conversion, exchange or exercise of any Equity Securities included in
clause (i); provided, however, that shares subject to options under Company
benefit plans granted or shares otherwise issued under Company benefit
plans to any Person who, at the time of the grant or issuance, was an
officer or director of the Company or any of its Subsidiaries shall not be
deemed to be Equity Securities Beneficially Owned by BNP or any of its
Affiliates; and provided further, however, that Equity Securities
Beneficially Owned by BNP and its Affiliates shall not include, for
purposes of clause (i) above, any Equity Securities held by BNP and its
Subsidiaries in trust, managed, custodial or nominee accounts and the like,
or held by mutual funds for which BNP or one of its Subsidiaries acts as
investment advisor, in each case for the benefit of customers of BNP and
its Subsidiaries ("Trust Account Shares"), provided that (A) such Trust
Account Shares were acquired by BNP or its Subsidiaries in the ordinary
course of their banking or investment management businesses, solely for
investment and not with the intent or purpose of influencing control of the
Company or avoiding the provisions of this Agreement, and (B) to the extent
that such Trust Account Shares at any time constitute in the aggregate more
than four percent of the Company's then outstanding Voting Securities (such
excess shares, the "Excess Trust Shares"), BNP shall, and shall cause its
Subsidiaries which hold any such Excess Trust Shares to, (x) vote such
Excess Trust Shares on all matters submitted to a vote of stockholders of
the Company in the same proportion as the stockholders of the Company other
than BNP and its Affiliates vote (or, if BNP or such Subsidiaries are not
legally permitted to so vote such Excess Trust Shares, BNP shall, and shall
cause any of its Subsidiaries which hold any such shares to, vote a number
of Company Common Shares having the same
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voting power as such Excess Trust Shares in the same proportion as the
stockholders of the Company other than BNP and its Affiliates vote), and
(y) BNP shall, and shall cause its Subsidiaries to, use all reasonable
efforts to either reduce its aggregate Beneficial Ownership of such Trust
Account Shares to four percent or less of the Company's then outstanding
Voting Securities or Transfer (pursuant to clauses (i) or (ii) of Section
3.2(c)) a sufficient number of other Equity Securities having aggregate
voting power equal to the Excess Trust Shares. For purposes of Section
5.1(b) only, the Ownership Percentage shall include the Equity Securities
Beneficially Owned by any Qualified Transferee in addition to the Equity
Securities Beneficially Owned by BNP and its Affiliates.
"Permitted Ownership Percentage" means, immediately following the
Closing, the Initial Ownership Percentage and thereafter, such Ownership
Percentage as may be permitted under the terms of this Agreement to be
Beneficially Owned by BNP and its Affiliates from time to time; provided
that except as expressly permitted by Sections 2.1 and 2.4 hereof, in no
event shall the Permitted Ownership Percentage be greater than the Initial
Ownership Percentage.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, other entity, government or
any agency or political subdivision thereof or any Group comprised of two
or more of the foregoing.
"Prime Rate" means the prime rate, base lending rate or similar bench
mark rate in effect from time to time as announced by The Chase Manhattan
Bank (or any successor institution).
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, between the Company and BNP.
"Regulation Y" means Regulation Y (12 C.F.R. Part 225) or any
successor regulation, as promulgated by the Board of Governors of the
Federal Reserve System under the BHC Act.
"Restated Charter" means the amended Certificate of Incorporation of
the Company, the form of which is set forth in Exhibit A to the Merger
Agreement, as amended or supplemented from time to time.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the Commission from time to time
thereunder (or under any successor statute).
"Standstill Period" shall mean the period commencing on the Closing
and continuing until the fourth anniversary of the Closing.
"Subsidiary" means, with respect to any Person, any corporation or
other organization, whether incorporated or unincorporated, (x) of which
such Person or any other Subsidiary of such Person is a general partner
(excluding partnerships, the general partnership interests of which held by
such Person or any Subsidiary of such Person do not have a majority of the
voting interests in such partnership), or (y) at least a majority of the
securities or other interests of which having by their terms ordinary
voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person
or by any one or more of its Subsidiaries, or by such Person and one or
more of its Subsidiaries.
"Transfer" means, directly or indirectly, to sell, transfer, assign,
pledge, encumber, hypothecate or similarly dispose of (by operation of law
or otherwise), either voluntarily or involuntarily, or to enter into any
contract, option or other arrangement or understanding with respect to the
sale, transfer, assignment, pledge, encumbrance, hypothecation or similar
disposition of (by operation of law or otherwise), any Equity Securities or
any interest in any Equity Securities, provided, however, that a merger or
consolidation in which BNP or any of its Affiliates is a constituent
corporation shall not be deemed to be the Transfer of any Equity Securities
Beneficially Owned by such Person (provided, that the primary purpose of
any such transaction is not to avoid the provisions of this Agreement and
that the successor or surviving Person to such merger or consolidation, if
not BNP or such Affiliate, expressly assumes all obligations of BNP or such
Affiliate, as the case may be, under this Agreement). For purposes of this
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Agreement, the term Transfer shall include the sale of an Affiliate or
BNP's interest in an Affiliate which Beneficially Owns Company Common
Shares.
"Voting Securities" means at any time shares of any class of Capital
Stock or other securities of the Company which are then entitled to vote
generally in the election of Directors and not solely upon the occurrence
and during the continuation of certain specified events.
SECTION 1.2 Other Defined Terms. The following terms shall have the
meanings defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
TERM SECTION
- ---- ---------------
<S> <C>
Acquisition Restrictions.................................... Section 2.1(a)
Acquisition Restrictions Termination Events................. Section 2.1(b)
Appraisal................................................... Section 3.3(f)
Average Price............................................... Section 2.1(f)
BancWest.................................................... Preamble
BNP......................................................... Preamble
BNP Repurchase.............................................. Section 2.1(f)
Closing..................................................... Recitals
Company..................................................... Preamble
Company Repurchase.......................................... Section 2.1(f)
Excess Trust Shares......................................... Section 1.1
Litigation.................................................. Section 6.12(a)
Market Check Period......................................... Section 2.4(b)
Market Sale Option.......................................... Section 2.1(f)
Merger Agreement............................................ Recitals
Notice...................................................... Section 6.11
Offer Price................................................. Section 3.3(b)
Permitted Transferee........................................ Section 3.2(c)
Post-Standstill Period...................................... Section 2.4(a)
Process Agent............................................... Section 6.12(b)
Proxy Information........................................... Section 5.1(b)
Qualified Pledgee........................................... Section 3.2(c)
Qualified Transferee........................................ Section 3.2(c)
Repurchase Number of Shares................................. Section 2.1(f)
Repurchase Option........................................... Section 2.1(f)
Repurchase Price............................................ Section 2.1(f)
Required Repurchase Event................................... Section 2.1(f)
Superior Proposal........................................... Section 2.4(b)
Term........................................................ Section 6.2
Third Party................................................. Section 2.1(b)
Transfer Measurement Date................................... Section 2.1(e)
Transfer Notice............................................. Section 3.3(a)
Transfer Reduction Level.................................... Section 2.1(e)
Transferring Party.......................................... Section 3.3
Trust Account Shares........................................ Section 1.1
Update Notice............................................... Section 2.1(f)
</TABLE>
SECTION 1.3 Other Definitional Provisions. (a) The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any
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particular provision of this Agreement, and Article, Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
SECTION 1.4 Methodology for Calculations. For purposes of calculating the
number of outstanding Company Common Shares, Equity Securities or Voting
Securities and the number of Company Common Shares, Equity Securities or Voting
Securities Beneficially Owned by BNP and its Affiliates as of any date, any
Company Common Shares, Equity Securities or Voting Securities held in the
Company's treasury or belonging to any Subsidiaries of the Company which are not
entitled to be voted or counted for purposes of determining the presence of a
quorum pursuant to Section 160(c) of the Delaware General Corporation Law (or
any successor statute) shall be disregarded.
ARTICLE II
STANDSTILL
SECTION 2.1 Acquisition of Additional Voting Securities. (a) During the
Standstill Period, except as provided in paragraphs (b), (c), (d) and (e) below,
BNP covenants and agrees with the Company that it shall not, and shall cause
each of its Affiliates, directors and executive officers not to, directly or
indirectly, acquire, offer or propose to acquire or agree to acquire, whether by
purchase, tender or exchange offer, through the acquisition of control of
another Person (including by way of merger or consolidation), by joining a
partnership, syndicate or other Group or otherwise, the Beneficial Ownership of
any additional Voting Securities (except by way of stock dividends, stock
reclassifications or other distributions or offerings made available and, if
applicable, exercised on a pro rata basis, to holders of Company Common Shares
generally) (the "Acquisition Restrictions").
(b) The foregoing Acquisition Restrictions will not apply if either (i) a
third party who is not an Affiliate of BNP or any of its Affiliates (a "Third
Party", which term shall include any Group, other than a Group which includes
BNP or any of its Affiliates as a member) commences a bona fide tender or
exchange offer for more than 50% of the outstanding Company Common Shares and
the Board does not both (x) recommend against the tender or exchange offer
within ten Business Days after the commencement thereof (which, in the case of
an exchange offer, shall be deemed to be the effective date of the registration
statement relating to the securities offered in such exchange offer) or such
longer period as shall then be permitted under the Commission's rules and (y)
adopt a stockholders' rights plan (if the Company does not then have one in
effect) which does not contain an exception from the definition of "Acquiring
Person", "Triggering Event" or similar terms for such Third Party or its
Affiliates (it being understood that, notwithstanding the foregoing, the Board
shall not be required to adopt such a plan if such plan is opposed by any of the
Class A Directors), (ii) a Third Party acquires Beneficial Ownership of 25% of
the outstanding Company Common Shares (other than as a result of purchases of
such securities from the Company) and at such time, the Ownership Percentage is
equal to at least 25%, or (iii) a Third Party acquires Beneficial Ownership of
20% of the outstanding Company Common Shares (other than as a result of
purchases of such securities from the Company) and publicly discloses in a
filing on Schedule 13D or otherwise a possible intention to seek control of the
Company or to engage in a transaction that would result in a Change of Control
of the Company and at such time, the Ownership Percentage is equal to at least
20%; provided that if the Acquisition Restrictions terminate as a result of any
of (i), (ii) or (iii) above, BNP may only acquire shares of Company Common Stock
pursuant to (x) a tender or exchange offer for any and all outstanding shares of
Company Common Stock or (y) a Business Combination Proposal for the Company so
long as (A) such proposal is made in writing delivered only to the Executive
Committee and (B) BNP and its representatives keep confidential and refrain from
disclosing to any other Person the fact that they have made any such proposal or
any of the terms thereof. If (x) the foregoing tender or exchange offer referred
to in clause (i) shall have been terminated, (y) the Third Party referred to in
clauses (ii) or (iii) shall have reduced its Beneficial Ownership below 25% or
20%, respectively, of the outstanding Company Shares or (z) the Third Party
referred to in clause (iii) shall have publicly altered or modified its prior
public disclosure to provide that it intends to hold the shares
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acquired for investment purposes and not with the intention to seek control of
the Company or to engage in a transaction that would result in a Change of
Control of the Company, in each case without BNP having made a bona fide tender
or exchange offer or a bona fide Business Combination Proposal, then the
Acquisition Restrictions shall be reinstated at the Permitted Ownership
Percentage in effect prior to the termination of the Acquisition Restrictions.
The events described in clauses (i), (ii) and (iii) of this Section 2.1(b) and
in Section 2.1(c) are hereinafter referred to as the "Acquisition Restrictions
Termination Events".
(c) Notwithstanding any other provision hereof, BNP shall be entitled at
any time to acquire shares of Company Common Stock in excess of the
then-applicable Permitted Ownership Percentage if (i) BNP shall make a capital
infusion into the Company (A) in response to the requirements of applicable U.S.
bank regulatory authorities, as advised in writing to the Company by such
authority, or (B) because the Company shall cease to be a "well-capitalized"
bank holding company within the meaning of Section 225.2(r)(1) of Regulation Y
and is not restored to the status of a "well capitalized" bank holding company
within twelve months after the date on which it ceased to be a "well
capitalized" bank holding company; provided that nothing herein shall be deemed
to derogate the authority of the Board to approve the terms of any such capital
infusion, or (ii) the Company shall become subject to any regulatory capital
directive, or become an institution in "troubled" condition under 12 C.F.R.
ss.325.6 and Section 225.71(d) of Regulation Y, respectively, or under 12 C.F.R.
ss.263.81(c) or under any successor provisions. Any shares of Company Common
Stock acquired pursuant to this paragraph (c) shall not be subject to any of the
voting restrictions contained in Section 4.1(a)(ii) or 4.2. In the event that
BNP wishes to acquire additional shares of Company Common Stock following any
acquisition of shares pursuant to this paragraph (c), such acquisition may only
be effected through a Business Combination Proposal which provides for a price
per share of Company Common Stock so acquired that, in the written opinion of an
Independent Investment Banking Firm selected by the Board (by a majority vote of
the Directors constituting the entire Board), is fair from a financial point of
view to the holders of such Company Common Stock.
(d) If the Ownership Percentage declines due to an issuance or disposition
by the Company of Company Common Stock or other Equity Securities (whether in a
public offering, in connection with an acquisition, upon exercise of employee
stock options or otherwise), BNP and its Affiliates shall be permitted to
purchase a number of shares of Company Common Stock or other Equity Securities
in the open market or in privately-negotiated transactions so that the Ownership
Percentage following such purchase is no greater than the then-applicable
Permitted Ownership Percentage; provided that neither BNP nor any of its
Affiliates shall be permitted to purchase any shares pursuant to this Section
2.1(d) if the act of purchasing such shares would cause a transaction entered
into or proposed to be entered into by the Company to be disqualified as a
"pooling of interests" under applicable accounting rules, in which case such
purchase rights shall be deferred until such time as such purchases may be
effected without adversely affecting the pooling accounting treatment of such
transaction. The Company and BNP agree to confer and reasonably cooperate with
one another with respect to share repurchases or purchases to facilitate
satisfaction of such requirements of the applicable accounting rules with
respect to any such transaction.
(e) (i) In the event that the Ownership Percentage decreases by an
aggregate of less than 10% (the "Transfer Reduction Level") from the Ownership
Percentage on the same date of the prior year (the "Transfer Measurement Date")
as a result of a Transfer or a series of Transfers by BNP or its Affiliates of
any Company Common Shares or other Equity Securities (other than any Transfers
pursuant to clauses (iv), (v), (vi) or (vii) of Section 3.2(c)), BNP and its
Affiliates may purchase additional shares of Company Common Stock or other
Equity Securities in open market purchases or in privately-negotiated
transactions so long as, after giving effect to such acquisitions, the Ownership
Percentage does not exceed the Permitted Ownership Percentage on the Transfer
Measurement Date (as reduced in accordance with clause (ii) below subsequent to
such Transfer Measurement Date).
(ii) Upon any Transfer of any Company Common Shares or other Equity
Securities by BNP or any of its Affiliates pursuant to clauses (iv), (v), (vi)
or (vii) of Section 3.2(c) or to the extent of any other Transfers that result
in the Ownership Percentage decreasing below the Transfer Reduction Level, the
Permitted Ownership Percentage shall be automatically decreased to the actual
Ownership Percentage following such event. For purposes of this Section 2.1(e),
a Transfer pursuant to clause (vii) of Section 3.2(c) shall not be
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deemed to have occurred so long as BNP continues to have sole power to vote or
direct the voting of such Company Common Shares or other Equity Securities which
have been so pledged.
(f) (i) Upon a repurchase or redemption of Equity Securities by the Company
that, by reducing the number of outstanding Equity Securities, increases the
Ownership Percentage (a "Company Repurchase") to an amount in excess of the
then-applicable Permitted Ownership Percentage, BNP shall dispose, or cause its
Affiliates to dispose, of Equity Securities Beneficially Owned by them as set
forth in clauses (ii) or (iii) below, as applicable; provided, however, that if
effecting such disposition at such time would subject BNP or any such Affiliate
to liability under Section 16(b) of the Exchange Act, then the obligation of BNP
to effect, or cause its Affiliates to effect, such disposition shall be deferred
until the earliest date on which it or its Affiliates may effect such
disposition without incurring such liability under Section 16(b).
(ii) In the event of a proposed Company Repurchase (other than pursuant to
a proposed program of open market repurchases by the Company, which shall be
treated in accordance with the provisions of clause (iii) below) which, together
with any prior Company Repurchases of less than 1% of the outstanding Equity
Securities with respect to which no Equity Securities Beneficially Owned by BNP
or its Affiliates were disposed of in the manner required by this Section
2.1(f), shall be in excess of 1% of the outstanding Equity Securities prior to
such Company Repurchase (a "Required Repurchase Event"), the Company shall give
written notice to BNP not later than five Business Days prior to the Company
Repurchase, specifying the number and type of Equity Securities to be
repurchased and the repurchase price (the "Repurchase Price") (if known) per
security. On the date of the Company Repurchase giving rise to such notice, BNP
shall sell or cause one or more of its Affiliates to sell to the Company (a "BNP
Repurchase") a sufficient number of Equity Securities of the type repurchased or
to be repurchased by the Company, or, if BNP and its Affiliates do not own such
type of Equity Securities, shares of Class A Common Stock or Company Common
Stock (the "Repurchase Number of Shares"), such that the Ownership Percentage
following such BNP Repurchase is equal to the Ownership Percentage prior to the
Company Repurchase or Company Repurchases giving rise to such Required
Repurchase Event, at a price, payable in cash, equal to the Repurchase Price;
provided that, at BNP's option and subject to applicable law, in lieu of selling
any Equity Securities to the Company, BNP may dispose or cause one or more of
its Affiliates to dispose of the Repurchase Number of Shares in open market
transactions of the type described in clauses (i) and (ii) of Section 3.2(c)
(the "Market Sale Option"). BNP shall give written notice to the Company not
later than two Business Days prior to the Company Repurchase of its election to
exercise its Market Sale Option and shall consummate the sale of such Equity
Securities as specified in such written notice within ten Business Days
thereafter (or such longer period as may be required to comply with any volume
restrictions on sales of securities under Rule 144 of the Securities Act (or any
successor rule) if BNP elects to dispose of such Equity Securities in
transactions of the type described in clause (ii) of Section 3.2(c)). BNP shall
not be deemed to be in violation of this Agreement to the extent that the
Permitted Ownership Percentage has been reduced as a result of a Company
Repurchase which has not resulted in a Required Repurchase Event pursuant to
this paragraph.
(iii) In the event that the Company shall propose to commence a program of
open market repurchases of Equity Securities which would constitute a Required
Repurchase Event, the Company shall give written notice thereof to BNP not later
than ten Business Days prior to the commencement of any repurchases of Equity
Securities pursuant thereto, and BNP shall have the option, exercisable by
written notice given to the Company within five Business Days after receipt of
such notice from the Company, to either (i) participate in such repurchases by
selling Equity Securities to the Company on a regular basis proportionate with
the Company's repurchase of Equity Securities in the open market (the
"Repurchase Option"), or (ii) sell the applicable number of Equity Securities
pursuant to the Market Sale Option. In either case the Company shall give
written notice to BNP (the "Update Notice") not less frequently than every
second week as to the number of Equity Securities so repurchased by the Company
during the two preceding calendar weeks, the weighted average price paid for
such repurchased Equity Securities (the "Average Price"), and the Repurchase
Number of Shares. If BNP has elected the Repurchase Option, BNP shall sell, or
cause one or more of its Affiliates to sell, to the Company the Repurchase
Number of Shares at the Average Price within five Business Days after receiving
the Update Notice. If BNP has not elected the Repurchase Option, it shall sell
the Repurchase Number of Shares pursuant to the Market Sale Option within ten
Business Days after
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receiving the Update Notice (or such longer period as may be required to comply
with any volume restrictions on sales of securities under Rule 144 of the
Securities Act (or any successor rule) if BNP elects to dispose of such Equity
Securities in transactions of the type described in clause (ii) of Section
3.2(c)).
(g) Except as expressly provided herein, neither BNP nor any Affiliate
thereof shall permit any of their respective Subsidiaries (regardless of whether
such entity became a Subsidiary of BNP or such Affiliate after the date of this
Agreement) to Beneficially Own any Equity Securities. Notwithstanding the
foregoing, the acquisition (whether by merger, consolidation or otherwise) by
BNP or an Affiliate thereof of any entity that Beneficially Owns Equity
Securities, or the acquisition of Equity Securities in connection with securing
or collecting a debt previously contracted in good faith in the ordinary course
of BNP's or such Affiliate's banking business, shall not constitute a violation
of the Permitted Ownership Percentage in effect at the time of such acquisition;
provided that a significant purpose of any such transaction is not to avoid the
provisions of this Agreement; and provided further, that the provisions of
paragraph (h) below are complied with.
(h) If at any time BNP or any of its Affiliates become aware that BNP and
its Affiliates Beneficially Own in the aggregate more than the Permitted
Ownership Percentage (including by virtue of acquisitions referred to in
paragraph (g) above), then BNP shall, as soon as is reasonably practicable (but
in no manner that would require BNP or any such Affiliate to incur liability
under Section 16(b) of the Exchange Act) take all action necessary to reduce the
amount of Equity Securities Beneficially Owned by it and its Affiliates to an
amount not greater than the Permitted Ownership Percentage in effect at such
time. Notwithstanding any other provision of this Agreement, in no event may BNP
or any of its Affiliates exercise any voting rights in respect of any Equity
Securities Beneficially Owned by BNP and its Affiliates in excess of the
Permitted Ownership Percentage in effect at such time.
(i) Any shares of Company Common Stock acquired by BNP or any of its
Affiliates in accordance with the terms of paragraphs (b), (c), (d) and (e)
above shall be exchangeable by BNP, at its option, for shares of Class A Common
Stock. Except pursuant to this Section 2.1(i), the Company agrees that, after
the Closing, it shall not issue any additional shares of Class A Common Stock to
any Person (other than in exchange or substitution for shares of Class A Common
Stock already Beneficially Owned by such Person or in connection with a dividend
payable in shares of Class A Common Stock to holders of Class A Common Stock or
upon exercise of options, warrants or other securities previously distributed as
a dividend on the shares of Class A Common Stock which are exercisable for or
convertible into shares of Class A Common Stock). In order to effect any such
exchange, BNP shall surrender the certificate or certificates evidencing the
shares of Company Common Stock to be exchanged for Class A Common Stock to the
secretary of the Company. Such certificates shall be duly endorsed to the
Company or in blank, accompanied by proper instruments of transfer to the
Company or in blank. The Company shall, within five Business Days after the
surrender thereof, issue and deliver, or cause to be issued and delivered, to
BNP certificates representing that number of shares of Class A Common Stock
equal to the number of shares of Company Common Stock converted pursuant to the
terms of this Section 2.1(i). Subject to the Restated Charter and the By-Laws,
upon such surrender, the shares shall be deemed to be treated as shares of Class
A Common Stock for all purposes of this Agreement irrespective of any delay in
issuing such new share certificates. The Company agrees to use its reasonable
best efforts (including, without limitation, seeking to obtain from its
stockholders approval of an amendment to the Restated Charter to increase the
number of authorized shares of Class A Common Stock at the next scheduled
meeting of stockholders with respect to which a proxy statement has not
theretofore been mailed) to at all times keep reserved, out of its authorized
but unissued shares of Class A Common Stock, such number of shares of Class A
Common Stock as shall be sufficient to provide for the reasonably anticipated
exchange of its outstanding Common Stock into Class A Common Stock in accordance
with the terms of this Section 2.1(i).
(j) Any additional Equity Securities acquired by BNP or any of its
Affiliates or its or their directors or executive officers following the Closing
shall be subject to the restrictions contained in this Agreement as fully as if
such Equity Securities were acquired by BNP pursuant to the Merger, it being
understood that any Company Common Shares acquired by any Person who at the time
of such acquisition was an officer or director of the Company or any of its
Subsidiaries pursuant to options granted or any other issuances of shares
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of Company Common Stock under any Company benefit plan shall not be deemed to be
subject to this Agreement.
SECTION 2.2 Certain Restrictions. (a) During the Standstill Period, except
as provided below, BNP agrees not to, and to cause each of its Affiliates and
its and their respective directors and executive officers not to, directly or
indirectly, alone or in concert with others:
(i) initiate, propose or otherwise solicit securityholders of the
Company for the approval of one or more securityholder proposals or induce
or attempt to induce any other Person to initiate any securityholder
proposal, or seek election to or seek to place a representative or other
Affiliate or nominee on the Board (other than a Class A Nominee) or seek
removal of any member of the Board (other than a Class A Director);
(ii) (A) except in the manner and to the extent permitted under
Section 2.1(b), propose or seek to effect a merger, consolidation,
recapitalization, reorganization, sale, lease, exchange or other
disposition of substantially all assets or other business combination
involving, or a tender or exchange offer for securities of, the Company or
any of its Subsidiaries or any material portion of its or such Subsidiary's
business or assets or any other type of transaction that would otherwise
result in a Change of Control of the Company or in any increase in the
Ownership Percentage beyond the then existing Ownership Percentage (any
such action described in this clause (A), a "Company Transaction
Proposal"), (B) seek to exercise any control or influence over the
management of the Company or the Board or any of the businesses, operations
or policies of the Company (other than solely by virtue of representation
on the Board and participation in meetings and other actions of the Board
and any duly constituted committee thereof or by informal meetings or
consultations with members of the Board or management), (C) advise, assist
or encourage or finance (or assist or arrange financing to or for) any
other Person in connection with any of the matters restricted by, or to
otherwise seek to circumvent the limitations of, this Agreement, or (D)
present to the Company, its stockholders or any third party any proposal
constituting or that can reasonably be expected to result in a Company
Transaction Proposal or in an increase in the Ownership Percentage;
(iii) publicly suggest or announce its willingness or desire to engage
in a transaction or group of transactions or have another Person engage in
a transaction or group of transactions that constitute or could reasonably
be expected to result in a Company Transaction Proposal or in an increase
in the Ownership Percentage or take any action that might require the
Company to make a public announcement regarding any such Company
Transaction Proposal;
(iv) initiate, request, induce, encourage or attempt to induce or give
encouragement to any other Person to initiate, or otherwise provide
assistance to any Person who has made or is contemplating making, or enter
into discussions or negotiations with respect to, any proposal constituting
or that can reasonably be expected to result in a Company Transaction
Proposal or in an increase in the Ownership Percentage;
(v) solicit proxies (or written consents) or assist or participate in
any other way, directly or indirectly, in any solicitation of proxies (or
written consents), or otherwise become a "participant" in a "solicitation,"
or assist any "participant" in a "solicitation" (as such terms are defined
in Rule 14a-1 of Regulation 14A and Instruction 3 of Item 4 of Schedule
14A, respectively, under the Exchange Act) in opposition to the
recommendation or proposal of the Board, or recommend or request or induce
or attempt to induce any other Person to take any such actions, or seek to
advise, encourage or influence any other Person with respect to the voting
of (or the execution of a written consent in respect of) Voting Securities
or, except as otherwise expressly required, permitted or contemplated by
this Agreement or the Restated Charter, execute any written consent in lieu
of a meeting of the holders of Voting Securities or grant a proxy with
respect to the voting of Voting Securities to any Person other than an
officer or agent of BNP or the Company;
(vi) form, join in or in any other way (including by deposit of Equity
Securities) participate in a partnership, pooling agreement, syndicate,
voting trust or other Group with respect to Equity Securities,
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or enter into any agreement or arrangement or otherwise act in concert with
any other Person, for the purpose of acquiring, holding, voting or
disposing of Equity Securities;
(vii) take any other actions, alone or in concert with any other
Person, to seek to effect a Change of Control of the Company or an increase
in the Ownership Percentage or otherwise seek to circumvent any of the
limitations set forth in this Section 2.2; or
(viii) request, or induce or encourage any other Person to request,
that the Company amend or waive any of the provisions of this Agreement.
(b) If any Acquisition Restrictions Termination Event occurs, the
restrictions set forth in paragraphs (i) through (viii) above will not apply to
the extent (but only to the extent) necessary to enable BNP to make the Business
Combination Proposal permitted to be made under Section 2.1(b) hereof and
subject to the terms and conditions relating thereto.
(c) Notwithstanding the foregoing restrictions, BNP may at any time submit
a Business Combination Proposal for the Company so long as (i) such Business
Combination Proposal is made in writing delivered only to the Executive
Committee in a manner which does not require public disclosure thereof by the
Company and (ii) BNP and its representatives keep confidential and refrain from
disclosing to any other Person the fact that they have made such a Business
Combination Proposal or any of the terms thereof, it being understood that the
Executive Committee shall be under no obligation to BNP or its Affiliates to
accept such Business Combination Proposal or to cause such Business Combination
Proposal to be submitted to the full Board for consideration. In addition, (x)
if it shall become part of the agenda of any meeting of the Board or any
committee thereof to review any proposal submitted by a Third Party with respect
to a Company Transaction Proposal which would result in a Change of Control of
the Company (other than as a result of action taken by BNP pursuant to Section
5.2), or (y) if the Board or any committee thereof shall determine to solicit
proposals for such a transaction from Third Parties, the Company shall give
prompt written notice of such determination to BNP and shall provide BNP with a
reasonable opportunity to, in the case of clause (x), participate as a potential
bidder prior to accepting such Third Party proposal or, in the case of clause
(y), participate in the solicitation process as a potential bidder. For purposes
of this Section 2.2(c), the reference to "Company Common Stock" in clause
(iii)(B) of the term "Change of Control" shall be deemed to be a reference to
"Company Common Shares".
SECTION 2.3 Notice of Certain Events; Press Releases, etc. (a) During the
Standstill Period, BNP will, subject to any requirements of applicable law or
regulation, inform the Chief Executive Officer of the Company orally within one
Business Day and as promptly as practicable in writing (but in no more than ten
Business Days) upon it or any of its Affiliates being contacted by any Person or
Group with respect to any of the matters covered by paragraphs (i) through
(viii) of Section 2.2(a) as to the content and nature of any such contact and
the identity of such Person or Group.
(b) Unless otherwise required by applicable law, BNP will not, and will not
permit any of its Affiliates to, issue any press release or make any public
announcement or other communication with respect to any of the matters described
in Sections 2.1(b) or 2.2(a) without the prior written consent of the Chief
Executive Officer of the Company or as authorized by a resolution adopted by a
majority of the Board.
SECTION 2.4 Post-Standstill Period. (a) Following the expiration of the
Standstill Period and during the remainder of the Term (such period, the
"Post-Standstill Period"), BNP covenants and agrees with the Company that:
(i) neither BNP nor any of its Affiliates will take any action
resulting in a majority of the Directors being BNP nominees or otherwise
not constituting Independent Directors (other than as a result of a
transaction permitted by clauses (ii) or (iii) below);
(ii) neither BNP nor any of its Affiliates will acquire Beneficial
Ownership of Equity Securities such that following such acquisition, the
Ownership Percentage would be greater than the Permitted Ownership
Percentage that was in effect on the date on which the Standstill Period
expired, except in transactions effected pursuant to the procedures
described in paragraph (b) below; and
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(iii) neither BNP nor any of its Affiliates will take any other action
that could result in an increase in the Ownership Percentage or other
material transactions between the Company and BNP or its Affiliates except
in transactions effected pursuant to the procedures described in paragraph
(b) below.
(b) During the Post-Standstill Period, BNP may submit a Business
Combination Proposal to the Executive Committee on a confidential basis,
whereupon (if BNP has notified the Company that it is submitting such Business
Combination Proposal pursuant to this Section 2.4(b) and not pursuant to the
first sentence of Section 2.2(c)) the Executive Committee shall promptly (but no
later than 10 days after the submission of such proposal) retain an Independent
Investment Banking Firm and outside legal counsel to assist the Executive
Committee in its review of the proposal and shall follow the procedures
hereinafter set forth. The fees and expenses of such financial and legal
advisors shall be borne by the Company. If the Independent Investment Banking
Firm is unable to conclude within a reasonable period of time (not exceeding 60
days) following submission of such Business Combination Proposal to the
Executive Committee that such Business Combination Proposal is fair from a
financial point of view to the stockholders of the Company (other than BNP and
its Affiliates), or concludes that it is inadequate, then BNP shall withdraw
such Business Combination Proposal and shall not submit another Business
Combination Proposal to the Company pursuant to this Section 2.4(b) for a period
of twelve months from the date on which such Independent Investment Banking Firm
reaches such conclusion. If the Independent Investment Banking Firm concludes
that the Business Combination Proposal is fair and adequate, then the Executive
Committee shall cause the proposal to be submitted to the full Board for
consideration. If a majority of the Independent Directors on the Board shall
conclude, after considering the advice of such financial and legal advisors as
such Independent Directors consider relevant and material in the circumstances,
that the transaction contemplated by such Business Combination Proposal is not
in the best interests of all of the Company's stockholders at that time, then
BNP shall withdraw such Business Combination Proposal and shall not submit
another Business Combination Proposal to the Company pursuant to this Section
2.4(b) for a period of twelve months from the date on which the Independent
Directors make such conclusion. Approval of such Business Combination Proposal
by the Board shall require the affirmative vote of a majority of the Independent
Directors then on the Board (in addition to any other vote required by
applicable law) and may be subject to any "market check" procedures for a
reasonable period of time (not exceeding 90 days) (the "Market Check Period") as
the Board (including a majority of the Independent Directors of the Board) may
determine to be appropriate in the circumstances. If within the Market Check
Period the Company receives from a Third Party a superior proposal (a "Superior
Proposal") to the Business Combination Proposal submitted by BNP (as determined
in good faith by the Board (including a majority vote of the Independent
Directors)), the Company shall offer BNP a reasonable period after delivery to
BNP of notice of such Superior Proposal (but no more than five Business Days) to
revise its Business Combination Proposal so that the terms thereof, as so
revised, are superior to the Superior Proposal (as determined in good faith by
the Board (including a majority vote of the Independent Directors)). If BNP does
not submit, within such five Business Day period, a revised proposal which is
determined in accordance with the preceding sentence to be superior to the
Superior Proposal, the Board may cause the Company to enter into an agreement
for such Superior Proposal and recommend acceptance thereof to the stockholders
of the Company. In such event, BNP agrees that it shall, and shall cause each of
its Affiliates to, in connection with any vote or action by written consent of
the stockholders of the Company with respect to such agreement, vote or cause to
be voted (or execute or cause to be executed a written consent in respect of)
all Voting Securities, if any, Beneficially Owned by BNP and its Affiliates in
favor of the Superior Proposal (or, if such Superior Proposal is a tender or
exchange offer, tender and cause each of its Affiliates to tender, its Equity
Securities) unless the Board withdraws its recommendation of such Superior
Proposal prior to the date on which such vote is held or such action by written
consent becomes effective or the consummation of such tender or exchange offer
occurs, as the case may be. If the Company shall not have received a Superior
Proposal during the Market Check Period, then the Company and BNP may enter into
a definitive agreement (containing customary terms and conditions, including
customary "fiduciary out" provisions) to consummate BNP's Business Combination
Proposal (it being understood that, following the execution of a definitive
agreement with the Company, BNP need not vote its shares in favor of any
alternative proposal or tender its shares in any alternative tender or exchange
offer which is thereafter entered into by the Company or made by any Third
Party); provided that the Board has received a
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reaffirmation as of such date of the fairness opinion described above in form
and substance reasonably and in good faith satisfactory to a majority of the
Independent Directors. If the Independent Investment Banking Firm shall be
unable to reaffirm such fairness opinion, the Company shall give notice thereof
to BNP which shall have 15 days to improve its proposal so that such opinion may
be reaffirmed and if, after submission of an improved proposal, if any, such
opinion is still not reaffirmed, then the proposed transaction shall terminate
and BNP may not submit another such proposal under this Section 2.4(b) for 12
months following the date such proposal is first submitted by the Executive
Committee to the Board for consideration.
(c) During the Post-Standstill Period, BNP may contact or respond to
contacts from other stockholders of the Company regarding the business and
affairs of the Company on a confidential basis, but, for the first four years of
such Post-Standstill Period, BNP may not, and may not permit any of its
Affiliates to, either directly or through others (i) solicit, finance or become
a participant in a solicitation (as such terms are defined in Rule 14a-1 of Rule
14A and Instruction 3 of Item 4 of Schedule 14A, respectively, under the
Exchange Act) of proxies or written consents, (A) for the election of Non-Class
A Directors of the Company, (B) for any stockholder proposal opposed by the
Board or (C) against any proposal submitted to the stockholders and recommended
by the Board, (ii) make or submit any proposal to the Company's stockholders
opposed by the Board, (iii) make any public statement as to any intention or
plan to take actions not consistent with the then-applicable terms of this
Agreement (including, without limitation, Section 2.4(b)), (iv) publicly
announce (except as otherwise legally required) any intention to dispose of some
or all of its Equity Securities or acquire additional Equity Securities, (v)
form or join a Group with the objective or effect of effecting a Change of
Control of the Company, (vi) take any action inconsistent with the procedures
described in paragraph (b) above or (vii) publicly request or encourage others
to request that the Company waive any of the then-applicable provisions or
limitations contained in this Agreement.
ARTICLE III
TRANSFER RESTRICTIONS
SECTION 3.1 General Transfer Restrictions. The right of BNP and its
Affiliates to Transfer any Equity Securities is subject to the restrictions set
forth in this Article III, and no Transfer of Equity Securities by BNP or any of
its Affiliates may be effected except in compliance with this Article III. Any
attempted Transfer in violation of this Agreement shall be of no effect and null
and void, regardless of whether the purported transferee has any actual or
constructive knowledge of the Transfer restrictions set forth in this Agreement,
and shall not be recorded on the stock transfer books of the Company.
SECTION 3.2 Restrictions on Transfer. (a) Without the prior written
consent of the Company, except as provided in paragraph (d) below, during an
initial period of eighteen months following the Closing, BNP shall not, and
shall cause its respective Affiliates not to, Transfer any Equity Securities;
provided, that the foregoing restriction shall not prohibit BNP or any of its
Affiliates from Transferring any Equity Securities (x) to the Company (or its
designee) pursuant to Section 2.1(f), (y) in the manner provided in clause (i)
or (ii) of paragraph (c) below to the extent such Transfer is required pursuant
to Section 2.1(f) or 2.1(h) or the second proviso to the definition of
"Ownership Percentage" or (z) as provided in clause (iii) of paragraph (c)
below.
(b) For the period between eighteen months and two years following the
Closing, the restrictions set forth in paragraph (a) above shall continue to
apply to Transfers of Equity Securities by BNP or its Affiliates except that BNP
and its Affiliates may also effect Transfers of Equity Securities as provided in
clause (ii) of paragraph (c) below.
(c) Following the second anniversary of the Closing, except as provided in
paragraph (d) below, BNP shall not, and shall cause its Affiliates not to,
Transfer any Equity Securities; provided that the foregoing restriction shall
not be applicable to Transfers (i) of Company Common Shares in a
Commission-registered underwritten offering in which no Transfer of a number of
shares of Company Common Stock representing more than 2% of the outstanding
Company Common Shares is made to any Person or Group, (ii) pursuant to the
restrictions of Rule 144 under the Securities Act applicable to sales of
securities by Affiliates of an issuer
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(regardless of whether BNP or its Affiliates is deemed at such time to be an
Affiliate of the Company), (iii) to an Affiliate of BNP which agrees in writing
with the Company to be bound by this Agreement as fully as if it or they were an
initial signatory hereto, (iv) pursuant to a tender or exchange offer by a Third
Party that is not rejected by the Board within the time period prescribed by the
Exchange Act and the rules and regulations promulgated by the Commission
thereunder, (v) of no more than 4.9% of the outstanding Company Common Shares to
any one institutional investor which (A) purchases such shares in the normal
course of its investment business, for investment purposes only, and with no
intention of influencing control of the Company and which purchases such shares
pursuant to an exemption from the registration requirements of the Securities
Act, and (B) provides appropriate certification to the Company as to the
foregoing matters; provided that neither BNP nor any of its Affiliates may
exercise its right to Transfer shares as described in this clause (v) on more
than one occasion in any 12-month period, (vi) of any number of shares to any
one or more institutional investors (but not more than 20% of the
then-outstanding Company Common Shares to any one bank holding company, as such
term is defined Section 2(c)(1) of Regulation Y, or foreign bank or foreign
banking organization, as such terms are defined in Sections 211.21(m) and (n) of
Regulation K under the International Banking Act of 1978, as amended) who are
reasonably acceptable to the Board (such approval not to be unreasonably
withheld or delayed) and who agree in writing with the Company to be bound by
the then-applicable provisions of this Agreement as fully as if it or they were
an initial signatory hereto (a "Qualified Transferee"), or (vii) pursuant to a
bona fide pledge to secure money borrowed by BNP or any Affiliate, entered into
in good faith and not for purposes of avoiding the restrictions set forth in
this Agreement; provided (x) that such pledge is made to a Person who is a
Qualified Transferee pursuant to clause (vi) above (a "Qualified Pledgee"), (y)
the number of Equity Securities pledged complies with the limitations as to
amount set forth in clause (vi) above and (z) at the time such pledge is made,
such Qualified Pledgee agrees in writing to be bound by the then-applicable
provisions of this Agreement as fully as if it was an initial signatory hereto;
subject, in the case of Transfers pursuant to clauses (i), (v) and (vi), to the
Company's right of first refusal described in Section 3.3. In the case of any
Transfer to an Affiliate of BNP in accordance with clause (iii), BNP shall (a)
be liable for the performance by such Affiliate of its obligations under this
Agreement, and (b) act, and cause such Affiliate to agree that BNP shall act, as
agent for such Affiliate in connection with the receipt or giving of any and all
notices or approvals under this Agreement. Any Affiliate or Qualified Transferee
to whom BNP Transfers Equity Securities pursuant to clauses (iii) or (vi) of
this Section, respectively, shall be referred to herein as a "Permitted
Transferee".
(d) If at any time a court of competent jurisdiction or an applicable
regulatory agency or authority orders BNP or its Affiliates to dispose of any
and all of the Equity Securities Beneficially Owned by them, then BNP or such
Affiliate may dispose of such Equity Securities in transactions described in
clauses (i) through (vi) of paragraph (c) above, in each case only to the extent
necessary to comply with such order, subject, in each case, to the extent
provided in Section 3.3, to a right of first refusal by the Company as set forth
in such Section 3.3.
SECTION 3.3 Right of First Refusal. Prior to making any offer to Transfer
any Equity Securities pursuant to clauses (i), (v) or (vi) of Section 3.2(c),
BNP and/or its Affiliates proposing to effect such Transfer (collectively, the
"Transferring Party") shall give the Company the opportunity to purchase such
Equity Securities in the following manner:
(a) The Transferring Party shall give written notice (the "Transfer
Notice") to the Company, specifying (i) the Person to whom the Transferring
Party proposes to make such Transfer (in the case of clauses (v) or (vi) of
Section 3.2(c)) and the proposed manner of Transfer, (ii) the number or
amount and description of the Equity Securities to be Transferred, (iii)
except in the case of a public offering, the Offer Price (as defined
below), and (iv) all other material financial and economic terms and
conditions of the proposed Transfer, including a description of any
non-cash consideration sufficiently detailed to permit valuation thereof.
The Transfer Notice shall constitute an offer to the Company (or its
designee, as provided below) which is irrevocable during the period
described in paragraph (c) below, to sell to the Company (or any permitted
designee) the Equity Securities which are the subject of such Transfer
Notice upon the terms set forth in this Section 3.3 and the Transfer
Notice. The Company may elect to purchase (or cause its permitted designee
to purchase) all (but not less than all) the Equity Securities
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that are the subject of the Transfer Notice for cash at the Offer Price
(or, if the Offer Price includes property other than cash, the equivalent
in cash of such property as determined in accordance with Section 3.3(d))
and upon the other financial and economic terms and conditions specified in
the Transfer Notice.
(b) For purposes of this Section 3.3, "Offer Price" shall be defined
to mean on a per share basis, or in the case of Equity Securities other
than Company Common Shares, a per unit basis, (i) in the case of a public
offering, the Current Market Value per Equity Security as of the date the
election notice of the Company hereinafter described is delivered, and (ii)
in the case of a privately-negotiated transaction, the proposed sale price
per Equity Security.
(c) If the Company elects to purchase the offered Equity Securities,
it shall give notice to the Transferring Party within 15 Business Days of
its receipt of the Transfer Notice of its election, which notice shall
include the date set for the closing of such purchase, which date shall be
no later than five Business Days following the delivery of such election
notice, or, if later, five Business Days after receipt of all required
regulatory approvals. In the event that the number of Equity Securities
purchased by the Company in connection with its exercise of its rights
pursuant to this Section 3.3 in any twelve-month period would exceed 4.9%
of the total number of outstanding Company Common Shares at the date of the
Transfer Notice (or, if more than one Transfer Notice has been given, the
date of the last of such Transfer Notices), the Company may, at its option,
designate any Person to purchase the Equity Securities subject to such
Transfer Notice; provided that if the closing of the purchase of the Equity
Securities by any such designee is delayed by reason of the need by such
designee to obtain required regulatory approvals beyond the date on which
the Company could have consummated such purchase pursuant to the first
sentence of this Section 3.3(c), the purchase price for such Equity
Securities shall also include interest on the Offer Price for the Equity
Securities subject to the Transfer Notice at the Prime Rate from the date
on which the Company would have been legally permitted to consummate such
purchase to but excluding the date that the designee actually purchases the
shares.
(d) If (i) the consideration specified in the Transfer Notice consists
of, or includes, consideration other than cash or a publicly traded
security, or (ii) any property other than Company Common Stock is proposed
to be transferred in connection with the transaction to which the Transfer
Notice relates, then the price payable by the Company under this Section
3.3 for the Equity Securities being transferred shall be equal to the Fair
Market Value of such consideration which shall be determined in the manner
set forth in Section 3.3(f). Notwithstanding anything to the contrary
contained in this Section 3.3, the time periods applicable to an election
by the Company to purchase the offered securities set forth in Section
3.3(a) shall not be deemed to commence until the Fair Market Value has been
determined. The Company and BNP shall cooperate and use their respective
best efforts to cause the Fair Market Value to be determined as promptly as
practicable but in no event later than 10 Business Days after the receipt
by the Company of the Transfer Notice.
(e) If the Company does not respond to the Transfer Notice within the
required response time period or elects not to purchase the offered Equity
Securities, the Transferring Party shall be free to complete the proposed
Transfer (to the same proposed transferee, in the case of a
privately-negotiated transaction) on terms no less favorable to the
Transferring Party than those set forth in the Transfer Notice, provided
that (x) such Transfer is closed within (i) 90 days after the latest of (A)
the expiration of the foregoing required response time periods, (B) the
receipt by BNP of the foregoing election notice by the Company or (C) the
receipt of all regulatory approvals and consents, and the expiration or
termination of all waiting periods in respect thereof, necessary to
consummate such proposed Transfer or (ii) in the case of a public offering,
within 20 days of the declaration by the Commission of the effectiveness of
a registration statement filed with the Commission pursuant to the
Registration Rights Agreement, and (y) the price at which the Equity
Securities are transferred must be equal to or higher than the Offer Price
(except in the case of a public offering, in which case the price at which
the Equity Securities are sold (before deducting underwriting discounts and
commissions) shall be equal to at least 90% of the Offer Price). Any Equity
Securities which continue to be held by the Transferring Party following
such period shall again be subject to the provisions of this Section 3.3.
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(f) In the event that a determination of Fair Market Value must be
made pursuant to Section 3.3(d), the Company and BNP shall select a
mutually acceptable Independent Investment Banking Firm which shall
promptly make a determination (an "Appraisal") of the Fair Market Value of
the applicable consideration or the property proposed to be transferred.
Such Independent Investment Banking Firm's determination of the Fair Market
Value shall be conclusive and binding absent manifest error. The fees and
expenses of such Independent Investment Banking Firm shall be borne by the
Company.
SECTION 3.4 Transferees. Any Permitted Transferee shall be subject to the
then-applicable obligations of BNP under this Agreement as if such Permitted
Transferee were BNP; provided that in the case of a Transfer by BNP or one or
more of its Affiliates of less than all of the Equity Securities Beneficially
Owned by BNP and its Affiliates to a Qualified Transferee or Qualified Pledgee,
the Permitted Ownership Percentage applicable to each such Qualified Transferee
and its Affiliates and each such Qualified Pledgee and its Affiliates shall be
equal to the Ownership Percentage of such Qualified Transferee and its
Affiliates or such Qualified Pledgee and its Affiliates, respectively,
immediately following such Transfer, subject to adjustment as provided herein.
Prior to the initial acquisition of Beneficial Ownership of any Equity
Securities by any Permitted Transferee, and as a condition thereto, BNP agrees
to cause such Permitted Transferee to agree in writing with the Company to be
bound by the terms and conditions of this Agreement to the extent described in
Section 3.2(c) and this Section 3.4. Except as otherwise contemplated by this
Agreement BNP agrees not to cause or permit any Permitted Transferees who are
Affiliates of BNP to cease to qualify as an Affiliate of BNP so long as such
Permitted Transferees Beneficially Own any Company Common Shares, and if any
such Permitted Transferee shall cease to be so qualified, such Permitted
Transferee shall automatically upon the occurrence of such event cease to be a
"Permitted Transferee" for any purpose under this Agreement, and BNP shall
immediately cause all Company Common Shares Beneficially Owned by such entity to
be Transferred to BNP or another Permitted Transferee.
ARTICLE IV
VOTING
SECTION 4.1 Voting on Certain Matters. (a)(i) Each Class A Holder may vote
its shares of Class A Common Stock in its sole discretion with respect to Class
A Nominees for election as Class A Directors.
(ii) Unless an Acquisition Restrictions Termination Event shall have
occurred and the Acquisition Restrictions have not been reinstated pursuant to
the terms of this Agreement (but only until such time, if any, as the
Acquisition Restrictions shall have been reinstated), BNP shall, and shall cause
each of its Affiliates who Beneficially Owns Voting Securities to, at any annual
or special meeting of securityholders at which members of the Board are to be
elected or in connection with a solicitation of consents through which members
of the Board are to be elected, vote or cause to be voted (or act by written
consent with respect to) all Voting Securities (other than shares of Class A
Common Stock), if any, Beneficially Owned by it in the same proportion as the
stockholders of the Company other than BNP and its Affiliates vote.
(b) BNP may, and may cause each of its Affiliates to, in connection with
any vote or action by written consent of the stockholders of the Company (other
than with respect to any vote or action by written consent described in
paragraph (a)(ii) of this Section 4.1 or in Section 2.4(b) with respect to a
Superior Proposal, in which event such Voting Securities shall be voted or
caused to be voted as provided therein), vote or cause to be voted all Voting
Securities Beneficially Owned by it, as it shall elect in its sole discretion.
SECTION 4.2 Irrevocable Proxy. (a) Unless an Acquisition Restrictions
Termination Event shall have occurred and the Acquisition Restrictions have not
been reinstated pursuant to the terms of this Agreement (but only until such
time, if any, as the Acquisition Restrictions shall have been reinstated), at
least ten Business Days prior to any meeting of stockholders, BNP shall, and
shall cause each of its Affiliates who own Voting Securities to, deliver a duly
executed irrevocable proxy to the Company specifying how BNP or such Affiliate
shall vote such Voting Securities (to the extent such Voting Securities are
entitled to vote thereon) as to the election or removal of Non-Class A Directors
or a Superior Proposal described in Section 2.4(b) if such
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matters are scheduled to be brought before the meeting (which shall be in
accordance with Section 4.1(a)(ii) or Section 2.4(b), as applicable). Such proxy
shall appoint such officers of the Company as the Board shall designate as BNP's
or such Affiliates' (as the case may be) true and lawful proxies and
attorneys-in-fact as to the matters to be voted at the meeting and shall state
that it is irrevocable.
(b) Unless an Acquisition Restrictions Termination Event shall have
occurred and the Acquisition Restrictions have not been reinstated pursuant to
the terms of this Agreement (but only until such time, if any, as the
Acquisition Restrictions shall have been reinstated), in connection with any
proposed action by written consent of the stockholders relating to the election
or removal of Non-Class A Directors or the approval of a Superior Proposal
described in Section 2.4(b), BNP shall, and shall cause each of its Affiliates
who own any Voting Securities to, execute and deliver its written consent to the
Company with respect to any Voting Securities Beneficially Owned by BNP or its
Affiliates (to the extent such Voting Securities are entitled to execute a
written consent with respect to such matters). Any written consent delivered by
BNP or any of its Affiliates shall be made in accordance with Section 4.1(a)(ii)
or Section 2.4(b), as applicable.
SECTION 4.3 Quorum. BNP shall, and shall cause each of its Affiliates who
hold Voting Securities to, be present in person or represented by proxy at all
meetings of securityholders of the Company to the extent necessary so that all
Voting Securities Beneficially Owned by BNP and its Affiliates shall be counted
as present for the purpose of determining the presence of a quorum at such
meetings.
ARTICLE V
CORPORATE GOVERNANCE
SECTION 5.1 Composition of the Board. (a) Effective as of the Closing, the
Board shall initially be comprised of 20 directors of whom nine Directors shall
be Class A Directors nominated and elected solely by the Class A Holders. Such
initial nine Class A Directors shall be apportioned equally among the three
classes of Directors of the Company as determined by the Class A Holders. Prior
to the Closing, the Board shall take such action as is required under applicable
law (including increasing the size of the Board if necessary) to cause to be
elected to the Board, effective upon the Closing, the initial Class A Nominees.
Following the Closing, the size of the Board may be increased or decreased as
permitted by the By-Laws and Restated Charter of the Company as in effect from
time to time.
(b) At least 30 days prior to its distribution of its proxy statement or
information statement with respect to each meeting of stockholders at which
Directors are to be elected, the Company shall notify the Class A Holders as to
the number of Class A Nominees that the Class A Holders are entitled to
designate (calculated based on the estimated Ownership Percentage as of the
anticipated record date). BNP, on behalf of the Class A Holders, shall notify
the Company of the identity of the Class A Nominees designated pursuant to this
Section and shall provide to the Company any information regarding such Class A
Nominees required by the Exchange Act and the rules and regulations promulgated
by the Commission thereunder to be set forth in such proxy statement or
information statement (the "Proxy Information") on or prior to the close of
business on the later of (x) the 15th day following its receipt of the Company's
notice and (y) the 30th day prior to the Company's anticipated distribution of
such proxy statement or information statement. Promptly following the record
date, the Company shall advise the Class A Holders of the actual Ownership
Percentage as of the record date and shall provide the Class A Holders with a
reasonable opportunity to withdraw the name or names of previously submitted
Class A Nominees (in the event that such holders are entitled to elect fewer
directors than previously estimated) or supplement the list of Class A Nominees
(in the event that such holders are entitled to nominate more Class A Nominees
than previously estimated). The Proxy Information, on the date the proxy
statement is first mailed to the Company's stockholders and on the date of the
related stockholders meeting, shall not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
(c) The Company shall provide notice of any meeting of the Board of
Directors for which advance notice is required to be given under the By-Laws in
the manner and at the times required by such By-Laws. In order
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to assure timely receipt of any such notice, (i) BNP shall provide to the
Company, or shall cause each Class A Director to provide to the Company (A) a
fax number to which such notices may be sent by fax, or an e-mail address to
which such notices may be sent by electronic e-mail and (B) an address to which
notices may be sent by mail or recognized courier service, and (ii) the Company
shall provide any notice to each Class A Director of a Board meeting required by
the preceding sentence (A) by fax or e-mail (as specified by such Director) not
later than the date on which such notice is first required to be sent or given,
and (B) by mail or recognized courier service, sent on such date, in each case
in accordance with the delivery instructions provided by BNP or such Director
from time to time in accordance with clause (i) or if no such instructions are
provided, to such Class A Director in care of BNP at its principal executive
offices. Each Class A Director shall be responsible for providing the Company
with the information specified in clause (i) of the preceding sentence and any
changes to such information that may be applicable from time to time.
(d) No Person who is not an officer of BNP or any of its Affiliates shall
be a Class A Nominee and no Person who is not an officer of BNP or any of its
Affiliates shall be permitted to fill any vacancy created with respect to any
Class A directorship unless, in either case, such Person shall be reasonably
satisfactory to the Board (as evidenced by a resolution duly adopted by the
Directors constituting a majority of the entire Board prior to the time such
Person becomes a Class A Nominee).
SECTION 5.2 Agenda. If BNP wishes to include a matter on the agenda for
any meeting of the Board, BNP shall communicate such matter to the Chief
Operating Officer of the Company who may communicate such matter to the Chief
Executive Officer of the Company for consideration. The Chief Executive Officer
shall place such matters on the agenda as soon as reasonably practicable, in his
judgment, subject to the terms hereof.
SECTION 5.3 Committees. So long as the Ownership Percentage is at least
20%, the Company shall cause each committee of the Board to, subject to any
requirements under the Exchange Act or applicable securities exchange or market,
include at the request of BNP a number of Class A Directors proportionate to the
Ownership Percentage; provided that in no event shall BNP be entitled to
designate a majority of the members of any such committee. Subject to the
foregoing, the Board shall have the power at any time to fill vacancies in, to
change the membership of or to discharge any committee. BNP and the Company
agree that it is their understanding and intention that the provisions of
Section 4.1 of the By-Laws or paragraph (b) of Article Sixth of the Restated
Charter shall not be construed to limit the rights of BNP under this Section
5.3.
SECTION 5.4 Certain Officers. (a) Upon the Closing, the present Chief
Executive Officer of the Company shall remain the Chief Executive Officer of the
Company and First Hawaiian Bank and the CEO of Bank of the West shall become the
Chief Operating Officer of the Company and remain the Chief Executive Officer of
Bank of the West. Each of these officers shall continue to serve in those
respective capacities unless removed by a vote of two-thirds of the Board or
until their death, voluntary retirement or resignation. Each party hereto agrees
not to take, and to cause its Affiliates and, in the case of BNP, to use its
reasonable best efforts to cause any Class A Directors nominated by it not to
take, any action inconsistent with the foregoing sentence. Upon a vacancy
occurring in either of those positions for any reason, a nominating committee of
the Board shall be formed consisting of two Class A Directors (selected by the
Class A Directors) and two Independent Directors (selected by the Non-Class A
Directors). Such nominating committee shall nominate an individual to fill the
vacancy and will submit the nomination to the full Board for approval by a
two-thirds vote. If the initial four director nominating committee cannot agree
on a nomination, the members of the committee will jointly select a fifth
director, who must be a Non-Class A Director, to resolve the disagreement by a
majority vote of such nominating committee and will submit the nomination to the
full Board for a vote in accordance with the terms of the By-Laws.
(b) BNP shall have the right to designate a deputy chief auditor of the
Company and any successor thereto from time to time, provided that such
individual (i) is or thereupon becomes an employee of the Company or First
Hawaiian Bank, and (ii) is reasonably acceptable to both the Chief Executive
Officer and the Chief Operating Officer of the Company.
SECTION 5.5 Regulatory Cooperation. The Company and BNP agree to
cooperate, and BNP agrees to cause its Affiliates to reasonably cooperate, with
each other to prepare and file on a timely basis all
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necessary notices, applications for approvals and consents and other documents
and information with all applicable regulatory authorities that may be necessary
in connection with any acquisitions or divestitures of any companies,
businesses, branches or assets, or for the commencement of any de novo
activities, by the Company or any of its Subsidiaries as may from time to time
in the future be approved or authorized by the Board. The Company agrees to
reimburse BNP for all actual, documented and reasonable out-of-pocket expenses
incurred by BNP in connection with making or processing any such filing.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Conflicting Agreements. Each party represents and warrants
that it has not granted and is not a party to any proxy, voting trust or other
agreement that is inconsistent with or conflicts with any provision of this
Agreement.
SECTION 6.2 Duration of Agreement. Except as otherwise provided in this
Agreement, the rights and obligations of BNP and its Affiliates under this
Agreement shall terminate at such time as (i) the Ownership Percentage is less
than 10% or (ii) (A) upon the consummation of a transaction provided for in a
Business Combination Proposal made pursuant to Section 2.4(b) or pursuant to any
other section hereof in accordance with the procedures set forth in Section
2.4(b) or (B) upon consummation of any other tender or exchange offer set forth
in a Business Combination Proposal in which at least 90% of the outstanding
Company Common Shares (other than Company Common Shares Beneficially Owned by
BNP and its Affiliates) are acquired by BNP and its Affiliates (the "Term").
SECTION 6.3 Ownership Information. (a) For purposes of this Agreement,
BNP, in determining the amount of outstanding Equity Securities, may rely upon
information set forth in the most recent quarterly or annual report, and any
current report subsequent thereto, filed by the Company with the Commission,
unless the Company shall have updated such information by delivery of notice to
BNP.
(b) BNP shall deliver to the Company, promptly (but in no event more than
two Business Days) after any Transfer of Equity Securities, an accurate written
report specifying the amount and class of Equity Securities Transferred in such
transaction and the amount of each class of Equity Securities owned by BNP and
its Affiliates after giving effect to such transaction; provided, however, that
no such report need be delivered with respect to any Transfer of Equity
Securities by BNP and its Affiliates that is reported in a statement on Schedule
13D filed with the Commission and delivered to the Company by BNP in accordance
with Section 13(d) of the Exchange Act. In addition, upon the reasonable request
of the Company, BNP shall deliver to the Company a written notice specifying the
amount of Equity Securities then Beneficially Owned by BNP and its Affiliates.
The Company shall be entitled to rely on the most recently delivered report,
statement on Schedule 13D or notice for all purposes of this Agreement, unless
BNP shall have updated such information by delivery of a subsequent report,
statement on Schedule 13D or notice.
SECTION 6.4 Further Assurances. At any time or from time to time after the
date hereof, the parties agree to cooperate with each other, and at the request
of any other party, to execute and deliver any further instruments or documents
and to take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties
hereunder.
SECTION 6.5 Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement, and no
giving of any consent provided for hereunder, shall be effective against the
Company or BNP unless such modification, amendment, waiver or consent is
approved by a majority of the Directors then in office, a majority of the
Independent Directors then in office and a majority of the Class A Directors
then in office. The failure of any party to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
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SECTION 6.6 Severability. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
SECTION 6.7 Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement and the Merger Agreement, together with the several
agreements and other documents and instruments referred to therein or annexed
thereto, embody the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, that may have related to the subject matter hereof in any way.
Without limiting the generality of the foregoing, to the extent that any of the
terms hereof are inconsistent with the rights or obligations of BNP under any
other agreement with the Company, the terms of this Agreement shall govern.
SECTION 6.8 Successors and Assigns. Neither this Agreement nor any of the
rights or obligations of any party under this Agreement shall be assigned, in
whole or in part (except by operation of law pursuant to a merger whose purpose
is not to avoid the provisions of this Agreement), by any party without the
prior written consent of the other parties hereto except as and to the extent
expressly provided for in Article III. Subject to the foregoing, this Agreement
shall bind and inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
SECTION 6.9 Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
SECTION 6.10 Remedies. (a) Each party hereto acknowledges that money
damages would not be an adequate remedy in the event that each and every one of
the covenants or agreements in this Agreement are not performed in accordance
with their terms, and it is therefore agreed that, in addition to and without
limiting any other remedy or right it may have, the non-breaching party will
have the right to an injunction, temporary restraining order or other equitable
relief in any court of competent jurisdiction enjoining any such breach and
enforcing specifically each and every one of the terms and provisions hereof.
Each party hereto agrees not to oppose the granting of such relief in the event
a court determines that such a breach has occurred, and to waive any requirement
for the securing or posting of any bond in connection with such remedy.
(b) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
SECTION 6.11 Notices. Any notice, request, claim, demand or other
communication under this Agreement (each a "Notice") shall be in writing, shall
be either personally delivered, sent by reputable overnight courier service
(charges prepaid), sent by facsimile to the address for such Person set forth
below or such other address as the recipient party has specified by prior
written notice to the other parties hereto and shall be deemed to have been
given hereunder on (i) the date of delivery if sent by messenger, (ii) on the
Business Day following the Business Day on which delivered to a recognized
courier service if sent by overnight courier or (iii) upon confirmation of
receipt, if sent by fax.
If to the Company:
First Hawaiian, Inc.
999 Bishop Street
Honolulu, Hawaii 96813
Attention: Howard H. Karr
Telephone: (808) 525-8800
Fax: (808) 533-7844
with a copy to:
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Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Lee Meyerson, Esq.
Telephone: (212) 455-2000
Fax: (212) 455-2502
If to BNP:
Banque Nationale de Paris
Affaires Juridiques et Fiscales
Affaires Juridiques Internationales
1, Boulevard Haussmann
75009 Paris
France
Attention: General Counsel
Telephone: (011) (33) (1) 40.14.26.78
Fax: (011) (33) (1) 40.14.86.30
with a copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Attention: Rodney R. Peck, Esq.
Telephone: (415) 983-1000
Fax: (415) 983-1200
and
Cleary Gottlieb Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Robert L. Tortoriello, Esq.
Telephone: (212) 225-2000
Fax: (212) 225-3999
SECTION 6.12 Governing Law; Consent to Jurisdiction. (a) This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware without giving effect to the principles of conflicts of law. Each of
the parties hereto hereby irrevocably and unconditionally consents to submit to
the non-exclusive jurisdiction of the courts of the State of New York and of the
United States of America, in each case located in the County of New York, for
any action, proceeding or investigation in any court or before any governmental
authority ("Litigation") arising out of or relating to this Agreement and the
transactions contemplated hereby. Each of the parties hereto hereby irrevocably
and unconditionally waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any such Litigation, the defense of
sovereign immunity, any claim that it is not personally subject to the
jurisdiction of the aforesaid courts for any reason other than the failure to
serve process in accordance with this Section 6.12, that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and to the fullest extent permitted by applicable law, that the
Litigation in any such court is brought in an inconvenient forum, that the venue
of such Litigation is improper, or that this Agreement, or the subject matter
hereof, may not be enforced in or by such courts and further irrevocably waives,
to the fullest extent permitted by applicable law, the benefit of any defense
that would hinder, fetter or delay the levy, execution or collection of any
amount to which the party is entitled pursuant to the final judgment of any
court having jurisdiction. Each of the parties irrevocably and unconditionally
waives, to the
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fullest extent permitted by applicable law, any and all rights to trial by jury
in connection with any Litigation arising out of or relating to this Agreement
or the transactions contemplated hereby.
(ii) BNP hereby irrevocably designates French American Banking Corporation
(in such capacity, the "Process Agent"), with an office at 200 Liberty Street,
New York, New York, 10281 its designee, appointee and agent to receive, for and
on its behalf, service of process in such jurisdiction in any Litigation arising
out of or relating to this Agreement and such service shall be deemed complete
upon delivery thereof to the Process Agent; provided that in the case of any
such service upon the Process Agent, the party effecting such service shall also
deliver a copy thereof to BNP in the manner provided in Section 6.11. Each of
the Company and BNP further irrevocably consents to the service of process out
of any of the aforementioned courts in any such Litigation by the mailing of
copies thereof by registered mail, postage prepaid, to such party at its address
set forth in this Agreement, such service of process to be effective upon
acknowledgment of receipt of such registered mail. BNP expressly acknowledges
that the foregoing waiver is intended to be irrevocable under the laws of the
State of New York and of the United States of America; provided that BNP's
consent to jurisdiction and service contained in this Section 6.12 is solely for
the purpose referred to in this Section 6.12 and shall not be deemed to be a
general submission to said courts or in the State of New York other than for
such purpose. If the Process Agent shall cease to act as such or to exist, BNP
covenants that it shall appoint without delay another such agent reasonably
satisfactory to the Company.
SECTION 6.13 Legends. (a) Upon original issuance thereof, and until such
time as the same is no longer required under the applicable requirements of the
Securities Act or applicable state securities or "blue sky" laws or until such
time as the Equity Securities are no longer subject to the restrictions of this
Agreement, any certificate issued representing any Equity Securities held by
BNP, any of its Affiliates or any Qualified Transferee shall bear the following
conspicuous legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VOTING
AGREEMENTS, RESTRICTIONS ON TRANSFER AND CERTAIN OTHER LIMITATIONS SET
FORTH IN A CERTAIN STANDSTILL AND GOVERNANCE AGREEMENT DATED AS OF
, 1998 BETWEEN FIRST HAWAIIAN, INC. (THE
"COMPANY") AND BANQUE NATIONALE DE PARIS, AS THE SAME MAY BE AMENDED FROM
TIME TO TIME (THE "AGREEMENT"), COPIES OF WHICH AGREEMENT ARE ON FILE AT
THE PRINCIPAL OFFICE OF THE COMPANY. THE SECURITIES EVIDENCED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON VOTING PROVIDED FOR IN THE
AGREEMENT AND NO VOTE OF SUCH SECURITIES THAT CONTRAVENES SUCH AGREEMENT
SHALL BE EFFECTIVE."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
("TRANSFERRED") UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS SUCH TRANSFER IS EXEMPT FROM
REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS."
(b) Upon any acquisition by BNP or any of its Affiliates of additional
Equity Securities pursuant to this Agreement, BNP shall, and shall cause each of
its Affiliates to, submit any and all certificates representing such Equity
Securities to the Company so that the legends required by this Section 6.13 may
be placed thereon.
(c) The Company may make a notation on its records or give instructions to
any transfer agents or registrars for the Equity Securities in order to
implement the restrictions on Transfer set forth in this Agreement.
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(d) In connection with any Transfer of Equity Securities, the transferor
shall provide the Company with such customary certificates, opinions and other
documents as the Company may reasonably request to assure that such Transfer
complies fully with applicable securities and other laws.
(e) The Company shall use its reasonable best efforts to comply on a timely
basis with any request for any Transfer of Equity Securities made in accordance
with the provisions of this Agreement; provided, however, that the Company shall
not incur any liability for any delay in recognizing any Transfer of Equity
Securities if the Company in good faith reasonably believes that such Transfer
may have been or would be in violation in any material respect of the provisions
of the Securities Act, applicable state securities or "blue sky" laws, or this
Agreement.
(f) After such time as any of the legends described by this Section 6.13
are no longer required on any certificate or certificates representing the
Equity Securities and such Equity Securities are no longer subject to this
Agreement, upon the request of BNP, the Company will cause such certificate or
certificates to be exchanged for a certificate or certificates that do not bear
such legends.
SECTION 6.14 Interpretation. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
SECTION 6.15 Effectiveness. This Agreement shall become effective upon
consummation of the Merger and prior thereto shall be of no force or effect. If
the Merger Agreement shall be terminated in accordance with its terms, this
Agreement shall automatically be deemed to have been terminated and shall
thereafter be of no force or effect.
IN WITNESS WHEREOF, the parties hereto have executed this Standstill and
Governance Agreement as of the date first written above.
FIRST HAWAIIAN, INC.
By:
--------------------------------------
Name:
Title:
BANQUE NATIONALE DE PARIS
BY:
--------------------------------------
Name:
Title:
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EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT, dated as of
, 1998 (this "Agreement"), between First Hawaiian, Inc., a Delaware
corporation (the "Company") and Banque Nationale de Paris, a societe anonyme or
limited liability banking corporation organized under the laws of the Republic
of France ("BNP").
W I T N E S S E T H :
WHEREAS, the Company and BancWest Corporation, a corporation organized
under the laws of the State of California and a wholly owned subsidiary of BNP
("BancWest"), have entered into a Merger Agreement, dated as of May 28, 1998
(the "Merger Agreement"), pursuant to which and subject to the terms and
conditions thereof, among other things, BancWest will merge with and into the
Company (the "Merger"), and all of the outstanding shares of common stock,
without par value, of BancWest (the "BancWest Common") will be converted into
shares of Class A Common Stock (as defined herein); and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Company and BNP are entering into a Standstill and Governance Agreement,
dated as of the date hereof (the "Standstill Agreement"); and
WHEREAS, the Company and BNP are entering into this Agreement to establish
certain arrangements with respect to the shares of Class A Common Stock into
which the BancWest Common held by BNP will be converted in the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein:
"associate" shall have the meaning ascribed to such term in Rule 12b-2
under the Exchange Act.
"Business Day" means any day excluding Saturday, Sunday or other day
on which banks are required or authorized by law to be closed in the
Honolulu, Hawaii, San Francisco, California or Paris, France.
"Class A Common Stock" shall mean the Class A Common Stock, par value
$1.00 per share, of the Company.
"Company Common Shares" shall mean, collectively, the Class A Common
Stock and the Company Common Stock.
"Company Common Stock" shall mean Common Stock, par value $1.00 per
share, of the Company (other than the Class A Common Stock).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and any successor thereto, and the rules and regulations
promulgated thereunder, all as the same shall be in effect from time to
time.
"Holder" shall mean any party hereto (other than the Company) and
their permitted successors and assigns, and any Person who becomes a party
hereto.
"Holders' Representative" shall mean BNP, as representative of the
Holders.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof or any Group comprised of two or more of the
foregoing.
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"Registrable Securities" shall mean (x) the shares of Company Common
Stock issuable upon the transfer of the shares of Class A Common Stock that
may be owned from time to time by BNP and (y) any securities which have
been or may be issued or distributed in respect of Class A Common Stock
issued to BNP in the Merger or any other shares covered by clause (x) by
way of stock dividend, stock split or other distribution, recapitalization,
or reclassification, exchange offer, merger, consolidation or similar
transaction. As to any particular Registrable Securities, once issued such
Securities shall cease to be Registrable Securities when (i) such
securities shall have been sold pursuant to Rule 144 (or any successor
provision) under the Securities Act, (ii) a registration statement with
respect to the sale of such securities shall have become effective under
the Securities Act and such securities shall have been disposed of in
accordance with the plan of distribution set forth in such registration
statement, (iii) such securities shall have been otherwise transferred
(except pursuant to Section 3.2(c)(iii) or (vi) of the Standstill
Agreement), new certificates for them not bearing a legend restricting
further transfer shall have been delivered by the Company, and subsequent
disposition of them shall not require registration or qualification of them
under the Securities Act or any state securities or blue sky law then in
force or (iv) such securities shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without
limitation, (i) all SEC and securities exchange or NASD registration and
filing fees, (ii) all fees and expenses of complying with securities or
blue sky laws (including reasonable fees and disbursements of counsel for
the underwriters in connection with blue sky qualifications of the
Registrable Securities and, if the Registrable Securities are debt
securities, in connection with a determination of their eligibility for
investment under the laws of such jurisdictions as the managing
underwriters or holders of a majority of such Registrable Securities being
sold may designate to the extent provided in Section 4(d)), (iii) all
printing, duplicating, word processing, telephone, facsimile, messenger and
delivery expenses, (iv) all fees and expenses incurred in connection with
the listing of the Registrable Securities on any securities exchange or
quotation of the Registrable Securities on any inter-dealer quotation
system pursuant to Section 4(h), (v) the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any "cold comfort" letters required by or incident to such
performance and compliance, (vi) any fees and disbursements of underwriters
customarily paid by the issuers or sellers of securities, and (vii) if the
Registrable Securities are preferred stock or debt securities, all
applicable rating agency fees with respect thereto; provided, that
Registration Expenses shall exclude all underwriting discounts and
commissions, selling or placement agent or broker fees and commissions,
transfer taxes, if any, and the fees and disbursements of counsel for the
Holders.
"SEC" shall mean the Securities and Exchange Commission, or any
successor governmental body or agency.
"Securities Act" shall mean the Securities Act of 1933, as amended and
any successor thereto, and the rules and regulations promulgated
thereunder, all as the same shall be in effect from time to time.
2. Incidental Registrations.
(a) Right to Include Registrable Securities. Subject to the last sentence
of this Section 2(a) and Article III of the Standstill Agreement, each time the
Company proposes to register shares of Company Common Stock under the Securities
Act (other than a registration on Form S-4 or S-8, or any successor or other
forms promulgated for similar purposes), whether or not for sale for its own
account, pursuant to a registration statement on which it is permissible to
register Registrable Securities for sale to the public under the Securities Act,
it will give reasonably prompt written notice to each Holder of its intention to
do so and of such Holder's rights under this Section 2. Upon the written request
of any Holder made in good faith on behalf of such Holder and made within 15
days after the receipt of any such notice (which request shall specify the
number and type of Registrable Securities intended to be disposed of by such
Holder), the Company will use its reasonable best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by each such Holder; provided that (i)
if, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration
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statement filed in connection with such registration, the Company shall
determine for any reason not to proceed with the proposed registration or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to each Holder who has requested to include
Registrable Securities in such registration and in the case of a determination
not to register, thereupon shall be relieved, subject to paragraph (b) below, of
its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith) and in the case of a determination to delay registering,
the Company may delay registering the Registrable Securities for the same period
as the delay in registering such other securities, and (ii) if such registration
involves an underwritten offering by the Company, the Holders requesting to be
included in the Company's registration must sell their Registrable Securities to
the underwriters selected by the Company on the same terms and conditions as
apply to the Company, with such differences, including any with respect to
indemnification and contribution, as may be customary or appropriate in combined
primary and secondary offerings. Each Holder shall be permitted to withdraw all
or part of such Holder's Registrable Securities from a registration pursuant to
this Section 2(a) at any time prior to the effective date thereof; provided,
that the Company shall be entitled to reimbursement from a Holder of withdrawn
Registrable Securities for any registration fees incurred by the Company in
connection with the registration of such Registrable Securities. In order to
assure the efficient operation of this Section 2(a), BNP may, upon transfer of
any shares of Class A Common Stock in accordance with the provisions of the
Standstill Agreement, enter into appropriate agreements with any transferee who
would become a Holder to limit such transferee's rights to cause the Company to
register securities pursuant to this Section 2(a) without the consent of the
Holders' Representative; provided that BNP shall deliver a copy of any such
agreement to the Company. The Holders shall not have any rights under this
Section 2(a) if, during the twelve-month period preceding the date on which
notice would be required to be given by the Company pursuant to the first
sentence of this paragraph (a), the number of registrations requested by the
Holders pursuant to this Section 2(a), when combined with the number of
registrations registered pursuant to Section 3(a), would exceed three.
(b) Conversion to Demand Registration. In the event that the Company shall
determine for any reason not to proceed with a proposed registration as
described in paragraph (a) above, one or more Holders shall be permitted to
request that the Company continue such registration pursuant to, and subject to
all of the terms and conditions of, Section 3 (including, without limitation,
the limitations on the number, frequency, amount of securities to be requested
to be registered and the ability of the Company to delay registration or suspend
sales contained in Sections 3(a) and 3(g)). Any such request shall be made by
written notice delivered within two Business Days of receipt by such Holders of
the notice from the Company to the Holders of the Company's determination not to
proceed with the registration and shall count as a demand under Section 3(a).
(c) Expenses. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 2.
(d) Priority. If a registration pursuant to this Section 2 involves an
underwritten offering by the Company (as described in Section 2(a)(ii)) and the
managing underwriter with respect to such offering advises the Company and the
Holders electing to participate in such offering in writing that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number of securities which can be sold in such offering without
being likely to have an adverse effect on the offering of securities as
contemplated by the Company (including the price at which the Company proposes
to sell such securities), then the Company will include in such registration (i)
if the registration is a primary registration on behalf of the Company, (x)
first, all securities proposed to be sold by the Company, and (y) second, the
Registrable Securities requested to be included in such registration by the
Holders and any other Person requested to be included in such registration, pro
rata in accordance with the number of Registrable Securities proposed to be
included by each Holder and the number of securities proposed to be included by
such other Person, respectively, and (ii) if the registration is a secondary
registration on behalf of a Person other than the Company or a Holder of
Registrable Securities, (x) first, all the securities proposed to be sold by
such other Person and (y) second, the number of securities the Company proposes
to sell for its own account and the number of Registrable Securities which the
Holders have requested to be included in such registration
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pursuant to this Section 2, pro rata in accordance with the combined number of
securities proposed to be registered by the Company and the number of
Registrable Securities requested to be included, respectively.
(e) Custody Agreement and Power of Attorney. Upon the Company's request,
the Holders' Representative will execute and deliver a customary custody
agreement and power of attorney in form and substance reasonably satisfactory to
the Company with respect to the Registrable Securities to be registered pursuant
to this Section 2 (a "Custody Agreement and Power of Attorney"). The Custody
Agreement and Power of Attorney will provide, among other things, that the
Holders will deliver to and deposit in custody with the custodian and
attorney-in-fact named therein a certificate or certificates representing such
shares or other units of Registrable Securities (duly endorsed in blank by the
registered owner or owners thereof or accompanied by duly executed stock powers
in blank) and irrevocably appoint said custodian and attorney-in-fact as such
Holder's agent and attorney-in-fact with full power and authority to act under
the Custody Agreement and Power of Attorney on behalf of such Holder with
respect to the matters specified therein.
3. Registration on Demand.
(a) Right to Demand Registration. (i) Subject to Article III of the
Standstill Agreement, upon the written request of one or more Holders requesting
that the Company effect the registration under the Securities Act of all or part
of such Holders' Registrable Securities (constituting in the aggregate at least
2% but no more than 25% of the total number of Company Common Shares or other
Registrable Securities outstanding at the date of such request or such lesser
number as the managing underwriter, if any, of the offering may determine is the
maximum number of shares that may be offered without adversely affecting the
trading market of the Company Common Stock, as provided in paragraph (f) below)
and specifying the intended method of disposition thereof, the Company thereupon
will, as expeditiously as possible, use its reasonable best efforts to effect
the registration under the Securities Act of the Registrable Securities which
the Company has been so requested to register by such Holder, provided that the
Company shall be obligated to register Registrable Securities pursuant to this
Section 3(a) on only five occasions and no more than two demand registrations
may be requested in any twelve-month period, and provided further that the
Company shall not be obligated to effect more than three registrations pursuant
to this Section 3(a) and Section 2(a) in any twelve-month period. In order to
assure the efficient operation of this Section 3(a), BNP may, upon transfer of
any shares of Class A Common Stock in accordance with the provisions of the
Standstill Agreement, enter into appropriate agreements with any transferee who
would become a Holder to limit such transferee's rights to cause the Company to
register securities pursuant to this Section 3(a) without the consent of the
Holders' Representative; provided that BNP shall deliver a copy of such
agreement to the Company.
(ii) Promptly upon receipt of any request for a demand registration
pursuant to paragraph (a)(i) above (but in no event more than five Business Days
thereafter), the Company shall serve written notice of any such request to all
other Holders, and the Company shall include in such registration all
Registrable Securities of any Holder with respect to which the Company has
received written requests for inclusion therein within 30 Business Days after
such notice has been given pursuant to Section 6(f). All requests made pursuant
to this Section 4(a)(ii) shall specify the kind and aggregate amount of
Registrable Securities to be registered and the intended method of distribution
of such securities.
(b) Registration Statement Form. Registration statements filed pursuant to
this Section 3 shall be on such form of the SEC as shall be selected by the
Company, and as shall permit the disposition of the subject Registrable
Securities in accordance with the intended methods of disposition specified by
the Holders.
(c) Expenses. The Company will pay all Registration Expenses in connection
with the registrations of Registrable Securities pursuant to this Section 3.
(d) Effective Registration Statement. A registration requested pursuant to
this Section 3 will not be deemed to have been effected unless it has become
effective; provided, that if, within 90 days after it has become effective, the
offering of Registrable Securities pursuant to such registration is (i)
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court or (ii) the conditions to closing
specified in the underwriting agreement, if any, entered into in connection with
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such registration are not satisfied by reason of a wrongful act,
misrepresentation or breach of the applicable underwriting agreement by the
Company, such registration will be deemed not to have been effected.
(e) Selection of Underwriters. If a requested registration pursuant to
this Section 3 involves an underwritten offering, the Holders of a majority of
the Registrable Securities which the Company has been requested to register in
such registration shall have the right to select in good faith the investment
banker or bankers and managers to administer the offering; provided, however,
that such investment banker or bankers and managers shall be reasonably
satisfactory to the Company.
(f) Priority. If a requested registration pursuant to this Section 3
involves an underwritten offering and the managing underwriter advises the
Company in writing that, in its opinion, the number of securities requested to
be included in such registration (including securities of the Company which are
not Registrable Securities) would jeopardize the success of the offering, the
Company will include in such registration only the Registrable Securities
requested to be included in such registration. In the event that the number of
Registrable Securities requested to be included in such registration exceeds the
number which, in the opinion of such managing underwriter, can be sold, the
number of securities of each class of such Registrable Securities to be included
in such registration shall be limited to the number which, based on the opinion
of the managing underwriter, can be sold without jeopardizing the success of the
offering, pro rata in accordance with the number of Registrable Securities
requested to be included by each Holder. In the event that the number of
Registrable Securities requested to be included in such registration is less
than the number which, in the opinion of the managing underwriter, can be sold
without jeopardizing the success of the offering, the Company may include in
such registration the securities the Company proposes to sell up to the number
of securities that, in the opinion of the managing underwriter, can be sold.
(g) Certain Delay Rights. Notwithstanding any other provision of this
Agreement to the contrary, if at any time (i) while a registration statement is
effective or (ii) before a registration statement has been filed pursuant to
this Section 3, the sale of Registrable Securities covered by such registration
statement or the disclosure of information therein or in any related prospectus
or prospectus supplement would in the reasonable good faith judgment of a
majority of the entire Board of Directors of the Company (including a majority
of the Independent Directors (as defined in the Standstill Agreement))
materially interfere with or materially and adversely affect any pending or
proposed acquisition, merger, recapitalization, consolidation, reorganization,
financing or other material event or transaction, or negotiations, discussions
or pending proposals with respect thereto, and would thus not be in the best
interests of the stockholders of the Company or materially interfere with a
pending share repurchase program (a "Disadvantageous Condition"), the Company
may, as applicable, (i) defer filing such registration statement pursuant to
Section 3(a) of this Agreement or (ii) suspend sales of shares by any Holder
until such Disadvantageous Condition no longer exists (notice of which the
Company shall promptly deliver to the Holders' Representative); provided, that
any delay by the Company pursuant to this Section 3(g) may not exceed (A) 60
consecutive days or (B) 120 days in any twelve-month period. With respect to
each Holder, upon the receipt of any such notice of a Disadvantageous Condition,
such Holder shall, as applicable (i) forthwith discontinue use of the prospectus
and any prospectus supplement under such Registration Statement and suspend
sales of Registrable Securities until such Disadvantageous Condition no longer
exists, as advised by the Company to the Holders' Representative (which notice
shall be given promptly following such time as the Disadvantageous Condition no
longer exists), and (ii) if so directed by the Company, deliver to the Company
all copies, other than permanent file copies then in such Holder's possession,
of the prospectus and prospectus supplements then covering such Registrable
Securities at the time of receipt of such notice.
4. Registration Procedures. If and whenever the Company is required to use
its reasonable best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
the Company will, as expeditiously as possible:
(a) prepare and file as promptly as practicable (but in no event later
than 30 days after the earlier of (i) the date that all Holders to whom
notice has been given pursuant to Section 4(a)(ii) have responded to such
notice and (ii) the date that the time period to receive requests under
Section 4(a)(ii) has expired) with the SEC a registration statement with
respect to such Registrable Securities and use its
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reasonable best efforts to cause such registration statement to become
effective; provided, that the Company may in its sole discretion
discontinue any registration of its securities which is being effected
pursuant to Section 2 at any time prior to the effective date of the
registration statement relating thereto;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for the shorter of a period of (i) 90
days or (ii) until the distribution pursuant to such registration statement
is completed, and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the seller thereof set forth in such registration statement;
provided, that before filing a registration statement pursuant to Section 3
(or Section 2 if it mentions any Holder) or any prospectus or any
amendments or supplements thereto naming any Holder, the Company will
furnish to the Holders' Representative, the underwriters (if any) and their
respective counsel copies of all documents proposed to be filed and will
provide the Holders' Representative, the underwriters (if any) and their
respective counsel the opportunity to comment thereon;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement and of each amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus and prospectus supplement, as
applicable), in conformity with the requirements of the Securities Act, and
such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities by such seller,
but only while the Company shall be required under the provisions hereof to
cause such registration statement to remain current;
(d) use its reasonable best efforts to register or qualify such
Registrable Securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as each seller or
managing underwriter shall reasonably request, and do any and all other
acts and things which may be reasonably necessary or advisable to enable
each seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller, except that the Company shall
not for any such purpose be required to qualify generally to do business as
a foreign corporation in any jurisdiction where, but for the requirements
of this Section 4(d), it would not be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction, or to consent to
general service of process in any such jurisdiction;
(e) use its reasonable best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the sellers to consummate the disposition of such
Registrable Securities;
(f) promptly notify the sellers of Registrable Securities and the
managing underwriter or underwriters, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 4(b), of the Company's
becoming aware that the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing or, if for any other reason it shall be necessary during such
time period to amend or supplement the registration statement or prospectus
in order to comply with the Securities Act, and at the request of such
seller or managing underwriter promptly prepare and furnish to such seller
or managing underwriter a reasonable number of copies of an amended or
supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an 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 not misleading in the light of the circumstances then
existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable (but not more than 15 months)
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after the effective date of the registration statement, an earnings
statement which shall satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations promulgated thereunder;
(h) if such Registrable Securities are shares of Company Common Stock,
use its reasonable best efforts to cause all such Registrable Securities
(or, in the case of Registrable Securities that are convertible into or
exercisable for shares of Company Common Stock, such underlying shares of
Company Common Stock) to be listed on any securities exchange on which
Company Common Stock is then listed, if such Registrable Securities are not
already so listed and if such listing is then permitted under the rules of
such exchange and, to use its reasonable best efforts to cause any other
Registrable Securities, if not already so listed or quoted, to be listed on
any securities exchange or quoted on any inter-dealer quotation system on
which securities of the same class or type are then so listed or quoted;
(i) enter into and perform its obligations under such customary
agreements (including an underwriting agreement in customary form for
underwriting agreements (including indemnities no less favorable than those
set forth in Section 5(a)) with respect to secondary distributions at such
time) as the sellers of a majority of such Registrable Securities may
reasonably request in connection with the disposition of such Registrable
Securities;
(j) obtain a "cold comfort" letter or letters from the Company's
independent public accountants in customary form and covering matters of
the type customarily covered by "cold comfort" letters as the sellers of a
majority of such Registrable Securities or the managing underwriter shall
reasonably request; and
(k) make available for inspection by representatives of the sellers of
the Registrable Securities to be sold in such registration, by any
underwriter participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by such seller or any such underwriter, such financial and other
records, corporate documents and properties of the Company as are
customarily made available in connection with a "due diligence"
investigation for an underwritten secondary offering, and cause all of the
Company's (and its subsidiaries) officers and accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement as is
customarily made available in connection with a "due diligence"
investigation for an underwritten secondary offering and make available
such officers, accountants and other employees in connection therewith;
provided, however, that (i) the sellers and the underwriters and their
respective counsel, accountants and other agents shall have entered into a
confidentiality agreement customary in form and reasonably acceptable to
the Company and (ii) the sellers and the underwriters and their respective
counsel, accountants and other agents shall use their reasonable best
efforts to minimize the disruption to the Company's business and coordinate
any such investigation of the books, records and properties of the Company
and any such discussions with the Company's officers and accountants so
that all such investigations and all such discussions occur at the same
time.
(l) notify the selling Holders and the managing underwriter or
underwriters and (if requested) confirm such advice in writing, as soon as
reasonably practicable after notice thereof is received by the Company (i)
when the registration statement or any amendment thereto has been filed or
becomes effective, when the prospectus or any amendment or supplement to
the prospectus has been filed, and, to furnish such selling holders and
managing underwriter or underwriters, if any, with copies thereof, (ii) of
any written comments by the SEC or any request by the SEC or any other
federal or state governmental authority for amendments or supplements to
the registration statement or the prospectus or for additional information,
(iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the registration statement or any order preventing or
suspending the use of any preliminary or final prospectus or the initiation
or threatening of any proceedings for such purposes, (iv) if, at any time,
the representations and warranties of the Company contemplated by paragraph
(i) above cease to be true and correct in all material respects or (v) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for offering
or sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose;
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(m) make every reasonable effort to prevent or obtain the withdrawal
of any stop order or other order suspending the use of any preliminary or
final prospectus or suspending any qualification of the Registrable
Securities at the earliest possible moment;
(n) if reasonably requested by the managing underwriter or
underwriters or a Holder of Registrable Securities being sold, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters and the Holders of
a majority of the Registrable Securities being sold agree should be
included therein relating to the plan of distribution with respect to such
Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to, and the
purchase price being paid therefor by, such underwriter or underwriters and
with respect to any other terms of the offering of the Registrable
Securities to be sold in such offering; and make all required filings of
such prospectus supplement or post-effective amendment as soon as
reasonably practicable after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
(o) cooperate with the selling Holders and the managing underwriter,
underwriters or agent, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends; and enable such Registrable Securities
to be in such denominations and registered in such names as the managing
underwritings may request at least two Business Days prior to any sale or
Registrable Securities to the underwriters;
(p) not later than the effective date of the applicable registration
statement (or if later, the earliest Business Day thereafter on which a
CUSIP number is available), provide a CUSIP number for all Registrable
Securities and provide the applicable transfer agent with printed
certificates for the Registrable Securities which are in a form eligible
for deposit with The Depository Trust Company (if such Registrable
Securities are then eligible for such deposit);
(q) cooperate with each seller of Registrable Securities and each
underwriter or agent, if any, participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD; and
(r) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such registration
statement.
The Company may require each seller of Registrable Securities as to which
any registration statement is being effected to furnish the Company with such
information regarding such seller, and pertinent to the disclosure requirements
relating to the registration and the distribution of such securities, as the
Company may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(f), such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 4(f), and, if so directed by the Company, such Holder will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give such notice, the period mentioned in Section
4(b)(i) shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 4(f) and
through and including the date when each seller of Registrable Securities
covered by such registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by Section 4(f).
5. Indemnification.
(a) Indemnification by the Company. In the event of any registration of
any securities of the Company under the Securities Act pursuant to Section 2 or
3, the Company hereby indemnifies and agrees to hold harmless, to the extent
permitted by law, the seller of any Registrable Securities covered by such
registration
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statement, each affiliate of such seller and its directors and officers or
general and limited partners (and the directors, officers, affiliates and
controlling Persons thereof), each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
Securities Act (collectively, the "Holder Indemnified Parties"), against any and
all losses, claims, damages or liabilities, joint or several, and expenses to
which such Holder Indemnified Party may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof, whether or not such Holder
Indemnified Party is a party thereto) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary, final or summary prospectus contained therein,
or any amendment or supplement thereto, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and the Company will reimburse such Holder Indemnified Party for
any legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, liability, action or proceeding
as such expenses are incurred; provided, that the Company shall not be liable to
any Holder Indemnified Party in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, in any such
preliminary, final or summary prospectus, or any amendment or supplement thereto
(i) following notice by the Company to such Holder Indemnified Party of any
Disadvantageous Condition or otherwise pursuant to Section 4(f) if such Holder
Indemnified Party thereafter uses the prospectus in effect at the time of such
notice, unless the Company has delivered a notice that such Disadvantageous
Condition or other circumstance specified in Section 4(f) no longer exists or
(ii) in reliance upon and in conformity with written information with respect to
such Holder Indemnified Party furnished to the Company by such Holder
Indemnified Party for use in the preparation thereof; and provided, further,
that the Company will not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, under the indemnity agreement in this Section 5(a) with respect
to any preliminary prospectus or the final prospectus or the final prospectus as
amended or supplemented, as the case may be, to the extent that any such loss,
claim, damage or liability of such underwriter or controlling Person results
from the fact that such underwriter sold Registrable Securities to a person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final prospectus or of the final prospectus as then
amended or supplemented, whichever is most recent, if the Company has previously
furnished copies thereof to such underwriter. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
any Holder or any Holder Indemnified Party and shall survive the transfer of
such securities by any Holder.
(b) Indemnification by the Sellers and Underwriters. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed in accordance with Section 2 or 3 herein, that the
Company have received an undertaking reasonably satisfactory to it from the
prospective sellers of such Registrable Securities or any underwriter to
indemnify and hold harmless, severally and not jointly, the Company or any
underwriter, as the case may be, and any of their respective affiliates,
directors, officers and controlling Persons (the "Company Indemnified Parties",
and together with the Holder Indemnified Parties, the "Indemnified Parties"),
against any and all losses, claims, damages or liabilities, joint or several,
and expenses to which such Company Indemnified Party may become subject under
the Securities Act, common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof, whether or
not such Company Indemnified Party is a party thereto) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with the written
information furnished to the Company by such seller or such
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underwriter expressly for use in the preparation of such registration statement,
preliminary, final or summary prospectus, or any amendment or supplement
thereto, or a document incorporated by reference into any of the foregoing and
the sellers and such underwriters will reimburse such Company Indemnified Party
for any legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, liability, action or proceeding
as such expenses are incurred. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company or
such underwriter, or any Company Indemnified Party and shall survive the
transfer of such securities by any Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an Indemnified Party
hereunder of written notice of the commencement of any action or proceeding with
respect to which a claim for indemnification may be made pursuant to this
Section 5, such Indemnified Party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, that the failure of the Indemnified Party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 5(a) or 5(b), except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an Indemnified Party, unless in the
reasonable judgment of the Indemnified Party's counsel a conflict of interest
between such Indemnified Parties and indemnifying parties may exist in respect
of such claim, the indemnifying party will be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such Indemnified Party, and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof. If, in the reasonable judgment of the counsel for the
Indemnified Party, having common counsel would result in a conflict of interest
between the interests of such Indemnified Parties and indemnifying parties, then
such Indemnified Party may employ separate counsel reasonably acceptable to the
indemnifying party to represent or defend such Indemnified Party in such action,
it being understood, however, that the indemnifying party shall not be liable
for the reasonable fees and expenses of more than one separate firm of attorneys
at any time for all such Indemnified Parties (and not more than one separate
firm of local counsel at any time for all such Indemnified Parties) in such
action. Without the consent of the Indemnified Party, no indemnifying party will
consent to the entry of any judgment or enter into any settlement that includes
as a term thereof an admission of wrongdoing by the Indemnified Party, that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation or that imposes material obligations on the
Indemnified Party. No Indemnified Party shall agree to any settlement without
the prior written consent of the indemnifying party (which consent shall not be
unreasonably withheld).
(d) Contribution. If recovery is not available under the foregoing
indemnification provisions of this Section 5 for any reason other than as
expressly specified therein, the parties entitled to indemnification by the
terms thereof shall be entitled to contribution to liabilities and expenses
except to the extent that contribution is not permitted under Section 11(f) of
the Securities Act. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered (x) the relative
benefits received by each party from the offering of the Registrable Securities
(taking into account the portion of the proceeds received by each), (y) the
relative fault of the parties in connection with the statements, actions or
omissions which resulted in the losses, claims, damages or liabilities which
gave rise to the indemnity obligation pursuant to this Section 5, and (z) any
other relevant equitable considerations under the circumstances. The relative
fault of the parties shall be determined with reference to, among other things,
whether such statement or omission relates to information supplied by the
indemnifying party or by the Indemnified Party and the parties' relative
knowledge, access to information and opportunity to prevent such action or
omission. The amount paid or payable by a party under this Section 5(d) as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
or by any other method of allocation which does not take account of
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the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding anything in this Section 5 to the contrary, no indemnifying
party (other than the Company) shall be required pursuant to this Section 5 to
contribute any amount in excess of the gross proceeds received by such
indemnifying party from the sale of Registrable Securities in the offering to
which the losses, claims, damages or liabilities of the Indemnified Parties
relate. No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
(e) Non-Exclusivity. The obligations of the parties under this Section 5
shall be in addition to any liability which any party may otherwise have to any
other party.
6. Miscellaneous.
(a) Rule 144. The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any Holder, make
publicly available such information as is specified in Section (c)(2) of Rule
144), all to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC.
(b) Holdback Agreement. In connection with any registration by the Company
of Company Common Stock, each Holder agrees not to effect any public sale or
distribution (except in connection with such underwritten public offering
pursuant to Section 2(a)), including any sale pursuant to Rule 144 under the
Securities Act, of any equity securities of the Company, or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (in each case, other than as part of such underwritten public offering
pursuant to Section 2(a)), during the seven days prior to, and during the
120-day period (or such lesser period as the managing underwriters may permit,
it being understood that the Company will request that such managing
underwriters act in good faith in determining whether to permit a lesser period)
after the effective date of such registration (other than a Registrable Security
included in such registration pursuant to Section 2(a)). If any registration of
Registrable Securities pursuant to Section 3 of thus Agreement shall be in
connection with an underwritten public offering, the Company agrees not to
effect any public sale or distribution (except in connection with such
underwritten public offering), of any equity securities of the Company or of any
security convertible into or exchangeable or exercisable for any equity security
of the Company (in each case, other than as part of such underwritten public
offering) during the seven days prior to, and during the 45-day period (or such
lesser period as the managing underwriters may permit) after the effective date
of such registration.
(c) Amendments and Waivers. (i) This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Holders of
a majority of the Registrable Securities then outstanding. Each Holder of
Registrable Securities at the time or thereafter outstanding shall be bound by
any amendment authorized by this Section 6(c).
(ii) The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach. Except as
otherwise expressly provided herein, no failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder, or
otherwise available in respect hereof at law or in equity, shall operate as a
waiver thereof, nor shall any single or partial exercise of such right, power or
remedy by such party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
(d) Successors, Assigns and Transferees. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
(e) Additional Parties. Upon the transfer of any shares of Class A Common
Stock pursuant to clauses (iii) or (vi) of Section 3.2(c) of the Standstill
Agreement, such transferee shall become a party to this Agreement by agreeing in
writing to be bound by the terms and conditions of this Agreement pursuant to an
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instrument of assumption and shall thereby be deemed a Holder of Registrable
Securities for the purposes of this Agreement.
(f) Notices. All notices, requests, demands or other communications
provided herein shall be made in writing and shall be deemed to have been duly
given if delivered as follows:
If to the Company:
First Hawaiian, Inc.
999 Bishop Street
Honolulu, Hawaii 96813
Attention: Howard H. Karr
Telephone: (808) 525-8800
Facsimile: (808) 533-7844
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attention: Lee Meyerson, Esq.
Fax: (212) 455-2502
If to BNP:
Banque Nationale de Paris
Affaires Juridiques et Fiscales
Affaires Juridiques Internationales
1, Boulevard Haussmann
75009 Paris
France
Telecopier No.: (011) (33) (1) 40.14.86.30
Telephone No.: (011) (33) (1) 40.14.26.78
Attention: General Counsel
with a copy to:
Pillsbury Madison & Sutro, LLP
235 Montgomery Street
San Francisco, California 94104
Attention: Rodney R. Peck, Esq.
Fax: (415) 983-1200
and
Cleary Gottlieb Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Robert L. Tortoriello
Fax: (212) 225-3999
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on (i) the date of delivery
if sent by messenger, (ii) on the Business Day following the Business Day on
which delivered to a recognized courier service if sent by overnight courier or
(iii) on the date received, if sent by fax or regular mail.
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(g) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section to this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
(h) Severability. If any provision of this Agreement shall be declared by
any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
(i) 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 a binding agreement when one or more counterparts have been signed
by each party and delivered to the other parties.
(j) Remedies. Each of the parties hereto acknowledges and agrees that (i)
the provisions of this Agreement are reasonable and necessary to protect the
proper and legitimate interests of the parties hereto, and (ii) the other
parties hereto would be irreparably damaged in the event any of the provisions
of this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties hereto shall
be entitled to preliminary and permanent injunctive relief to prevent breaches
of the provisions of this Agreement by the other parties hereto without the
necessity of proving actual damages or of posting any bond, and to enforce
specifically the terms and provisions hereof and thereof, which rights shall be
cumulative and in addition to any other remedy to which the parties hereto may
be entitled hereunder or at law or equity.
(k) Governing Law; Consent to Jurisdiction. (i) This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
non-exclusive jurisdiction of the courts of the State of New York and of the
United States of America, in each case located in the County of New York, for
any action, proceeding or investigation in any court or before any governmental
authority ("Litigation") arising out of or relating to this Agreement and the
transactions contemplated hereby. Each of the parties hereto hereby irrevocably
and unconditionally waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any such Litigation, the defense of
sovereign immunity, any claim that it is not personally subject to the
jurisdiction of the aforesaid courts for any reason other than the failure to
serve process in accordance with this Section 6(k), that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and to the fullest extent permitted by applicable law, that the
Litigation in any such court is brought in an inconvenient forum, that the venue
of such Litigation is improper, or that this Agreement, or the subject matter
hereof, may not be enforced in or by such courts and further irrevocably waives,
to the fullest extent permitted by applicable law, the benefit of any defense
that would hinder, fetter or delay the levy, execution or collection of any
amount to which the party is entitled pursuant to the final judgment of any
court having jurisdiction. Each of the parties irrevocably and unconditionally
waives, to the fullest extent permitted by applicable law, any and all rights to
trial by jury in connection with any Litigation arising out of or relating to
this Agreement or the transactions contemplated hereby.
(ii) BNP hereby irrevocably designates French American Banking Corporation
(in such capacity, the "Process Agent"), with an office at 200 Liberty Street,
New York, New York, 10281, as its designee, appointee and agent to receive, for
and on its behalf service of process in such jurisdiction in any Litigation
arising out of or relating to this Agreement and such service shall be deemed
complete upon delivery thereof to the Process Agent; provided that in the case
of any such service upon the Process Agent, the party effecting such service
shall also deliver a copy thereof to BNP in the manner provided in Section 6(f).
Each of the Company and BNP further irrevocably consents to the service of
process out of any of the aforementioned courts in any such Litigation by the
mailing of copies thereof by registered airmail, postage prepaid, to such party
at its address set forth in this Agreement, such service of process to be
effective upon acknowledgment of receipt of such registered mail. BNP expressly
acknowledges that the foregoing waiver is intended to be
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irrevocable under the laws of the State of Delaware and of the United States of
America; provided that BNP's consent to jurisdiction and service contained in
this Section 6(k) is solely for the purpose referred to in this Section 6(k) and
shall not be deemed to be a general submission to said courts or in the State of
New York other than for such purpose. If the Process Agent shall cease to act,
BNP covenants that it shall appoint without delay another such agent reasonably
satisfactory to the Company.
(l) Further Assurances. From time to time, at the reasonable request of
any other party hereto and without further consideration, each party hereto
shall execute and deliver such additional documents and take all such further
action as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement.
(m) No Third-Party Rights. Nothing in this Agreement, expressed or
implied, shall or is intended to confer upon any Person other than the parties
hereto or their respective successors or assigns, any rights or remedies of any
nature or kind whatsoever under or by reason of this Agreement.
(n) Entire Agreement; No Oral Waiver; Construction. This Agreement and the
other agreements and documents contemplated hereby and thereby constitute the
entire agreement among the parties pertaining to the subject matter hereof and
supersede all prior and contemporaneous agreements, understandings and
representations, whether oral or written, of the parties in connection
therewith. No covenant or condition or representation not expressed in this
Agreement shall affect or be effective to interpret, change or restrict this
Agreement. No prior drafts of this Agreement and no words or phrases from any
such prior drafts shall be admissible into evidence in any action, suit or other
proceeding involving this Agreement or the transactions contemplated hereby.
This Agreement may not be changed or terminated orally, nor shall any change,
termination or attempted waiver of any of the provisions of this Agreement be
binding on any party unless in writing signed by the parties hereto. No
modification, waiver, termination, rescission, discharge or cancellation of this
Agreement and no waiver of any provision of or default under this Agreement
shall affect the right of any party thereafter to enforce any other provision or
to exercise any right or remedy in the event of any other default, whether or
not similar. This Agreement has been negotiated by the parties hereto and their
respective legal counsel, and legal or equitable principles that might require
the construction of this Agreement against the party drafting this Agreement
will not apply in any construction or interpretation of this Agreement.
(o) Noncontravention of Other Agreements. Notwithstanding any other
provision of this Agreement to the contrary, no Holder shall have any right to
sell, transfer or otherwise dispose of any Registrable Securities in
contravention of the terms of the Merger Agreement or the Standstill Agreement.
(p) No Inconsistent Agreements. The Company agrees not to enter into any
other agreement that is inconsistent with or conflicts with any provision of
this Agreement or which would impair the ability of the Company to perform its
obligations under this Agreement.
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or
caused this Agreement to be executed on its behalf as of the date first written
above.
FIRST HAWAIIAN, INC.
By:
--------------------------------------
Name:
Title:
BANQUE NATIONALE DE PARIS
By:
--------------------------------------
Name:
Title:
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APPENDIX II
AGREEMENT
AGREEMENT dated as of May 28, 1998 (this "Agreement") between First
Hawaiian, Inc., a Delaware corporation (the "FHI"), and Banque Nationale de
Paris, a societe anonyme or limited liability banking corporation organized
under the laws of the Republic of France ("BNP").
WHEREAS, concurrently with the execution and delivery of this Agreement,
FHI and BancWest Corporation, a corporation organized under the laws of
California ("BancWest"), are entering into an Agreement and Plan of Merger,
dated of even date herewith (the "Merger Agreement"), pursuant to which and
subject to the terms and conditions thereof, among other things, BancWest will
merge (the "Merger") with and into FHI and all of the outstanding shares of
common stock, without par value, of BancWest will be converted into shares of
Class A Common Stock (as defined in the Merger Agreement; capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the Merger
Agreement);
WHEREAS, BNP is the beneficial and record owner of all of the issued and
outstanding shares of common stock, without par value, of BancWest (the
"BancWest Stock"); and
WHEREAS, in consideration of, and as an inducement to FHI's agreement to
enter into the Merger Agreement, BNP has agreed to enter into this Agreement
with FHI.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
1.1 Representations and Warranties of BNP. BNP represents and warrants to
FHI as follows:
(a) Authority; No Violation. (i) BNP has all requisite corporate
power and authority to enter into this Agreement and each of the other
Transaction Agreements and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and each
of the other Transaction Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of BNP. No stockholder or other
securityholder consent or approval is required or will be required to be
obtained by BNP for the execution, delivery and performance by BNP of this
Agreement or the other Transaction Agreements or the consummation by BNP of
the transactions contemplated hereby or thereby or for the execution,
delivery and performance by BancWest of the Merger Agreement or the
consummation by BancWest of the transactions contemplated thereby. This
Agreement has been duly executed and delivered by BNP and (assuming due
authorization, execution and delivery by FHI) constitutes the valid and
binding obligation of BNP, enforceable against BNP in accordance with its
terms, and when the other Transaction Agreements have been duly executed
and delivered by BNP each such Transaction Agreement will constitute
(assuming due authorization, execution and delivery by FHI) the valid and
binding obligation of BNP, enforceable against BNP in accordance with its
terms.
(ii) The execution and delivery by BNP of this Agreement and the other
Transaction Agreements does not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
Violation pursuant to, (x) any provision of the articles of incorporation
or by-laws or comparable organizational documents of BNP, or (y) subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii)
below, any loan or credit agreement, note, mortgage, indenture, lease,
Benefit Plan or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to BNP or its properties or
assets, which Violation, in the case of clause (y), individually or in the
aggregate, would be reasonably likely to have a material adverse effect
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(as defined in the Merger Agreement) on BancWest or on the ability of BNP
to perform its obligations under this Agreement or under the other
Transaction Agreements on a timely basis.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is or
will be required by or with respect to BNP in connection with the execution
and delivery of this Agreement and the other Transaction Agreements, the
execution and delivery of the Merger Agreement by BancWest or the
consummation by BNP and BancWest, as the case may be, of the transactions
contemplated hereby and thereby, the failure to make or obtain which would
have a material adverse effect on BancWest or on the ability of BNP to
perform its obligations hereunder or under the other Transaction Agreements
on a timely basis, except for (A) the filing of applications and notices
with the Board of Governors of the Federal Reserve under the BHC Act and
the FRA and approval of same, (B) the filing by FHI with the SEC of the
Proxy Statement, (C) the State Banking Approvals and any applicable State
Takeover Approvals, (D) notification of the proposed issuance of the shares
of Class A Common Stock to the Nasdaq National Market pursuant to Schedule
D to the By-Laws of the NASD, (E) notices under the HSR Act and (F) the
filing with the Secretary of State of the State of Delaware of the
Certificate of Merger and with the Secretary of State of the State of
California of the Agreement of Merger.
(b) Ownership of BancWest Common Stock. All of the shares of BancWest
Common Stock issued and outstanding as of the date of this Agreement are
owned by BNP, free and clear of any lien or encumbrance and as of the
Closing Date all of the outstanding shares of BancWest Common Stock shall
be owned by BNP, free and clear of any lien, claim or encumbrance (other
than shares issued to FABC pursuant to Section 5.6 of the Merger Agreement,
which shall be owned by FABC free and clear of any lien, claim or
encumbrance).
(c) Ownership of Capital Stock of FHI. Neither BNP nor any of its
Subsidiaries or other affiliates beneficially owns, directly or indirectly,
any shares of capital stock of FHI, securities of FHI convertible into, or
exchangeable for, such shares, or options, warrants or other rights to
acquire such shares (regardless of whether such securities, options,
warrants or other rights are then exercisable or convertible), nor is BNP
or any of such Subsidiaries or other affiliates a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of shares of capital stock of FHI or any such other
securities, options, warrants or other rights (other than shares held in
trust, managed, custodial or nominee accounts and the like, or held by
mutual funds for which BNP or one of its Subsidiaries acts as investment
advisor, that in any such case are beneficially owned by third parties; to
the best knowledge of BNP, the total number of shares held in such
capacities by Subsidiaries, branches and operations of BNP in the United
States as of the date of this Agreement, does not exceed 3% of FHI's total
outstanding Common Stock).
(d) Investment Intent. BNP is aware that none of the shares of Class
A Common Stock to be received in the Merger are registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any
state securities laws. BNP is not an underwriter, as such term is defined
under the Securities Act, with respect to such shares of Class A Common
Stock and BNP is acquiring the Class A Common Stock pursuant to the Merger
Agreement solely for its own account for investment purposes, with no
present intention to distribute any such shares of Class A Common Stock to
any person, and will not sell or otherwise dispose of the shares of Class A
Common Stock except in compliance with the registration requirements, or in
transactions exempt from the registration requirements, under the
Securities Act and the rules and regulations promulgated thereunder, or any
other applicable securities laws and subject to compliance with the terms
of the Standstill Agreement.
(e) Information Supplied. None of the information supplied or to be
supplied by BNP for inclusion in the Proxy Statement will, at the date of
mailing to stockholders of FHI and at the time of the Stockholders' Meeting
to be held in connection with obtaining the FHI Stockholder Approval, (i)
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 or (ii) at the time and in the light of the
circumstances under which it is
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made, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein
not false or misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of a proxy for the
Stockholders' Meeting which has become false or misleading.
(f) Litigation. There is no Litigation pending to which BNP is a
party or by which any of its assets may be bound or, to the best knowledge
of BNP, threatened, against or affecting BNP which could reasonably be
expected, individually or in the aggregate, to have a material adverse
effect (as defined in the Merger Agreement) on BancWest or on the ability
of BNP to perform its obligations under this Agreement or under any other
Transaction Agreement on a timely basis, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against BNP having, or which, insofar as reasonably can be
foreseen, in the future could have, individually or in the aggregate, any
such effect.
(g) Agreements with Bank Regulators. Except as previously disclosed
in Section 3.1(l) of the BancWest Disclosure Schedule, BNP is not a party
to any written agreement or memorandum of understanding with, or a party to
any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory letter
from, or has adopted any board resolutions at the request of, any Bank
Regulator which restricts materially the conduct by BancWest and its
Subsidiaries of their businesses, or in any manner relates to their capital
adequacy, credit policies or management, nor has BNP been advised by any
Bank Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission, or any such board
resolutions.
1.2 Representations and Warranties of FHI. FHI warrants to BNP as follows:
(a) Authority; No Violation. (i) FHI has all requisite corporate
power and authority to enter into this Agreement and each of the other
Transaction Documents and, subject to obtaining the FHI Stockholder
Approval and the filing of the Charter Amendments, to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and each of the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of FHI,
subject to obtaining the FHI Stockholder Approval. This Agreement has been
duly executed and delivered by FHI and (assuming due authorization,
execution and delivery by FHI) constitutes the valid and binding obligation
of FHI, enforceable against FHI in accordance with its terms, and when the
other Transaction Agreements have been duly executed and delivered by FHI
each such Transaction Agreement will constitute (assuming due
authorization, execution and delivery by BNP) the valid and binding
obligation of FHI, enforceable against FHI in accordance with its terms.
(ii) Except as set forth in Section 3.2(c) of the FHI Disclosure
Schedule to the Merger Agreement, the execution and delivery by FHI of this
Agreement and the other Transaction Agreements to which it is or becomes a
party does not, and the consummation of the transactions contemplated
hereby and thereby will not, conflict with, or result in any Violation
pursuant to, (x) any provision of the articles of incorporation or by-laws
of FHI, or (y) subject to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations and filings referred to
in paragraph (iii) below, any loan or credit agreement, note, mortgage,
indenture, lease, Benefit Plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to FHI or its properties or
assets, which Violation, in the case of clause (y), individually or in the
aggregate, would be reasonably likely to have a material adverse effect on
the ability of FHI to perform its obligations under this Agreement or under
the other Transaction Agreements on a timely basis.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality, domestic
or foreign (a "Governmental Entity"), is or will be required by or with
respect to FHI in connection with
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the execution and delivery of this Agreement and the other Transaction
Agreements or the consummation by FHI of the transactions contemplated
hereby and thereby, the failure to make or obtain which would have a
material adverse effect on FHI or on the ability of FHI to perform its
obligations hereunder or thereunder on a timely basis, except for (A) the
filing of applications and notices with the Federal Reserve under the BHC
Act and the FRA and approval of same, (B) the filing by FHI with of the
Proxy Statement, (C) the State Banking Approvals and the State Takeover
Approvals, (D) notification of the proposed issuance of the shares of Class
A Common Stock to the Nasdaq National Market pursuant to Schedule D to the
By-Laws of the NASD, (E) notices under the HSR Act and (F) the filing with
the Secretary of State of the State of Delaware of the Certificate of
Merger and with the Secretary of State of the State of California of the
Agreement of Merger.
(b) Litigation. There is no Litigation pending to which FHI is a
party or by which any of its assets may be bound or, to the best knowledge
of FHI, threatened, against or affecting FHI which could reasonably be
expected, individually or in the aggregate, to have a material adverse
effect (as defined in the Merger Agreement) on FHI or on the ability of FHI
to perform its obligations under this Agreement or under any other
Transaction Agreement on a timely basis, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against FHI having, or which, insofar as reasonably can be
foreseen, in the future could have, individually or in the aggregate, any
such effect.
ARTICLE II
CERTAIN AGREEMENTS
2.1 Preparation of the Proxy Statement. At least ten Business Days prior
to the mailing of the Proxy Statement, BNP shall furnish to FHI such information
regarding the identity and background of, and such other information regarding,
each of the Class A Nominees permitted to be designated by BNP pursuant to
Section 5.1(a) of the Standstill Agreement as may be required by the Exchange
Act and the rules and regulations promulgated by the SEC thereunder to be set
forth in such Proxy Statement, which shall include BNP's requested apportionment
of such Class A Nominees among the three classes of directors of FHI (which
shall provide for the apportionment of such Class A Nominees equally among such
three classes). BNP agrees to correct any information provided by it for use in
the Proxy Statement which shall have become false or misleading.
2.2 Bank of the West and BancWest Preferred Stock. Prior to the Effective
Time, (a) BNP shall cause FABC to transfer all of the issued and outstanding
shares of the Series A Preferred Stock owned by FABC to BancWest in exchange for
shares of BancWest Common Stock and (b) BNP shall (i) exercise, or transfer to
an affiliate of BNP (the "Designated Affiliate") and cause such affiliate to
exercise, the Purchase Option with respect to the BancWest Preferred Stock
effective as of the Effective Time, (ii) provide for a Purchase Date on or prior
to the Closing Date, (iii) acquire, or cause such Designated Affiliate to
acquire, beneficial ownership of the outstanding shares of BancWest Preferred
Stock free and clear of any lien, claim or other encumbrance and duly vote all
such shares in favor of the approval of the Merger Agreement, and (iv) transfer
all of the shares of BancWest Preferred Stock to the Surviving Corporation
effective as on or before the Closing Date, in exchange for a payment by the
Surviving Corporation of an amount equal to the aggregate price (the "Preferred
Purchase Price") paid by BNP or such Designated Affiliate upon exercise of the
Purchase Option. If requested by BNP not less than two Business Days prior to
the Closing Date, FHI shall lend to the Designated Affiliate on the Closing Date
an amount equal to the Preferred Purchase Price, which amount shall be credited
against the payment required to be made by the Surviving Corporation to such
Designated Affiliate pursuant to clause (iv) of the preceding sentence.
2.3 No Solicitations. From the date hereof until the earlier of the
Effective Time or the termination of the this Agreement, BNP agrees that neither
it, nor any of its respective Subsidiaries, affiliates or agents shall, nor
shall it authorize or permit any of its Representatives retained by it or any of
its Subsidiaries, affiliates or agents to, solicit, initiate or knowingly
encourage the submission of, or enter into discussions or negotiations with or
provide information to any person or group of persons (other than the respective
parties to this
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Agreement) concerning, any Takeover Proposal or assist, participate in,
facilitate or encourage any effort or attempt by any other person to do or seek
to do any of the foregoing.
2.4 Dividends. BNP understands and agrees with FHI that notwithstanding
whether the Effective Time occurs prior to the record date for the payment of
the fourth quarter dividend on FHI Common Stock (if the Effective Time occurs on
or prior to December 31, 1998) or prior to the record date for the payment of
the 1999 first quarter dividend on FHI Common Stock (if the Effective Time
occurs after December 31, 1998 and on or prior to March 31, 1999), BNP shall not
be entitled to receive, and hereby waives any right to, any such dividend
payable to it as a result of its being a record holder of shares of Class A
Common Stock on such record date.
2.5 Covenants of BancWest. BNP will not take any action to prevent
BancWest from performing its covenants and agreements contained in Articles IV
and V of the Merger Agreement.
2.6 Legal Conditions. BNP will not take any action to prevent BancWest
from taking, or causing to be taken, all actions, or doing, or causing to be
done, all things necessary and proper or advisable to consummate, as soon as
practicable after the date of this Agreement, the transactions contemplated
hereby and by the Merger Agreement.
2.7 Intercompany Transactions. BNP shall, and shall cause Bank of the West
to, take such action as is necessary to ensure that any arrangements, contracts,
agreements or transactions between BancWest or any of its Subsidiaries, on the
one hand, and BNP and any of its affiliates, on the other hand (other than the
office lease for the premises located on Montgomery Street in San Francisco,
California, referred to in Section 3.1(i) of the BancWest Disclosure Schedule),
may be terminated by the Surviving Corporation upon not more than 30 days'
notice following the Effective Time without the payment of any financial penalty
or fee.
2.8 Closing Certificate of BNP. On the Closing Date, BNP shall deliver a
certificate signed on behalf of BNP by its authorized officer to the effect that
(i) BNP has performed in all material respects all obligations to be performed
by it under this Agreement and (ii) the representations and warranties of BNP
contained herein were true and correct when made and are true and correct
(except to the extent such representations speak as of an earlier date) as of
the Closing Date, with the same force and effect as though made at and as of the
Closing Date, subject to such exceptions as would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
Surviving Corporation or on FHI's ability to exercise and enforce its rights
under the Transaction Agreements.
2.9 Closing Certificate of FHI. On the Closing Date, FHI shall deliver a
certificate signed on behalf of FHI by its Chairman and Chief Executive Officer
and a Vice Chairman to the effect that the representations and warranties of FHI
contained herein were true and correct when made and are true and correct
(except to the extent such representations speak as of an earlier date) as of
the Closing Date, with the same force and effect as though made at and as of the
Closing Date, subject to such exceptions as would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on BNP or the
Surviving Corporation or on BNP's ability to exercise and enforce its rights
under the Transaction Agreements.
ARTICLE III
INDEMNIFICATION
3.1 Expiration of Representations and Warranties. Except as set forth
below, the respective representations and warranties of BNP and FHI contained in
this Agreement shall not survive the Effective Time. The respective
representations and warranties (x) of BNP and FHI contained in Sections
1.1(a)(i), 1.1(b), 1.1(c), 1.1(d), 1.1(e) and 1.2(a)(i) of this Agreement and of
BancWest and FHI contained in Sections 3.1(b), 3.1(c)(i), 3.1(s), 3.2(b),
3.2(c)(i), and 3.2(s) of the Merger Agreement (collectively, the "Non-Limited
Representations and Warranties") shall survive the Effective Time without
limitation as to time and (y) of BancWest and FHI contained in Sections 3.1(k),
3.1(r) and 3.2(k) of the Merger Agreement shall survive the Effective Time until
the date which is eighteen months after such Effective Time; provided,
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however, that any representation or warranty shall survive the time it would
otherwise terminate pursuant to this Section 3.1 to the extent that notice of a
breach thereof giving rise to a right of indemnification shall have been given
by a party hereto in accordance with Section 3.2 or 3.3 hereof, as the case may
be, prior to such time. The covenants set forth in Sections 2.3, 2.5, 2.6, 2.8
and 2.9 of this Agreement shall not survive the Effective Time. Neither the
officers, directors or affiliates of BNP or FHI nor any controlling person,
legal representative, heir, successor or assign of any such officer, director or
affiliate shall have any liability for any breach of any representation,
warranty, covenant or agreement of BNP or FHI under this Agreement contained
herein.
3.2 Indemnification Against Loss Due to Inaccuracies in the Representations
and Warranties of BNP and BancWest, Etc. BNP agrees to indemnify FHI against,
and agrees to hold FHI harmless from, all losses, costs, damages, liabilities,
claims, demands, judgments, settlements and expenses of any nature whatsoever,
governmental or non-governmental (including, but not limited to, reasonable fees
and expenses of counsel and expenses of investigation) (collectively, "Losses")
incurred directly or indirectly because or resulting from or arising out of the
fact that any matter which is the subject of a representation or warranty of BNP
or BancWest specifically referred to in Section 3.1 of this Agreement is not as
represented or warranted (without regard, for this purpose, to any materiality
qualification or limitation set forth therein). Notwithstanding anything to the
contrary contained in this Section 3.2, BNP shall not have any obligation to
indemnify and hold harmless FHI pursuant to this Section 3.2 unless the
aggregate amount, if any, by which such Losses under all matters subject to this
Section 3.2 exceed in total $10 million in which event BNP shall be liable for
all Losses in excess of $10 million up to a maximum of $175 million.
3.3 Indemnification Against Loss Due to Inaccuracies in FHI's
Representations and Warranties, Etc. FHI agrees to indemnify BNP against, and
agrees to hold BNP harmless from, all Losses incurred directly or indirectly
because or resulting from or arising out of the fact that any matter which is
the subject of a representation or warranty of FHI specifically referred to in
Section 3.1 of this Agreement is not as represented or warranted (without
regard, for this purpose, to any materiality qualification or limitation set
forth therein). Notwithstanding anything to the contrary contained in this
Section 3.3, FHI shall not have any obligation to indemnify and hold harmless
BNP pursuant to this Section 3.3 unless the aggregate amount, if any, by which
such Losses under all matters subject to this Section 3.3 exceed in total $10
million in which event FHI shall be liable for all Losses in excess of $10
million up to a maximum of $175 million.
3.4 Procedure. (a) In the event that any person shall incur or suffer any
Losses in respect of which indemnification may be sought hereunder (other than
pursuant to Section 3.5) by FHI or BNP, the party seeking to be indemnified
hereunder (the "Indemnitee") shall assert a claim for indemnification by written
notice (the "Notice") to the party from whom indemnification is being sought
(the "Indemnitor") stating the nature and basis of such claim. Any Notice must
be given not later than the date which is eighteen months after the Effective
Time, provided that any claim for indemnification made with respect to any
matter which is the subject of any Non-Limited Representation and Warranty may
be made at any time, subject only to the applicable statute of limitations in
the relevant jurisdiction. In the case of Losses arising or which may arise by
reason of any third party claim (a "Third Party Claim"), promptly after receipt
by an Indemnitee of written notice of the assertion or the commencement of such
Third Party Claim with respect to any matter in respect of which indemnification
may be sought by such party hereunder, the Indemnitee shall give Notice to the
Indemnitor, provided that failure of the Indemnitee to give the Indemnitor
prompt notice as provided herein shall not relieve the Indemnitor of any of its
obligations hereunder, except to the extent that the Indemnitor is materially
prejudiced by such failure. In case any such Third Party Claim is brought
against any Indemnitee, the Indemnitor shall be entitled to assume the defense
thereof, by written notice of its intention to do so to the Indemnitee within 30
days after receipt of the Notice, in which event the Indemnitor shall assume all
past and future responsibility for such Third Party Claim, including reimbursing
the Indemnitee for all prior reasonable legal expenses incurred in connection
therewith. If the Indemnitor shall assume the defense of such Third Party Claim,
it shall not settle such Third Party Claim unless such settlement includes as an
unconditional term thereof the giving by the claimant or the plaintiff of a
release of the Indemnitee from all liability with respect to such Third Party
Claim. As long as the Indemnitor is contesting any such Third Party Claim in
good faith and on a timely basis, the Indemnitee shall not pay or settle any
claims brought under such Third
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Party Claim. Notwithstanding the assumption by the Indemnitor of the defense of
any Third Party Claim as provided in this subsection, the Indemnitee shall be
permitted to participate in the defense of such Third Party Claim and to employ
counsel at its own expense; provided, however, that if the defendants in any
action shall include both an Indemnitor and any Indemnitee and such Indemnitee
shall have reasonably concluded that counsel selected by Indemnitor has a
conflict of interest because of the availability of different or additional
defenses to such Indemnitee, such Indemnitee shall have the right to select
separate counsel to participate in the defense of such action on its behalf, at
the expense of the Indemnitor; provided that the Indemnitor shall not be
obligated to pay the expenses of more than one separate counsel for all
Indemnitees with respect to any Third Party Claim or group of related Third
Party Claims.
(b) If the Indemnitor shall fail to notify the Indemnitee of its desire to
assume the defense of any such Third Party Claim within the prescribed period of
time and as required above, or shall notify the Indemnitee that it will not
assume the defense of any such Third Party Claim, then the Indemnitee may assume
the defense of any such Third Party Claim, in which event it may do so in such
manner as it may deem appropriate, and the Indemnitor shall be bound by any
determination made in such Third Party Claim or any settlement thereof effected
by the Indemnitee, provided that the Indemnitee shall not effect any such
settlement without the prior written consent of the Indemnitor (such consent not
to be unreasonably withheld). The Indemnitor shall be permitted to join in the
defense of such Third Party Claim and to employ counsel at its own expense.
(c) Amounts payable by the Indemnitor to the Indemnitee in respect of any
Losses for which such party is entitled to indemnification hereunder shall be
payable by the Indemnitor as incurred by the Indemnitee.
(d) After the Closing Date, the indemnification in this Article III, and
any other indemnification expressly provided in this Agreement and the terms of
any other agreements or documents delivered pursuant to this Agreement, will be
the sole and exclusive remedy of FHI or BNP, as the case may be, with respect to
any and all Losses incurred directly or indirectly because or resulting from or
arising out of this Agreement and the transactions contemplated hereby (other
than claims of, or causes of action arising from, the wilful breach by the other
party or parties of any of its representations, warranties, covenants or
agreements set forth in this Agreement). In furtherance of the foregoing, each
of BNP and FHI hereby waives, to the fullest extent permitted under applicable
law, any and all rights, claims and causes of action (other than as contemplated
by the preceding sentence) it may have against the other party, their affiliates
and their respective officers, directors, employees, stockholders, agents and
representatives which arise under or are based upon any Federal, state, local or
foreign statute, law, ordinance, rule or regulation (including any such relating
to environmental matters) and which are with respect to such Losses.
(e) An Indemnitee's right to indemnification under this Article IV shall
not be subject to set-off for any claim by the Indemnitor against such
Indemnitee.
3.5 Tax Indemnity. (a) BNP shall be responsible for, shall pay or cause to
be paid, and shall indemnify and hold harmless FHI and its affiliates (including
any Subsidiary of BancWest which becomes a Subsidiary of the Surviving
Corporation) from and against any and all taxes (as defined in the Merger
Agreement) for or in respect of each of the following:
(i) with respect to any and all taxes of any member (other than
BancWest or any of its Subsidiaries) of a consolidated, combined or unitary
group of which BancWest or any of its Subsidiaries (or any predecessor) is
or was a member on or prior to the Effective Time by reason of the
liability of BancWest or any of its Subsidiaries pursuant to Treasury
Regulation Section 1.1502-6(a) (or any analogous or similar state, local or
foreign law or regulation), as a transferee or successor, by contract, or
otherwise;
(ii) with respect to any and all taxes payable to the California
Franchise Tax Board as a result of the proceeding referred to in Note 12 to
the Notes to the Consolidated Financial Statements of The Bank of the West
for the years ended December 31, 1997, 1996 and 1995 to the extent such
taxes shall exceed any reserves therefor on the books of Bank of the West
at the date hereof; and
(iii) any payments required to be made after the Closing Date under
any tax sharing, tax indemnity, tax allocation or similar contracts
(whether or not written) to which BancWest and its Subsidiaries was
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obligated, or was a party, on or prior to the Closing Date other than
agreements to which the only parties are one or more of BancWest and any of
its Subsidiaries.
(b) For federal income tax purposes, the taxable year of each Subsidiary of
BancWest shall end as of the Effective Time, and, with respect to all other
taxes BNP, BancWest and FHI shall, to the extent permitted by applicable law,
elect with the relevant taxing authority to close the taxable period of each
Subsidiary of BancWest at the end of the day on the Effective Time. In any case
where applicable law does not permit any Subsidiary of BancWest to close its
taxable year at the Effective Time, then taxes attributable to the taxable
period of such Subsidiary of BancWest beginning on or before and ending after
the Effective Time (including any taxes resulting from a tax audit or
administrative or court proceeding) shall be apportioned to the period ending on
the Effective Time and to the period beginning on the day after the Effective
Time by means of a closing of the books and records of such Subsidiary of
BancWest as of the close of business on the Effective Time and, to the extent
not susceptible to such allocation, by apportionment on the basis of elapsed
days unless such tax is transaction based (such as sales, transfer and other
similar taxes) in which case such tax shall be apportioned to the period in
which the related transaction occurred/occurs.
(c)(i) BNP shall have the sole right to represent BancWest's interests in
any tax audit or administrative or court proceeding relating to any tax covered
by Section 3.5(a) and to employ counsel of its choice; provided, that, at FHI's
request, BNP will consult with FHI concerning such proceeding and give fair
consideration to its views insofar as they could reasonably affect FHI's ongoing
business or interests; provided, further, that BNP shall not, without the prior
written consent of FHI (which shall not be unreasonably withheld), settle any
such claim or proceeding that imposes material obligations on the Surviving
Corporation or its Subsidiaries or that could reasonably be expected to have a
material adverse effect on the Surviving Corporation. BNP shall promptly notify
FHI if it decides not to control the defense or settlement of any such tax audit
or administrative or court proceeding and FHI thereupon shall be permitted to
defend and settle such tax audit or proceeding.
(ii) With respect to any taxable period of a Subsidiary of BancWest
beginning before and ending after the Effective Time, FHI and BNP shall jointly
control the defense and settlement of any tax audit or administrative or court
proceeding relating to any tax covered by Section 3.5(a) and each party shall
cooperate with the other party at its own expense and there shall be no
settlement or closing or other agreement with respect thereto without the
consent of the other party, which consent will not be unreasonably withheld;
provided, however, that if either party shall refuse to consent to any
settlement, closing or other agreement that the other party proposed to accept
(a "Proposed Settlement"), then (A) the liability with respect to the subject
matter of the Proposed Settlement of the party who proposed to accept the
Proposed Settlement shall be limited to the amount that such liability would
have been if the Proposed Settlement had been accepted and (B) the other party
shall be responsible for all expenses incurred thereafter in connection with the
contest of such tax audit or proceeding except to the extent that the final
settlement imposes less liability on the party who proposed to accept the
Proposed Settlement than the Proposed Settlement would have imposed.
(d)(i) FHI shall, or cause each Subsidiary of BancWest to, prepare or cause
to be prepared, and shall timely file or cause to be timely filed, all tax
returns which include BancWest and its Subsidiaries or their assets or
operations for all taxable periods ending on or before the Effective Time (which
tax returns shall include the assets or operations of BancWest and its
Subsidiaries through and including the Effective Time). Such tax returns shall
be prepared in a manner consistent with past practices.
(ii) FHI shall pay or cause to be paid all taxes shown as due and owing on
such tax returns or otherwise levied or assessed upon BancWest and its
Subsidiaries or any of their assets or BNP with respect to BancWest and its
Subsidiaries or any of their assets on or prior to the Effective Time.
(iii) FHI shall be responsible for filing all other tax returns required to
be filed after the Effective Time by or on behalf of BancWest, or with respect
to its assets and operations.
(iv) BNP and FHI shall cooperate fully with each other in connection with
the preparation and timely filing of any tax returns required to be prepared and
filed by FHI hereunder. FHI shall and shall cause each
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Subsidiary of BancWest to provide access to BNP at any reasonable time and from
time to time, at the business location at which the books and records are
maintained, after the Effective Time, to such tax data of BancWest as BNP may
from time to time reasonably request and will furnish, and request the
independent accountants and legal counsel of FHI to furnish to BNP such
additional tax and other information and documents in the possession of such
persons as BNP or FHI may from time to time reasonably request.
(e) Any claim for indemnity hereunder may be made at any time prior to 60
days after the expiration of the applicable tax statute of limitations with
respect to the relevant taxable period (including all periods of extension,
whether automatic or permissive).
3.6 Survival. The indemnities provided in this Article III shall survive
the Effective Time as provided herein.
3.7 Basis Adjustment. The parties intend that any indemnification payment
made pursuant to this Article III will be treated as a basis adjustment for
purposes of the Merger Agreement.
3.8 FHI Remittance. Within three Business Days following any final
resolution (without the possibility of appeal) of the matter referred to in
Section 3.5(a)(ii), FHI shall pay to BNP cash equal to the amount of any
positive difference resulting from subtracting the taxes actually paid or
payable to the Franchise Tax Board with respect to such matter from the reserves
therefor on the books of Bank of the West as of the date of this Agreement.
ARTICLE IV
TERMINATION
4.1 Termination. This Agreement shall terminate automatically and without
any additional action by either of the parties hereto, upon the termination of
the Merger Agreement in accordance with its terms.
ARTICLE V
GENERAL PROVISIONS
5.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first business day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third business day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice.
(a) if to FHI, to
First Hawaiian, Inc.
999 Bishop Street
Honolulu, Hawaii 96813
Attention: Howard H. Karr
Telecopy No.: (808) 533-7844
with a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, N.Y. 10017
Attention: Lee Meyerson, Esq.
Telecopy No.: (212) 455-2502
and
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(b) if to BNP, to
Banque Nationale de Paris
16, Boulevard des Italiens
75009, Paris, France
Attention: General Counsel
Telecopy No.: (011) 33-1-40-14-86-30
with copies to
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Attention: Rodney R. Peck, Esq.
Fax: (415) 983-1200
and
Cleary Gottlieb Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Robert L. Tortoriello, Esq.
Fax: (212) 225-3999
5.2 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". The phrase "made available" in this Agreement shall mean
that the information referred to has been made available if requested by the
party to whom such information is to be made available. The phrases "the date of
this Agreement", "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to May 28, 1998.
5.3 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
5.4 Entire Agreement; No Third Party Beneficiaries. This Agreement,
together with the Merger Agreement and the documents and the instruments
referred to herein, (a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, other than the Confidentiality
Agreement, which shall survive the execution and delivery of this Agreement and
(b) is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
5.5 Governing Law; Consent to Jurisdiction. (i) This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
non-exclusive jurisdiction of the courts of the State of New York and of the
United States of America, in each case located in the County of New York, for
any action, proceeding or investigation in any court or before any governmental
authority ("Litigation") arising out of or relating to this Agreement and the
transactions contemplated hereby. Each of the parties hereto hereby irrevocably
and unconditionally waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any such Litigation, the defense of
sovereign immunity, any claim that it is not personally subject to the
jurisdiction of the aforesaid courts for any reason other than the failure to
serve process in accordance with this Section 5.5, that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and to the fullest extent permitted by applicable law, that the
Litigation
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in any such court is brought in an inconvenient forum, that the venue of such
Litigation is improper, or that this Agreement, or the subject matter hereof,
may not be enforced in or by such courts and further irrevocably waives, to the
fullest extent permitted by applicable law, the benefit of any defense that
would hinder, fetter or delay the levy, execution or collection of any amount to
which the party is entitled pursuant to the final judgment of any court having
jurisdiction. Each of the parties irrevocably and unconditionally waives, to the
fullest extent permitted by applicable law, any and all rights to trial by jury
in connection with any Litigation arising out of or relating to this Agreement
or the transactions contemplated hereby.
(ii) BNP hereby irrevocably designates FABC (in such capacity, the "Process
Agent"), with an office at 200 Liberty Street, New York, New York, 10281, as its
designee, appointee and agent to receive, for and on its behalf service of
process in such jurisdiction in any Litigation arising out of or relating to
this Agreement and such service shall be deemed complete upon delivery thereof
to the Process Agent; provided that in the case of any such service upon the
Process Agent, the party effecting such service shall also deliver a copy
thereof to BNP in the manner provided in Section 5.1. Each of FHI and BNP
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such Litigation by the mailing of copies thereof by
registered airmail, postage prepaid, to such party at its address set forth in
this Agreement, such service of process to be effective upon acknowledgment of
receipt of such registered mail. BNP expressly acknowledges that the foregoing
waiver is intended to be irrevocable under the laws of the State of New York and
of the United States of America; provided that BNP's consent to jurisdiction and
service contained in this Section 5.5 is solely for the purpose referred to in
this Section 5.5 and shall not be deemed to be a general submission to said
courts or in the State of New York other than for such purpose. If the Process
Agent shall cease to act as such or to exist, BNP covenants that it shall
appoint without delay another such agent reasonably satisfactory to FHI.
5.6 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability and, unless the
effect of such invalidity or unenforceability would prevent the parties from
realizing the major portion of the economic benefits of the Merger that they
currently anticipate obtaining therefrom, shall not render invalid or
unenforceable the remaining terms and provisions of this Agreement or affect the
validity or enforceability of any of the terms or provisions of this Agreement
in any other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
5.7 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
party, and any attempt to make any such assignment without such consent shall be
null and void. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, FHI and BNP have caused this Agreement to be executed
by their respective officers thereunto duly authorized, all as of date first
above written.
FIRST HAWAIIAN, INC.
By: /s/ WALTER A. DODS, JR.
------------------------------------
Name: Walter A. Dods, Jr.
Title: Chairman and Chief
Executive Officer
BANQUE NATIONALE DE PARIS
By: /s/ LEVY GARBOUA
------------------------------------
Name: Levy Garboua
Title: Directeur General
Delegue
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<PAGE> 268
APPENDIX III
[GOLDMAN, SACHS & CO. ADDRESS]
[GOLDMAN SACHS LOGO]
PERSONAL AND CONFIDENTIAL
JULY 17, 1998
Board of Directors
First Hawaiian, Inc.
999 Bishop Street
Honolulu, HI 96813
Gentlemen and Madame:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $5.00
per share (the "Shares"), of First Hawaiian, Inc. (the "Company") of the
conversion (the "Conversion") of all of the outstanding stock of BancWest
Corporation ("BancWest"), a subsidiary of Banque Nationale de Paris ("BNP"),
into a number of shares of Class A Common Stock of the Company, par value $5.00
per share (the "Class A Shares"), (rounded upward to the nearest whole number)
equal to the excess of (i) the quotient of (A) the aggregate number of Shares
issued and actually outstanding at the close of business on the business day
immediately preceding the Effective Time (as defined in the Agreement referred
to below) plus the number of Shares to be issued upon surrender and cancellation
of BancWest stock appreciation rights pursuant to the Agreement, divided by (B)
0.55, over (ii) the number of Shares specified in clause (i)(A) pursuant to the
Agreement and Plan of Merger, dated as of May 28, 1998, between the Company and
BancWest (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time and having acted as its financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the Agreement. We have also provided certain investment banking services to
BNP from time to time and may provide investment banking services to BNP in the
future. Goldman, Sachs & Co. provides a full range of financial advisory and
securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold positions in securities,
including derivative securities, of the Company or BNP for its own account and
for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Proxy Statement relating to the Special Meeting of stockholders
of the Company to be held in connection with the Agreement; Annual Reports to
Stockholders and Annual Reports on Form 10-K of the Company for the five years
ended December 31, 1997; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company through March 31, 1998; income statements
and balance sheets of BancWest for the three years ended December 31, 1997;
Annual Reports of Bank of the West, a wholly-owned subsidiary of BancWest, for
the five years ended December 31, 1997; certain unaudited income statements of
BancWest and Bank of the West through March 31, 1998; certain internal financial
analyses and forecasts for the Company and Bank of the West prepared by their
respective managements; and certain forecasts of the
New York Y London Y Tokyo Y Boston Y Chicago Y Dallas Y Frankfurt Y George
Town Y Hong Kong Y Houston Y Los Angeles Y Memphis
Miami Y Milan Y Montreal Y Osaka Y Paris Y Philadelphia Y San
Francisco Y Singapore Y Sydney Y Toronto Y Vancouver Y Zurich
<PAGE> 269
First Hawaiian, Inc.
July 17, 1998
Page 2
projected cost savings, operating synergies and revenue increases expected to be
derived from the business combination prepared jointly by the respective
managements of the Company and Bank of the West. We have also held discussions
with members of the senior management of each of the Company and Bank of the
West regarding the strategic rationale for, and the potential benefits of, the
transaction contemplated by the Agreement and the past and current business
operations, financial condition and future prospects of their respective
companies and of the companies as combined pursuant to the Agreement. We have
considered the view of the senior management of the Company that the transaction
contemplated by the Agreement represents a significant business opportunity for
the Company and that certain strategic and operational benefits will be derived
from such transaction. In addition, we have reviewed the reported price and
trading activity for the Shares, compared the reported price and trading
activity for the Shares with similar information for certain other companies the
securities of which are publicly traded, compared certain financial information
for the Company and Bank of the West with similar information for certain other
companies and reviewed the financial terms of certain recent business
combinations in the commercial banking industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In that regard, we have
assumed, with your consent, that the financial forecasts, including, without
limitation, projected cost savings, operating synergies and revenue increases
resulting from the merger and projections regarding under-performing and
non-performing assets and net charge-offs, have been reasonably prepared on a
basis reflecting the best currently available judgments and estimates of the
Company and Bank of the West and that such forecasts will be realized in the
amounts and at the times contemplated thereby. We are not experts in the
evaluation of loan and lease portfolios for the purposes of assessing the
adequacy of the allowances for losses with respect thereto and have assumed,
with your consent, that such allowances for each of the Company and Bank of the
West are in the aggregate adequate to cover all such losses. In addition, we
have not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of the Company or Bank of
the West and we have not been furnished with any such evaluation or appraisal.
Our opinion as to the fairness of the Conversion from a financial point of view
to the holders of the Shares addresses the ownership position in the Company to
be held by such holders after giving effect to the transaction contemplated by
the Agreement and does not address the future trading or acquisition value of
the stock of the Company.
Our advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of the Company's securities should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Conversion pursuant to the Agreement is fair from a financial point of view to
the holders of the Shares.
Very truly yours,
/s/ Goldman Sachs & Co.
- ---------------------------------------
(GOLDMAN, SACHS & CO.)
III-2
<PAGE> 270
PROXY
FIRST HAWAIIAN, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF STOCKHOLDERS ON AUGUST 28, 1998
The undersigned hereby revokes all prior proxies and appoints R. F. McPhee, F.
Matsuda, and F. C. Weyand, and each or any of them, as attorneys and agents of
the undersigned, with full power of substitution, to represent the undersigned
and to vote as Proxy all shares of the Common Stock of First Hawaiian, Inc. (the
"Company"), which the undersigned is entitled to vote, at the Special Meeting of
the Stockholders of the Company to be held on August 28, 1998 at 9:30 a.m.,
local time, in the 30th Floor Board Room at First Hawaiian Center, 999 Bishop
Street, Honolulu, Hawaii, and at any adjournments thereof, upon the proposal
listed on the reverse side hereof and in their discretion upon other matters
incident to the conduct of the meeting.
You are encouraged to specify your choice by marking the appropriate box, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendation. The proxies cannot vote your shares
unless you sign and return this card.
(Continued and to be signed on other side)
- FOLD AND DETACH HERE -
<PAGE> 271
Please mark [X]
your votes as
indicated in
this example.
This proxy will be voted and will be voted as specified by the stockholders. If
no choice is specified, it will be voted FOR the proposal.
The Board of Directors recommends a vote FOR the proposal.
1. Proposal to approve and adopt the Agreement and Plan of Merger dated as of
May 28, 1998 (the "Merger Agreement") between the Company and BancWest
Corporation. A copy of the Merger Agreement is attached as Appendix I to the
Proxy Statement relating to the Special Meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. In accordance with their discretion on any matters incident to the conduct of
the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE. Signature
should conform exactly to name shown on this proxy. Joint owners must each sign.
When signing as an attorney, executor, administrator, trustee or guardian,
please give your full title as it appears on this proxy. If a corporation,
please sign in full corporate name by President or other authorized officer. If
a partnership, please sign in partnership name by authorized person.
Signature:______________________________________Date:_________________
Signature:______________________________________Date:_________________
- FOLD AND DETACH HERE -
