<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BANCORP HAWAII, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
HAWAII 6022 99-0148992
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>
130 MERCHANT STREET
HONOLULU, HAWAII 96813
(808) 643-3888
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------
JOSEPH T. KIEFER, ESQ.
BANCORP HAWAII, INC.
130 MERCHANT STREET
HONOLULU, HAWAII 96813
(808) 643-3888
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent For Service)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
J. THOMAS VAN WINKLE, ESQ. ANITA WOLMAN, ESQ. STANLEY F. FARRAR, ESQ.
CARLSMITH BALL WICHMAN CU BANCORP SULLIVAN & CROMWELL
CASE & ICHIKI SECRETARY AND GENERAL COUNSEL 444 SOUTH FLOWER STREET
SUITE 2200, PACIFIC TOWER 16030 VENTURA BOULEVARD LOS ANGELES, CALIFORNIA 90071
1001 BISHOP STREET ENCINO, CALIFORNIA 91436 (213) 955-8023
HONOLULU, HAWAII 96813 (818) 907-9122
(808) 523-2500
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED (1) PER UNIT OFFERING PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $2.00 par value........ 4,031,499 shares N/A $141,652,632 $42,925.04
</TABLE>
(1) The number of shares to be registered pursuant to this Registration
Statement is based on the maximum number of shares of Common Stock of the
Registrant issuable to shareholders of CU Bancorp ("CU") in the proposed
merger of CU with and into Registrant, assuming the exchange ratio is .4067
(the maximum exchange ratio) and the estimated maximum number of shares of
CU to be acquired in the merger for stock of the Registrant is 12,390,888.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended,
based on the product of the estimated maximum number of shares of CU to be
acquired in the merger (12,390,888) multiplied by the average of the high
and low prices of CU Common Stock on March 27, 1997 ($14.50) as reported by
the Nasdaq National Market, less a minimum assumed amount of cash to be paid
for shares of CU Common Stock ($38,015,244).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CU BANCORP
16030 VENTURA BOULEVARD
ENCINO, CALIFORNIA 91436-4487
May , 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of CU
Bancorp to be held at 10:00 a.m., Pacific Daylight Time on Friday, June 27,
1997, at the Long Beach Marriott Airport Hotel, 4700 Airport Drive, Long Beach,
California.
The purpose of the Special Meeting is to vote on a proposal to approve an
Agreement and Plan of Reorganization (the "Merger Agreement"), and the related
Agreement and Plan of Merger, pursuant to which CU Bancorp ("CU") will be merged
(the "Merger") into Bancorp Hawaii, Inc. ("BHI"). In the Merger, CU shareholders
will have the right, at their election, to receive $15.34 per share in cash, or
shares of BHI common stock, or a combination of the two, for their shares of CU
common stock, subject to the proration procedures, adjustments and limitations
described in the attached Proxy Statement/Prospectus.
The number of shares of BHI common stock that will be issued to CU
shareholders who elect to receive BHI common stock for their shares of CU common
stock, and the initial aggregate market value of the shares of BHI common stock,
will be determined through a formula that will be based on the average per share
closing price of BHI common stock as reported on the New York Stock Exchange for
the twenty trading days ending on the third trading day immediately prior to the
closing date of the Merger. A description of this formula, which is subject to
adjustments and limitations that may result in the BHI common stock that is
issued in exchange for each share of CU common stock having an initial market
value that is greater or less than $15.34, together with other important
information, is contained in the accompanying Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF CU HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT, THE
MERGER AND RELATED TRANSACTIONS THAT WILL BE PRESENTED AT THE SPECIAL MEETING.
Approval of the Merger will require the affirmative vote of a majority of
all outstanding shares of CU common stock. An abstention or failure to vote will
have the same effect as a vote against the Merger. It is therefore important
that your shares be represented at the Special Meeting, whether or not you
currently plan to attend the Special Meeting in person.
Please complete, date, sign and promptly return your proxy card in the
enclosed envelope. Returning your proxy card now will not prevent you from
voting in person at the Special Meeting, but will assure that your vote is
counted if you are unable to attend.
Please vote today.
Stephen G. Carpenter
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
IMPORTANT: IF YOUR SHARES OF CU COMMON STOCK ARE HELD IN THE NAME OF A BROKERAGE
FIRM OR NOMINEE, ONLY IT CAN VOTE YOUR SHARES. TO ENSURE THAT YOUR SHARES ARE
VOTED, FOLLOW THE VOTING INSTRUCTIONS PROVIDED TO YOU BY SUCH FIRM OR NOMINEE
WITH THIS PROXY STATEMENT/PROSPECTUS OR TELEPHONE THE PERSON RESPONSIBLE FOR
YOUR ACCOUNT TODAY TO OBTAIN INSTRUCTIONS ON HOW TO DIRECT HIM OR HER TO EXECUTE
A PROXY ON YOUR BEHALF. IF YOU HAVE ANY QUESTIONS OR NEED HELP IN VOTING YOUR
SHARES, PLEASE TELEPHONE [INFORMATION AGENT] AT .
<PAGE>
CU BANCORP
16030 VENTURA BOULEVARD
ENCINO, CALIFORNIA 91436-4487
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 27, 1997
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of shareholders of CU Bancorp
will be held at the Long Beach Airport Marriott Hotel, 4700 Airport Drive, Long
Beach, California, on Friday, June 27, 1997 at 10:00 a.m. Pacific Daylight Time.
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve and adopt the Agreement and Plan of Reorganization, dated February
24, 1997 (the "Merger Agreement") and related Agreement and Plan of Merger, by
and between Bancorp Hawaii, Inc. ("BHI") and CU Bancorp ("CU"), providing for
the merger of CU with and into BHI, as more completely described in the enclosed
Proxy Statement/Prospectus.
The Board of Directors has selected April 28, 1997 as the record date for
the Special Meeting. Only those shareholders of record at the close of business
on that date will be entitled to notice of and to vote at the Special Meeting or
any postponements or adjournments thereof.
By Order of the Board of Directors
Stephen G. Carpenter,
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Encino, California
May , 1997
IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO SIGN AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN
TO ATTEND THE SPECIAL MEETING IN PERSON. IF YOU DO ATTEND THE SPECIAL MEETING,
YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON AT THAT TIME. YOU MAY REVOKE YOUR
PROXY AT ANY TIME PRIOR TO ITS EXERCISE.
PLEASE INDICATE ON THE PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING SO WE CAN PROVIDE ADEQUATE ACCOMMODATIONS.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION; DATED APRIL 1, 1997
PROXY STATEMENT
CU BANCORP
SPECIAL MEETING TO BE HELD ON JUNE 27, 1997
------------------------
PROSPECTUS
BANCORP HAWAII, INC.
COMMON STOCK
(PAR VALUE $2.00 PER SHARE)
------------------------
This Proxy Statement/Prospectus is being furnished to the holders of common
stock, no par value ("CU Stock"), of CU Bancorp, a California corporation
("CU"), in connection with the solicitation of proxies by the Board of Directors
of CU for use at the special meeting of CU's shareholders to be held at the Long
Beach Airport Marriott Hotel, 4700 Airport Drive, Long Beach, California, on
Friday, June 27, 1997, at 10:00 a.m., Pacific Daylight Time, and at any
adjournments or postponements thereof (the "Special Meeting").
At the Special Meeting, the shareholders of record of CU Stock as of the
close of business on April 28, 1997 will consider and vote upon a proposal to
approve that certain Agreement and Plan of Reorganization, dated February 24,
1997 (the "Merger Agreement"), and the related Agreement and Plan of Merger
("Plan of Merger"), by and between Bancorp Hawaii, Inc., a Hawaii corporation
("BHI"), and CU, pursuant to which CU will merge with and into BHI (the
"Merger"). See "THE SPECIAL MEETING." Upon consummation of the Merger, each
outstanding share of CU Stock (except for shares held by CU shareholders
properly exercising dissenters' rights and certain shares held by BHI or CU)
will be converted into the right to receive either (1) $15.34 in cash; or (2) a
fraction of a share of common stock of BHI, par value $2.00 per share ("BHI
Stock"), calculated as described in this Proxy Statement/Prospectus and holders
of CU Stock will be given the opportunity to indicate the form of consideration
they prefer, subject to the proration procedures, adjustments and limitations
described herein. Pursuant to the Merger Agreement, at least 60% (the "Minimum
Stock Amount") and no more than 80% (the "Maximum Stock Amount") of the
aggregate number of issued and outstanding shares of CU Stock as of the
Effective Time (as hereinafter defined) will be converted into shares of BHI
Stock. In the event that holders of CU Stock elect, in the aggregate, to convert
more than the Maximum Stock Amount or less than the Minimum Stock Amount into
shares of BHI Stock, certain holders of CU Stock will receive a prorated number
of shares of BHI Stock and a prorated amount of cash so that the number of
shares of CU Stock converted into shares of BHI Stock will be at least the
Minimum Stock Amount and not greater than the Maximum Stock Amount. The fraction
of a share of BHI Stock into which each share of CU Stock for which an effective
Stock Election or Combination Election (each as hereinafter defined) is made
will be converted in the Merger cannot be determined until the Election
Deadline, and is subject to upper and lower limits. As a result, and because the
exchange ratio will be based on an average, the BHI Stock issued in exchange for
each share of CU Stock may have an initial market value that is greater or less
than $15.34. See "THE MERGER--Consideration Payable Upon Consummation of the
Merger." The Merger Agreement and the Plan of Merger are included as Appendix A
to this Proxy Statement/Prospectus. Subject to regulatory approval, the
shareholder approval being sought at the Special Meeting, and satisfaction or
waiver of the other conditions described herein, the Merger currently is
expected to be consummated on or about June 30, 1997.
(CONTINUED ON NEXT PAGE)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE SHARES OF BHI STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MAY , 1997.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
This Proxy Statement/Prospectus also constitutes a prospectus of BHI in
respect of up to 4,031,499 shares of BHI Stock to be issued upon consummation of
the Merger pursuant to the Merger Agreement. This Proxy Statement/Prospectus
does not cover any resales of such securities, and no person is authorized to
make use of this Proxy Statement/Prospectus in connection with any such resale.
The outstanding shares of BHI Stock are listed on the New York Stock
Exchange ("NYSE"). The last reported sale price of BHI Stock on the NYSE
Composite Transactions Tape on May , 1997 was $
per share.
This Proxy Statement/Prospectus, the attached Notice to Shareholders and the
accompanying proxy card are first being mailed to shareholders of CU on or about
May , 1997.
------------------------
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Proxy Statement/Prospectus and the
documents incorporated herein by reference may constitute forward-looking
statements within the meaning of the Private Litigation Reform Act of 1995 and
as such may involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance, or achievements of BHI and/or
CU to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements.
Specifically, BHI and CU caution readers that the following important factors
could affect BHI's and/or CU's respective businesses and cause actual results to
differ materially from those expressed or implied in any forward-looking
statement made by, or on behalf of, BHI or CU in this Proxy
Statement/Prospectus:
(1) ECONOMIC CONDITIONS. BHI's and CU's respective results are strongly
influenced by general economic conditions in their respective market areas.
Accordingly, a deterioration in these conditions could have a material adverse
impact on the quality of BHI's or CU's loan portfolio, the demand for their
products and services, or acquisition and growth opportunities.
(2) INTEREST RATES. BHI's and/or CU's net interest income may differ
materially as a result of variances in interest rates. In addition, changes in
interest rates, marketing and other factors could affect the parties' respective
deposit base.
(3) GOVERNMENT REGULATION AND MONETARY POLICY. All forward-looking
statements presume a continuation of the existing regulatory environment and
United States government monetary policies. The banking industry is subject to
extensive federal and state regulations, and significant new laws or changes in,
or repeals of, existing laws may cause results to differ materially. Further,
federal monetary policy, particularly as implemented through the Federal Reserve
System, significantly affects credit conditions for BHI and CU, primarily
through open market operations in United States government securities, the
discount rate for member bank borrowings and bank reserve requirements, and a
material change in these conditions would be likely to have a material impact on
BHI's and/or CU's results.
(4) COMPETITION. BHI and CU compete with numerous other domestic and
foreign financial institutions and non-depository financial intermediaries.
Results of BHI and/or CU may differ if circumstances affecting the nature or
level of competition change, such as the merger of competing financial
institutions.
(5) CREDIT QUALITY. A significant source of risk arises from the
possibility that losses will be sustained because borrowers, guarantors and
related parties may fail to perform in accordance with the terms of their loans.
2
<PAGE>
(6) OTHER RISKS. From time to time, BHI and CU detail other risks with
respect to their respective businesses and/or their financial results in their
respective filings with the Securities and Exchange Commission (the "SEC").
While management of BHI and CU believe that their respective assumptions
regarding these and other factors on which forward-looking statements are based
are reasonable, such assumptions are necessarily speculative in nature, and
actual outcomes may vary materially.
Consequently, there can be no assurance that the results described in such
forward-looking statements will be achieved.
AVAILABLE INFORMATION
BHI and CU are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, each files reports, proxy statements and other information with the
SEC. Such reports, proxy statements, and other information can be inspected and
copied at the public reference facilities maintained by the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The SEC maintains a website at
http://www.sec.gov that also contains certain reports, proxy statements and
other information concerning BHI and CU, each of which files information
electronically with the SEC. The BHI Stock is listed on the NYSE, and such
reports, proxy statements and other information concerning BHI should be
available for inspection and copying at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
This Proxy Statement/Prospectus constitutes a part of a registration
statement on Form S-4 (together with all amendments and exhibits, the
"Registration Statement") filed by BHI with the SEC under the Securities Act of
1933, as amended (the "Securities Act") with respect to the shares of BHI Stock
to be issued in the Merger. This Proxy Statement/Prospectus does not contain all
of the information included in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the SEC. Any
statement contained herein concerning the provisions of any document does not
purport to be complete and, in each such instance, is subject to and qualified
in its entirety by reference to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the SEC. Reference is made to
such Registration Statement and to the exhibits relating thereto for further
information with respect to BHI and the securities offered hereby. Copies of all
or any part of the Registration Statement, including exhibits thereto, may be
obtained, upon payment of the prescribed fees, or inspected at the offices of
the SEC and the NYSE as set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS
RELATING TO BHI, OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE,
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST, FROM CORI C. WESTON, VICE PRESIDENT
AND SECRETARY, BANCORP HAWAII, INC., 130 MERCHANT STREET, HONOLULU, HAWAII
96813, TELEPHONE (808) 537-8272. COPIES OF SUCH DOCUMENTS RELATING TO CU, OTHER
THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE, WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST, FROM PATRICK HARTMAN, CHIEF FINANCIAL
3
<PAGE>
OFFICER, CU BANCORP, 16030 VENTURA BOULEVARD, ENCINO, CALIFORNIA 96813,
TELEPHONE (818) 907-9122. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY JUNE 17, 1997.
------------------------
The following documents filed with the SEC by BHI are hereby incorporated by
reference in this Proxy Statement/Prospectus and made a part hereof: (1) Current
Report on Form 8-K, filed February 27, 1996; (2) Annual Report on Form 10-K for
the fiscal year ended December 31, 1996; and (3) the description of BHI Stock
set forth in the Registration Statement on Form 8-A dated March 18, 1991. See
"DESCRIPTION OF BHI CAPITAL STOCK."
The following documents filed with the SEC by CU are hereby incorporated by
reference in this Proxy Statement/Prospectus and made a part hereof: (1) Current
Report on Form 8-K, filed February 27, 1996; (2) Annual Report on Form 10-K for
the fiscal year ended December 31, 1996; and (3) the description of CU Stock
contained in the Joint Proxy Statement/Prospectus forming part of the
Registration Statement on Form S-4 dated June 7, 1996, as amended (Registration
No. 333-02777).
All documents filed by BHI or CU pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the Special Meeting shall be deemed incorporated by reference in this
Proxy Statement/Prospectus and a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed
incorporated herein by reference will be deemed to be modified or superseded for
purpose of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is, or
is deemed to be, incorporated herein by reference, modifies or supersedes such
statement. Any such statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
All information contained in this Proxy Statement/Prospectus with respect to
BHI and its subsidiaries has been supplied by BHI, and all information with
respect to CU and its subsidiaries has been supplied by CU.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS DOCUMENT NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BHI OR CU SINCE
THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITY OTHER THAN THE BHI STOCK TO WHICH IT
RELATES.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.......................................................... 2
AVAILABLE INFORMATION...................................................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 3
TABLE OF CONTENTS.......................................................................................... 5
INDEX OF CERTAIN DEFINED TERMS............................................................................. 10
SUMMARY.................................................................................................... 10
Parties to the Merger.................................................................................. 10
Special Meeting of Shareholders........................................................................ 10
Vote Required; Record Date............................................................................. 10
Effect of the Merger................................................................................... 10
Consideration Payable Upon Consummation of the Merger.................................................. 11
Reasons for the Merger; Recommendation of Board of Directors........................................... 12
CU................................................................................................. 12
BHI................................................................................................ 12
Opinion of Financial Advisor........................................................................... 12
Effective Time; Closing Date........................................................................... 12
Conditions; Regulatory Approvals....................................................................... 13
Conduct of Business Pending Merger..................................................................... 13
CU................................................................................................. 13
BHI................................................................................................ 13
Termination of the Merger Agreement.................................................................... 13
Interests of Certain Persons in the Merger............................................................. 14
Certain Federal Income Tax Considerations.............................................................. 14
Accounting Treatment................................................................................... 15
Shareholder's Agreements............................................................................... 15
Stock Option Agreement................................................................................. 15
Dissenters' Rights..................................................................................... 15
Certain Differences in Shareholders' Rights............................................................ 15
Markets and Market Prices.............................................................................. 15
Selected Consolidated Financial Data................................................................... 16
Comparative per Share Data (Unaudited)................................................................. 18
INTRODUCTION............................................................................................... 19
General................................................................................................ 19
Parties to the Merger.................................................................................. 19
Bancorp Hawaii, Inc................................................................................ 19
CU Bancorp......................................................................................... 20
THE SPECIAL MEETING........................................................................................ 21
Record Date............................................................................................ 21
Proxies................................................................................................ 21
Quorum................................................................................................. 22
Vote Required.......................................................................................... 22
THE MERGER................................................................................................. 23
Background of and Reasons for the Merger............................................................... 23
Recommendation of the CU Board of Directors............................................................ 25
Opinion of Financial Advisor........................................................................... 26
General............................................................................................ 26
Present Value Analysis............................................................................. 28
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
Contribution Analysis.............................................................................. 28
<S> <C>
Dilution Analysis.................................................................................. 28
Dividend Pickup Analysis........................................................................... 29
Effect of the Merger................................................................................... 30
Consideration Payable Upon Consummation of the Merger.................................................. 30
Conversion of CU Stock............................................................................. 30
Election and Allocation Procedure.................................................................. 30
No Fractional Shares............................................................................... 32
Effective Time; Closing Date........................................................................... 32
Surrender of CU Stock Certificates; Delivery of Merger Consideration................................... 32
Conditions to Consummation of the Merger............................................................... 33
Conditions to Each Party's Obligations............................................................. 33
CU Conditions...................................................................................... 34
BHI Conditions..................................................................................... 34
Regulatory Approvals................................................................................... 35
Representations and Warranties......................................................................... 36
Conduct of Business Pending the Merger................................................................. 36
CU................................................................................................. 36
BHI................................................................................................ 38
Additional Covenants............................................................................... 38
Nonsolicitation........................................................................................ 38
Amendment and Termination.............................................................................. 39
Amendment and Waiver............................................................................... 39
Termination........................................................................................ 39
Price-Based Termination............................................................................ 40
Interests of Certain Persons in the Merger............................................................. 40
Indemnification of Directors and Officers; D & O Coverage.......................................... 41
Certain Options.................................................................................... 41
Management Retention and Other Agreements.......................................................... 41
Fees to CU Financial Advisor....................................................................... 42
Stock Options.......................................................................................... 42
Employee Benefit Plans................................................................................. 45
Certain Federal Income Tax Considerations.............................................................. 46
Continuity of Interest............................................................................. 46
CU Shareholders--Generally......................................................................... 47
Receipt of BHI Stock for All CU Stock Actually Owned............................................... 47
Receipt of Cash for All CU Stock Actually Owned.................................................... 47
Receipt of Both Shares of BHI Stock and Cash for CU Stock Actually Owned........................... 48
Impact of Section 302 of the Code.................................................................. 48
Constructive Ownership............................................................................. 50
Fractional Shares.................................................................................. 50
Other Considerations Applicable to CU Shareholders................................................. 50
Shares Issued in Connection with Stock Options or the Performance of Services...................... 50
Accounting Treatment................................................................................... 51
Expenses............................................................................................... 51
Certain Post-Merger Matters............................................................................ 51
CERTAIN RELATED AGREEMENTS................................................................................. 52
Shareholder's Agreements............................................................................... 52
Stock Option Agreement................................................................................. 52
General............................................................................................ 52
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
Exercise of Option................................................................................. 53
<S> <C>
Expiration......................................................................................... 53
Adjustment of Number of Shares..................................................................... 53
Substitute Option.................................................................................. 54
Repurchase at the Option of BHI.................................................................... 54
Minimum Option Repurchase Price.................................................................... 54
Registration Rights................................................................................ 54
Effect of Stock Option Agreement................................................................... 54
Resale of BHI Stock; Affiliate's Agreements............................................................ 55
DESCRIPTION OF BHI CAPITAL STOCK........................................................................... 55
Common Stock........................................................................................... 55
Preferred Stock........................................................................................ 56
Certain Provisions of the BHI Articles and of Hawaii Law............................................... 56
COMPARISON OF RIGHTS OF SHAREHOLDERS....................................................................... 58
DISSENTERS' RIGHTS......................................................................................... 58
VALIDITY OF BHI STOCK...................................................................................... 60
EXPERTS.................................................................................................... 60
OTHER MATTERS.............................................................................................. 61
APPENDICES
</TABLE>
<TABLE>
<S> <C>
Appendix A Agreement and Plan of Reorganization (With Agreement and Plan of
Merger and Certain Other Exhibits)
Appendix B Stock Option Agreement
Appendix C Chapter 13 of the California General Corporation Law
Appendix D Fairness Opinion of Montgomery Securities
</TABLE>
7
<PAGE>
INDEX OF CERTAIN DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Acquisition Transaction.................................................................................... 53
Average Price of BHI Stock................................................................................. 11
BHCA....................................................................................................... 19
BHI Articles............................................................................................... 15
BHI Option Plan............................................................................................ 42
BHI Option Plan Amendment.................................................................................. 44
BHI Preferred Stock........................................................................................ 56
BHI Stock.................................................................................................. 55
California Code............................................................................................ 15
Cancelled Shares........................................................................................... 11
Cash Election.............................................................................................. 11
Cash EPS................................................................................................... 28
Code....................................................................................................... 13
Combination Cash Election.................................................................................. 11
Combination Election....................................................................................... 31
Combination Stock Election................................................................................. 11
CSA Statutes............................................................................................... 57
CU Articles................................................................................................ 15
CU Bank.................................................................................................... 10
CUBNA...................................................................................................... 21
Determination Date......................................................................................... 45
Dissenting Shares.......................................................................................... 11
Effective Time............................................................................................. 12
Election................................................................................................... 31
Election Deadline.......................................................................................... 31
Engagement Letter.......................................................................................... 26
Exchange Act............................................................................................... 3
Exchange Agent............................................................................................. 30
Exchange Ratio............................................................................................. 11
FDIC....................................................................................................... 19
HBCA....................................................................................................... 55
Incentive Payments......................................................................................... 41
Index Price................................................................................................ 13
IRS........................................................................................................ 46
Key Employees.............................................................................................. 41
Letter of Transmittal...................................................................................... 31
LTM........................................................................................................ 27
Mailing Date............................................................................................... 31
Maximum Stock Amount....................................................................................... 11
Merger Proposal............................................................................................ 10
Minimum Stock Amount....................................................................................... 12
Montgomery................................................................................................. 12
Option..................................................................................................... 52
Option Repurchase Price.................................................................................... 54
Option Share Repurchase Price.............................................................................. 54
Planned Dispositions....................................................................................... 46
Ratification Date.......................................................................................... 45
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
Record Date................................................................................................ 10
<S> <C>
Registration Statement..................................................................................... 3
Regulatory Approvals....................................................................................... 33
Replacement Option......................................................................................... 44
Replacement Option Amount.................................................................................. 45
Reported EPS............................................................................................... 28
Restricted Securities...................................................................................... 55
Sale....................................................................................................... 55
SEC........................................................................................................ 3
Securities Act............................................................................................. 3
Shareholder's Agreements................................................................................... 52
Stock Election............................................................................................. 11
Superintendent............................................................................................. 35
Tax Counsel................................................................................................ 46
Terminating Event.......................................................................................... 42
Triggering Event........................................................................................... 53
Undesignated Shares........................................................................................ 31
</TABLE>
9
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE A COMPLETE DESCRIPTION OF ALL
MATERIAL FACTS REGARDING BHI, CU AND THE MATTERS TO BE CONSIDERED AT THE SPECIAL
MEETING, AND IS QUALIFIED IN ALL RESPECTS BY THE INFORMATION APPEARING ELSEWHERE
OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS, THE APPENDICES
HERETO AND THE DOCUMENTS REFERRED TO HEREIN. SHAREHOLDERS ARE URGED TO READ THIS
PROXY STATEMENT/PROSPECTUS AND THE APPENDICES HERETO IN THEIR ENTIRETY.
CAPITALIZED TERMS USED BUT NOT DEFINED IN THIS SUMMARY HAVE THE MEANINGS
ASCRIBED TO SUCH TERMS ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS. SEE "INDEX
OF CERTAIN DEFINED TERMS."
PARTIES TO THE MERGER
BHI is a bank holding company incorporated under the laws of Hawaii. BHI
provides varied financial services to customers in Hawaii, other areas of the
Pacific Basin, Asia, and the U.S. Mainland. It is the largest of the bank
holding companies headquartered in the State of Hawaii. The principal
subsidiaries of BHI are Bank of Hawaii and Bancorp Pacific, Inc. (the holding
company of First Federal Savings and Loan Association of America). The address
of BHI's principal executive offices is 130 Merchant Street, Honolulu, Hawaii
96813 and its telephone number at that address is (808) 643-3888.
CU is a bank holding company incorporated under the laws of California,
which conducts a commercial banking business through its wholly owned
subsidiary, California United Bank ("CU Bank"). The address of CU's principal
executive offices is 16030 Ventura Boulevard, Encino, California 91436-4487 and
its telephone number at that address (818) 907-9122.
See "INTRODUCTION--Parties to the Merger."
SPECIAL MEETING OF SHAREHOLDERS
The Special Meeting will be held at the Long Beach Airport Marriott Hotel,
which is located at 4700 Airport Drive, Long Beach, California, on Friday, June
27, 1997 at 10:00 a.m., Pacific Daylight Time. The purpose of the Special
Meeting is to consider and vote upon a proposal (the "Merger Proposal") to
approve the Merger Agreement, the related Plan of Merger, the Merger and the
other transactions contemplated thereby. See "THE SPECIAL MEETING."
VOTE REQUIRED; RECORD DATE
Only CU shareholders of record at the close of business on April 28, 1997
(the "Record Date") will be entitled to vote at the Special Meeting. See "THE
SPECIAL MEETING--Record Date." The affirmative vote of the holders of a majority
of the outstanding shares of CU Stock on such date is required to approve the
Merger Proposal. See "THE SPECIAL MEETING--Vote Required." As of the Record
Date, there were [11,377,197] shares of CU Stock outstanding.
As of the Record Date, CU's directors, executive officers and their
respective affiliates beneficially owned an aggregate of [1,164,849] shares of
CU Stock (not including shares issuable upon exercise of stock options), or
approximately [10.24]% of those outstanding as of the Record Date. All of CU's
directors have agreed to vote their approximately [612,573] shares
(approximately [5.38]%) in favor of the Merger Proposal. See "CERTAIN RELATED
AGREEMENTS--Shareholder's Agreements."
As of the Record Date, BHI beneficially owned an aggregate of [53,900]
shares of CU Stock and intends to vote such shares in favor of the Merger
Proposal.
EFFECT OF THE MERGER
Pursuant to the Merger Agreement, at the Effective Time (as hereinafter
defined), CU will merge with and into BHI, with BHI being the surviving
corporation. See "THE MERGER--Effect of the Merger." For information on how CU
shareholders will be able to exchange certificates representing
10
<PAGE>
shares of CU Stock for new certificates representing shares of BHI Stock (and
cash in lieu of fractional shares), and/or cash to be issued to them, see "THE
MERGER--Surrender of CU Stock Certificates; Delivery of Merger Consideration."
CONSIDERATION PAYABLE UPON CONSUMMATION OF THE MERGER
In the aggregate, at least 60%, and not more than 80%, of the shares of CU
Stock issued and outstanding immediately prior to the Effective Time (other than
"Dissenting Shares" and "Cancelled Shares" (each as defined below)) will be
converted into the right to receive BHI Stock. The remaining shares of CU Stock
will be converted into the right to receive cash. Holders of CU Stock will have
the opportunity to indicate their preference for the proportion of cash and BHI
Stock exchanged for their shares, and may indicate a preference for receiving
all cash or all BHI Stock. As used in this Proxy Statement/Prospectus, (i)
"Dissenting Shares" means shares which have been voted against approval of the
Merger Agreement and with respect to which dissenters' rights have been
perfected in accordance with California law and (ii) "Cancelled Shares" means
shares of CU Stock that may be owned by CU, by BHI, or by any of their
respective wholly owned subsidiaries, other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted.
Each such share of CU Stock will, by virtue of the Merger, be converted into
the right to receive either: (i) a fraction of a share of BHI Stock equal to the
quotient (such quotient, the "Exchange Ratio") of (a) $15.34 divided by (b) the
average of the daily closing prices of a share of BHI Stock on the NYSE as
reported in The Wall Street Journal for the twenty consecutive trading days
ending on the third trading day immediately prior to the Closing Date (as
hereinafter defined)(such average, the "Average Price of BHI Stock"); provided,
however, that if the Average Price of BHI Stock is more than $51.03125, such
average will be deemed to be $51.03125 and, accordingly, the Exchange Ratio will
be fixed at 0.3006, and if the Average Price of BHI Stock is less than
$37.71875, such average will be deemed to be $37.71875 and, accordingly, the
Exchange Ratio will be fixed at .4067; or (ii) cash in the amount of $15.34. The
fraction of a share of BHI Stock into which each share of CU Stock for which an
effective Stock Election or Combination Stock Election (each as hereinafter
defined) is made will be converted in the Merger cannot be determined until the
Effective Time. BECAUSE THE EXCHANGE RATIO IS SUBJECT TO UPPER AND LOWER LIMITS,
AND BECAUSE THE EXCHANGE RATIO IS BASED ON AN AVERAGE, THE BHI STOCK ISSUED IN
EXCHANGE FOR EACH SHARE OF CU STOCK MAY HAVE AN INITIAL MARKET VALUE THAT IS
GREATER OR LESS THAN $15.34.
Each holder of CU Stock will be permitted to elect to receive: (i) BHI Stock
with respect to all such holder's CU Stock (a "Stock Election"), or (ii) cash
with respect to all such holder's CU Stock (a "Cash Election"), or (iii) BHI
Stock with respect to a specified number of shares of CU Stock (a "Combination
Stock Election") and cash with respect to a specified number of shares of CU
Stock (a "Combination Cash Election"). Any shares as to which the Exchange Agent
(as defined herein) does not timely receive an effective, properly completed
election form will constitute "Undesignated Shares."
If holders of CU Stock effectively elect, in the aggregate, to convert into
BHI Stock at least the Minimum Stock Amount and no more than the Maximum Stock
Amount (as these terms are defined below), Undesignated Shares will be converted
into cash and all shares covered by an effective Election will be converted into
the right to receive the form of consideration specified therein.
If holders of CU Stock effectively elect, in the aggregate, to convert into
BHI Stock more than 80% of the shares of CU Stock outstanding immediately prior
to the Effective Time (the "Maximum Stock Amount"), Undesignated Shares and
Dissenting Shares will be deemed to have made Cash Elections, and the Exchange
Agent will select by lot to the extent necessary to not exceed the Maximum Stock
Amount some or all of the persons who hold of record 100 or less shares of CU
Stock who effectively made a Stock Election or a Combination Stock Election and
shall treat such persons as having made a Cash Election as to all of such
persons' CU Stock. If thereafter the number of remaining shares of CU Stock as
to which Stock Elections and Combination Stock Elections have been effectively
made nonetheless exceeds the
11
<PAGE>
Maximum Stock Amount, all holders of such shares will receive a prorated number
of shares of BHI Stock and a prorated amount of cash such that shares of CU
Stock approximately equal to the Maximum Stock Amount are converted into shares
of BHI Stock.
If holders of CU Stock effectively elect, in the aggregate, to convert into
BHI Stock less than 60% of the shares of CU Stock outstanding immediately prior
to the Effective Time (the "Minimum Stock Amount"), the Exchange Agent will
select by lot to the extent necessary to meet the Minimum Stock Amount some or
all persons holding Undesignated Shares and treat them as having made a Stock
Election. If thereafter the total number of shares of CU Stock as to which Stock
Elections and Combination Stock Elections have been made or deemed made is less
than the Minimum Stock Amount, persons who have made effective Cash Elections or
Combination Cash Elections will receive a prorated number of shares of BHI Stock
and a prorated amount of cash such that the number of shares of CU Stock
converted into BHI Stock is approximately equal to the Minimum Stock Amount.
BECAUSE OF THE PRORATION PROVISIONS OF THE MERGER AGREEMENT, THERE IS NO
ASSURANCE THAT A HOLDER OF CU STOCK WILL RECEIVE THE PROPORTION OF BHI STOCK AND
CASH INDICATED ON SUCH HOLDER'S ELECTION. ALSO, RECORD HOLDERS OF 100 OR LESS
SHARES OF CU STOCK MAY RECEIVE CASH IN EXCHANGE FOR THOSE SHARES, AND BE SUBJECT
TO TAX AS A RESULT THEREOF, DESPITE DELIVERY OF AN EFFECTIVE STOCK ELECTION OR
COMBINATION STOCK ELECTION.
See "THE MERGER--Consideration Payable Upon Consummation of the Merger."
REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS
CU. The CU Board of Directors has unanimously concluded that the Merger is
in the best interests of CU and its shareholders and unanimously recommends that
shareholders vote for the Merger Proposal. See "THE MERGER--Recommendation of
the CU Board of Directors." For information on the interests of certain CU
directors and officers in the Merger, see "THE MERGER--Interests of Certain
Persons in the Merger."
BHI. The BHI Board of Directors has approved the Merger Agreement and the
Plan of Merger and determined that the Merger and the issuance of the BHI Stock
pursuant thereto are in the best interests of BHI and its shareholders. The
approval of the Merger Proposal by the shareholders of BHI is not required.
OPINION OF FINANCIAL ADVISOR
Montgomery Securities ("Montgomery") has served as financial advisor to CU
in connection with the Merger, and has delivered a written opinion to the CU
Board of Directors dated February 21, 1997, that the consideration to be
received by CU's shareholders pursuant to the Merger was fair from a financial
point of view, as of the date of such opinion. Montgomery has also delivered to
the CU Board of Directors a written opinion reconfirming its conclusions, as of
the date of this Proxy Statement/Prospectus. For additional information, see
"THE MERGER--Opinion of Financial Advisor." The opinion of Montgomery dated the
date of this Proxy Statement/Prospectus is attached as Appendix D to this Proxy
Statement/ Prospectus. Shareholders are urged to read such opinion in its
entirety.
EFFECTIVE TIME; CLOSING DATE
The Merger will become effective when certain filings are made with the
Director of the Department of Commerce and Consumer Affairs of the State of
Hawaii, or on such later date as may be agreed by CU and BHI and specified in
such filings (the "Effective Time"), which are to be made on or as soon as
practicable following the Closing Date. The Closing Date is to occur on the
first Friday (unless such date is not a business day, in which case it will be
the preceding business day) that is both (i) after satisfaction of each of the
conditions set forth in Articles IX, X and XI of the Merger Agreement (see "THE
MERGER--Conditions to Consummation of the Merger") and (ii) no less than four
business days after
12
<PAGE>
the occurrence of the Election Deadline (as hereinafter defined). The parties
anticipate that they may waive the four business day waiting period.
If the Merger is approved by the shareholders of CU, subject to certain
conditions described herein, the Effective Time is currently expected to occur
on or about June 30, 1997.
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is subject to various conditions, including (i)
receipt of the shareholder approval solicited hereby; (ii) receipt of requisite
regulatory approvals without imposition of conditions that BHI reasonably
determines in the good faith exercise of its business judgment would be
materially burdensome to BHI or any of its subsidiaries (including CU Bank);
(iii) that Dissenting Shares shall not exceed 10% of the outstanding CU Stock;
(iv) that at the close of business on the last day of the month preceding the
Effective Time, total deposits of CU Bank (subject to certain exclusions) shall
be no less than $605 million; (v) receipt of certain opinions of counsel
regarding, among other matters, certain tax aspects of the Merger; and (vi)
satisfaction of other closing conditions.
The Merger is subject to prior approval by the Federal Reserve Board and
California banking regulators. BHI has submitted applications seeking such
approvals, but there can be no assurance that such approvals will be obtained,
and, if obtained, that they will not contain any materially burdensome condition
or requirement which would cause such approval to fail to satisfy the conditions
set forth in the Merger Agreement.
See "THE MERGER--Conditions to Consummation of the Merger," and
"--Regulatory Approvals."
CONDUCT OF BUSINESS PENDING MERGER
CU. The Merger Agreement contains certain restrictions on the conduct of
CU's business prior to the Effective Time. Certain purposes of these
restrictions are to (i) ensure that CU is in substantially the same condition at
the Effective Time as it was on or prior to the date of the Merger Agreement,
(ii) ensure that the Effective Time is not unnecessarily delayed and (iii)
preserve the status of the Merger as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
BHI. The Merger Agreement also contains certain restrictions on the conduct
of BHI's business prior to the Effective Time. Certain purposes of these
restrictions are to ensure that (i) BHI does not take action that adversely
affects the rights of BHI Stock and (ii) the Effective Time is not unnecessarily
delayed.
See "THE MERGER--Conduct of Business Pending the Merger."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, either before or after its approval by the shareholders of CU, (i) by the
mutual agreement of CU and BHI, (ii) by CU or BHI if for any period of 10
consecutive trading days prior to the Closing Date the closing price of BHI
Stock on the NYSE is less than $35.50, (iii) by CU if for any period of 10
consecutive trading days prior to the Closing Date the closing price of BHI
Stock on the NYSE is less than $37.71875 AND for each such day the number
obtained by dividing the closing price of the BHI Stock by $44.375 is less than
85% of the number obtained by dividing the closing price of the Standard and
Poor's Bank Index (the "Index Price") for that day by 524.05 (the Index Price on
the trading day immediately preceding execution of the Merger Agreement), and
(iv) by one or both parties under various other circumstances, including the
failure of the Merger to be effective by September 30, 1997 (subject to possible
extension for up to 90 days) unless such
13
<PAGE>
failure is due to a breach of the Merger Agreement by the party seeking to
terminate. See "THE MERGER--Amendment and Termination."
Following the Special Meeting, if CU should have a right to terminate the
Merger Agreement as the result of reductions in the price of BHI Stock, the CU
Board of Directors will have the discretion, without the necessity of a further
vote of the CU shareholders, to determine whether or not to proceed with the
Merger. In exercising such discretion, the CU Board of Directors anticipates
that it would review current information and consider a variety of factors,
including those which it considered in making its initial decision to enter into
the Merger Agreement. Based thereon, the Board of Directors may determine not to
exercise CU's right to terminate the Merger Agreement. See "THE
MERGER--Background of and Reasons for the Merger" and "--Amendment and
Termination."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Record Date the directors and executive officers of CU
beneficially owned [622,041] outstanding shares of CU Stock. All of such shares
(in addition to any shares acquired upon exercise of options prior to the
Effective Time) will be converted into the right to receive cash or BHI Stock or
both at the Effective Time in the same manner as will the shares of CU Stock
held by all other CU shareholders. In addition, directors and executive officers
of CU held as of such date options to purchase [566,702] shares of CU Stock at a
weighted average exercise price of [$5.91]. Unexercised CU Options held by CU
Bank employees (including those held by executive officers who are employees of
CU Bank) as of the Effective Time shall be assumed or replaced by BHI subject to
and contingent upon certain specified conditions. All other unexercised options
will be cancelled.
The Merger Agreement provides that all rights to indemnification or
exculpation existing in favor of the directors and officers of CU or CU Bank in
effect as of January 31, 1997 with respect to matters occurring before the
Effective Time of the Merger will survive the Merger and will continue in full
force and effect for a period of six years following the Effective Time. The
Merger Agreement further provides that directors' and officers' liability
insurance coverage will be provided to directors and officers of CU and CU Bank
covering acts and omissions prior to the Effective Time, including acts related
to the Merger Agreement. Such coverage will be provided, at the election of BHI,
either pursuant to insurance policies maintained by BHI or pursuant to a policy
obtained by CU. The Merger Agreement also provides that the employee benefits
provided to CU Bank employees immediately following the Effective Time shall be
substantially equivalent to the benefits to which such employees were entitled
as of the date of the Merger Agreement.
Under the Merger Agreement and pursuant to the terms of certain incentive
agreements to be entered into prior to the Closing Date, certain key employees
of CU and CU Bank (including certain executive officers of CU and CU Bank) who
are employed by CU Bank at the Effective Time will be entitled to receive
certain incentive payments totalling $1,082,000 and will be granted at-market
incentive stock options to purchase a total of 39,000 shares of BHI Stock. In
addition, at the Effective Time, CU will make cash payments of $265,000 and
$212,000 to Messrs. Stephen G. Carpenter and David I. Rainer, Chief Executive
Officer and President of CU, respectively.
See "THE MERGER--Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
It is intended that the Merger will be treated as a tax-deferred
reorganization within the meaning of Section 368 of the Code and accordingly,
for federal income tax purposes, (i) no gain or loss will be recognized by
either CU or BHI as a result of the Merger, (ii) in general, holders of CU Stock
will not recognize gain or loss to the extent that they receive BHI Stock in
exchange for CU Stock, and (iii) in general, if cash is received by a holder of
CU Stock in exchange for some or all of such CU Stock, all or a portion of such
cash may be taxable as capital gain or or as ordinary income, depending on the
holder's particular circumstances. See "THE MERGER--Certain Federal Income Tax
Considerations."
14
<PAGE>
ACCOUNTING TREATMENT
The Merger will be accounted for by BHI under the purchase method of
accounting. See "THE MERGER--Accounting Treatment."
SHAREHOLDER'S AGREEMENTS
Each of the directors of CU has agreed, pursuant to a Shareholder's
Agreement, to vote all shares of CU Stock held by such director in favor of the
Merger Proposal. In addition, the CU directors have agreed to vote their shares
of CU Stock against any action that could interfere with, delay, or materially
adversely affect the contemplated economic benefits to BHI of the Merger or the
Stock Option Agreement, and against extraordinary corporate transactions,
changes in the majority of the CU Board of Directors, or certain other material
changes. See "CERTAIN RELATED AGREEMENTS--Shareholder's Agreements."
STOCK OPTION AGREEMENT
Concurrently with the execution and delivery of the Merger Agreement, and as
a condition and inducement thereto, BHI and CU entered into a Stock Option
Agreement, pursuant to which CU granted BHI an option to purchase up to
2,260,421 shares of CU Stock (or such other number as shall represent 19.9% of
the then outstanding shares of CU Stock) at a price of $13.00 per share. The
option will become exercisable only upon occurrence of certain triggering events
that generally relate to competing proposals to acquire CU. The Stock Option
Agreement includes provisions that could require CU to repurchase the option
granted thereby at a minimum price of $5,000,000. The Stock Option Agreement is
intended to increase the likelihood that the Merger will be consummated, and may
have the effect of discouraging alternative acquisition proposals, including
proposals involving greater consideration than that provided by the Merger
Agreement. The consummation of transactions pursuant to the Stock Option
Agreement may be subject to, among other things, receipt of any required
regulatory approvals. See "CERTAIN RELATED AGREEMENTS--Stock Option Agreement."
DISSENTERS' RIGHTS
If holders of five percent (5%) or more of the outstanding CU Stock vote
against the Merger and make a written demand upon CU for the purchase of
dissenting shares and otherwise perfect their rights in accordance with the
provisions of Chapter 13 of the California General Corporation Law (the
"California Code"), such holders will be entitled to receive an amount equal to
the fair market value of their shares as of February 24, 1997, the last trading
day before the public announcement of the Merger. See "DISSENTERS' RIGHTS" and
Appendix C.
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS
CU shareholders' rights are currently governed by California law, the CU
Articles of Incorporation (the "CU Articles") and the CU Bylaws. Upon
consummation of the Merger, holders of CU Stock receiving BHI Stock will become
shareholders of BHI and their rights as such will be governed by Hawaii law, the
BHI Articles of Incorporation (the "BHI Articles") and the BHI Bylaws. See
"COMPARISON OF RIGHTS OF SHAREHOLDERS."
MARKETS AND MARKET PRICES
BHI Stock is listed on the NYSE under the symbol "BOH" and CU Stock is
quoted on the Nasdaq National Market under the symbol "CUBN." The following
table sets forth the high and low closing price per share of BHI Stock, as
reported on the NYSE Composite Tape, and the high and low closing price per
15
<PAGE>
share of CU Stock, as reported on the Nasdaq National Market, for each calendar
quarter during 1995 and 1996.
<TABLE>
<CAPTION>
PRICE PER SHARE
------------------------------------------
BHI STOCK CU STOCK
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1995
First Quarter.......................................... $ 28.50 $ 24.88 $ 7.50 $ 7.13
Second Quarter......................................... $ 30.88 $ 27.63 $ 7.13 $ 6.86
Third Quarter.......................................... $ 36.75 $ 29.38 $ 8.75 $ 6.94
Fourth Quarter......................................... $ 37.13 $ 32.50 $ 10.25 $ 8.38
1996
First Quarter.......................................... $ 36.25 $ 33.25 $ 11.50 $ 9.27
Second Quarter......................................... $ 37.63 $ 33.13 $ 11.25 $ 9.75
Third Quarter.......................................... $ 39.75 $ 34.13 $ 11.63 $ 9.88
Fourth Quarter......................................... $ 44.00 $ 38.38 $ 11.63 $ 9.75
</TABLE>
The closing price per share of BHI Stock, as reported on the NYSE Composite
Tape, and the closing price per share of CU Stock, as reported on the Nasdaq
National Market, as of February 24, 1997, the last trading day before the date
on which BHI and CU announced execution of the Merger Agreement, and as of
[March 27,] 1997, and equivalent per share prices for CU Stock based on the BHI
Stock prices, were as follows:
<TABLE>
<CAPTION>
CU PRO FORMA
BHI STOCK PRICE CU STOCK PRICE EQUIVALENT(A)
--------------- -------------- --------------
<S> <C> <C> <C>
February 24, 1997............................ $45.00 $13.25 $15.34
[March 27,] 1997............................. [$ 43.875 ] [$ 14.50 ] [$ 15.34 ]
</TABLE>
- ------------------------
(A) Represents the equivalent of one share of CU Stock calculated by multiplying
the closing price of BHI Stock by an implied exchange ratio calculated as
though the Average Price of BHI Stock were equal to such closing price of
BHI Stock.
Following the Merger, CU Stock will no longer exist and, as a result, will
no longer be quoted on the Nasdaq National Market. The shares of BHI Stock
issued in connection with the Merger will be listed on the NYSE.
SELECTED CONSOLIDATED FINANCIAL DATA
The following sets forth selected consolidated historical financial and
other data for BHI and its consolidated subsidiaries and CU and its consolidated
subsidiary as of, and for each of the five years ended, December 31, 1992
through 1996. Such data should be read in conjunction with, and is qualified in
its entirety by, the more detailed information, Management's Discussion and
Analysis of Financial Condition and Results of Operations, and the consolidated
financial statements and notes thereto in the documents described under
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
16
<PAGE>
BANCORP HAWAII, INC. AND SUBSIDIARIES
(IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION
Net Loans........................................ $ 8,347.9 $ 7,853.0 $ 7,599.5 $ 6,983.1 $ 6,691.7
Total Assets..................................... 14,009.2 13,206.8 12,586.4 12,462.1 12,713.1
Total Deposits................................... 8,684.1 7,576.8 7,115.1 7,005.0 7,890.5
Total Long-term Debt............................. 932.1 1,063.4 861.6 378.2 119.4
Total Shareholders' Equity....................... 1,066.1 1,054.4 966.8 938.1 828.3
OPERATING RESULTS
Net Interest Income.............................. $ 481.3 $ 428.5 $ 449.3 $ 467.2 $ 436.2
Provision for Possible Losses.................... 22.2 17.0 21.9 54.2 50.1
Net Income....................................... 133.1 121.8 117.7 132.6 127.5
Earnings per Share............................... $ 3.23 $ 2.90 $ 2.75 $ 3.09 $ 3.00
Cash Dividends Paid per Common Share............. $ 1.16 $ 1.08 $ 1.04 $ 0.90 $ 0.85
KEY RATIOS
Return on Average Assets......................... 0.99% 0.98% 0.93% 1.05% 1.10%
Return on Average Equity......................... 12.43% 11.87% 12.13% 14.85% 16.25%
Total Capital Ratio.............................. 12.96% 12.74% 12.99% 13.60% 11.49%
Leverage Ratio................................... 7.98% 7.82% 7.28% 6.89% 6.37%
Reserve for Losses to Outstanding Loans.......... 1.97% 1.90% 1.92% 1.76% 1.89%
</TABLE>
CU BANCORP AND SUBSIDIARY
(IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION
Net Loans........................................................ $ 464.6 $ 391.8 $ 363.0 $ 330.6 $ 426.9
Total Assets..................................................... 844.2 749.1 743.8 670.5 762.9
Total Deposits................................................... 737.4 653.5 656.5 574.7 680.5
Total Long-term Debt............................................. 0.0 0.0 0.0 0.0 0.0
Total Shareholders' Equity....................................... 88.5 84.4 75.4 74.4 68.3
OPERATING RESULTS
Net Interest Income.............................................. $ 45.0 $ 40.0 $ 36.4 $ 34.8 $ 42.4
Provision for Possible Losses.................................... 4.4 2.1 0.8 1.2 23.1
Net Income....................................................... 0.7 6.7 5.9 5.7 (7.7)
Earnings per Share............................................... $ 0.06 $ 0.62 $ 0.56 $ 0.55 $ (0.76)
Cash Dividends Paid per Common Share............................. $ 0.17 $ 0.20 $ 0.12 $ 0.09 $ 0.12
KEY RATIOS
Return on Average Assets......................................... 0.09% 0.91% 0.84% 0.81% (1.14%)
Return on Average Equity......................................... 0.80% 8.40% 7.90% 8.07% (11.35%)
Total Capital Ratio.............................................. 15.65% 16.19% 16.45% 17.12% 13.90%
Leverage Ratio................................................... 9.70% 10.50% 10.30% 9.90% 7.70%
Reserve for Losses to Outstanding Loans.......................... 2.54% 2.50% 2.74% 2.96% 3.83%
</TABLE>
17
<PAGE>
COMPARATIVE PER SHARE DATA (UNAUDITED)
The following table sets forth for BHI Stock and CU Stock certain
historical, pro forma consolidated and pro forma equivalent financial
information for the year ended December 31, 1996. The pro forma consolidated
information for BHI and CU is presented after giving effect to two purchase
transactions completed by BHI in the first quarter of 1997 and after giving
effect to the acquisition of CU, each utilizing the purchase method of
accounting. The pro forma information assumes such acquisitions had been made at
the beginning of 1996. The pro forma information does not purport to be
indicative of the results of future operations or the results that would have
occurred had the Merger been consummated at the beginning of the period. The
information presented herein should be read in conjunction with Management s
Discussion and Analysis of Financial Condition and Results of Operations, the
consolidated financial statements and notes thereto, and the other information
contained in the documents described under "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------
HISTORICAL BHI AND CU PRO
-------------------- FORMA CU PRO FORMA
BHI CU CONSOLIDATED(1) EQUIVALENT(2)
--------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
PER COMMON SHARE
(IN DOLLARS)
Net Income:
1996..................................... $ 3.23 $ 0.08 $ 2.77 $ 0.95
Cash Dividend Paid:
1996..................................... $ 1.16 $ 0.17 $ 1.16 $ 0.39
Book Value:
1996..................................... $ 26.68 $ 7.08 $ 24.05 $ 8.20
</TABLE>
- ------------------------
(1) The pro forma consolidated amounts are based on combined 1996 data for BHI
and CU. Pro forma data reflects purchase accounting adjustments and
amortization of goodwill. The pro forma calculations assume a BHI Stock
price of $45.00, the exchange for BHI Stock of 70% of the CU Stock
outstanding as of December 31, 1996 at an Exchange Ratio of .3409, and that
the aggregate number of additional shares of BHI Stock issued as a result is
approximately 2.7 million shares. Additionally, fully diluted equivalent
shares, used in calculating earnings per share, have been adjusted by 0.1
million shares to reflect options to acquire CU Stock outstanding as of
December 31, 1996. Pro forma data does not reflect the effects of any future
acquisitions by BHI of BHI Stock. See "THE MERGER--Certain Post-Merger
Matters."
(2) Represents the pro forma equivalent of one share of CU Stock, calculated by
multiplying the BHI and CU pro forma consolidated data by an assumed
Exchange Ratio of .3409 (obtained by dividing $15.34 by an assumed Average
Price of BHI Stock of $45.00).
18
<PAGE>
INTRODUCTION
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of CU
Stock in connection with the solicitation of proxies by the Board of Directors
of CU for use at the Special Meeting of CU shareholders to be held at the Long
Beach Airport Marriott Hotel, 4700 Airport Drive, Long Beach, California, on
Friday, June 27, 1997, at 10:00 a.m., Pacific Daylight Time, and at any
adjournments or postponements thereof.
At the Special Meeting, the shareholders of record of CU Stock as of the
close of business on April 28, 1997, will consider and vote upon a proposal (the
"Merger Proposal") to approve the Merger Agreement and related Plan of Merger
pursuant to which CU will merge with and into BHI, and the Merger. Upon
consummation of the Merger, each outstanding share of CU Stock (other than
Dissenting Shares and Cancelled Shares (each as hereinafter defined)) will be
converted into the right to receive, at the election of the holder thereof, and
subject to the proration procedures, limitations and adjustments described
herein, either: (1) a fraction of a share of BHI Stock calculated as described
herein; or (2) $15.34 in cash. See "THE SPECIAL MEETING" and "THE
MERGER--Consideration Payable Upon Consummation of the Merger." The BHI Board of
Directors has approved the issuance of the shares of BHI Stock to be issued upon
consummation of the Merger. Approval of the shareholders of BHI is not required
for the issuance of the shares of BHI Stock or the consummation of the Merger.
This Proxy Statement/Prospectus also constitutes a prospectus of BHI in
respect of the shares of BHI Stock to be issued in connection with the Merger.
PARTIES TO THE MERGER
BANCORP HAWAII, INC. Bancorp Hawaii, Inc. is a regional multi-bank holding
company registered under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). As of December 31, 1996, BHI had total assets of $14.0 billion, total
deposits of $8.7 billion, shareholders' equity of $1.1 billion and was, in terms
of assets, the largest bank holding company headquartered in Hawaii.
BHI was organized under the laws of Hawaii on August 12, 1971, as the first
bank holding company in the State of Hawaii, and has been continuously in
business since. Its principal executive offices are located at 130 Merchant
Street, Honolulu, Hawaii, and its telephone number at that address is (808)
643-3888.
BHI provides varied financial services to customers in Hawaii, other areas
of the Pacific Basin, Asia and the U.S. Mainland. The principal subsidiaries of
BHI are Bank of Hawaii and Bancorp Pacific, Inc. (the holding company, formerly
known as FirstFed America, Inc., of First Federal Savings and Loan Association
of America).
Bank of Hawaii was organized under the laws of Hawaii on December 17, 1897,
and has been continuously in business since. Its headquarters are in Honolulu,
Hawaii, and its deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC"). It is not a member of the Federal Reserve.
Bank of Hawaii, with total assets of $12.5 billion as of December 31, 1996,
provides general retail and commercial banking services in its four primary
markets: Hawaii, the Pacific Islands, Asia, and the U.S. Mainland, through
branch offices in the State of Hawaii, an Edge Act office in New York City and
branches or representative offices in American Samoa, Bahamas (Nassau),
Commonwealth of the Northern Mariana Islands (Saipan), Federated States of
Micronesia (Pohnpei, Kosrae and Yap), Guam, Hong Kong, Japan (Tokyo), Korea
(Seoul), Philippines (Manila, Davao, and Cebu), Republic of Fiji (Suva, Nadi,
and Lautoka), Republic of the Marshall Islands (Majuro), Republic of Palau
(Koror), Singapore and Taiwan (Taipei). Bank of Hawaii also has affiliates in
New Caledonia, Papua New Guinea, Solomon Islands, Tahiti, Tonga, Vanuatu and
Western Samoa.
19
<PAGE>
Bank of Hawaii focuses its lending activities on loans to small and middle
market businesses operating in its local markets, loans to Fortune 1000
companies that may have a Pacific orientation, loans to the communications and
media industry, and loans secured by real estate properties. At December 31,
1996, Bank of Hawaii's net loan portfolio totaled $7.1 billion and consisted of
approximately 23.7% commercial and industrial loans, approximately 39.4% real
estate loans, 20.3% foreign loans, with the balance of loans concentrated in the
consumer, international and lease financing sectors. The largest segment of Bank
of Hawaii's real estate loan portfolio was represented by domestic loans secured
by residential properties which totaled approximately 55.2% of the total
domestic real estate loan portfolio at December 31, 1996. The remainder of this
portfolio consisted mainly of loans on income producing commercial properties.
Non-performing assets for Bank of Hawaii totaled $69.4 million at December 31,
1996, which was 0.94% of total loans and other real estate owned. Bank of
Hawaii's loan loss reserve at that date was 2.06% of total loans, representing
215.3% of non-performing assets.
Bank of Hawaii owns all the outstanding stock of Hawaiian Trust Company,
Limited, Bank of Hawaii International, Inc. and other subsidiaries engaged in
lease financing, international payments, securities brokerage, insurance agency
and investment advisory services. Hawaiian Trust Company, which was organized
under the laws of Hawaii on August 10, 1898, offers trust services primarily in
the State of Hawaii and the Territory of Guam. Through Bank of Hawaii's
ownership of Bank of Hawaii International, Inc., formed in 1968, equity
interests are held in the following foreign financial institutions: Bank of
Tonga--30%; Banque de Nouvelle Caledonie, New Caledonia--91%; Banque de
Tahiti--92%; Pacific Commercial Bank, Limited, Western Samoa--43%; Banque
d'Hawaii (Vanuatu) Ltd.--100%; and National Bank of Solomon Islands Ltd.--51%.
On March 10, 1997, Bank of Hawaii International, Inc. completed the acquisition
of Indosuez Niugini Bank Ltd., Papua New Guinea, which will operate as Bank of
Hawaii (PNG) Ltd., a wholly owned subsidiary of Bancorp Hawaii International,
Inc.
Bancorp Pacific, Inc.'s only significant business is conducted through its
wholly owned subsidiary, First Federal Savings and Loan Association of America
("First Federal"). First Federal, a federally chartered stock savings and loan
association, has been in operation since 1904. In 1978, First Federal merged
with Island Federal Savings and Loan Association of Honolulu, Hawaii, and during
the 1980s acquired several smaller savings and loan associations. First Federal
operates 25 full service offices throughout Hawaii. Its deposits are also
insured by the FDIC. As of December 31, 1996, First Federal had total assets of
$1.2 billion and total deposits of $867.9 million. Its subsidiary, First Savings
and Loan Association of America, operates three offices in the Territory of Guam
and one in Saipan.
BHI also owns all the outstanding stock (except for directors' qualifying
shares) of Pacific Century Bank, N.A. (which, until March 21, 1997 was known as
First National Bank of Arizona), organized under the laws of the United States
and having its principal office in Phoenix, Arizona. Pacific Century Bank, N.A.,
with assets of $203.3 million as of December 31, 1996, provides customary
banking services through six branches located in the State of Arizona. On March
21, 1997, it completed the acquisition of four additional branches in Arizona
from Home Savings of America, F.S.B., with combined deposits of approximately
$250 million. In addition, BHI owns other non-banking subsidiaries engaged in
insurance agency and credit life insurance services.
As discussed in the documents incorporated herein by reference, BHI and its
subsidiaries are subject to extensive regulation by federal and state
regulators, including the Board of Governors of the Federal Reserve, the FDIC,
the Office of Thrift Supervision, the Comptroller of the Currency, and the
Department of Commerce and Consumer Affairs of the State of Hawaii. These
regulatory bodies examine BHI or one or more of its subsidiaries and supervise
numerous aspects of their business.
Additional information about BHI is included in documents incorporated by
reference into this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
CU BANCORP. CU was incorporated under the laws of the State of California
on September 3, 1981 and is registered as a bank holding company under the BHCA.
CU does not conduct any activities other than
20
<PAGE>
in connection with its ownership of CU Bank, a California state chartered bank,
which is its sole subsidiary. As of December 31, 1996, CU had total consolidated
assets of $844.2 million, total consolidated deposits of $737.4 million and
total shareholders' equity of $88.5 million. The principal executive offices of
CU are located at 16030 Ventura Boulevard, Encino, California 91436-4487, and
its telephone number at that address is (818) 907-9122.
At December 31, 1995, CU's sole subsidiary was California United Bank,
National Association ("CUBNA"), a national banking association. On January 12,
1996, CUBNA merged with Corporate Bank, a California state chartered bank, with
CUBNA as the surviving association. On August 9, 1996, CU merged with Home
Interstate Bancorp, with CU being the surviving corporation. At the same time,
CUBNA merged with and into Home Bank, a California state chartered bank and a
wholly owned subsidiary of Home Interstate Bancorp, with Home Bank being the
surviving corporation, under the name of California United Bank. Home Bank was
founded in February 1950 and was licensed by the California State Banking
department and commenced operations as a state chartered bank on October 28,
1950. CU Bank is a member of the Federal Reserve System and its deposits are
insured up to the maximum extent permitted by law.
CU Bank provides varied commercial and individual banking services through
its commercial banking operation as well as through its Entertainment, Private
Banking, Investment, Business Banking and SBA divisions and through its
International Trade Services Group. CU Bank makes real estate construction loans
and a variety of other real estate loans. CU Bank also offers a wide range of
banking services to individuals including personal checking accounts, NOW and
savings accounts and time certificates of deposit and offers a variety of
special banking and financial services to its individual customers including
telephone transfers between accounts, travelers' checks, money orders, safe
deposit boxes, discount stock brokerage and notary services. CU Bank has
walk-up, drive through and ATM facilities with extended hours for customers'
convenience.
CU Bank's lending activities are concentrated in four primary areas:
commercial loans, real estate construction loans, other real estate loans and
installment loans. At December 31, 1996, these four categories accounted for
approximately 55%, 5%, 32%, and 8%, respectively of CU Bank's loan portfolio.
CU Bank operates from 21 locations in California including its head office
in Encino and branches in West Los Angeles, Camarillo, Gardena, City of
Industry, Santa Ana, Anaheim, Signal Hill, Brea, Hacienda Heights, Irvine,
Lomita, Los Alamitos, Lynwood, Manhattan Beach, Paramount, Redondo Beach, San
Pedro (2), Torrance and Westminster.
THE SPECIAL MEETING
RECORD DATE
The CU Board of Directors has fixed the close of business on April 28, 1997,
as the Record Date for the determination of shareholders entitled to notice of,
and to vote at, the Special Meeting. Accordingly, only holders of record of
shares of CU Stock on the Record Date will be entitled to vote at the Special
Meeting. As of the Record Date, there were [11,377,197] shares of CU Stock
outstanding held by approximately [1,400] shareholders of record.
PROXIES
When a proxy card is returned, properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. If a shareholder does not attend the Special Meeting and if a
shareholder does not return the signed proxy card, such holder's shares will not
be voted and this will have the effect of a vote "AGAINST" the approval of the
Merger Agreement and the Merger (except for purposes of dissenters' rights, as
explained under "DISSENTERS' RIGHTS".) Shareholders are urged to mark the box on
the proxy card to indicate how their shares are to be voted. If a shareholder
21
<PAGE>
returns a signed proxy card but does not indicate how the shares represented by
the proxy card are to be voted, such shares will be voted "FOR" approval of the
Merger Proposal. The proxy card also confers discretionary authority on the
proxy holder to vote the shares represented thereby on any other matter that is
properly presented for action at the Special Meeting. A shareholder who has
given a proxy may revoke it at any time prior to its exercise at the Special
Meeting by delivering an instrument of revocation to the Secretary of CU, by
duly executing and submitting a proxy card bearing a later date, or by appearing
at the Special Meeting and voting in person. However, the mere presence at the
Special Meeting of the shareholder who has given a proxy will not revoke such
proxy. In addition, brokers who hold shares of CU Stock as nominees will not
have discretionary authority to vote such shares in connection with the Merger
Proposal in the absence of instructions from the beneficial owners.
Expenses related to solicitation of proxies for the Special Meeting will be
borne by CU. Proxies will be solicited by mail and may also be solicited by
telephone or other means of communication. Certain directors, officers and
employees of CU may solicit proxies (for no additional compensation) by personal
interview, telephone, telegram or similar means of communication. CU has
retained the services of D.F. King & Co., Inc. to assist in soliciting proxies
from shareholders and brokers, banks and other institutions, nominees and
fiduciaries for a fee estimated at $10,000, plus reimbursement of reasonable
expenses. Banks, trust companies, brokerage firms and other custodians, nominees
and fiduciaries will be reimbursed for their reasonable expenses in forwarding
these proxy materials to their principals.
CU SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
QUORUM
The presence, either in person or by properly executed proxies, of the
holders of a majority of the outstanding shares of CU Stock is necessary to
constitute a quorum at the Special Meeting. Abstentions will be counted for
purposes of establishing a quorum.
VOTE REQUIRED
CU shareholders are entitled to one vote at the Special Meeting for each
share of CU Stock held of record by them on the Record Date. Approval of the
Merger Proposal requires the affirmative vote of the holders of a majority of
the outstanding shares of CU Stock. Abstentions and broker non-votes will have
the same effect as a vote "AGAINST" the proposal, except for purposes of
entitlement to dissenters' rights. See "DISSENTERS' RIGHTS."
Directors, executive officers and affiliates of such directors and executive
officers of CU beneficially owned an aggregate of [1,164,849] shares of
outstanding CU Stock (not including shares issuable upon exercise of stock
options) or approximately [10.24]% of the shares outstanding as of the Record
Date. All of CU's directors have agreed to vote their approximately [612,573]
shares (approximately [5.38]%) in favor of the Merger Proposal. See "CERTAIN
RELATED AGREEMENTS--Shareholder's Agreements." As of the Record Date, BHI
beneficially owned [53,900] shares of CU Stock and intends to vote such shares
in favor of the Merger Proposal.
A majority of the shares of CU Stock present at the Special Meeting, in
person or by proxy, whether or not constituting a quorum, may vote to, and the
CU Board of Directors in its discretion may, adjourn the Special Meeting from
time to time without further notice, including for the purpose of soliciting
additional proxies. Proxies containing a vote against the Merger Proposal will
not be used to vote in favor of any such adjournment.
22
<PAGE>
THE MERGER
The following information, insofar as it relates to matters contained in the
Merger Agreement and the Exhibits thereto, is qualified in its entirety by
reference to the Merger Agreement, which is incorporated herein by reference and
attached hereto as Appendix A. CU shareholders are urged to read the Merger
Agreement carefully.
BACKGROUND OF AND REASONS FOR THE MERGER
CU's informal strategy as expressed in its past performance and strategic
planning discussions was to continue as an independent bank and to grow, through
both internal growth and by acquisition/merger with other quality institutions.
CU was actively engaged in seeking out acceptable candidates for such
acquisition or merger.
In September 1996, representatives of BHI's financial advisors, Credit
Suisse First Boston Corporation, contacted Stephen G. Carpenter, Chairman of the
Board and Chief Executive Officer of CU, to explore the possibility of a
combination between BHI and CU. This telephone conversation was unsolicited by
CU. As a result, Mr. Carpenter engaged in informal discussions with several
members of the CU Board of Directors to seek their views on the matter. Issues
discussed were the impact on CU's strategic plan, the fact that the integration
of Home Interstate Bancorp and CU was still ongoing and the possible benefits to
the CU shareholders from such a transaction. The informal consensus was that
further exploration of the possible combination was appropriate.
On October 4, 1996, Mr. Carpenter and David Rainer, CU's President and Chief
Operating Officer, met with David Houle, BHI's Chief Financial Officer, in Los
Angeles. They discussed the general structure of BHI's possible acquisition of
CU, including that the consideration would be a mix of cash and BHI Stock which
was traded on the NYSE. Mr. Houle requested Messrs. Carpenter and Rainer to
visit with BHI at its headquarters to further discuss the proposal and become
acquainted with BHI and its leadership. Mr. Carpenter and Mr. Rainer informally
consulted with the CU Board of Directors, informing them of these matters.
On November 14, 1996, Messrs. Carpenter and Rainer met with BHI Chairman and
Chief Executive Officer Lawrence Johnson, President and Chief Operating Officer
Richard Dahl, Chief Financial Officer David Houle, and other BHI officers in
Honolulu. During the course of those meetings, corporate culture, credit
policies, management and business strategies, continuity of management, and
similar issues were discussed. Upon their return, Messrs. Carpenter and Rainer
reported the results of these meetings to the CU Board of Directors. The Board
determined that CU should review the proposal completely, should it be formally
made by BHI. Management was requested to retain an investment banker to assist
CU in negotiations should they take place and to provide to the Board of
Directors appropriate information on the fairness of any proposal from a
financial point of view.
In the course of the discussions with BHI, BHI had requested that CU provide
certain information which was not public. As a result, on November 22, 1996, CU
and BHI entered into a confidentiality and standstill agreement.
During December 1996, CU interviewed investment bankers to assist CU with
the possible transaction. At a meeting of the CU Board of Directors on December
16, 1996, the Board considered the qualifications, background and expertise of
investment bankers as well as the terms and conditions of their engagement. On
January 2, 1997, CU entered into an engagement letter with Montgomery.
Montgomery had acted as a financial advisor to CU in connection with the sale of
its mortgage division in 1993, and in connection with its merger with Home
Interstate Bancorp in August 1996. Montgomery had also acted as a financial
advisor to Home Interstate Bancorp both prior to the agreement to merge with CU
and in connection with that transaction.
23
<PAGE>
In a letter dated January 9, 1997, Thomas Leppert, Vice Chairman of BHI,
expressed BHI's interest in acquiring CU. Under the terms of the January 9
non-binding proposal, each share of CU would have been exchanged for
consideration consisting of BHI Stock and cash, having a value of $14 per share.
Over the course of the two following weeks, CU and its financial advisor
reviewed and analyzed the BHI proposal. Based upon this review, including the
market price of CU during that period, CU's advisors notified BHI's advisors
that CU viewed $14 per share as inadequate.
On January 18, 1997, Messrs. Leppert and Houle came to Los Angeles where
they met with Messrs. Carpenter and Rainer. In the course of those discussions,
Mr. Leppert indicated that, subject to due diligence, BHI would be prepared to
raise its offer to $15.55 per share.
At the regular meeting of the CU Board on January 28, Mr. Carpenter
communicated this new offer to the CU Board and its financial advisors. The CU
Board directed management to continue negotiations, commence due diligence and
employ counsel. Discussions among the financial advisors and counsel continued
on an outline of terms.
At a meeting of the CU Board held on February 7, 1997, the CU Board
reviewed, with the assistance of CU management, legal and financial advisors,
the BHI proposal, presentations by management and Montgomery concerning the BHI
proposal and an outline of terms of the definitive merger agreement. Based upon
that review and after consideration of other factors, the CU Board unanimously
approved management's going forward with the due diligence process and the
negotiation of a definitive agreement.
BHI conducted due diligence during the week of February 10, 1996. On
February 14, BHI indicated that the number of outstanding options to acquire CU
Stock was higher than BHI had previously ascertained, due, in part, to grants of
options in November 1996, grants in which executive officers did not
participate. As a result, BHI indicated that its prior offer (which was based on
11,650,000 fully diluted shares of CU Stock, for a total purchase price of
$181,157,500) was to be adjusted by a reduction of $0.34 per share. The advisors
continued to negotiate while discussions were ongoing relative to the number of
outstanding options and other information related to stock options. On February
18, the CU Board held a telephonic meeting to consider a transaction at a
revised price of $15.34 per share of CU Stock (which, based on the larger number
of fully diluted shares outstanding, resulted in a purchase price of
approximately $182,803,000). It was determined to call a full meeting of the
Board of Directors on February 21.
On February 21, the CU Board met to review the definitive agreement,
including the final consideration. With the assistance of CU's management, legal
and financial advisors, the CU Board heard presentations concerning the BHI
proposal, including review of the definitive Merger Agreement, an analysis of
BHI's financial performance and Montgomery's fairness opinion concerning the
fairness of the consideration to the shareholders of CU. Based upon that review
and after consideration of all relevant factors, the CU Board unanimously
approved the Merger Agreement.
BHI has undertaken the Merger as part of its strategy of geographic
diversification across the Asia-Pacific region. Southern California has been a
focus of that strategy because it is a large and vibrant market with a
substantial Asia-Pacific trade orientation, and a banking market that offers
expansion opportunities. In evaluating Southern California acquisition
candidates, BHI viewed CU as an attractive opportunity because of its financial
condition, its quality management, its strength with middle-market businesses
that form an important part of BHI's customer base, and CU's recent initiatives
involving international trade finance. BHI believes the Merger with CU will
create diversification and growth opportunities and position BHI to accomplish
further expansion through additional acquisitions. On February 24, 1997 the BHI
Board of Directors approved the Merger Agreement and the Plan of Merger and
determined that the Merger and the issuance of the BHI Stock pursuant thereto
are in the best interests of BHI and its shareholders. Approval of BHI's
shareholders is not required for the Merger Proposal.
24
<PAGE>
RECOMMENDATION OF THE CU BOARD OF DIRECTORS
The CU Board of Directors has determined that the Merger Agreement and
related Plan of Merger are fair to, and in the best interests of, CU and its
shareholders, and unanimously recommends that the CU shareholders approve the
Merger Proposal. The CU Board of Directors believes that the Merger will enable
CU shareholders to realize significant value on their investment and also enable
them to participate in opportunities for growth that the CU Board of Directors
believes the Merger makes possible.
In reaching its determination that the Merger Agreement and related Plan of
Merger are fair to, and in the best interests of, CU and the CU shareholders,
the CU Board of Directors considered a number of factors including, among other
things, the following:
(i) information concerning the financial performance and condition,
business operations, capital levels, asset quality and prospects of BHI,
including the significant performance and market share achieved by BHI in
its principal markets;
(ii) the unique strategic fit between two financially sound institutions
such as BHI and CU with complimentary markets, and the resulting geographic
diversity of the combined entity;
(iii) the value of the consideration offered by BHI, especially in light
of the value of the consideration received in other bank mergers both in
California and elsewhere in the United States in recent years;
(iv) the benefits to be realized by the CU shareholders who choose to
receive BHI Stock in the Merger in holding a more liquid stock, traded on
the NYSE, and with a record of strong dividends;
(v) the fact that the Merger will generally be tax-free for federal
income tax purposes for the CU shareholders to the extent they receive BHI
Stock in the Merger;
(vi) the opportunity to receive cash for CU shareholders who choose to
do so;
(vii) BHI's expressed intention to retain and build on substantially all
of the management team of CU;
(viii) the terms of the Merger Agreement, related Plan of Merger and other
documents executed in connection with the Merger and the overall structure
of the transaction; and
(ix) the financial and other presentations of Montgomery, financial
advisor to CU, and the written opinion of Montgomery, delivered to the CU
Board of Directors on February 21, 1997 and updated by Montgomery's written
opinion dated the date of this Proxy Statement/Prospectus, that the
consideration is fair to the shareholders of CU from a financial point of
view.
While each member of the CU Board of Directors individually evaluated each
of the foregoing as well as other factors, the CU Board of Directors
collectively did not assign any specific or relative weight to the factors under
consideration and did not make any determinations with respect to any individual
factor. The CU Board of Directors collectively made its determination with
respect to the Merger Proposal based on the unanimous conclusion reached by its
members that the Merger Proposal, in light of the factors that each of them
individually considered as appropriate, is fair and in the best interests of CU
and its shareholders.
THE CU BOARD OF DIRECTORS HAS UNANIMOUSLY CONCLUDED THAT THE MERGER PROPOSAL IS
IN THE BEST INTERESTS OF CU AND ITS SHAREHOLDERS. THE BOARD OF DIRECTORS OF CU
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE PLAN OF MERGER, THE MERGER
AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE MERGER PROPOSAL.
25
<PAGE>
OPINION OF FINANCIAL ADVISOR
GENERAL. Pursuant to an engagement letter dated January 2, 1997 (the
"Engagement Letter"), CU engaged Montgomery to evaluate a potential merger
between CU and BHI. As part of its engagement, Montgomery agreed, if requested
by CU, to render to the Board of Directors a fairness opinion with respect to a
potential sale of CU. Montgomery is a nationally recognized investment banking
firm and, as part of its investment banking activities, is regularly engaged in
the valuation of businesses and their securities in connection with merger
transactions and other types of acquisitions, negotiated underwritings, private
placements and valuations for corporate and other purposes. CU selected
Montgomery to render the opinion on the basis of Montgomery's experience and
expertise in transactions similar to the Merger and its reputation in the
banking and investment communities. Montgomery was not retained nor did it
advise CU with respect to alternatives to the Merger. Further, Montgomery was
not requested to nor did it solicit or assist CU in soliciting indications of
interest from third parties for all or any part of CU.
At a meeting of the CU Board of Directors on February 21, 1997, Montgomery
delivered its oral opinion that the consideration to be received by the holders
of CU Stock pursuant to the Merger was fair to such shareholders from a
financial point of view, as of the date of such opinion. Montgomery's oral
opinion was subsequently confirmed in writing as of such date. Montgomery also
delivered to the CU Board of Directors a written opinion as of the date of this
Proxy Statement/Prospectus reconfirming its conclusions, as of the date of this
Proxy Statement/Prospectus. No limitations were imposed by CU on Montgomery with
respect to the investigation made or procedures followed in rendering its
opinion.
THE FULL TEXT OF MONTGOMERY'S WRITTEN OPINION TO THE CU BOARD OF DIRECTORS,
DATED THE DATE OF THIS PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITATIONS OF THE REVIEW BY
MONTGOMERY, IS ATTACHED HERETO AS APPENDIX D AND IS INCORPORATED HEREIN BY
REFERENCE. THE FOLLOWING SUMMARY OF MONTGOMERY'S OPINION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION, WHICH SHOULD BE READ
CAREFULLY AND IN ITS ENTIRETY. IN FURNISHING SUCH OPINION, MONTGOMERY DOES NOT
ADMIT THAT IT IS AN EXPERT WITH RESPECT TO THE REGISTRATION STATEMENT OF WHICH
THIS PROXY STATEMENT/ PROSPECTUS IS PART WITHIN THE MEANING OF THE TERM
"EXPERTS" AS USED IN THE SECURITIES ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER, OR THAT ITS OPINION CONSTITUTES A REPORT OR VALUATION
WITHIN THE MEANING OF SECTION 11 OF THE SECURITIES ACT AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER, AND STATEMENTS TO THAT EFFECT ARE INCLUDED
IN THE TEXT OF MONTGOMERY'S WRITTEN OPINION. MONTGOMERY'S OPINION IS ADDRESSED
TO THE CU BOARD OF DIRECTORS, COVERS ONLY THE FAIRNESS OF THE CONSIDERATION TO
BE RECEIVED BY HOLDERS OF CU STOCK FROM A FINANCIAL POINT OF VIEW AS OF THE DATE
OF THE OPINION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF CU
STOCK AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE SPECIAL MEETING.
In connection with its February 21, 1997 opinion, Montgomery, among other
things: (i) reviewed certain publicly available financial and other data with
respect to CU and BHI, including the audited, consolidated financial statements
for the fiscal years ended December 31, 1994 and 1995 and unaudited consolidated
financial statements for the fiscal year ended December 31, 1996, and certain
other relevant financial and operating data relating to CU and BHI made
available to Montgomery from published sources and, in the case of CU, from the
internal records of CU; (ii) reviewed a draft of the Merger Agreement; (iii)
reviewed certain publicly available information concerning the trading of, and
the trading market for, CU Stock and BHI Stock; (iv) compared both CU and BHI
from a financial point of view with certain other companies in the banking
industry, respectively, which Montgomery deemed to be relevant; (v) considered
the financial terms, to the extent publicly available, of business combinations
in the banking industry which Montgomery deemed to be comparable, in whole or in
part, to the Merger; (vi) reviewed and discussed with representatives of the
management of CU certain information of a business and financial nature
regarding CU furnished to Montgomery by them, including financial forecasts and
related assumptions of CU; (vii) made inquiries regarding and discussed the
Merger and the Merger Agreement and other matters related thereto with CU's
counsel; and (viii) performed such other analyses and examinations as Montgomery
deemed appropriate.
26
<PAGE>
In connection with Montgomery's review, Montgomery did not assume any
obligation independently to verify the foregoing information and relied on its
being accurate and complete in all material respects. With respect to the
financial forecasts for CU provided to Montgomery by its management, upon their
advice and with CU's consent, Montgomery assumed for purposes of its opinion
that the forecasts were reasonably prepared on bases reflecting the best
available estimates and judgment of CU's management at the time of preparation
and that they provided a reasonable basis from which Montgomery could form its
opinion. Montgomery also assumed with CU's consent that Montgomery's research
analysts' estimates as to the future financial performance of BHI provided a
reasonable basis upon which Montgomery could form its opinion. Montgomery also
assumed that there were no material changes in CU's or BHI's assets, financial
condition, results of operations, business or prospects since the respective
dates of their last financial statements made available to Montgomery.
Montgomery relied on advice of counsel and independent accountants to CU as to
all legal and financial reporting matters with respect to CU, the Merger and the
Merger Agreement. Montgomery assumed that the Merger will be consummated in a
manner that complies in all respects with the applicable provisions of the
Securities Act, the Exchange Act and all other applicable federal and state
statutes, rules and regulations. Montgomery is not an expert in the evaluation
of loan portfolios for purposes of assessing the adequacy of the allowances for
losses with respect thereto and assumed, with CU's consent, that such allowances
for each of CU and BHI were in the aggregate adequate to cover such losses. In
addition, Montgomery did not assume responsibility for reviewing any individual
credit files, or making an independent evaluation, appraisal or physical
inspection of any of the assets or liabilities (contingent or otherwise) of CU
or BHI, nor was Montgomery furnished with any such appraisals. CU informed
Montgomery, and Montgomery assumed, that the Merger will be recorded as a
purchase under generally accepted accounting principles. Finally, Montgomery's
opinion was based on economic, monetary, market and other conditions as in
effect on, and the information made available to Montgomery as of, the date of
the opinion. Accordingly, although subsequent developments may affect the
opinion, Montgomery has not assumed any obligation to update, revise or reaffirm
its opinion.
Set forth below is a brief summary of the report presented by Montgomery to
CU's Board of Directors on February 21, 1997 in connection with its opinion. For
purposes of the report, Montgomery assumed 11.917 million fully diluted shares
of CU Stock outstanding, 3.3 million shares to be issued by BHI in the Merger
for 80% of the shares outstanding, cash consideration of $15.34 per share for
20% of the shares outstanding, and CU balance sheet figures as of December 31,
1996. Although the total consideration payable in the Merger may vary between
60% and 80% BHI Stock and 40% and 20% cash, unless otherwise noted, Montgomery's
analysis assumed that 80% of the purchase price will be in the form of BHI Stock
(valued at $15.34 per share, based upon the closing price of BHI Stock on
February 20, 1997) and 20% of the purchase price will be in the form of cash.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Montgomery reviewed the
consideration paid in selected categories of bank transactions. Specifically,
Montgomery reviewed bank transactions from January 1, 1992 to February 7, 1997
involving (i) mergers in California; (ii) mergers in California with transaction
value greater than $50 million; and (iii) U.S. bank transactions involving
sellers with assets greater than $500 million and less than $1.5 billion.
Several transactions appeared on more than one of these lists. For each
transaction, Montgomery analyzed data illustrating, among other things, the
multiple of purchase price to book value, the multiple of purchase price to
tangible book value, the ratio of purchase price to deposits, the ratio of the
premium (i.e., purchase price in excess of tangible book value) to core
deposits, and the multiple of purchase price to last twelve-months ("LTM")
earnings.
27
<PAGE>
A summary of the median multiples and ratios in the analysis is as follows:
<TABLE>
<CAPTION>
PRICE TO PRICE TO PREM. TO PRICE TO # OF
BOOK TAN. BK. PRICE TO CORE LTM TRANS.
TRANSACTION CATEGORIES: VALUE VALUE DEPOSITS DEPOSITS EARNINGS EXAMINED
- --------------------------------------------- --------- --------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mergers in California........................ 1.63x 1.67x 16.94% 7.01% 16.82x 78
Mergers in California with transaction value
greater than $50 million................... 1.86x 1.87x 17.92% 8.14% 16.63x 17
National sellers with assets more than $500
million and less than $1.5 billion......... 1.67x 1.76x 17.91% 8.92% 15.28x 162
</TABLE>
A summary of the results of Montgomery's analysis concerning the Merger is
as follows:
<TABLE>
<CAPTION>
PRICE TO PRICE TO PREM. TO PRICE TO
BOOK TAN. BK. PRICE TO CORE LTM
VALUE VALUE DEPOSITS DEPOSITS EARNINGS
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
CU/BHI....................................... 1.96x 2.22x 24.79% 14.38% 21.61x
</TABLE>
Montgomery used a group of 35 national bank acquisitions announced since
January 1, 1992 with purchase prices of greater than $100 million and less than
$250 million where pricing information was available to analyze premiums paid
compared to the seller stock price at various times prior to the announcement of
the acquisition. These figures produced: (i) a median ratio of premium to the
seller's stock price one month prior to announcement of 23.7%; (ii) a median
ratio of premium to the seller's stock price six days prior to announcement of
23.1%; and (iii) a median ratio of premium to the seller's stock price the day
prior to announcement of 13.4%. In comparison, BHI's offer of $15.34 per share
exceeded the CU Stock price one month prior to the announcement by 20.3%, the CU
Stock price six days prior to the announcement by 18.0% and the CU Stock price
one day prior to the announcement by 18.0%.
PRESENT VALUE ANALYSIS. In performing the present value analysis,
Montgomery estimated the future earnings per share and dividend payments of CU
over a five year period. The estimated earnings per share in the year 2001 was
multiplied by an estimated price to earnings multiple ranging from 9.0x to
13.0x. This product was then added to the cumulative estimated dividends and the
sum of these two numbers was discounted to the present using a discount rate of
15%. This analysis indicated that the present value of CU's future stock price
plus dividends ranged from $11.52 to $15.97 per share, as compared to BHI's
offer of $15.34 per share.
CONTRIBUTION ANALYSIS. Montgomery analyzed the contribution of each of CU
and BHI to, among other things, total equity, assets, deposits and core deposits
of the pro forma combined companies for the period ending December 31, 1996 and
projected net income for the calendar year ending December 31, 1997. This
analysis showed, among other things, that based on pro forma combined balance
sheets for CU and BHI at December 31, 1996, CU would have contributed 7.7% of
the total equity, 5.7% of the total assets, 7.8% of the total deposits and 7.9%
of the total core deposits. The pro forma projected income statement for the
period ending December 31, 1997 showed that CU would contribute 7.8% of the net
income of the combined companies. Based on an exchange ratio of 0.3496 of BHI
Stock for each share of CU Stock and assuming a 100% stock transaction, holders
of CU Stock would own approximately 9.3% of the combined companies based on
common shares outstanding at December 31, 1996.
DILUTION ANALYSIS. Using earnings estimates and projected growth rates for
CU provided by CU's management and, for BHI, derived from published reports by
Montgomery's research analysts, Montgomery compared estimated reported EPS
("Reported EPS") and estimated cash EPS ("Cash EPS") of BHI Stock on a
stand-alone basis to the Reported EPS and Cash EPS of the common stock for the
pro forma combined company for the calendar years 1997, 1998, 1999, 2000 and
2001. Montgomery noted that, based
28
<PAGE>
upon its research analysts estimates, as adjusted to reflect management's pretax
cost savings estimates, management's estimates of one-time charges related to
the transaction and certain assumptions as to, among other things, the merger
consideration and cost of acquisition funds, (i) the Merger would be dilutive to
BHI's Reported EPS in 1997, 1998 and 1999 and accretive thereafter, and (ii) the
Merger would be dilutive to Cash Earnings in 1997 and accretive thereafter. This
analysis did not include the effect of share repurchases contemplated by BHI's
management. These estimates were used for purposes of this analysis only and are
not necessarily indicative of expected results or plans of BHI, CU, or the
combined institution.
DIVIDEND PICKUP ANALYSIS. In performing the dividend pickup analysis,
Montgomery analyzed the exchange ratio of 0.3496 (assuming a 100% stock
transaction) of BHI Stock for each share of CU Stock based on their respective
stock prices as of February 20, 1997 and applied it to BHI's current annual
dividend rate per share of $1.20. This analysis showed that holders of CU Stock
would receive an annual dividend of $0.42 per share or a 49.8% increase from
CU's current annual dividend of $0.28 per share.
In connection with its written opinion dated the date of this Proxy
Statement/Prospectus, Montgomery performed procedures to reconfirm, as
necessary, certain of the analyses described above and reviewed the assumptions
on which such analyses were based and the factors considered in connection
therewith.
The summary set forth above does not purport to be a complete description of
the presentation by Montgomery to the CU Board of Directors on February 21, 1997
or of the analyses performed by Montgomery. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. Montgomery believes that its analyses and the summary set forth
above must be considered as a whole and that selecting a portion of its analyses
and factors, without considering all analyses and factors, would create an
incomplete view of the process underlying the analyses set forth in its
presentation to the CU Board of Directors. In addition, Montgomery may have
given various analyses more or less weight than other analyses and may have
deemed various assumptions more or less probable than other assumptions, so that
the ranges of valuations resulting from any particular analysis described above
should not be taken to be Montgomery's view of the actual value of CU or the
combined companies. The fact that any specific analysis has been referred to in
the summary above is not meant to indicate that such analysis was given greater
weight than any other analysis.
In performing its analyses, Montgomery made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of CU or BHI. The analyses
performed by Montgomery are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Montgomery's analysis of the fairness of the consideration to be received by the
holders of CU Stock in the Merger and were provided to the CU Board of Directors
in connection with the delivery of Montgomery's opinion. The analyses do not
purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade at the present
time or any time in the future. The projections used in Montgomery's analyses
are based on numerous variables and assumptions which are inherently
unpredictable and must be considered not certain of occurrence as projected.
Accordingly, actual results could vary significantly from those set forth in
such projections.
As described above under "THE MERGER--Recommendation of the CU Board of
Directors," Montgomery's February 21, 1997 opinion and presentation to the CU
Board of Directors were among the many factors taken into consideration by the
CU Board of Directors in making its determination to approve the Merger
Agreement.
Pursuant to the Engagement Letter, CU paid Montgomery a fee of $250,000 upon
delivery of its February 21, 1997 fairness opinion. An additional $250,000 will
be due upon the mailing of this Proxy Statement/Prospectus. In addition,
Montgomery will receive approximately $1,250,000 upon the closing of the Merger.
As a result, a significant portion of Montgomery's fee is contingent on
consummation of the
29
<PAGE>
Merger. CU has also agreed to reimburse Montgomery for its reasonable
out-of-pocket expenses, including any fees and disbursements for Montgomery's
legal counsel and other experts retained by Montgomery. CU has agreed to
indemnify Montgomery, its affiliates, and their respective partners, directors,
officers, agents, consultants, employees and controlling persons against certain
liabilities, including liabilities under the federal securities laws.
In 1996, CU completed its merger with Home Interstate Bancorp. Montgomery
served as an advisor to both parties in this transaction and received fees
totaling $900,000 for its services. In addition, in 1995, Montgomery and CU
entered into a general advisory agreement under which CU paid fees totaling
$125,000. A portion of those fees were credited towards the fee due Montgomery
in connection with the merger with Home Interstate Bancorp and $50,000 of those
fees will be credited towards the fee due upon consummation of the Merger.
In the ordinary course of its business, Montgomery may trade equity
securities of CU and BHI for its own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
EFFECT OF THE MERGER
At the Effective Time, CU will merge with and into BHI, and CU's separate
corporate existence will cease. BHI will be the surviving corporation. At the
Effective Time, the BHI Articles of Incorporation and the BHI Bylaws as in
effect immediately prior thereto will be the Articles of Incorporation and
Bylaws of the surviving corporation. In addition, the directors and officers of
BHI immediately prior to the Effective Time will continue as the directors and
officers of the surviving corporation.
CONSIDERATION PAYABLE UPON CONSUMMATION OF THE MERGER
CONVERSION OF CU STOCK. In the aggregate, at least 60% and not more than
80% of the shares of CU Stock issued and outstanding immediately prior to the
Effective Time (other than Dissenting Shares and Cancelled Shares) will be
converted into the right to receive BHI Stock. The remaining shares of CU Stock
will be converted into the right to receive cash. Holders of CU Stock will have
the opportunity to indicate their preference for the proportion of cash and BHI
Stock to be exchanged for their shares of CU Stock in the Merger, and may
indicate a preference for receiving all cash or all BHI Stock.
Each such share of CU Stock will, by virtue of the Merger, be converted into
the right to receive either: (i) a fraction of a share of BHI Stock equal to the
quotient (such quotient, the "Exchange Ratio") of (a) $15.34 divided by (b) the
average of the daily closing prices of a share of BHI Stock on the NYSE as
reported in The Wall Street Journal for the twenty consecutive trading days
ending on the third trading day immediately prior to the Closing Date (such
average, the "Average Price of BHI Stock"); provided, however, that if the
Average Price of BHI Stock is more than $51.03125, such average will be deemed
to be $51.03125 and, accordingly, the Exchange Ratio will be fixed at 0.3006,
and if the Average Price of BHI Stock is less than $37.71875, such average will
be deemed to be $37.71875 and, accordingly, the Exchange Ratio will be fixed at
.4067; or (ii) cash in the amount of $15.34. The fraction of a share of BHI
Stock into which each share of CU Stock covered by an effective Stock Election
or Combination Stock Election will be converted in the Merger cannot be
determined until the Effective Time. MOREOVER, BECAUSE THE EXCHANGE RATIO IS
SUBJECT TO UPPER AND LOWER LIMITS, AND BECAUSE THE EXCHANGE RATIO IS BASED ON AN
AVERAGE, THE BHI STOCK ISSUED IN EXCHANGE FOR EACH SHARE OF CU STOCK MAY HAVE AN
INITIAL MARKET VALUE THAT IS GREATER OR LESS THAN $15.34.
At the Effective Time, Cancelled Shares shall be cancelled, retired and
shall cease to exist, and no exchange or payment shall be made with respect to
such Cancelled Shares.
ELECTION AND ALLOCATION PROCEDURE. BHI will with CU's consent appoint a
financial institution (the "Exchange Agent") to effect the exchange of CU shares
for the Merger consideration. The Exchange
30
<PAGE>
Agent will mail a form of transmittal letter ("Letter of Transmittal") at least
thirty-five days prior to the anticipated Effective Time or on such other date
as CU and BHI mutually agree (the "Mailing Date") to each holder of CU Stock of
record as of five business days prior to the Mailing Date. Each Letter of
Transmittal will permit the holder to elect (an "Election") to receive either
BHI Stock (a "Stock Election") with respect to all of such holder's CU Stock,
cash (a "Cash Election") with respect to all of such holder's CU Stock, or a
combination of shares of BHI Stock and cash (a "Combination Election") in the
proportions specified in the Letter of Transmittal. The stock and cash
components of Combination Elections are referred to in the Merger Agreement and
in the following description as "Combination Stock Elections" and "Combination
Cash Elections," respectively. Any CU Stock (other than Dissenting Shares and
Cancelled Shares) with respect to which the Exchange Agent does not receive an
effective, properly completed Letter of Transmittal prior to the Election
Deadline (as hereinafter defined) will be deemed to be "Undesignated Shares."
An Election will be deemed properly made and effective only if the Exchange
Agent actually receives a properly completed Letter of Transmittal by 5:00 P.M.
Pacific Daylight Time on or before the 30th day following the Mailing Date (or
such other time and date as CU and BHI mutually agree) (the "Election
Deadline"). The Election Deadline will be specified in the Letter of
Transmittal. A Letter of Transmittal will be deemed properly completed only if
an Election is indicated for each share of CU Stock covered by such Letter of
Transmittal and if accompanied by one or more certificates (or customary
affidavits and indemnification regarding the loss or destruction of such
certificates or the guaranteed delivery of such certificates) representing all
shares of CU Stock covered by such Letter of Transmittal, together with duly
executed transmittal materials included in or required by the Letter of
Transmittal.
CU SHAREHOLDERS SHOULD NOT FORWARD CU STOCK CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED LETTERS OF TRANSMITTAL. CU SHAREHOLDERS SHOULD
NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
An Election may be revoked or changed at any time prior to the Election
Deadline. In the event an Election is revoked prior to the Election Deadline,
the related shares of CU Stock will automatically become Undesignated Shares
unless and until a new Election is properly made with respect to such shares on
or before the Election Deadline.
If holders of CU Stock effectively elect, in the aggregate, to convert into
BHI Stock at least the Minimum Stock Amount and no more than the Maximum Stock
Amount, Undesignated Shares will be converted into cash and all shares covered
by an effective Election will be converted into the right to receive the form of
consideration specified therein.
If holders of CU Stock effectively elect, in the aggregate, to convert into
BHI Stock more than 80% of the shares of CU Stock outstanding immediately prior
to the Effective Time (the "Maximum Stock Amount"), then (i) all Cash Elections
will be accepted; (ii) all Undesignated Shares and Dissenting Shares will be
deemed to have made Cash Elections; and (iii) to the extent necessary so that
the number of shares of CU Stock to be converted into BHI Stock does not exceed
the Maximum Stock Amount, the Exchange Agent will select by lot some or all of
the persons who hold of record 100 or less shares of CU Stock who effectively
made a Stock Election or a Combination Stock Election and shall treat such
persons as having made a Cash Election as to all of such persons' CU Stock. If
thereafter the number of remaining shares as to which Stock Elections and
Combination Stock Elections have been effectively made exceeds the Maximum Stock
Amount, the holders of such shares will receive a prorated number of shares of
BHI Stock and a prorated amount of cash such that a number of shares of CU Stock
approximately equal to the Maximum Stock Amount is converted into shares of BHI
Stock.
If holders of CU Stock effectively elect, in the aggregate, to convert into
BHI Stock less than 60% of the shares of CU Stock outstanding immediately prior
to the Effective Time (the "Minimum Stock Amount"), to the extent necessary to
meet the Minimum Stock Amount the Exchange Agent will select by lot, some or all
persons holding Undesignated Shares and treat them as having made a Stock
Election. If
31
<PAGE>
thereafter the total number of shares of CU Stock as to which Stock Elections
and Combination Stock Elections have been made or deemed made is less than the
Minimum Stock Amount, persons who have made effective Cash Elections or
Combination Cash Elections will receive a prorated number of shares of BHI Stock
and a prorated amount of cash such that the number of shares of CU Stock
converted into BHI Stock is approximately equal to the Minimum Stock Amount.
BECAUSE OF THE PRORATION PROVISIONS OF THE MERGER AGREEMENT, THERE IS NO
ASSURANCE THAT A HOLDER OF CU STOCK WILL RECEIVE THE PROPORTION OF BHI STOCK AND
CASH INDICATED ON SUCH HOLDER'S ELECTION. ALSO, RECORD HOLDERS OF 100 OR LESS
SHARES OF CU STOCK MAY RECEIVE CASH IN EXCHANGE FOR THOSE SHARES, AND BE SUBJECT
TO TAX AS A RESULT THEREOF, DESPITE DELIVERY OF AN EFFECTIVE STOCK ELECTION OR
COMBINATION STOCK ELECTION.
For a more complete discussion of the foregoing proration procedure, see
Section 2.3 of the Merger Agreement. For a discussion of the rights of
dissenting shareholders, see "DISSENTERS' RIGHTS."
NO FRACTIONAL SHARES. Notwithstanding the foregoing, each holder of shares
of CU Stock exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of BHI Stock (after taking into
account all certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of BHI Stock multiplied by the Average Price of BHI Stock. No holder will
be entitled to dividends, voting rights or any other rights as a shareholder in
respect of any fractional share of BHI Stock.
EFFECTIVE TIME; CLOSING DATE.
The Merger will become effective upon filing of Articles of Merger and the
Plan of Merger with the Director of the Department of Commerce and Consumer
Affairs of the State of Hawaii, or on such later date as may be agreed by CU and
BHI and specified in the Articles of Merger. Such filings are to be made on or
as soon as practicable following the Closing Date. The Closing Date is to occur
on the first Friday (unless such date is not a business day, in which case it
will be the preceding business day) that is both (i) after satisfaction of each
of the conditions set forth in Articles IX, X and XI of the Merger Agreement
(see "THE MERGER--Conditions to Consummation of the Merger") and (ii) no less
than four business days after the occurrence of the Election Deadline. The
parties anticipate that they may waive the four business day waiting period.
Within three business days following the Effective Time, the parties will make
such filings with the Secretary of State of the State of California as are
required by California law, which filings are expected to include an executed
counterpart of the Articles of Merger, a copy of the Merger Agreement, officers'
certificates conforming to Section 1103 of the California Code, and a tax
clearance certificate from the California Franchise Tax Board with respect to
CU.
If the Merger Proposal is approved by the shareholders of CU, subject to the
satisfaction or waiver of certain conditions described herein, the Effective
Time currently is expected to occur on or about June 30, 1997.
SURRENDER OF CU STOCK CERTIFICATES; DELIVERY OF MERGER CONSIDERATION.
As soon as practicable following the Effective Time, and after the proration
procedures described above are completed, each holder of CU Stock who submits
(or submitted) a properly completed Letter of Transmittal accompanied by such
holder's certificates for CU Stock will be issued a certificate or certificates
representing the number of shares of BHI Stock to which such holder is entitled,
if any (and, if applicable, a check for the amount to be paid in lieu of
fractional shares of BHI Stock), and/or an amount of cash (without interest) to
which such holder is entitled, if any. Holders of CU Stock who did not submit a
Letter of Transmittal prior to the Election Deadline must nevertheless submit a
properly completed Letter of Transmittal (other than the section pertaining to
the Election) and the certificate or certificates representing CU Stock to the
Exchange Agent in order to receive the Merger consideration payable in respect
of such shares.
32
<PAGE>
After the Effective Time, there will be no transfers on CU's stock transfer
books of shares of CU Stock. If certificates representing shares of CU Stock are
presented for transfer after the Effective Time, together with documents
sufficient to evidence and effect such transfer, they will be cancelled and
exchanged for shares of BHI Stock and/or cash, if any, deliverable in respect
thereof.
No dividend or other distribution declared or made with respect to BHI Stock
with a record date after the Effective Time will be paid to the holder of any
unsurrendered certificate for CU Stock until the holder duly surrenders such
certificate. Following the surrender of any such certificate, there will be paid
to the holder, without interest, (i) the amount of any cash payable with respect
to a fractional share of BHI Stock to which such holder is entitled and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of BHI Stock
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such shares
of BHI Stock.
None of BHI, CU, the Exchange Agent or any other person will be liable to
any former holder of CU Stock for any shares of BHI Stock (or dividends or
distributions with respect thereto) or cash delivered to a public official
pursuant to applicable unclaimed property, abandoned property, escheat or
similar laws. BHI or the Exchange Agent will be entitled to deduct and withhold
from the Merger consideration otherwise payable to the holder of CU Stock such
amounts as are required to be deducted and withheld pursuant to federal, state,
local or foreign tax laws.
If a certificate for CU Stock has been lost, stolen or destroyed, the
Exchange Agent will issue the consideration properly payable in accordance with
the Merger Agreement upon receipt of appropriate evidence as to such loss, theft
or destruction, appropriate evidence as to the ownership of such certificate by
the claimant, and appropriate and customary indemnification.
Any shares as to which dissenters' rights have been perfected will be
purchased in accordance with the procedures described under "DISSENTERS' RIGHTS"
and in Appendix C to this Proxy Statement/ Prospectus.
Certificates surrendered by persons who are "affiliates" of CU for purposes
of Rule 145 under the Securities Act will not be exchanged for certificates
representing BHI Stock until BHI has received an affiliate's agreement. See
"CERTAIN RELATED AGREEMENTS--Resale of BHI Stock; Affiliate's Agreements."
CONDITIONS TO CONSUMMATION OF THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of BHI
and CU to effect the Merger are subject to the satisfaction or waiver prior to
the Effective Time of certain conditions, including the following:
(1) Receipt of the approval of the shareholders of CU solicited hereby;
(2) The absence of any judgment, decree, injunction, order or proceeding
that prohibits, enjoins or restrains consummation of the Merger, or the
other transactions contemplated by the Merger Agreement;
(3) Receipt of all required approvals, waivers or consents of any
governmental agency or regulatory authority and expiration of all applicable
waiting periods (all such approvals and the expiration of all applicable
waiting periods being the "Regulatory Approvals"), the satisfaction of all
other statutory or regulatory requirements for the valid completion of the
transactions contemplated by the Merger Agreement, and the absence of any
statute, rule or regulation that prohibits or makes illegal consummation of
the Merger;
33
<PAGE>
(4) CU and BHI shall have received a tax opinion from Carlsmith Ball
Wichman Case & Ichiki, counsel to BHI, to the effect that the Merger will
qualify as a reorganization under Section 368 of the Code and that BHI and
CU will each be a party to such reorganization within the meaning of Section
368(b) of the Code, which opinion will be based in part on certain
representations to be made by BHI and CU;
(5) No stop order suspending the effectiveness under the Securities Act
of the Registration Statement of which this Proxy Statement/Prospectus is a
part shall have been issued and no proceeding for that purpose shall have
been initiated and copies of the Proxy Statement/Prospectus shall have been
timely mailed to the shareholders of CU on the Record Date; and
(6) The shares of BHI Stock to be issued in the Merger shall be approved
for listing on the NYSE, subject to official notice of issuance.
For a discussion of the Regulatory Approvals required for consummation of
the Merger, see "THE MERGER--Regulatory Approvals."
CU CONDITIONS. The obligation of CU to effect the Merger is subject to the
satisfaction or waiver prior to the Effective Time of certain additional
conditions, including the following:
(1) The truth of each of the representations and warranties of BHI
contained in the Merger Agreement, in all material respects, as of the date
of the Merger Agreement and (with certain exceptions) as of the Closing
Date; compliance with and performance by BHI in all material respects of the
covenants, terms and conditions of the Merger Agreement to be complied with
and performed by BHI at or before the Closing Date; the absence of any
change or event that has had or could reasonably be expected to have a
material adverse effect on the business, financial condition, or results of
operations of BHI and its subsidiaries taken as a whole; and the receipt by
CU of an officer's certificate of BHI to the foregoing effect;
(2) The Board of Directors of BHI shall have adopted the BHI Option Plan
Amendment (subject to subsequent approval or ratification by BHI's
shareholders) referred to under "THE MERGER--Stock Options."
(3) Receipt by CU of an opinion from Carlsmith Ball Wichman Case &
Ichiki, counsel to BHI, as to certain legal matters.
BHI CONDITIONS. The obligation of BHI to effect the Merger is subject to
the satisfaction or waiver prior to the Effective Time of certain additional
conditions, including the following:
(1) The truth of each of the representations and warranties of CU
contained in the Merger Agreement, in all material respects, as of the date
of the Merger Agreement and (with certain exceptions) as of the Closing
Date; compliance with and performance by CU in all material respects of the
covenants, terms and conditions of the Merger Agreement to be complied with
and performed by CU at or before the Closing Date; the completion of all
actions necessary to authorize performance of the Merger Agreement by CU and
the consummation of the transactions contemplated thereby as required by
applicable law; the receipt by CU of all consents of third parties to its
and CU Bank's material mortgages, notes, leases, franchises, agreements,
licenses and permits as may be necessary to permit the Merger and other
transactions contemplated by the Merger Agreement to be consummated without
material default, acceleration, breach or loss of rights or benefits
thereunder; the absence of any change or event that has had or could
reasonably be expected to have a material adverse effect on the business,
financial condition, or results of operations of CU and its subsidiaries
taken as a whole; and the receipt by BHI of an officer's certificate of CU
to the foregoing effect;
34
<PAGE>
(2) The absence of any action by any governmental entity or agency or
regulatory authority in connection with any Regulatory Approval, and the
lack of any existing or proposed statute, rule, regulation or order, which
in either case would impose any condition or restriction on BHI or any of
its subsidiaries (including CU Bank after the Merger) that BHI reasonably
determines in the good faith exercise of its business judgment will be
materially burdensome to BHI or any such subsidiary;
(3) Delivery by each person identified by CU as an "affiliate" for
purposes of Rule 145 under the Securities Act of an affiliate's agreement in
the form specified by the Merger Agreement;
(4) Receipt by BHI and certain others of letters from CU's independent
auditors, dated as of the effective date of the Registration Statement of
which this Proxy Statement is a part, and dated as of the Closing Date, with
respect to certain financial information regarding CU in form and substance
reasonably satisfactory to BHI and in scope and substance consistent with
applicable professional standards for such letters delivered by independent
public accountants in connection with such registration statements;
(5) Receipt by BHI of resignations of all of the directors of CU and CU
Bank, other than those directors of CU Bank designated by BHI prior to the
Closing Date to remain in office after the Effective Time;
(6) Receipt by BHI of the final calculation of certain fees and expenses
incurred by CU and CU Bank in connection with the Merger through the fifth
business day preceding the Closing Date, the payment of such fees and
expenses by CU and CU Bank, and the release of BHI from liability for such
fees and expenses (subject to certain exceptions);
(7) The number of shares of CU Stock as to which dissenters' rights are
exercised shall not exceed 10% of the issued and outstanding shares of CU
Stock;
(8) As of the last day of the month preceding the Effective Time, the
total deposits of CU Bank (excluding CD Network deposits) shall be no less
than $605 million; and
(9) Receipt by BHI of the opinion of Sullivan & Cromwell, counsel to CU,
or other counsel acceptable to BHI, as to certain legal matters.
REGULATORY APPROVALS
The consummation of the Merger is subject to the approval of the Federal
Reserve Board under the BHCA and also requires approval of the Superintendent of
Banks of the State of California or the successor thereto (the
"Superintendent"). Receipt of all requisite Regulatory Approvals and consents is
a condition precedent to the consummation of the Merger. See "THE
MERGER--Conditions to Consummation of the Merger."
Applications for prior approval of the Merger were filed with the Federal
Reserve Board on April , 1997 and with the Superintendent on April , 1997.
Although neither BHI nor CU is aware of any reason why the requisite approvals
of the Merger would not be granted, there can be no assurance such approvals and
consents will be obtained or that, if obtained, such approvals and consents will
not include conditions of a type that would relieve BHI of its obligation to
consummate the Merger. See "THE MERGER-- Conditions to Consummation of the
Merger" and "--Amendment and Termination."
In determining whether to approve the Merger, the Federal Reserve Board and
Superintendent will consider factors such as the financial and managerial
resources and future prospects of BHI and CU separately and as a combined
entity, and the convenience and needs of the communities to be served. The BHCA
prohibits approval of the Merger if it would have specified anti-competitive
effects unless the Federal Reserve Board finds those effects are clearly
outweighed by the probable benefits of the Merger. The Federal Reserve Board
also has the authority to deny any application if it concludes that the combined
organization would have an inadequate capital position or if the acquiring
organization does not meet the
35
<PAGE>
requirements of the Community Reinvestment Act. Under the BHCA, the Merger may
not be consummated until the 15th day following the date of the Federal Reserve
Board approval, during which time the United States Department of Justice may
challenge the Merger on antitrust grounds. The BHCA also provides for the
publication of notice and the opportunity for administrative hearings relating
to an application for approval under the BHCA and authorizes the Federal Reserve
Board to permit interested parties to intervene in the proceedings. If an
interested party is permitted to intervene, such intervention could
substantially delay the regulatory approval required for consummation of the
Merger.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains substantial representations and warranties
made by BHI and CU to each other relating to their respective assets,
liabilities, obligations, business operations and other matters. The
representations and warranties were made upon execution of the Merger Agreement
and are required to be true and correct in all material respects on such date
and (with certain exceptions) upon the Closing Date.
CONDUCT OF BUSINESS PENDING THE MERGER
CU. The Merger Agreement contains certain restrictions and requirements as
to the conduct of CU's business pending consummation of the Merger.
The Merger Agreement provides that, during the period from the date of the
Merger Agreement to the Effective Time, CU and CU Bank will each conduct its
respective business only in the normal and customary manner and in accordance
with sound banking practices and will not, without the prior written consent of
BHI, which will not be unreasonably withheld, take any of the following actions:
(i) issue any security except pursuant to the exercise of options outstanding as
of the date of the Merger Agreement; (ii) except for paying regular quarterly
dividends in an amount not to exceed $0.07 per share, declare, set aside or pay
any dividend or make any other distribution upon, or purchase or redeem any
shares of CU Stock; (iii) amend its Articles of Incorporation or its Bylaws;
(iv) grant any general or uniform increase in the rate of pay of employees or
employee benefits or grant any material increase in salary, incentive
compensation or employee benefits or pay any bonus to any person (except for
salary increases in the ordinary course of business consistent with past
practices, increases that are required by certain preexisting contracts or
plans, or payment of certain bonuses accrued in the ordinary course of business
through the end of the month preceding the Closing Date); (v) make any capital
expenditure in excess of $250,000, except for ordinary repairs, renewals and
replacements; (vi) compromise, settle or adjust any assertion or claim of a
deficiency in taxes (or interest thereon or penalties in connection therewith)
in excess of $200,000, extend the statute of limitations with any tax authority
or file any pleading in court in any tax litigation or any appeal from an
asserted deficiency in excess of $200,000; (vii) grant or commit to grant any
new extension of credit or amend the terms of any such credit outstanding on the
date of the Merger Agreement to any executive officer, director or principal
shareholder, or to any corporation, partnership, trust or other entity
controlled by any such person, except as consistent with practices and policies
in existence as of the date of the Merger Agreement; (viii) close or open any
offices at which business is conducted except as disclosed to BHI prior to the
date of the Merger Agreement; (ix) adopt or amend any employee plan or other
benefit plan or arrangement of any such type except such amendments as are
required by law or do not materially increase the costs or benefits of such plan
or arrangement (other than certain previously approved amendments); (x) change
any policies and practices with respect to deposits, investments or accounting
except such changes as may be required by the rules of the American Institute of
Certified Public Accountants or the Financial Accounting Standards Board or by
applicable governmental authorities; (xi) grant any person a power of attorney
or similar authority except in connection with tax audits; (xii) make any
material investment by purchase of stock or securities, contributions to
capital, property transfers or otherwise in any other person, except for
investments made in the ordinary course of business consistent with policies in
effect on January 31, 1997; (xiii) amend, modify or terminate, except in
36
<PAGE>
accordance with its terms, any material contract or enter into any material
agreement or contract; (xiv) create or incur or suffer to exist any mortgage,
lien, pledge, security interest, charge, encumbrance or restraint of any kind
against or in any of its properties or rights (except for liens incurred in the
ordinary course of business and certain other liens); (xv) sell, lease or
otherwise dispose of any assets which are material, individually or in the
aggregate, except in the ordinary course of business consistent with past
practice or as disclosed to BHI prior to execution of the Merger Agreement;
(xvi) make any extraordinary payment exceeding $25,000 to any person; (xvii)
except as required by law, take or cause to be taken any action which would
prevent the contemplated transactions from qualifying as a reorganization under
Section 368 of the Code; (xviii) take any action which would reasonably be
expected to adversely affect or delay the ability of BHI or CU to obtain any
necessary Regulatory Approvals or third-party consents or to adversely affect
the ability of CU to perform its covenants on a timely basis; (xix) incur
indebtedness for borrowed money or assume, guaranty, endorse or otherwise as an
accommodation become responsible for the obligations of others, except in
connection with banking customers in the ordinary course of business and except
for certain short-term borrowings; (xx) become a party to any transaction (other
than repurchase agreements and reverse repurchase agreements) involving
derivative instruments; or (xxi) agree or make any commitment to take any of the
foregoing actions.
The Merger Agreement also requires that CU and CU Bank will each, among
other things, (i) use its best efforts to maintain its business or organization
and relationships with customers, employees, and others; (ii) maintain its
assets in good condition; (iii) use commercially reasonable efforts to keep in
full force and effect all material licenses and permits; (iv) use commercially
reasonable efforts to maintain insurance coverage substantially similar to that
in effect upon execution of the Merger Agreement; (v) perform its material
legal, regulatory, and contractual obligations and not become in material
default on any thereof; (vi) duly and timely file all required governmental
reports; (vii) periodically furnish to BHI certain information, loan reports and
updates of information previously provided; (viii) promptly notify BHI of
certain communications from tax authorities, events whereby any person or group
acquires 5% or more of the outstanding CU Stock, material litigation, and any
event which has had or may reasonably be expected to have a materially adverse
effect on the business, financial condition or results of operations of CU or CU
Bank; (ix) provide BHI with access to certain information; (x) use commercially
reasonable efforts to obtain any requisite third-party consent; and (xi) comply
with certain obligations concerning the filing of tax returns and payment of tax
liabilities. CU has also agreed to notify BHI of any fact or event that could
reasonably be expected to cause CU's disclosure schedules to be materially
incorrect, and to notify BHI of any fact or event which may reasonably be
expected to have a material adverse effect on the business, financial condition,
results of operations or prospects of CU and CU Bank, or if CU determines that
it is likely to become unable to fulfill any of the conditions to the
performance of BHI's obligation under the Merger Agreement.
Among other things, CU has agreed that (i) it will coordinate with BHI the
declaration of any dividends and the record and payment dates related thereto,
such that holders of CU Stock will not receive two dividends, or fail to receive
one dividend, for any single calendar quarter with respect to CU Stock exchanged
for BHI Stock in the Merger; (ii) neither it nor CU Bank will prior to the
Effective Time apply reserves for loan and lease losses except for the purposes
for which such reserves were created, or in the case of other reserves existing
as of December 31, 1996, apply those reserves except with respect to those
specific items and those specific amounts for which the applicable portion of
such reserve was created, except to the extent the purpose of such reserve no
longer exists and is required to be taken into income under generally accepted
accounting principles consistently applied; and (iii) it will use reasonable
efforts to cause the delivery to BHI at Closing of the resignations of all
directors of CU and CU Bank, other than directors of CU Bank designated by BHI
prior to the Closing Date to remain in office after the Effective Time.
BHI. In the Merger Agreement, BHI has agreed not to (i) take any action
which would reasonably be expected to delay or adversely affect the ability of
BHI or CU to obtain any necessary Regulatory
37
<PAGE>
Approval or third-party consent or to adversely affect BHI's ability to perform
its covenants or agreements on a timely basis under the Merger Agreement; (ii)
amend BHI's Articles of Incorporation in any respect that materially and
adversely affects the rights and privileges attendant to the BHI Stock; (iii)
except as required by law, take any action that could reasonably be expected to
prevent the contemplated transactions from qualifying as a reorganization under
Section 368 of the Code (it being acknowledged that although BHI has no present
intention to reacquire from CU's shareholders BHI Stock issued in the Merger,
BHI does intend to repurchase shares of BHI Stock in the open market from time
to time before and after the Effective Time); or (iv) agree to, or make any
commitment to, do any of the foregoing.
BHI has further agreed prior to the Effective Time to observe all lawful
requirements applicable to BHI and its subsidiaries that are material to their
business on a consolidated basis; to notify CU of any fact or event that could
reasonably be expected to cause its disclosure schedules to be materially
incorrect as of the Closing Date; to use commercially reasonable efforts to
obtain any requisite third party consents to be obtained by BHI in connection
with the Merger; to provide CU with access to certain information; to notify CU
of any fact or event which may reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of BHI and
its subsidiaries taken as a whole or if BHI determines it is likely to become
unable to fulfill any conditions to the performance of CU's obligations under
the Merger Agreement. BHI has also agreed to take all steps necessary to adopt
the BHI Option Plan Amendment, subject to subsequent approval or ratification by
BHI's shareholders at BHI's 1998 annual shareholders meeting. See "THE
MERGER--Stock Options." The BHI Board of Directors is required to recommend that
the BHI shareholders approve or ratify such amendment and to use its reasonable
best efforts to obtain such approval or ratification. Within two business days
following such approval, BHI is required to file a registration statement with
the Securities and Exchange Commission to permit the public resale of BHI Stock
to be issued upon the exercise of the CU options assumed pursuant to such
amendment. BHI has also agreed, in those portions of a November 22, 1996
confidentiality agreement which survived execution of the Merger Agreement, that
except pursuant to the Merger Agreement or the Stock Option Agreement and
subject to certain other exceptions, BHI will not for a period of one year
acquire securities or property of CU.
ADDITIONAL COVENANTS. BHI and CU have entered into various additional
agreements, including agreements to cooperate with the other; to prepare and
file all necessary applications and filings; to use reasonable best efforts to
accomplish all actions necessary to comply with applicable legal requirements
related to the Merger and to obtain requisite Regulatory Approvals; and to
consult with the other party before issuing any press release or other public
statement with respect to the transactions contemplated by the Merger Agreement
and to make no such statement without the prior approval of the other party
(except on the advice of counsel that such disclosure is required by law, in
which case the other party is to be afforded a reasonable opportunity to review
and comment upon such disclosure).
NONSOLICITATION
Under the terms of the Merger Agreement, CU has agreed not to directly or
indirectly solicit, initiate, recommend, endorse or enter into (or, subject to
the proviso noted below, encourage or entertain) any agreement or agreement in
principle, or announce any intention to do any of the foregoing, with respect to
any Alternative Transaction (as hereafter defined). CU also agreed upon
execution of the Merger Agreement to terminate any prior activities, discussions
or negotiations with any parties other than BHI with respect to any Alternative
Transaction. In addition, CU has agreed not to directly or indirectly
participate in any negotiations or discussions regarding, or furnish any
information with respect to, or otherwise cooperate in any way in connection
with or assist or participate in, facilitate or encourage, any effort or attempt
to effect, any Alternative Transaction with or involving any person other than
BHI; provided that CU may provide such information or undertake such discussions
or negotiations if CU shall have received an unsolicited, bona fide written
offer from a person other than BHI to effect an Alternative Transaction and the
Board of Directors of CU reasonably and in good faith determines, based on
advice of
38
<PAGE>
its outside counsel, that the failure to provide such information to or
undertake such discussions or negotiations with the person submitting such
unsolicited written offer could cause the members of CU's Board of Directors to
breach their fiduciary duties under applicable laws. CU has agreed to promptly
communicate to BHI the terms of any proposal which it may receive in respect of
any Alternative Transaction and keep BHI informed as to the status of any
actions, including negotiations or discussions or the provision of information,
taken pursuant to the foregoing proviso. The term "Alternative Transaction"
means any of the following involving CU or CU Bank: any merger, consolidation,
share exchange or other business combination; a sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets of CU or CU Bank representing
10% or more of CU's consolidated assets; a sale of shares of capital stock (or
securities convertible or exchangeable into or otherwise evidencing, or any
agreement or instrument evidencing, the right to acquire capital stock,
representing 10% or more of the voting power of CU or CU Bank; a tender offer or
exchange offer for at least 10% of the outstanding shares of CU or CU Bank; a
bonafide solicitation of proxies in opposition to approval of the Merger by CU's
shareholders; or a public announcement of a proposal, plan, or intention to do
any of the foregoing.
AMENDMENT AND TERMINATION
AMENDMENT AND WAIVER. Except as otherwise required by law, the Merger
Agreement may be modified or amended by action of the Boards of Directors of CU
and BHI, without action by their respective shareholders, pursuant to a writing
signed by the parties to the Merger Agreement or their agents. Prior to the
Effective Time, any provision of the Merger Agreement may be waived by the party
benefitted by that provision or by both parties.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time of the Merger upon the occurrence of any of the following:
(1) By mutual consent of BHI and CU;
(2) By BHI or CU, if any governmental authority or regulatory agency
(including the Federal Reserve Board) has denied any approval, waiver or
consent required to consummate the Merger and such denial has become final
and nonappealable;
(3) By BHI, if (a) CU's Board of Directors fails to recommend approval
of the Merger Agreement to the shareholders of CU or withdraws, revokes or
materially modifies its recommendation in a manner adverse to BHI; (b) the
shareholders of CU fail to approve the Merger Agreement at the Special
Meeting, including any adjournments or postponements hereof; or (c) there
occurs a material breach by CU of any representation, warranty or agreement
in the Merger Agreement which is not cured or not curable within 30 days
after written notice of such breach is given to CU;
(4) By CU, in the event of a material breach by BHI of any
representation, warranty or agreement contained in the Merger Agreement
which is not cured or not curable within 30 days after written notice of
such breach is given to BHI;
(5) By BHI or CU, if the Merger is not consummated by September 30, 1997
(except that such date shall be extended at the request of either party for
no more than ninety days, if as of September 30, 1997, there remain pending
any applications for Regulatory Approvals other than appeals of Regulatory
Approvals which have been denied); provided that a party cannot terminate
the Merger Agreement if the failure to consummate the Merger by such time is
due to the breach of any representation, warranty or agreement in the Merger
Agreement by the party seeking to terminate;
(6) By BHI or CU, if any governmental or regulatory authority or agency,
or court of competent jurisdiction, shall have issued a final and
nonappealable permanent order or injunction enjoining or otherwise
prohibiting the consummation of the Merger and the time for appeal or
petition for reconsideration of such order or injunction shall have expired
without such appeal or petition being granted;
39
<PAGE>
(7) By CU, if both: (a) the closing price of BHI Stock for any period of
ten consecutive trading days prior to the Closing Date is less than
$37.71875 and (b) for each such day the number obtained by dividing the
closing price of BHI Stock by $44.375 (which was the closing price of BHI
Stock on February 21, 1997, the last trading day prior to execution of the
Merger Agreement) is less than 85% of the number obtained by dividing the
Index Price for that day by 524.05 (the Index Price on February 21, 1997).
(8) By BHI, if (a) CU shall have exercised a right pursuant to Section
6.2(b) of the Merger Agreement with respect to any Alternative Transaction,
and shall continue discussions with any third party concerning such
Alternative Transaction for more than ten business days after the date CU
was first apprised of such Alternative Transaction; or (b) a proposal to
effect an Alternative Transaction shall have been commenced, publicly
announced or communicated to CU which contains a proposal as to price and CU
shall not have rejected such proposal within ten business days of its
receipt or the date its existence first becomes publicly disclosed, if
earlier; or
(9) By BHI or CU, if the closing price of BHI Stock for any period of
ten consecutive trading days prior to the Closing Date is less than $35.50.
If the Merger Agreement is terminated by either CU or BHI, the Merger
Agreement shall be void and have no further effect, except that no termination
of the Merger Agreement shall release CU or BHI from their respective
obligations: (i) under the Stock Option Agreement (termination of which will be
governed by the terms of that agreement), (ii) to maintain confidentiality of
information and documents concerning the other party, as provided by Sections
6.4 and 7.3 of the Merger Agreement, (iii) to pay their own costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby, or (iv) from any liability or damage to the other party
arising directly or indirectly out of said party's intentional breach, default
or failure to perform any of its covenants, agreements, duties or obligations
arising under the Merger Agreement.
PRICE-BASED TERMINATION. As discussed above, if the closing price of BHI
Stock (which was [$43.875] on [March 27,] 1997) falls below certain specified
amounts for ten consecutive trading days prior to the Closing Date, the CU Board
of Directors may, in its discretion, terminate the Merger Agreement. In making
any such determination, the CU Board of Directors anticipates that it would
review current information relating to BHI and CU, receive presentations from
its officers, financial advisor and legal counsel and consider a variety of
factors including those which it considered in making its initial decision to
enter into the Merger Agreement. See "THE MERGER--Background of and Reasons for
the Merger." If a right of termination arises after the Merger Proposal is
approved by a majority of the outstanding shares of CU Stock, the Board of
Directors of CU will have the power and authority, without the necessity of a
further vote of the CU shareholders, to determine whether or not to proceed with
the Merger. As such, the Board of Directors may determine not to exercise a
right to terminate the Merger Agreement resulting from a decline in the price of
BHI Stock.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the CU Board of Directors with respect
to the Merger Proposal, the shareholders of CU should be aware that certain
members of CU's management and the CU Board of Directors may be deemed to have
certain interests in the Merger that are in addition to their interests as
shareholders of CU generally.
40
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS; D & O COVERAGE. The Merger
Agreement provides that all rights to indemnification or exculpation existing in
favor of the directors and officers of CU or CU Bank as of January 31, 1997, as
provided in their respective Articles of Incorporation and Bylaws shall, with
respect to matters occurring before the Effective Time, survive the Merger and
continue in full force and effect for a period of six years following the
Effective Time of the Merger.
In addition, the Merger Agreement requires that, if requested by BHI, CU
shall use commercially reasonably efforts to obtain (i) coverage for at least
three years following the Effective Time for the directors and officers of CU
and CU Bank under a directors' and officers' liability insurance policy (on
terms and conditions no less protective than the CU's existing policy) covering
acts and omissions occurring prior to the Effective Time and actions related to
the Merger Agreement and (ii) coverage for at least three (3) years following
the Effective Time under a banker's blanket bond (on terms and conditions which
are no less protective than CU's existing policy) covering losses incurred prior
to the Effective Time and actions relating to the Merger Agreement. If BHI makes
no such request, then it shall provide the coverage contemplated by clause (i)
of the preceding sentence pursuant to directors' and officers' liability
insurance maintained by BHI.
CERTAIN OPTIONS. As of the Record Date, the directors and executive
officers of CU beneficially owned [622,041] outstanding shares of CU Stock (not
including shares such persons may acquire through the exercise of stock options)
which will be converted into the right to receive cash or BHI Stock or both at
the Effective Time in the same manner as will the shares of CU Stock held by all
other CU shareholders. In addition, directors and executive officers of CU held
as of such date options to purchase [566,702] shares of CU Stock. Certain
options held by CU's directors and executive officers that are not presently
exercisable will become exercisable as the result of the Merger. See "THE
MERGER--Stock Options." As therein discussed, all options held by directors and
executive officers who at the Effective Time are employees of CU Bank are
eligible for conversion into replacement options to be issued by BHI. Any
unexercised options held by non-employees of CU Bank, including existing and
former directors, will be cancelled at the Effective Time.
MANAGEMENT RETENTION AND OTHER AGREEMENTS. In connection with a change in
control of CU or CU Bank (including a change of more than 50% in the current
shareholders of CU), Mr. Carpenter and Mr. Rainer are entitled to any accrued
but unpaid bonus at that time. The Merger Agreement generally permits payment at
or prior to Closing to all CU employees of bonuses accrued in the ordinary
course of business through the end of the month preceding the Closing Date.
Additionally, if there is a change of control, and if a position commensurate
with Mr. Carpenter's or Mr. Rainer's current position with CU Bank is not
offered, CU is to pay such party, subject to non-disapproval by regulatory
authorities, twelve months' compensation. Under the Merger Agreement, CU is
required to make cash payments to Mr. Carpenter and Mr. Rainer in the amount of
$265,000 and $212,000, respectively, at the Effective Time and, in addition, to
enter into management retention agreements with them as described below.
Prior to the Closing Date, CU Bank is required to enter into management
retention agreements with nine key employees of CU Bank (the "Key Employees")
who will be entitled to receive incentive compensation (the "Incentive
Payments") equivalent to between six months' and one year's salary, subject to
the conditions set forth in the retention agreements. The aggregate Incentive
Payments to all Key Employees is $1,082,000. The executive officers of CU who
will be offered such retention agreements, and the respective Incentive Payments
set forth therein, are as follows: Mr. Carpenter--$265,000; Mr.
Rainer--$212,000; Anne Williams, Chief Credit Officer-- $150,000; and Anita
Wolman, Corporate Secretary and General Counsel--$105,000.
Under each retention agreement, if the Key Employee is employed by CU Bank
at the Effective Time, he or she shall be paid the Incentive Payment in the
following installments, if the Employee is at the time of the required
installment employed by CU Bank: (i) one-third on the first anniversary of the
Effective Time; (ii) one-third on the thirtieth month anniversary of the
Effective Time; and (iii) one-third on the
41
<PAGE>
thirtieth month anniversary of the Effective Time, provided that the third
installment payment shall not be made unless the cumulative net income (less
extraordinary items) of CU Bank for the fiscal years ended December 31, 1998 and
1999 shall exceed $33,458,000. Payment of the Incentive Payment shall be in lieu
of any other severance payment otherwise payable to Employee by CU Bank. The
obligations of CU Bank under the retention agreements shall be subject to and
expressly conditioned on the execution and delivery by each of the Key Employees
of a Waiver and Release Agreement dated as of the Effective Time granting a
general release in favor of CU and its affiliates.
The Merger Agreement further provides that following the Effective Time, BHI
shall grant to the Key Employees who are employed by CU Bank at the Effective
Time incentive stock options to acquire 39,000 shares of BHI Stock, pursuant to
the Bancorp Hawaii, Inc. Stock Option Plan of 1994 (the "BHI Option Plan"),
subject to certain conditions. Such options will, among other provisions, have
an exercise price equal to the fair market value of BHI Stock as of the date of
grant, have a ten (10) year term and will vest upon one (1) year of employment
following the date of grant. Messrs. Carpenter and Rainer will each be entitled
to receive an option for 9,000 shares of BHI Stock and the other Key Employees
(including Ms. Williams and Ms. Wolman) will each be entitled to receive an
option for 3,000 shares of BHI Stock.
The Merger Agreement also provides that prior to the Closing Date, CU Bank
is to enter into a retention agreement with Patrick Hartman, Chief Financial
Officer of CU and CU Bank. If Mr. Hartman is employed by CU or CU Bank at the
Effective Time, he is entitled thereunder to receive a payment of $194,667 upon
termination of his employment or his death, whichever is earlier. Such payment
shall be in lieu of any other severance payment otherwise payable to Mr. Hartman
by CU Bank. The obligations of CU Bank under the agreement with Mr. Hartman are
conditioned upon the execution and delivery by him of Waivers and Releases which
will grant a general release in favor of CU and BHI and their affiliates. It is
anticipated that Mr. Hartman will not continue as an executive of CU Bank after
a transition period following the Merger.
FEES TO CU FINANCIAL ADVISOR. Montgomery will receive certain fees in
connection with investment advisory services provided to CU. See "THE
MERGER--Opinion of Financial Advisor."
STOCK OPTIONS
CU has maintained various plans pursuant to which options have been issued
to directors, officers and employees of CU. As of the Record Date, options were
outstanding under such Plans to acquire [1,013,691] shares of CU Stock at a
weighted average exercise price of [$7.16] per share. Of those amounts,
directors and executive officers as a group held options to acquire [566,702]
shares of CU Stock, at a weighted average exercise price of $[5.91] per share.
At the Effective Time of the Merger, all CU option plans will be terminated and
any options not exercised or replaced by BHI options will be cancelled.
Under CU's option plans, any options granted prior to a reorganization,
merger or consolidation of CU in which CU will not be the surviving or resulting
entity (a "Terminating Event") will become exercisable in full, whether or not
then vested, no later than thirty (30) days prior to the completion of any such
Terminating Event. As of [March 14], 1997, there were a total of [492,490]
options to acquire CU Stock issued under such plans that were not presently
exercisable, all of which would become exercisable as a result of the Merger.
The following table sets forth as to each of the CU directors and executive
officers,
42
<PAGE>
who on that date held options that would become exercisable due to the Merger,
the number of shares subject to such options and the exercise prices thereof:
<TABLE>
<CAPTION>
UNVESTED OPTIONS-- EXERCISE
NUMBER PRICE
DIRECTOR OR EXECUTIVE OFFICER OF SHARES PER SHARE
- ---------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Kenneth L. Bernstein...................................... 2,500 $ 6.25
3,750 $ 6.88
5,000 $ 10.50
------
11,250
------
------
Paul W. Glass............................................. 3,750 $ 6.25
5,625 $ 6.88
5,000 $ 10.50
------
14,375
------
------
Ronald S. Parker.......................................... 2,500 $ 6.25
3,750 $ 6.88
5,000 $ 10.50
------
11,250
------
------
Stephen G. Carpenter...................................... 14,800 $ 5.13
5,000 $ 4.88
750 $ 10.50
5,708 $ 6.63
38,585 $ 6.63
------
64,843
------
------
David I. Rainer........................................... 1,194 $ 5.00
9,806 $ 5.00
4,430 $ 4.88
1,141 $ 6.88
3,750 $ 10.50
14,182 $ 6.63
23,318 $ 6.63
------
57,821
------
------
Anne Williams............................................. 3,000 $ 4.75
1,000 $ 6.88
1,000 $ 6.00
5,000 $ 6.63
6,250 $ 7.13
5,625 $ 10.50
------
21,875
------
------
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
UNVESTED OPTIONS-- EXERCISE
NUMBER PRICE
DIRECTOR OR EXECUTIVE OFFICER OF SHARES PER SHARE
- ---------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Patrick Hartman........................................... 2,980 $ 6.88
3,021 $ 6.88
2,000 $ 6.00
5,000 $ 6.63
6,250 $ 7.13
------
19,251
------
------
Anita Wolman.............................................. 1,400 $ 4.88
1,200 $ 6.00
3,750 $ 6.63
3,750 $ 7.13
1,875 $ 10.50
------
11,975
------
------
</TABLE>
Under the Merger Agreement, unexercised options issued pursuant to CU's
employee option plans that are held by a person who is an employee of CU Bank at
the Effective Time will be assumed or replaced by BHI as of the Effective Time
with a comparable substituted option, subject to certain conditions described
below. Such assumption shall be effected pursuant to (i) an amendment (the "BHI
Option Plan Amendment") to the BHI Option Plan to be adopted prior to the
Closing Date (subject to subsequent approval or ratification by the holders of a
majority of the outstanding BHI Stock) and (ii) new option agreements with each
optionee. Each option so assumed or replaced shall at the Effective Time be
deemed to be an option to acquire BHI Stock (a "Replacement Option") granted by
BHI. Subject to certain other requirements, the per share exercise price for the
Replacement Options granted to each optionee will equal the exercise price of
such optionee's CU options which are converted into such Replacement Options
divided by the Exchange Ratio, and shall be for such number of shares of BHI
Stock as are equal to the product of the Exchange Ratio multiplied by the number
of shares of CU Stock subject to such Options (except that no option shall be
deemed granted by BHI to acquire a fractional share of BHI Stock). The new
option agreements granting Replacement Options will be distributed to CU
employees who then hold unexercised options no later than 20 calendar days prior
to the anticipated Closing Date, and must be executed and returned to BHI no
later than 10 calendar days prior to the anticipated Closing Date in order for
such assumption or replacement to be effective.
The assumption of the options by BHI shall be contingent upon (i) the
Closing, (ii) the execution prior to the Closing Date by the particular
optionee, BHI and CU of a new option agreement providing for the assumption or
replacement of such optionee's unexercised options and (iii) the employment of
the optionee by CU Bank at the Effective Time. To the extent that the assumption
or replacement of an option by BHI would result in the issuance of an option to
purchase a fractional share of BHI Stock, such fractional share option shall be
canceled, and the aggregate exercise price of the optionee's Replacement Options
shall be reduced by the proportionate amount of the aggregate exercise price
attributable to the fractional share.
The assumption or replacement by BHI of the CU options pursuant to the BHI
Option Plan Amendment and the new option agreements shall (unless otherwise
agreed by BHI and CU) be subject to the following limitations: (i) the excess of
the aggregate fair market value of the shares of BHI Stock subject to a
Replacement Option immediately after the assumption over the aggregate option
exercise price for such shares of BHI Stock shall not be greater than the excess
of the aggregate fair market value of the shares subject to the CU option
immediately before the assumption over the aggregate option exercise price for
such shares of CU Stock; (ii) for any option, on a share by share comparison,
the ratio of the option exercise price to the fair market value of the BHI Stock
subject to the Replacement Option
44
<PAGE>
immediately after the assumption shall not be more favorable to the optionee
than the ratio of the CU option exercise price to the fair market value of the
CU Stock subject to the option immediately before the assumption; (iii) the
optionee shall not receive additional benefits under the Replacement Option
which he did not have under the CU option; and (iv) Replacement Options shall
not be exercisable prior to the date ("Ratification Date") on which the BHI
Option Plan Amendment is approved or ratified by the holders of a majority of
the outstanding shares of BHI Stock. However, in the event that the exercise
period for a Replacement Option would otherwise expire during the period from
the Effective Time through the Ratification Date (including expiration of the
exercise period following termination of employment), such Replacement Option
shall be deemed to be a nonqualified stock option not described in Code Section
422 (if not otherwise already designated a nonqualified stock option) and the
exercise period for such Replacement Option shall be extended to the date that
is 90 days following the Ratification Date.
Each option to acquire CU Stock issued by CU that is outstanding and
unexercised at the Effective Time and that is not assumed or replaced as
provided above (including any such option as to which an optionee has executed a
new option agreement, but has ceased to be an employee of CU Bank at the
Effective Time) will terminate at the Effective Time.
If approval or ratification of BHI's shareholders is not received on or
prior to June 30, 1998, each Replacement Option will be void, and BHI will pay
the holder thereof the Replacement Option Amount (as defined below) which shall
be calculated by reference to the closing price of BHI Stock on the earlier of
the date of disapproval or June 30, 1998 (the "Determination Date"), and paid
within five business days thereafter in cash or cash equivalent or, at the
election of BHI, by delivery of such number of shares of BHI Stock as equals the
Replacement Option Amount divided by the closing price of BHI Stock on the
Determination Date, rounded down to a whole share, plus cash for any fractional
share. The "Replacement Option Amount" means an amount equal to (i) the product
of the number of shares of BHI Stock covered by such optionee's Replacement
Options multiplied by the closing price of BHI Stock on the relevant date, less
(ii) the aggregate exercise price for all such Replacement Options held by the
optionee.
Except for options assumed by BHI as provided above: (i) CU shall cause each
plan, program or arrangement pursuant to which CU is or may be required to issue
CU Stock or compensation based on CU Stock, and all rights thereunder to
purchase shares of CU Stock or BHI Stock, to be terminated as of the Effective
Time, and (ii) CU shall ensure that following the Effective Time no holder of
any options to acquire CU Stock or any participant in any CU plan providing for
the issuance of CU Stock or options shall have any right thereunder to acquire
any equity securities of CU or of BHI.
EMPLOYEE BENEFIT PLANS
Pursuant to the Merger Agreement, employee benefits provided to employees of
CU Bank immediately following the Effective Time shall, in the aggregate, be
substantially equivalent to the employee benefits to which such employees were
entitled and which were in effect as of the date of the Merger Agreement.
Notwithstanding the foregoing, neither BHI nor any subsidiary of BHI (including
CU Bank after the Merger) shall be required to maintain any particular plan,
program, policy or arrangement following the Effective Time.
The Merger Agreement also provides that employees of CU Bank who become
participants in any employee benefit plan, practice or policy of BHI or its
subsidiaries shall be given credit thereunder for all service prior to the
Effective Time with CU or CU Bank, or any predecessor employer (to the extent
such credit was given by CU or CU Bank), for purposes of eligibility and
vesting, for determination of benefits such as vacation and sick leave
allowances, and for such other purposes, if any (other than benefit accrual) for
which such service is either taken into account or recognized by BHI or its
subsidiaries.
45
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain of the material federal income
tax consequences of the Merger. The summary is based upon current law and the
opinion of Carlsmith Ball Wichman Case & Ichiki, counsel to BHI ("Tax Counsel").
Future legislative, administrative or judicial changes or interpretations, which
may be retroactive, could alter or modify the discussion set forth below. The
opinion of Tax Counsel, as set forth below, is also based, among other things,
on certain assumptions regarding the factual circumstances that will exist at
the Effective Time of the Merger and on the truth and correctness of certain
representations, to be made by BHI, CU and certain CU shareholders pursuant to
the Merger Agreement prior to or as of the Effective Time, including
representations regarding intended actions of BHI and certain CU shareholders
following the Merger. If any of these factual assumptions or representations is
inaccurate, the tax consequences of the Merger could differ from those described
below. Neither BHI nor CU intends to apply for a ruling from the Internal
Revenue Service ("IRS") with respect to the federal income tax consequences of
the Merger. There can be no assurance that the IRS will not take a view contrary
to those expressed herein. CU shareholders should also be aware that the opinion
of Tax Counsel represents the best judgment of such counsel, but is not binding
on the IRS or the courts.
The following discussion is intended to provide only a general summary and
does not include a complete analysis of all the potential federal income tax
consequences or consequences that may vary with or be contingent upon individual
circumstances of particular CU shareholders, or to certain types of shareholders
subject to special treatment under the federal income tax laws, such as
financial institutions, broker-dealers, life insurance companies, tax-exempt
organizations, investment companies, foreign taxpayers, persons who acquired
their shares of CU Stock pursuant to the exercise of employee stock options,
taxpayers subject to the alternative minimum tax and other special status
taxpayers. This discussion also does not address any aspects of state, local, or
foreign tax laws or any federal tax laws other than those pertaining to income
tax. CU shareholders who are individuals should be aware that the federal income
tax rate on long-term capital gains of individuals is significantly lower than
the tax rate that may apply to ordinary income or short-term capital gains of
individuals, and that the amount of long-term capital gain, short-term capital
gain or ordinary income that may be realized by a particular CU shareholder as a
result of the Merger may vary depending on a shareholder's particular
circumstances. ALL SHAREHOLDERS SHOULD THEREFORE CONSULT THEIR OWN TAX ADVISORS
AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM ARISING FROM THE MERGER.
CONTINUITY OF INTEREST. It is intended that the Merger will be treated as a
tax-deferred reorganization within the meaning of Section 368 of the Code and
that BHI and CU will each be treated as a party to the reorganization within the
meaning of Section 368(b) of the Code, as the result of which neither BHI nor CU
will recognize gain or loss, for federal income tax purposes, as a result of the
Merger. The treatment of the Merger as a tax-deferred reorganization will depend
upon, among other things, whether the CU shareholders maintain a sufficient
continuity of stock ownership interest in BHI after the Merger. In order for the
continuity of interest requirement to be met, CU shareholders must not, pursuant
to a plan or intent existing at or prior to the Effective Time, dispose of so
much of either (i) their CU Stock in anticipation of the Merger (including CU
Stock surrendered in the exercise of dissenters' rights, if any), or (ii) the
BHI Stock to be received in the Merger (collectively the "Planned
Dispositions"), such that the CU shareholders, as a group, no longer have a
significant equity interest in the CU business being conducted after the Merger.
CU shareholders will generally be regarded as having a significant equity
interest as long as the BHI Stock received in the Merger (after taking into
account Planned Dispositions), in the aggregate, represents a substantial
portion of the entire consideration received by the holders of CU Stock in the
Merger. The actual continuity of interest percentages will be influenced by the
percentage of cash that BHI pays in this transaction, Planned Dispositions, the
cash paid to dissenting shareholders, and the trading value of BHI Stock at the
Effective Time. Prior to its adoption of its current policy that it will not
issue "comfort rulings" regarding certain reorganizations, the IRS took the
position for purposes of issuing advance rulings under Section 368(a)(1)(A) of
the Code that the shareholders of an acquired corporation (such as CU) had to
maintain a continuing equity ownership interest in the acquiring corporation
(such as
46
<PAGE>
BHI) equal to at least 50% of the value of their equity ownership interest in
the acquired corporation. The case law standard is less stringent than the IRS
advance rulings standard, which expressly did not define the lower limits of
"continuity of interest" as a matter of substantive law. It is anticipated that
the Merger will satisfy the continuity of shareholder interest requirement as
reflected in advance rulings standard, but it is possible that post-merger
sales, exchanges or other transactions affecting BHI Stock undertaken by the
former CU shareholders could disqualify the Merger as a tax-deferred
reorganization within the meaning of Section 368(a) of the Code. It is a
condition to the obligation of BHI and CU to consummate the Merger that BHI and
CU receive an opinion as of the Effective Time from Tax Counsel, concluding that
the Merger qualifies as a tax-deferred reorganization within the meaning of
Section 368 of the Code, and that BHI and CU will each be a party to such
reorganization within the meaning of Section 368(b) of the Code. The ability of
Tax Counsel to give that opinion will depend, upon other things, on Tax
Counsel's determination as to whether the continuity of interest requirement is
satisfied. If the continuity of interest requirement is not satisfied, the
Merger would be treated as a taxable event. In that case, the Merger would
constitute a fully taxable transaction for CU and its shareholders and BHI would
succeed to CU's tax liability (if any) resulting from the Merger.
CU SHAREHOLDERS--GENERALLY. Subject to the assumptions discussed above, the
federal income tax consequences of the Merger to a CU shareholder will depend on
whether the shareholder receives cash, shares of BHI Stock, or both in exchange
for his or her shares of CU Stock. If a CU shareholder (who does not otherwise
actually or constructively own any stock of BHI) receives cash in exchange for
all shares of CU Stock actually owned by him or her, the federal income tax
consequences will also depend on whether any shares of CU Stock constructively
owned by that shareholder (pursuant to the constructive ownership rules of
Section 318 of the Code) are exchanged for cash or for shares of BHI Stock. The
federal income tax consequences of the Merger to a CU shareholder who receives
only cash in the Merger but who also owns BHI Stock (either actually or
constructively pursuant to Section 318 of the Code), or who receives both cash
and BHI Stock in the Merger, may depend on whether the distribution of cash to
such shareholder has the effect of the distribution of a dividend to such
shareholder (see "Impact of Section 302 of the Code"). In short, the tax
consequences of the Merger to a CU shareholder who receives only cash in the
Merger may depend on (1) the nature of the consideration received in the Merger
by certain individuals and entities owning Shares of CU Stock if the shares
owned by such persons are attributed to the CU shareholder (as described under
"Constructive Ownership" below), and (2) whether the particular CU shareholder
owns any BHI Stock, either actually or constructively (as described under
"Constructive Ownership"), other than as a result of participating in the
Merger.
RECEIPT OF BHI STOCK FOR ALL CU STOCK ACTUALLY OWNED. A CU shareholder who
receives shares of BHI Stock in exchange for all the shares of CU Stock actually
owned by that shareholder will recognize no gain or loss as a result of the
Merger (except with respect to any cash received in lieu of a fractional share).
The basis of the BHI Stock received by that shareholder (including any
fractional interests deemed received) will be the same as the basis of the
shares of the CU Stock exchanged therefor, and the holding period of those
shares of BHI Stock will include the holding period of the CU Stock surrendered
in the exchange, provided the latter shares were held by the shareholder as a
capital asset at the Effective Time. The foregoing result will be obtained
regardless of whether the shareholder is treated as owning other shares under
the constructive ownership rules described in "Constructive Ownership" below.
RECEIPT OF CASH FOR ALL CU STOCK ACTUALLY OWNED. If cash is received for
all shares of CU Stock actually owned by a CU shareholder, that shareholder will
recognize gain or loss in an amount equal to the difference between the amount
of cash received by the shareholder and his or her tax basis for the shares of
CU Stock exchanged. That gain or loss generally will be capital gain or loss if
the shares of CU Stock are held as a capital asset at the Effective Time and
will be long-term capital gain or capital loss if the CU shareholder's holding
period for his or her shares of CU Stock is more than one year at the Effective
Time. The Code imposes significant limitations on the ability of individuals to
offset capital losses against ordinary income, and corporations may not offset
capital losses against ordinary income to any extent. If,
47
<PAGE>
however, any such CU shareholder constructively owns shares of CU Stock
(pursuant to the constructive ownership rules of Section 318 of the Code) that
are exchanged for shares of BHI Stock in the Merger or owns shares of BHI Stock
actually or constructively after the Merger, the consequences to such
shareholder may be similar to the consequences described below under, "Receipt
of Both Shares of BHI Stock and Cash for CU Stock Actually Owned," except that
the amount of consideration, if any, treated as a dividend may not be limited to
the amount of such shareholder's gain. BECAUSE THE TAX TREATMENT DESCRIBED IN
THE IMMEDIATELY PRECEDING SENTENCE IS NOT FREE FROM DOUBT, A SHAREHOLDER IN THAT
SITUATION IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE TAX
CONSEQUENCES TO SUCH SHAREHOLDER.
RECEIPT OF BOTH SHARES OF BHI STOCK AND CASH FOR CU STOCK ACTUALLY OWNED. A
CU shareholder who, in the Merger, receives both shares of BHI Stock and cash
(other than cash received in lieu of a fractional share of BHI Stock) in
exchange for all of the shares of CU Stock actually owned by that shareholder,
will not be permitted to recognize any loss as a result of the Merger, but will
be required to recognize gain (if any) equal to the lesser of: (1) the amount of
cash so received; and (2) the gain realized (i.e., the amount by which the sum
of the amount of cash so received and the fair market value at the Effective
Time of the shares of BHI Stock received, including any fractional interest,
exceeds that shareholder's basis for the shares of CU Stock surrendered). For
this purpose, gain or loss must be calculated separately for each identifiable
block of shares surrendered in the exchange, and a loss realized on a particular
block of shares of CU Stock cannot be used to offset a gain recognized on
another block of shares of CU Stock. Any shareholder who holds shares of CU
Stock with differing tax bases is urged to consult his, her or its own tax
advisor regarding the tax consequences of the Merger. The Clinton
Administration's Fiscal Year 1998 Revenue Proposals, issued February 6, 1997,
would require an investor who disposes of shares of a particular security
acquired at different times and at different costs to use the average cost of
all shares owned before the disposition in determining gain or loss. In
addition, the Administration's Proposals would require taxpayers to use the
first-in, first-out method in determining holding periods. There is no way to
know whether legislation will be enacted containing the Administration's
Proposals or any variation thereof or, if enacted, the effect of such
legislation on any CU shareholder.
The characterization of any recognized gain as capital gain or ordinary
(dividend) income will depend upon whether the receipt of cash by that
shareholder has the effect of a distribution of a dividend under Section 302 of
the Code with respect to BHI Stock. See "Impact of Section 302 of the Code"
below. In general, Section 302 of the Code sets forth three tests for
determining the character of the gain. Provided that any one of the three tests
for sale or exchange treatment is satisfied, the gain so recognized will be
capital gain if that shareholder's shares of CU Stock are held as a capital
asset at the Effective Time. If none of the three sale or exchange tests is
satisfied, the entire amount of gain required to be recognized by that
shareholder will be treated as a dividend to the extent of the shareholder's
ratable share of the earnings and profits of CU (or possibly the earnings and
profits of CU and BHI) accumulated through the Effective Time, and any remaining
amount of recognized gain will be characterized in accordance with the preceding
sentence. The tax basis of the shares of BHI Stock received by such a
shareholder will be the same as the tax basis of the shares of CU Stock
surrendered in exchange therefor, increased by the amount recognized as either
dividend income or capital gain, and decreased by the amount of cash received,
other than cash received in lieu of a fractional share of BHI Stock, and by any
basis allocable to such a fractional share of BHI Stock. The holding period of
the shares of BHI Stock received by that shareholder in the Merger will include
the holding period of the shares of CU Stock exchanged therefor, provided the
shares of CU Stock are held as a capital asset at the Effective Time.
IMPACT OF SECTION 302 OF THE CODE. The manner in which Section 302 of the
Code is applied depends upon whether a CU shareholder receives only cash or both
cash and shares of BHI Stock in exchange for the shares of CU Stock actually
owned by that shareholder and on whether such CU shareholder constructively owns
(1) other shares of CU Stock that are exchanged for BHI Stock in the Merger or
(2) other shares of BHI Stock, or actually owns other shares of BHI Stock. The
receipt of cash by a CU shareholder who receives only cash in exchange for his
or her shares of CU Stock will be considered to be
48
<PAGE>
in connection with a sale or exchange and not to have the effect of a
distribution of a dividend under Section 302 only if, after giving effect to the
constructive ownership rules of Section 318 of the Code and, if applicable, the
exception thereto provided in Section 302(c)(2) of the Code, the receipt of that
cash is: (A) "not essentially equivalent to a dividend," (B) a "substantially
disproportionate redemption" with respect to that shareholder, or (C) a
"complete termination of interest" in all the shares of CU Stock actually and
constructively owned by that shareholder.
The determination of whether any of the three tests of Section 302 for sale
or exchange treatment is satisfied is made by treating the exchange as if all
the shares of CU Stock actually and constructively owned by the shareholder had
been exchanged solely for shares of BHI Stock, and the shares of BHI Stock that
were not in fact received had then been redeemed by BHI for cash (the
"hypothetical redemption of BHI Stock"). The rules of Section 302 are then
applied by comparing a shareholder's hypothetical stock ownership in BHI before
the hypothetical redemption of BHI Stock with that shareholder's stock ownership
in BHI after the Merger.
Whether the receipt of cash by a CU shareholder will be "not essentially
equivalent to a dividend" depends on the facts and circumstances of the
individual CU shareholder. The receipt of cash by a CU shareholder in exchange
for the shares of CU Stock actually owned by that shareholder should not be
taxable as a dividend if the shareholder's relative stock interest in BHI is
minimal, the shareholder exercises no control over BHI's affairs, and the
hypothetical redemption of BHI shares described above causes the shareholder to
undergo some reduction in equity interest in BHI (taking into account the
hypothetical redemption of BHI Stock) in relation to all BHI shareholders taken
as a group. It is not clear what constitutes a "minimal" stock interest for this
purpose, nor how much reduction in relative equity interest is required. BECAUSE
OF THE UNCERTAINTY IN THIS AREA, SHAREHOLDERS ARE STRONGLY URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO WHETHER THE RECEIPT OF CASH QUALIFIES FOR CAPITAL
GAINS TREATMENT UNDER THIS TEST.
Whether the receipt of cash by a CU shareholder will constitute a
"substantially disproportionate redemption" within the meaning of Section 302 of
the Code is determined by the application of certain numerical tests. If cash is
received for shares of CU Stock actually owned by a shareholder, those numerical
tests are applied as follows: First, immediately, after the exchange, the
shareholder must own, both actually and constructively, less than 50% of the
total combined voting power of all classes of BHI Stock entitled to vote.
Second, the ratio that the voting stock of BHI owned, both actually and
constructively, by the shareholder immediately after the hypothetical redemption
bears to all the voting stock of BHI outstanding at that time must be less than
80% of the ratio that the voting stock of BHI owned, both actually and
constructively, by the shareholder immediately before the hypothetical
redemption of BHI Stock described above bears to all the voting stock of BHI
outstanding at that time. In making the calculations required to determine
whether the hypothetical redemption of BHI Stock is "substantially
disproportionate," the constructive ownership rules described below apply. See
"Constructive Ownership" below.
The receipt of cash by a CU shareholder will be a "complete termination of
interest" only if cash is received for all of the shares of CU Stock actually
and constructively owned by that shareholder at the Effective Time. For these
purposes, the attribution rules of Section 318 of the Code will apply as
described below. However, Section 302(c)(2) provides that, for the purpose of
determining whether there is a "complete termination of interest," the family
attribution rules of Section 318(a)(1) of the Code (described in "Constructive
Ownership" below) will not apply if certain conditions are met. If those
conditions are met, a CU shareholder will not be deemed to own shares of CU
Stock owned or deemed to be owned by family members for the purpose of
determining whether there is a complete termination of that shareholder's
interest.
The Merger Agreement permits CU shareholders to make certain elections
regarding their preference for receiving cash and BHI Stock in the Merger. In
planning which election to make, shareholders of CU should take into account the
rules regarding Section 302 of the Code described above. The factors
49
<PAGE>
determining whether a particular shareholder will obtain sale or exchange
treatment (as opposed to dividend treatment) with respect to any cash received
must be analyzed on a shareholder-by-shareholder basis. In addition, the
relative benefits of receiving sale or exchange treatment (as opposed to
dividend treatment) with respect to any cash received must be determined and
weighed on a shareholder-by-shareholder basis. In planning for such an election,
each shareholder should consult with his or her own tax advisor.
CONSTRUCTIVE OWNERSHIP. Under Section 318 of the Code, a CU shareholder
will be deemed to own CU Stock that is owned or deemed to be owned by certain
members of his family and other related parties including, for example, certain
entities in which the shareholder has a direct or indirect interest (including
partnerships, estates, trusts and corporations) as well as shares of CU Stock
that the shareholder (or a related person) has the right to acquire upon
exercise of an option or conversion right held by the shareholder (or a related
person). Similarly, a shareholder of BHI, including a former CU shareholder
after the Merger, will be deemed to own BHI Stock that is owned or deemed to be
owned as described in the preceding sentence, including any BHI Stock received
in exchange for CU Stock as a result of the Merger. Because application of these
constructive ownership rules could affect the application of Section 302 to a CU
shareholder, each shareholder should consult his or her own tax advisor with
respect to the application of the constructive ownership rules to his or her
particular circumstances prior to making an election pursuant to the terms of
the Merger.
FRACTIONAL SHARES. Any CU shareholder who receives cash in lieu of a
fractional share of BHI Stock will be treated as if that shareholder had
received the fractional share of BHI Stock in the Merger, and such fractional
share was then redeemed by BHI.
OTHER CONSIDERATIONS APPLICABLE TO CU SHAREHOLDERS. Treasury Regulations
require that every taxpayer who receives stock in connection with the Merger
must file with his or her income tax return a statement of facts pertinent to
the nonrecognition of gain or loss upon the transaction, including (i) a
statement of the basis of the stock transferred in the transaction and (ii) a
statement of the fair market value of the stock transferred in the transaction.
In addition, taxpayers are required to maintain permanent records with respect
to the foregoing information. CU shareholders will be required to comply with
these requirements. CU shareholders will also be required to provide their
social security numbers or their taxpayer identification numbers or, in some
circumstances, certain other information to the Exchange Agent in order to avoid
the "backup withholding" requirements that might otherwise apply under the Code.
If a CU shareholder is subject to backup withholding, federal tax will be
withheld at the rate of 31% on the cash consideration received by such
shareholder in the Merger. Any amount paid as backup withholding will be
creditable against the shareholder's federal income tax liability.
SHARES ISSUED IN CONNECTION WITH STOCK OPTIONS OR THE PERFORMANCE OF
SERVICES. The preceding discussion of federal income tax consequences may not
be applicable to a CU shareholder who acquired shares of CU Stock: (1) pursuant
to the exercise of any incentive stock option that was granted less than two
years prior to the Effective Time; (2) pursuant to the exercise of an incentive
stock option that was exercised less than one year prior to the Effective Time;
or (3) in connection with the performance of services where the shares of CU
Stock continue to be subject to a "substantial risk of forfeiture" (or are
substantially non-vested), as of the Effective Time. Such a CU shareholder may
be treated as having received compensation (taxable as ordinary income) as a
result of the conversion of such shares, at the Effective Time of the Merger,
into BHI Stock and/or cash. Accordingly, any such shareholder should consult his
or her own tax advisor with respect to the federal income tax consequences of
the Merger.
FEDERAL INCOME TAX TREATMENT OF DISSENTERS. Any CU shareholder who
effectively dissents from the Merger (see "DISSENTERS' RIGHTS," below) and who
receives cash for his or her shares should recognize capital gain or loss for
federal income tax purposes in an amount equal to the difference between the
adjusted tax basis for their shares and the amount of cash received in exchange
therefor, provided that such payment is not essentially equivalent to a dividend
within the meaning of Section 302 of
50
<PAGE>
the Code. See "Impact of Section 302 of the Code," above. The amount of that
gain (or loss), if any, will be treated as ordinary income (or loss) or
long-term or short-term capital gain (or loss) depending on the length of time
the shares are held by the dissenter, whether the shares are held as a capital
asset, and whether the dissenter actually owns BHI Stock or is deemed to own
shares of CU Stock or BHI Stock pursuant to the attribution rules of Section 318
of the Code. See "Constructive Ownership," above.
THE SUMMARY FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY. EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER APPLICABLE TO HIM
OR HER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL, AND
FOREIGN AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for by BHI under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16,
"Business Combinations," as amended. Under this method of accounting, the
purchase price will be allocated to assets acquired and liabilities assumed
based on their estimated fair values at the Effective Time. Income of the
surviving company will not include income (or loss) of CU prior to the Closing.
EXPENSES
The Merger Agreement provides that each party will pay its own expenses in
connection with the Merger Agreement.
CERTAIN POST-MERGER MATTERS
BHI presently expects CU Bank will continue its banking business following
the Merger as a wholly owned subsidiary of BHI under the direction of current
management, whom BHI has sought to retain (see "THE MERGER--Interests of Certain
Persons in the Merger--Management Retention and Other Agreements," "THE
MERGER--Stock Options," and "THE MERGER--Employee Benefit Plans").
BHI management presently intends during 1997 to acquire a number of shares
of BHI Stock approximately equal to those issued in the Merger. BHI presently
anticipates that any such acquisitions will be accomplished with a combination
of cash and borrowings. However, the amount and timing of such anticipated
purchases of BHI Stock may be affected, among other things, by market and other
factors that could affect whether shares of BHI Stock are available at prices
deemed favorable by BHI, by changes in credit markets or general economic
conditions that could affect the cost of any related borrowings, by the
possibility that alternate opportunities will arise for utilization of capital
resources by BHI, and by the fact that any such acquisitions (like other share
repurchase programs conducted by BHI) will be subject to BHI's overriding
strategy of maintaining capital levels that qualify as "well capitalized" for
regulatory purposes.
51
<PAGE>
CERTAIN RELATED AGREEMENTS
SHAREHOLDER'S AGREEMENTS
In connection with the Merger Agreement, the directors of CU, together
holding an aggregate of approximately [612,573] outstanding shares of CU Stock
(approximately [5.38%] of the shares of CU Stock outstanding on the Record
Date), have entered into agreements with BHI dated February 24, 1997 (the
"Shareholder's Agreements") in the form attached as Exhibit D to the Merger
Agreement committing such directors, among other things, to vote their shares of
CU Stock in favor of the Merger and to comply with certain representations
concerning the ownership and disposition of CU Stock. Pursuant to the
Shareholder's Agreements, the CU directors have agreed, among other things, to
vote or cause to be voted all shares of CU Stock as to which they have sole or
shared voting power in favor of the Merger, the Merger Agreement and the other
matters contemplated by the Merger Agreement. In addition, such persons have
agreed to vote or cause to be voted all of their shares of CU Stock, against the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement): (i) any extraordinary corporate transactions, such as a
merger, consolidation or other business combination involving CU or its
subsidiaries; (ii) any sale, lease or transfer of a material amount of the
assets of CU or its subsidiaries; (iii) any change in the majority of the Board
of Directors of CU; (iv) any material change in the present capitalization of
CU; (v) any amendment of the Articles of Incorporation of CU; (vi) any other
material change in CU's corporate structure or business; or (vii) any other
action which is intended, or could reasonably be expected, to impede, interfere
with, delay, postpone, discourage or materially adversely affect the
contemplated economic benefits to BHI of the Merger or the transactions
contemplated by the Merger Agreement or the Stock Option Agreement.
Such persons have also agreed that, from and after the date of the
Shareholder's Agreements and during the term thereof, they will not take any
action that will alter or affect in any way the right to vote CU Stock and will
not pledge or otherwise encumber, sell, assign, transfer or otherwise dispose of
or reduce their risk of ownership or investment in any CU Stock except (i)
pursuant to the Merger; or (ii) for any Shares acquired by such persons after
the Record Date upon exercise of options held by such persons as of the date of
the Shareholder's Agreements. In addition, CU has issued stop transfer
instructions to its transfer agent in accordance with the restrictions set forth
in the Shareholder's Agreements and intends to maintain such instructions in
effect until termination of the Shareholder's Agreements. The Shareholder's
Agreements will (except for certain provisions related to the Stock Option
Agreement) terminate at the earlier of the Effective Time or the termination of
the Merger Agreement in accordance with its terms.
The shareholders subject to the Shareholder's Agreements have further agreed
that they will not in their individual capacity as shareholders directly or
indirectly solicit any inquiries or proposals from any person relating to any
proposal or transaction for the disposition of the business or assets of CU or
any of its subsidiaries, or the acquisition of voting securities of CU or any
subsidiary of CU or any business combination between CU or any subsidiary of CU
and any person other than BHI.
STOCK OPTION AGREEMENT
GENERAL. Concurrently with the execution and delivery of the Merger
Agreement, and as a condition and inducement to BHI to enter into the Merger
Agreement, BHI and CU entered into the Stock Option Agreement, pursuant to which
CU granted BHI an option to purchase up to 2,260,421 shares of CU Stock (or such
other number shares of CU Stock as shall represent 19.9% of the then outstanding
shares of CU Stock) at a price per share of $13.00 (the "Option"). The
consummation of a purchase or repurchase (as described below) pursuant to the
Stock Option Agreement will be subject to, among other things, obtaining any
required regulatory approvals.
The following is a summary of certain provisions of the Stock Option
Agreement which is included as Appendix B to this Proxy Statement/Prospectus and
is incorporated herein by reference. The following summary is qualified in its
entirety by reference to the Stock Option Agreement.
52
<PAGE>
EXERCISE OF OPTION. The Option is exercisable only after the occurrence of
certain specified events (each a "Triggering Event"). These events include, but
are not limited to:
(1) CU or its subsidiary enter into an agreement to engage in an
"Acquisition Transaction." An Acquisition Transaction is (i) a merger or
consolidation, or any similar transaction, involving CU or its subsidiary,
(ii) a purchase, lease or other acquisition representing 10% or more of the
consolidated assets of CU and its subsidiary, (iii) a purchase or other
acquisition of securities representing 10% or more of the voting power of CU
or its subsidiary, or (iv) any substantially similar transaction.
(2) CU or its subsidiary shall have authorized, recommended, proposed or
publicly announced its intention to authorize, recommend or propose an
agreement to enter into an Acquisition Transaction with any person other
than BHI or its subsidiaries or the Board of Directors of CU shall have
withdrawn or modified or announced its intent to withdraw or modify its
recommendation that the shareholders of CU approve the transaction
contemplated by the Merger Agreement.
(3) Any person or group other than BHI shall acquire beneficial
ownership of 10% or more of the outstanding shares of CU Stock.
(4) Any person other than BHI shall make a bona fide proposal to CU or
its shareholders by public announcement or written communication that it is
or becomes the subject of public disclosure to engage in an Acquisition
Transaction.
(5) After a proposal is made by a third party to CU or its shareholders
to engage in an Acquisition Transaction, CU breaches any covenant or
obligation in the Merger Agreement entitling BHI to terminate the Merger
Agreement unless such breach is cured before BHI exercises the Option.
(6) Any person other than BHI or its subsidiaries files an application
with the Federal Reserve Board or other federal or state bank regulatory
authority, which application has been accepted for processing, for approval
to engage in an Acquisition Transaction.
If the Merger Agreement is terminated in a manner that does not immediately
render the Option exercisable, the Option may thereafter become exercisable upon
the occurrence of a Triggering Event, provided the Option has not expired.
EXPIRATION. The right to exercise the Option expires under various
circumstances, including but not limited to, (i) upon the Effective Time of the
Merger, (ii) termination of the Merger Agreement by CU if for any ten
consecutive trading days prior to the Closing Date the Closing Price of BHI
Stock is less than $37.71875 and for each such day the number obtained by
dividing the Closing Price of BHI Stock by $44.375 is less than 85% of the
number obtained by dividing the Index Price for that day by 524.05, (iii)
termination of the Merger Agreement by CU or BHI if the Closing Price of BHI
Stock is less than $35.50 for any ten consecutive trading days prior to the
Closing Date, (iv) provided a Triggering Event has not occurred, termination of
the Merger Agreement in accordance with its terms including due to a material
breach thereof by BHI, the failure to obtain regulatory approval or shareholder
approval or the failure to consummate the merger by September 30, 1997 (except
as extended pursuant to the terms of the Merger Agreement), or (v) twelve months
after termination of the Merger Agreement if such occurs after the occurrence of
a Triggering Event or if a termination by BHI is due to a material breach of the
Merger Agreement by CU or as a result of the negotiation for or failure to
timely reject an Alternative Transaction under Section 13.1(h) of the Merger
Agreement.
ADJUSTMENT OF NUMBER OF SHARES. The number and type of securities subject
to the Option and the purchase price of the shares of CU Stock, are subject to
adjustment upon any change in CU Stock by reason of dividend, stock split,
recapitalization, combination, exchange of shares or other similar transactions
or events such that BHI will receive (upon exercise of the Option) the same
number and class of securities as if the Option had been exercised immediately
prior to the occurrence of such transaction or
53
<PAGE>
event. The number of shares of CU Stock subject to the Option will also be
adjusted in the event CU issues additional shares of CU Stock such that the
number of shares of CU Stock subject to the Option shall be 19.9% of CU Stock
then outstanding. The exercise price shall be reduced downward in the event
that, except as otherwise permitted under the Merger Agreement, CU shall sell CU
Stock at less than $13.00 per share.
SUBSTITUTE OPTION. In the event of certain mergers or consolidations
involving CU or its subsidiary, or the sale or transfer of substantially all of
CU's assets, BHI has the right to cause the Option to convert into or be
exchanged for a substitute option. This substitute option shall be subject to
exercise by BHI and repurchase by the issuer at the request of BHI at prices,
and subject to the conditions, specified in the Stock Option Agreement.
REPURCHASE AT THE OPTION OF BHI. At any time after a Triggering Event and
prior to the expiration of the Option, BHI has the right to require CU to
repurchase the Option and, to the extent permitted by applicable law, all shares
of CU Stock purchased by BHI pursuant to a previous exercise of the Option.
Any repurchase of the Option will be at a price specified in the Stock
Option Agreement as the "Option Repurchase Price." Generally, the Option
Repurchase Price equals the excess of the "Market/ Offer Price" over $13.00,
multiplied by the number of shares of CU's common stock with respect to which
the Option has not been exercised. Any repurchase of shares of CU common stock
will be at a price specified in the Stock Option Agreement as the "Option Share
Repurchase Price." Generally, the Option Share Repurchase Price equals the
Market/Offer Price multiplied by the number of shares of CU Stock acquired by
BHI under the Option and then beneficially held by it and which BHI elects to
have repurchased.
Under the Stock Option Agreement, the "Market/Offer Price" generally refers
to the highest price per share of CU Stock (i) paid by another party in an
Acquisition Transaction, (ii) received by CU shareholders in any transaction
which causes a substitute option to be issued, or (iii) which is trading in the
public market during the six month period prior to BHI's exercise of its
repurchase right. In the event of a sale of less than all of CU's assets,
"Market/Offer Price" will be determined with respect to the market value of CU's
remaining assets.
MINIMUM OPTION REPURCHASE PRICE. The Stock Option Agreement provides that
the Option Repurchase Price (assuming that the Option has not been exercised)
shall not be less than $5,000,000, thereby providing BHI a minimum premium in
such amount in the event of a repurchase of the Option. If the Option is
exercised, then the $5,000,000 minimum premium upon repurchase is apportioned on
a per share basis (based upon the number of shares which could be obtained upon
exercise of the Option in full) between the shares remaining for exercise under
the Option, and the shares which have been purchased by BHI under the Option and
will be payable to the extent that BHI elects to have CU repurchase the Option
or the CU Stock purchased under the Option and such minimum premium is more than
the premium otherwise payable under the Option Repurchase Price or the Option
Share Repurchase Price.
REGISTRATION RIGHTS. BHI has certain rights to require registration under
the securities laws of any shares of CU common stock purchased pursuant to the
Stock Option Agreement if necessary to enable BHI to sell such shares.
EFFECT OF STOCK OPTION AGREEMENT. The Stock Option Agreement is intended to
increase the likelihood that the Merger will be consummated on the terms set
forth in the Merger Agreement. Consequently, certain aspects of the Stock Option
Agreement may have the effect of discouraging persons who might now or prior to
the Effective Time be interested in acquiring all or a significant interest in
CU from considering or proposing such an acquisition, even if such persons were
prepared to offer higher consideration per share for CU Stock than the
consideration set forth in the Merger Agreement.
54
<PAGE>
RESALE OF BHI STOCK; AFFILIATE'S AGREEMENTS
The shares of BHI Stock issued pursuant to the Merger Agreement upon
consummation of the Merger will be freely transferable under the Securities Act
except for shares issued to any shareholder who may be deemed to be an
"affiliate" of CU for purposes of Rule 145 under the Securities Act as of the
date of the Special Meeting. Affiliates may not sell their shares of BHI Stock
acquired in connection with the Merger except pursuant to an effective
registration statement under the Securities Act covering such shares or in
compliance with Rule 145 under the Securities Act or another applicable
exemption from the registration requirements of the Securities Act. Persons who
may be deemed to be affiliates of CU generally include individuals or entities
that control, are controlled by or are under common control with CU and may
include certain officers and directors of CU as well as principal shareholders
of CU.
The Merger Agreement requires CU to use all reasonable efforts to cause
certain persons who CU believes to be "affiliates" of CU within the meaning of
Rule 145 to enter into and deliver to BHI, prior to the Closing Date,
affiliate's agreements providing that such persons: (i) will not pledge or
otherwise encumber, nor sell, assign, transfer or otherwise dispose of or reduce
their risk of ownership or investment in, any of their shares of CU Stock except
with the prior written consent of BHI or pursuant to the Merger; (ii) will not
sell, transfer or dispose of any of their shares of BHI Stock which they may
acquire in connection with the Merger or any securities which may be paid as a
dividend or otherwise distributed with respect thereto or issued or delivered in
exchange or substitution therefor (collectively, "Restricted Securities"), or
any option, right or other interest with respect to any Restricted Securities,
unless such sale, transfer or disposition is effected (x) pursuant to an
exemption from the registration requirements of the Securities Act, (y) pursuant
to an effective registration statement under, and in compliance with, the
Securities Act, or (z) in compliance with Rule 145(d) (as evidenced by a
broker's letter stating that the requirements of Rule 145 have been met); (iii)
have no present plan or intent to (x) engage in a sale, exchange, transfer,
redemption or reduction in any way of their risk of ownership by short sale or
otherwise, or other disposition, directly or indirectly (such actions being
collectively referred to as a "Sale") of BHI Stock to be received by such
persons pursuant to the Merger; (y) engage in a Sale of their shares of CU Stock
(other than in exchange for BHI Stock pursuant to the Merger), or (z) exercise
dissenters' rights in connection with the Merger. BHI will place a legend on
certificates representing shares of Restricted Securities to the effect that
such shares were issued in a transaction covered by Rule 145 of the Securities
Act and may be sold, transferred or otherwise disposed of only in accordance
with the terms of the affiliate's agreement. Stop transfer instructions shall be
given to BHI's transfer agent in accordance with the restrictions on transfer
set forth in the affiliate's agreement. The Merger Agreement provides that
certificates for CU Stock held by a person who is an affiliate of CU for
purposes of Rule 145 will not be exchanged for certificates representing BHI
Stock until BHI has received an affiliate's agreement from such person.
DESCRIPTION OF BHI CAPITAL STOCK
The following description summarizes certain information regarding the
capital stock of BHI. This information does not purport to be complete and is
subject in all respects to the applicable provisions of the Hawaii Business
Corporation Act ("HBCA"), BHI's Articles of Incorporation (the "BHI Articles")
and BHI's Bylaws (the "BHI Bylaws"). For discussion of certain other rights
associated with the BHI Stock, see "COMPARISON OF RIGHTS OF SHAREHOLDERS."
COMMON STOCK
The BHI Articles authorize the issuance of up to 100,000,000 shares of
common stock, par value $2.00 per share (the "BHI Stock"), of which
approximately [39,685,182] shares were outstanding at [March 26,] 1997. The
common stock is listed on NYSE. The Transfer Agents and Registrars are
Continental Stock Transfer & Trust Company and Hawaiian Trust Company, Limited.
55
<PAGE>
Each share of common stock is entitled to one vote per share on each matter
submitted to a vote at a meeting of shareholders. The affirmative vote of the
holders of at least a majority of the shares of common stock represented in
person or by proxy at the applicable meeting of shareholders and entitled to
vote thereat is required with respect to the election of directors and certain
other matters. The BHI Bylaws provide for a classified board of directors, and
cumulative voting is not permitted. Shares of BHI Common Stock have no
preemptive or other subscription or conversion rights, and are not assessable.
The BHI Articles permit BHI's Board of Directors to issue authorized shares of
its capital stock without shareholder approval. However, BHI Stock is listed on
the NYSE, which requires shareholder approval for the issuance of additional
shares of BHI capital stock under certain circumstances.
Dividends may be paid on BHI Stock at the discretion of the BHI Board of
Directors out of any funds of BHI legally available therefor. Upon liquidation,
dissolution or winding up of BHI, the assets legally available for distribution
to holders of BHI Stock after satisfaction of liabilities would be distributed
ratably among such holders. BHI's ability to pay dividends on the BHI Stock, or
the rights of holders of common stock to receive payments upon liquidation,
could be limited by the terms and conditions of the BHI Preferred Stock
authorized by the BHI Articles if shares of such preferred stock are issued. In
addition, the ability of BHI to pay dividends or liquidating payments on, or
redeem its capital stock, is subject to BHI's obligations in connection with
$100 million in liquidation amount of 8.25% Capital Securities, Series A, issued
by Bancorp Hawaii Capital Trust I, a wholly owned subsidiary of BHI, and
guaranteed by BHI. The sole assets of the Trust are Junior Subordinated Debt
Securities issued by BHI to the Trust, which have a maturity date of December
15, 2026 and provide for semi-annual distributions at a cumulative fixed rate of
8.25%. BHI has the right to defer payment of interest on the Junior Subordinated
Debt Securities for periods of up to 5 years. During any such deferral period,
and also if certain defaults have occurred, BHI will not be permitted (subject
to certain exceptions) to declare or pay any cash dividends or redemptions or
otherwise make cash distributions with respect to BHI's capital stock. As of the
date of this Proxy Statement/Prospectus, BHI has not deferred any interest on
the Junior Subordinated Debt Securities.
PREFERRED STOCK
The BHI Articles authorize the issuance of up to 20,000,000 shares of
preferred stock, par value $1.00 per share (the "BHI Preferred Stock"). No BHI
Preferred Stock is presently outstanding. The BHI Board is authorized without
further action by shareholders to establish one or more series of BHI Preferred
Stock, and to fix and determine the relative rights, preferences and limitations
of each such series with respect to dividend rates, voting rights, conversion
into common stock, and amounts payable upon redemption, liquidation or
dissolution.
CERTAIN PROVISIONS OF THE BHI ARTICLES AND OF HAWAII LAW
The following provisions may have the effect of preventing, discouraging or
delaying any change of control of BHI.
The BHI Bylaws provide for a board of directors divided into three classes
as nearly equal in number as possible. Directors serve staggered three-year
terms, with the term of one class expiring each year. Hawaii law permits a
classified board only if a corporation has at least nine directors. There are
currently 11 directors of BHI. Thus, at each annual meeting of shareholders,
approximately one-third of the members of the BHI Board will be elected for a
three-year term, and the other directors will remain in office until their
three-year terms expire. The BHI Articles require that the BHI Board consist of
at least 3 and not more than 15 directors, and the BHI Bylaws provide that the
number of directors is to be determined from time to time by resolution of a
majority of the entire BHI Board. The BHI Articles permit the board to fill any
vacancy resulting from an increase in Board size, and provide that a decrease in
the size of the board shall not shorten the term of any incumbent director.
56
<PAGE>
The authority of the BHI Board under the BHI Articles to issue preferred
stock in one or more series provides BHI with increased flexibility in
structuring its capital. Having such shares available permits BHI to issue
shares of preferred stock without the delay and expense of a shareholders
meeting. Although the BHI Board has no intention at the present time of doing
so, it would have the power to issue a series of preferred stock that could,
depending on the terms of such series, increase the difficulty and expense of
obtaining control of BHI in a merger, tender offer, proxy fight or similar
transaction.
Sections 171 and 172 of the HBCA (the "CSA Statutes") regulate "control
share acquisitions," which are transactions that would cause the beneficial
ownership of the acquiring person to enter a new range of voting power specified
in the CSA Statutes. Those ranges begin at 10%, 20%, 30%, 40% and a majority of
voting power in the election of directors. The CSA Statutes do not apply to
acquisitions from the issuer, or to certain other transactions. Any person
proposing to make a control share acquisition is required to deliver to the
affected corporation an information statement setting forth (among other things)
the terms of the proposed control share acquisition, funding and financial
arrangements, any plans or proposals to engage in a merger, liquidation, sale of
substantial assets or similar transaction, plans to materially alter the
corporation's business activities, or plans to take certain actions affecting
management, employees, suppliers, customers or the communities in which the
corporation operates. Thereafter, the corporation is required on a specific
schedule to call and conduct a special meeting of shareholders to vote upon the
proposed control acquisition. A proxy relating to such special meeting must be
solicited separately from any offer to purchase or solicitation of an offer to
sell, and a proxy may not be solicited sooner than 30 days prior to such special
meeting. The CSA Statutes permit consummation of a proposed control share
acquisition only if it is approved by the affirmative vote of the holders of a
majority of voting power of all shares entitled to vote which are not
beneficially owned by the acquiring person, and only if the acquisition is
consummated within 180 days after shareholder approval. Otherwise, for a period
of one year after the acquisition, shares acquired in the control share
acquisition have no voting rights, are not transferrable on the books of the
corporation, and may be redeemed by the corporation either at the price at which
they were acquired or at book value.
The Hawaii Corporate Take-Overs Act, Chapter 417E of the Hawaii Revised
Statutes, generally applies to "take-over offers" made to residents of the State
of Hawaii in which the offeror would acquire more than 10% of the equity
securities of any publicly traded corporation organized under Hawaii law unless
the takeover is approved by the board of directors of the corporation or is
registered under and complies with the Hawaii Corporate Take-Overs Act.
Under the Hawaii Environmental Disclosure Act, Chapter 343D of the Hawaii
Revised Statutes, a person (including such person's affiliates) who beneficially
owns at least 10% but less than 50% of the securities entitled to vote for the
election of directors of BHI may not acquire more than an additional 5% of such
securities during any 12-month period without filing an environmental disclosure
statement concerning environmental, financial and other matters with the Hawaii
Office of Environmental Quality Control.
Section 415-35 of the HBCA, which deals with the duties of directors,
provides that a director of a Hawaii corporation, in determining the best
interests of the corporation, may consider, in such director's discretion, the
following factors in addition to the interests of the corporation's
shareholders: the interests of the corporation's employees, customers, suppliers
and creditors; community and societal considerations, including, without
limitation, the impact of any action upon the communities in or near which the
corporation has offices or operations; the economy of the State of Hawaii and of
the United States; and the long-term as well as the short-term interests of the
corporation and its shareholders, including, without limitation, the possibility
that these interests may be best served by the continued independence of the
corporation.
Article X of the BHI Articles provides that a director shall not be
personally liable to BHI or its shareholders for monetary damages for breach of
fiduciary duties as a director, except for liability for
57
<PAGE>
(i) breach of the director's duty of loyalty to the corporation or its
shareholders; (ii) acts or omissions not performed in good faith, or which
involve intentional misconduct or knowing violation of law, or constitute a
willful or reckless disregard of the director's fiduciary duty; (iii) the
director's willful or negligent violation of certain HBCA provisions regarding
payment of dividends or stock purchases or redemptions; or (iv) transactions
from which the director received an improper benefit.
COMPARISON OF RIGHTS OF SHAREHOLDERS
At the Effective Time, shareholders of CU (except for any CU shareholder who
elects and receives only cash or who properly exercises dissenters' rights)
automatically will become shareholders of BHI, and their rights as shareholders
will be determined by the HBCA, the BHI Articles and the BHI Bylaws. The
following is a summary of material differences in the rights of shareholders of
BHI and CU. For additional information as to certain provisions of the BHI
Articles and Hawaii law, see "DESCRIPTION OF BHI CAPITAL STOCK--Certain
Provisions of the BHI Articles and of Hawaii Law."
The CU Articles provide for a minimum of 7 directors and a maximum of 13
directors, elected annually. CU shareholders have cumulative voting rights in
the election of directors, which are not available to BHI shareholders.
The BHI Articles require that the BHI Board of Directors consist of at least
3 and not more than 15 directors, at least one-third of whom must be Hawaii
residents. The number of directors is fixed by the BHI Board of Directors, and
is divided into three classes, serving staggered three-year terms. Under the CU
Bylaws, a vacancy in the CU Board of Directors, except for a vacancy created by
removal of a director, may be filled by the CU Board of Directors. Shareholders
may fill any vacancy if the CU Board of Directors does not do so. Under the BHI
Bylaws, only the BHI Board of Directors may fill a vacancy in its membership,
except that a vacancy created by a director reaching the age of 70 is to be
filled by the shareholders at an annual meeting. Each director who fills a
vacancy holds office until the next election of the class to which such director
was elected or appointed.
In order to nominate a candidate for the CU Board of Directors, a
shareholder must deliver written notice of such nomination to CU by the later of
21 days prior to the meeting or 10 days after the date of mailing of notice of
the meeting. BHI shareholders who wish to nominate persons for election as
directors or propose business for consideration at meetings of shareholders are
permitted to do so only if they deliver a notice that complies with strict
timing requirements set forth in Article II of the BHI Bylaws. For example, a
person wishing to propose business to be considered at an annual meeting, or to
nominate a candidate for election to the BHI Board of Directors at that meeting,
must ordinarily give a written notice thereof containing specified information
that is received by the BHI secretary no later than 80 days nor earlier than 90
days prior to the first anniversary of the preceding year's annual meeting.
Shareholders of CU may accomplish various actions (subject to specified
procedures) by written consent of the holders of such number of shares as would
be required to approve that action at a meeting of shareholders. Hawaii law does
not permit action by written consent in lieu of a meeting of shareholders unless
that written consent is unanimous.
Approval of a majority of the outstanding CU Stock is required to amend its
Articles of Incorporation or to approve a merger or certain other extraordinary
corporate transactions. Amendments to the BHI Articles require approval of
two-thirds of its shares having voting power (except no shareholder approval is
required for amendments that result from establishing a series of preferred
stock by resolution of the BHI Board of Directors, or (if there is only one
class of stock outstanding) for amendments involving certain changes to the
number of authorized shares in connection with a stock split or stock dividend).
A merger, consolidation or share exchange requires the affirmative vote of
three-fourths of the outstanding shares of BHI's voting stock (irrespective of
any provision of the BHI Articles or Bylaws that restrict or deny such shares
the right to vote). However, in the case of a merger, no such approval is
required from shareholders of the surviving corporation if among other things
the merger will not alter the number or rights of those
58
<PAGE>
shares outstanding prior to the merger, and the number of voting shares
outstanding immediately following the merger plus the number of voting shares
issuable on conversion of other securities issued in the merger will not exceed
by more than 20% the number of voting shares outstanding immediately before the
merger. The dissolution of BHI or the sale of substantially all its assets
outside the ordinary course of business would require the approval of
three-fourths of the shares entitled to vote thereon (and also three-fourths of
any class of shares entitled to vote thereon as a class).
DISSENTERS' RIGHTS
Because CU Stock is traded on the Nasdaq National Market, dissenters' rights
will be available to the shareholders of CU only if the holders of five percent
(5%) or more of the outstanding CU Stock make a written demand upon CU for the
purchase of Dissenting Shares in accordance with Chapter 13 of the California
Code. If this condition is satisfied and the Merger is consummated, shareholders
of CU who vote against the Merger Proposal and otherwise perfect their rights by
complying with the procedures set forth in Chapter 13 of the California Code
will be entitled to receive an amount equal to the fair market value of their
shares as of February 24, 1997, the day before the public announcement of the
Merger. The high, low and closing sales prices for CU Stock on February 24, 1997
were $13.25, $12.75 and $13.25, respectively. A copy of Chapter 13 of the
California Code is attached hereto as Appendix C and should be read for more
complete information concerning dissenters' rights. THE REQUIRED PROCEDURE SET
FORTH IN CHAPTER 13 OF THE CALIFORNIA CODE MUST BE FOLLOWED EXACTLY OR ANY
DISSENTERS' RIGHTS MAY BE LOST. The information set forth below is a general
summary of dissenters' rights as they apply to CU shareholders and is qualified
in its entirety by reference to Appendix C.
In order to be entitled to exercise dissenters' rights, a shareholder of CU
must vote "Against" the Merger Proposal. Thus, any shareholder who wishes to
dissent and executes and returns a proxy in the accompanying form must specify
that his or her shares are to be voted "Against" the Merger. If the shareholder
returns a proxy without voting instructions or with instructions to vote "For"
the Merger, his or her shares will automatically be voted in favor of the Merger
and the shareholder will lose any dissenters' rights. In addition, if the
shareholder abstains from voting his or her shares, the shareholder will lose
his or her dissenters' rights.
Furthermore, in order to preserve his or her dissenters' rights, a
shareholder must make a written demand upon CU for the purchase of Dissenting
Shares and payment to such shareholder of their fair market value, specifying
the number of shares held of record by such shareholder and a statement of what
the shareholder claims to be the fair market value of those shares as of
February 24, 1997. Such demand must be addressed to CU Bancorp, 16030 Ventura
Boulevard, Encino, California 91436, Attention: Anita Wolman, Esq., and must be
received by CU not later than the date of the Special Meeting. A vote "Against"
the Merger or the giving of a proxy directing a negative vote does not
constitute such written demand. A proxy that fails to include instructions with
respect to approval of the Merger will be voted in favor of the Merger.
Accordingly, shares covered by such a proxy will not be Dissenting Shares. In
addition, a vote in favor of the Merger, or a failure to vote at all, will
nullify any previously filed written demand for payment as to those shares.
If the holders of five percent (5%) or more of the outstanding shares of CU
Stock have submitted a written demand for CU to purchase their shares, which
demands are received by CU on or before the date of the Special Meeting and the
Merger is approved by the CU shareholders, CU will have ten (10) days after such
approval to send those shareholders who have submitted such written demands and
who have voted against the approval of the Merger written notice of such
approval accompanied by a copy of Chapter 13 of the California Code, a statement
of the price determined by CU to represent the fair market value of the
Dissenting Shares as of February 24, 1997 (which is expected to be the closing
price per share as reported on Nasdaq on February 24, 1997), and a brief
description of the procedure to be followed if a shareholder desires to exercise
dissenters' rights. The statement of price will constitute an offer by CU to
purchase the Dissenting Shares at the price stated therein. It is, however, a
condition to closing the Merger
59
<PAGE>
that Dissenting Shares shall not exceed 10% of the aggregate number of issued
and outstanding shares of CU Stock. In the event that Dissenting Shares exceed
10% of the aggregate number of issued and outstanding shares of CU Stock, BHI
will not consummate the Merger unless such condition is waived in writing by
BHI. See "THE MERGER--Conditions to Consummation of the Merger" . Within 30 days
after the date on which the notice of the approval of the Merger is mailed, the
dissenting shareholder must surrender to CU, at the office designated in the
notice of approval, the certificates representing the Dissenting Shares to be
stamped or endorsed with a statement that they are Dissenting Shares or to be
exchanged for certificates of appropriate denomination so stamped or endorsed.
Any shares of CU Stock that are transferred prior to their submission for
endorsement lose their status as Dissenting Shares.
If CU and the dissenting shareholder agree that the surrendered shares are
Dissenting Shares and agree upon the price of the shares, the dissenting
shareholder will be entitled to the agreed price with interest thereon at the
legal rate on judgments from the date of the agreement. Payment of the fair
market value of the Dissenting Shares shall be made within 30 days after the
amount thereof has been agreed upon or 30 days after any statutory or
contractual conditions to the Merger have been satisfied, whichever is later,
subject to the surrender of the certificates therefor, unless provided otherwise
by agreement. Any holder of CU Stock who becomes entitled, pursuant to the
provisions of Chapter 13 of the California Code, to payment for his or her
Dissenting Shares will receive payment therefor directly or indirectly from BHI
and such shares of CU Stock shall be cancelled.
If CU denies that the shares surrendered are Dissenting Shares, or CU and
the dissenting shareholder fail to agree upon a fair market value of such shares
of CU Stock, then the dissenting shareholder must, within six months after the
notice of approval is mailed, file a complaint at the Superior Court of the
proper county requesting the court to make such determinations or intervene in
any pending action brought by any other dissenting shareholder. If the complaint
is not filed or intervention in a pending action is not made within the
specified six-month period, the dissenters' rights are lost.
The court will proceed to determine whether the shares are Dissenting
Shares, or if the fair market value of the Dissenting Shares is at issue the
court will determine, or will appoint one or more impartial appraisers to
determine, the fair market value of any Dissenting Shares. If judgment is
rendered against CU, the court will direct payments of the appraised value of
such shares, together with interest thereon at the legal rate on judgments from
the date on which the judgment was entered, by CU to the dissenting shareholder
upon the surrender of the certificates representing such shares. The cost of any
such proceeding shall be apportioned as the court considers equitable, but if
the appraisal exceeds the price offered by CU, CU shall pay such cost, and if
the appraisal is more than 125% of the price offered by CU, CU also may be
required to pay attorneys' and other fees and interest at the legal rate on
judgments from the date the dissenting shareholder complied with Sections
1300-1302 of Chapter 13 of the California Code.
A dissenting shareholder may not withdraw his or her dissent or demand for
payment unless CU consents to such withdrawal.
VALIDITY OF BHI STOCK
The validity of the BHI Stock to be issued in the Merger will be passed upon
for BHI by Carlsmith Ball Wichman Case & Ichiki. As of [March 27,] 1997,
attorneys in that firm who have rendered legal services to BHI related to the
Merger beneficially owned an aggregate of [16,536] shares of BHI Stock.
EXPERTS
The consolidated financial statements of CU and subsidiary as of December
31, 1996 and 1995 and for each of the three years then ended, incorporated by
reference from CU's Annual Report on Form 10-K for the year ended December 31,
1996, have been incorporated herein in reliance upon the report of Arthur
Andersen LLP, independent auditors, incorporated herein by reference, and upon
the authority of such
60
<PAGE>
firm as experts in accounting and auditing. Representatives of Arthur Andersen
LLP are expected to be present at the Special Meeting and are expected to be
available to respond to appropriate questions.
The consolidated financial statements of BHI and subsidiaries appearing in
BHI's Annual Report (Form 10-K) for the year ended December 31, 1996 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
OTHER MATTERS
The Board of Directors of CU does not know of any matter to be presented at
the Special Meeting other than as set forth above. However, if other matters
come before the meeting, it is the intention of the persons named in the
accompanying Proxy to vote the shares represented by the Proxy in their
discretion, taking into account any recommendations of the Board of Directors of
CU on such matters, and discretionary authority to do so is included in the
Proxy.
61
<PAGE>
APPENDIX A
AGREEMENT
AND
PLAN OF REORGANIZATION
BANCORP HAWAII, INC.
CU BANCORP
FEBRUARY 24, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE I
DEFINITIONS.............................................................................................. 1
ARTICLE II
THE MERGER AND RELATED MATTERS........................................................................... 6
2.1 THE MERGER........................................................................................ 6
2.2 CONVERSION OF CU STOCK............................................................................ 7
2.3 ELECTION AND PRORATION PROCEDURES................................................................. 7
2.4 ADJUSTMENTS FOR DILUTION AND OTHER MATTERS........................................................ 10
2.5 CONVERSION OF DISSENTING SHARES................................................................... 10
2.6 EXCHANGE PROCEDURES............................................................................... 10
2.7 VOTING AND DIVIDENDS.............................................................................. 11
2.8 NO LIABILITY...................................................................................... 11
2.9 WITHHOLDING RIGHTS................................................................................ 11
2.10 EFFECTS OF MERGER................................................................................. 12
2.11 ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING COMPANY......................................... 12
2.12 DIRECTORS AND OFFICERS OF SURVIVING COMPANY....................................................... 12
2.13 OPTIONS........................................................................................... 12
2.14 CU STOCK OPTION AGREEMENT......................................................................... 13
ARTICLE III
THE CLOSING.............................................................................................. 13
3.1 CLOSING........................................................................................... 13
3.2 FILINGS........................................................................................... 14
3.3 DOCUMENTS TO BE DELIVERED......................................................................... 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CU..................................................................... 14
4.1 INCORPORATION, STANDING AND POWER................................................................. 14
4.2 CAPITALIZATION.................................................................................... 14
4.3 SUBSIDIARIES...................................................................................... 15
4.4 FINANCIAL STATEMENTS.............................................................................. 15
4.5 SEC/REGULATORY FILINGS............................................................................ 15
4.6 AUTHORITY OF CU................................................................................... 15
4.7 INSURANCE......................................................................................... 16
4.8 TITLE TO ASSETS................................................................................... 16
4.9 REAL ESTATE....................................................................................... 16
4.10 LITIGATION........................................................................................ 17
4.11 TAXES............................................................................................. 17
4.12 COMPLIANCE WITH LAWS AND REGULATIONS.............................................................. 18
4.13 PERFORMANCE OF OBLIGATIONS........................................................................ 18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
4.14 EMPLOYEES......................................................................................... 18
4.15 BROKERS AND FINDERS............................................................................... 19
4.16 MATERIAL CONTRACTS................................................................................ 19
4.17 ABSENCE OF MATERIAL CHANGE........................................................................ 20
4.18 LICENSES AND PERMITS.............................................................................. 20
4.19 NO MATERIAL LIABILITIES; ENVIRONMENTAL............................................................ 21
4.20 EMPLOYEE BENEFIT PLANS............................................................................ 22
4.21 CORPORATE RECORDS................................................................................. 24
4.22 OFFICES AND ATMS.................................................................................. 24
4.23 OPERATING LOSSES.................................................................................. 25
4.24 LOAN PORTFOLIO.................................................................................... 25
4.25 POWER OF ATTORNEY................................................................................. 25
4.26 DISCLOSURE DOCUMENTS, REPORTS AND APPLICATIONS.................................................... 25
4.27 ACCURACY OF INFORMATION FURNISHED................................................................. 26
4.28 LOAN SERVICING PORTFOLIO.......................................................................... 26
4.29 CERTAIN INTERESTS................................................................................. 26
4.30 INVESTMENT SECURITIES............................................................................. 26
4.31 COMMUNITY REINVESTMENT ACT........................................................................ 26
4.32 KNOWLEDGE AS TO CONDITIONS........................................................................ 26
4.33 ALLOWANCE FOR POSSIBLE LOAN LOSSES................................................................ 26
4.34 LISTING OF LOANS.................................................................................. 26
4.35 DERIVATIVE TRANSACTIONS........................................................................... 27
4.36 TRUST ADMINISTRATION.............................................................................. 27
4.37 ACCOUNTING RECORDS................................................................................ 27
4.38 INTELLECTUAL PROPERTY RIGHTS...................................................................... 27
4.39 1996 FINANCIAL STATEMENTS......................................................................... 28
4.40 POOLING OF INTERESTS.............................................................................. 28
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BHI.................................................................... 28
5.1 INCORPORATION, STANDING AND POWER................................................................. 28
5.2 CAPITALIZATION.................................................................................... 28
5.3 FINANCIAL STATEMENTS.............................................................................. 28
5.4 SEC/REGULATORY FILINGS............................................................................ 28
5.5 AUTHORITY OF BHI.................................................................................. 29
5.6 LITIGATION........................................................................................ 29
5.7 COMPLIANCE WITH LAWS AND REGULATIONS.............................................................. 29
5.8 BROKERS AND FINDERS............................................................................... 30
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
5.9 ABSENCE OF MATERIAL CHANGE........................................................................ 30
5.10 DISCLOSURE DOCUMENTS, REPORTS AND APPLICATIONS.................................................... 30
5.11 ACCURACY OF INFORMATION FURNISHED................................................................. 30
5.12 CAPITAL STOCK..................................................................................... 30
5.13 KNOWLEDGE AS TO CONDITIONS........................................................................ 31
ARTICLE VI
COVENANTS OF CU PENDING EFFECTIVE TIME OF THE MERGERS.................................................... 31
6.1 LIMITATION ON CU'S AND CU BANK'S CONDUCT PRIOR TO EFFECTIVE TIME.................................. 31
6.2 NO SOLICITATION, ETC.............................................................................. 33
6.3 AFFIRMATIVE CONDUCT OF CU AND CU BANK PRIOR TO EFFECTIVE TIME..................................... 33
6.4 ACCESS TO INFORMATION............................................................................. 35
6.5 NOTICES........................................................................................... 35
6.6 CU SHAREHOLDERS' MEETING.......................................................................... 35
6.7 D&O COVERAGE...................................................................................... 35
6.8 CERTAIN LOANS AND OTHER EXTENSIONS OF CREDIT...................................................... 36
6.9 TERMINATION OF CU STOCK PLAN...................................................................... 36
6.10 COORDINATION OF DIVIDENDS......................................................................... 36
6.11 CERTAIN RESERVES.................................................................................. 36
ARTICLE VII
COVENANTS OF BHI......................................................................................... 36
7.1 LIMITATION ON BHI'S CONDUCT PRIOR TO EFFECTIVE TIME............................................... 36
7.2 AFFIRMATIVE CONDUCT OF BHI PRIOR TO EFFECTIVE TIME................................................ 37
7.3 ACCESS TO INFORMATION............................................................................. 37
7.4 NOTICES; REPORTS.................................................................................. 37
7.5 BHI OPTION PLAN AMENDMENT......................................................................... 38
ARTICLE VIII
ADDITIONAL COVENANTS..................................................................................... 38
8.1 REGULATORY MATTERS................................................................................ 38
8.2 LEGAL CONDITIONS TO MERGER........................................................................ 39
8.3 CUSTOMER CALLS.................................................................................... 39
8.4 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS........................................................ 39
8.5 ADDITIONAL AGREEMENTS; PARTIES.................................................................... 40
8.6 PUBLICITY......................................................................................... 40
8.7 PRE-CLOSING ADJUSTMENTS........................................................................... 40
8.8 DIRECTOR RESIGNATIONS............................................................................. 40
8.9 [RESERVED.]....................................................................................... 40
8.10 [RESERVED.]....................................................................................... 40
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
8.11 NOTICES AND COMMUNICATIONS........................................................................ 40
8.12 INSURANCE POLICIES ASSIGNMENT..................................................................... 41
8.13 AFFILIATES AND FIVE PERCENT SHAREHOLDERS.......................................................... 41
8.14 LETTERS OF CU'S ACCOUNTANTS....................................................................... 41
8.15 SHAREHOLDERS' AGREEMENT........................................................................... 41
8.16 COOPERATION OF CU BANK............................................................................ 41
ARTICLE IX
CONDITIONS PRECEDENT TO THE MERGER....................................................................... 41
9.1 SHAREHOLDER APPROVAL.............................................................................. 41
9.2 NO JUDGMENTS OR ORDERS............................................................................ 41
9.3 REGULATORY APPROVALS.............................................................................. 42
9.4 TAX OPINION....................................................................................... 42
9.5 S-4 AND PROXY STATEMENT........................................................................... 42
9.6 NYSE LISTING...................................................................................... 42
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CU............................................................ 42
10.1 LEGAL OPINION.................................................................................... 42
10.2 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF COVENANTS......................................... 42
10.3 ABSENCE OF CERTAIN CHANGES....................................................................... 42
10.4 OFFICERS' CERTIFICATE............................................................................ 42
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BHI............................................................... 43
11.1 LEGAL OPINION.................................................................................... 43
11.2 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF COVENANTS......................................... 43
11.3 AUTHORIZATION OF MERGERS......................................................................... 43
11.4 ABSENCE OF REGULATORY CONDITIONS................................................................. 43
11.5 THIRD PARTY CONSENTS............................................................................. 43
11.6 ABSENCE OF CERTAIN CHANGES....................................................................... 43
11.7 OFFICERS' CERTIFICATE............................................................................ 43
11.8 BLUE SKY MATTERS................................................................................. 43
11.9 AFFILIATE AGREEMENTS............................................................................. 44
11.10 SHAREHOLDER'S AGREEMENTS......................................................................... 44
11.11 COMFORT LETTERS.................................................................................. 44
11.12 CU STOCK OPTION AGREEMENT........................................................................ 44
11.13 RESIGNATIONS..................................................................................... 44
11.14 PAYMENT OF EXPENSES.............................................................................. 44
11.15 DISSENTERS....................................................................................... 44
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
11.16 DEPOSITS......................................................................................... 44
11.17 AUDIT OPINION.................................................................................... 44
ARTICLE XII
EMPLOYEE MATTERS......................................................................................... 44
12.1 EMPLOYEE BENEFITS................................................................................ 44
12.2 PRIOR SERVICE CREDIT............................................................................. 45
12.3 MANAGEMENT RETENTION AND OTHER AGREEMENTS........................................................ 45
12.4 GRANT OF BHI OPTIONS............................................................................. 45
12.5 PAYMENT OF ACCRUED BONUSES....................................................................... 45
12.6 INDEMNIFICATION OF DIRECTORS AND OFFICERS........................................................ 45
ARTICLE XIII
TERMINATION.............................................................................................. 45
13.1 TERMINATION...................................................................................... 45
13.2 EFFECT OF TERMINATION............................................................................ 46
ARTICLE XIV
MISCELLANEOUS............................................................................................ 47
14.1 EXPENSES......................................................................................... 47
14.2 NOTICES.......................................................................................... 47
14.3 SUCCESSORS AND ASSIGNS........................................................................... 48
14.4 COUNTERPARTS..................................................................................... 48
14.5 EFFECT OF REPRESENTATIONS AND WARRANTIES......................................................... 48
14.6 THIRD PARTIES.................................................................................... 48
14.7 SCHEDULES; EXHIBITS; INTEGRATION................................................................. 48
14.8 KNOWLEDGE; MATERIALTY............................................................................ 48
14.9 GOVERNING LAW.................................................................................... 48
14.10 SCHEDULES........................................................................................ 48
14.11 CAPTIONS......................................................................................... 49
14.12 SEVERABILITY..................................................................................... 49
14.13 WAIVER AND MODIFICATION.......................................................................... 49
14.14 ATTORNEY'S FEES.................................................................................. 49
14.15 JURY WAIVER...................................................................................... 49
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and entered
into as of the 24th day of February, 1997, by and between Bancorp Hawaii, Inc.,
a Hawaii corporation ("BHI"), and CU Bancorp, a California corporation ("CU").
R E C I T A L S:
WHEREAS, BHI and CU desire to effect a merger (the "Merger") in accordance
with the terms of this Agreement.
WHEREAS, the respective Boards of Directors of BHI and CU believe that the
proposed Merger, on the terms and conditions set forth herein, is in the best
interests of their respective corporations and shareholders.
WHEREAS, BHI and CU Bancorp desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement.
WHEREAS, the parties intend that for federal income tax purposes the Merger
qualify as a "reorganization" within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended.
NOW, THEREFORE, on the basis of the foregoing recitals and in consideration
of the mutual representations, warranties, covenants and agreements contained
herein, BHI and CU hereby agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise expressly provided for in this Agreement, or unless the
context otherwise requires, as used throughout this Agreement the following
terms shall have the respective meanings specified below:
1.1 "Affiliate" of, or a Person "Affiliated" with, a specific Person is a
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified.
1.2 "Agreement of Merger" means the Agreement and Plan of Merger to be
entered into by and between BHI and CU substantially in the form of Exhibit A
hereto, but subject to any changes that may be necessary to conform to any
requirements of any regulatory agency having authority over the Merger.
1.3 "Alternative Transaction" means any of the following involving CU or CU
Bank (other than transactions with BHI contemplated by this Agreement): any
merger, consolidation, share exchange or other business combination; a sale,
lease, exchange, mortgage, pledge, transfer or other disposition of assets of CU
or CU Bank (as applicable) representing 10% or more of CU's consolidated assets;
a sale of shares of capital stock (or securities convertible or exchangeable
into or otherwise evidencing, or any agreement or instrument evidencing, the
right to acquire capital stock), representing 10% or more of the voting power of
CU or CU Bank; a tender offer or exchange offer for at least 10% of the
outstanding shares of CU; a bona fide solicitation of proxies in opposition to
approval of the Merger by CU's shareholders; or a public announcement of a
proposal, plan, or intention to do any of the foregoing.
1.4 "ATM" has the meaning set forth in Section 4.22.
1.5 "Average Price of BHI Stock" means the average of the Closing Price of
BHI Stock for the 20 consecutive trading days ending on the third trading day
immediately prior to the Closing Date (subject to adjustment as provided below).
The term "trading day" shall mean a day on which trading generally takes place
on the NYSE and on which trading in BHI Stock has not been halted or suspended.
In the event BHI pays, declares or otherwise effects a stock split, reverse
stock split, reclassification or stock dividend or distribution with respect to
the BHI Stock between the date of this Agreement and the Effective Time,
appropriate adjustments will be made to the Average Price of BHI Stock.
<PAGE>
1.6 "BHC Act" means the Bank Holding Company Act of 1956, as amended.
1.7 "BHI Option Plan Amendment" means the amendment to the BHI Stock Option
Plan contemplated by Section 2.13.
1.8 "BHI Options" means options to purchase BHI Stock granted by BHI.
1.9 "BHI Schedules" means the schedules prepared and delivered by BHI
pursuant to this Agreement.
1.10 "BHI Stock" means the common stock, $2.00 par value, of BHI.
1.11 "BHI Stock Option Plan" means the Bancorp Hawaii, Inc. Stock Option
Plan of 1994.
1.12 "BHI Supplied Information" has the meaning set forth in Section 5.10.
1.13 "Business Day" means any day other than Saturday, Sunday or a day on
which commercial banks in either of California or Hawaii are authorized or
required to be closed.
1.14 "California Secretary" means the Secretary of State of the State of
California.
1.15 "Cash Election" has the meaning set forth in Section 2.3(a).
1.16 "Cash Proration Factor" has the meaning set forth in Section 2.3(c).
1.17 "Closing" has the meaning set forth in Section 3.1.
1.18 "Closing Date" means the date on which the Closing is to be conducted,
as provided by Section 3.1.
1.19 "Closing Price of BHI Stock" means the closing price of BHI Stock on
the NYSE as reported in The Wall Street Journal.
1.20 "Code" means the Internal Revenue Code of 1986, as amended.
1.21 "Combination Cash Election" and "Combination Stock Election" have the
meanings set forth in Section 2.3(a).
1.22 "Commissioner" means the Commissioner of Financial Institutions of the
State of Hawaii.
1.23 "Covered Loan" has the meaning set forth in Section 4.24.
1.24 "CU Bank" means California United Bank, a California-chartered
commercial bank.
1.25 "CU Bank Stock" means the common stock, $5.00 par value, of CU Bank.
1.26 "CUBNA" means California United Bank, National Association.
1.27 "CU Employee Plans" has the meaning set forth in Section 4.20.
1.28 "CU Option Plan" means, collectively, each plan included in the CU
Stock Plan that provides for the issuance of options to acquire CU Stock.
1.29 "CU Options" means options, rights or warrants to purchase CU Stock
granted by CU (other than the CU Stock Option Agreement).
1.30 "CU Real Property" has the meaning set forth in Section 4.9.
1.31 "CU Scheduled Contracts" has the meaning set forth in Section 4.16.
1.32 "CU Schedules" means the Schedules prepared and delivered by CU
pursuant to this Agreement.
2
<PAGE>
1.33 "CU Shareholders' Meeting" means the meeting of CU's shareholders
referred to in Section 6.6 hereof, including any adjournments or postponements
thereof.
1.34 "CU Stock" means the common stock, no par value, of CU (including
certificates representing securities of any Predecessor entitled to be converted
into or exchanged for certificates for CU common stock).
1.35 "CU Stock Option Agreement" or "Stock Option Agreement" means the
Stock Option Agreement entered into between CU and BHI and attached hereto as
Exhibit B.
1.36 "CU Stock Plan" means, collectively, the following CU plans: (i) the
1983 Employee Stock Option Plan, (ii) 1985 Employee Stock Option Plan, (iii)
1987 Special Stock Option Plan, (iv) 1993 Employee Stock Option Plan, (v) 1994
Non-Employee Director Stock Option Plan, (vi) 1995 Restricted Stock Plan, (vii)
1996 Non-Employee Director Stock Option Plan, (viii) 1996 Employee Stock Option
Plan, (ix) 1996 Restricted Stock Plan, and (x) the CU Bancorp 1996 Conversion
Option Plan.
1.37 "CU Supplied Information" has the meaning set forth in Section 4.26.
1.38 "DCCA" means the Director of the Department of Commerce and Consumer
Affairs of the State of Hawaii.
1.39 "Dissenting Shares" means any shares of CU Stock issued and
outstanding immediately prior to the Effective Time of the Merger that are
"dissenting shares" as that term is defined in Section 1300(b) of the California
Corporations Code.
1.40 "Effective Time" means the date and time of filing of Articles of
Merger and the Agreement of Merger with DCCA or such later effective time as may
be agreed by the parties and set forth in such Articles.
1.41 "Election Deadline" has the meaning set forth in Section 2.3(b).
1.42 "Election Form" has the meaning set forth in Section 2.3(a).
1.43 "Election Form Record Date" has the meaning set forth in Section
2.3(a).
1.44 "Employee Benefit Plan" has the meaning set forth in Section 4.20(a).
1.45 "Employee Pension Benefit Plan" has the meaning set forth in Section
4.20(b).
1.46 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.47 "Environmental Law" means any federal, state, provincial or local
statute, law, ordinance, rule, regulation, order, consent decree, judicial or
administrative decision or directive of the United States or other jurisdiction
whether now existing or as hereinafter promulgated, issued or enacted relating
to: (A) pollution or protection of the environment, including natural resources;
(B) exposure of Persons, including employees, to Hazardous Substances or other
products, materials or chemicals; (C) protection of the public health or welfare
from the effects of products, by-products, wastes, emissions, discharges or
releases of chemical or other substances; or (D) regulation of the manufacture,
use or introduction into commerce of substances, including, without limitation,
their manufacture, formulation, packaging, labeling, distribution
transportation, handling, storage and disposal. For the purposes of this
definition the term "Environmental Law" shall include, without limiting the
foregoing, the following statutes, as amended from time to time: (1) the Clean
Air Act, as amended, 42 U.S.C. Section 7401 ET SEQ.; (2) the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.; (3) the
Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section
6901 ET SEQ.; (4) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (including the Superfund Amendments and
Reauthorization Act of 1986), 42 U.S.C. Section 2601 ET SEQ.; (5) the Toxic
Substances Control Act, as amended, 15 U.S.C. Section 2601 ET SEQ.; (6) The
Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651; (7) the
Emergency Planning and Community Right-To-Know Act of 1986, 42 U.S.C.
3
<PAGE>
Section 1101 ET SEQ.; (8) the Mine Safety and Health Act of 1977, as amended, 30
U.S.C. Section 801 ET SEQ.; (9) the Safe Drinking Water Act, 42 U.S.C. Section
300f ET SEQ.; and (10) all comparable state and local laws, laws of other
jurisdictions or orders and regulations including, but not limited to, the
Carpenter-Presley-Tanner Hazardous Substance Account Act, Cal. Health & Safety
Code Section 25300 ET SEQ.
1.48 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.49 "Exchange Agent" means the financial institution appointed by BHI,
with the consent of CU, to effect the exchange contemplated by Article II
hereof.
1.50 "Exchange Ratio" has the meaning set forth in Section 2.2(a).
1.51 "FDIC" means the Federal Deposit Insurance Corporation.
1.52 "FDIC Filings of CU" means all reports, registration statements, proxy
statements or other filings made by CU or CU Bank with the FDIC during the time
period from January 1, 1994 through the date of this Agreement.
1.53 "Financial Statements of BHI" means (i) the audited consolidated
financial statements and notes thereto of BHI and the related opinions thereon
included in BHI's Annual Reports on Form 10-K for the years ended December 31,
1993, 1994 and 1995 and (ii) the unaudited consolidated interim financial
statements and notes thereto of BHI included in BHI's Quarterly Reports on Form
10-Q for the quarters ended March 31, June 30 and September 30, 1996.
1.54 "Financial Statements of Corporate Bank" means the audited
consolidated financial statements of Corporate Bank for the years ended December
31, 1993 and 1994, the unaudited statements of operations of Corporate Bank for
the nine months ended September 30, 1995 and 1994, and the unaudited balance
sheets of Corporate Bank as of September 30, 1995 and 1994.
1.55 "Financial Statements of CU" means (i) the audited consolidated
financial statements and notes thereto of CU and the related opinions thereon
included in CU's Annual Reports on Form 10-K for the years ended December 31,
1993, 1994 and 1995 and (ii) the unaudited consolidated interim financial
statements and notes thereto of CU included in CU's Quarterly Reports on Form
10-Q for the quarters ended March 31, June 30 and September 30, 1996.
1.56 "Financial Statements of Home" mean (i) the audited consolidated
financial statements and notes thereto of Home Interstate Bancorp and the
related opinions thereon included in its Annual Reports on Form 10-K for the
years ended December 31, 1993, 1994 and 1995 and (ii) the unaudited consolidated
interim financial statements and notes thereto of Home Interstate Bancorp
included in its Quarterly Reports on Form 10-Q for the quarters ended March 31
and June 30, 1996.
1.57 "FRB" means the Board of Governors of the Federal Reserve System.
1.58 "FRB Filings of CU" means all reports, registration statements, proxy
statements or other filings made by CU or CU Bank with the FRB during the time
period from January 1, 1994 through the date of this Agreement.
1.59 "Hazardous Substances" means (i) substances that are defined or listed
in, or otherwise classified pursuant to, or the use or disposal of which are
regulated by, any Environmental Law as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances," or any other formulation
intended to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, toxicity,
carcinogenicity, or reproductive toxicity; (ii) oil, petroleum or petroleum
derived from substances and drilling fluids, produced waters, and other wastes
associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources; (iii) any flammable substances or
explosives, any radioactive materials, any hazardous wastes or substances, any
toxic wastes or substances or any other materials or pollutants which pose a
hazard to any property or to
4
<PAGE>
Persons on or about such property; and (iv) asbestos in any form or electrical
equipment which contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
1.60 "Home" means Home Interstate Bancorp, a California corporation.
1.61 "Immediate Family" means a Person's spouse, parents, in-laws, children
and siblings.
1.62 "IRS" means the Internal Revenue Service.
1.63 "Maximum Stock Amount" and "Minimum Stock Amount" have the meanings
set forth in Section 2.3(c).
1.64 "Non-Performing Loans" means loans or investments held by CU Bank
which are (i) more than ninety (90) days past due with respect to any scheduled
payment of principal or interest, (ii) classified as "loss," "doubtful,"
"substandard," "other assets especially mentioned" or "special mention," or
(iii) on non-accrual status in accordance with CU Bank's loan review procedures.
1.65 "NYSE" means the New York Stock Exchange.
1.66 "OCC" means the Office of the Comptroller of the Currency.
1.67 "OCC Filings of CU" means all reports, registration statements, proxy
statements or other filings made by CU or CU Bank with the OCC during the time
period from January 1, 1994 through the date of this Agreement.
1.68 "Operating Loss" has the meaning set forth in Section 4.23.
1.69 "Other Real Estate Owned" means any real property owned or acquired by
foreclosure or otherwise, in the ordinary course of collecting a debt previously
contracted for in good faith.
1.70 "Per Share Cash Consideration" has the meaning set forth in Section
2.2(a).
1.71 "Person" means any individual, corporation, association, partnership,
joint venture, other entity, government or governmental department or agency.
1.72 "Predecessors" means such corporations and banks as heretofore have
been merged into either of CU or CU Bank (including without limitation, in the
case of CU, Home Interstate Bancorp, a California corporation, and in the case
of CU Bank, CUBNA and Corporate Bank, a California state-chartered bank).
1.73 "Proxy Statement" means the Proxy Statement and Prospectus that is
used to solicit proxies for the CU Shareholders' Meeting and to offer and sell
the shares of BHI Stock to be issued in connection with the Merger.
1.74 "Ratification Date" has the meaning set forth in Section 2.13(d).
1.75 "Related Group of Persons" means Affiliates, members of an Immediate
Family or Persons the obligations of whom would be attributed to another Person
pursuant to the regulations promulgated by the SEC (as defined herein).
1.76 "S-4" means the registration statement on Form S-4 to be filed with
the SEC relating to the registration under the Securities Act of the BHI Stock
to be issued in connection with the Merger.
1.77 "SEC" means the Securities and Exchange Commission.
1.78 "SEC Filings of BHI" means all reports, registration statements, proxy
statements or other filings made by BHI with the SEC during the time period from
January 1, 1994 through the date of this Agreement.
5
<PAGE>
1.79 "SEC Filings of CU" means all reports, registration statements, proxy
statements or other filings made by CU with the SEC during the time period from
January 1, 1994 through the date of this Agreement.
1.80 "Secured Loan" has the meaning set forth in Section 4.24.
1.81 "Securities Act" means the Securities Act of 1933, as amended.
1.82 "Senior Management Group" means the following senior officers of CU
and its subsidiaries: Stephen Carpenter, David Rainer, Anne Williams, Anita
Wolman, Patrick Hartman, Doug Goddard, Emily Hamilton and James P. Staes.
1.83 "Stock Election" has the meaning set forth in Section 2.3(a).
1.84 "Stock Proration Factor" has the meaning set forth in Section 2.3(c).
1.85 "Superintendent" means the Superintendent of Banks of the State of
California or the successor thereto.
1.86 "Surviving Company" means the corporation surviving the Merger.
1.87 "Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, business,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, workers' compensation,
disability, Pension Guaranty Benefit Corporation premium, real property,
personal property, ad valorem, sales, use, transfer, conveyance, registration,
value added, alternative or add-on minimum, estimated, or other taxes, or
assessments in the nature of taxes, of any kind whatsoever and however
denominated, including any interest, penalty, or addition thereto, whether
disputed or not.
1.88 "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to or required to be filed in
connection with any Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
1.89 "Understanding" means any contract, agreement, understanding,
commitment or offer, whether written or oral, which is or to the knowledge of CU
is reasonably likely to become a binding obligation if accepted by another
Person.
1.90 "Undesignated Shares" has the meaning set forth in Section 2.3(a).
ARTICLE II
THE MERGER AND RELATED MATTERS
2.1 THE MERGER. The Merger shall become effective at the date and time of
filing of Articles of Merger and the Agreement of Merger with DCCA (or at such
later effective time as may be agreed by the parties and set forth in the
Articles of Merger) in accordance with applicable provisions of Hawaii law. At
the Effective Time, the following transactions will be deemed to have occurred
simultaneously:
(a) CU shall be merged with and into BHI with BHI being the Surviving
Company, the separate corporate existence of CU shall cease, and BHI shall
continue its existence under the laws of the State of Hawaii.
(b) Each share of BHI Stock issued and outstanding immediately prior to
the Effective Time shall remain an issued and outstanding share of common
stock of the Surviving Company and shall not be converted or otherwise
affected by the Merger.
(c) Subject to Sections 2.1(d), 2.1(e) and 2.3(e), each share of CU
Stock issued and outstanding immediately prior to the Effective Time shall,
on and after the Effective Time, be automatically
6
<PAGE>
canceled and cease to be an issued and outstanding share of CU Stock and
shall be converted into the right to receive BHI Stock or cash as provided
in Section 2.2(a).
(d) Each Dissenting Share of CU Stock shall not be converted into or
represent a right to receive BHI Stock or cash hereunder unless and until
such shares have lost their status as dissenting shares under Chapter 13 of
the California Corporations Code, at which time such shares shall be
converted either into cash or BHI Stock pursuant to Section 2.5.
(e) Any shares of CU Stock held by BHI (or any of its wholly owned
subsidiaries) or CU (or any of its wholly owned subsidiaries), other than
those held in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
2.2 CONVERSION OF CU STOCK.
(a) Subject to the other provisions of this Article II, each share of CU
stock issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares and CU Stock described in Section 2.1(e) ) shall, by virtue of
the Merger, be converted into the right to receive, at the election of the
holder thereof as provided in Section 2.3, either:
(i) a fraction of a share of BHI Stock equal to the quotient (such
quotient, the "Exchange Ratio") of (i) $15.34 divided by (ii) the Average
Price of BHI Stock; provided, in the event that the Average Price of BHI
Stock shall be more than $51.03125, the Exchange Ratio shall be .3006 and in
the event that the Average Price of BHI Stock shall be less than $37.71875,
the Exchange Ratio shall be .4067; or
(ii) cash in the amount of $15.34 (such amount, the "Per Share Cash
Consideration").
(b) At the Effective Time, the stock transfer books of CU shall be
closed as to holders of CU Stock immediately prior to the Effective Time and
no transfer of CU Stock by any such holder shall thereafter be made or
recognized. If, after the Effective Time, certificates are properly
presented in accordance with Section 2.6 of this Agreement to the Exchange
Agent, such certificates shall be canceled and exchanged for certificates
representing the number of whole shares of BHI Stock, if any, and/or a check
representing the amount of cash, if any, into which the CU Stock represented
thereby was converted in the Merger, plus any payment for a fractional share
of BHI Stock.
2.3 ELECTION AND PRORATION PROCEDURES.
(a) ELECTION FORMS AND TYPES OF ELECTION. An election form and other
appropriate and customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of CU Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent) in such form as BHI and CU
shall mutually agree ("Election Form") shall be mailed no less than thirty-five
days prior to the anticipated Closing Date or on such other date as BHI and CU
shall mutually agree ("Mailing Date") to each holder of record of CU Stock as of
five Business Days prior to the Mailing Date ("Election Form Record Date"). CU
shall make available one or more Election Forms as may be reasonably requested
by all Persons who become holders (or beneficial owners) of CU Stock after the
Election Form Record Date and prior to the Election Deadline (as defined
herein), and CU shall provide to the Exchange Agent all information reasonably
necessary for it to perform its obligations as specified herein. Each Election
Form shall permit the holder (or the beneficial owner through appropriate and
customary documentation and instructions) to elect (an "Election") to receive
either (i) BHI Stock (a "Stock Election") with respect to all of such holder's
CU Stock, or (ii) cash (a "Cash Election") with respect to all of such holder's
CU Stock, or (iii) a specified number of shares of CU Stock to receive BHI Stock
(a "Combination Stock Election") and a specified number of shares of CU Stock to
receive cash (a "Combination Cash Election"). Any CU Stock (other than
Dissenting Shares) with respect to which the holder (or the beneficial owner, as
the case may be) shall not have submitted to the
7
<PAGE>
Exchange Agent, an effective, properly completed Election Form received prior to
the Election Deadline shall be deemed to be "Undesignated Shares" hereunder.
(b) PROPER AND TIMELY ELECTION. Any Election shall have been properly made
and effective only if the Exchange Agent shall have actually received a properly
completed Election Form by 5:00 p.m. on the later of the 30th day following the
Mailing Date or the 31st day following the mailing of any notice required by
Section 1301 of the California Corporations Code (or such other time and date as
BHI and CU may mutually agree) (the "Election Deadline"). An Election Form shall
be deemed properly completed only if an Election is indicated for each share of
CU Stock covered by such Election Form and if accompanied by one or more
certificates (or customary affidavits and indemnification regarding the loss or
destruction of such certificates or the guaranteed delivery of such
certificates) representing all shares of CU Stock covered by such Election Form,
together with duly executed transmittal materials included in or required by the
Election Form. Any Election Form may be revoked or changed by the Person
submitting such Election Form at or prior to the Election Deadline. In the event
an Election Form is revoked prior to the Election Deadline, the shares of CU
Stock represented by such Election Form shall automatically become Undesignated
Shares unless and until a new Election is properly made with respect to such
shares on or before the Election Deadline, and BHI shall cause the certificates
representing such shares of CU Stock to be promptly returned without charge to
the Person submitting the revoked Election Form upon written request to that
effect from the holder who submitted such Election Form. Subject to the terms of
this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any decisions of BHI and CU required by the Exchange Agent
and made in good faith in determining such matters shall be binding and
conclusive. Neither BHI nor the Exchange Agent shall be under any obligation to
notify any Person of any defect in an Election Form.
(c) PRORATION. As promptly as practicable but not later than ten calendar
days after the Effective Time, BHI shall cause the Exchange Agent to effect the
allocation among the holders of CU Stock of rights to receive BHI Stock or cash
in the merger in accordance with the Election Forms as follows:
(i) if the aggregate number of shares of CU Stock as to which Stock
Elections and Combination Stock Elections shall have effectively been made
exceeds, and is not approximately equal to, 80% of the issued and
outstanding shares of CU Stock as of the Effective Time (the "Maximum Stock
Amount"), then:
(A) All Undesignated Shares and Dissenting Shares shall be deemed to
have made Cash Elections; and
(B) the Exchange Agent shall select by lot some or all of the Persons
who hold of record 100 or less shares of CU Stock who effectively made
Stock Elections or Combination Stock Elections and shall treat them for
purposes of this Section 2.3(c) as having made a Cash Election, to the
extent necessary to reach the Maximum Stock Amount. If the remaining
shares of CU Stock as to which Stock Elections and Combination Stock
Elections have been effectively made (the "Remaining Stock Election
Shares") exceeds, and is not approximately equal to, the Maximum Stock
Amount, then:
(C) a stock proration factor (the "Stock Proration Factor") shall be
determined by dividing the Maximum Stock Amount by the Remaining Stock
Election Shares. Each holder of such Remaining Stock Election Shares
shall be entitled to receive in respect thereof:
(I) the number of shares of BHI Stock equal to the product of
(x) the Exchange Ratio, multiplied by (y) the number of such
Remaining Stock Election Shares held by such holder multiplied by (z)
the Stock Proration Factor; and
8
<PAGE>
(II) cash in an amount equal to the product of (x) the Per Share
Cash Consideration, multiplied by (y) the number of Remaining Stock
Election Shares held by such holder, multiplied by (z) one minus the
Stock Proration Factor.
(ii) if the aggregate number of shares of CU Stock as to which Stock
Elections and Combination Stock Elections shall have effectively been made
shall be less than, and not approximately equal to, 60% of the issued and
outstanding shares of CU Stock as of the Effective Time (the "Minimum Stock
Amount"), then:
(A) the Exchange Agent shall select by lot some or all of the Persons
who hold of record Undesignated Shares and shall treat them for purposes
of this Section 2.3(c) as having made a Stock Election, to the extent
necessary to reach the Minimum Stock Amount. All Undesignated Shares so
selected shall be converted into the right to receive BHI Stock (and if
it is not necessary to select all Undesignated Shares to reach the
Minimum Stock Amount, Undesignated Shares not so selected shall be
converted into the right to receive cash). If thereafter the total number
of shares of CU Stock as to which Stock Elections and Combination Stock
Elections have been effectively made or deemed made is less than, and not
approximately equal to, the Minimum Stock Amount, then:
(B) a cash proration factor (the "Cash Proration Factor") shall be
determined by dividing the Minimum Stock Amount (less the shares for
which a Stock Election or Combination Stock Election has been effectively
made or deemed made) by the total number of shares of CU Stock as to
which Cash Elections and Combination Cash Elections have been effectively
made (the "Cash Election Shares"). Each holder of such Cash Election
Shares shall be entitled to receive in respect thereof:
(I) cash equal to the product of (x) the Per Share Cash
Consideration, multiplied by (y) the number of Cash Election Shares
held by such holder, multiplied by (z) one minus the Cash Proration
Factor; and
(II) the number of shares of BHI Stock equal to the product of
(x) the Exchange Ratio, multiplied by (y) the number of Cash Election
Shares held by such holder, multiplied by (z) the Cash Proration
Factor.
(iii) if the aggregate number of shares of CU Stock as to which Stock
Elections and Combination Stock Elections shall have effectively been made
is approximately equal to or exceeds the Minimum Stock Amount and is also
less than or approximately equal to the Maximum Stock Amount, then:
(A) all Undesignated Shares and Dissenting Shares shall be deemed to
have made Cash Elections; and
(B) each holder of CU Stock who made an effective Stock Election or
Combination Stock Election shall be entitled to receive BHI Stock with
respect to the number of shares of CU Stock covered by such Stock
Election or Combination Stock Election; and
(C) each holder of CU Stock who made an effective Cash Election or
Combination Cash Election shall be entitled to receive cash with respect
to the number of shares of such holder's CU Stock covered by such Cash
Election or Combination Cash Election.
(d) CALCULATIONS. The calculations required by Section 2.2(a)(i) shall be
prepared by BHI prior to the anticipated Effective Time and shall be set forth
in a certificate executed by the Chief Financial Officer of BHI and furnished to
CU two Business Days prior to the Closing Date showing the manner of calculation
in reasonable detail, which shall be conclusive absent manifest error. Any
calculation of a portion of a share of BHI Stock shall be rounded to the nearest
ten-thousandth of a share, and any cash payment shall be rounded to the nearest
cent. For purposes of this Section 2.3, the shares of CU Stock for which BHI
Stock is to be issued as consideration in the Merger shall be deemed to be
"approximately
9
<PAGE>
equal" to the Minimum or Maximum Stock Amount if such number is within 25,000
shares (of CU Stock) of such amount.
(e) NO FRACTIONAL SHARES. Notwithstanding any other provisions of this
Agreement, each holder of shares of CU Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of BHI
Stock (after taking into account all certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of BHI Stock multiplied by the Average Price of
BHI Stock. No holder will be entitled to dividends, voting rights or any other
rights as a stockholder in respect of any fractional share of BHI Stock.
2.4 ADJUSTMENTS FOR DILUTION AND OTHER MATTERS. If prior to the Effective
Time, (a) CU shall declare a stock dividend or distribution on the CU Stock, or
subdivide, split up, reclassify or combine the CU Stock, or declare a dividend,
or make a distribution, on the CU Stock, in any security convertible into CU
Stock (provided that no such action may be taken by CU without BHI's prior
written consent as provided in Section 6.1) or (b) the outstanding shares of BHI
Stock shall have been increased, decreased, changed into or exchanged for a
different number or kind of shares or securities, in each case as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar change in BHI's capitalization, then an
appropriate adjustment or adjustments will be made to the Exchange Ratio
(including the Average Price of BHI Stock and the Average Price of BHI Stock
below and above which the Exchange Ratio is a specified amount pursuant to
Section 2.2).
2.5 CONVERSION OF DISSENTING SHARES.
(a) CU shall give BHI prompt notice upon receipt by CU of any written
demands for appraisal rights, withdrawal of such demands, and any other
documents received or instruments served pursuant to Chapter 13 of the
California Corporations Code and shall give BHI the opportunity to direct all
negotiations and proceedings with respect to such demands. CU shall not
voluntarily make any payment with respect to any demands for appraisal rights
and shall not, except with the prior written consent of BHI, settle or offer to
settle such demands. Each holder of CU Stock who becomes entitled, pursuant to
provisions of said Chapter 13 of the California Corporations Code, to payment
for his or her Dissenting Shares under the provisions of said Chapter shall
receive payment therefor directly or indirectly from BHI and such shares of CU
Stock shall be canceled.
(b) If prior to the Election Deadline any shareholder of CU shall fail to
perfect, or shall effectively withdraw or lose, his or her rights under Chapter
13 of the California Corporations Code, the Dissenting Shares of such holder
shall be treated for purposes of this Article II as any other shares of
outstanding CU Stock. If, after the Election Deadline, any holder of CU Stock
shall fail to perfect, or shall effectively withdraw or lose, his or her right
to appraisal of and payment for his or her Dissenting Shares under Chapter 13 of
the California Corporations Code, each Dissenting Share of such holder shall be
converted into the right to receive the Per Share Cash Consideration pursuant to
this Article II.
2.6 EXCHANGE PROCEDURES.
(a) EXCHANGE AGENT. No later than the Effective Time, BHI shall deposit
with the Exchange Agent the number of shares of BHI Stock issuable in the Merger
and the amount of cash payable in the Merger. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to BHI Stock
held by it from time to time hereunder, except that it shall receive and hold
all dividends or other distributions paid or distributed with respect to such
shares for the account of the Persons entitled thereto.
(b) EXCHANGE OF CERTIFICATES AND CASH. After completion of the allocation
procedure set forth in Section 2.3, each holder of a certificate formerly
representing CU Stock (other than Dissenting Shares) who surrenders or has
surrendered such certificate (or customary affidavits and indemnification
regarding the loss or destruction of such certificate), together with duly
executed transmittal materials included in or required by the Election Form, to
the Exchange Agent shall, upon acceptance thereof, be entitled to a certificate
representing BHI Stock and/or cash to which such holder would otherwise be
entitled. The
10
<PAGE>
Exchange Agent shall accept such CU certificate upon compliance with such
reasonable and customary terms and conditions as the Exchange Agent may impose
to effect an orderly exchange thereof in accordance with normal practices. Until
surrendered as contemplated by this Section 2.6, each certificate representing
CU Stock shall be deemed from and after the Effective Time to evidence only the
right to receive cash and/or BHI Stock, as the case may be, upon such surrender.
BHI shall not be obligated to deliver the consideration to which any former
holder of CU Stock is entitled as a result of the Merger until such holder
surrenders his certificate or certificates representing shares of CU Stock (or
customary affidavits and indemnification regarding the loss or destruction of
such certificate) for exchange as provided in this Section 2.6. If any
certificate for shares of BHI Stock, or any check representing cash and/ or
declared but unpaid dividends, is to be issued in a name other than that in
which a certificate surrendered for exchange is issued, the certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and the Person requesting such exchange shall affix any requisite stock transfer
tax stamps to the certificate surrendered or provide funds for their purchase or
establish to the satisfaction of the Exchange Agent that such taxes are not
payable.
(c) AFFILIATES. Certificates surrendered for exchange by any Person
constituting an "affiliate" of CU for purposes of Rule 145 under the Securities
Act shall not be exchanged for certificates representing whole shares of BHI
Stock until BHI has received a written agreement from such Person as
contemplated by Section 8.13(a).
2.7 VOTING AND DIVIDENDS. Former shareholders of record of CU shall be
entitled to vote after the Effective Time at any meeting of BHI stockholders the
number of whole shares of BHI Stock into which their respective shares of CU
Stock are converted, regardless of whether such holders have exchanged their
certificates representing CU Stock for certificates representing BHI Stock in
accordance with the provisions of this Agreement. Until surrendered for exchange
in accordance with the provisions of Section 2.6 of this Agreement, each
certificate theretofore representing shares of CU Stock (other than shares to be
canceled pursuant to Section 2.1(e) of this Agreement) shall from and after the
Effective Time represent for all purposes only the right to receive shares of
BHI Stock, cash in lieu of fractional shares and/or cash, as set forth in this
Agreement. No dividends or other distributions declared or made after the
Effective Time with respect to BHI Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered certificate of CU Stock
with respect to the shares of BHI Stock represented thereby, until the holder of
such certificate of CU Stock shall surrender such certificate. Subject to the
effect of applicable laws, following surrender of any such certificates of Stock
for which shares of BHI Stock are to be issued, there shall be paid to the
holder of the certificates, without interest, (i) the amount of any cash payable
with respect to a fractional share of BHI Stock to which such holder is entitled
pursuant to Section 2.3(e) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole shares of BHI Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of BHI Stock.
2.8 NO LIABILITY. Neither BHI, CU nor the Exchange Agent shall be liable
to any holder of shares of CU Stock for any shares of BHI Stock (or dividends or
distributions with respect thereto) or cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.9 WITHHOLDING RIGHTS. BHI or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of CU Stock such amounts as BHI or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by BHI or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of CU Stock in respect of which
such deduction and withholding was made by BHI or the Exchange Agent.
11
<PAGE>
2.10 EFFECTS OF MERGER. At and after the Effective Time, the Merger will
have the effects set forth in the Hawaii Business Corporation Act and the
California Corporations Code.
2.11 ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING COMPANY. At the
Effective Time, the Articles of Incorporation and Bylaws of BHI as in effect
immediately prior to the Effective Time shall continue to be the Articles of
Incorporation and Bylaws of the Surviving Company.
2.12 DIRECTORS AND OFFICERS OF SURVIVING COMPANY. At the Effective Time,
the directors and officers of BHI immediately prior to the Effective Time shall
be the directors and officers of the Surviving Company.
2.13 OPTIONS.
(a) Subject to Sections 2.13(a) through 2.13(d), the unexercised CU Options
held by each Person who is at the Effective Time an employee of CU Bank shall be
assumed, or replaced with a comparable substituted option, by the Surviving
Company as of the Effective Time. Such assumption shall be accomplished pursuant
to the BHI Option Plan Amendment to be adopted prior to the Closing Date
(subject to subsequent approval or ratification by the holders of a majority of
the outstanding BHI Stock) and pursuant to new option agreements with each
optionee. Each CU Option so assumed or replaced shall at the Effective Time be
deemed to be an option (a "Replacement Option") granted by the Surviving Company
to acquire BHI Stock. Subject to Section 2.13(d), the per share exercise price
for the Replacement Options granted to each optionee shall be equal to the
exercise price of such optionee's CU Options which are converted into such
Replacement Options divided by the Exchange Ratio, and shall be for such number
of shares of BHI Stock as are equal to the product of the Exchange Ratio
multiplied by the number of shares of CU Stock subject to such CU Options
(except that no option shall be deemed granted by the Surviving Company to
acquire a fractional share of BHI Stock). The new option agreements contemplated
by this Section 2.13(a) shall be distributed to CU employees who then hold
unexercised CU Options no later than 20 calendar days prior to the anticipated
Closing Date, which new option agreements as executed by the employees must be
returned to BHI no later than 10 calendar days prior to the anticipated Closing
Date in order for such assumption or replacement to be effective.
(b) Assumption of such CU Options shall be contingent upon (i) the Closing,
(ii) the execution prior to the Closing Date by the particular optionee, BHI and
CU of a new option agreement providing for the assumption or replacement of such
optionee's unexercised CU Options and (iii) the employment by CU Bank of the
optionee at the Effective Time.
(c) To the extent that the assumption or replacement of a CU Option by the
Surviving Company would result in the issuance of an option to purchase a
fractional share of BHI Stock, such fractional share option shall be canceled,
and the aggregate exercise price of the optionee's Replacement Options shall be
reduced by the proportionate amount of the aggregate exercise price attributable
to the fractional share.
(d) The assumption or replacement by the Surviving Company of CU Options
pursuant to the BHI Option Plan Amendment and the new option agreements shall
(unless otherwise agreed by BHI and CU) be subject to the following limitations:
(i) The excess of the aggregate fair market value of the shares of BHI
Stock subject to a Replacement Option immediately after the assumption over
the aggregate option exercise price for such shares of BHI Stock shall not
be greater than the excess of the aggregate fair market value of the shares
subject to the CU Option immediately before the assumption over the
aggregate option exercise price for such shares of CU Stock.
(ii) For any option, on a share by share comparison, the ratio of the
option exercise price to the fair market value of the BHI Stock subject to
the Replacement Option immediately after the assumption shall not be more
favorable to the optionee than the ratio of the CU Option exercise price to
the fair market value of the CU Stock subject to the option immediately
before the assumption.
12
<PAGE>
(iii) The optionee shall not receive additional benefits under the
Replacement Option which he did not have under the CU Option.
(iv) Replacement Options shall not be exercisable prior to the date
("Ratification Date") on which the BHI Option Plan Amendment is approved or
ratified by the holders of a majority of the outstanding shares of BHI
Stock. However, in the event that the exercise period for a Replacement
Option would otherwise expire during the period from the Effective Time
through the Ratification Date (including expiration of the exercise period
following termination of employment), such Replacement Option shall be
deemed to be a nonqualified stock option not described in Code Section 422
(if not otherwise already designated a nonqualified stock option) and the
exercise period for such Replacement Option shall be extended to the date
that is 90 days following the Ratification Date.
(e) Each CU Option issued pursuant to the CU Stock Plan that is outstanding
and unexercised at the Effective Time and that is not assumed or replaced
pursuant to Sections 2.13(a) to 2.13(d) (including any such CU Option as to
which an optionee has executed a new option agreement as contemplated by Section
2.13(b) but has ceased to be an employee of CU Bank at the Effective Time) shall
automatically terminate at the Effective Time.
(f) If approval or ratification of BHI's shareholders is not received on or
prior to June 30, 1998, each Replacement Option shall be void, and BHI shall pay
the holder thereof the amount provided by this Section 2.13(f), which amount
shall be calculated by reference to the Closing Price of BHI Stock on the
earlier of the date of disapproval or June 30, 1998 (the "Determination Date"),
and paid within five (5) Business Days thereafter in cash or cash equivalent or,
at the election of BHI in its sole discretion, by delivery of such number of
shares of BHI Stock as equals the amount to be paid hereunder divided by the
Closing Price of BHI Stock on the Determination Date, rounded down to a whole
share, plus cash for any fractional share. Any payment required by this Section
2.13(f) shall be in an amount equal to difference between (a) the product of the
number of shares of BHI Stock covered by such optionee's Replacement Options
multiplied by the Closing Price of BHI Stock on the relevant date, less (b) the
aggregate exercise price for all such Replacement Options held by the optionee.
(g) Except for CU Options assumed as provided herein: (i) CU shall cause the
CU Stock Plan and any other plan, program or arrangement pursuant to which CU is
or may be required to issue CU Stock or compensation based on CU Stock, and all
rights thereunder to purchase shares of CU Stock or BHI Stock, to be terminated
as of the Effective Time, and (ii) CU shall ensure that following the Effective
Time no holder of CU Options or any participant in any CU Stock Plan shall have
any right thereunder to acquire any equity securities of CU or of BHI.
(h) Each BHI Option issued and outstanding immediately prior to the
Effective Time shall not be affected by the Merger.
2.14 CU STOCK OPTION AGREEMENT. Concurrently with the execution of this
Agreement, BHI and CU have executed the CU Stock Option Agreement, pursuant to
which agreement CU has granted the right to purchase up to 19.9% of the issued
and outstanding shares of capital stock of CU on the terms and subject to the
conditions set forth in such agreement.
ARTICLE III
THE CLOSING
3.1 CLOSING. The closing of the Merger (the "Closing") will take place at
9:00 a.m. Pacific time, on the first Friday (unless such date is not a Business
Day, in which case it will be the preceding Business Day), that is both (a)
after satisfaction of each of the conditions set forth in Articles IX, X and XI;
and (b) no less than four Business Days after the occurrence of the Election
Deadline. The Closing will be conducted at 555 South Flower Street, 25th Floor,
Los Angeles, California 90071-2326 or such other location as the parties may
agree.
13
<PAGE>
3.2 FILINGS. Concurrently with execution of this Agreement, the parties
have executed the Agreement of Merger, and shall promptly reexecute the
Agreement of Merger if any changes thereto are necessary to conform to any
requirements of any regulatory agency having authority over the Merger. On the
Closing Date, or as soon as practicable thereafter, the parties shall cause to
be duly filed with DCCA, as required by applicable law and regulations, duly
executed Articles of Merger with the Agreement of Merger, together with all
requisite certificates. BHI and CU shall each execute, deliver and/or certify
each and every document, certificate or other instrument required under
California law to be filed with the California Secretary in order for the
effectiveness of the merger to be recognized in California. BHI shall file such
items no later than three Business Days following the Effective Time.
3.3 DOCUMENTS TO BE DELIVERED. At the Closing, the parties hereto shall
deliver, or cause to be delivered, such documents or certificates as may be
necessary, in the reasonable opinion of counsel for any of the parties, to
effectuate the transactions contemplated by this Agreement. From and after the
Effective Time, each of the parties hereto hereby covenants and agrees, without
the necessity of any further consideration whatsoever, to execute, acknowledge
and deliver any and all other documents and instruments and take any and all
such other action as may be reasonably necessary or desirable to effectuate the
transactions set forth herein or contemplated hereby, and the officers and
directors of the parties hereto shall execute and deliver, or cause to be
executed and delivered, all such documents as may reasonably be required to
effectuate such transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CU
CU represents and warrants to BHI as follows:
4.1 INCORPORATION, STANDING AND POWER. CU has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
State of California and is registered as a bank holding company under the BHC
Act. CU Bank has been duly incorporated and is validly existing as a state
chartered bank under the laws of the State of California and is a member of the
Federal Reserve System, and its deposits are insured by the FDIC in the manner
and to the fullest extent provided by law. CU and CU Bank have all requisite
corporate power and authority to own, lease and operate their respective
properties and assets and to carry on their respective businesses as presently
conducted. Neither the scope of the business of CU or CU Bank nor the location
of any of their respective properties requires that CU or CU Bank be licensed to
do business in any jurisdiction other than the State of California where the
failure to be so licensed would, individually or in the aggregate, have a
material adverse effect on the business, financial condition or results of
operations of CU and its subsidiaries taken as a whole.
4.2 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of CU
consists of 24,000,000 shares of CU Stock, of which 11,358,898 shares were
outstanding on February 21, 1997, and 10,000,000 shares of serial preferred
stock, none of which is outstanding. All of the outstanding shares of CU Stock
are duly authorized, validly issued, fully paid and nonassessable, and are not
subject to preemptive rights. As of the date of this Agreement, except for CU
Options covering 1,025,488 shares of CU Stock granted pursuant to the CU Option
Plan, outstanding warrants dated February 1, 1994 covering 7,500 shares of CU
Stock at an aggregate exercise price of $53,475 (the form of which has been
furnished to BHI) and 2,260,421 shares covered by the CU Stock Option Agreement,
there are no outstanding options, warrants or other rights in or with respect to
the unissued shares of CU Stock or CU serial preferred stock nor any securities
convertible into such stock, and CU is not obligated to issue any additional
shares of CU Stock or preferred stock or any additional options, warrants or
other rights in or with respect to the unissued shares of such stock or any
other securities convertible into such stock. Schedule 4.2 sets forth the name
of each holder of a CU Option, the number of shares of CU Stock covered by each
such CU Option, the exercise price per share and the expiration date of each
such CU Option.
14
<PAGE>
(b) As of the date of this Agreement, the authorized capital stock of CU
Bank consists of 4,000,000 shares of CU Bank Stock, of which 1,938,746 shares
are outstanding and all of which are owned of record and beneficially by CU. All
the outstanding shares of CU Bank Stock are duly authorized, validly issued,
fully paid and nonassessable (except for assessments that may be made by order
of the Superintendent pursuant to the Section 662 of the California Finance
Code) and are not subject to preemptive rights. There are no outstanding
options, warrants or other rights in or with respect to the unissued shares of
CU Bank Stock or any other securities convertible into such stock, and CU Bank
is not obligated to issue any additional shares of its common stock or any
options, warrants or other rights in or with respect to the unissued shares of
its common stock or any other securities convertible into such stock.
4.3 SUBSIDIARIES. Except for CU Bank, a wholly owned subsidiary of CU, CU
does not own, directly or indirectly (except as pledgee pursuant to loans or
upon acquisition in satisfaction of debt previously contracted), any outstanding
stock of or other equity or voting interest in any corporation, partnership,
joint venture or other entity.
4.4 FINANCIAL STATEMENTS. CU has previously made available to BHI copies
of the Financial Statements of Home, the Financial Statements of Corporate Bank,
and the Financial Statements of CU. Each of the Financial Statements of Home,
the Financial Statements of Corporate Bank and the Financial Statements of CU
(as well as the financial statements of CU included in any of its subsequent
Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q): (a) present or
will present fairly the consolidated financial condition of such entity and its
subsidiaries as of the respective dates indicated and their consolidated results
of operations and changes in financial position/cash flow, as applicable, for
the respective periods then ended (subject, in the case of the unaudited
consolidated interim financial statements, to normal recurring adjustments and
the absence of certain footnote information); (b) have been or will be prepared
in accordance with generally accepted accounting principles consistently applied
(except as otherwise indicated in such financial statements for periods ended
prior to the date of this Agreement); (c) did or will set forth as of the
respective dates indicated adequate reserves for all foreseeable loan losses and
other contingencies; and (d) are or will be in accordance with the books and
records of such entity and its subsidiaries.
4.5 SEC/REGULATORY FILINGS. Since January 1, 1994, CU, CU Bank, CUBNA and
Home have each filed all material reports, registrations and statements that
were required to be filed with the (i) FDIC; (ii) the FRB; (iii) the OCC; (iv)
the SEC; (v) any other applicable federal, state or local governmental or
regulatory authority; and (vi) any self-regulatory organization, and have paid
all fees and assessments due and payable in connection therewith. CU has
previously furnished to BHI a copy of the SEC Filings, FDIC Filings, OCC Filings
and FRB Filings of CU, CU Bank, CUBNA and Home. As of their respective dates,
the SEC Filings, FDIC Filings, OCC Filings and FRB Filings of CU, CU Bank, CUBNA
and Home complied in all material respects with the requirements of their
respective forms, the information contained therein was true and correct in all
material respects and, in the case of such filings with the SEC, did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.6 AUTHORITY OF CU. The execution and delivery by CU of this Agreement
and the Agreement of Merger and, subject to the requisite approval of the
shareholders of CU, the consummation of the transactions contemplated hereby,
have been duly and validly authorized by all necessary corporate action on the
part of CU, including without limitation approval by a vote of the board of
directors of CU (which approval includes a resolution recommending that this
Agreement and the transactions contemplated hereby be approved by the
shareholders of CU), and this Agreement is, and the Agreement of Merger will be,
a valid and binding obligation of CU, enforceable in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, liquidation, receivership, conservatorship, insolvency, moratorium
or other similar laws affecting the rights of creditors generally and by general
equitable principles and by applicable laws and regulations affecting bank
holding companies. Except as set forth in
15
<PAGE>
Schedule 4.6, neither the (i) execution and delivery by CU of this Agreement or
the Agreement of Merger; (ii) the consummation of the Merger or the transactions
contemplated herein; nor (iii) compliance by CU or CU Bank with any of the
provisions hereof, will: (a) conflict with or result in a breach of any
provision of the Articles of Incorporation, as amended, or Bylaws, as amended,
of CU or CU Bank; (b) constitute a breach of or result in a default (or give
rise to any rights of termination, cancellation or acceleration, or any right to
acquire any securities or assets) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, franchise, license, permit,
agreement or other instrument or obligation to which CU or CU Bank is a party,
or by which CU or CU Bank or any of their respective properties or assets is
bound, if in any such circumstances, such event could have consequences
materially adverse to CU and its subsidiaries taken as a whole; or (c) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
CU or CU Bank or any of their respective properties or assets, if such violation
could have consequences materially adverse to CU and its subsidiaries taken as a
whole. Except as set forth in the CU Schedules, no consent of, approval of,
notice to or filing with any regulatory agency or governmental authority having
jurisdiction over any aspect of the business or assets of CU or CU Bank, and no
consent of, approval of or notice to any other Person that if not obtained or
given would have consequences materially adverse to CU and its subsidiaries
taken as a whole, is required in connection with the execution and delivery by
CU of this Agreement or the Agreement of Merger, or the consummation by CU of
the Merger or the transactions contemplated hereby, except (i) the approval of
this Agreement and the transactions contemplated hereby by the shareholders of
CU; (ii) such approvals as may be required by the FRB, the Superintendent and
the Commissioner; (iii) the filings with DCCA, the California Franchise Tax
Board and the California Secretary pursuant to Section 3.2; and (iv) such
filings, approvals, consents, or waivers as are required under federal or state
securities laws.
4.7 INSURANCE. CU and CU Bank have policies of insurance and bonds with
respect to their respective assets and businesses against such casualties and
contingencies and in such amounts, types and forms as are appropriate for their
respective businesses, operations, properties and assets. All such insurance
policies and bonds are in full force and effect. To the knowledge of CU and
except as set forth on Schedule 4.7, no insurer under any such policy or bond
has canceled or indicated an intention to cancel or not to renew or to
materially amend any such policy or bond or generally disclaimed liability
thereunder. To the knowledge of CU and except as set forth on Schedule 4.7,
neither CU nor CU Bank is in default under any such policy or bond and all
material claims thereunder have been filed in a timely fashion. Set forth on
Schedule 4.7 is a list of all bonds and all policies of insurance carried and
owned by CU or CU Bank, showing the name of the issuer or insurance company, the
nature of the coverage, limits, the annual premiums and the expiration dates. CU
has made available to BHI copies of all such policies of insurance and bonds.
4.8 TITLE TO ASSETS. CU and CU Bank have good and marketable title to all
their respective material properties and assets, other than real property, owned
or stated to be owned by CU or CU Bank (including without limitation all
personal and intangible properties reflected in CU's September 30, 1996
Quarterly Report on Form 10-Q or acquired thereafter and in either case not
subsequently disposed of for fair value in the ordinary course of business). All
such properties and assets are free and clear of all mortgages, liens,
encumbrances, pledges or charges of any kind or nature except: (a) as set forth
in the SEC Filings of CU; (b) for liens or encumbrances for current taxes not
yet due; (c) for liens or encumbrances incurred in the ordinary course of
business; (d) for liens that are not substantial in character, amount or extent
or that do not materially detract from the value, or interfere with present use,
of the property subject thereto or affected thereby, or otherwise materially
impair the conduct of business of CU on a consolidated basis; or (e) as set
forth on Schedule 4.8.
4.9 REAL ESTATE. Schedule 4.9 sets forth a list of real property,
including leaseholds, owned or leased by CU or CU Bank (the "CU Real Property").
CU or CU Bank has good and marketable title to the CU Real Property, and valid
leasehold interests in the leaseholds, described on Schedule 4.9, free and clear
of all mortgages, covenants, conditions, restrictions, easements, liens,
security interests, charges, claims,
16
<PAGE>
assessments and encumbrances, except (a) for rights of lessors, co-lessees or
sublessees in such matters that are reflected in the lease; (b) for current
taxes not yet due and payable; (c) for liens and encumbrances of public record;
(d) for such imperfections of title, liens and encumbrances, if any, as do not
materially detract from the value of or materially interfere with the present
use of such property; and (e) as described in the SEC Filings of CU or set forth
on Schedule 4.9.
4.10 LITIGATION. Except as specifically identified in the SEC Filings of
CU or Schedule 4.10, there are no private or governmental suits, claims, actions
or proceedings pending, nor to CU's knowledge, threatened against CU or CU Bank
or against any of their respective directors, officers or employees relating to
the performance of their duties in such capacities or against or affecting any
properties of CU or CU Bank that individually or in the aggregate has had or may
reasonably be expected to have a material adverse effect upon the business,
financial condition or results of operations of CU and its subsidiaries taken as
a whole or to materially hinder or delay the Merger or which may involve a
payment by CU or CU Bank in excess of $100,000 of applicable insurance coverage.
Also, except as specifically identified in the SEC Filings of CU or on Schedule
4.10, there are no material judgments, decrees, stipulations or orders against
CU or CU Bank enjoining either of them or any of their respective directors,
officers or employees in respect of, or the effect of which is to prohibit, any
business practice or the acquisition of any property or the conduct of business
in any area. Schedule 4.10 lists all pending litigation in which CU, CU Bank, or
a Predecessor is named as a defendant, cross-defendant or third-party defendant.
4.11 TAXES.
(a) Each of CU and CU Bank has filed all Tax Returns required to be filed by
it or them on or before the date hereof and has paid all Taxes, together with
any interest and penalties owing in connection therewith, shown on such Tax
Returns to be due in respect of the periods covered by such Tax Returns or which
are required to be paid by them without the filing of a Tax Return. Neither CU
nor CU Bank has any known liability for Taxes with respect to such periods in
excess of the amounts so paid, except to the extent accruals or reserves
therefor are set forth in the CU Financial Statements or as otherwise set forth
in Schedule 4.11. Schedule 4.11 sets forth a complete list of (i) all Tax
Returns of CU and CU Bank for periods ending before January 1, 1997 which have
not yet been filed and the due dates therefor; (ii) dates through which the
Internal Revenue Service ("IRS"), California Franchise Tax Board, and any other
taxing authority has examined the Tax Returns of CU and CU Bank; (iii) all Tax
Returns of CU and CU Bank for which the statute of limitations for the
assessment of Taxes has not yet expired, the expiration date(s) of such statutes
of limitations and whether such statutes of limitations have been requested to
be extended; and (iv) all Tax Returns of CU and CU Bank which have been examined
by any taxing authority since January 1, 1994 or are presently under examination
by any taxing authority and the results or status of such examinations. Except
as set forth on Schedule 4.11, neither the IRS nor any other taxing authority is
now asserting or to the knowledge of CU threatening or proposing to assert any
deficiency or claim for material additional Taxes of CU or CU Bank, nor is any
administrative or court proceeding pending with respect thereto. Except as set
forth in Schedule 4.11, neither CU nor CU Bank has entered into a closing
agreement or similar arrangement with the IRS or any other taxing authority that
is presently in effect. CU and CU Bank have delivered or made available to BHI
true and complete copies of all Tax Returns filed by CU and CU Bank for all
years for which the statute of limitations for the assessment of Taxes has not
yet expired. CU and CU Bank have complied with all information reporting
requirements under the Code. For purposes only of this Section 4.11(a) and the
first two sentences of Section 4.11(b), the terms "CU" and "CU Bank" shall
include all predecessor entities or transferors for whose Taxes CU and/or CU
Bank is responsible.
(b) As of the Effective Time, each of CU and CU Bank will have timely filed
all Tax Returns not due as of the date hereof but required to be filed prior to
the Effective Time (taking into account valid extensions) and paid all Taxes,
together with any interest and penalties owing in connection therewith, shown on
such Tax Returns to be due in respect of the periods covered by such Tax Returns
or which are required to be paid by them without the filing of a Tax Return. The
positions taken by CU and CU Bank in
17
<PAGE>
connection with the Tax Returns described in the preceding sentence and in
Section 4.11(a) were (or in the case of the returns not yet filed, will be)
asserted with reasonable cause and in good faith. When available, CU and CU Bank
will deliver to BHI true and complete copies of their draft and final Tax
Returns for 1996. CU and CU Bank will not take any position on their 1996 Tax
Returns inconsistent with the federal income tax discussions in CU's SEC Filings
in 1996 with respect to any transactions described in such SEC Filings. CU has
no reason to believe that the tax opinions rendered in those transactions were
incorrect.
(c) Except as set forth in Schedule 4.11, Neither CU nor CU Bank has agreed
to or is required to make any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise. Except as set forth in
Schedule 4.11 to the knowledge of CU or CU Bank, CU and CU Bank have no
liability for Taxes, including employment taxes, of any Person other than CU or
CU Bank under Treasury Regulation Section 1.1502-6, or as a transferee or
successor, or otherwise. Except as set forth in Schedule 4.11, neither CU nor CU
Bank has made, nor is either of them obligated to make, nor is either of them a
party to any agreement that could reasonably be expected to obligate either of
them to make, any payments that are not deductible pursuant to Section 280G of
the Code. Neither CU nor CU Bank is a dealer within the meaning of Section 475
of the Code and the applicable Treasury Regulations.
4.12 COMPLIANCE WITH LAWS AND REGULATIONS. Neither CU nor CU Bank is in
default under or in breach of any provision of their respective Articles of
Incorporation or Bylaws, each as amended. Neither CU nor CU Bank is in material
violation of any law, ordinance, rule or regulation promulgated by any
governmental agency or regulatory authority having authority over either of
them, where such default, breach or violation would have a material adverse
effect on the business, financial condition or results of operations of CU and
its subsidiaries taken as a whole. Except for normal examinations conducted by
governmental agencies or regulatory authorities in the regular course of the
business of CU and CU Bank, or as set forth in SEC Filings of CU made prior to
the date hereof or in Schedule 4.12, (i) no governmental agency or regulatory
authority has initiated or, to the best knowledge of CU or CU Bank threatened,
any proceeding or investigation into the business or operations of CU, CU Bank
or any Predecessor since January 1, 1994 and (ii) neither CU nor CU Bank is
subject to any cease and desist order, written agreement, memorandum of
understanding or any similar regulatory action or order with any federal or
state governmental agencies or regulatory authorities, nor in receipt of any
extraordinary supervisory letter from, nor has it adopted any board resolution
at the request of, any of its regulators, nor been advised that any such
issuance or request is contemplated. Except as set forth in the Schedule 4.12,
there is no material unresolved violation, criticism or exception by any
government agency or regulatory authority with respect to any report or
statement relating to any examinations of CU, CU Bank or any Predecessor.
4.13 PERFORMANCE OF OBLIGATIONS. CU and CU Bank have performed in all
material respects all of the obligations required to be performed by them to
date, are not in default under or in breach of any term or provision of any
material covenant, contract, lease, indenture or any other covenant to which
either of them is a party, is subject or is otherwise bound, and no event has
occurred that, with the giving of notice or the passage of time or both, would
constitute such default or breach, where such default or breach would have a
material adverse effect on the business, financial condition or results of
operations of CU and its subsidiaries taken as a whole. Except for loans and
leases made by CU Bank in the ordinary course of business, to CU's knowledge, no
party with whom CU or CU Bank has an agreement that is of material importance to
the business of CU and its subsidiaries taken as a whole is in default
thereunder.
4.14 EMPLOYEES.
(a) There are no controversies pending or, to the knowledge of CU
threatened, between CU or CU Bank and any of their respective employees that are
likely to have a material adverse effect on the business, financial condition or
results of operations of CU and its subsidiaries taken as a whole. Neither CU
nor CU Bank is a party to any collective bargaining agreement with respect to
any of their respective employees or any labor organization to which their
respective employees or any of them belong.
18
<PAGE>
(b) Except as disclosed on Schedule 4.14 or as otherwise specifically
provided by this Agreement, there are no Understandings with respect to the
employment of any officer or employee of CU or CU Bank which are not terminable
by CU or CU Bank without liability on not more than thirty (30) days' notice.
(c) Except as disclosed in the CU Financial Statements or on Schedule 4.14,
all material sums due for employee compensation have been paid or accrued and
all employer contributions for employee benefits, including deferred
compensation obligations, and any benefits under any CU Employee Plan have been
duly and adequately paid or provided for in accordance with plan documents.
(d) Schedule 4.14 sets forth the name of each director, officer, employee,
agent or representative of CU or CU Bank and every other Person entitled to
receive any benefit, any increase in benefits, any acceleration of vesting or
benefits, or any payment of any amount under any existing employment agreement,
severance plan or other benefit plan or Understanding as a result of the
consummation of any transaction contemplated in this Agreement (other than
Montgomery Securities, Credit Suisse First Boston Corporation, accountants,
attorneys, proxy solicitors, information agents, printers or other Persons
providing services to CU or BHI of a type customarily provided in connection
with transactions like those contemplated by this Agreement), and with respect
to each such Person, the nature of such benefit, increase or acceleration or the
amount of such payment, the event triggering the benefit increase, acceleration
or payment, and the date of, and parties to, such employment agreement,
severance or other benefit plan or Understanding. BHI has been provided with a
complete and accurate listing of the names and current annual salary rates of
all Persons employed by CU or CU Bank showing for each such Person the amounts
paid or payable as salary, bonus payments and any indirect compensation for the
year ended December 31, 1996, the names of all of the directors and officers of
CU and CU Bank, and the names of all Persons, if any, holding tax or other
powers of attorney for CU or CU Bank.
4.15 BROKERS AND FINDERS. Except for financial advisory services performed
for CU by Montgomery Securities pursuant to an agreement dated January 2, 1997,
a copy of which has been furnished to BHI, neither CU nor CU Bank nor any of its
or their officers, directors, employees or agents, has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees in connection with this Agreement or the
transactions contemplated hereby.
4.16 MATERIAL CONTRACTS. Except as set forth on Schedule 4.16 hereto (all
items listed or required to be listed on Schedule 4.16 being referred to herein
as "CU Scheduled Contracts"), neither CU nor CU Bank is a party or otherwise
subject to:
(a) any employment, deferred compensation, bonus or consulting contract
that requires payment by CU or CU Bank of $100,000 or more per annum;
(b) any advertising, brokerage, licensing, dealership, representative or
agency relationship or contract not terminable by CU or CU Bank on 30 days'
or less notice and which requires payment by CU or CU Bank of $50,000 or
more per annum;
(c) any contract or agreement that restricts CU (or would restrict any
Affiliate of CU after the Effective Time) from competing in any line of
business with any Person or using or employing the services of any Person;
(d) any lease of real or personal property providing for annual lease
payments by or to CU or CU Bank in excess of $200,000 per annum other than
(i) financing leases entered into in the ordinary course of business in
which CU or CU Bank is lessor and (ii) leases of real property presently
used by CU Bank as banking offices;
(e) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any
interest of CU or CU Bank (other than as mortgagor or pledgor in the
ordinary course of their banking business or as mortgagee, secured party or
deed of trust
19
<PAGE>
beneficiary in the ordinary course of their business) in personal property
having a value of $200,000 or more;
(f) any agreement to acquire equipment or any commitment to make capital
expenditures of $200,000 or more;
(g) other than agreements entered into in the ordinary course of
business, including sales of Other Real Estate Owned, any agreement for the
sale of any property or assets in which CU or CU Bank has an ownership
interest or for the grant of any preferential right to purchase any such
property or asset;
(h) any agreement for the borrowing of any money (other than liabilities
or interbank borrowings made in the ordinary course of their banking
business or reflected in the Financial Statements of CU);
(i) any guarantee or indemnification which involves the sum of $200,000
or more, other than letters of credit or loan commitments issued in the
normal course of business;
(j) any supply, maintenance or landscape contracts not terminable by CU
or CU Bank without penalty on 30 days' or less notice and which provide for
payments in excess of $50,000 per annum;
(k) any material agreement which would be terminable other than at the
election of CU or CU Bank as a result of the consummation of the
transactions contemplated by this Agreement;
(l) any contract of participation with any other bank in any loan
entered into subsequent to December 31, 1995 in excess of $200,000 or any
sales with recourse of any kind to CU or CU Bank except the sale of mortgage
loans, Small Business Administration loans, servicing rights, repurchase or
reverse repurchase agreements, securities or other financial transactions in
the ordinary course of business;
(m) any other Understanding of any other kind not terminable on 30 days'
or less notice which involves future payments or receipts or performances of
services or delivery of items requiring payment of $50,000 or more to or by
CU or CU Bank other than payments made under or pursuant to loan agreements,
participation agreements and other agreements for the extension of credit in
the ordinary course of their business; or
(n) any Understanding that is otherwise material to the business,
financial condition or results of operations of CU and its subsidiaries
taken as a whole.
CU has made available to BHI copies of all CU Scheduled Contracts, including all
amendments and supplements thereto.
4.17 ABSENCE OF MATERIAL CHANGE. Except as set forth in CU's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996, or in other SEC
Filings of CU, or Schedule 4.17, since December 31, 1995, the businesses of CU
and CU Bank have been conducted only in the ordinary course, substantially in
the same manner as theretofore conducted and there has not occurred: (i) any
event that has had or may reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of CU and
its subsidiaries taken as a whole; (ii) any amendment to the Articles of
Incorporation or Bylaws of CU or CU Bank; (iii) any declaration, setting aside
or payment of any dividend or any other distribution in respect of the capital
stock of CU other than regular quarterly dividends; or (iv) any change by CU or
CU Bank in accounting principles or methods or tax methods, except as required
or permitted by the Financial Accounting Standards Board or by any governmental
agencies or regulatory authorities having jurisdiction over CU or CU Bank.
4.18 LICENSES AND PERMITS. CU and CU Bank have all material licenses and
permits that are necessary for the conduct of their respective businesses, and
such licenses are in full force and effect, except for any failure to be in full
force and effect that would not, individually or in the aggregate, have a
20
<PAGE>
material adverse effect on the business, financial condition, or results of
operations of CU and its subsidiaries taken as a whole. The properties and
operations of CU and CU Bank are and have been maintained and conducted, in all
material respects, in compliance with all applicable laws and regulations.
4.19 NO MATERIAL LIABILITIES; ENVIRONMENTAL.
(a) Schedule 4.19 sets forth all material liabilities of CU and CU Bank,
including liabilities for Hazardous Substances or under any Environmental Law,
contingent or otherwise, that are not reflected or reserved against in the CU
Financial Statements, except for liabilities incurred or accrued since September
30, 1996 in the ordinary course of business which have not had and cannot
reasonably be expected to have a material adverse effect on the business,
financial condition or results of operations of CU and its subsidiaries taken as
a whole. Except as set forth in Schedule 4.19, neither CU nor CU Bank knows of
any basis for the assertion against it of any liability, obligation or claim
that could reasonably be expected to have a material adverse effect on the
business, financial condition or results of operations of CU and its
subsidiaries taken as a whole.
(b) To CU's knowledge, all of the properties and operations of CU and CU
Bank are in compliance in all material respects with all material Environmental
Laws applicable to such properties and operations.
(c) To CU's knowledge, CU and CU Bank have each obtained all material
permits, licenses, and authorizations which are required for its and their
operations under Environmental Laws.
(d) Except as set forth in Schedule 4.19 or except to the extent that as a
result thereof no material liability has been incurred or could reasonably be
expected to be incurred by CU or CU Bank, to CU's knowledge, no Hazardous
Substances exist on, about, or within or have been used, generated, stored,
transported, disposed of on, or released from, any of the properties of CU or CU
Bank except in accordance in all material respects with Environmental Laws and
there are no underground storage tanks or surface impoundments on or in any such
properties. Neither CU nor CU Bank has any knowledge that any prior owners,
occupants or operators of any such properties ever deposited, disposed of, or
allowed to be deposited or disposed of, in, on, or under or handled or processed
on, or released, emitted or discharged from, such properties any Hazardous
Materials except in accordance in all material respects with Environmental Laws,
or that any prior or present owners, occupants or operators of any properties in
which it holds a security interest, mortgage or other lien or interest,
deposited or disposed of, in, on or under or handled and/or processed on, or
released, emitted or discharged from, such properties any Hazardous Material
except in accordance in all material respects with Environmental Laws, that in
any such case has caused or is reasonably likely to cause CU or CU Bank to incur
a material liability. The use which each of CU and CU Bank has made, makes or
intends to make of its properties will not result in the use, generation,
storage, transportation, accumulation, disposal, or release of any Hazardous
Substance on, in, or from any such properties except in accordance in all
material respects with applicable Environmental Laws.
(e) Except as set forth in Schedule 4.19, there is no action, suit,
proceeding, investigation, or inquiry before any court, administrative agency or
other governmental authority pending, or, to the knowledge of CU, threatened
against CU or CU Bank relating in any way to any violation of any applicable
Environmental Law. Except as set forth in Schedule 4.19: to the knowledge of CU,
neither it nor CU Bank has any material liability for remedial action with
respect to an Environmental Law, nor has CU or CU Bank received any written
requests for information relating to any material violation of any Environmental
Law from any governmental authority with respect to the condition, use, or
operation of any of its properties nor has either of them received any notice
from any governmental authority or any written notice from any other Person with
respect to any material violation of or material liability for any remedial
action under any Environmental Law.
(f) CU has made available to BHI true copies of all environmental
assessments and reports obtained by CU or CU Bank with respect to those
properties of CU or CU Bank owned, operated or leased by CU
21
<PAGE>
or CU Bank as of December 31, 1996, and will after the date of this Agreement
upon request of BHI make available to BHI environmental assessments and reports
in the possession of CU or CU Bank concerning other properties of CU and CU
Bank.
(g) As used in this Section 4.19, the term "properties" shall include: all
real property now or previously owned, operated or leased by CU or CU Bank or
any Predecessor, all property as to which CU or CU Bank holds any security
interest, deed of trust, mortgage or other lien, and all property of which CU or
CU Bank could be deemed an "owner" or "operator" under any applicable
Environmental Law; provided that solely for purposes of representations and
warranties made in this Section 4.19 on the date of this Agreement with respect
to properties that are not presently owned, operated or leased by CU or CU Bank
and with respect to properties in which CU or CU Bank holds any security
interest, deed of trust, mortgage or other lien, the "knowledge" of CU Bank as
of the date of this Agreement shall be limited to the actual knowledge of the
members of CU's Senior Management Group, without inquiry of such officers'
subordinates. Such knowledge limitation shall not apply with respect to the
representations and warranties under this Section 4.19 to be made as of the
Closing Date (and Schedule 4.19 shall be updated accordingly within 30 days
following execution of this Agreement), but (x) the truth and accuracy of the
representations made as of the date of this Agreement and those made as of the
Closing Date shall in each such case be determined by reference to the knowledge
standard applicable on such date and (y) any variations between information
disclosed pursuant to such representations made as of the date of this Agreement
as those made as of the Closing Date that result from application of such
alternate knowledge standards shall not constitute a failure of a condition
precedent under Article XI unless such variations have or could reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of CU and its subsidiaries taken as a whole.
4.20 EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.20 sets forth all employee benefit plans and any collective
bargaining agreements or labor contracts in which CU or CU Bank participates, or
by which they are bound, including, without limitation; (i) any profit sharing,
stock bonus, employee stock ownership, deferred compensation, bonus, stock
option, stock appreciation rights, phantom stock, stock purchase, pension,
retainer, consulting, retirement, welfare or incentive plan or agreement whether
legally binding or not; (ii) any plan providing for "fringe benefits" to its
employees, including but not limited to vacation, holiday, sick leave,
disability, severance, medical, hospitalization, dental, vision, counseling,
life insurance and other insurance plans, personal leave, employee discount,
educational, and related benefits; (iii) any written employment agreement and
any other employment agreement not terminable at will; or (iv) any other
"employee benefit plan" (within the meaning of Section 3(3) of ERISA) ("Employee
Benefit Plan") (collectively, the "CU Employee Plans"). Except as set forth in
Schedule 4.20, (i) CU is in compliance in all material respects with the
reporting and disclosure requirements of Part 1 of Subtitle IB of ERISA and the
corresponding provisions of the Code to the extent applicable to all Employee
Benefit Plans; (ii) CU has performed in all material respects all of its
obligations under all CU Employee Plans required to be performed heretofore; and
(iii) there are no actions, suits or claims pending or, to the knowledge of CU
or CU Bank, threatened against any CU Employee Plan or the assets of such plans,
and to the best knowledge of CU, no facts exist which are likely to give rise to
any material actions, suits or claims against such plans or the assets of such
plans. CU or CU Bank shall notify BHI in writing of any such actions, suits or
claims existing after the date of this Agreement but before the Effective Time.
(b) The "employee pension benefit plans" (within the meaning of Section 3(2)
of ERISA) ("Employee Pension Benefit Plan") described on Schedule 4.20 have been
duly authorized by the Board of Directors of CU. Except as set forth in Schedule
4.20, each such plan and associated trust intended to be qualified under Section
401(a) and to be exempt from tax under Section 501(a) of the Code, respectively,
has either received a favorable determination letter from the IRS, has applied
for such a determination letter (or will apply for such a determination letter)
before the expiration of the remedial amendment period set forth in Section
401(b) of the Code, as the IRS may extend such period, and to the knowledge of
22
<PAGE>
CU no event has occurred that will or is likely to give rise to disqualification
of any such plan which is intended to be qualified under Section 401(a) of the
Code or loss of the exemption from tax of any such trust which is intended to be
exempt from tax under Section 501(a) of the Code. Except as disclosed in
Schedule 4.20, no event has occurred that will or is likely to subject any such
plans to material tax under Section 511 of the Code. Except as disclosed in
Schedule 4.20, none of such plans has engaged in a merger or consolidation with
any other plan or transferred assets or liabilities from any other plan. No
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) has occurred with respect to any of such plans which could
subject CU or CU Bank to material excise tax or penalty. All costs of each
Employee Pension Benefit Plan have been provided for on the basis of consistent
methods in accordance with sound actuarial assumptions and practices. No
Employee Pension Benefit Plan maintained by CU or CU Bank, or any entity which
is part of a group which includes CU or CU Bank and which is treated as a single
employer under Section 414 of the Code ("Controlled Group Member") has incurred
any "accumulated funding deficiency" (as defined in Section 302(2) of ERISA),
whether or not waived, taking into account contributions made within the period
described in Section 412(c)(10) of the Code; nor has CU or CU Bank failed to
make any contributions or pay any amount due and owing as required by law or the
terms of any Employee Benefit Plan or employment agreement. No nondeductible
contributions (within the meaning of Section 4972 of the Code) have been made
with respect to any Employee Pension Benefit Plan which could subject CU or CU
Bank to any excise tax or penalty. Since the last valuation date for each
Employee Pension Benefit Plan, there has been no amendment or change to such
plan that would increase the amount of benefits thereunder.
(c) Except as set forth on Schedule 4.20, neither CU nor CU Bank (nor any
Controlled Group Member) sponsors or participates in, or has sponsored or
participated in, any Employee Pension Benefit Plan to which Section 4021 of
ERISA applies that would create a liability under Title IV of ERISA.
(d) Neither CU nor CU Bank (nor any Controlled Group Member) sponsors or
participates in, or has sponsored or participated in, any Employee Pension
Benefit Plan that is a "multiemployer plan" (within the meaning of Section 3(37)
of ERISA) or "multiple employer plan" (within the meaning of Section 413 of the
Code).
(e) All group health plans of CU or CU Bank (including any plans of
Affiliates of CU that must be taken into account under Section 162(i) or (k) of
the Code as in effect immediately prior to the Technical and Miscellaneous
Revenue Act of 1988 and Section 4980B of the Code) have been operated in
compliance in all material respects with the group health plan continuation
coverage requirements and notice requirements of Section 4980B of the Code and
Sections 601 through 608 of ERISA to the extent such requirements are
applicable.
(f) To the best knowledge of CU or CU Bank, there have been no acts or
omissions by CU or CU Bank that have given rise to or may give rise to material
fines, penalties, or related charges under Sections 502(c) or (i) or 4071 of
ERISA or Chapter 43 of the Code which could be imposed on CU or CU Bank.
(g) Except as described in Section 4.20(j), neither CU or CU Bank maintains
any Employee Benefit Plan or employment agreement pursuant to which any benefit
or other payment will be required to be made by CU or CU Bank to, or pursuant to
which any benefit or other payment will accrue or vest in, any director, officer
or employee of CU or CU Bank, in either case as a result of the consummation of
the transactions contemplated by the Agreement.
(h) No "reportable event," as defined in Section 4043 of ERISA, has occurred
with respect to any of the Employee Pension Benefit Plans.
(i) All amendments required to bring each of the Employee Pension Benefit
Plans into conformity with all of the applicable provisions of Section 401(a) of
the Code have been made, or will be made before
23
<PAGE>
the expiration of the remedial amendment period, if applicable, as set forth
under Section 401(b) of the Code, as such period may be extended by the IRS.
(j) CU has furnished BHI with true and correct copies of all documents with
respect to the plans and agreements referred to in Schedule 4.20 delivered as of
the date of the Agreement, including all amendments and supplements thereto, and
all related summary plan descriptions. For each of the Employee Benefit Plans of
CU and CU Bank referred to in Schedule 4.20 delivered as of the date of the
Agreement, CU has furnished BHI with true and correct copies of (i) to the
extent required to be filed, the Form 5500, 5500-C or 5500-R which was filed in
each of the three most recent plan years, including without limitation, all
schedules thereto and all financial statements with attached opinions of
independent accountants to the extent required; (ii) if applicable, the most
recent determination letter from the IRS; (iii) if applicable, the statement of
assets and liabilities as of the most recent valuation date; and (iv) if
applicable, the statement of changes in fund balance and in financial position
or the statement of changes in net assets available for benefits under each of
said plans for the most recently ended plan year. The documents referred to in
subdivisions (iii) and (iv) fairly present the financial condition of each of
said plans as of and at such dates and the results of operations of each of said
plans, all in accordance with generally accepted accounting principles or on the
cash method of accounting applied on a consistent basis.
(k) Except as set forth in Schedule 4.20, neither CU nor CU Bank has any
obligation to provide, or any liability with respect to, any post-retirement
benefits for any current or former employee under any "welfare benefit plan"
(within the meaning of Section 3(1) of ERISA).
(l) The written terms of each of the CU Employee Plans and any related trust
agreement, group annuity contract, insurance policy or other agreement, have
been administered in substantial compliance with the applicable requirements of
ERISA.
(m) All contributions to CU Employee Plans for all periods ending prior to
the Effective Time (including periods from the first day of the current plan
year to the Effective Time) will be made or accrued prior to the Effective Time
by CU or CU Bank, as applicable, in accordance with prior practice.
(n) All material expenses and liabilities up to the Effective Time with
respect to all of the CU Employee Plans have been, or will on the Effective
Time, be fully and properly accrued on CU's books and records (subject to normal
recurring audit adjustments in the case of unaudited books, records, and
financial statements) to the extent required by generally accepted accounted
principles.
4.21 CORPORATE RECORDS. The minute books of CU and CU Bank accurately
reflect (or in the case of meetings held between December 31, 1996 and the date
of this Agreement will in due course so reflect) all material actions taken by
the respective shareholders, boards of directors and committees of CU and CU
Bank and contain true and complete copies of their Articles of Incorporation,
Bylaws and other charter documents, and all amendments thereto.
4.22 OFFICES AND ATMS. Schedule 4.22 sets forth the headquarters of CU and
CU Bank (identified as such) and each of the offices and automated teller
machines ("ATMs") maintained and operated by CU Bank (including, without
limitation, representative and loan production offices and operations centers)
and the location thereof. Except as set forth on Schedule 4.22, neither CU nor
CU Bank maintains any other office or ATM nor conducts business at any other
location. Neither CU nor CU Bank has applied for or received permission to open
any additional branch or operate at any other location.
24
<PAGE>
4.23 OPERATING LOSSES. Schedule 4.23 sets forth a list of any Operating
Loss (as herein defined) which to the knowledge of CU or CU Bank has occurred at
CU Bank during the period after September 30, 1996, and any other action or
omission known to CU or CU Bank that might reasonably be expected to result in
the incurrence of any individual Operating Loss after September 30, 1996, which,
net of any insurance proceeds payable in respect thereof, would exceed $100,000.
For purposes of this Agreement "Operating Loss" means any loss resulting from
cash shortages, lost or misposted items, disputed clerical and accounting
errors, forged checks, payment of checks over stop payment orders, merchant
credit card processing, counterfeit money, wire transfers made in error, theft,
robberies, defalcations, check kiting, fraudulent use of credit cards or
electronic teller machines or other similar acts or occurrences.
4.24 LOAN PORTFOLIO. All loans or other extensions of credit, and
guaranties, security agreements or other agreements supporting any loans or
extensions of credit, and investments of CU or CU Bank are, in all material
respects, legal, enforceable and authorized under applicable federal and state
laws and regulations, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors generally and by general equitable principles. Except as previously
disclosed in writing to BHI, no loans or investments held by CU Bank are, as of
December 31, 1996 (i) more than ninety (90) days past due with respect to any
scheduled payment of principal or interest; (ii) classified by any bank
regulatory authority or any unit of CU or CU Bank as "Loss," "Doubtful,"
"Substandard," "Special Mention," or "Criticized" or any comparable
classification by any bank regulatory authority or any unit of CU or CU Bank; or
(iii) on a non-accrual status in accordance with CU Bank's loan review
procedures. No material amount of any such investments is subject to any
restrictions, contractual, statutory or other, that would materially impair the
ability of the entity holding such investment to dispose freely of any such
investments at any time, except restrictions on the public distribution or
transfer of any such investments under the Securities Act and the regulations
thereunder or state securities laws and pledges or security interests given in
connection with government deposits. Except as previously disclosed in writing
to BHI, CU Bank has no loans, leases or other extensions of credit outstanding,
or commitments to make any loans, leases or other extensions of credit to any
Affiliates of CU or CU Bank which are not on substantially the same terms
(including interest rates, repayment terms and collateral) as would be available
for comparable transactions with Persons of similar creditworthiness who are not
Affiliates of CU or CU Bank. For each outstanding loan or extension of credit or
commitment to make a loan or extension of credit where the original principal
amount is in excess of $100,000 and which by its terms is either secured by
collateral ("Secured Loan") or supported by a guaranty or similar obligation
("Covered Loan"), in the case of each Secured Loan, to the best knowledge of CU
Bank, the security interest has been perfected and, in the case of each Covered
Loan, the guaranty or similar obligation has been executed and delivered to CU
Bank and is still in full force and effect.
4.25 POWER OF ATTORNEY. Neither CU nor CU Bank has granted any Person a
power of attorney or similar authorization that is presently in effect or
outstanding other than in connection with a tax audit.
4.26 DISCLOSURE DOCUMENTS, REPORTS AND APPLICATIONS. None of the
information supplied or to be supplied by or on behalf of CU (the "CU Supplied
Information") for inclusion in the S-4 or the Proxy Statement, or incorporated
by reference therein, or any amendments or supplements thereto will, at the
respective times such documents are filed or become effective, and in the case
of the Proxy Statement or any amendment thereof or supplement thereto at the
date it is mailed to shareholders of CU and at the time of the CU Shareholders'
Meeting, contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. CU represents, warrants and agrees that through the Effective
Time of the Merger, each of the reports, registrations, statements, applications
and other filings filed by it or CU Bank with the SEC, the FRB or any other
governmental agency or regulatory authority will be filed on a timely basis,
will comply in all material respects with all of the applicable statutes, rules
and regulations enforced or promulgated by the governmental agency or
25
<PAGE>
regulatory authority with which it will be filed and that the information
contained therein will be true and correct in all material respects (and in the
case of such filings with the SEC will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they will be made, not misleading). Any financial statement contained in
any such report, registration, statement, application or other filing that is
intended to present the financial position of CU and/or CU Bank will fairly
present the financial position of such entities or entity and will be prepared
in accordance with generally accepted accounting principles or applicable
regulatory accounting principles consistently applied during the periods
involved. Notwithstanding anything to the contrary set forth in this Section
4.26, CU makes no representation or warranty with respect to any information
supplied by and relating to BHI.
4.27 ACCURACY OF INFORMATION FURNISHED. The representations and warranties
made by CU or CU Bank hereby contain no statements of material fact which are
untrue or misleading, or omit to state any material fact which is necessary
under the circumstances to prevent the statements contained herein from being
misleading.
4.28 LOAN SERVICING PORTFOLIO. Except as set forth on Schedule 4.28, CU
Bank services no loans owned in whole or in part by other parties.
4.29 CERTAIN INTERESTS. Schedule 4.29 sets forth a description of each
instance in which an executive officer or director of CU or CU Bank or any such
Person's related interests (as defined under FRB Regulation "O") (a) has any
material interest in any property, real or personal, tangible or intangible,
used by or in connection with the business of CU or CU Bank; (b) is indebted to
CU or CU Bank except for normal business expense advances; or (c) is a creditor
(other than as a deposit holder of CU Bank) of CU or CU Bank except for amounts
due under normal salary and related benefits or reimbursement of ordinary
business expenses. Except as set forth in Schedule 4.29, all such arrangements
are arm's length transactions pursuant to normal commercial terms and
conditions.
4.30 INVESTMENT SECURITIES. All investment securities held by CU or CU
Bank are legal investments under applicable law and regulations. Each of CU and
CU Bank has good and marketable title to all securities held by it (except
securities sold under repurchase agreements or held in any fiduciary or agency
capacity), free and clear of any mortgage, lien, pledge or encumbrance, except
to the extent such securities are pledged in the ordinary course of business
consistent with prudent banking practice to secure obligations of CU or CU Bank.
Such securities are valued on the books of CU in accordance with generally
accepted accounting principles.
4.31 COMMUNITY REINVESTMENT ACT. Each of CU Bank, Home and Corporate Bank
received a rating of "satisfactory" in its most recent examination or interim
review with respect to the Community Reinvestment Act. CU Bank has not been
advised of any supervisory concerns regarding CU Bank's compliance with the
Community Reinvestment Act.
4.32 KNOWLEDGE AS TO CONDITIONS. CU knows of no reason why the approvals,
consents and waivers of governmental authorities referred to in Section 9.3
should not be obtained without the imposition of any burdensome condition of the
type referred to in Section 11.4.
4.33 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for loan and lease
losses for CU Bank is adequate in accordance with generally accepted accounting
principles and regulatory accounting principles.
4.34 LISTING OF LOANS. Copies, in writing, have been made available to BHI
of the detailed listing of all loans and notes receivable of CU and CU Bank as
of December 31, 1996, including participations, with the outstanding principal
balance of each such loan and note receivable, and the past due status of any
loan or note receivable, and such copies reflect correctly the detail of trial
balance totals in all material respects as of the date of such reports.
26
<PAGE>
4.35 DERIVATIVE TRANSACTIONS. Except for repurchase agreements and reverse
repurchase agreements, and except as disclosed on Schedule 4.35, neither CU nor
CU Bank is a party to a transaction in or involving forwards, futures, options
on futures, swaps or other derivative instruments.
4.36 TRUST ADMINISTRATION. Neither CU nor CU Bank presently exercises
trust powers, including, but not limited to, trust administration, and neither
they nor any Predecessor has exercised such trust powers for a period of at
least 3 years prior to the date hereof. The term "trusts" as used in this
Section 4.36 includes (i) any and all common law or other trusts between an
individual, corporation or other entities and CU, CU Bank or a Predecessor, as
trustee or co-trustee, including, without limitation, pension or other qualified
or nonqualified employee benefit plans, compensation, testamentary, inter vivos,
and charitable trust indentures; (ii) any and all decedents' estates where CU,
CU Bank or a Predecessor is serving or has served as a co-executor or sole
executor, personal representative or administrator, administrator de bonis non,
administrator de bonis non with will annexed, or in any similar fiduciary
capacity; (iii) any and all guardianships, conservatorships or similar positions
where CU, CU Bank or a Predecessor is serving or has served as a co-grantor or a
sole grantor or a conservator or a co-conservator of the estate, or any similar
fiduciary capacity; and (iv) any and all agency and/or custodial accounts and/or
similar arrangements, including plan administrator for employee benefit
accounts, under which CU, CU Bank or Predecessor is serving or has served as an
agent or custodian for the owner or other party establishing the account with or
without investment authority.
4.37 ACCOUNTING RECORDS.
(a) Each of CU and CU Bank maintains records that accurately, validly and
fairly reflect its transactions and dispositions of assets and maintains a
system of internal accounting controls, policies and procedures sufficient to
make it reasonable to expect that (i) such transactions are executed in
accordance with its management's general or specific authorization, (ii) such
transactions are recorded in conformity with generally accepted accounting
principles and in such a manner as to permit preparation of financial statements
in accordance with generally accepted accounting principles and any other
criteria applicable to such statements and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with management's
general or specific authorization, (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences, and (v) records of such transactions
are retained, protected and duplicated in accordance with prudent banking
practices and applicable regulatory requirements.
(b) The data processing equipment, data transmission equipment, related
peripheral equipment and software used by CU and CU Bank in the operation of
their businesses (including any disaster recovery facility) to generate and
retrieve such records (whether owned or leased by CU or CU Bank, or provided
under any agreement or other arrangement with a third party for data processing
services) are adequate for the needs of CU and CU Bank.
(c) CU has made available to BHI for inspection all management letters and
opinions and all reviews, correspondence, and other documents in the files of CU
and CU Bank, prepared by any certified public accounting firm and delivered to
CU, CU Bank or any of its Predecessors since January 1, 1994.
4.38 INTELLECTUAL PROPERTY RIGHTS. To CU's knowledge, Schedule 4.38
contains a true, correct and complete list of all trademarks, service marks and
patents used by CU or CU Bank that are material to the conduct of their
respective businesses. To CU's knowledge, CU or CU Bank owns, has the exclusive
right to use, sell, license or dispose of, has the exclusive right to bring
actions for the infringement of, and has taken all appropriate actions and made
all applicable applications and filings pursuant to any applicable laws to
perfect or protect its interest in, all such trademarks, services marks and
patents. Neither the execution, delivery and performance of this Agreement nor
the consummation of the Merger or any of the other transactions contemplated
hereby will materially impair the right of CU, CU Bank or the Surviving Company
to use, sell, license or dispose of or to bring any action for the infringement
of, any such trademarks, service marks or patents. CU and CU Bank have taken all
reasonable steps necessary or
27
<PAGE>
appropriate to safeguard and maintain their respective proprietary rights in all
such trademarks, service marks and patents.
4.39 1996 FINANCIAL STATEMENTS. The audited consolidated financial
statements of CU and its subsidiaries included in CU's Annual Report on Form
10-K for the year ended December 31, 1996 will with respect to the financial
data reported thereon conform in all respects to the summary consolidated
statements of income, selected financial data and summary consolidated
statements of financial condition included in the CU news release dated January
29, 1997 (except to the extent of reductions in net income not exceeding
$200,000 in the aggregate that result from normal recurring audit adjustments).
4.40 POOLING OF INTERESTS. The merger of Home with CU has been and will be
accounted for on a pooling of interests basis, and no event has occurred or is
reasonably foreseeable (including any transaction contemplated by this
Agreement) that could alter such treatment.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BHI
BHI represents and warrants to CU as follows:
5.1 INCORPORATION, STANDING AND POWER. BHI has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
State of Hawaii and is registered as a bank holding company under the BHC Act.
BHI has all requisite corporate power and authority to own, lease and operate
its properties and assets and to carry on its business as presently conducted.
BHI is licensed to do business in all jurisdictions where such licensing is
required, except where the failure to be so licensed would not have a material
adverse effect on the business, financial condition, results of operations or
prospects of BHI and its subsidiaries on a consolidated basis.
5.2 CAPITALIZATION. As of the date of this Agreement, the authorized
capital stock of BHI consists of 100,000,000 shares of BHI Stock, of which
39,750,880 shares were outstanding on February 21, 1997, and 20,000,000 shares
of preferred stock, none of which are outstanding. All of the outstanding shares
of BHI Stock are duly authorized, validly issued, fully paid and nonassessable,
and are not subject to preemptive rights.
5.3 FINANCIAL STATEMENTS. BHI has previously furnished to CU a copy of the
Financial Statements of BHI. The Financial Statements of BHI (as well as the
financial statements of BHI included in any of its subsequent Annual Reports on
Form 10-K or Quarterly Reports on Form 10-Q): (a) present or will present fairly
the consolidated financial condition of BHI and its subsidiaries as of the
respective dates indicated and their consolidated results of operations and
changes in financial position/cash flow, as applicable, for the respective
periods then ended (subject, in the case of the unaudited consolidated interim
financial statements, to normal recurring adjustments and the absence of certain
footnote information); (b) have been or will be prepared in accordance with
generally accepted accounting principles consistently applied (except as
otherwise indicated in such financial statements for periods ended prior to the
date of this Agreement); (c) did or will set forth as of the respective dates
indicated adequate reserves for all foreseeable loan losses and other
contingencies; and (d) are or will be in accordance with the books and records
of BHI and its subsidiaries, which books and records are and will be complete
and accurate in all material respects and which have been and will have been
maintained in accordance with good business practices.
5.4 SEC/REGULATORY FILINGS. Since January 1, 1994, BHI has filed all
material reports, registrations, and statements that were required to be filed
with the SEC and any other applicable federal, state or local governmental
agency or regulatory authority. BHI has previously furnished to CU a copy of the
SEC Filings of BHI. As of their respective dates, the SEC Filings of BHI
complied in all material respects with the requirements of their respective
forms and did not contain any untrue statement of a material fact or
28
<PAGE>
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
5.5 AUTHORITY OF BHI. The execution and delivery by BHI of this Agreement
and the Agreement of Merger, and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of BHI, including without limitation approval by a
vote of the board of directors of BHI, and this Agreement is, and the Agreement
of Merger will be, a valid and binding obligation of BHI, enforceable in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, liquidation, receivership, conservatorship,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally and by general equitable principles and by applicable law and
regulations affecting bank holding companies. Except as set forth in Schedule
5.5, neither the (i) execution and delivery by BHI of this Agreement or the
Agreement of Merger; (ii) the consummation of the Merger or the transactions
contemplated herein; nor (iii) compliance by BHI with any of the provisions
hereof, will: (a) conflict with or result in a breach of any provision of its
Articles of Incorporation, as amended, or Bylaws, as amended; (b) constitute a
breach of or result in a default (or give rise to any rights of termination,
cancellation or acceleration, or any right to acquire any securities or assets)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, franchise, license, permit, agreement or other instrument or
obligation to which BHI or any BHI subsidiary is a party, or by which BHI or any
BHI subsidiary or any of their respective properties or assets is bound, if in
any such circumstances, such event could have consequences materially adverse to
BHI and its subsidiaries taken as a whole, or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to BHI or any BHI
subsidiary or any of their respective properties or assets, if such violation
could have consequences materially adverse to BHI and its subsidiaries taken as
a whole. Except as set forth in the BHI Schedules, no consent of, approval of,
notice to or filing with any governmental agency or regulatory authority having
jurisdiction over any aspect of the business or assets of BHI, and no consent
of, approval of or notice to any other Person that if not obtained or given
would have consequences materially adverse to BHI and its subsidiaries taken as
a whole, is required in connection with the execution and delivery by BHI of
this Agreement or the Agreement of Merger, or the consummation by BHI of the
Merger and transactions contemplated hereby, except (i) such approvals as may be
required by the FRB, the Superintendent and the Commissioner; (ii) the filings
with DCCA, the California Franchise Tax Board and the California Secretary
pursuant to Section 3.2; and (iii) such filings, approvals, consents or waivers
as are required under federal or state securities laws.
5.6 LITIGATION. Except as specifically identified in the SEC Filings of
BHI or Schedule 5.6, there is no private or governmental suit, claim, action or
proceeding pending, nor to BHI's knowledge, threatened against BHI or any BHI
subsidiary or against any of their respective directors, officers or employees
relating to the performance of their duties in such capacities or against or
affecting any properties of BHI or its subsidiaries that has had or may
reasonably be expected to have a material adverse effect upon the business,
financial condition or results of operations of BHI and its subsidiaries taken
as a whole or to materially hinder or delay the Merger.
5.7 COMPLIANCE WITH LAWS AND REGULATIONS. Neither BHI nor any BHI
subsidiary is in default under or in breach of any provision of its Articles of
Incorporation or Association, as amended, as the case may be, or Bylaws, as
amended. Neither BHI nor any BHI subsidiary is in material violation of any law,
ordinance, rule or regulation promulgated by any governmental agency having
authority over any of them, where such default, breach or violation would have a
material adverse effect on the business, financial condition or results of
operations of BHI and its subsidiaries taken as a whole. Except for normal
examinations conducted by governmental agencies and regulatory authorities in
the regular course of the business of BHI and its subsidiaries, or as set forth
in Schedule 5.7, (i) no governmental agency or regulatory authority has
initiated or, to the best knowledge of BHI threatened, any proceeding or
investigation into the business or operations of BHI or its banking subsidiaries
since January 1, 1994 and (ii) neither BHI nor any BHI banking subsidiary is
subject to any cease and desist order, written
29
<PAGE>
agreement, memorandum of understanding or any similar regulatory action or order
with any federal or state governmental agencies or regulatory authorities, nor
in receipt of any extraordinary supervisory letter from, nor has it adopted any
board resolution at the request of, any of its regulators, nor been advised that
any such issuance or request is contemplated. Except as set forth in Schedule
5.7, there is no material unresolved violation, criticism or exception by any
government agency or regulatory authority with respect to any report or
statement relating to any examinations of BHI or any BHI banking subsidiary by
any governmental agency or regulatory authority with respect to any report or
statement relating to any examinations of BHI or such subsidiary.
5.8 BROKERS AND FINDERS. Other than financial advisory services performed
for BHI by Credit Suisse First Boston Corporation, neither BHI nor any of its
subsidiaries nor any of its or their officers, directors, employees or agents,
has employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees in connection with
this Agreement or the transactions contemplated hereby.
5.9 ABSENCE OF MATERIAL CHANGE. Except as set forth in BHI's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996, or in other SEC
Filings of BHI, or in Schedule 5.9, since December 31, 1995 there has not
occurred any event that has had or may reasonably be expected to have a material
adverse effect on the business, financial or results of operations of BHI and
its subsidiaries taken as a whole or any change by BHI in accounting principles
or methods or tax methods, except as required or permitted by the Financial
Accounting Standards Board or by any governmental agencies or regulatory
authorities having jurisdiction over BHI or its subsidiaries.
5.10 DISCLOSURE DOCUMENTS, REPORTS AND APPLICATIONS. None of the
information supplied or to be supplied by or on behalf of BHI (the "BHI Supplied
Information") for inclusion in the S-4 or the Proxy Statement, or incorporated
by reference therein, or any amendments or supplements thereto will, at the
respective times such documents are filed or become effective, and in the case
of the Proxy Statement or any amendment thereof or supplement thereto at the
date it is mailed to shareholders of CU and at the time of the CU Shareholders'
Meeting, contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. BHI represents, warrants and agrees that through the Effective
Time of the Merger, each of the reports, registrations, statements, applications
and other filings filed by it with the SEC, FRB or any other governmental agency
or regulatory authority will be filed on a timely basis, will comply in all
material respects with all of the applicable statutes, rules and regulations
enforced or promulgated by the governmental agency or regulatory authority with
which it will be filed, and that the information contained therein will be true
and correct in all material respects (and in the case of such filings with the
SEC will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they will be made, not
misleading). Any financial statement contained in any such report, registration,
statement, application or other filing that is intended to present the financial
position of BHI will fairly present the financial position of BHI and will be
prepared in accordance with generally accepted accounting principles or
applicable regulatory accounting principles consistently applied during the
periods involved. Notwithstanding anything to the contrary set forth in this
Section 5.10, BHI makes no representation or warranty with respect to any
information supplied by and relating to CU or CU Bank.
5.11 ACCURACY OF INFORMATION FURNISHED. The representations and warranties
made by BHI hereby or in the schedules hereto contain no statements of material
fact which are untrue or misleading, or omit to state any material fact which is
necessary under the circumstances to prevent the statements contained herein or
in such schedules from being misleading.
5.12 CAPITAL STOCK. The BHI Stock issuable to holders of CU Stock upon
consummation of the Merger will be duly authorized, validly issued, fully paid
and nonassessable at the Effective Time.
30
<PAGE>
5.13 KNOWLEDGE AS TO CONDITIONS. BHI knows of no reason why the approvals,
consents and waivers of governmental agencies and regulatory authorities
referred to in Section 9.3 should not be obtained without the imposition of any
burdensome condition of the type referred to in Section 11.4.
ARTICLE VI
COVENANTS OF CU
PENDING EFFECTIVE TIME OF THE MERGERS
CU covenants and agrees with BHI as follows:
6.1 LIMITATION ON CU'S AND CU BANK'S CONDUCT PRIOR TO EFFECTIVE
TIME. Between the date hereof and the Effective Time, except as contemplated by
this Agreement, CU and CU Bank will conduct their respective businesses only in
the normal and customary manner and in accordance with sound banking practices,
and CU and CU Bank shall not, without the prior written consent of BHI (which
shall not be unreasonably withheld):
(a) issue any CU Stock (except pursuant to the exercise of CU Options
outstanding as of the date hereof and those warrants identified in Section
4.2(a)), CU preferred stock, CU Bank Stock, CU Bank preferred stock, any
other securities (including long term debt) of CU or CU Bank or any rights,
options or securities to acquire any CU Stock, CU preferred stock, CU Bank
Stock, CU Bank preferred stock or any other securities (including long term
debt) of CU or CU Bank;
(b) except for paying regular quarterly dividends (subject to Section
6.10) in an amount not to exceed $0.07 per share of CU Stock, declare, set
aside or pay any dividend or make any other distribution upon, or purchase
or redeem any shares of, CU Stock (but nothing in this Agreement shall
preclude payment of dividends by CU Bank to CU in the ordinary course of
business);
(c) amend their respective Articles of Incorporation or its Bylaws;
(d) grant any general or uniform increase in the rate of pay of
employees or employee benefits except with respect to salary increases
permitted by subsection (e) below;
(e) grant any material increase in salary, incentive compensation or
employee benefits or pay any bonus to any Person (except for (i) such salary
increases as are made in the ordinary course of business consistent with
past practices; (ii) such other increases as are required by any
pre-existing contract, arrangement or plan disclosed on the CU Schedules;
and (iii) the bonus payments referred to in Section 12.5);
(f) make any capital expenditure in excess of $250,000, except for
ordinary repairs, renewals and replacements;
(g) compromise or otherwise settle or adjust any assertion or claim of a
deficiency in taxes (or interest thereon or penalties in connection
therewith) in excess of $200,000, extend the statute of limitations with any
tax authority or file any pleading in court in any tax litigation or any
appeal from an asserted deficiency in excess of $200,000;
(h) grant or commit to grant any new extension of credit or amend the
terms of any such credit outstanding on the date hereof to any executive
officer or director of CU or any holder of five percent (5%) or more of the
outstanding CU Stock, or to any corporation, partnership, trust or other
entity controlled by any such Person, except as consistent with practices
and policies in existence as of the date of this Agreement;
(i) close or open any offices at which business is conducted except as
disclosed to BHI prior to the date hereof;
31
<PAGE>
(j) adopt or amend any CU Employee Plan or other benefit plan or
arrangement of any such type except for such amendments as are required by
law or do not materially increase the costs or benefits of such plan or
arrangement (other than previously approved amendments to CU's 401(k) Plan);
(k) change any of CU's or CU Bank's policies and practices with respect
to deposits, investments, or accounting, except such changes as may be
required by the rules of the American Institute of Certified Public
Accountants or the Financial Accounting Standards Board or by applicable
governmental authorities;
(l) grant any Person a power of attorney or similar authority other than
in connection with tax audits;
(m) make any material investment by purchase of stock or securities,
contributions to capital, property transfers or otherwise in any other
Person, except for investments made in the ordinary course of business
consistent with policies in effect on January 31, 1997;
(n) amend, modify or terminate, except in accordance with its terms, any
CU Scheduled Contract or enter into any agreement, contract or Understanding
that would be a CU Scheduled Contract under Section 4.16;
(o) create or incur or suffer to exist any mortgage, lien, pledge,
security interest, charge, encumbrance or restraint of any kind against or
in respect of any property or right of CU and/or CU Bank except: (a) for
liens or encumbrances for current taxes not yet due, (b) for liens or
encumbrances incurred in the ordinary course of business and (c) for liens
that are not substantial in character, amount or extent or that do not
materially detract from the value, or interfere with the conduct of business
of CU on a consolidated basis;
(p) sell, lease or otherwise dispose of any of its assets which are
material, individually or in the aggregate, to CU or CU Bank, except in the
ordinary course of business consistent with past practice or as disclosed to
BHI prior to the date hereof;
(q) make any extraordinary payment in excess of $25,000 to any Person;
(r) except as required by law, take or cause to be taken any action
which would prevent the transactions contemplated hereby from qualifying as
a tax free reorganization under Section 368 of the Code;
(s) take any action which would reasonably be expected to adversely
affect or delay the ability of BHI or CU to obtain any necessary approvals,
consents or waivers of any governmental agency or regulatory authority or
other parties required for the transactions contemplated by this Agreement
or to adversely affect the ability of CU to perform its covenants or
agreements under this Agreement on a timely basis;
(t) incur any indebtedness for borrowed money or assume, guaranty,
endorse or otherwise as an accommodation become responsible for the
obligations of any other Person, except for (i) in connection with banking
transactions with banking customers in the ordinary course of business, or
(ii) short-term borrowings not at any time exceeding $5,000,000 in the
aggregate made in the ordinary course of business consistent with past
practice at prevailing market rates and terms;
(u) become a party to any transaction (other than repurchase agreements
and reverse repurchase agreements) involving forwards, futures, options on
futures, swaps or other derivative instruments; or
(v) agree to, or make any commitment to, take any of the actions
prohibited by this Section 6.1.
32
<PAGE>
For purposes of this Section 6.1, any consent required from BHI, unless
earlier given or denied, shall be deemed to have been given five Business Days
after the time CU shall have requested such consent in writing, unless during
such five-day period BHI shall have promptly requested further information in
writing reasonably necessary to allow the decision to be made, in which case
such consent, unless earlier given or denied, shall be deemed to have been given
five Business Days after the time such reasonably requested information has been
furnished.
6.2 NO SOLICITATION, ETC.
(a) CU and CU Bank shall not, and shall cause each of their respective
officers, directors, employees, agents, legal and financial advisors and
Affiliates not to, directly or indirectly, solicit, initiate, recommend, endorse
or enter into (or except to the extent permitted by Section 6.2(b) hereof
encourage or entertain) any agreement or agreement in principle, or announce any
intention to do any of the foregoing, with respect to any Alternative
Transaction. CU will immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than BHI with respect to any Alternative
Transaction.
(b) CU and CU Bank shall not, and shall cause each of its officers,
directors, employees, agents, legal and financial advisors and Affiliates not
to, directly or indirectly, participate in any negotiations or discussions
regarding, or furnish any information with respect to, or otherwise cooperate in
any way in connection with, or assist or participate in, facilitate or
encourage, any effort or attempt to effect, any Alternative Transaction with or
involving any Person other than BHI; provided that CU may provide such
information or undertake such discussions or negotiations if CU shall have
received an unsolicited, bona fide written offer from a Person other than BHI to
effect an Alternative Transaction and the Board of Directors of CU reasonably
and in good faith determines, based on advice of its outside counsel, that the
failure to provide such information to or undertake such discussions or
negotiations with the Person submitting such unsolicited written offer could
cause the members of CU's Board of Directors to breach their fiduciary duties
under applicable laws.
(c) CU will promptly communicate to BHI the terms of any proposal which it
may receive in respect of any Alternative Transaction and will keep BHI informed
as to the status of any actions, including negotiations or discussions or the
provision of information, taken pursuant to subsection (b) of this Section 6.2.
6.3 AFFIRMATIVE CONDUCT OF CU AND CU BANK PRIOR TO EFFECTIVE TIME. Between
the date hereof and the Effective Time, CU and CU Bank shall:
(a) use and devote their respective best efforts consistent with this
Agreement to maintain and preserve intact their respective present business
organizations and to maintain and preserve their respective relationships and
goodwill with account holders, borrowers, employees and others having business
relationships with CU or CU Bank;
(b) use their respective commercially reasonable efforts to keep in full
force and effect all of the existing material permits and licenses of CU or CU
Bank;
(c) use their respective commercially reasonable efforts to maintain
insurance coverage at least equal to that now in effect on all properties for
which they are responsible and on their respective business operations;
(d) perform their respective material contractual obligations and not become
in material default on any thereof;
(e) duly and timely file all reports and returns required to be filed with
any federal, state or local governmental authority, unless any extensions have
been duly granted by such authority;
33
<PAGE>
(f) duly observe and substantially comply with and perform all material
obligations and duties imposed by all federal and state laws, and rules,
regulations and orders imposed by federal or state governmental authorities;
(g) maintain their respective assets and properties in good condition and
repair, normal wear and tear excepted;
(h) promptly advise BHI in writing of any event or any other transaction
within CU's or CU Bank's knowledge whereby any Person or Related Group of
Persons acquires, directly or indirectly, record or beneficial ownership or
control (as defined in Rule 13d-3 promulgated by the SEC under the Exchange Act)
of five percent (5%) or more of the outstanding CU Stock prior to the record
date fixed for the CU Shareholders' Meeting or any adjourned meeting thereof to
approve this Agreement and the transactions contemplated herein;
(i) promptly notify BHI regarding receipt from any tax authority of any
notification of the commencement of an audit, any request to extend the statute
of limitations, any statutory notice of deficiency, any revenue agent's report,
any notice of proposed assessment, or any other similar notification of
potential adjustments to the tax liabilities of CU and/or CU Bank, or any actual
or threatened collection enforcement activity by any tax authority with respect
to tax liabilities of CU and/or CU Bank;
(j) furnish to BHI, as soon as practicable, and in any event within fifteen
days after it is prepared, (i) a copy of any report submitted to the board of
directors or any committee thereof of CU or CU Bank, provided, however, that CU
need not furnish to BHI communications of CU's legal counsel regarding CU's
rights and obligations under this Agreement or the transactions contemplated
hereby or books, records and documents covered by confidentiality agreements or
the attorney-client privilege, or which are attorneys' work product, (ii) copies
of all reports, filings, certificates, correspondence and other documents filed
with or received from the SEC, FRB, FDIC, Superintendent or any other
governmental agency or regulatory authority, to the extent permitted by law (and
CU and CU Bank shall use their reasonable best efforts to obtain any waiver or
consent necessary to provide such materials under applicable law), (iii) monthly
unaudited consolidated balance sheets and consolidated statements of operations
of CU, (iv) such other existing reports as BHI may reasonably request relating
to CU or CU Bank, and (v) all proxy statements, information statements,
financial statements, reports, letters and communications sent by CU to its
shareholders or other security holders;
(k) promptly notify BHI of any fact or event that does or could reasonably
be expected to cause the CU Schedules to be incorrect in any material respect as
of the date of this Agreement or as of the Closing Date;
(l) use commercially reasonable efforts to obtain any requisite third party
consent with respect to any contract, agreement, lease, license, amendment,
permit or release that is material to the business of CU or CU Bank or that is
contemplated or required to be obtained by CU or CU Bank in connection with this
Agreement or the Merger;
(m) promptly notify BHI of the filing of any material litigation, or the
filing of any governmental or regulatory action, including any investigation or
notice of investigation, or similar proceeding or notice of any claim against CU
or CU Bank or any of their assets; and
(n) prepare and timely file all tax returns and amendments thereto required
to be filed by them on or before the Effective Time. BHI shall have a reasonable
opportunity to review all such returns and amendments thereto on a pre-filing
basis. CU and CU Bank shall each discharge all taxes, assessments and
governmental charges in the nature of taxes upon or against it or any of its
properties or assets, and all tax liabilities at any time existing, before the
same shall become delinquent and before penalties accrue thereon, except to the
extent and as long as: (i) the same are being contested in good faith and by
appropriate proceedings pursued diligently and in such manner as not to cause
any material adverse effect
34
<PAGE>
upon the condition (financial or otherwise) or operations of CU or CU Bank; and
(ii) CU and CU Bank shall have set aside on their books appropriate reserves
relating thereto, if any.
6.4 ACCESS TO INFORMATION. CU and CU Bank will afford BHI and its
representatives, counsel, accountants, agents and employees access during normal
business hours to all of their respective businesses, operations, properties,
books, files and records and will do everything reasonably necessary to enable
BHI and its representatives, counsel, accountants, agents and employees to make
a complete examination of the financial statements, businesses, assets and
properties of CU and CU Bank and the condition thereof and to update such
examination at such intervals as BHI shall deem appropriate. Such examination
shall be conducted in cooperation with the officers of CU and CU Bank and in
such a manner as to minimize any disruption of, or interference with, the normal
business operations of CU and CU Bank. Upon the request of BHI, CU will request
that the independent auditors of CU, CU Bank and their Predecessors and all
predecessor firms of independent auditors of any of them, provide reasonable
access to auditors' work papers with respect to the businesses and properties of
CU and CU Bank, including tax accrual work papers prepared for CU, CU Bank or
their Predecessors during the preceding sixty (60) months, other than (a) books,
records and documents covered by the attorney-client privilege, or that are
attorneys' work product, and (b) books, records and documents that CU or CU Bank
is legally obligated to keep confidential. No examination or review conducted by
BHI under this Section 6.4 shall constitute a waiver or relinquishment on the
part of BHI of the right to rely upon the representations and warranties made by
CU herein; provided, that BHI shall disclose in writing to CU any fact or
circumstance it may discover which BHI believes renders any representation or
warranty made by CU hereunder incorrect in any respect. BHI covenants and agrees
that it and its representatives, counsel, accountants, agents and employees will
hold in strict confidence all documents and information concerning CU and CU
Bank so obtained (except to the extent that such documents or information are a
matter of public record or require disclosure in the S-4 or Proxy Statement or
become publicly available information by reason of applications required to be
filed with any governmental agency or regulatory authority to obtain the
approvals and consents required to effect the transactions contemplated hereby),
and if the transactions contemplated herein are not consummated, such confidence
shall be maintained and all such documents shall be returned to CU and CU Bank.
6.5 NOTICES. CU will promptly notify BHI of any event of which CU or CU
Bank obtains knowledge which has had or may reasonably be expected to have a
material adverse effect on the business, financial condition, results of
operations or prospects of CU or CU Bank or in the event that CU determines that
it is or is likely to become unable to fulfill any of the conditions to the
performance of BHI's obligations hereunder, as set forth in Articles IX or XI
herein.
6.6 CU SHAREHOLDERS' MEETING. Promptly after the execution of this
Agreement, CU will take all action necessary in accordance with applicable law
and its Articles of Incorporation and Bylaws to convene a meeting of its
shareholders to consider and vote upon this Agreement and the transactions
contemplated hereby. The Board of Directors of CU shall, except to the extent it
is advised by its outside counsel that to do so could constitute a violation of
its fiduciary duties, recommend that CU's shareholders approve this Agreement
and the transactions contemplated hereby, and the Board of Directors of CU
shall, except to the extent it is advised by its outside counsel that to do so
could constitute a violation of its fiduciary duties, use its reasonable best
efforts (including if BHI so requests the retention of a proxy solicitation firm
and an information agent) to obtain the requisite vote of the holders of CU
Stock to approve this Agreement and the transactions contemplated hereby.
6.7 D&O COVERAGE. If requested to do so by BHI prior to June 30, 1997: CU
shall use commercially reasonable efforts to obtain (i) coverage for a period of
at least 36 months following the Effective Time for the directors and officers
of CU and CU Bank under a directors' and officers' liability insurance policy
which is no less protective in terms of coverage or limitations then now
possessed by CU covering acts or omissions occurring prior to the Effective Time
and actions related to this Agreement and (ii) coverage for a period of at least
36 months following the Effective Time under a bankers' blanket bond which is no
less
35
<PAGE>
protective in terms of coverage or limitations then now possessed by CU which
covers losses incurred prior to the Effective Time and actions related to this
Agreement. If no such request is made, BHI shall provide the coverage
contemplated by clause (i) of the preceding sentence pursuant to directors' and
officers' liability insurance policies maintained by BHI.
6.8 CERTAIN LOANS AND OTHER EXTENSIONS OF CREDIT. CU Bank will promptly
inform BHI of the amounts and categories of any loans, leases or other
extensions of credit that have been classified by any bank regulatory authority
or by any unit of CU or CU Bank as "Criticized," "Specially Mentioned,"
"Substandard," "Doubtful," "Loss" or any comparable classification ("Classified
Credits"). CU Bank will furnish BHI, as soon as practicable, and in any event
within 30 days after the end of each calendar month, schedules, including the
following: (a) Classified Credits (including with respect to each credit its
classification category; (b) nonaccrual credits; (c) accrual exception credits
that are delinquent 90 or more days and have not been placed on nonaccrual
status; (d) credits delinquent as to payment of principal or interest, including
an aging into 30-89 and 90+ day categories; (e) participating loans and leases,
stating, with respect to each, whether it is purchased or sold; (f) loans or
leases (including any commitments) by CU or CU Bank to any CU or CU Bank
director, officer at or above the senior vice president level, or shareholder
holding five percent (5%) or more of the capital stock of CU, including with
respect to each such loan or lease the identity and, to the knowledge of CU, the
relation of the borrower to CU or CU Bank, and the outstanding and undrawn
amounts; (g) letters of credit; (h) loans or leases wholly or partially charged
off during the previous month (including with respect to each loan or lease, the
originating amount and the write-off amount); and (i) other real estate or
assets acquired in satisfaction of debt.
6.9 TERMINATION OF CU STOCK PLAN. CU will take all steps necessary to
cause the CU Stock Plan to be terminated as of or prior to the Effective Time,
and for any CU Options eligible for assumption or replacement pursuant to
Section 2.13 and the terms of the BHI Option Plan Amendment, to obtain at the
earliest practicable date and prior to the Closing Date a revised stock option
contract with each holder of such unexercised options, incorporating such terms
as may be necessary in order to make such option contracts consistent with the
BHI Option Plan Amendment.
6.10 COORDINATION OF DIVIDENDS. CU shall coordinate with BHI the
declaration of any dividends that may be allowed hereunder in respect of CU and
the record date and payment dates relating thereto, it being the intention of
the parties that holders of CU Stock shall not receive two dividends, or fail to
receive one dividend, for any single calendar quarter with respect to their
shares of CU Stock and any shares of BHI Stock any such holder will receive in
exchange therefor in the Merger.
6.11 CERTAIN RESERVES. CU represents, warrants and agrees that neither CU
nor CU Bank has applied, and will not apply prior to the Effective Time, any
portion of (x) any reserve existing on its books as of December 31, 1996 (other
than reserves for loan and lease losses) except with respect to those specific
items and in those specific amounts for which the applicable portion of such
reserve was created, and except to the extent that the purpose of such reserve
no longer exists and is required to be taken into income under generally
accepted accounting principles consistently applied in accordance with prior
practices of CU;or (y) any reserves for loan and lease losses except for the
purposes for which such reserves were created.
ARTICLE VII
COVENANTS OF BHI
PENDING EFFECTIVE TIME OF THE MERGER
BHI covenants and agrees with CU as follows:
7.1 LIMITATION ON BHI'S CONDUCT PRIOR TO EFFECTIVE TIME. Except as
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, BHI shall not (a) take any
36
<PAGE>
action which would reasonably be expected to adversely affect or delay the
ability of BHI or CU to obtain any necessary approvals, consents or waivers of
any governmental agency or regulatory authority or other parties required for
the transactions contemplated by this Agreement or to adversely affect the
ability of BHI to perform its covenants or agreements under this Agreement on a
timely basis, (b) amend its Articles of Incorporation in any respect that
materially and adversely affects the rights and privileges attendant to the BHI
Stock, (c) except as required by law, take or cause to be taken any action which
would reasonably be expected to prevent the transactions contemplated hereby
from qualifying as a reorganization under Section 368 of the Code (provided it
is understood and acknowledged that although BHI has no present plan or
intention to reacquire from CU's shareholders the shares of BHI Stock to be
issued pursuant to the Merger, BHI does intend to repurchase shares of BHI Stock
in the open market from time to time before and after the Effective Time, and
nothing in this Agreement shall preclude BHI from such open market purchases of
BHI Stock), or (d) agree to, or make any commitment to, take any of the actions
prohibited by this Section 7.1.
7.2 AFFIRMATIVE CONDUCT OF BHI PRIOR TO EFFECTIVE TIME. Between the date
hereof and the Effective Time, BHI shall:
(a) duly observe and conform to all lawful requirements applicable to BHI
and its subsidiaries that are material to their business on a consolidated
basis;
(b) promptly notify CU of any fact or event that does or could reasonably be
expected to cause the BHI Schedules to be incorrect in any material respect as
of the date of this Agreement or as of the Closing Date; and
(c) use commercially reasonable efforts to obtain any requisite third party
consent with respect to any contract, agreement, lease, license, amendment,
permit or release that is material to the business of BHI on a consolidated
basis or that is contemplated or required to be obtained by BHI in connection
with the Merger.
7.3 ACCESS TO INFORMATION. Upon reasonable request by CU, BHI shall (i)
make its Chief Financial Officer and General Counsel available to discuss with
CU and its representatives BHI's operations and (ii) shall provide CU with
written information which is (a) similar to the written information that CU
reviewed in connection with this Agreement, and (b) related to BHI's business
condition, operations and prospects. No information provided under this Section
7.3 shall constitute a waiver or relinquishment on the part of CU of the right
to rely upon the representations and warranties made by BHI herein; provided,
that CU shall disclose in writing to BHI any fact or circumstance it may
discover which CU believes renders any representation or warranty made by BHI
hereunder incorrect in any respect. CU covenants and agrees that it and its
representatives, counsel, accountants, agents and employees will hold in strict
confidence all documents and information concerning BHI and its subsidiaries so
obtained (except to the extent that such documents or information are a matter
of public record or require disclosure in the S-4 or Proxy Statement or become
publicly available information by reason of any applications required to be
filed with any governmental agency or regulatory authority to obtain the
approvals and consents required to effect the transactions contemplated hereby),
and if the transactions contemplated herein are not consummated, such confidence
shall be maintained and all such documents shall be returned to BHI.
7.4 NOTICES; REPORTS. BHI will promptly notify CU of any event of which
BHI obtains knowledge which has had or may reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operations of BHI and its subsidiaries taken as a whole or in the event that BHI
determines that it is or is likely to become unable to fulfill any of the
conditions to the performance of CU's obligations hereunder, as set forth in
Articles IX or X herein, and BHI will furnish CU as soon as available, all proxy
statements, information statements, financial statements, reports, letters and
communications sent by BHI to its shareholders or other security holders, and
all reports filed by BHI with the SEC.
37
<PAGE>
7.5 BHI OPTION PLAN AMENDMENT. BHI will take all steps necessary to adopt
the BHI Option Plan Amendment, subject to subsequent approval or ratification by
BHI's shareholders at BHI's 1998 annual shareholders' meeting, and take any
other actions necessary or appropriate to effect the assumption of CU Options
contemplated by Section 2.13(a). The Board of Directors of BHI shall recommend
that its shareholders approve or ratify the BHI Option Plan Amendment and use
its reasonable best efforts to obtain the affirmative vote of the outstanding
BHI Stock to approve or ratify the BHI Option Plan Amendment. At or prior to the
1998 annual meeting of BHI's shareholders, BHI shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of BHI Stock for
delivery upon exercise of CU Options assumed by it in accordance with Section
2.13(a). Within two Business Days following such approval or ratification, BHI
shall file a registration statement on Form S-8 (or any successor or other
appropriate form) with respect to the CU Stock subject to such CU Options. BHI
shall use its reasonable best efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses related thereto) for so long as the CU Options remain outstanding.
ARTICLE VIII
ADDITIONAL COVENANTS
8.1 REGULATORY MATTERS.
(a) BHI and CU shall promptly prepare and BHI shall file with the SEC the
S-4, in which the Proxy Statement will be included as a prospectus. BHI shall
use all reasonable efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing, and CU shall
promptly thereafter mail the Proxy Statement to its shareholders. BHI shall also
use all reasonable efforts to obtain any necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by this Agreement, and obtain the approval for listing on the NYSE of the shares
of BHI Stock to be issued in the Merger. CU shall furnish all information
concerning CU and the holders of CU Stock as may be reasonably requested in
connection with any such action. Each party shall immediately notify the other
party in writing in the event that such party becomes aware that the S-4 or
Proxy Statement at any time contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading or that the S-4 or the Proxy Statement
otherwise is required to be amended or supplemented, which notice shall specify,
in reasonable detail, the circumstances thereof.
(b) The parties hereto shall cooperate with each other and use reasonable
efforts to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and governmental agencies and regulatory authorities which are necessary
or advisable to consummate the transactions contemplated by this Agreement
(including, without limitation, the Merger) and (subject to Section 11.4) to
comply with the terms and conditions of all such permits, consents, approvals,
and authorizations and to the extent practicable each will consult the other on,
in each case subject to applicable laws relating to the exchange of information,
all the information relating to BHI or CU, as the case may be, and any of their
respective subsidiaries which appear in any filing made with, or written
materials submitted to, any third party or any governmental authority in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and governmental authorities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
38
<PAGE>
(c) BHI and CU shall, upon request, furnish each other with all information
concerning themselves, their subsidiaries, directors, officers and stockholders
and such other matters as may be reasonably necessary or advisable in connection
with the Proxy Statement or the S-4 or any other statement, filing, notice or
application made by or on behalf of BHI, CU or any of their respective
subsidiaries to any governmental authority in connection with the transactions
contemplated by this Agreement.
(d) BHI and CU shall promptly advise each other upon receiving any
communication from any governmental agency or regulatory authority whose consent
or approval is required for consummation of the transactions contemplated by
this Agreement which causes such party to believe that there is a reasonable
likelihood that the approval of any governmental agency or regulatory authority
required to consummate the transactions contemplated as this Agreement will not
be obtained or that the receipt of any such approval will be materially delayed
beyond August 31, 1997.
8.2 LEGAL CONDITIONS TO MERGER.
(a) Each of BHI and CU shall, and shall cause each of its subsidiaries to,
use its reasonable best efforts (i) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
which may be imposed on such party or its subsidiaries with respect to the
Merger and, subject to the conditions set forth in Articles IX, X and XI hereof,
to consummate the transactions contemplated by this Agreement and (ii) to obtain
(and to cooperate with the other party to obtain) any consent, authorization,
order or approval of, or any exemption by, any governmental agency or regulatory
authority which is required to be obtained by CU or BHI or any of their
respective subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement, and (subject to Section 11.4) to comply with the
terms and conditions of any such consent, authorization, order or approval.
(b) Each of BHI and CU agrees to use reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated
hereby, including, without limitation, using reasonable efforts to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby
and using reasonable efforts to defend any litigation seeking to enjoin, prevent
or delay the consummation of the transactions contemplated hereby or seeking
material damages.
8.3 CUSTOMER CALLS. Following regulatory and shareholder approval and
prior to the Effective Time, representatives of BHI will be permitted to conduct
joint calls, accompanied by representatives of CU Bank, upon such of CU Bank's
customers and upon such schedule as are agreed upon between the parties;
provided, however, that in the event that either party terminates this Agreement
in accordance with the terms hereof, BHI shall not, for a period of one (1) year
from the date of the termination of this Agreement contact any customer of CU
Bank contacted pursuant to this Section 8.3.
8.4 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. BHI, CU and CU Bank shall
(a) promptly make any filings and applications required to be filed in order to
obtain all requisite approvals, consents and waivers of the FRB, the
Superintendent, the Commissioner and any other governmental agencies or
regulatory authorities necessary or appropriate for the consummation of the
transactions contemplated hereby, (b) cooperate with one another (i) in promptly
determining what filings are required to be made or approvals, consents or
waivers are required to be obtained under any relevant Federal, state or foreign
law or regulation, (ii) in providing the other a reasonable opportunity to
review and comment upon the publicly available portions of such filings, and
(iii) in promptly making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such approvals, consents
or waivers and (c) deliver to the other copies of publicly available portions of
all such filings and applications promptly after they are filed.
39
<PAGE>
8.5 ADDITIONAL AGREEMENTS; PARTIES. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all commercially
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly or cause to be done promptly, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement as promptly as practicable,
including using commercially reasonable efforts to obtain all necessary actions
or nonactions, extensions, waivers, consents and approvals from all applicable
governmental authorities, effecting all necessary registrations, applications
and filings and obtaining any required contractual consents (including consent
to assignment of leases where required) and regulatory approvals.
8.6 PUBLICITY. The initial press release announcing this Agreement shall
be a joint press release or dual press releases, which in either case shall
(subject to the proviso in the last sentence of this section) be issued only
with the prior approval of the other party as to the content and timing thereof.
Thereafter BHI and CU shall consult with each other in issuing any press
releases or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any governmental authority or
with any national securities exchange with respect thereto. Neither party shall
issue any such press release or public statement concerning the transactions
contemplated hereby without the prior approval of the other party, which shall
not be unreasonably withheld or delayed; provided that if either party hereto,
on the advice of counsel, determines that a disclosure is required by law, it
may make such disclosure without the approval of the other party, but only after
affording such party a reasonable opportunity to review and comment upon the
disclosure.
8.7 PRE-CLOSING ADJUSTMENTS. At or before the Closing, CU and CU Bank
shall make such accounting entries or adjustments, including charge-offs of
loans, as BHI shall direct in order to implement its plans for CU Bank following
the Closing or to reflect expenses and costs related to the Merger; provided,
however, that (a) CU and CU Bank shall not be required to take such actions more
than one day prior to the Closing Date or prior to the time BHI agrees in
writing that all of the conditions to its obligation to close as set forth in
Article XI have been satisfied or waived, and (b) based upon consultation with
counsel and accountants for CU, no such adjustment shall (i) require any filing
with any governmental agency or regulatory authority, (ii) violate any law, rule
or regulation applicable to CU or CU Bank, or (iii) otherwise materially
disadvantage CU or CU Bank if the Merger were not consummated; provided that in
any event, no accrual or reserve made by CU or CU Bank pursuant to this Section
8.7, or any litigation or regulatory proceeding arising out of any such accrual
or reserve, shall constitute or be deemed to be a breach, violation of or
failure to satisfy any representation, warranty, covenant, condition or other
provision of this Agreement or otherwise be considered in determining whether
any such breach, violation or failure to satisfy shall have occurred. The
recording of such adjustments shall not be deemed to imply any misstatement of
previously furnished financial statements or information, shall not be construed
as concurrence of CU's or CU Bank's management with any such adjustments, and
shall not affect the Exchange Ratio or the Per Share Cash Consideration.
8.8 DIRECTOR RESIGNATIONS. CU shall use reasonable efforts to cause to be
delivered to BHI at the Closing, the resignations of all of the directors of CU
and CU Bank (other than those directors of CU Bank designated by BHI prior to
the Closing Date to remain in office after the Effective Time), to be effective
at the Effective Time.
8.9 [Reserved.]
8.10 [Reserved.]
8.11 NOTICES AND COMMUNICATIONS. CU and CU Bank shall, if requested to do
so by BHI cooperate with BHI by sending necessary or appropriate customer
notifications and communications as drafted by BHI to advise such customers of
the impending transaction and of plans following the Effective Time.
40
<PAGE>
8.12 INSURANCE POLICIES ASSIGNMENT. CU and CU Bank shall make commercially
reasonable efforts to obtain consent to partial or complete assignments of any
of their insurance policies if requested to do so by BHI, to the extent
necessary to maintain the benefits thereof to BHI and to CU Bank after the
Merger. CU and CU Bank shall also inform BHI no later than the Closing Date of
any material unfiled insurance claims of which they have knowledge and for which
they believe coverage exists.
8.13 AFFILIATES AND FIVE PERCENT SHAREHOLDERS.
(a) At least 40 days prior to the anticipated Closing Date, CU after
consulting with its counsel shall deliver to BHI a letter identifying all
Persons who are, at the time this Agreement is submitted for approval to the
stockholders of CU, "affiliates" of CU for purposes of Rule 145 under the
Securities Act, and CU shall update that letter as of the Closing Date. CU shall
use all reasonable efforts to cause each such affiliate to deliver to BHI at or
prior to the Closing Date a written "Affiliates" agreement, substantially in the
form of Exhibit C.
(b) Prior to the Closing Date, CU shall use all reasonable efforts to cause
each Person or group of Persons who holds five percent (5%) or more of CU's
Stock (regardless of whether such Person is an "affiliate") to deliver to the
firm delivering the opinion pursuant to Section 9.4 a letter stating that such
shareholder(s) have no present intention to dispose of the BHI Stock he or she
or they will receive in the Merger, and committing that he, she or they will not
dispose of such BHI Stock in such a manner as to cause a violation of the
"continuity of shareholder interest" requirements of Treasury Regulation
1.368-1.
8.14 LETTERS OF CU'S ACCOUNTANTS. CU shall use all reasonable efforts to
cause to be delivered to BHI letters of Arthur Andersen, LLP, CU's independent
auditors, dated as of the date on which the S-4 shall become effective and as of
the Closing Date and addressed to BHI and its directors who sign the S-4, in
form and substance reasonably satisfactory to BHI, and in scope and substance
consistent with applicable professional standards for letters delivered by
independent public accountants in connection with registration statements
similar to the S-4.
8.15 SHAREHOLDERS' AGREEMENT. CU will use all reasonable efforts to cause
all of the directors of CU who own CU Stock to execute and deliver to BHI
concurrently with execution of this Agreement one or more shareholders'
agreements substantially in the form of Exhibit D hereto, committing such
Persons, among other things, to vote their shares of CU Stock in favor of the
Merger at the CU Shareholders' Meeting held for that purpose, and to comply with
certain representations concerning the ownership and disposition of CU Stock.
8.16 COOPERATION OF CU BANK. CU shall and shall cause CU Bank to cooperate
with BHI in all reasonable respects relevant to this Agreement or the
transactions contemplated hereby. Any provision of this Agreement requiring CU
Bank to take or refrain from taking any action shall be construed as requiring
CU to cause CU Bank's compliance therewith.
ARTICLE IX
CONDITIONS PRECEDENT TO THE MERGER
The obligations of each of the parties hereto to consummate the transactions
contemplated herein are subject to the satisfaction, on or before the Closing
Date, of the following conditions:
9.1 SHAREHOLDER APPROVAL. The transactions contemplated hereby shall have
received all requisite approvals of the shareholders of CU.
9.2 NO JUDGMENTS OR ORDERS. No judgment, decree, injunction, order or
proceeding shall be outstanding by any governmental agency or entity or any
regulatory authority or court which prohibits, enjoins or restrains consummation
of the Merger or the other transactions contemplated by this Agreement.
41
<PAGE>
9.3 REGULATORY APPROVALS. To the extent required by applicable law or
regulation, there shall have been obtained or granted all approvals, waivers or
consents of any governmental agency or regulatory authority, including, without
limitation, those of the FRB, necessary for consummation of the Merger and the
transactions contemplated hereby, all such approvals, waivers or consents shall
remain in full force and effect, and the applicable waiting period under all
laws shall have expired. All other statutory or regulatory requirements for the
valid completion of the transactions contemplated hereby shall have been
satisfied, and there shall be in effect no statute, rule or regulation that
prohibits or makes illegal consummation of the Merger.
9.4 TAX OPINION. BHI and CU shall have received an opinion dated the
Closing Date from Carlsmith Ball Wichman Case & Ichiki, counsel to BHI,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, which are consistent with the state of
facts existing at the Closing Date, (i) the Merger will qualify as a
reorganization under Section 368 of the Code, and (ii) BHI and CU will each be a
party to such reorganization within the meaning of Section 368(b) of the Code.
The representations which will be required of BHI and of CU in connection with
the opinion shall include those set forth in Exhibit E hereto, together with
such other representations as may reasonably be requested by such counsel.
9.5 S-4 AND PROXY STATEMENT. The S-4 shall have become effective under the
Securities Act and shall not be subject to any stop order or proceeding seeking
a stop order and copies of the Proxy Statement shall have been timely mailed to
the shareholders of record of CU on the record date.
9.6 NYSE LISTING. The shares of BHI Stock issuable to holders of CU Stock
upon consummation of the Merger shall have been duly authorized for listing on
the NYSE, subject to official notice of issuance.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CU
All of the obligations of CU to effect the transactions contemplated hereby
shall be subject to the satisfaction, on or before the Closing Date, of the
following conditions, any of which may be waived in writing by CU:
10.1 LEGAL OPINION. CU shall have received the opinion of Carlsmith Ball
Wichman Case & Ichiki, counsel to BHI, dated as of the Closing Date, in
substantially the form required by Exhibit F hereto.
10.2 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF COVENANTS. All
covenants, terms and conditions of this Agreement to be complied with and
performed by BHI at or before the Closing Date shall have been complied with and
performed in all material respects; the representations and warranties of BHI
contained herein shall have been true and correct in all material respects on
and as of the date of this Agreement and on and as of the Closing Date (or on
the date when made in the case of a representation or warranty which by its
express provisions is made with respect to a date prior to the date of this
Agreement), with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
10.3 ABSENCE OF CERTAIN CHANGES. Between the date of this Agreement and
the Effective Time, there shall not have occurred any change or event that has
had or could reasonably be expected to have a material adverse effect on the
business, financial condition or results of operations of BHI and its
subsidiaries taken as a whole, whether or not such event, change or effect is
reflected in any amendment or supplement to the BHI Schedules delivered after
the date of this Agreement.
10.4 OFFICERS' CERTIFICATE. There shall have been delivered to CU on the
Closing Date a certificate executed by the Chief Executive Officer and the Chief
Financial Officer of BHI certifying compliance with all of the provisions of
Sections 10.2 and 10.3.
42
<PAGE>
10.5 BHI OPTION PLAN AMENDMENT. The Board of Directors of BHI shall have
adopted the BHI Option Plan Amendment, subject to subsequent approval or
ratification by BHI's shareholders.
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BHI
All of the obligations of BHI to effect the transactions contemplated hereby
shall be subject to the satisfaction, on or before the Closing Date, of the
following conditions, any of which may be waived in writing by BHI:
11.1 LEGAL OPINION. BHI shall have received the opinion of Sullivan &
Cromwell, counsel to CU, or other counsel acceptable to BHI, dated as of the
Closing Date, in substantially the form required by Exhibit G hereto.
11.2 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF COVENANTS. All the
covenants, terms and conditions of this Agreement to be complied with and
performed by CU at or before the Closing Date shall have been complied with and
performed in all material respects; the representations and warranties of CU
contained herein shall have been true and correct in all material respects on
and as of the date of this Agreement and on and as of the Closing Date (or on
the date when made in the case of a representation or warranty which by its
express provisions is made with respect to a date prior to the date of this
Agreement), with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
11.3 AUTHORIZATION OF MERGERS. All actions necessary to authorize the
execution, delivery and performance of this Agreement and the Agreement of
Merger by CU, and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Board of Directors and
shareholders of CU, as required by applicable law, and CU shall have full power
and right to merge pursuant to this Agreement and the Agreement of Merger.
11.4 ABSENCE OF REGULATORY CONDITIONS. There shall not be any action taken
by any governmental entity or agency or regulatory authority in connection with
the grant of any approval, waiver or consent referred to in Section 9.3, or any
statute, rule, regulation or order enacted, entered, proposed or deemed
applicable to the Merger, which does or would impose any condition or
restriction upon the Surviving Company or any of its subsidiaries (including CU
Bank after the Merger) that BHI reasonably determines in the good faith exercise
of its business judgment would be materially burdensome to BHI or any such
subsidiary in the context of the transactions contemplated by this Agreement.
11.5 THIRD PARTY CONSENTS. CU shall have obtained all consents of other
parties to its and CU Bank's material mortgages, notes, leases, franchises,
agreements, licenses and permits as may be necessary to permit the Merger and
the transactions contemplated herein to be consummated without a material
default, acceleration, breach or loss of rights or benefits thereunder.
11.6 ABSENCE OF CERTAIN CHANGES. Between the date of this Agreement and
the Effective Time, there shall not have occurred any change or event that has
had or could reasonably be expected to have a material adverse effect on the
business, financial condition, results of operations of CU and its subsidiaries
taken as a whole, whether or not such event, change or effect is reflected in
any amendment or supplement to the CU Schedules delivered after the date of this
Agreement.
11.7 OFFICERS' CERTIFICATE. There shall have been delivered to BHI on the
Closing Date a certificate executed by the Chief Executive Officer and the Chief
Financial Officer of each of CU and CU Bank certifying compliance with all of
the provisions of Sections 11.2, 11.3, 11.5 and 11.6.
11.8 BLUE SKY MATTERS. The issuance of the BHI Stock in the Merger shall
have been qualified or registered with the appropriate governmental entity under
any applicable state securities or Blue Sky laws, and such qualifications or
registrations shall be in effect on the Closing Date, if required by such laws.
43
<PAGE>
11.9 AFFILIATE AGREEMENTS. Each of those Persons identified by CU pursuant
to Section 8.13(a) shall have executed and delivered to BHI agreements
acceptable to BHI in substantially the form of Exhibit C.
11.10 SHAREHOLDER'S AGREEMENTS. The directors of CU shall have executed
and delivered to BHI shareholder's agreements acceptable to BHI in substantially
the form of Exhibit D.
11.11 COMFORT LETTERS. BHI and its directors who sign the S-4 shall have
received from CU's independent auditors each of the letters contemplated by
Section 8.14.
11.12 CU STOCK OPTION AGREEMENT. Concurrently with the execution of this
Agreement, CU shall have executed and delivered to BHI the CU Stock Option
Agreement.
11.13 RESIGNATIONS. BHI shall have received resignations of all of the
directors of CU and CU Bank, other than those directors of CU Bank designated by
BHI prior to the Closing Date to remain in office after the Effective Time,
which resignations shall be effective as of the Effective Time.
11.14 PAYMENT OF EXPENSES. At least three Business Days prior to the
Closing Date, all attorneys, accountants, investment bankers and other advisors
and agents for CU and CU Bank shall have submitted to CU (with a copy to BHI)
estimates of their fees and expenses for all services rendered or to be rendered
in any respect in connection with the transactions contemplated hereby to the
extent not already paid, and based on such estimates, CU shall have prepared and
submitted to BHI a summary of such fees and expenses for the transaction. At the
Closing Date (i) such advisors shall have submitted their full final bills for
such fees and expenses to CU and CU Bank for services rendered and expenses
incurred through the fifth Business Day preceding the Closing Date, with a copy
to be delivered to BHI, and based on such final bills, CU shall have prepared
and submitted to BHI a final calculation of such fees and expenses, (ii) CU and
CU Bank shall have accrued and paid the amount of such fees and expenses as
calculated above, after BHI has been given an opportunity to review and comment
upon all such bills and calculation of such fees and expenses, and (iii) such
advisors shall have released BHI from liability for all such fees and expenses.
BHI shall not be liable for any such fees and expenses. The foregoing provisions
shall not preclude the subsequent payment to any such advisor of fees and
expenses incurred between the fifth Business Day preceding the Closing Date and
the Effective Time that are reasonably consistent with the good faith estimate
submitted by such advisor, and shall not require the release by Montgomery
Securities of its rights under its indemnification agreement with CU included in
the agreement referred to in Section 4.15.
11.15 DISSENTERS. Dissenting Shares shall not exceed 10% of the aggregate
number of issued and outstanding shares of CU Stock.
11.16 DEPOSITS. At the close of business on the last day of the month
preceding the Effective Time, total deposits (excluding CD Network deposits) of
CU Bank, calculated pursuant to regulatory accounting principles and generally
accepted accounting principles, shall be no less than $605 million.
11.17 AUDIT OPINION. CU's independent auditors shall have issued an
unqualified opinion with respect to the audited financial statements of CU
included in its Report on Form 10-K for the year ended December 31, 1996.
ARTICLE XII
EMPLOYEE MATTERS
12.1 EMPLOYEE BENEFITS. Employee benefits provided to employees of CU Bank
following the Effective Time shall, in the aggregate, be substantially
equivalent to the employee benefits to which such employees were entitled and
which were in effect as of the date hereof. Notwithstanding the foregoing,
nothing herein contained shall require BHI or any subsidiary of BHI (including
CU Bank after the Merger) to maintain any particular plan, program, policy or
arrangement following the Effective Time. BHI will, and will cause CU Bank after
the Effective Time to perform its obligations existing as of the
44
<PAGE>
Effective Time under those employee (or former employee) benefit obligations,
employment agreements and severance agreements that are listed on Schedule 12.1,
each in accordance with its terms.
12.2 PRIOR SERVICE CREDIT. Employees of CU Bank who become participants in
any employee benefit plan, practice or policy of BHI or its subsidiaries shall
be given credit thereunder for all service prior to the Effective Time with CU
or CU Bank, or any predecessor employer (to the extent such credit was given by
CU or its CU Bank), for purposes of eligibility and vesting, for determination
of benefits such as vacation and sick leave allowances, and for such other
purposes, if any (other than benefit accrual) for which such service is either
taken into account or recognized by BHI or its subsidiaries.
12.3 MANAGEMENT RETENTION AND OTHER AGREEMENTS. CU will make cash payments
to Stephen G. Carpenter and David I. Rainer at the Effective Time in the amount
of $265,000 and $212,000, respectively. In addition, CU Bank shall at least
eight days before the Closing Date enter into (i) agreements in the form
attached as Exhibit H with the CU Bank employees listed on Exhibit I, providing
for payment to such individuals of the respective amounts set forth on Exhibit I
and (ii) an agreement in the form attached as Exhibit J with Patrick Hartman.
12.4 GRANT OF BHI OPTIONS. Within five (5) Business Days following the
Effective Time, BHI shall grant BHI Options pursuant to the BHI Stock Option
Plan to those individuals identified as option recipients on Exhibit G (except
that no such options shall be issued to any such person who is not an employee
of CU Bank at the Effective Time). Each such option shall be for the number of
shares of BHI Stock set forth on Exhibit G for such employee, shall conform with
the terms and conditions of the BHI Stock Option Plan, and shall be an incentive
stock option under Code Section 422 that (a) has an exercise price equal to the
fair market value of BHI Stock as of the date of grant; (b) vests upon one (1)
year of employment following the date of grant; (c) has a ten (10) year term;
(d) is exercisable for a period of no longer than one (1) year following the
death or disability of the optionee; (e) is exercisable for a period of no
longer than three (3) months following any other termination of employment by
optionee; (f) will be forfeited in the event of termination of employment by
optionee for "cause" (within the meaning of the Plan); and (g) will be
immediately exercisable in the event of a "change in control" (within the
meaning of the Plan) of BHI.
12.5 PAYMENT OF ACCRUED BONUSES. CU shall be entitled on or prior to the
Closing Date to pay employee bonuses accrued in the ordinary course of business
through the end of the month immediately preceding the Closing Date pursuant to
bonus arrangements which are disclosed on the CU Schedules, in amounts that are
consistent with CU's historical compensation practices.
12.6 INDEMNIFICATION OF DIRECTORS AND OFFICERS. BHI agrees that all rights
to indemnification or exculpation existing as of January 31, 1997 in favor of
the directors and officers of CU or CU Bank as provided in their respective
articles of incorporation, bylaws, or in any indemnification agreements listed
and identified as such on the CU Schedules shall, with respect to matters
occurring prior to the Effective Time, survive the Merger and continue in full
force and effect for a period of six years following the Effective Time.
ARTICLE XIII
TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time of the Merger upon the occurrence of any of the following:
(a) by the mutual consent of BHI and CU if the Board of Directors of each so
determines;
(b) by BHI or CU, if its Board of Directors so determines, if any
governmental authority or regulatory agency (including without limitation the
FRB) shall have denied any approval, waiver or consent required for consummation
of the Merger and such denial has become final and nonappealable;
45
<PAGE>
(c) by BHI, if its Board of Directors so determines, if (i) CU's Board of
Directors fails to recommend approval of the Agreement to the shareholders of CU
or withdraws, revokes or materially modifies its recommendation in a manner
adverse to BHI; (ii) the shareholders of CU fail to approve the Agreement at the
CU Shareholders' Meeting; or (iii) there occurs a material breach by CU of any
representation, warranty or agreement contained herein which is not cured or not
curable within thirty (30) days after written notice of such breach is given to
CU (but in the case of such event that is curable within such 30-day period,
this Agreement shall not be terminated pursuant to this Section 13.1(c) or
Section 13.1(e) unless such 30-day period has first elapsed);
(d) by CU, if its Board of Directors so determines, in the event of a
material breach by BHI of any representation, warranty or agreement contained
herein which is not cured or not curable within thirty (30) days after written
notice of such breach is given to BHI (but in the case of such event that is
curable within such 30-day period this Agreement shall not be terminated
pursuant to this Section 13.1(d) or Section 13.1(e) unless such 30-day period
has first elapsed);
(e) by BHI or CU if its Board of Directors so determines, in the event that
the Merger is not consummated on or prior to September 30, 1997 (except that
such date shall be extended at the request of either party for a period not to
exceed ninety (90) days, if as of September 30, 1997, there remain pending any
applications for regulatory approvals other than appeals of regulatory approvals
which have been denied); provided that a party shall not be entitled to
terminate this Agreement pursuant to this Section 13.1(e) if the failure to
consummate the Merger by such time is due to the breach of any representation,
warranty or agreement in this Agreement by the party seeking to terminate;
(f) by BHI or CU if its Board of Directors so determines, if any
governmental or regulatory authority or agency, or court of competent
jurisdiction, shall have issued a final and nonappealable permanent order or
injunction enjoining, or otherwise prohibiting the consummation of the Merger
and the time for appeal or petition for reconsideration of such order or
injunction shall have expired without such appeal or petition being granted;
(g) by CU, if its Board of Directors so determines, if BOTH: (i) the Closing
Price of BHI Stock for any period of ten (10) consecutive trading days prior to
the Closing Date is less than $37.71875 AND (ii) for each such day the number
obtained by dividing the Closing Price of BHI Stock by $44.375 is less than 85%
of the number obtained by dividing the Index Price for that day by 524.05. For
purposes of clause (ii), the results of each required calculation shall be
rounded to the nearest ten-thousandth. The "Index Price" for any day shall mean
the closing price of the Standard & Poor's Bank Index (symbol: BIX);
(h) by BHI, if (i) CU shall have exercised a right specified in the proviso
set forth in Section 6.2(b) with respect to any Alternative Transaction and
shall, directly or through agents or representatives, continue discussions with
any third party concerning such Alternative Transaction for more than ten (10)
Business Days after the date CU was first apprised of such Alternative
Transaction; or (ii) a proposal to effect an Alternative Transaction shall have
been commenced, publicly announced or communicated to CU which contains a
proposal as to price (without regard to the specificity of such price proposal)
and CU shall not have rejected such proposal within 10 Business Days of its
receipt or the date its existence first becomes publicly disclosed, if earlier;
or
(i) by BHI or CU, if its Board of Directors so determines, if the Closing
Price of BHI Stock for any period of ten (10) consecutive trading days prior to
the Closing Date is less than $35.50. Neither the Per Share Cash Consideration
nor the Exchange Ratio determined pursuant to Section 2.2(a)(i) shall be
affected by the absence of a determination by the Board of Directors of BHI or
CU to exercise a termination right under this subsection (i).
13.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
this Article XIII, this Agreement shall be void and have no further effect,
except that no termination of this Agreement under this Article XIII for any
reason or in any manner shall release, or be construed as so releasing, CU or
BHI
46
<PAGE>
from its or their respective obligations (a) under the CU Stock Option Agreement
(termination of which shall be governed by the terms of that agreement), (b)
under the last sentence of Section 6.4, the last sentence of Section 7.3, or
under Section 14.1 hereof, or (c) from any liability or damage to the other
party hereto arising out of in connection with or otherwise relating to,
directly or indirectly, said party's intentional breach, default or failure to
perform any of its covenants, agreements, duties or obligations arising
hereunder.
ARTICLE XIV
MISCELLANEOUS
14.1 EXPENSES. Each party hereto shall pay its own costs and expenses,
including but not limited to those of its attorneys and accountants, in
connection with this Agreement and the transactions contemplated hereby.
14.2 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto to another shall be in writing and delivered
personally or by facsimile transmission or sent by registered or certified mail,
postage prepaid, with return receipt requested, addressed as follows:
<TABLE>
<S> <C>
To CU: 16030 Ventura Boulevard
Encino, California 91436-4487
Attention: Stephen G. Carpenter
Facsimile Number: (818) 907-5024
With copies to: Anita Wolman, Esq.
16030 Ventura Boulevard
Encino, California 91436-4487
Facsimile Number: (818) 907-5024
and Sullivan & Cromwell
444 South Flower Street
Los Angeles, CA 90071-2901
Attention: Stanley F. Farrar, Esq.
Facsimile Number: (213) 683-0457
To BHI: Bancorp Hawaii, Inc.
130 Merchant Street
Honolulu, Hawaii 96813
Attention: David A. Houle
Facsimile Number: (808) 537-8637
With copies to: Joseph T. Kiefer, Esq.
130 Merchant Street
Honolulu, Hawaii 96813
Facsimile Number: (808) 538-4346
and Carlsmith Ball Wichman Case & Ichiki
Pacific Tower, Suite 2200
1001 Bishop Street
Honolulu, Hawaii 96813
Attention: J. Thomas Van Winkle, Esq.
Facsimile Number: (808) 523-0842
</TABLE>
47
<PAGE>
Any such notice, request, instruction or other document shall be deemed
received on the date delivered personally or sent by facsimile transmission, or
on the fourth Business Day after it was sent by registered or certified mail,
postage prepaid. Any of the Persons shown above may change its address for
purposes of this Section by giving notice in accordance herewith.
14.3 SUCCESSORS AND ASSIGNS. All terms and conditions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective transferees, successors and permitted assigns; provided,
however, that this Agreement and all rights, privileges, duties and obligations
of the parties hereto may not be assigned or delegated by either party hereto
without the prior written consent of the other party hereto.
14.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which, taken together, shall constitute one original
document.
14.5 EFFECT OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of CU and BHI contained in this Agreement shall terminate immediately
after the Effective Time.
14.6 THIRD PARTIES. Except for the final sentence of Section 12.1 and
Sections 12.3, 12.4 and 12.6, or as provided in Exhibits H and J, this Agreement
shall not benefit or create any right or cause of action on the part of any
Person other than BHI and CU.
14.7 SCHEDULES; EXHIBITS; INTEGRATION. Each Schedule, exhibit and letter
delivered pursuant to this Agreement shall be in writing and shall constitute a
part of the Agreement, although Schedules and letters need not be attached to
each copy of this Agreement. This Agreement, together with such Schedules,
exhibits and letters, and the CU Stock Option Agreement, constitute the entire
agreement between the parties pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the parties in connection
therewith. The Confidentiality Agreement dated November 22, 1996 between CU and
BHI is terminated as of the date of this Agreement, except that the provisions
of Section IX.A. shall remain in effect (it being agreed that such provisions
shall not apply to any acquisition of securities of CU pursuant to the Stock
Option Agreement).
14.8 KNOWLEDGE; MATERIALITY.
(a) All references herein to the "knowledge" or "best knowledge" of BHI or
of CU shall mean facts and other information which an executive vice president,
chief financial officer, controller or senior vice president (and any officer
superior to any of the foregoing) of BHI or of CU (and, in the case of CU, of
any such officer of CU Bank whether or not knowledge of CU Bank is expressly
referred to), knows as a result of the performance of his or her duties, or that
such officer or a senior executive officer of a bank or bank holding company
similar to such party with similar duties reasonably should know after diligent
inquiry.
(b) All references herein to "material adverse change" or "material adverse
effect" shall not include the effect of any change in Federal or state banking
laws or regulations or any change in generally accepted accounting principles,
in each case affecting depository institutions or depository institution holding
companies generally.
14.9 GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of California (however, not to the
exclusion of any applicable Federal law), without regard to California statutes
or judicial decisions regarding choice of law questions.
14.10 SCHEDULES. The Schedules are an integral part of this Agreement, and
each Schedule shall be applicable as if set forth in full in the text hereof. In
the event there is any absolute unconditional representation contained in this
Agreement, said representation shall be modified by any contrary information
specifically referring to said representation that is set forth in any Schedule.
48
<PAGE>
14.11 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement and shall
not affect the interpretation hereof.
14.12 SEVERABILITY. If any portion of this Agreement shall be deemed by a
court of competent jurisdiction to be unenforceable, the remaining portions
shall be valid and enforceable only if, after excluding the portion deemed to be
unenforceable, the remaining terms hereof shall provide for the consummation of
the transactions contemplated herein without a materially adverse impact on the
financial or business benefits to the parties hereto that would otherwise be
provided by this Agreement.
14.13 WAIVER AND MODIFICATION. Prior to the Effective Time, any provision
of this Agreement may be waived by the party benefitted by that provision or by
both parties. No waiver of any term, provision or condition of this Agreement,
in any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition of this Agreement.
Except as otherwise required by law, this Agreement, may be modified or amended
by action of the Boards of Directors of CU and BHI, without action by their
respective shareholders. This Agreement may be modified or amended only by an
instrument of equal formality signed by the parties or their duly authorized
agents.
14.14 ATTORNEY'S FEES. In the event either party to this Agreement brings
an action or suit against the other party by reason of any breach of any
covenant, agreement, representation, warranty or other provision hereof, or any
breach by such other party of any duty or obligation created hereunder, the
prevailing party, as determined by the court or other body having jurisdiction,
shall be entitled to have and recover of and from the losing party, as
determined by the court or other body having jurisdiction, all reasonable costs
and expenses incurred or sustained by such prevailing party in connection with
such suit or action, including, without limitation, reasonable legal fees and
court costs (whether or not taxable as such).
14.15 JURY WAIVER. THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY MATTER
ARISING OUT OF THIS AGREEMENT OR RELATED TO THIS AGREEMENT OR IN CONNECTION WITH
ANY TRANSACTION OR MATTER CONTEMPLATED IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed this
Agreement as of the day and year first above written.
<TABLE>
<S> <C> <C>
CU BANCORP
By: /s/ STEPHEN G. CARPENTER
-----------------------------------------
Name: Stephen G. Carpenter
Title: Chairman
BANCORP HAWAII, INC.
By: /s/ JOSEPH T. KIEFER
-----------------------------------------
Name: Joseph T. Kiefer
Title: General Counsel
</TABLE>
49
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is made and
entered into as of the 24th day of February, 1997, by and between CU Bancorp, a
California corporation ("CU") and Bancorp Hawaii, Inc., a Hawaii corporation
("BHI"), with reference to the following facts:
R E C I T A L S:
(a) CU is a California corporation duly organized, validly existing and in
good standing under the laws of the State of California, with authorized capital
of 24,000,000 shares of no par value common stock of which there were 11,358,898
shares issued and outstanding on February 21, 1997, and 10,000,000 shares of
serial preferred stock, none of which is outstanding.
(b) BHI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Hawaii with authorized capital of
100,000,000 shares of common stock, $2.00 par value, of which there were
39,750,880 shares issued and outstanding on February 21, 1997, and 20,000,000
shares of preferred stock, none of which are outstanding on the date hereof.
(c) The respective Boards of Directors of CU and BHI deem it desirable and
in the best interests of their respective corporations and stockholders that CU
be merged (the "Merger") with and into BHI as provided in this Merger Agreement
pursuant to the laws of the States of Hawaii and California and that BHI be the
surviving company (the "Surviving Company").
(d) In connection with the Merger, CU and BHI entered into an Agreement and
Plan of Reorganization, dated as of February 24, 1997 (the "Reorganization
Agreement").
NOW THEREFORE, in consideration of the premises and of the mutual covenants
and agreements herein set forth and for the purpose of prescribing the terms and
conditions of such Merger, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Upon consummation of the Merger at the Effective Time (as defined in Article
VII hereof), CU shall be merged with and into BHI which shall thereupon be the
Surviving Company, and the separate corporate existence of CU shall cease.
ARTICLE II
ARTICLES OF INCORPORATION
The Articles of Incorporation of BHI as in effect immediately prior to the
Effective Time shall, at and after the Effective Time, continue to be the
Articles of Incorporation of the Surviving Company.
ARTICLE III
BYLAWS
The Bylaws of BHI as in effect immediately prior to the Effective Time
shall, at and after the Effective Time, continue to be the Bylaws of the
Surviving Company.
ARTICLE IV
EFFECTS OF MERGER
At and after the Effective Time, the Merger will have the effects set forth
in the Hawaii Business Corporation Act and the California Corporations Code.
<PAGE>
ARTICLE V
CONVERSION OF SHARES
5.1 EFFECTS ON STOCK. At the Effective Time of the Merger:
(a) Each share of BHI Stock issued and outstanding immediately prior to the
Effective Time shall remain an issued and outstanding share of common stock of
the Surviving Company and shall not be converted or otherwise affected by the
Merger.
(b) Subject to Sections 5.1(c), 5.1(d) and 5.3(e), each share of CU Stock
issued and outstanding immediately prior to the Effective Time shall, on and
after the Effective Time, be automatically canceled and cease to be an issued
and outstanding share of CU Stock and shall be converted into the right to
receive BHI Stock or cash as provided in Section 5.2(a).
(c) Each Dissenting Share of CU Stock shall not be converted into or
represent a right to receive BHI Stock or cash hereunder unless and until such
shares have lost their status as dissenting shares under Chapter 13 of the
California Corporations Code, at which time such shares shall be converted
either into cash or BHI Stock pursuant to Section 5.5.
(d) Any shares of CU Stock held by BHI (or any of its wholly owned
subsidiaries) or CU (or any of its wholly owned subsidiaries), other than those
held in a fiduciary capacity or as a result of debts previously contracted,
shall be canceled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
5.2 CONVERSION OF CU STOCK.
(a) Subject to the other provisions of this Article V, each share of CU
stock issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares and CU Stock described in Section 5.1(d) ) shall, by virtue of
the Merger, be converted into the right to receive, at the election of the
holder thereof as provided in Section 5.3, either:
(i) a fraction of a share of BHI Stock equal to the quotient (such
quotient, the "Exchange Ratio") of (i) $15.34 divided by (ii) the Average
Price of BHI Stock; provided, in the event that the Average Price of BHI
Stock shall be more than $51.03125, the Exchange Ratio shall be .3006 and in
the event that the Average Price of BHI Stock shall be less than $37.71875,
the Exchange Ratio shall be .4067; or
(ii) cash in the amount of $15.34 (such amount, the "Per Share Cash
Consideration").
(b) At the Effective Time, the stock transfer books of CU shall be closed as
to holders of CU Stock immediately prior to the Effective Time and no transfer
of CU Stock by any such holder shall thereafter be made or recognized. If, after
the Effective Time, certificates are properly presented in accordance with
Section 5.6 of this Merger Agreement to the Exchange Agent, such certificates
shall be canceled and exchanged for certificates representing the number of
whole shares of BHI Stock, if any, and/or a check representing the amount of
cash, if any, into which the CU Stock represented thereby was converted in the
Merger, plus any payment for a fractional share of BHI Stock.
5.3 ELECTION AND PRORATION PROCEDURES.
(a) ELECTION FORMS AND TYPES OF ELECTION. An election form and other
appropriate and customary transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of CU Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent) in such form as BHI and CU
shall mutually agree ("Election Form") shall be mailed no less than thirty-five
days prior to the anticipated closing date or on such other date as BHI and CU
shall mutually agree ("Mailing Date") to each holder of record of CU Stock as of
five Business Days prior to the Mailing Date ("Election Form Record Date"). CU
shall make available one or
2
<PAGE>
more Election Forms as may be reasonably requested by all persons who become
holders (or beneficial owners) of CU Stock after the Election Form Record Date
and prior to the Election Deadline (as defined herein), and CU shall provide to
the Exchange Agent all information reasonably necessary for it to perform its
obligations as specified herein. Each Election Form shall permit the holder (or
the beneficial owner through appropriate and customary documentation and
instructions) to elect (an "Election") to receive either (i) BHI Stock (a "Stock
Election") with respect to all of such holder's CU Stock, or (ii) cash (a "Cash
Election") with respect to all of such holder's CU Stock, or (iii) a specified
number of shares of CU Stock to receive BHI Stock (a "Combination Stock
Election") and a specified number of shares of CU Stock to receive cash (a
"Combination Cash Election"). Any CU Stock (other than Dissenting Shares) with
respect to which the holder (or the beneficial owner, as the case may be) shall
not have submitted to the Exchange Agent, an effective, properly completed
Election Form received prior to the Election Deadline shall be deemed to be
"Undesignated Shares" hereunder.
(b) PROPER AND TIMELY ELECTION. Any Election shall have been properly made
and effective only if the Exchange Agent shall have actually received a properly
completed Election Form by 5:00 p.m. on the later of the 30th day following the
Mailing Date or the 31st day following the mailing of any notice required by
Section 1301 of the California Corporations Code (or such other time and date as
BHI and CU may mutually agree) (the "Election Deadline"). An Election Form shall
be deemed properly completed only if an Election is indicated for each share of
CU Stock covered by such Election Form and if accompanied by one or more
certificates (or customary affidavits and indemnification regarding the loss or
destruction of such certificates or the guaranteed delivery of such
certificates) representing all shares of CU Stock covered by such Election Form,
together with duly executed transmittal materials included in or required by the
Election Form. Any Election Form may be revoked or changed by the person
submitting such Election Form at or prior to the Election Deadline. In the event
an Election Form is revoked prior to the Election Deadline, the shares of CU
Stock represented by such Election Form shall automatically become Undesignated
Shares unless and until a new Election is properly made with respect to such
shares on or before the Election Deadline, and BHI shall cause the certificates
representing such shares of CU Stock to be promptly returned without charge to
the person submitting the revoked Election Form upon written request to that
effect from the holder who submitted such Election Form. Subject to the terms of
this Merger Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any decisions of BHI and CU required by the Exchange Agent
and made in good faith in determining such matters shall be binding and
conclusive. Neither BHI nor the Exchange Agent shall be under any obligation to
notify any person of any defect in an Election Form.
(c) PRORATION. As promptly as practicable but not later than ten calendar
days after the Effective Time, BHI shall cause the Exchange Agent to effect the
allocation among the holders of CU Stock of rights to receive BHI Stock or cash
in the merger in accordance with the Election Forms as follows:
(i) if the aggregate number of shares of CU Stock as to which Stock
Elections and Combination Stock Elections shall have effectively been made
exceeds, and is not approximately equal to, 80% of the issued and
outstanding shares of CU Stock as of the Effective Time (the "Maximum Stock
Amount"), then:
(A) All Undesignated Shares and Dissenting Shares shall be deemed to
have made Cash Elections; and
(B) the Exchange Agent shall select by lot some or all of the persons
who hold of record 100 or less shares of CU Stock who effectively made
Stock Elections or Combination Stock Elections and shall treat them for
purposes of this Section 5.3(c) as having made a Cash Election, to the
extent necessary to reach the Maximum Stock Amount. If the remaining
shares of CU Stock as to which Stock Elections and Combination Stock
Elections have been effectively made (the
3
<PAGE>
"Remaining Stock Election Shares") exceeds, and is not approximately
equal to, the Maximum Stock Amount, then:
(C) a stock proration factor (the "Stock Proration Factor") shall be
determined by dividing the Maximum Stock Amount by the Remaining Stock
Election Shares. Each holder of such Remaining Stock Election Shares
shall be entitled to receive in respect thereof:
(I) the number of shares of BHI Stock equal to the product of
(x) the Exchange Ratio, multiplied by (y) the number of such
Remaining Stock Election Shares held by such holder multiplied by (z)
the Stock Proration Factor; and
(II) cash in an amount equal to the product of (x) the Per Share
Cash Consideration, multiplied by (y) the number of Remaining Stock
Election Shares held by such holder, multiplied by (z) one minus the
Stock Proration Factor.
(ii) if the aggregate number of shares of CU Stock as to which Stock
Elections and Combination Stock Elections shall have effectively been made
shall be less than, and not approximately equal to, 60% of the issued and
outstanding shares of CU Stock as of the Effective Time (the "Minimum Stock
Amount"), then:
(A) the Exchange Agent shall select by lot some or all of the persons
who hold of record Undesignated Shares and shall treat them for purposes
of this Section 5.3(c) as having made a Stock Election, to the extent
necessary to reach the Minimum Stock Amount. All Undesignated Shares so
selected shall be converted into the right to receive BHI Stock (and if
it is not necessary to select all Undesignated Shares to reach the
Minimum Stock Amount, Undesignated Shares not so selected shall be
converted into the right to receive cash). If thereafter the total number
of shares of CU Stock as to which Stock Elections and Combination Stock
Elections have been effectively made or deemed made is less than, and not
approximately equal to, the Minimum Stock Amount, then:
(B) a cash proration factor (the "Cash Proration Factor") shall be
determined by dividing the Minimum Stock Amount (less the shares for
which a Stock Election or Combination Stock Election has been effectively
made or deemed made) by the total number of shares of CU Stock as to
which Cash Elections and Combination Cash Elections have been effectively
made (the "Cash Election Shares"). Each holder of such Cash Election
Shares shall be entitled to receive in respect thereof:
(I) cash equal to the product of (x) the Per Share Cash
Consideration, multiplied by (y) the number of Cash Election Shares
held by such holder, multiplied by (z) one minus the Cash Proration
Factor; and
(II) the number of shares of BHI Stock equal to the product of
(x) the Exchange Ratio, multiplied by (y) the number of Cash Election
Shares held by such holder, multiplied by (z) the Cash Proration
Factor.
(iii) if the aggregate number of shares of CU Stock as to which Stock
Elections and Combination Stock Elections shall have effectively been made
is approximately equal to or exceeds the Minimum Stock Amount and is also
less than or approximately equal to the Maximum Stock Amount, then:
(A) all Undesignated Shares and Dissenting Shares shall be deemed to
have made Cash Elections; and
(B) each holder of CU Stock who made an effective Stock Election or
Combination Stock Election shall be entitled to receive BHI Stock with
respect to the number of shares of CU Stock covered by such Stock
Election or Combination Stock Election; and
4
<PAGE>
(C) each holder of CU Stock who made an effective Cash Election or
Combination Cash Election shall be entitled to receive cash with respect
to the number of shares of such holder's CU Stock covered by such Cash
Election or Combination Cash Election.
(d) CALCULATIONS. The calculations required by Section 5.2(a)(i) shall be
prepared by BHI prior to the anticipated Effective Time and shall be set forth
in a certificate executed by the Chief Financial Officer of BHI and furnished to
CU two Business Days prior to the closing date showing the manner of calculation
in reasonable detail, which shall be conclusive absent manifest error. Any
calculation of a portion of a share of BHI Stock shall be rounded to the nearest
ten-thousandth of a share, and any cash payment shall be rounded to the nearest
cent. For purposes of this Section 5.3, the shares of CU Stock for which BHI
Stock is to be issued as consideration in the Merger shall be deemed to be
"approximately equal" to the Minimum or Maximum Stock Amount if such number is
within 25,000 shares (of CU Stock) of such amount.
(e) NO FRACTIONAL SHARES. Notwithstanding any other provisions of this
Merger Agreement, each holder of shares of CU Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of BHI Stock (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of BHI Stock multiplied by the Average
Price of BHI Stock. No holder will be entitled to dividends, voting rights or
any other rights as a stockholder in respect of any fractional share of BHI
Stock.
5.4 ADJUSTMENTS FOR DILUTION AND OTHER MATTERS. If prior to the Effective
Time, (a) CU shall declare a stock dividend or distribution on the CU Stock, or
subdivide, split up, reclassify or combine the CU Stock, or declare a dividend,
or make a distribution, on the CU Stock, in any security convertible into CU
Stock (provided that no such action may be taken by CU without BHI's prior
written consent) or (b) the outstanding shares of BHI Stock shall have been
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities, in each case as a result of a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in BHI's capitalization, then an appropriate
adjustment or adjustments will be made to the Exchange Ratio (including the
Average Price of BHI Stock and the Average Price of BHI Stock below and above
which the Exchange Ratio is a specified amount pursuant to Section 5.2).
5.5 CONVERSION OF DISSENTING SHARES.
(a) CU shall give BHI prompt notice upon receipt by CU of any written
demands for appraisal rights, withdrawal of such demands, and any other
documents received or instruments served pursuant to Chapter 13 of the
California Corporations Code and shall give BHI the opportunity to direct all
negotiations and proceedings with respect to such demands. CU shall not
voluntarily make any payment with respect to any demands for appraisal rights
and shall not, except with the prior written consent of BHI, settle or offer to
settle such demands. Each holder of CU Stock who becomes entitled, pursuant to
provisions of said Chapter 13 of the California Corporations Code, to payment
for his or her Dissenting Shares under the provisions of said Chapter shall
receive payment therefor directly or indirectly from BHI and such shares of CU
Stock shall be canceled.
(b) If prior to the Election Deadline any shareholder of CU shall fail to
perfect, or shall effectively withdraw or lose, his or her rights under Chapter
13 of the California Corporations Code, the Dissenting Shares of such holder
shall be treated for purposes of this Article V as any other shares of
outstanding CU Stock. If, after the Election Deadline, any holder of CU Stock
shall fail to perfect, or shall effectively withdraw or lose, his or her right
to appraisal of and payment for his or her Dissenting Shares under Chapter 13 of
the California Corporations Code, each Dissenting Share of such holder shall be
converted into the right to receive the Per Share Cash Consideration pursuant to
this Article V.
5
<PAGE>
5.6 EXCHANGE PROCEDURES.
(a) EXCHANGE AGENT. No later than the Effective Time, BHI shall deposit
with the Exchange Agent the number of shares of BHI Stock issuable in the Merger
and the amount of cash payable in the Merger. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to BHI Stock
held by it from time to time hereunder, except that it shall receive and hold
all dividends or other distributions paid or distributed with respect to such
shares for the account of the persons entitled thereto.
(b) EXCHANGE OF CERTIFICATES AND CASH. After completion of the allocation
procedure set forth in Section 5.3, each holder of a certificate formerly
representing CU Stock (other than Dissenting Shares) who surrenders or has
surrendered such certificate (or customary affidavits and indemnification
regarding the loss or destruction of such certificate), together with duly
executed transmittal materials included in or required by the Election Form, to
the Exchange Agent shall, upon acceptance thereof, be entitled to a certificate
representing BHI Stock and/or cash to which such holder would otherwise be
entitled. The Exchange Agent shall accept such CU certificate upon compliance
with such reasonable and customary terms and conditions as the Exchange Agent
may impose to effect an orderly exchange thereof in accordance with normal
practices. Until surrendered as contemplated by this Section 5.6, each
certificate representing CU Stock shall be deemed from and after the Effective
Time to evidence only the right to receive cash and/or BHI Stock, as the case
may be, upon such surrender. BHI shall not be obligated to deliver the
consideration to which any former holder of CU Stock is entitled as a result of
the Merger until such holder surrenders his certificate or certificates
representing shares of CU Stock (or customary affidavits and indemnification
regarding the loss or destruction of such certificate) for exchange as provided
in this Section 5.6. If any certificate for shares of BHI Stock, or any check
representing cash and/ or declared but unpaid dividends, is to be issued in a
name other than that in which a certificate surrendered for exchange is issued,
the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and the person requesting such exchange shall affix any
requisite stock transfer tax stamps to the certificate surrendered or provide
funds for their purchase or establish to the satisfaction of the Exchange Agent
that such taxes are not payable.
(c) AFFILIATES. Certificates surrendered for exchange by any person
constituting an "affiliate" of CU for purposes of Rule 145 under the Securities
Act shall not be exchanged for certificates representing whole shares of BHI
Stock until BHI has received a written affiliate's agreement from such person.
5.7 VOTING AND DIVIDENDS. Former shareholders of record of CU shall be
entitled to vote after the Effective Time at any meeting of BHI stockholders the
number of whole shares of BHI Stock into which their respective shares of CU
Stock are converted, regardless of whether such holders have exchanged their
certificates representing CU Stock for certificates representing BHI Stock in
accordance with the provisions of this Merger Agreement. Until surrendered for
exchange in accordance with the provisions of Section 5.6, each certificate
theretofore representing shares of CU Stock (other than shares to be canceled
pursuant to Section 5.1(d)) shall from and after the Effective Time represent
for all purposes only the right to receive shares of BHI Stock, cash in lieu of
fractional shares and/or cash, as set forth in this Merger Agreement. No
dividends or other distributions declared or made after the Effective Time with
respect to BHI Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered certificate of CU Stock with respect to the
shares of BHI Stock represented thereby, until the holder of such certificate of
CU Stock shall surrender such certificate. Subject to the effect of applicable
laws, following surrender of any such certificates of CU Stock for which shares
of BHI Stock are to be issued, there shall be paid to the holder of the
certificates, without interest, (i) the amount of any cash payable with respect
to a fractional share of BHI Stock to which such holder is entitled pursuant to
Section 5.3(e) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of BHI Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of BHI Stock.
6
<PAGE>
5.8 NO LIABILITY. Neither BHI, CU nor the Exchange Agent shall be liable
to any holder of shares of CU Stock for any shares of BHI Stock (or dividends or
distributions with respect thereto) or cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
5.9 WITHHOLDING RIGHTS. BHI or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Merger Agreement to any holder of shares of CU Stock such amounts as BHI or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by BHI or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Merger Agreement
as having been paid to the holder of the shares of CU Stock in respect of which
such deduction and withholding was made by BHI or the Exchange Agent.
5.10 OPTIONS.
(a) Subject to Sections 5.10(a) through 5.10(d), the unexercised CU Options
held by each person who is at the Effective Time an employee of California
United Bank ("CU Bank") shall be assumed, or replaced with a comparable
substituted option, by the Surviving Company as of the Effective Time. Such
assumption shall be accomplished pursuant to the BHI Option Plan Amendment to be
adopted prior to the closing date (subject to subsequent approval or
ratification by the holders of a majority of the outstanding BHI Stock) and
pursuant to new option agreements with each optionee. Each CU Option so assumed
or replaced shall at the Effective Time be deemed to be an option (a
"Replacement Option") granted by the Surviving Company to acquire BHI Stock.
Subject to Section 5.10(d), the per share exercise price for the Replacement
Options granted to each optionee shall be equal to the exercise price of such
optionee's CU Options which are converted into such Replacement Options divided
by the Exchange Ratio, and shall be for such number of shares of BHI Stock as
are equal to the product of the Exchange Ratio multiplied by the number of
shares of CU Stock subject to such CU Options (except that no option shall be
deemed granted by the Surviving Company to acquire a fractional share of BHI
Stock). The new option agreements contemplated by this Section 5.10(a) shall be
distributed to CU employees who then hold unexercised CU Options no later than
20 calendar days prior to the anticipated closing date, which new option
agreements as executed by the employees must be returned to BHI no later than 10
calendar days prior to the anticipated closing date in order for such assumption
or replacement to be effective.
(b) Assumption of such CU Options shall be contingent upon (i) the Closing,
(ii) the execution prior to the closing date by the particular optionee, BHI and
CU of a new option agreement providing for the assumption or replacement of such
optionee's unexercised CU Options and (iii) the employment by CU Bank of the
optionee at the Effective Time.
(c) To the extent that the assumption or replacement of a CU Option by the
Surviving Company would result in the issuance of an option to purchase a
fractional share of BHI Stock, such fractional share option shall be canceled,
and the aggregate exercise price of the optionee's Replacement Options shall be
reduced by the proportionate amount of the aggregate exercise price attributable
to the fractional share.
(d) The assumption or replacement by the Surviving Company of CU Options
pursuant to the BHI Option Plan Amendment and the new option agreements shall
(unless otherwise agreed by BHI and CU) be subject to the following limitations:
(i) The excess of the aggregate fair market value of the shares of BHI
Stock subject to a Replacement Option immediately after the assumption over
the aggregate option exercise price for such shares of BHI Stock shall not
be greater than the excess of the aggregate fair market value of the shares
subject to the CU Option immediately before the assumption over the
aggregate option exercise price for such shares of CU Stock.
(ii) For any option, on a share by share comparison, the ratio of the
option exercise price to the fair market value of the BHI Stock subject to
the Replacement Option immediately after the
7
<PAGE>
assumption shall not be more favorable to the optionee than the ratio of the
CU Option exercise price to the fair market value of the CU Stock subject to
the option immediately before the assumption.
(iii) The optionee shall not receive additional benefits under the
Replacement Option which he did not have under the CU Option.
(iv) Replacement Options shall not be exercisable prior to the date
("Ratification Date") on which the BHI Option Plan Amendment is approved or
ratified by the holders of a majority of the outstanding shares of BHI
Stock. However, in the event that the exercise period for a Replacement
Option would otherwise expire during the period from the Effective Time
through the Ratification Date (including expiration of the exercise period
following termination of employment), such Replacement Option shall be
deemed to be a nonqualified stock option not described in Code Section 422
(if not otherwise already designated a nonqualified stock option) and the
exercise period for such Replacement Option shall be extended to the date
that is 90 days following the Ratification Date.
(e) Each CU Option issued pursuant to the CU Stock Plan that is outstanding
and unexercised at the Effective Time and that is not assumed or replaced
pursuant to Sections 5.10(a) to 5.10(d) (including any such CU Option as to
which an optionee has executed a new option agreement as contemplated by Section
5.10(b) but has ceased to be an employee of CU Bank at the Effective Time) shall
automatically terminate at the Effective Time.
(f) If approval or ratification of BHI's shareholders is not received on or
prior to June 30, 1998, each Replacement Option shall be void, and BHI shall pay
the holder thereof the amount provided by this Section 5.10(f), which amount
shall be calculated by reference to the Closing Price of BHI Stock on the
earlier of the date of disapproval or June 30, 1998 (the "Determination Date"),
and paid within five (5) Business Days thereafter in cash or cash equivalent or,
at the election of BHI in its sole discretion, by delivery of such number of
shares of BHI Stock as equals the amount to be paid hereunder divided by the
Closing Price of BHI Stock on the Determination Date, rounded down to a whole
share, plus cash for any fractional share. Any payment required by this Section
5.10(f) shall be in an amount equal to difference between (a) the product of the
number of shares of BHI Stock covered by such optionee's Replacement Options
multiplied by the Closing Price of BHI Stock on the relevant date, less (b) the
aggregate exercise price for all such Replacement Options held by the optionee.
(g) Except for CU Options assumed as provided herein: (i) CU shall cause the
CU Stock Plan and any other plan, program or arrangement pursuant to which CU is
or may be required to issue CU Stock or compensation based on CU Stock, and all
rights thereunder to purchase shares of CU Stock or BHI Stock, to be terminated
as of the Effective Time, and (ii) CU shall ensure that following the Effective
Time no holder of CU Options or any participant in any CU Stock Plan shall have
any right thereunder to acquire any equity securities of CU or of BHI.
(h) Each BHI Option issued and outstanding immediately prior to the
Effective Time shall not be affected by the Merger.
ARTICLE VI
FURTHER ACTION
The parties hereto shall execute and deliver, or cause to be executed and
delivered, all such deeds and other instruments, and will take or cause to be
taken all further or other action as they may deem necessary or desirable, in
order to vest in and confirm to the Surviving Company title to and possession of
all of CU's and BHI's property, rights, privileges, powers and franchises
hereunder, and otherwise to carry out the intent and purposes of this Merger
Agreement.
8
<PAGE>
ARTICLE VII
EFFECTIVE TIME
The Merger will become effective at the date and time of filing of Articles
of Merger and this Merger Agreement with the Director of the Department of
Commerce and Consumer Affairs of the State of Hawaii (or such later date and
time as may be agreed by the parties and set forth in the Articles of Merger).
Such date and time is referred to herein as the "Effective Time."
ARTICLE VIII
SUCCESSORS AND ASSIGNS
This Merger Agreement shall be binding upon and enforceable by the parties
hereto and their respective successors, assigns and transferees, but this Merger
Agreement may not be assigned by either party without the written consent of the
other.
ARTICLE IX
GOVERNING LAW
The laws of the State of California (other than those pertaining to choice
of law) shall govern the validity and interpretation of this Merger Agreement
and the performance by the parties hereto.
ARTICLE X
TERMINATION
This Merger Agreement may, by the mutual consent and action of the Boards of
Directors of CU and BHI, be abandoned at any time before or after approval
thereof by the shareholders of CU, but not later than the filing of the
documents referred to in Article VII of this Merger Agreement.
ARTICLE XI
CERTAIN DEFINITIONS
Except as otherwise expressly provided for in this Merger Agreement, or
unless the context otherwise requires, as used throughout this Merger Agreement
the following terms shall have the respective meanings specified below:
(a) "Average Price of BHI Stock" means the average of the Closing Price of
BHI Stock for the 20 consecutive trading days ending on the third trading day
immediately prior to the Closing Date (subject to adjustment as provided below).
The term "trading day" shall mean a day on which trading generally takes place
on the New York Stock Exchange and on which trading in BHI Stock has not been
halted or suspended. In the event BHI pays, declares or otherwise effects a
stock split, reverse stock split, reclassification or stock dividend or
distribution with respect to the BHI Stock between the date of this Merger
Agreement and the Effective Time, appropriate adjustments will be made to the
Average Price of BHI Stock.
(b) "BHI Option Plan Amendment" means the amendment to the BHI Stock Option
Plan contemplated by Section 5.10.
(c) "BHI Options" means options to purchase BHI Stock granted by BHI.
(d) "BHI Stock" means the common stock, $2.00 par value, of BHI.
(e) "BHI Stock Option Plan" means the Bancorp Hawaii, Inc. Stock Option Plan
of 1994.
9
<PAGE>
(f) "Business Day" means any day other than Saturday, Sunday or a day on
which commercial banks in either of California or Hawaii are authorized or
required to be closed.
(g) "Closing Price of BHI Stock" means the closing price of BHI Stock on the
New York Stock Exchange as reported in The Wall Street Journal.
(h) "CU Option Plan" means, collectively, each plan included in the CU Stock
Plan that provides for the issuance of options to acquire CU Stock.
(i) "CU Options" means options, rights or warrants to purchase CU Stock
granted by CU (other than the CU Stock Option Agreement).
(j) "CU Stock" means the common stock, no par value, of CU (including
certificates representing securities of any predecessor entitled to be converted
into or exchanged for certificates for CU common stock).
(k) "CU Stock Option Agreement" or "Stock Option Agreement" means the Stock
Option Agreement entered into between CU and BHI dated February 24, 1997.
(l) "CU Stock Plan" means, collectively, the following CU plans: (i) the
1983 Employee Stock Option Plan, (ii) 1985 Employee Stock Option Plan, (iii)
1987 Special Stock Option Plan, (iv) 1993 Employee Stock Option Plan, (v) 1994
Non-Employee Director Stock Option Plan, (vi) 1995 Restricted Stock Plan, (vii)
1996 Non-Employee Director Stock Option Plan, (viii) 1996 Employee Stock Option
Plan, (ix) 1996 Restricted Stock Plan, and (x) the CU Bancorp 1996 Conversion
Option Plan.
(m) "Dissenting Shares" means any shares of CU Stock issued and outstanding
immediately prior to the Effective Time of the Merger that are "dissenting
shares" as that term is defined in Section 1300(b) of the California
Corporations Code.
(n) "Exchange Agent" means the financial institution appointed by BHI, with
the consent of CU, to effect the exchange contemplated by Article V hereof.
10
<PAGE>
IN WITNESS WHEREOF, CU and BHI, pursuant to the approval and authority duly
given by resolution of their respective Boards of Directors, have caused this
Merger Agreement to be signed by their respective officers as of the day and
year first above written.
CU BANCORP
By: /s/ STEPHEN G. CARPENTER
-----------------------------------------
Stephen G. Carpenter
Title: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
By: /s/ ANITA Y. WOLMAN
-----------------------------------------
Anita Y. Wolman
Title: CORPORATE
SECRETARY
BANCORP HAWAII, INC.
By: /s/ DAVID A. HOULE
-----------------------------------------
David A. Houle
Title: SENIOR VICE
PRESIDENT
By: /s/ CORI C. WESTON
-----------------------------------------
Cori C. Weston
Title:
SECRETARY
11
<PAGE>
EXHIBIT B
STOCK OPTION AGREEMENT
------------------------
SEE APPENDIX B TO PROXY STATEMENT/PROSPECTUS
<PAGE>
EXHIBIT C
AFFILIATE'S AGREEMENT
____________,1997
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Reorganization, dated as of
, 1997 (the "Merger Agreement"), by and between Bancorp Hawaii, Inc.
("BHI") and CU Bancorp ("CU"), which Merger Agreement provides for the merger of
CU with and into BHI (the "Merger") in a transaction in which, among other
things, shares of common stock, without par value, of CU ("CU Common Stock")
will be exchanged and converted into the right to receive shares of common
stock, $2.00 par value, of BHI ("BHI Common Stock") and/or cash, as more fully
provided therein.
I have been informed that the Merger constitutes a transaction covered by
Rule 145 under the Securities Act of 1933, as amended (the "Securities Act");
that I may be deemed to be an "affiliate" of CU within the meaning of Rule 145;
and that, accordingly, the shares of BHI Common Stock which I may acquire in
connection with the Merger may only be disposed of in conformity with the
provisions hereof.
The capitalized terms used and not defined herein shall have the meanings
set forth in the Merger Agreement.
1. Provided the Merger occurs on or before , I, after inquiry of any
agent with discretionary power to transfer my shares of CU Common Stock,
represent, warrant and agree as follows:
a. I have full power to execute this Affiliate's Agreement and to make
the representations, warranties and agreements herein, and to perform my
obligations hereunder.
b. I am currently the owner of that number of shares of CU Common Stock
set forth in Appendix A hereto (the "CU Shares") and have held the CU Shares
at all times since January 1, 1997 unless otherwise set forth in Appendix A.
c. I will not pledge or otherwise encumber, nor sell, assign, transfer
or otherwise dispose of or reduce my risk of ownership or investment in, any
of the CU Shares, except (i) with the prior written consent of BHI (which
shall not be unreasonably withheld); or (ii) pursuant to the Merger.
d. I will not sell, transfer or dispose of any shares of BHI Common
Stock which I may acquire in connection with the Merger or any securities
which may be paid as a dividend or otherwise distributed thereon or with
respect thereto or issued or delivered in exchange or substitution therefor
(all such shares and other securities herein sometimes collectively referred
to as "Restricted Securities"), or any option, right or other interest with
respect to any Restricted Securities, unless such sale, transfer or
disposition is effected (i) pursuant to an exemption from the registration
requirements of the Securities Act as provided in Section 3 hereof, or (ii)
pursuant to an effective registration statement under, and in compliance
with, the Securities Act (provided that I may make bona fide gifts or
distributions without consideration so long as the recipients thereof agree
not to sell, transfer or otherwise dispose of the BHI Common Stock except as
provided herein).
e. I have no present plan or intent to engage in a sale, exchange,
transfer, redemption or reduction in any way of my risk of ownership by
short sale or otherwise, or other disposition, directly or indirectly (such
actions being collectively referred to as a "Sale") of BHI Common Stock to
be received by me pursuant to the Merger.
f. I have not engaged in a Sale of any shares of CU Stock at any time
since January 1, 1997 except as otherwise set forth in Appendix A.
g. I have no present plan or intent to (i) engage in a Sale of my CU
Shares (other than in exchange for BHI Common Stock pursuant to the Merger),
or (ii) exercise dissenters' rights in connection with the Merger.
<PAGE>
h. The representations contained herein shall be true and correct at
all times from the date hereof through the date the Merger is consummated.
i. I have consulted such legal and financial counsel as I have deemed
appropriate in connection with the execution of this Affiliate's Agreement.
2. I understand that BHI is under no obligation to register the sale,
transfer or other disposition of the Restricted Securities by me or on my behalf
under the Securities Act or to take any other action necessary in order to make
available an exemption from registration requirements of the Securities Act.
3. BHI acknowledges that the provisions of Section 1(d) of this Affiliate's
Agreement will be satisfied as to any sale by me of Restricted Securities
pursuant to Rule 145(d) under the Securities Act, as evidenced by a broker's
letter stating that the requirements of Rule 145 have been met; provided,
however, that if counsel for BHI reasonably believes that the provisions of Rule
145 have not been complied with, or if requested by BHI in connection with a
proposed disposition, I shall furnish to BHI a copy of a "no action" letter or
other communication from the staff of the SEC or an opinion of counsel in form
and substance satisfactory to BHI and its counsel, to the effect that the
applicable provisions of paragraphs (c), (e), (f) and (g) of Rule 144 under the
Securities Act have been complied with or that the disposition may be otherwise
effected in the manner requested in compliance with the Securities Act.
4. I also understand that stop transfer instructions will be given to BHI's
transfer agent with respect to the Restricted Securities and that there will be
placed on the certificates evidencing the Restricted Securities, or any
substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), APPLIES AND MAY ONLY BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
BETWEEN THE REGISTERED HOLDER HEREOF AND BANCORP HAWAII, INC., A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF BANCORP HAWAII,
INC."
BHI agrees that such stop transfer instructions and legend will be promptly
removed if the provisions of Section 3 are complied with, and further, after the
expiration of 12 months from the Effective Date of the Merger, upon request, BHI
will remove the portion of the legend related to this Agreement.
5. This Affiliate's Agreement shall be binding upon and enforceable against
my administrators, executors, representatives, heirs, legatees and devisees and
any pledgee holding the Restricted Securities as collateral.
6. In the event any of the parties to this Agreement brings an action or
suit against any other party by reason of any breach of any covenant, agreement,
representation, warranty or other provision hereof, or any breach of any duty or
obligation created hereunder by such other party, the prevailing party, as
determined by the court or other body having jurisdiction, shall be entitled to
have and recover of and from the losing party, as determined by the court or
other body having jurisdiction, all reasonable costs and expenses incurred or
sustained by such prevailing party in connection with such suit or action,
including, without limitation, legal fees and court costs (whether or not
taxable as such).
7. THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY MATTER ARISING OUT OF THIS
AGREEMENT OR RELATED TO THIS AGREEMENT OR IN CONNECTION WITH ANY TRANSACTION OR
MATTER CONTEMPLATED IN THIS AGREEMENT.
2
<PAGE>
IN WITNESS WHEREOF, I have executed the foregoing Affiliate's Agreement
this day of , 1997.
<TABLE>
<S> <C>
Very truly yours,
By:
Name:
Title:
AFFILIATE
Agreed to and accepted:
BANCORP HAWAII, INC.
By:
Title:
By:
Title:
</TABLE>
SPOUSAL CONSENT
I am the spouse of the Affiliate in the above Agreement. I understand that I
may consult independent legal counsel as to the effect of this Agreement and the
consequences of my execution of this Agreement and, to the extent I felt it
necessary, I have discussed it with legal counsel. I hereby confirm this
Agreement and agree that it shall bind my interest in the Shares, if any.
<TABLE>
<S> <C>
- ---------------------------------------------
(Affiliate's Spouse's Name)
</TABLE>
3
<PAGE>
APPENDIX A TO AFFILIATE'S AGREEMENT
DATED , 1997
------------------------
NAME OF AFFILIATE
Shares Held as of
<TABLE>
<S> <C> <C> <C>
Number of Shares of CU Common Stock as to
which the Affiliate had sole or shared voting
or dispositive power as of the above date
including the number of shares which such
person had the right to acquire as of such Common Shares Issuable Upon Total Common
date Owned Conversion Equivalent
- --------------------------------------------- --------------- ------------- -------------
</TABLE>
<PAGE>
EXHIBIT D
SHAREHOLDER'S AGREEMENT
This SHAREHOLDER'S AGREEMENT (this "Agreement"), dated as of February 24,
1997, is entered into among Bancorp Hawaii, Inc., a Hawaii corporation ("BHI"),
(the "Shareholder"), and CU Bancorp, a California corporation
("CU").
R E C I T A L S
A. BHI and CU entered into that certain Agreement and Plan of Reorganization
dated as of February 24, 1997 (the "Reorganization Agreement").
B. The Shareholder is a beneficial shareholder of shares of common stock,
no par value, of CU (the "CU Stock").
C. The Shareholder is a director of CU.
D. Unless otherwise provided in this Agreement, capitalized terms shall have
the meanings ascribed to such terms in the Reorganization Agreement.
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties and covenants, agreements and conditions contained
herein and in the Reorganization Agreement, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
SHAREHOLDER'S AGREEMENT
1.1 AGREEMENT TO VOTE. At any meeting of shareholders of CU to approve the
Reorganization Agreement, the Merger and the transactions contemplated thereby
(the "CU Shareholders' Meeting"), Shareholder shall vote or cause to be voted in
favor of, and to approve, the Reorganization Agreement, the Merger and the
transactions contemplated thereby, all of the shares of CU Stock as to which
Shareholder has sole or shared voting power (the "Shares"). Shareholder further
agrees to vote or cause to be voted all the Shares, except with the prior
written consent of BHI, against the following actions (other than the Merger and
the transactions contemplated by the Reorganization Agreement): (a) any
extraordinary corporate transactions, such as a merger, consolidation or other
business combination involving CU or its subsidiaries; (b) any sale, lease or
transfer of a material amount of the assets of CU or its subsidiaries; (c) any
change in the majority of the board of directors of CU; (d) any material change
in the present capitalization of CU; (e) any amendment of CU's Articles of
Incorporation; (f) any other material change in CU's corporate structure or
business; or (g) any other action which is intended, or could reasonably be
expected to, impede, interfere with, delay, postpone, discourage or materially
adversely affect the contemplated economic benefits to BHI of the Merger or the
transactions contemplated by the Reorganization Agreement or the CU Stock Option
Agreement.
1.2 LEGEND. The Shareholder agrees that the following legend may be
stamped, printed or typed on the face of his certificates of CU Stock evidencing
the Shares:
"THE VOTING, SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER
ENCUMBRANCE OR DISPOSITION OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO A SHAREHOLDER'S AGREEMENT DATED AS OF THE 24TH DAY OF
FEBRUARY, 1997 BY AND BETWEEN BANCORP HAWAII, INC. AND (THE RECORD OWNER
HEREOF), COPIES OF WHICH ARE ON FILE AT THE OFFICES OF BANCORP HAWAII,
INC."
CU agrees to issue stop transfer instructions to CU's transfer agent with
respect to Shareholder's CU Stock, to maintain such instructions in effect until
termination of this Agreement, and to use its reasonable best efforts to prevent
a transfer of Shareholder's CU Stock contrary to the terms of this Agreement.
<PAGE>
1.3 RESTRICTIONS ON DISPOSITIONS. The Shareholder agrees that, from and
after the date of this Agreement and during the term of this Agreement, the
Shareholder will not take any action that will alter or affect in any way the
right to vote the Shares, except (i) with the prior written consent of BHI or
(ii) to change such right from that of a shared right of the Shareholder to vote
the Shares to a sole right of the Shareholder to vote the Shares. The
Shareholder agrees that he will not pledge or otherwise encumber, nor sell,
assign, transfer or otherwise dispose of or reduce his risk of ownership or
investment in, any of the Shares currently owned or acquired by such Shareholder
after the date of this Agreement, except (i) with the prior written consent of
BHI (which shall not be unreasonably withheld); (ii) pursuant to the Merger; or
(iii) for any Shares acquired by Shareholder after the record date for the CU
Shareholders' Meeting upon exercise of options presently held by Shareholder.
1.4 COOPERATION. Shareholder agrees that he/she will not directly or
indirectly solicit any inquiries or proposals from any person relating to any
proposal or transaction for the disposition of the business or assets of CU or
any of its subsidiaries, or the acquisition of voting securities of CU or any
subsidiary of CU or any business combination between CU or any subsidiary of CU
and any person other than BHI.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
The Shareholder represents and warrants to BHI that the statements set forth
below are true and correct as of the date of this Agreement, except those that
are specifically as of a different date:
2.1 OWNERSHIP AND RELATED MATTERS.
(a) Schedule 2.1(a) hereto correctly sets forth the number of Shares
beneficially owned by Shareholder and the nature of Shareholder's voting power
with respect thereto. The Shareholder has good title to all of the Shares
indicated as owned by such Shareholder in the capacity set forth on Schedule
2.1(a), and such Shares are so owned free and clear of any liens, security
interest, charges or other encumbrances, except as set forth in such Schedule
2.1(a). Within five Business Days after the record date for the CU Shareholder's
Meeting (the "Record Date"), the Shareholder shall amend said Schedule 2.1(a) to
correctly reflect the number of Shares and the nature of Shareholder's voting
power with respect thereto as of the Record Date.
(b) There are no proxies, voting trusts or other agreements or
understandings to or by which the Shareholder or the Shareholder's spouse is a
party or bound or that expressly requires that any of the Shares be voted in any
specific manner other than as provided in this Agreement.
2.2 AUTHORIZATION AND BINDING AGREEMENT. The Shareholder has the legal
right, power, capacity and authority to execute, deliver and perform this
Agreement, and this Agreement is the valid and binding obligation of the
Shareholder enforceable in accordance with its terms, except as the enforcement
thereof may be limited by general principles of equity.
2.3 NON-CONTRAVENTION. The execution, delivery and performance of this
Agreement by the Shareholder will not (a) conflict with or result in the breach
of, or default or actual or potential loss of any benefit under, any provision
of any agreement, instrument or obligation to which the Shareholder or the
Shareholder's spouse is a party or by which any of Shareholder's properties or
the Shareholder's spouse's properties are bound, or give any other party to any
such agreement, instrument or obligation a right to terminate or modify any term
thereof; (b) require the consent or approval of any third party; (c) result in
the creation or imposition of any lien, mortgage or encumbrance on any of the
Shares or any other assets of the Shareholder or the Shareholder's spouse; or
(d) violate any law, rule or regulation to which the Shareholder or the
Shareholder's spouse is subject.
2
<PAGE>
ARTICLE III
GENERAL
3.1 AMENDMENTS. To the fullest extent permitted by law, this Agreement and
any schedule or exhibit attached hereto may be amended by agreement in writing
of the parties hereto at any time.
3.2 INTEGRATION. This Agreement constitutes the entire agreement between
the parties pertaining to the subject matter hereof and (except for other
documents to be executed pursuant to the Reorganization Agreement) supersedes
all prior agreements and understandings of the parties in connection therewith.
3.3 SPECIFIC PERFORMANCE. The Shareholder and BHI each expressly
acknowledge that, in view of the uniqueness of the obligations of the
Shareholder contemplated hereby, BHI would not have an adequate remedy at law
for money damages in the event that this Agreement has not been performed by the
Shareholder in accordance with its terms, and therefore the Shareholder and BHI
agree that BHI shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which it may be entitled at law or in equity.
3.4 TERMINATION. This Agreement shall terminate automatically without
further action at the earlier of the Effective Time of the Merger (as defined in
the Reorganization Agreement) or the termination of the Reorganization Agreement
in accordance with its terms (except that the obligation set forth in clause (g)
of the last sentence of Section 1.1 shall survive until the CU Stock Option
Agreement has terminated or been fully performed). Upon such termination of this
Agreement, the respective obligations of the parties hereto shall immediately
become void and have no further force and effect.
3.5 NO ASSIGNMENT. Neither this Agreement nor any rights, duties or
obligations hereunder shall be assignable by BHI or the Shareholder, in whole or
in part. Any attempted assignment in violation of this prohibition shall be null
and void. Subject to the foregoing, all of the terms and provisions hereof shall
be binding upon, and inure to the benefit of, the successors of the parties
hereto.
3.6 HEADINGS. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
3.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to each party hereto.
3.8 NOTICES. Any notice or communication required or permitted hereunder,
shall be deemed to have been given if in writing and (a) delivered in person,
(b) delivered by confirmed facsimile transmission (c) sent by overnight carrier,
postage prepaid with return receipt requested or (d) mailed by certified or
registered mail, postage prepaid with return receipt requested, addressed as
follows:
If to BHI, addressed to:
Bancorp Hawaii, Inc.
111 S. King Street
Honolulu, HI 96813
Attn: David A. Houle
Fax. No. (808) 537-8637
3
<PAGE>
With a copy addressed to:
Carlsmith Ball Wichman Case & Ichiki
2200 Pacific Tower
1001 Bishop Street
Honolulu, HI 96813
Attn: J. Thomas Van Winkle, Esq.
Fax. No. (808) 523-0842
If to Shareholder, addressed to:
----------------------------
----------------------------
----------------------------
With a copy addressed to:
CU Bancorp
16030 Ventura Blvd.
Encino, CA 91436
Attn: Anita Y. Wolman, Esq.
Fax No. (818) 907-5024
or at such other address and to the attention of such other person as a party
may notice to the others in accordance with this Section 3.8. Any such notice or
communication shall be deemed received on the date delivered personally or
delivered by confirmed facsimile transmission, on the first Business Day after
it was sent by overnight carrier, postage prepaid with return receipt requested
or on the fourth Business Day after it was sent by certified or registered mail,
postage prepaid with return receipt requested.
3.9 GOVERNING LAW. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of California applicable to contracts between California parties made and
performed in such State.
3.10 SEVERABILITY AND THE LIKE. If any provision of this Agreement shall
be held by a court of competent jurisdiction to be unreasonable as to duration,
activity or subject, it shall be deemed to extend only over the maximum
duration, range of activities or subjects as to which such provision shall be
valid and enforceable under applicable law. If any provisions shall, for any
reason, be held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein.
3.11 EXPENSES. Each party hereto shall pay its own costs and expenses,
including, but not limited to, those of its attorneys and accountants, in
connection with this Agreement and transactions covered and contemplated hereby.
3.12 WAIVER OF BREACH. Any failure or delay by BHI in enforcing any
provision of his Agreement shall not operate as a waiver thereof. The waiver by
BHI of a breach of any provision of this Agreement by the Shareholder shall not
operate or be construed as a waiver of any subsequent breach or violation
thereof. All waivers shall be in writing and signed by the party to be bound.
3.13 ATTORNEYS' FEES. In the event either of the parties to this Agreement
brings an action or suit against any other party by reason of any breach of any
covenant, agreement, representation, warranty or
4
<PAGE>
other provision hereof, or any breach by such other party of any duty or
obligation created hereunder, the prevailing party in whose favor final judgment
is entered shall be entitled to have and recover of and from the losing party
all reasonable costs and expenses incurred or sustained by such prevailing party
in connection with such suit or action, including without limitation, legal fees
and court costs (whether or not taxable as such).
3.14 JURY WAIVER. THE PARTIES HERETO AGREE TO WAIVE TRIAL BY JURY IN ANY
DISPUTE OVER THIS AGREEMENT OR RELATED THERETO IN ANY MANNER.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed this
Agreement as of the day and year first above written.
<TABLE>
<S> <C>
BANCORP HAWAII, INC. CU BANCORP
By: By:
--------------------------------------- ----------------------------------------
Title: General Counsel Title:
By:
----------------------------------------
Title:
SHAREHOLDER
- -------------------------------------------
Name:
</TABLE>
5
<PAGE>
SPOUSAL CONSENT
I am the spouse of the Shareholder in the above Agreement. I understand that
I may consult independent legal counsel as to the effect of this Agreement and
the consequences of my execution of this Agreement and, to the extent I felt it
necessary, I have discussed it with legal counsel. I hereby confirm this
Agreement and agree that it shall bind my interest in the Shares, if any.
- -------------------------------------------
(Shareholder's Spouse's Name)
6
<PAGE>
SCHEDULE 2.1(A) TO SHAREHOLDER'S AGREEMENT
Dated , 1997
-------------------------------------------
Name of Shareholder
Shares Held as of
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CU COMMON STOCK AS TO WHICH THE SHAREHOLDER
HAD SOLE OR SHARED VOTING OR DISPOSITIVE POWER AS OF THE ABOVE
DATE INCLUDING THE NUMBER OF SHARES WHICH SUCH PERSON HAD THE COMMON SHARES ISSUABLE UPON TOTAL COMMON
RIGHT TO ACQUIRE AS OF SUCH DATE OWNED CONVERSION EQUIVALENT
- ------------------------------------------------------------------ --------------- ------------- -------------
<S> <C> <C> <C>
</TABLE>
7
<PAGE>
EXHIBIT E
TAX REPRESENTATIONS TO BE MADE BY BHI AND CU
BHI will make the following representations in connection with the Tax Opinion
referenced in Section 9.4 of the Agreement:
1. The terms of the Agreement reflect arm's length bargaining between unrelated
parties. Accordingly, BHI believes that the fair market value of the BHI
Common Stock and other consideration received by each CU shareholder will be
approximately equal to the fair market value of the CU Common Stock
surrendered by such shareholder in the Merger.
2. To the best knowledge of the management of BHI after due inquiry and
investigation, there is no plan or intention on the part of the shareholders
of CU to sell, exchange, or otherwise dispose of a number of shares of BHI
Common Stock received in the Merger that would reduce the CU shareholders'
ownership of the BHI Common Stock to a number of shares having a value, as
of the Closing Date, of less than 50% of the value of all the formerly
outstanding CU Common Stock as of the same date. For purposes of this
representation, (i) shares of CU Common Stock exchanged by CU for cash or
other property or redeemed in the period between [January 1, 1997] and the
Closing Date will be treated as outstanding CU Common Stock on the Closing
Date; (ii) the value of any extraordinary dividends or other distributions
made by CU between [January 1, 1997] and the Closing Date will be treated as
part of the value of the outstanding CU Common Stock on the Closing Date;
and (iii) shares of CU Common Stock surrendered by dissenters or exchanged
for cash in lieu of fractional shares of BHI Common Stock will be treated as
outstanding CU Common Stock on the Closing Date. Moreover, shares of BHI
Common Stock and shares of CU Common Stock held by CU shareholders as of the
commencement of negotiations between BHI and CU regarding the Merger and
otherwise sold, redeemed or disposed of before the transaction in
contemplation thereof, will be considered in making this representation.
3. The CU shareholders will have unrestricted rights of ownership of BHI common
stock received in the transaction, and their ability to retain the BHI
common stock received in the transaction will not be limited in any way. BHI
has no present plan or intention to reacquire any of the shares of BHI
Common Stock to be issued pursuant to the Merger, whether in a private
transaction or otherwise; provided, however, that BHI does intend to
repurchase shares of BHI Common Stock in the open market from time to time.
Any such open market purchases by BHI will be on an anonymous basis and BHI
will not know prior to such purchases the identities of the sellers of the
shares being purchased, nor will the sellers of such shares have reason to
know that their shares are being purchased by BHI. There is no plan or
arrangement between BHI and any of CU's shareholders which would require BHI
to reacquire from a CU shareholder, or which would require any CU
shareholder to surrender to BHI, any of the shares of BHI Common Stock to be
issued to the CU shareholders pursuant to the Merger. For purposes of this
representation, the term "BHI" shall include any subsidiary or affiliate of
BHI.
4. BHI has no plan or intention to sell or otherwise dispose of the stock of CU
Bank, or any of the assets of CU or CU Bank acquired in the Merger, except
for dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C) of the Code.
5. To BHI's knowledge, the liabilities of CU to be assumed by BHI in the Merger
and the liabilities to which the transferred assets of CU are subject were
incurred by CU in the ordinary course of its business.
6. Following the Merger, BHI will continue the historic business of CU or use a
significant portion of CU's business assets in a business, in each case
within the meaning of Treasury Regulation Section 1.368-1(d).
i
<PAGE>
7. BHI, CU and their respective shareholders will pay their respective expenses
incurred in connection with the Merger.
8. There is no intercorporate indebtedness existing between BHI and CU that was
issued, acquired or will be settled at a discount.
9. BHI is not an investment company as defined in Section 368(a)(2)(F)(iii) and
(iv) of the Code.
10. The fair market value of the assets of CU transferred to BHI pursuant to the
Merger will equal or exceed the sum of the liabilities assumed by BHI plus
the amount of liabilities, if any, to which the transferred assets are
subject.
11. The BHI Common Stock and other consideration to be issued to CU shareholders
pursuant to the Merger will be issued solely on account of each CU
shareholder's interest in his, her or its CU stock, and no part of such
consideration will represent payment in respect of indebtedness,
compensation, or any purpose other than payments for CU Common Stock.
12. None of the compensation paid or to be paid by BHI to any employee will be
separate consideration for, or allocable to, any such employee's shares of
CU Common Stock exchanged in the Merger; rather, the compensation paid to
any shareholder-employee will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length
for similar services. None of the shares of BHI Common Stock to be issued to
any shareholder-employee in the Merger will be separate consideration for,
or allocable to, any employment agreement.
13. Cash payments to be made to shareholders of CU in lieu of fractional shares
of BHI Common Stock that would otherwise be issued to such shareholders in
the Merger will be made for the purpose of saving BHI the expense and
inconvenience of issuing and transferring fractional shares of BHI Common
Stock, and do not represent separately bargained for consideration. The
total cash consideration that will be paid in the transaction to the CU
stockholders instead of issuing fractional shares of BHI common stock will
not exceed (1) one percent of the total consideration that will be issued in
the transaction to the CU stockholders in exchange for their shares of CU
common stock. The fractional share interests of each CU stockholder will be
aggregated, and no CU stockholder will receive cash for
such fractional share interests in an amount equal to or greater than the
value of one full share of BHI common stock.
14. The Merger is being undertaken for bona fide reasons germane to the business
of BHI.
15. BHI will not take any position on any Federal, state or local income or
franchise tax return, or take any other action or reporting position, that
is inconsistent with the treatment of the Merger as a reorganization within
the meaning of Section 368(a) of the Code or with the foregoing
representations.
CU will make the following representations in connection with the Tax Opinion
referenced in Section 9.4 of the Agreement:
1. The terms of the Agreement reflect arm's length bargaining between unrelated
parties. Accordingly, CU believes that the fair market value of the BHI
Common Stock and other consideration received by each CU shareholder will be
approximately equal to the fair market value of the CU Common Stock
surrendered by such shareholder in the Merger.
2. There is no plan or intention on the part of shareholders of CU who own 5%
or more of CU's Common Stock, and to the best knowledge of the management of
CU after due inquiry and investigation, there is no plan or intention on the
part of the remaining shareholders of CU to sell, exchange, or otherwise
dispose of a number of shares of BHI Common Stock received in the Merger
that would reduce the CU shareholders' ownership of the BHI Common Stock to
a number of shares having a value, as of the Closing Date, of less than 50%
of the value of all the formerly outstanding
ii
<PAGE>
CU Common Stock as of the same date. For purposes of this representation,
(i) shares of CU Common Stock exchanged by CU for cash or other property or
redeemed in the period between [January 1, 1997] and the Closing Date will
be treated as outstanding CU Common Stock on the Closing Date; (ii) the
value of any extraordinary dividends or other distributions made by CU
between [January 1, 1997] and the Closing Date will be treated as part of
the value of the outstanding CU Common Stock on the Closing Date; and (iii)
shares of CU Common Stock surrendered by dissenters or exchanged for cash in
lieu of fractional shares of BHI Common Stock will be treated as outstanding
CU Common Stock on the Closing Date. Moreover, shares of BHI Common Stock
and shares of CU Common Stock held by CU shareholders as of the commencement
of negotiations between BHI and CU regarding the Merger and otherwise sold,
redeemed or disposed of before the transaction in contemplation thereof,
will be considered in making this representation.
3. The CU shareholders will have unrestricted rights of ownership of BHI common
stock received in the transaction, and their ability to retain the BHI
common stock received in the transaction will not be limited in any way. To
the best knowledge of the management of CU after due inquiry and
investigation, there is no plan or arrangement between BHI and any of CU's
shareholders which would require BHI to reacquire from a CU shareholder, or
which would require any CU shareholder to surrender to BHI, any of the
shares of BHI Common Stock to be issued to the CU shareholders pursuant to
the Merger. For purposes of this representation, the term "BHI" shall
include any subsidiary or affiliate of BHI.
4. The liabilities of CU to be assumed by BHI in the Merger and the liabilities
to which the transferred assets of CU are subject were incurred by CU in the
ordinary course of its business.
5. CU operates at least one significant historic line of business or owns at
least a significant portion of its historic business assets, in each case
within the meaning of Treasury Regulation Section 1.368-1(d).
6. BHI, CU and their respective shareholders will pay their respective expenses
incurred in connection with the Merger.
7. There is no intercorporate indebtedness existing between BHI and CU that was
issued, acquired or will be settled at a discount.
8. CU is not an investment company as defined in Section 368(a)(2)(F)(iii) and
(iv) of the Code.
9. The fair market value of the assets of CU transferred to BHI pursuant to the
Merger will equal or exceed the sum of the liabilities assumed by BHI plus
the amount of liabilities, if any, to which the transferred assets are
subject.
10. The BHI Common Stock and other consideration to be issued to CU shareholders
pursuant to the Merger will be issued solely on account of each CU
shareholder's interest in his, her or its CU stock, and no part of such
consideration will represent payment in respect of indebtedness,
compensation, or any purpose other than payments for CU Common Stock.
11. None of the shares of BHI Common Stock to be issued to any
shareholder-employee in the Merger will be separate consideration for, or
allocable to, any existing employment agreement with CU or CU Bank.
12. Cash payments to be made to shareholders of CU in lieu of fractional shares
of BHI Common Stock that would otherwise be issued to such shareholders in
the Merger will be made for the purpose of saving BHI the expense and
inconvenience of issuing and transferring fractional shares of BHI Common
Stock, and do not represent separately bargained for consideration. The
total cash consideration that will be paid in the transaction to the CU
stockholders instead of issuing fractional shares of BHI common stock will
not exceed (1) one percent of the total consideration that will be issued in
the transaction to the CU stockholders in exchange for their shares of CU
common stock. The fractional share interests of each CU stockholder will be
aggregated, and no CU stockholder will receive cash for
iii
<PAGE>
such fractional share interests in an amount equal to or greater than the
value of one full share of BHI common stock.
13. Since [January 1, 1997], CU has not redeemed any shares of CU Common Stock,
or made any extraordinary dividends or distributions to any CU shareholder.
14. The Merger is being undertaken for bona fide reasons germane to the business
of CU.
15. CU is not under the jurisdiction of a court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
16. CU will not take any position on any Federal, state or local income or
franchise tax return, or take any other action or reporting position, that
is inconsistent with the treatment of the Merger as a reorganization within
the meaning of Section 368(a) of the Code or with the foregoing
representations.
iv
<PAGE>
EXHIBIT F
FORM OF OPINION OF BHI'S COUNSEL
The opinion of counsel required by Section 10.1 of the Agreement and Plan of
Reorganization (the "Agreement") shall be dated as of the Closing Date, shall be
in form and substance reasonably satisfactory to CU, and shall contain opinions
substantially in the form set forth below. (All capitalized terms not otherwise
defined herein have the meanings specified in the Agreement).
1. BHI is a Hawaii corporation duly incorporated, validly existing and in
good standing under the laws of the State of Hawaii. BHI is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended.
2. BHI has all necessary corporate power and authority to own, lease and
operate its properties and assets and to carry on its businesses as presently
conducted.
3. The authorized capital of BHI is as set forth in Section 5.2 of the
Agreement.
4. The execution and delivery by BHI of the Agreement, the Articles of
Merger and the Agreement of Merger, and the consummation of the transactions
contemplated thereby, have been duly and validly authorized by all necessary
action on the part of BHI. The Agreement and the Agreement of Merger each
constitutes a valid and binding obligation of BHI, enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors generally or general equitable principles.
5. Neither the execution and delivery by BHI of the Agreement or the
Agreement of Merger, nor the consummation of the transactions contemplated
thereby, nor compliance by BHI with any of the provisions thereof, will (i)
conflict with or result in the breach of, or default under, any provision of its
articles of incorporation or bylaws, or violate any law, order, writ,
injunction, decree, statute, rule or regulation applicable to BHI, (ii) if such
violation could have consequences materially adverse to BHI and its subsidiaries
on a consolidated basis.
6. Any consent or approval of, notice to or filing with, and any waiting
period imposed by, any governmental agency or regulatory authority which is
required or applicable under Federal, California or Hawaii law in connection
with the execution and delivery of the Agreement and the Agreement of Merger by
BHI and the consummation by BHI of the transactions contemplated thereby has
been obtained as specified in such opinion, or has expired.
7. Except as to those matters set forth on Schedule 5.6 of the Agreement,
to such counsel's knowledge, there is no private or governmental suit, claim,
action or proceeding pending, nor private or governmental suit, claim, action or
proceeding threatened, against BHI or against any of its directors, officers or
employees relating to the performance of their duties in such capacities or
against or affecting any properties of BHI or challenging or in any way or any
manner seeking to prohibit the transactions contemplated by the Agreement or
seeking to obtain any damages against any Person as a result of the transactions
contemplated thereby.
8. The portion of the S-4 (including the Proxy Statement and any amendments
or supplements thereto) relating to BHI, as of the effective date of the S-4 and
as of the date of mailing of the Proxy Statement and the date of the CU
Shareholders' Meeting, complied as to form in all material respects with the
requirements of the Securities Act and the Exchange Act and all applicable rules
and regulations thereunder (except no opinion need be expressed as to operating
statistics, financial statements, financial schedules, or other financial or
statistical data, or as to material relating to and supplied by CU).
9. Upon completion of the filings intended to effect the merger of CU into
BHI in accordance with the Agreement and provisions of Hawaii and California
law, the Merger will have been validly consummated, CU will have been merged
into BHI and the separate existence of CU will have ceased, and the outstanding
shares of CU Stock will have been converted into the right to receive BHI Stock
and cash upon the basis set forth in the Agreement.
<PAGE>
10. The BHI Stock issuable to holders of CU Stock upon consummation of the
Merger in the manner contemplated by the Agreement will be duly authorized,
validly issued, fully paid and nonassessable.
Counsel shall further state that although such counsel has not itself
confirmed the accuracy or completeness of, or otherwise verified the information
included in the S-4 or the Proxy Statement, on the basis of the information
developed in the course of such counsel's performance of legal services for BHI
in connection with the Agreement and in connection with preparation of the S-4
and Proxy Statement, including such counsel's participation in conferences with
representatives of BHI and its auditors, such counsel has not become aware of
any information which has caused such counsel to believe that the S-4, insofar
as its contents relate to BHI (other than the operating statistics, financial
statements, financial schedules, and other financial and statistical data
contained therein), as of its effective date, failed to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Proxy Statement (as amended or supplemented, if so
amended or supplemented) insofar as its contents relate to BHI (other than the
operating statistics, financial statements, financial schedules, and other
financial and statistical data contained therein) as of the date of mailing and
as of the time of the CU Shareholders' Meeting, contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering its opinion, such counsel may rely, to the extent that such
counsel deems reliance necessary or appropriate, as to matters of fact upon
certificates of government officials and officers of BHI or BHI's registrar and
transfer agent. The opinion may be limited to matters of California, Hawaii and
Federal law, and such counsel may expressly exclude any opinions as to choice of
law matters and antitrust matters and may add such other qualifications and
explanations of the basis of its opinions as may be reasonably acceptable to CU.
2
<PAGE>
EXHIBIT G
FORM OF OPINION OF CU'S COUNSEL
The opinion of counsel required by Section 11.1 of the Agreement and Plan of
Reorganization (the "Agreement") shall be dated as of the Closing Date, shall be
in form and substance reasonably satisfactory to BHI, and shall contain opinions
substantially in the form set forth below. (All capitalized terms not otherwise
defined herein have the meanings specified in the Agreement).
1. CU Bank is a California state-chartered bank duly incorporated, validly
existing and in good standing under the laws of the State of California and is
authorized by the Superintendent of Banks of the State of California to conduct
a general banking business. The deposits of CU Bank are insured by the FDIC in
the manner and to the fullest extent provided by law.
2. CU is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of California. CU is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended.
3. CU and CU Bank have all necessary corporate power and authority to own,
lease and operate their respective properties and assets and to carry on their
respective businesses as presently conducted.
4. The authorized capital of CU and CU Bank is as set forth in Sections
4.2(a) and 4.2(b), respectively, of the Agreement. All of the outstanding shares
of CU Stock and CU Bank Stock are duly authorized, validly issued, fully paid
and nonassessable (except, in the case of the CU Bank Stock, as provided by
Section 662 of the California Financial Code) and are not subject to preemptive
rights. To such counsel's knowledge, except for the CU Options granted under the
CU Option Plan referred to in Section 4.2(a) of the Agreement and the CU Stock
Option Agreement, there are no outstanding options, warrants or other rights in
or with respect to the unissued shares of CU Stock, CU serial preferred stock or
CU Bank Stock or any other securities convertible into any such stock and
neither CU nor CU Bank is obligated to issue any additional shares of CU Stock,
CU serial preferred stock or CU Bank Stock or any additional options, warrants
or other rights in or with respect to the unissued shares of any such stock or
securities convertible into any such stock.
5. The execution and delivery by CU of the Agreement, the Articles of
Merger and the Agreement of Merger, and the consummation of the transactions
contemplated thereby, have been duly and validly authorized by all necessary
action on the part of CU. The Agreement and the Agreement of Merger each
constitutes a valid and binding obligation of CU, enforceable in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally or general equitable principles.
6. Neither the execution and delivery by CU of the Agreement or the
Agreement of Merger, nor the consummation of the transactions contemplated
thereby, nor compliance by CU or CU Bank with any of the provisions thereof,
will (i) conflict with or result in the breach of, or default under, any
provision of the articles of incorporation or bylaws of CU or CU Bank, (ii) to
such counsel's knowledge, constitute a breach of or result in a default (or give
rise to any rights of termination, cancellation or acceleration, or any right to
acquire any securities or assets) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, franchise, license, permit,
agreement or other instrument or obligation to which either CU or CU Bank is a
party, or by which either CU or CU Bank or any of their respective properties or
assets is bound, if in any such circumstance such event could have consequences
materially adverse to CU or CU Bank; or (iii) violate any law, order, writ,
injunction, decree, statute, rule or regulation applicable to either CU or CU
Bank or any of their respective properties or assets, if such violation could
have consequences materially adverse to CU or CU Bank.
7. Any consent or approval of, notice to or filing with, and any waiting
period imposed by, any governmental agency or regulatory authority which is
required or applicable under California or Federal law in connection with the
execution and delivery of the Agreement and the Agreement of Merger by CU and
the consummation by CU of the transactions contemplated thereby has been
obtained as specified in such opinion, or has expired.
<PAGE>
8. Except as to those matters set forth on Schedule 4.10 of the Agreement,
to such counsel's knowledge, (i) there is no private or governmental suit,
claim, action or proceeding pending, nor private or governmental suit, claim,
action or proceeding threatened, against either CU or CU Bank or against any of
their respective directors, officers or employees relating to the performance of
their duties in such capacities or against or affecting any properties of either
CU or CU Bank or challenging or in any way or any manner seeking to prohibit the
transactions contemplated by the Agreement or seeking to obtain any damages
against any Person as a result of the transactions contemplated thereby; and
(ii) there are no judgments, decrees, stipulations or orders against either CU
or CU Bank enjoining either of them or any of their respective directors,
officers or employees in respect of, or the effect of which is to prohibit, any
business practice or the acquisition of any property or the conduct of business
of either CU or CU Bank in any area.
9. The portion of the S-4 (including the Proxy Statement and any amendments
or supplements thereto) relating to CU and CU Bank, as of the effective date of
the S-4 and as of the date of mailing of the Proxy Statement and the date of the
CU Shareholders' Meeting, complied as to form in all material respects with the
requirements of the Securities Act and the Exchange Act and all applicable rules
and regulations thereunder (except no opinion need be expressed as to operating
statistics, financial statements, financial schedules or other financial or
statistical data, or as to material relating to and supplied by BHI).
10. To such counsel's knowledge, there are no Persons who may be deemed
"affiliates" of CU as of the time of the CU Shareholders' Meeting, other than
those Persons identified pursuant to Section 8.13(a) of the Agreement.
11. Upon completion of the filings intended to effect the merger of CU into
BHI in accordance with the Agreement and provisions of Hawaii and California
law, the Merger will have been validly consummated, CU will have been merged
into BHI and the separate existence of CU will have ceased, and the outstanding
shares of CU Stock will have been converted into the right to receive BHI Stock
and cash upon the basis set forth in the Agreement.
Counsel shall further state that although such counsel has not itself
confirmed the accuracy or completeness of, or otherwise verified the information
included in the S-4 or the Proxy Statement, on the basis of the information
developed in the course of such counsel's performance of legal services for CU
in connection with the Agreement and in connection with preparation of the S-4
and Proxy Statement, including such counsel's participation in conferences with
representatives of CU and CU Bank and their auditors, such counsel has not
become aware of any information which has caused such counsel to believe that
the S-4, insofar as its contents relate to CU (other than the operating
statistics, financial statements, financial schedules, and other financial and
statistical data contained therein), as of its effective date, failed to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Proxy Statement (as amended or
supplemented, if so amended or supplemented) insofar as its contents relate to
CU (other than the operating statistics, financial statements, financial
schedules, and other financial and statistical data contained therein) as of the
date of mailing and as of the time of the CU Shareholders' Meeting, contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made.
In rendering its opinion, such counsel may rely, to the extent that such
counsel deems reliance necessary or appropriate, as to matters of fact upon
certificates of government officials and officers of CU or CU Bank or CU's
registrar and transfer agent. The opinion may be limited to matters of
California and Federal law, and such counsel may expressly exclude any opinions
as to choice of law matters and antitrust matters and may add such other
qualifications and explanations of the basis of its opinions as may be
reasonably acceptable to BHI.
2
<PAGE>
EXHIBIT H
AGREEMENT
This Agreement (the "Agreement"), dated this day of
, 1997, is made between California United Bank, a
California chartered commercial bank (the "Bank"), and
("Executive").
RECITALS
A. The Board of Directors of the Bank has concluded that it would be in the
best interests of the Bank, its shareholder, CU Bancorp, a California
corporation ("CU"), and CU's shareholders to enter into agreements with certain
members of senior management in the form set forth below to accomplish the
following objectives:
1. To minimize the distraction to existing senior managers occasioned
by the proposed Business Combination (as defined below); and
2. To enhance the ability of the Bank to retain capable senior
managers.
3. To provide added incentive to senior managers to maximize
performance and value for the Bank and to facilitate an orderly transition
in connection with the proposed Business Combination.
B. This Agreement pertains to a Business Combination (as defined below) as
a result of which Executive, to the extent Executive has a position with the
successor company in the Business Combination, could be subject to an alteration
in the nature or status of Executive's responsibilities from those in effect
immediately prior to the Effective Date (as defined below) of the Business
Combination.
C. Executive is willing to serve the Bank in accordance with the terms and
provisions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties, intending to
be legally bound, agree and covenant as follows:
1. DEFINITIONS. For purposes of this Agreement, the terms set forth below
have the following meanings:
(a) "Business Combination" means the consummation of a merger or other
extraordinary transaction between Bancorp Hawaii, Inc., a Hawaii corporation
("BHI"), and CU (each a "Company" and, collectively, the "Companies") on or
prior to September 30, 1997 or as such date may be extended pursuant to
Section 13.1(e) of the Agreement and Plan of Reorganization between BHI and
CU dated February , 1997. For purposes of this Agreement, "merger or
other extraordinary transaction" shall mean any transaction or related
series or combinations of transactions whereby, directly or indirectly, (i)
one of the Companies or all or substantially all of its assets are merged
with and into the other Company or any of its subsidiaries or affiliates, or
(ii) both Companies or all or substantially all of their assets are merged
with or into a company newly formed for the purpose of effecting a merger in
a sale or exchange of stock, business combination or consolidation, sale of
assets or other transaction.
(b) "Incentive Payment" means the sum of $ .
(c) "Code" means the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder.
(d) "Effective Date" means the date on which the Business Combination
shall become effective in accordance with the laws of the jurisdiction
governing such Business Combination.
(e) "Leave of Absence" means a period of absence from regular employment
which is approved by the Bank in a non-discriminatory manner for reasons
such as, but not limited to, sickness, disability,
<PAGE>
education, jury duty, convenience to the Bank, maternity or paternity leave,
family leave, or for periods of military duty during which the Executive's
reemployment rights are protected by law.
(f) "Waiver Agreement" means the Waiver and Release Agreement,
substantially in the form of Exhibit A attached hereto, to be entered into
by and among Executive, CU and the Bank.
2. PAYMENTS UPON CONSUMMATION OF BUSINESS COMBINATION.
(a) INCENTIVE BENEFITS. If Executive is employed by the Bank on the
Effective Date, Executive shall be entitled to receive the benefits set forth
below:
(i) An amount equal to one-third of the Incentive Payment to be paid on
the twelve month anniversary of the Effective Date if the Executive is
employed by the Bank on such date;
(ii) An amount equal to one-third of the Incentive Payment to be paid on
the thirtieth month anniversary of the Effective Date if the Executive is
employed by the Bank on such date; and
(iii) An amount equal to one-third of the Incentive Payment to be paid on
the thirtieth month anniversary of the Effective Date if the Executive is
employed by the Bank on such date, provided that no payment shall be made
under this Section 2(a)(iii) unless the cumulative net income of the Bank
for the fiscal years ended December 31, 1998 and 1999 (as determined under
U.S. Generally Accepted Accounting Principles and adjusted for extraordinary
events), shall exceed $33,458,000.
For purposes of this Section 2(a), Executive is not considered to be
"employed" by the Bank on any applicable date if he has been on a Leave of
Absence for more than thirty (30) days as of such date.
(b) FULL PAYMENT. Executive acknowledges and agrees that the payment of
the Incentive Payment and the other consideration payable hereunder is in lieu
of any other severance payments otherwise payable to Executive pursuant to any
plan, agreement or other arrangement with the Bank.
3. EFFECT OF TERMINATION OF EMPLOYMENT.
(a) Executive has no vested right to a benefit hereunder except as
provided under Section 2. If Executive's employment with the Bank is
terminated for any reason prior to the Effective Date or is terminated by
the Bank for "cause" (as defined below) or by the Executive for any reason
(except for "good cause", as defined below) subsequent to the Effective Date
and prior to any date when an Incentive Payment is due, this Agreement shall
terminate automatically and shall be declared null and void, as of the date
of such termination, and no further benefit shall be payable to Executive.
If Executive's employment with the Bank is terminated without cause by the
Bank after the Effective Date, he shall be entitled to receive the Incentive
Payments set forth in Sections 2(a)(i) and 2(a)(ii) upon such termination
and, in the event the condition precedent (relating to the Bank's financial
performance) to the payment of the Incentive Payment under Section 2(a)(iii)
is satisfied then the Incentive Payment under said Section shall be paid on
the thirtieth month anniversary of the Effective Date. If Executive dies
while employed by the Bank after the Effective Time, then he shall be
entitled to the payments provided under Section 2 to be paid at the times
provided therein.
(b) "Cause" means (i) a material breach by Executive of this Agreement,
(ii) the commission by the Executive of a felony or an act which is
materially detrimental to the Bank's reputation or regulatory standing,
(iii) the commission by the Executive of an act of fraud, dishonesty or
gross misconduct relating to the business of the Bank or its affiliates, or
(iv) failure by the Executive to perform the Executive's duties with the
Bank after a demand for such performance is delivered to the Executive by an
officer of the Bank. "Good cause" means (i) a reduction in Executive's base
salary as in effect on the Effective Time, (ii) relocation of Executive's
base to more than fifty miles from his base on the Effective Time (other
than on a temporary basis), or (iii) a material reduction by the Bank in the
Executive's position, responsibility or authority.
2
<PAGE>
4. NO MITIGATION. Following the Effective Date, Executive shall not be
required to mitigate the amount of any payments provided for by this Agreement
by seeking employment or otherwise, nor shall the amount of any cash payments or
benefits provided under this Agreement be reduced by any compensation or
benefits earned by Executive after the Effective Date.
5. LIMITATION ON EXECUTIVE'S RIGHTS. Nothing herein contained shall be
deemed to create an employment agreement between the Bank and Executive
providing for the employment of Executive by the Bank for any fixed period of
time. Executive's employment with the Bank is terminable at will by the Bank or
Executive and each shall have the right to terminate Executive's employment with
the Bank at any time, with or without cause, except as otherwise set forth in
any Employment Agreement between Executive and the Bank, which is identified on
Exhibit B, attached hereto.
6. CONDITION PRECEDENT TO THE BANK'S OBLIGATIONS. The obligations of the
Bank hereunder shall be subject to, and expressly conditioned on, Executive's
execution and delivery of the Waiver Agreement, which agreement shall be dated
as of the Effective Date.
7. SUCCESSORS; BINDING AGREEMENT.
(a) The Bank will require any successor company in the Business
Combination to assume and agree expressly to perform this Agreement in the
same manner and to the same extent that the Bank would be required to
perform it if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representative, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the signature page of this
Agreement, provided that all notices to the Bank shall be directed to the
attention of with a copy to the Secretary of the Bank,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
9. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Bank. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement, and any such agreements are expressly superseded. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of California, except to the extent that
federal law is otherwise applicable.
10. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. ARBITRATION. Any controversy arising out of or relating to this
Agreement or the transactions contemplated hereby shall be referred to
arbitration strictly in accordance with the terms of this Agreement and the
applicable Rules of the American Arbitration Association. The board of
arbitrators shall convene at a place mutually acceptable to the parties in Los
Angeles, California, U.S.A. The parties hereto agree to accept the decision of
the board of arbitrators, and judgment upon any award rendered hereunder
3
<PAGE>
may be entered in any court having jurisdiction thereof. No party shall
institute a proceeding hereunder until that party has furnished to the other
parties, by registered mail, at least thirty (30) days prior written notice of
its intent to do so.
13. ATTORNEYS' FEES AND EXPENSES. If any dispute arises between the Bank
and Executive with respect to the interpretation or performance of this
Agreement, the prevailing party in any arbitration or other proceeding shall be
entitled to recover from the other party his or its attorneys' fees, arbitration
or court costs, and other expenses incurred in connection with any such
proceeding.
14. LIMITATIONS ON BENEFITS.
(a) In the event that the compensation and other benefits provided to
Executive above, combined with any other payments, benefits, or other items
provided to or for Executive, would (in whole or in part) be nondeductible
as a result of Section 280G of the Code or cause imposition of an excise tax
pursuant to Section 4999 of the Code (or successor provisions to such
sections), the payments to Executive shall be reduced to the extent
necessary to make such sections of the Code inapplicable. The specific
payments or benefits to be reduced shall be as designated by Executive,
subject to reasonable approval rights of the Bank. In the event that there
is a dispute among the parties regarding whether or the extent to which
payments must be reduced pursuant to this section, such dispute shall be
settled exclusively by arbitration, and no such disputed payment shall be
made until the dispute is settled.
(b) Notwithstanding any other provision to the contrary, the Bank shall
not be obligated pursuant to the terms of this Agreement to provide any of
the compensation payments contemplated above to the extent that the payment
thereof would violate any prohibition or limitation on termination payments
under any applicable federal or state statute or rule or regulation
promulgated, or effective order issued, by any federal or state regulatory
agency having jurisdiction over the Bank.
4
<PAGE>
IN WITNESS WHEREOF, California United Bank, pursuant to resolution of its
Board of Directors, and Executive have executed this Agreement, as of the date
above first written.
CALIFORNIA UNITED BANK
By: __________________________________
Its: _________________________________
Address: _____________________________
______________________________________
______________________________________
[Name of Executive]
______________________________________
[Signature of Executive]
Title: _______________________________
Address: _____________________________
______________________________________
______________________________________
5
<PAGE>
EXHIBIT A
WAIVER AND RELEASE AGREEMENT
This Waiver and Release Agreement (the "Waiver Agreement") is entered into
by and among [name] (hereinafter "Executive"),
California United Bank, a California chartered bank (the "Bank"), and CU
Bancorp, a California corporation ("CU"), their officers, directors, employees,
agents, affiliates and subsidiaries (collectively, hereinafter referred to as
the "Company"). Terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Agreement (as hereinafter defined).
RECITALS
WHEREAS, Executive and the Bank have entered into an Agreement, dated
, 1997 (the "Agreement"), pursuant to which Executive shall receive,
subject to the terms and conditions set forth therein, certain cash compensation
in the event Executive is employed by the Bank as of and after the Effective
Date; and
WHEREAS, a condition precedent to the Bank's obligations under the Agreement
is the execution of this Waiver Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties intending to
be legally bound, agree and covenant as follows:
1. RELEASE.
(a) In consideration for the execution of the Agreement, and the
agreements set forth therein, Executive agrees unconditionally and forever
to release and discharge the Company and its affiliated business entities,
their respective current and former shareholders, officers, directors,
employees, representatives, attorneys, agents and assigns, from any and all
claims, actions, causes of action, demands, rights, or damages of any kind
or nature which she/he may now have, or ever have, whether known or unknown,
from the beginning of time to the date hereof, including any claims, causes
of action or demands of any nature arising out of or in any way relating to
her/his employment with the Company on or before the date of the execution
of this Waiver Agreement or separation from the Company on or before the
date of the execution of this Waiver Agreement.
(b) This release specifically includes, but is not limited to, any
claims for discrimination and/or violation of any statutes, rules,
regulations or ordinances, whether federal, state or local, including, but
not limited to, Title VII of the Civil Rights Act of 1964, as amended, age
claims under the Age Discrimination in Employment Act of 1967, as amended by
the Older Workers Benefits Protection Act of 1990, Section 1981 of Title 42
of the United States Code, and the California Fair Employment and Housing
Act.
(c) Executive further agrees knowingly to waive the provisions and
protections of Section 1542 of the California Civil Code, which reads:
A general release does not extend to claims which the creditor does not know
or suspect to exist in his favor at the time of executing the release, which, if
known by him, must have materially affected his settlement with the debtor.
2. REPRESENTATIONS OF EXECUTIVE.
(a) Executive represents and agrees that, prior to the execution of this
Waiver Agreement, Executive has had the opportunity to discuss the terms of
this Waiver Agreement with legal counsel of his/her choosing.
(b) Executive affirms that no promise or inducement was made to cause
him/her to enter into this Waiver Agreement, other than the execution of the
Agreement and the inducements provided
<PAGE>
therein. Executive further confirms that he/she has not relied upon any
other statement or representation by anyone other than what is in this
Waiver Agreement as a basis for his/her agreement.
3. MISCELLANEOUS.
(a) Except for the Agreement, this Waiver Agreement sets forth the
entire agreement between Executive and the Company and shall be binding upon
both party's heirs, representatives and successors. This Waiver Agreement
shall be construed under the laws of the State of California, both
procedural and substantive. Any and all disputes or claims arising out of or
in any way related to Executive's employment with, or separation from the
Company, as well as any and all disputes or claims arising out of or in any
way related to this Waiver Agreement, including without limitation, fraud in
the inducement of this Waiver Agreement, or relating to the general validity
or enforceability of this Waiver Agreement, shall be submitted to final and
binding arbitration before an arbitrator of the American Arbitration
Association in Los Angeles County in accordance with the rules of that body,
and the prevailing party shall be entitled to reasonable costs and
attorney's fees. Judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. If any portion of this
Waiver Agreement is found to be illegal or unenforceable, such action shall
not affect the validity or enforceability of the remaining paragraphs or
subparagraphs of this Waiver Agreement.
(b) Executive acknowledges that he/she has been advised that he/she has
twenty-one (21) days to consider this settlement and that he/she was
informed that he/she has the right to consult with counsel regarding this
Waiver Agreement. To the extent Executive has taken less than twenty-one
(21) days to consider this Waiver Agreement, Executive acknowledges that
he/she has had sufficient time to consider the Waiver Agreement and to
consult with counsel and that he/she does not desire additional time.
(c) This Waiver Agreement is revocable by Executive for a period of
seven (7) days following Executive's execution of this Waiver Agreement. The
revocation by Executive of this Waiver Agreement must be in writing, must
specifically revoke this Waiver Agreement, and must be received by the
Company prior to the eighth (8th) day following the execution of this Waiver
Agreement by Executive. This Waiver Agreement becomes effective, enforceable
and irrevocable on the eighth (8th) day following Executive's execution of
the Waiver Agreement.
The undersigned agree to the terms of this Waiver Agreement and voluntarily
enter into it with the intent to be bound thereby.
<TABLE>
<S> <C> <C>
---------------------------------------------
Dated: , 1997 Executive (name printed)
---------------------------------------------
Executive Signature
</TABLE>
2
<PAGE>
Dated: , 1997 CALIFORNIA UNITED BANK
By: __________________________________
Name: ________________________________
Title: _______________________________
CU BANCORP
By: __________________________________
Name: ________________________________
Title: _______________________________
3
<PAGE>
EXHIBIT B
IDENTIFICATION OF EMPLOYMENT AGREEMENT
<PAGE>
EXHIBIT I
<TABLE>
<CAPTION>
PERIOD INCENTIVE OPTION
NAME TITLE (MONTHS) PAYMENT GRANT
- ------------------------------------------------ ----------------------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
1. Stephen G. Carpenter......................... Chief Executive Officer 12(1) $ 265,000 9,000
2. David I. Rainer.............................. President 12(1) $ 212,000 9,000
3. Anne Williams................................ Chief Credit Officer 12 $ 150,000 3,000
4. Anita Wolman................................. SVP, General Counsel 9 $ 105,000 3,000
5. Sam Kunianski................................ SVP, Commercial Lending 9 $ 79,000 3,000
6. John Callos.................................. SVP, Commercial Lending 9 $ 82,000 3,000
7. Gene Micco................................... SVP, Real Estate Lending 9 $ 68,000 3,000
8. Diane Shigekawa.............................. SVP, Retail 9 $ 71,000 3,000
9. Doug Goddard................................. Controller 6 $ 50,000 3,000
------------
$ 1,082,000
------------
------------
</TABLE>
- ------------------------
(1) Excludes existing change in control benefit.
<PAGE>
EXHIBIT J
AGREEMENT
This Agreement (the "Agreement"), dated this day of , 1997, is
made between California United Bank, a California chartered commercial bank (the
"Bank"), and Patrick Hartman ("Executive").
RECITALS
A. The Board of Directors of the Bank has concluded that it would be in the
best interests of the Bank, its shareholder, CU Bancorp, a California
corporation ("CU"), and CU's shareholders to enter into agreements with certain
members of senior management in the form set forth below to accomplish the
following objectives:
1. To minimize the distraction to existing senior managers occasioned
by the proposed Business Combination (as defined below);
2. To enhance the ability of the Bank to retain capable senior
managers; and
3. To provide added incentive to senior managers to maximize
performance and value for the Bank and to facilitate an orderly transition
in connection with the proposed Business Combination.
B. This Agreement pertains to a Business Combination (as defined below) as
a result of which Executive, to the extent Executive has a position with the
successor company in the Business Combination, could be subject to an alteration
in the nature or status of Executive's responsibilities from those in effect
immediately prior to the Effective Date (as defined below) of the Business
Combination.
C. Executive is willing to serve the Bank in accordance with the terms and
provisions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties, intending to
be legally bound, agree and covenant as follows:
1. DEFINITIONS. For purposes of this Agreement, the terms set forth below
have the following meanings:
(a) "Business Combination" means the consummation of a merger or other
extraordinary transaction between Bancorp Hawaii, Inc., a Hawaii corporation
("BHI"), and CU (each a "Company" and, collectively, the "Companies") on or
prior to September 30, 1997 or as such date may be extended pursuant to
Section 13.1(e) of the Agreement and Plan of Reorganization between BHI and
CU dated February , 1997. For purposes of this Agreement, "merger or other
extraordinary transaction" shall mean any transaction or related series or
combinations of transactions whereby, directly or indirectly, (i) one of the
Companies or all or substantially all of its assets are merged with and into
the other Company or any of its subsidiaries or affiliates, or (ii) both
Companies or all or substantially all of their assets are merged with or
into a company newly formed for the purpose of effecting a merger in a sale
or exchange of stock, business combination or consolidation, sale of assets
or other transaction.
(b) "Retention Payment" means the sum of $194,667.
(c) "Code" means the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder.
(d) "Effective Date" means the date on which the Business Combination
shall become effective in accordance with the laws of the jurisdiction
governing such Business Combination.
(e) "Leave of Absence" means a period of absence from regular employment
which is approved by the Bank in a non-discriminatory manner for reasons
such as, but not limited to, sickness, disability, education, jury duty,
convenience to the Bank, maternity or paternity leave, family leave, or for
periods of military duty during which the Executive's reemployment rights
are protected by law.
<PAGE>
(f) "Waiver Agreement" means the Waiver and Release Agreement,
substantially in the form of Exhibit A attached hereto, to be entered into
by and among Executive, CU and the Bank.
2. PAYMENTS UPON CONSUMMATION OF BUSINESS COMBINATION.
(a) RETENTION BENEFITS. If Executive is employed by the Bank or CU on
the Effective Date, Executive shall be entitled to receive an amount equal
to the Retention Payment following Executive's subsequent termination of
employment on the eighth day after the execution and delivery of the second
Waiver Agreement as required by Section 6, below, (provided, however, that
such Waiver Agreement is not revoked by the Executive prior to that time) or
upon his death, whichever is earlier.
(b) FULL PAYMENT. Executive acknowledges and agrees that the payment
of the Retention Payment is in lieu of any other severance payments
otherwise payable to Executive pursuant to any plan, agreement or other
arrangement with the Bank.
3. EFFECT OF TERMINATION OF EMPLOYMENT.
(a) Executive has no vested right to a benefit hereunder except as
provided under Section 2. If Executive's employment with the Bank is
terminated by the Bank for "cause" (as defined below) subsequent to the
Effective Date, this Agreement shall terminate automatically and shall be
declared null and void, as of the date of such termination, and no further
benefit shall be payable to Executive.
(b) "Cause" means (i) a material breach by Executive of this Agreement,
(ii) the commission by the Executive of a felony or an act which is
materially detrimental to the Bank's reputation or regulatory standing, or
(iii) the commission by the Executive of an act of fraud, dishonesty or
gross misconduct relating to the business of the Bank or its affiliates.
4. NO MITIGATION. Following the Effective Date, Executive shall not be
required to mitigate the amount of any payments provided for by this Agreement
by seeking employment or otherwise, nor shall the amount of any cash payments or
benefits provided under this Agreement be reduced by any compensation or
benefits earned by Executive after the Effective Date.
5. LIMITATION ON EXECUTIVE'S RIGHTS. Nothing herein contained shall be
deemed to create an employment agreement between the Bank and Executive
providing for the employment of Executive by the Bank for any fixed period of
time. Executive's employment with the Bank is terminable at will by the Bank or
Executive and each shall have the right to terminate Executive's employment with
the Bank at any time, with or without cause.
6. CONDITION PRECEDENT TO THE BANK'S OBLIGATIONS. The obligations of the
Bank hereunder shall be subject to, and expressly conditioned on, Executive's
execution and delivery of two forms of the Waiver Agreement, one such agreement
shall be dated as of the Effective Date and the second such agreement shall be
dated after the termination of Executive's employment and shall name BHI and its
officers, directors and other affiliates as additional releasees.
7. SUCCESSORS; BINDING AGREEMENT.
(a) The Bank will require any successor company in the Business
Combination to assume and agree expressly to perform this Agreement in the
same manner and to the same extent that the Bank would be required to
perform it if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representative, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the signature page of this
Agreement, provided that all notices to
2
<PAGE>
the Bank shall be directed to the attention of with a copy to the
Secretary of the Bank, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
9. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Executive and such officer as may be specifically
designated by the Board of Directors of the Bank. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement, and any such agreements are expressly superseded. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of California, except to the extent that
federal law is otherwise applicable.
10. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
12. ARBITRATION. Any controversy arising out of or relating to this
Agreement of the transactions contemplated hereby shall be referred to
arbitration strictly in accordance with the terms of this Agreement and the
applicable Rules of the American Arbitration Association. The board of
arbitrators shall convene at a place mutually acceptable to the parties in Los
Angeles, California, U.S.A. The parties hereto agree to accept the decision of
the board of arbitrators, and judgment upon any award rendered hereunder may be
entered in any court having jurisdiction thereof. No party shall institute a
proceeding hereunder until that party has furnished to the other parties, by
registered mail, at least thirty (30) days prior written notice of its intent to
do so.
13. ATTORNEYS' FEES AND EXPENSES. If any dispute arises between the Bank
and Executive with respect to the interpretation or performance of this
Agreement, the prevailing party in any arbitration or other proceeding shall be
entitled to recover from the other party his or its attorneys' fees, arbitration
or court costs, and other expenses incurred in connection with any such
proceeding.
14. LIMITATIONS ON BENEFITS.
(a) In the event that the compensation and other benefits provided to
Executive above, combined with any other payments, benefits, or other items
provided to or for Executive, would (in whole or in part) be nondeductible
as a result of Section 280G of the Code or cause imposition of an excise tax
pursuant to Section 4999 of the Code (or successor provisions to such
sections), the payments to Executive shall be reduced to the extent
necessary to make such sections of the Code inapplicable. The specific
payments or benefits to be reduced shall be as designated by Executive,
subject to reasonable approval rights of the Bank. In the event that there
is a dispute among the parties regarding whether or the extent to which
payments must be reduced pursuant to this section, such dispute shall be
settled exclusively by arbitration, and no such disputed payment shall be
made until the dispute is settled.
(b) Notwithstanding any other provision to the contrary, the Bank shall
not be obligated pursuant to the terms of this Agreement to provide any of
the compensation payments contemplated above to the extent that the payment
thereof would violate any prohibition or limitation on termination payments
under any applicable federal or state statute or rule or regulation
promulgated, or effective order issued, by any federal or state regulatory
agency having jurisdiction over the Bank.
3
<PAGE>
IN WITNESS WHEREOF, California United Bank, pursuant to resolution of its
Board of Directors, and Executive have executed this Agreement, as of the date
above first written.
CALIFORNIA UNITED BANK
By: __________________________________
Its: _________________________________
Address: _____________________________
______________________________________
______________________________________
Patrick Hartman
______________________________________
[Signature of Executive]
Address: _____________________________
______________________________________
______________________________________
4
<PAGE>
EXHIBIT A
WAIVER AND RELEASE AGREEMENT
This Waiver and Release Agreement (the "Waiver Agreement") is entered into
by and among Patrick Hartman (hereinafter "Executive"), California United Bank,
a California chartered bank (the "Bank"), and CU Bancorp, a California
corporation ("CU"), their officers, directors, employees, agents, affiliates and
subsidiaries (collectively, hereinafter referred to as the "Company"). Terms not
otherwise defined herein shall have the meanings ascribed to such terms in the
Agreement (as hereafter defined).
RECITALS
WHEREAS, Executive and the Bank have entered into an Agreement, dated
, 1997 (the "Agreement"), pursuant to which Executive shall receive,
subject to the terms and conditions set forth therein, certain cash compensation
in the event Executive is employed by the Bank as of and after the Effective
Date; and
WHEREAS, a condition precedent to the Bank's obligations under the Agreement
is the execution of this Waiver Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties intending to
be legally bound, agree and covenant as follows:
1. RELEASE.
(a) In consideration for the execution of the Agreement, and the
agreements set forth therein, Executive agrees unconditionally and forever
to release and discharge the Company and its affiliated business entities,
their respective current and former shareholders, officers, directors,
employees, representatives, attorneys, agents and assigns, from any and all
claims, actions, causes of action, demands, rights, or damages of any kind
or nature which she/he may now have, or ever have, whether known or unknown,
from the beginning of time to the date hereof, including any claims, causes
of action or demands of any nature arising out of or in any way relating to
her/his employment with the Company on or before the date of the execution
of this Waiver Agreement or separation from the Company on or before the
date of the execution of this Waiver Agreement.
(b) This release specifically includes, but is not limited to, any
claims for discrimination and/or violation of any statutes, rules,
regulations or ordinances, whether federal, state or local, including, but
not limited to, Title VII of the Civil Rights Act of 1964, as amended, age
claims under the Age Discrimination in Employment Act of 1967, as amended by
the Older Workers Benefits Protection Act of 1990, Section 1981 of Title 42
of the United States Code, and the California Fair Employment and Housing
Act.
(c) Executive further agrees knowingly to waive the provisions and
protections of Section 1542 of the California Civil Code, which reads:
A general release does not extend to claims which the creditor does not know
or suspect to exist in his favor at the time of executing the release, which, if
known by him, must have materially affected his settlement with the debtor.
2. REPRESENTATIONS OF EXECUTIVE.
(a) Executive represents and agrees that, prior to the execution of this
Waiver Agreement, Executive has had the opportunity to discuss the terms of
this Waiver Agreement with legal counsel of his/her choosing.
(b) Executive affirms that no promise or inducement was made to cause
him/her to enter into this Waiver Agreement, other than the execution of the
Agreement and the inducements provided therein. Executive further confirms
that he/she has not relied upon any other statement or representation by
anyone other than what is in this Waiver Agreement as a basis for his/her
agreement.
<PAGE>
3. MISCELLANEOUS.
(a) Except for the Agreement, this Waiver Agreement sets forth the
entire agreement between Executive and the Company and shall be binding upon
both party's heirs, representatives and successors. This Waiver Agreement
shall be construed under the laws of the State of California, both
procedural and substantive. Any and all disputes or claims arising out of or
in any way related to Executive's employment with, or separation from the
Company, as well as any and all disputes or claims arising out of or in any
way related to this Waiver Agreement, including without limitation, fraud in
the inducement of this Waiver Agreement, or relating to the general validity
or enforceability of this Waiver Agreement, shall be submitted to final and
binding arbitration before an arbitrator of the American Arbitration
Association in Los Angeles County in accordance with the rules of that body,
and the prevailing party shall be entitled to reasonable costs and
attorney's fees. Judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. If any portion of this
Waiver Agreement is found to be illegal or unenforceable, such action shall
not affect the validity or enforceability of the remaining paragraphs or
subparagraphs of this Waiver Agreement.
(b) Executive acknowledges that he/she has been advised that he/she has
twenty-one (21) days to consider this settlement and that he/she was
informed that he/she has the right to consult with counsel regarding this
Waiver Agreement. To the extent Executive has taken less than twenty-one
(21) days to consider this Waiver Agreement, Executive acknowledges that
he/she has had sufficient time to consider the Waiver Agreement and to
consult with counsel and that he/she does not desire additional time.
(c) This Waiver Agreement is revocable by Executive for a period of
seven (7) days following Executive's execution of this Waiver Agreement. The
revocation by Executive of this Waiver Agreement must be in writing, must
specifically revoke this Waiver Agreement, and must be received by the
Company prior to the eighth (8th) day following the execution of this Waiver
Agreement by Executive. This Waiver Agreement becomes effective, enforceable
and irrevocable on the eighth (8th) day following Executive's execution of
the Waiver Agreement.
The undersigned agree to the terms of this Waiver Agreement and voluntarily
enter into it with the intent to be bound thereby.
Dated: __________________, 1997
Patrick Hartman
------------------------------------------------------------------------------
Signature
2
<PAGE>
Dated: , 1997 CALIFORNIA UNITED BANK
By: __________________________________
Name: ________________________________
Title: _______________________________
CU BANCORP
By: __________________________________
Name: ________________________________
Title: _______________________________
3
<PAGE>
APPENDIX B
EXHIBIT B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated February 24, 1997, between Bancorp Hawaii,
Inc., a Hawaii corporation ("Buyer"), and CU Bancorp, a California corporation
("Seller").
W I T N E S S E T H:
WHEREAS, Buyer and Seller have entered into an Agreement and Plan of
Reorganization of even date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Buyer's entering into the Merger Agreement and in
consideration therefor, Seller has agreed to grant Buyer the Option (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Seller hereby grants to Buyer an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 19.9% (or
2,260,421 fully paid and nonassessable shares) of Seller's Common Stock, no par
value ("Common Stock"), at a price of $13.00 per share, provided, however, that
in the event Seller issues or agrees to issue any shares of Common Stock (other
than as permitted under the Merger Agreement) at a price less than $13.00 per
share (as adjusted pursuant to subsection (b) of Section 5), such price shall be
equal to such lesser price (such price, as adjusted if applicable, the "Option
Price"); provided further that in no event shall the number of shares for which
this Option is exercisable exceed 19.9% of the Seller's issued and outstanding
shares of Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date hereof (or any treasury shares held
by Seller have been or are sold after the date hereof) (other than pursuant to
this Agreement), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, it equals 19.9% of the number
of shares of Common Stock then issued and outstanding without giving effect to
any shares subject to or issued pursuant to the Option. Nothing contained in
this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Seller or Buyer to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time from and after the occurrence of a
Triggering Event (as hereinafter defined) and prior to the occurrence of an
Exercise Termination Event (as hereinafter defined). Each of the following shall
be an Exercise Termination Event: (i) the effective time of the Merger as set
forth in the Merger Agreement; (ii) termination of the Merger Agreement by
Seller pursuant to Section 13.1(g) or Section 13.1(i) of the Merger Agreement;
(iii) termination of the Merger Agreement in accordance with the provisions
thereof if such termination occurs prior to the occurrence of an Triggering
Event other than a termination pursuant to Section 13.1(c)(iii) or Section
13.1(h); or (iv) the passage of 12 months after termination of the Merger
Agreement if such termination follows the occurrence of a Triggering Event or is
pursuant to Section 13.1(c)(iii) or Section 13.1(h) of the Merger Agreement. The
term "Holder" shall mean the holder or holders of the Option.
(b) The term "Triggering Event" shall mean any of the following events or
transactions occurring after the date hereof:
(i) Seller or any of its subsidiaries (each a "Seller Subsidiary"),
without having received Buyer's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act, and the rules and
<PAGE>
regulations thereunder) other than Buyer or any of its subsidiaries (each a
"Buyer Subsidiary") or the Board of Directors of Seller shall have
recommended that the stockholders of Seller approve or accept any
Acquisition Transaction or shall have failed to publicly oppose an
Acquisition Transaction with 10 business days of its receipt or the date its
existence becomes publicly disclosed, whichever is earlier. For purposes of
this Agreement, "Acquisition Transaction" shall mean (w) a merger or
consolidation, or any similar transaction, involving Seller or Seller
Subsidiary, (x) a purchase, lease or other acquisition representing 10% or
more of the consolidated assets of Seller and its Subsidiaries, (y) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 10% or more of the
voting power of Seller or any Seller Subsidiary , or (z) any substantially
similar transaction;
(ii) Seller or any Seller Subsidiary, without having received Buyer's
prior written consent, shall have authorized, recommended, proposed or
publicly announced its intention to authorize, recommend or propose, an
agreement to engage in an Acquisition Transaction with any person other than
Buyer or a Buyer Subsidiary, or the Board of Directors of Seller shall have
withdrawn or modified, or announced its intent to withdraw or modify, in any
manner adverse to Buyer, its recommendation that the stockholders of Seller
approve the transactions contemplated by the Merger Agreement;
(iii) Any person or group other than Buyer or any Buyer Subsidiary shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Common Stock (the term
"beneficial ownership" and "group" for purposes of this Agreement have the
meanings assigned thereto in Section 13(d) of the Exchange Act, and the
rules and regulations thereunder);
(iv) Any person other than Buyer or any Buyer Subsidiary shall have made
a bona fide proposal to Seller or its stockholders by public announcement or
written communication that is or becomes the subject of public disclosure to
engage in an Acquisition Transaction;
(v) After a proposal is made by a third party to Seller or its
stockholders to engage in an Acquisition Transaction, Seller shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Buyer to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Buyer or any Buyer Subsidiary, other than in
connection with a transaction to which Buyer has given its prior written
consent, shall have filed an application or notice with the Federal Reserve
Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) Seller shall notify Buyer promptly in writing of the occurrence of any
Triggering Event, it being understood that the giving of such notice by Seller
shall not be a condition to the right of the Holder to exercise the Option.
(d) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Seller a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 30 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided, that if the
closing of the purchase and sale pursuant to the Option (the "Closing") cannot
be consummated by reason of any applicable judgment, decree, order, law or
regulation, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided further, without
limiting the foregoing, that if prior notification to or approval of the Federal
Reserve Board or any other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required
2
<PAGE>
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. Notwithstanding this subsection (d), in no event shall any Closing Date
be more than 12 months after the related Notice Date, and if the Closing Date
shall not have occurred within 12 months after the related Notice Date due to
the failure to obtain any such required approval, the exercise of the Option
effected on the Notice Date shall be deemed to have expired. In the event (i)
Buyer receives official notice that an approval of the Federal Reserve Board or
any other regulatory authority required for the purchase of Option Shares (as
hereinafter defined) would not be issued or granted, (ii) a Closing Date shall
not have occurred within 12 months after the related Notice Date due to the
failure to obtain any such required approval or (iii) Holder (or Substitute
Holder) shall have the right pursuant to the last sentence of Section 7 (or
Section 9) to exercise the Option (or Substitute Option), Buyer or Holder (or
Substitute Holder) shall nevertheless be entitled to exercise its right as set
forth in Section 7 (or Section 9) and Buyer or Holder (or Substitute Holder)
shall be entitled to exercise the Option (or Substitute Option) in connection
with the resale of Seller Common Stock or other securities pursuant to a
registration statement as provided in Section 6.
(e) At the Closing referred to in subsection (d) of this Section 2, the
Holder shall pay to Seller the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Seller, provided that
failure or refusal of Seller to designate such a bank account shall not preclude
the Holder from exercising the Option.
(f) At such Closing, simultaneously with the delivery of immediately
available funds as provided in subsection (e) of this Section 2, Seller shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Seller a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(g) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof
and Seller and to resale restrictions arising under the Securities Act
of 1933, as amended. A copy of such agreement is on file at the
principal office of Seller and will be provided to the holder hereof
without charge upon receipt by Seller of a written request therefor.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder shall have
delivered to Seller a copy of a letter from the staff of the SEC, or an opinion
of counsel, in form and substance reasonably satisfactory to Seller, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(h) Upon the giving by the Holder to Seller of the written notice of
exercise of the Option provided for under subsection (d) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Seller shall then be closed or
3
<PAGE>
that certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder or the Seller shall have failed or refused to
designate the bank account described in subsection (e) of this Section 2. Seller
shall pay all expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with the preparation,
issuance and delivery of stock certificates under this Section 2 in the name of
the Holder or its assignee, transferee or designee.
3. Seller agrees: (a) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock (and other securities issuable pursuant to Section 5(a)) so that
the Option may be exercised without additional authorization of Common Stock (or
such other securities) after giving effect to all other options, warrants,
convertible securities and other rights to purchase Common Stock (or such other
securities); (b) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Seller; (c) promptly to take all action as may from time to time be
required (including (x) complying with all premerger notification, reporting and
waiting period requirements specified in 15 U.S.C. 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended ("BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, to cooperate fully with the Holder in preparing such
applications or notices and to provide such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and the Seller duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Seller, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Seller of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Seller will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Seller, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option shall be subject to adjustment from time to time as provided in this
Section 5.
(a) In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted so that Buyer shall receive upon exercise of the
Option and payment of the aggregate Option Price hereunder the number and
class of shares or other securities or property that Buyer would have
received in respect of Common Stock if the Option had been exercised in full
immediately prior to such event, or the record date therefor, as applicable.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option
4
<PAGE>
Price by a fraction, the numerator of which shall be equal to the number of
shares of Common Stock purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of Common Stock
purchasable after the adjustment.
6. (a) In the event the Option shall become exercisable in accordance with
Section 2 hereof, Seller shall, at the request of Buyer (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf or other registration statement under the
Securities Act covering any shares issued and issuable pursuant to this Option
and shall use its best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
any shares of Common Stock issued upon total or partial exercise of this Option
("Option Shares") in accordance with any plan of disposition requested by Buyer.
Seller will use its best efforts to cause such registration statement first to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Buyer for a period of 24 months following such first demand for
registration under this Section 6(a) shall have the right to demand a second
such registration if reasonably necessary to effect such sales or dispositions.
(b) If at any time Seller proposes to register any of its Common Stock under
the Securities Act, it will give written notice to Buyer of its intention to do
so. Upon the written request of Buyer, given within 15 calendar days after
receipt of Seller's notice, Seller will use its best efforts to cause to be
included in the shares to be covered by the registration statement proposed to
be filed by Seller the Option Shares proposed to be sold by Buyer; provided,
however, that Seller need not include such Option Shares in such registration
statement if Seller is advised by its investment banking firm that the inclusion
of such shares would materially interefere with the orderly sale and
distribution of the Seller shares being sold by Seller. Seller may in its own
discretion and wihout consent of Buyer, withdraw any such registration statement
and abandon the proposed offering in which Buyer shall have requested to
participate pursuant to this paragraph.
(c) Each such Holder shall provide all information reasonably requested by
Seller for inclusion in any registration statement to be filed hereunder. If
requested by any such Holder in connection with such registration, Seller shall
become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for the Seller. Upon receiving any
request under this Section 6 from any Holder, Seller agrees to send a copy
thereof to any other person known to Seller to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies.
7. (a) After the occurrence of a Triggering Event that occurs prior to an
Exercise Termination Event, (i) at the request of the Holder, Seller (or any
successor thereto) shall repurchase the Option from the Holder at a price (the
"Option Repurchase Price") equal to (x) the amount by which (A) the market/
offer price (as defined below) exceeds (B) the Option Price, multiplied by the
number of shares for which this Option may then be exercised or (y) the Minimum
Option Repurchase Price, whichever is greater, and (ii) at the request of the
owner of Option Shares from time to time (the "Owner"), Seller shall repurchase
such number of the Option Shares from the Owner as the Owner shall designate at
a price (the "Option Share Repurchase Price") equal to (x) the market/offer
price multiplied by the number of Option Shares so designated or (y) the Minimum
Option Share Repurchase Price, whichever is greater.
(b) The term "market/offer price" shall mean the highest of (i) the highest
price per share of Common Stock at which shares have been purchased in a tender
offer or exchange offer, (ii) the price per share of Common Stock which has been
paid by any third party pursuant to an agreement with Seller, (iii) the highest
closing price for shares of Common Stock quoted in the New York Stock Exchange
(or if Common Stock is not quoted in the New York Stock Exchange, the highest
bid price per share as quoted
5
<PAGE>
on the National Association of Securities Dealers Automated Quotation Systems,
or, if the shares of Common Stock are not quoted thereon, on the principal
trading market on which such shares are traded as reported by a recognized
source) within the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of Options or Option Shares, as the case
may be, or (iv) in the event of a sale of assets representing 15% or more of the
consolidated assets of Seller and its Subsidiaries, the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Seller as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, divided by the number
of shares of Common Stock of Seller outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be. The term "Minimum Option Repurchase
Price" shall mean $5,000,000 multiplied by a fraction the numerator of which is
the total Option Shares which may then be purchased upon exercise of the Option
and the denominator of which is the total Option Shares which could be purchased
upon exercise of the Option assuming the Option had not been previously
exercised. The term "Minimum Option Share Repurchase Price" shall mean
$5,000,000 multiplied by a fraction the numerator of which is the number of
Option Shares designated for repurchase and the denominator of which is the
total Option Shares which could be purchased upon exercise of the Option
assuming the Option had not been previously exercised.
(c) The Holder or the Owner, as the case may be, may exercise its right to
require Seller to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Seller, at its principal office,
prior to an Exercise Termination Event, a copy of this Agreement or certificates
for Option Shares, as applicable, accompanied by a written notice or notices
stating that the Holder or the Owner, as the case may be, elects to require
Seller to repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. As promptly as practicable, and in any event
within five business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto, Seller shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor
or the portion thereof that Seller is not then prohibited under applicable law
and regulation from so delivering.
(d) To the extent that Seller is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Seller shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Seller is no longer so prohibited, provided, however, that if
Seller at any time after delivery of a notice of repurchase pursuant to
paragraph (c) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Seller hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Seller shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Seller is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited
6
<PAGE>
from repurchasing. If an Exercise Termination Event shall have occurred prior to
the date of the notice by Seller described in the first sentence of this
subsection (d), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Holder shall
nonetheless have the right to exercise the Option until the expiration of such
30-day period.
8. (a) In the event that prior to an Exercise Termination Event, Seller
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Buyer or one of its subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Buyer or one of its subsidiaries, to merge into Seller and
Seller shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Buyer or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, issued by either (x) the Acquiring
Corporation (as hereinafter defined) or (y) any person that controls the
Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Seller (if other than Seller),
(ii) Seller in a merger in which Seller is the continuing or surviving
person, and (iii) the transferee of all or substantially all of Seller's
assets.
(2) "Substitute Common Stock" shall mean the common stock issued by the
issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
(or the value attributed to shares of Substitute Common Stock in) such
consolidation, merger or sale, provided that if Seller is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by the person merging into Seller or by any
company which controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as the Option, provided,
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
7
<PAGE>
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Seller")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Seller shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Seller
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Seller shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised or (y) the Minimum
Substitute Option Repurchase Price, whichever is greater, and at the request of
the owner (the "Substitute Share Owner") of shares of Substitute Common Stock
(the "Substitute Shares"), the Substitute Option Seller shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
(x) the Highest Closing Price multiplied by the number of Substitute Shares so
designated or (y) the Minimum Substitute Share Repurchase Price, whichever is
greater.
(b) The term "Highest Closing Price" shall mean the highest closing price
for shares of Substitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of the required
repurchase of the Substitute Option or the Substitute Share Owner gives notice
of the required repurchase of the Substitute Shares, as applicable. The term
"Minimum Substitute Option Repurchase Price" shall mean $5,000,000 multiplied by
a fraction the numerator of which is the number of shares of Substitute Common
Stock which may then be purchased upon exercise of the Substitute Option and the
denominator of which is the number of shares of Substitute Common Stock which
could be purchased upon exercise of the Substitute Option assuming the
Substitute Option or the Option had not been previously exercised. The term
"Minimum Substitute Share Repurchase Price" shall mean $5,000,000 multiplied by
a fraction the numerator of which is the number of shares of Substitute Common
Stock designated for repurchase and the denominator of which is the number of
shares of Substitute Common Stock which could be purchased upon exercise of the
Substitute Option assuming the Substitute Option or the Option had not been
previously exercised.
(c) The Substitute Option Holder and the Substitute Share Owner, as the case
may be, may exercise its respective right to require the Substitute Option
Seller to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Seller,
at its principal office, prior to an Exercise Termination Event, the agreement
for such Substitute Option (or, in the absence of such an agreement, a copy of
this Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option Seller
to repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provision of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Seller shall deliver
or cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the Substitute Option
Seller is not then prohibited under applicable law and regulation from so
delivering.
8
<PAGE>
(d) To the extent that the Substitute Option Seller is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Seller shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price, respectively, which
it is no longer prohibited from delivering, within five business days after the
date on which the Substitute Option Seller is no longer so prohibited; provided,
however, that if the Substitute Option Seller is at any time after delivery of a
notice of repurchase pursuant to subsection (c) of this Section 9 prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from delivering to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Seller shall use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Substitute Shares
either in whole or to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Seller shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Seller is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Seller described in the first sentence of this
subsection (d), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30 day period.
10. Any period for exercise of rights shall be extended: (a) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights,
and for the expiration of all statutory waiting periods; and (b) to the extent
necessary to avoid liability under Section 16(b) of the Exchange Act by reason
of such exercise.
11. Seller hereby represents and warrants to Buyer as follows:
(a) Seller has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Seller and no other corporate proceedings on the part of
Seller are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Seller. This Agreement is the valid and legally binding
obligation of Seller, enforceable against Seller in accordance with its terms.
(b) Seller has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and from
time to time issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued, fully paid, nonassessable, and
will be delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
9
<PAGE>
(c) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any breach pursuant to any provisions of the Articles of Incorporation
or by-laws of Seller or any Subsidiary of Seller or, subject to obtaining any
approvals or consents contemplated hereby or by the Merger Agreement, result in
any breach of any loan or credit agreement, note, mortgage, indenture, lease,
plan or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Seller or any Subsidiary of Seller or their respective properties
or assets.
12. Buyer hereby represents to Seller as follows:
(a) Buyer has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the board of
directors of Buyer and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Buyer. This Agreement is the valid and legally binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
(b) Buyer is acquiring the Option and, if and when it exercises the Option,
will be acquiring the Share issuable upon the exercise thereof for its own
account and not with a view to distribution or resale in any manner which would
be in violation of the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Triggering Event shall have occurred prior to an Exercise
Termination Event, Buyer, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder, provided, however,
that until the date 30 days following the date on which the Federal Reserve
Board approves an application by Buyer under the BHCA to acquire the shares of
Common Stock subject to the Option, Buyer may not assign its rights under the
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of Seller, (iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a widely dispersed
public distribution on Buyer's behalf, or (iv) any other manner approved by the
Federal Reserve Board.
14. Immediately following a Triggering Event, each of Buyer and Seller will
use its best efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including without limitation making
application to list the shares of Common Stock issuable hereunder on the
NASDAQ\NMS upon official notice of issuance and applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable hereunder, but
Buyer shall not be obligated to apply to state banking authorities for approval
to acquire the shares of Common Stock issuable hereunder until such time, if
ever, as it deems appropriate to do so.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder or Substitute Option Holder is not permitted to acquire, or
Seller or Substitute Option Seller is not permitted to repurchase pursuant to
Section 7 or Section 9, as the case may be, the full number of shares of Common
Stock provided in Section 1(a) hereof
10
<PAGE>
(as adjusted pursuant to Section 1(b) or Section 5 hereof), it is the express
intention of Seller to allow the Holder to acquire or to require Seller to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with the
laws of the State of California, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein. Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
22. In the event of any exercise of the Option by Buyer, Seller and Buyer
shall execute and deliver all other documents and instruments and take all other
action that may be reasonably necessary in order to consummate the transactions
provided for by such exercise.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
11
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be signed
by their respective officers thereunto duly authorized, all as of the date first
written above.
BANCORP HAWAII, INC.
By: /s/ JOSEPH T. KIEFER
- --------------------------------------------------------------------------------
Joseph T. Kiefer, GENERAL COUNSEL
CU BANCORP
By: /s/ STEPHEN G. CARPENTER
- --------------------------------------------------------------------------------
Stephen G. Carpenter, CHAIRMAN
12
<PAGE>
APPENDIX C
CALIFORNIA GENERAL CORPORATION LAW
DISSENTERS' RIGHTS--CHAPTER 13
SECTION 1300. RIGHT TO REQUIRE PURCHASE--"DISSENTING SHARES" AND "DISSENTING
SHAREHOLDER" DEFINED.
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to vote
on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as defined
in subdivision (b). The fair market value shall be determined as of the day
before the first announcement of the terms of the proposed reorganization or
short-form merger, excluding any appreciation or depreciation in consequence of
the proposed action, but adjusted for any stock split, reverse stock split, or
share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of Governors
of the Federal Reserve System, and the notice of meeting of shareholders to
act upon the reorganization summarizes this section and Sections 1301, 1302,
1303 and 1304; provided, however, that this provision does not apply to any
shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided,
further, that this provision does not apply to any class of shares described
in subparagraph (A) or (B) if demands for payment are filed with respect to
5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case where
the approval required by Section 1201 is sought by written consent rather
than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
SECTION 1301. DEMAND FOR PURCHASE
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the
<PAGE>
price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SECTION 1302. ENDORSEMENT OF SHARES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
SECTION 1303. AGREED PRICE--TIME FOR PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
SECTION 1304. DISSENTER'S ACTION TO ENFORCE PAYMENT
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision
2
<PAGE>
(i) of Section 1110 was mailed to the shareholder, but not thereafter, may file
a complaint in the superior court of the proper county praying the court to
determine whether the shares are dissenting shares or the fair market value of
the dissenting shares or both or may intervene in any action pending on such a
complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
SECTION 1305. APPRAISER'S REPORT--PAYMENT--COSTS
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time as
may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
SECTION 1306. DISSENTING SHAREHOLDER'S STATUS AS CREDITOR
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
SECTION 1307. DIVIDENDS PAID AS CREDIT AGAINST PAYMENT.
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
3
<PAGE>
SECTION 1308. CONTINUING RIGHTS AND PRIVILEGES OF DISSENTING SHAREHOLDERS.
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
SECTION 1309. TERMINATION OF DISSENTING SHAREHOLDER STATUS.
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement
in accordance with Section 1302 or are surrendered for conversion into
shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice
of the approval by the outstanding shares or notice pursuant to subdivision
(i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SECTION 1310. SUSPENSION OF PROCEEDINGS FOR PAYMENT OF PENDING LITIGATION.
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
SECTION 1311. EXEMPT SHARES.
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
SECTION 1312. ATTACKING VALIDITY OF REORGANIZATION OR MERGER.
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
4
<PAGE>
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of transaction except upon 10 days' prior
notice to the corporation and upon a determination by the court that clearly no
other remedy will adequately protect the complaining shareholder or the class of
shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
5
<PAGE>
APPENDIX D
FAIRNESS OPINION OF MONTGOMERY SECURITIES
[TO BE FILED BY AMENDMENT.]
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) PROVISIONS OF REGISTRANT'S ARTICLES. Articles IX and X of the
Registrant's Articles of Incorporation provide as follows:
IX
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND AGENTS
Section 1. As used in this Article IX, the following terms shall have the
following meanings:
(a) "Employee" means each 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, association, or
other enterprise.
(b) "Costs" means expenses (including attorney's fees), judgments,
fines, and amounts paid in settlement in connection with any Cause of
Action.
(c) "Cause of Action" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative.
Section 2. The corporation shall indemnify each Employee who was or is a
party or is threatened to be made a party to any Cause of Action (other than a
Cause of Action by or in the right of the corporation) by reason of the fact
that he is or was an Employee against Costs actually and reasonably incurred by
him in connection with such Cause of Action if (i) he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and (ii) with respect to any criminal Cause of Action, he had
no reasonable cause to believe his conduct was unlawful.
Section 3. The corporation shall indemnify each Employee who was a party or
is threatened to be made a party to any Cause of Action by or in the right of
the corporation by reason of the fact that he is or was an Employee against
Costs actually and reasonably incurred by him in connection with such Cause of
Action if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation.
Section 4. (a) To the extent that an Employee has been successful on the
merits or otherwise in defense of any Cause of Action or defense of any claim,
issue, or matter therein, the Employee shall be deemed to have met the
applicable standard of conduct set forth in Section 2 or Section 3 of this
Article IX and shall be indemnified by the corporation against Costs actually
and reasonably incurred by him in connection therewith.
(b) To the extent that an Employee has not been successful on the merits or
otherwise in defense of any Cause of Action or defense of any claim, issue, or
matter therein, the Employee shall nonetheless be indemnified against Costs
actually and reasonably incurred by him in connection therewith unless the
tribunal, if any, in which such Cause of Action is or was pending upon
application by the corporation determines that the Employee has not met the
applicable standard of conduct set forth in Section 2 or Section 3 or this
Article IX. The termination of any Cause of Action by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not create a presumption that such applicable standard of conduct has not
been met.
Section 5. Costs incurred in connection with any Cause of Action shall be
paid by the corporation in advance of the final disposition of such Cause of
Action upon receipt of an undertaking by or on behalf of the Employee to repay
the advanced amount if it is ultimately determined pursuant to Section 4(b) of
this Article IX that the Employee is not entitled to be indemnified by the
corporation.
II-1
<PAGE>
Section 6. The indemnification provided by this Article IX shall (i) not be
deemed exclusive of any other rights to which an Employee may be entitled by any
bylaw, agreement, vote of shareholders or disinterested directors, or otherwise,
and (ii) continue to a person who has ceased to be an Employee and shall inure
to the benefit of his heirs, executors, and administrators.
Section 7. The corporation may purchase and maintain insurance on behalf of
any Employee against any liability asserted against or incurred by the Employee,
whether or not the corporation would have the power to indemnify the Employee
against such liability. Any such insurance may be procured from any insurance
company, including an insurance company in which the corporation may have an
equity or other interest, through stock ownership or otherwise.
Section 8. This Article IX shall be effective with respect to any Cause of
Action arising at any time from acts or omissions occurring prior to the date
this Article IX is amended or terminated.
X
LIMITATION OF LIABILITY OF DIRECTORS
Section 1. A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders; (ii) for any act or
omission of the director not performed in good faith, or which involves
intentional misconduct or knowing violation of law, or which constitutes a
willful or reckless disregard of the director's fiduciary duty; (iii) for the
director's willful or negligent violation of any provision of Chapter 415 of the
Hawaii Revised Statutes regarding payment of dividends or stock purchase or
redemption; or (iv) for any transaction from which the director received an
improper benefit.
Section 2. Any repeal or modification of this Article X by the stockholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.
(b) MERGER AGREEMENT PROVISIONS. Section 12.6 of the Merger Agreement
filed herewith and incorporated by reference herein provides for the survival of
certain rights of indemnification or exculpation in favor of directors and
officers of CU Bancorp and California United Bank for a period of six years
following the Effective Time of the Merger, and Section 6.7 thereof requires the
provision of directors' and officers' liability insurance for at least three
years following the Effective Time providing coverage for such directors and
officers with respect to acts or omissions prior to the Effective Time and
actions related to the Merger Agreement.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The following exhibits are filed as part of this Registration
Statement or are incorporated herein by reference.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Restated Articles of Incorporation
3.2 Revised Bylaws dated July 26, 1996 (incorporated by reference to Exhibit 3.2 of Registrant's Report
on Form 10-K for the year ended December 31, 1996)
5 Opinion of Carlsmith Ball Wichman Case & Ichiki*
8 Tax Opinion of Carlsmith Ball Wichman Case & Ichiki*
12 Statement Regarding Computation of Ratios (incorporated by reference to Exhibit 12.1 of Registrant's
Report on Form 10-K for the year ended December 31, 1996)
21 Subsidiaries of Registrant (incorporated by reference to Exhibit 21.1 of Registrant's Report on Form
10-K for the year ended December 31, 1996)
23.1 Consent of Carlsmith Ball Wichman Case & Ichiki (included within Exhibits 5 and 8)*
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Ernst & Young LLP
24 Power of Attorney
99.1 Form of Proxy
99.2 Form of Letter of Transmittal and Instructions*
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(A) To include any prospectus required by Section 10(a)(3) of the
Securities Act.
(B) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(C) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of any employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first-class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired or involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Bancorp Hawaii,
Inc. has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City and County of Honolulu,
State of Hawaii, on the 1st day of April, 1997.
<TABLE>
<S> <C> <C>
BANCORP HAWAII, INC.
By: /s/ LAWRENCE M. JOHNSON
-----------------------------------------
Lawrence M. Johnson
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ LAWRENCE M. JOHNSON Chairman of the Board,
- ------------------------------ Chief Executive April 1, 1997
Lawrence M. Johnson Officer and Director
*
- ------------------------------ President and Director April 1, 1997
Richard J. Dahl
*
- ------------------------------ Director April 1, 1997
Peter D. Baldwin
*
- ------------------------------ Director April 1, 1997
Mary G.F. Bitterman
*
- ------------------------------ Director April 1, 1997
David A. Heenan
*
- ------------------------------ Director April 1, 1997
Stuart T.K. Ho
*
- ------------------------------ Director April 1, 1997
Herbert M. Richards, Jr.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
*
- ------------------------------ Director April 1, 1997
H. Howard Stephenson
*
- ------------------------------ Director April 1, 1997
Stanley S. Takahashi
*
- ------------------------------ Director April 1, 1997
Fred E. Trotter
*
- ------------------------------ Director April 1, 1997
K. Tim Yee
*
- ------------------------------ Chief Financial Officer April 1, 1997
David A. Houle
*
- ------------------------------ Chief Accounting Officer April 1, 1997
Denis K. Isono
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By /s/ LAWRENCE M. JOHNSON
-------------------------
Lawrence M. Johnson
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
BANCORP HAWAII, INC.
(AS AMENDED APRIL 27, 1994)
THESE ARTICLES OF INCORPORATION, made and entered into this 12th day
of August, 1971, by and between HARRISON R. COOKE, C. D. TERRY AND WILSON P.
CANNON, JR., residents of the City and County of Honolulu, State of Hawaii,
United States of America:
WITNESSETH:
That the parties hereto, desiring to become incorporated as a
corporation in accordance with the laws of the State of Hawaii, and to obtain
the rights and benefits conferred by said laws upon corporations, do hereby
associate themselves together and unite and form a corporation, and do make and
enter into the following Articles of Incorporation, the terms whereof it is
agreed shall be equally obligatory upon the parties signing this instrument and
upon all the parties who from time to time may hold stock in the corporation:
I
NAME
The name of the corporation shall be:
BANCORP HAWAII, INC.
II
OFFICES
The location of the principal office of the corporation shall be at
Honolulu, City and County of Honolulu, State of Hawaii, and the mailing address
of the initial office of the corporation shall be 111 South King Street,
Honolulu, Hawaii 96813. The corporation may
<PAGE>
have such other offices within and without the State of Hawaii as its business
may from time to time require.
III
CAPITAL STOCK
The capital stock of the corporation shall be $220,000,000. The
number of shares of stock that the corporation is authorized to issue shall be
120,000,000 shares, of which 100,000,000 shares shall be common stock of the par
value of $2 per share and 20,000,000 shares shall be preferred stock of the par
value of $1 per share.
No holder of the shares of stock of any class of the corporation shall
have any preemptive or preferential right of subscription for or to purchase any
shares of any class of stock or other securities of the corporation, whether now
or hereafter authorized.
In connection with any offering to stockholders, or any stock
dividend, or any other change in the capitalization of the corporation, or any
merger of consolidation, the Board of Directors may provide for the issuance of
fractional shares of the capital stock of the corporation, or the Board of
Directors may provide that no fractional shares shall be issued in connection
therewith and that the issuance of fractional shares may be avoided by the sale
of shares representing fractions or by the issuance of scrip or in any other
manner. The stockholders shall not have the right to split whole shares into
fractions or to split fractions.
The Board of Directors is authorized to provide for the issuance from
time to time of authorized but unissued shares of the common or preferred stock
of the corporation and to determine and approve the consideration for which such
shares shall be issued, and the other terms and conditions of the offering. The
Board of Directors is authorized to divide authorized and unissued shares of the
preferred stock of the corporation into series and issue any such series, and to
fix the terms, preferences, voting powers, restrictions and qualifications of
the preferred stock or any series thereof. The Board of Directors is authorized
to determine whether any of the preferred stock or any series of the preferred
stock of the corporation shall be convertible into shares of the common stock,
of the corporation, and to fix, before issuance, the terms and conditions with
or without limitations on which the preferred stock or any series of the
preferred stock shall be so convertible.
The Board of Directors may authorize the corporation to issue, sell or
dispose of bonds, debentures, notes, certificates of indebtedness and other
obligations and securities of the corporation, convertible into common or
preferred stock of the corporation or into any form of other security (or not so
convertible), all upon such terms and conditions and with such limitations as
may be fixed by the Board of Directors.
2
<PAGE>
IV
INITIAL DIRECTORS AND OFFICERS
The names and mailing addresses of the persons who are to act as the
initial directors and officers of the corporation are as follows:
DIRECTORS
NAMES MAILING ADDRESSES
Harrison R. Cooke 2549 Tantalus Drive
Honolulu, Hawaii 96813
Hung Wo Ching 1944 C Ualakaa
Honolulu, Hawaii 96822
James F. Gary 4746 Aukai Avenue
Honolulu, Hawaii 96816
Douglas S. Guild 140 Wailupe Circle
Honolulu, Hawaii 96821
Keiji Kawakami 2650 Kaaipu Avenue
Honolulu, Hawaii 96822
Garfield King 2969 Kalakaua Avenue
Honolulu, Hawaii 96815
Edmond H. Leavey 2003 Kalia Road
Honolulu, Hawaii 96815
Philip E. Spalding, Jr. 4340 Pahoa Avenue
Honolulu, Hawaii 96816
C. D. Terry 938 Onaha Street
Honolulu, Hawaii 96816
3
<PAGE>
OFFICERS
NAMES MAILING ADDRESSES
Harrison R. Cooke 2549 Tantalus Drive
Chairman of the Board of Directors Honolulu, Hawaii 96813
C. D. Terry 938 Onaha Street
President Honolulu, Hawaii 96816
Charles R. Klenske 3622 Anela Place
Vice President Honolulu, Hawaii 96815
Wilson P. Cannon, Jr. 3936 Gail Street
Vice President Honolulu, Hawaii 96815
Frank J. Manaut 4866 Analii Place
Vice President Honolulu, Hawaii 96821
Max L. Pilliard 3887 Lurline Drive
Secretary and Treasurer Honolulu, Hawaii 96816
V
PURPOSES AND POWERS
The purposes for which the corporation is organized and its powers in
connection therewith are as follows:
(a) To engage generally in all businesses in which a bank holding
company may lawfully engage, and in connection therewith to subscribe for,
purchase, take, receive or otherwise acquire, hold, own, use, employ,
mortgage, lend, pledge, sell or otherwise dispose of and otherwise deal in
and with shares of the capital stock and/or other securities of one or more
banks or banking institutions and other corporations.
(b) To buy, take leases of or otherwise acquire, hold, own, use,
improve, develop, cultivate, grant, bargain, sell, convey, lease, mortgage
or otherwise dispose of, and in all respects deal in and with, real
properties, improved or unimproved, and any interests and rights therein;
(c) To buy, hire, or otherwise acquire, hold, own, use, produce,
manufacture, sell, assign, transfer, pledge, or otherwise dispose of, and
in all respects deal in and with, personal property of whatever nature,
tangible or intangible, and any
4
<PAGE>
interests and rights therein, including any and all kinds of machinery,
equipment, materials, tools and other goods and chattels, and including
franchises, rights, licenses, patents, trademarks, bonds, notes, choses in
action and other evidences of indebtedness, and options for the purchase of
any of the foregoing;
(d) To purchase, take, receive, subscribe for, or otherwise acquire,
own, hold, use, employ, sell, mortgage, lend, pledge, or otherwise dispose
of, and otherwise use and deal in and with, shares of the capital stock of
or other interests in, or obligations of, other domestic or foreign
corporations, associations, trusts, partnerships or individuals, or direct
or indirect obligations of the United States or of any other government,
state, territory, governmental district, or municipality or of any
instrumentality thereof;
(e) To borrow money and to incur indebtedness, without limit as to
the amount and in excess of the capital stock of the corporation, and to
issue bonds, debentures, debenture stock, warrants, notes, or other
obligations therefor, and to secure the same by any lien, charge, grant,
pledge, deed of trust or mortgage of the whole or any part of the real and
personal property of the corporation, then owned or thereafter to be
acquired and/or to issue bonds, debentures, debenture stocks, warrants,
notes or other obligations without any such security;
(f) To act as agent of any corporation, association, trust,
partnership or individual or as manager of the business and affairs of any
corporation, association, trust, partnership or individual and in such
connection to exercise powers and authority on behalf of any corporation,
association, trust, partnership or individual, including ministerial,
executive, discretionary, and managerial powers, all on such terms and
conditions as may be agreed between the corporation and such corporation,
association, trust, partnership or individual;
(g) To promote or to aid in any manner, financially or otherwise, any
corporation or association any of whose stock or obligations are held
directly or indirectly by this corporation, and for this purpose to enter
into plans of reorganization or readjustment and to guarantee the whole or
any part of the indebtedness and obligations of any such other corporation
or association and the payment of dividends on its stock, and to do any
other acts or things designed to protect, preserve, improve, or enhance the
value of such stock or obligations;
(h) To issue shares of the capital stock and the notes, bonds, and
other obligations of the corporation, and options for the purchase of any
thereof, in payment for property acquired by the corporation or for
services rendered to the corporation or for any other objects in and about
its business, and to purchase, take, receive, or otherwise acquire, own,
hold, sell, transfer, accept as security for loans, and deal generally in
shares of its capital stock and its obligations in every lawful manner;
5
<PAGE>
(i) To enter into, make, perform, and carry out contracts of every
kind for any lawful purpose with any person, firm, association, trust or
corporation, one or more;
(j) To acquire the whole or any part of the property, assets,
business, good will, and rights of any person, firm, association, trust or
corporation engaged in any business or enterprise which may lawfully be
undertaken by the corporation, and to pay for the same in cash or shares of
the capital stock or obligations of the corporation, or by undertaking and
assuming the whole or any part of the indebtedness and obligations of the
transferor, or otherwise, and to hold or in any manner dispose of the whole
or any part of the property and assets so acquired, and to conduct in any
lawful manner the whole or any part of the business so acquired and to
exercise all the powers necessary or convenient in and about the conduct,
management and carrying on of such business;
(k) To draw, make, accept, endorse, guarantee, execute and issue
promissory notes, bills of exchange, drafts, warrants of all kinds,
obligations and certificates and negotiable or transferable instruments, to
loan money to others with or without security, and to guarantee the debts
and obligations of others and go security on bonds of others, but nothing
herein contained shall be construed as authorizing the business of banking
or as including the business purposes of a commercial bank, savings bank or
trust company;
(l) To effect any of the purposes mentioned in these Articles and to
exercise any powers so mentioned either directly or through the acquisition
and ownership of shares of stock of any other corporation or association
and by holding and voting the same or otherwise exercising and enjoying the
rights and advantages incidental thereto, and to operate wholly or
partially as a holding company through the acquisition and ownership of
shares of stock of any other corporation or association, whether or not
such shares of stock so acquired or owned by this corporation shall give to
this corporation control of such other corporation or association;
(m) To carry on any other lawful business whatsoever which may seem
to the corporation capable of being carried on in connection with the
foregoing purposes and powers, or calculated directly or indirectly to
promote the interests of the corporation or to enhance the value of its
properties;
(n) To enter into partnerships and joint ventures with corporations,
partnerships, or persons for the carrying on through such partnerships and
joint ventures of any business the purposes of which are the same as or are
germane, in whole or in part, to the purposes or business of the
corporation;
6
<PAGE>
(o) To conduct its business, carry on its operations and purposes,
and exercise its powers or any thereof in any state, territory, district,
or possession of the United States of America or in any foreign country;
(p) To have succession by its corporate name perpetually, and to
have, enjoy, and exercise all the other rights, powers, and privileges
which are now or which may hereafter be conferred upon corporations
organized under the general corporation laws of the State of Hawaii;
(q) To have and exercise all powers necessary or convenient to effect
any or all of the purposes set forth in these Articles or reasonably
incidental to the fulfillment of its purposes or the exercise of its powers
as set forth therein;
(r) To make donations of property or money to benevolent or
charitable institutions or associations, community funds, municipalities or
public charities or to public or private enterprises or purposes so far as
it may deem necessary or helpful in connection with the accomplishment of
the purposes herein stated or in the public or community interest.
The foregoing clauses shall each be construed as purposes and powers
and the matters expressed in each clause or any part of any clause shall not be
limited or restricted in any manner by reference to or inference from any other
clause or any other part of the same clause, but shall be regarded as
independent purposes and powers and the enumeration of specific purposes and
powers shall not be construed to limit or restrict in any manner the meaning of
the general purposes and powers of the corporation, nor shall the expression of
one thing be deemed to exclude another, although it be of like nature, not
expressed.
VI
BOARD OF DIRECTORS
There shall be a Board of Directors of the corporation to consist of
not less than three (3) nor more than fifteen (15) members. No less than
one-third of the members of the Board of Directors shall be residents of the
State of Hawaii, and in the absence of such one-third membership the Board of
Directors shall not function. The members of the Board of Directors shall be
elected or appointed at such times, in such manner and for such terms as may be
prescribed by the By-Laws which also may provide for the removal of directors
and the filling of vacancies and may provide that the remaining members of the
Board of Directors, although less than a majority thereof, may by the
affirmative vote of the majority of such remaining members fill vacancies in the
Board of Directors, including temporary vacancies caused by the illness of
directors or the temporary absence of directors from the city in which a meeting
is to be held. The directors need not be stockholders of the corporation. The
Board
7
<PAGE>
of Directors shall have full power to control and direct the business and
affairs of the Corporation, subject, however, to resolutions adopted by the
stockholders and to any limitations which may be set forth in statutory
provisions, in these Articles or in the By-Laws. There may be an executive
committee and such other committees as the Board of Directors shall determine,
each of which shall possess and may exercise such powers of the Board of
Directors as may be delegated to it by the Board of Directors. The Board of
Directors, without the approval of the stockholders of the corporation, or of
any percentage thereof, may authorize the making of donations referred to in
paragraph (r) of Article V hereof. Directors, as such, shall not receive any
stated salary for their services, but by resolution of the Board of Directors a
fixed sum reasonable in amount, and expenses of attendance, if any, may be
allowed for attendance at each regular or special meeting of the Board of
Directors.
VII
OFFICERS
The officers of the corporation shall consist of a Chairman of the
Board of Directors, a President, one or more Vice Presidents as may be
prescribed by the By-Laws, a Secretary, a Treasurer, and such other officers and
assistant officers and agents as may be prescribed by the By-Laws. The officers
shall be elected or appointed, hold office and may be removed as may be
prescribed by the By-Laws. The Chairman of the Board of Directors shall be a
director of the Corporation. No other officer and no subordinate officer need
be a director of the corporation, and no officer need be a stockholder of the
corporation. Any two or more offices may be held by the same person.
All officers and agents of the corporation, as between themselves and
the corporation, shall have such authority and perform such duties in the
management of the corporation as may be prescribed by the By-Laws, or as may be
determined by resolution of the Board of Directors not inconsistent with the
By-Laws.
VIII
CONTRACTS
No contract or other transaction between the corporation and any other
person, firm, corporation. association or other organization, and no act of the
corporation, shall in any way be affected or invalidated by the fact that any of
the directors or officers of the corporation are parties to such contract,
transaction or act or are pecuniarily or otherwise interested in the same or are
directors or officers or members of any such other firm, corporation,
association or other organization, provided that the interest of such director
shall be disclosed or shall have been known to the Board of Directors
authorizing or approving the
8
<PAGE>
same, or to a majority thereof. Any director of the corporation who is a party
to such transaction, contract, or act or who is pecuniarily or otherwise
interested in the same or is a director or officer or member of such other firm,
corporation, association or other organization, may be counted in determining a
quorum of any meeting of the Board of Directors which shall authorize or approve
any such contract, transaction or act, and may vote thereon with like force and
effect as if he were in no way interested therein. Neither any director nor any
officer of the corporation, being so interested in any such contract,
transaction or act of the corporation which shall be approved by the Board of
Directors of the corporation, nor any such other person, firm, corporation,
association or other organization in which such director or officer may be
interested or of which such officer or director may be a director, officer or
member, shall be liable or accountable to the corporation, or to any stockholder
thereof, for any loss incurred by the corporation pursuant to or by reason of
such contract, transaction or act, or for any gain received by any such other
party pursuant thereto or by reason thereof.
IX
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND AGENTS
Section 1. As used in this Article IX, the following terms shall
have the following meanings:
(a) "Employee" means each 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, association, or
other enterprise.
(b) "Costs" means expenses (including attorney's fees), judgments,
fines, and amounts paid in settlement in connection with any Cause of
Action.
(c) "Cause of Action" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative.
Section 2. The corporation shall indemnify each Employee who was
or is a party or is threatened to be made a party to any Cause of Action (other
than a Cause of Action by or in the right of the corporation) by reason of the
fact that he is or was an Employee against Costs actually and reasonably
incurred by him in connection with such Cause of Action if (i) he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and (ii) with respect to any criminal Cause of
Action, he had no reasonable cause to believe his conduct was unlawful.
9
<PAGE>
Section 3. The corporation shall indemnify each Employee who was a
party or is threatened to be made a party to any Cause of Action by or in the
right of the corporation by reason of the fact that he is or was an Employee
against Costs actually and reasonably incurred by him in connection with such
Cause of Action if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation.
Section 4. (a) To the extent that an Employee has been successful
on the merits or otherwise in defense of any Cause of Action or defense of any
claim, issue, or matter therein, the Employee shall be deemed to have met the
applicable standard of conduct set forth in Section 2 or Section 3 of this
Article IX and shall be indemnified by the corporation against Costs actually
and reasonably incurred by him in connection therewith.
(b) To the extent that an Employee has not been successful on the
merits or otherwise in defense of any Cause of Action or defense of any
claim, issue, or matter therein, the Employee shall nonetheless be
indemnified against Costs actually and reasonably incurred by him in
connection therewith unless the tribunal, if any, in which such Cause of
Action is or was pending upon application by the corporation determines
that the Employee has not met the applicable standard of conduct set forth
in Section 2 or Section 3 or this Article IX. The termination of any Cause
of Action by judgment, order settlement, conviction, or upon a plea of nolo
contendere or its equivalent shall not create a presumption that such
applicable standard of conduct has not been met.
Section 5. Costs incurred in connection with any Cause of Action
shall be paid by the corporation in advance of the final disposition of such
Cause of Action upon receipt of an undertaking by or on behalf of the Employee
to repay the advanced amount if it is ultimately determined pursuant to Section
4(b) of this Article IX that the Employee is not entitled to be indemnified by
the corporation.
Section 6. The indemnification provided by this Article IX shall
(i) not be deemed exclusive of any other rights to which an Employee may be
entitled by any bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise, and (ii) continue to a person who has ceased to be an
Employee and shall inure to the benefit of his heirs, executors, and
administrators.
Section 7. The corporation may purchase and maintain insurance on
behalf of any Employee against any liability asserted against or incurred by the
Employee, whether or not the corporation would have the power to indemnify the
Employee against such liability. Any such insurance may be procured from any
insurance company, including an insurance company in which the corporation may
have an equity or other interest, through stock ownership or otherwise.
10
<PAGE>
Section 8. This Article IX shall be effective with respect to any
Cause of Action arising at any time from acts or omissions occurring prior to
the date this Article IX is amended or terminated.
X
LIMITATION OF LIABILITY OF DIRECTORS
Section 1. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for any
act or omission of the director not performed in good faith, or which involves
intentional misconduct or knowing violation of law, or which constitutes a
willful or reckless disregard of the director's fiduciary duty; (iii) for the
director's willful or negligent violation of any provision of Chapter 415 of the
Hawaii Revised Statutes regarding payment of dividends or stock purchase or
redemption; or (iv) for any transaction from which the director received an
improper benefit.
Section 2. Any repeal or modification of this Article X by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
XI
LIMITED LIABILITY
No stockholder of the corporation shall be liable for any debt of the
corporation beyond any amount which may be due and unpaid upon the par value of
the share or shares held by such stockholder.
XII
SERVICE OF PROCESS
Service of process may be made upon any officer of the corporation.
11
<PAGE>
IN WITNESS WHEREOF, said parties have hereunto set their hands the day
and year first above written.
(s) Harrison R. Cooke
--------------------------------------------
HARRISON R. COOKE
(s) C.D. Terry
--------------------------------------------
C.D. TERRY
(s) Wilson P. Cannon, Jr.
--------------------------------------------
WILSON P. CANNON, JR.
Incorporators
12
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 27, 1997
(except with respect to the matter discussed in Note 20, as to which the date is
February 27, 1997), included in CU Bancorp's Form 10-K for the year ended
December 31, 1996 and to all references to our Firm included in this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
March 28, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Proxy Statement/Prospectus of
Bancorp Hawaii, Inc. for the registration of its common stock and to the
incorporation by reference therein of our report dated January 22, 1997, with
respect to the consolidated financial statements of Bancorp Hawaii, Inc. and
subsidiaries included in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Honolulu, Hawaii
March 31, 1997
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that BANCORP HAWAII, INC. (the
"Company") and the undersigned, in the capacities indicated below, hereby
constitute and appoint LAWRENCE M. JOHNSON, RICHARD J. DAHL, DAVID A. HOULE,
DENIS K. ISONO, JOSEPH T. KIEFER, J. THOMAS VAN WINKLE, of Honolulu, Hawaii, and
each of them (with full power to each of them to act alone), their true and
lawful attorneys and agents to do any and all acts and things and to execute any
and all instruments that said attorneys and agents, or any of them, may deem
necessary or advisable or may require to enable the Company to comply with the
Securities Act of 1933, as amended, and any rules, regulations, or requirements
of the Securities and Exchange Commission in respect thereof, in connection with
the registration under the Securities Act of 1933, as amended, of shares of
common stock of the Company that may be issued in connection with the Company's
acquisition by merger of CU Bancorp, a California corporation, including
specifically, but without limiting the generality of the foregoing, power and
authority to sign the names of the Company and the undersigned in the capacities
indicated below to any registration statement and any and all amendments and
supplements to any registration statement and to any instruments or documents
filed as a part of or in connection with said amendments or supplements to any
registration statement, and the undersigned hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
IN WITNESS WHEREOF, Bancorp Hawaii, Inc. and the undersigned have
hereunto set their hands as of the 21st day of March, 1997. This Power of
Attorney may be executed in any number of counterparts by one or more of the
undersigned.
BANCORP HAWAII, INC.
By /s/ Lawrence M. Johnson
--------------------------------
LAWRENCE M. JOHNSON
Its Chairman of the Board and
Chief Executive Officer
By /s/ Richard J. Dahl
--------------------------------
RICHARD J. DAHL
Its President
<PAGE>
/s/ Lawrence M. Johnson
-----------------------------------
LAWRENCE M. JOHNSON
Chairman of the Board, Chief
Executive Officer and Director
/s/ Richard J. Dahl
-----------------------------------
RICHARD J. DAHL
President and Director
/s/ David A. Houle
-----------------------------------
DAVID A. HOULE
Senior Vice President, Treasurer and
Chief Financial Officer
/s/ Denis K. Isono
-----------------------------------
DENIS K. ISONO
Vice President and Controller
(Principal Accounting Officer)
/s/ Peter D. Baldwin
-----------------------------------
PETER D. BALDWIN, Director
/s/ Mary G. F. Bitterman
-----------------------------------
MARY G. F. BITTERMAN, Director
/s/ David A. Heenan
-----------------------------------
DAVID A. HEENAN, Director
/s/ Stuart T. K. Ho
-----------------------------------
STUART T. K. HO, Director
2
<PAGE>
/s/ Herbert M. Richards, Jr.
-----------------------------------
HERBERT M. RICHARDS, JR., Director
/s/ H. Howard Stephenson
-----------------------------------
H. HOWARD STEPHENSON, Director
/s/ Stanley S. Takahashi
-----------------------------------
STANLEY S. TAKAHASHI, Director
/s/ Fred E. Trotter
-----------------------------------
FRED E. TROTTER, Director
/s/ K. Tim Yee
-----------------------------------
K. TIM YEE, Director
3
<PAGE>
EXHIBIT 99.1
CU BANCORP
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 27, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) hereby nominate(s) constitute(s) and
appoints ______________________, ______________________, and
____________________ and each of them, the attorneys, agents and proxies of the
undersigned, with full powers of substitution to each, to attend and act as
proxy or proxies of the undersigned at the Special Meeting of Shareholders (the
"Meeting") of CU Bancorp (the "Company") to be held at the Long Beach Airport
Marriott Hotel, 4700 Airport Drive, Long Beach, California, on Friday, June 27,
1997 at 10:00 a.m. Pacific Daylight Time, and at any and all adjournments
thereof, and to vote as specified herein the number of shares which the
undersigned, if personally present, would be entitled to vote.
PLEASE SIGN AND DATE ON REVERSE SIDE
1. APPROVAL OF THE MERGER PROPOSAL. To approve the Agreement and Plan of
Reorganization dated as of February 24, 1997, and the related Agreement and
Plan of Merger, by and between the Company and Bancorp Hawaii, Inc.
("BHI"), as described in the Proxy Statement/Prospectus for the Meeting,
including without limitation, the merger of the Company with and into BHI
(collectively, the "Merger Proposal"). / / FOR / / AGAINST / / ABSTAIN
<PAGE>
2. OTHER BUSINESS. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the Meeting and at any
and all adjournments thereof. The Board of Directors at present knows of
no other business to be presented by or on behalf of the Company or the
Board of Directors at the Meeting. / / FOR / / AGAINST / / ABSTAIN
I/WE PLAN TO ATTEND THE MEETING Yes
----
No
----
PLEASE SIGN AND DATE BELOW.
The undersigned hereby ratifies and confirms all that said attorneys,
agents, and proxies or any of them, or their substitutes, shall lawfully do or
cause to be done by virtue hereof, and hereby revokes any and all proxies
theretofore given by the undersigned to vote at the Meeting. The undersigned
acknowledges receipt of the notice of the Meeting and the Proxy
Statement/Prospectus accompanying said notice.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE MERGER PROPOSAL.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE MERGER PROPOSAL.
DATED: , 1997
---------------
SIGNED:
------------------------------
SIGNED:
------------------------------
Please date this proxy and sign above as your name(s) appear(s) on this card.
Joint owners should each sign personally. Corporate proxies should be signed by
an authorized officer. Executors, administrators, trustees, etc. should give
their full titles.
