As filed with the Securities and Exchange Commission on September 6, 1995
Registration No. 33-58379
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 4 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SDNB FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
California 95-3725079
(State or other (I.R.S. Employer
jurisdiction of Identification
incorporation or Number)
organization)
1420 Kettner Boulevard
San Diego, California 92101
(619) 233-1234
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
Murray L. Galinson
President and Chief Executive Officer
1420 Kettner Boulevard
San Diego, California 92101
(619) 233-1234
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
With Copies to:
Lawrence M. Sherman, Esq. Theodore G. Johnsen, Esq.
Sherman & Eggers, P.C. Arnold & Porter
350 West Ash Street, Suite 1100 777 South Figueroa Street
San Diego, California 92101 Los Angeles, California 90017-2513
(619) 338-4900 (213) 243-4000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of class Proposed maximum Proposed
maximum
of securities Amount to offering price aggregate
offering Amount of
to be registered be registered per security<F1>
price<F1> registration fee
<S> <C> <C> <C>
<C>
Common Stock
(no par value) 769,582 $4.34
$3,339,986 $1,151.72
Subscription Rights
to purchase Common Stock 769,582 (2)<F2>
(2)<F2> None
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
the Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended,
or until the Registration Statement shall become effective on such date
as the Commission, acting pursuant to said Section 8(a), may determine.
<FN>
<F1>
(1) Estimated solely for the purpose of calculating the registration fee.
<F2>
(2) No separate consideration will be received for the Subscription
Rights.
<F3>
(3) 1/29 of 1% of the proposed maximum aggregate offering price.
Previously paid.
</FN>
</TABLE>
<PAGE>
SDNB FINANCIAL CORP.
CROSS REFERENCE SHEET
Pursuant to Item 501(b)
Item Number and Location or
Caption Heading
in Form S-3 in Prospectus
1. Forepart of Registration Facing Page and Cross-
Statement Reference Sheet of
and Outside Front Cover Registration Statement and
Page of Cover Page of
Prospectus. Prospectus.
2. Inside Front and Outside Inside Front and Outside
Back Cover Back Cover
Pages of Prospectus. Pages of Prospectus.
3. Summary Information, Risk Prospectus Summary(pp. 4-7);
Factors Risk Factors (pp. 8-12).
and Ratio of Earnings to
Fixed
Charges.
4. Use of Proceeds. Use of Proceeds (p. 20).
5. Determination of Offering The Subscription Offering -
Price. Determination
of Subscription Price and
Fairness Opinion (p. 16).
6. Dilution. Risk Factors -
Dilution (pp. 9-10).
7. Selling Security Holders. *
8. Plan of Distribution. The Underwriting Agreement (pp. 19-20);
Plan of Distribution (pp. 25-26).
9. Description of Securities Incorporation of Certain
to be Documents by Reference (p. 3);
Registered. The Subscription Offering
(pp. 12-18); Description of
Capital Stock and Rights of
Shareholders (pp.24-25).
10. Interests of Named *
Experts and
Counsel.
11. Material Changes. *
12. Incorporation of Certain Incorporation of Certain
Information Documents by
by Reference. Reference (p. 3).
13. Disclosure of Commission *
Position on
Indemnification for
Securities Act
Liabilities.
_____________________________
* Omitted as not applicable.
<PAGE>
SDNB Financial Corp.
PROSPECTUS
769,582 Shares of Common Stock
(no par value)
SDNB Financial Corp. (the "Company") is hereby offering (the
"Subscription Offering") up to 769,582 shares of its Common Stock, no
par value ("Common Stock"), to holders of record of its Common Stock
(the "Shareholders") at the close of business on May 5, 1995
(the "Record Date"), pursuant to transferable subscription rights (the
"Basic Subscription Rights" and, together with the Oversubscription
Rights (as defined below), the "Subscription Rights"). The
subscription price is $4.34 per share (the "Subscription Price").
Holders of Subscription Rights, including transferees of Shareholders
(collectively, the "Rights Holders" and, together with the
Shareholders, the "Holders"), will be able to exercise their
Subscription Rights until 5:00 p.m., New York time, on September 21,
1995 (such date, as it may be extended by the Company to a date not later
than October 12, 1995, being the "Expiration Date"). See "THE SUBSCRIPTION
OFFERING." After the Expiration Date, the Subscription Rights will no
longer be exercisable to purchase shares of Common Stock.
For each two shares of Common Stock held of record as of the close of
business on the Record Date, a Shareholder will receive one Basic
Subscription Right. No fractional Basic Subscription Rights will be
issued by the Company. The number of Basic Subscription Rights
distributed by the Company to each Shareholder will be rounded up to
the nearest whole number. Each Rights Holder will have the right to
purchase one share of Common Stock for each Basic Subscription Right.
Rights Holders are entitled to subscribe for all, or any portion of,
the shares of Common Stock underlying their Basic Subscription Rights.
A Rights Holder who subscribes for the full number of shares of Common
Stock underlying the Basic Subscription Rights held by such Rights
Holder on the date of exercise (other than in his or her capacity
as a participant in the San Diego National Bank Deferred Savings Plan)
and evidenced by a Subscription Warrant will have the right to subscribe
for additional shares of Common Stock that are not subscribed for by
other Rights Holders pursuant to their Basic Subscription Rights (the
"Oversubscription Rights"). See "THE SUBSCRIPTION OFFERING -
Oversubscription Rights" and "RISK FACTORS - Interests of WHR."
No minimum amount of proceeds is required for the Company to consummate
the Subscription Offering.
The Common Stock is traded on the NASDAQ National Market System (the
"NASDAQ/NMS") under the symbol "SDNB" and, on September 5, 1995, the
last sale price of the Common Stock was $4.25. See "MARKET
PRICE AND DIVIDENDS ON THE COMMON STOCK." The Basic Subscription
Rights will be tradable on the NASDAQ/NMS under the symbol "SDNBR"
until the end of trading on the NASDAQ/NMS on the Expiration Date.
However, there has been no prior market for the Basic Subscription
Rights and no assurance can be given that a market will develop.
See "THE SUBSCRIPTION OFFERING - Transferability of Basic
Subscription Rights."
HOLDERS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
"RISK FACTORS (PAGES 8-12)."
_______________
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 PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_________________
THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND, OR ANY OTHER GOVERNMENTAL AGENCY.
Subscription Underwriting Discounts Proceeds to
Price and Commissions(1) the Company(2)
Per share $4.34 $.217 $4.34
Total $3,339,986 $166,999 $3,172,987
(1) Assumes all Subscription Rights exercised through the Underwriter
(defined herein). See "THE UNDERWRITING AGREEMENT - Underwriter's
Compensation" and "PLAN OF DISTRIBUTION" for information with
respect to other compensation payable to the Underwriter. See also
"THE SUBSCRIPTION OFFERING - Determination of Subscription Price
and Fairness Opinion" for information with respect to financial
advisory fees payable by the Company.
(2) Before deducting expenses payable by the Company estimated at
$360,000, of which $10,000 constitutes the Expense Fee (as defined
herein) payable to the Underwriter. See "THE UNDERWRITING AGREEMENT".
_______________________
The Common Stock is being offered directly to Rights Holders by the
Company and through the Underwriter pursuant to a best-efforts
underwriting agreement. See "THE UNDERWRITING AGREEMENT" and
"PLAN OF DISTRIBUTION." It is expected that delivery of the shares of
Common Stock will be made as soon as practicable after the Expiration
Date.
September _, 1995
<PAGE>
NOTICE REGARDING RESIDENTS OF FLORIDA
DUE TO BURDENSOME SECURITIES AND DEALER REGISTRATION REQUIREMENTS OF THE
FLORIDA SECURITIES AND PROTECTION ACT, SUBSCRIPTION RIGHTS MAY NOT BE
TRANSFERRED TO, OR EXCERCISED BY, A RESIDENT OF FLORIDA WHO WAS NOT A
SHAREHOLDER OF RECORD OF THE COMPANY'S COMMON STOCK ON THE RECORD DATE
(MAY 5, 1995).
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements, and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements, and other information
can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its Regional Offices at
Seven World Trade Center, Suite 1300, New York, New York 10048,
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the
Commission's Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission a Registration Statement
on Form S-3 (together with all amendments and exhibits, the
"Registration Statement") relating to the shares of Common Stock that
may be issued to Rights Holders. This Prospectus does not contain all
of the information set forth in the Registration Statement and exhibits
thereto that the Company has filed with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), and to which
reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated by reference in this Prospectus are the following
documents filed by the Company with the Commission pursuant to the
Exchange Act:
1. the Company's Annual Report on Form 10-K for the year ended
December 31, 1994;
2. the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1995 and June 30, 1995; and
3. the description of the Common Stock in the Company's
registration statement filed under the Exchange Act with respect to the
Common Stock, including any amendments and reports filed for the
purpose of updating such description.
All documents subsequently filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the
termination of the Subscription Offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof
from the date such documents are filed. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
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 by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom
this Prospectus is delivered, on the written or oral request of any
such person, a copy of any or all of the information incorporated
herein by reference other than exhibits to such information (unless
such exhibits are specifically incorporated by reference into such
information). Written or oral requests should be directed to SDNB
Financial Corp., 1420 Kettner Boulevard, San Diego, California 92101,
Attention: Howard W. Brotman, telephone (619) 233-1234, ext. 717.
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is
qualified in its entirety by the more detailed information, including
consolidated financial statements, appearing elsewhere, or incorporated
by reference, in this Prospectus.
The Company
SDNB Financial Corp. (the "Company") is a registered bank holding
company organized in 1982. The Company's principal subsidiary is San
Diego National Bank, San Diego, California (the "Bank"), a national
banking association organized in 1981, the deposits of which are
insured by the Bank Insurance Fund ("BIF") of the Federal Deposit
Insurance Corporation (the "FDIC") up to applicable limits. Through
the Bank, the Company provides general commercial banking services.
At June 30, 1995, the Company had consolidated assets of approximately
$156 million, consolidated liabilities of approximately $145 million
(which includes total deposits through the Bank of approximately $125
million), and shareholders' equity of approximately $11 million.
The Company's principal executive office is located at 1420 Kettner
Boulevard, San Diego, California 92101, and its telephone number
is (619) 233-1234. See "THE COMPANY."
The Subscription Offering
Shares Offered Hereby Up to 769,582 shares of Common Stock.
Subscription Price $4.34 per share of Common Stock.
Risk Factors See "RISK FACTORS" for a discussion
of certain important factors to be
considered by Holders.
Basic Subscription Rights For each two shares of
Common Stock held of record as of the
close of business on May 5, 1995,
1995 (the "Record Date"), a Shareholder
will receive one Basic Subscription
Right. The number of Basic Subscription
Rights distributed by the Company to each
Shareholder will be rounded up to the
nearest whole number. Each Rights Holder
will have the right to purchase one share
of Common Stock for each Basic
Subscription Right. Rights Holders are
entitled to subscribe for all, or any
portion of, the shares of Common Stock
underlying their Basic Subscription
Rights. Basic Subscription Rights will
be evidenced by Subscription Warrants.
Oversubscription Rights A Rights Holder who
subscribes for the full number of shares
of Common Stock underlying the Basic
Subscription Rights held by such Rights
Holder on the date of exercise (other
than in his or her capacity as a
participant in the San Diego National
Bank Deferred Savings Plan (the "Plan"))
and evidenced by a Subscription Warrant will
have the right to subscribe for
additional shares of Common Stock that
are not subscribed for by other Rights
Holders pursuant to their Basic
Subscription Rights. Basic Subscription
Rights held by the Plan shall not be
eligible for Oversubscription Rights due
to the prohibited transaction rules of the
Internal Revenue Code and the Employee
Retirement Income Security Act of 1974.
There can be no assurance that any shares
of Common Stock will be available to
satisfy in whole or in part a Rights
Holder's request to subscribe for shares
in excess of the shares underlying such
Rights Holder's Basic Subscription
Rights. Oversubscription Rights are
exercisable by all Rights Holders, other
than the Plan, including transferees of
Shareholders. See "THE SUBSCRIPTION
OFFERING - Oversubscription Rights."
<PAGE>
Proration of
Oversubscription Rights If there are shares
available for sale pursuant to the
exercise of Oversubscription Rights and
the number of such shares is not
sufficient to satisfy in full all
subscriptions submitted pursuant to such
requests, the available shares of Common
Stock will be allocated among the Rights
Holders who exercise Oversubscription
Rights pro rata based upon the
number of Basic Subscription Rights
held by each such Rights Holder on the
Expiration Date.
Private Placement On January 31, 1995, two
limited partnerships, of which WHR
Management Corp. is the general partner
(the two limited partnerships and WHR
Management Corp. are referred to herein,
collectively, as "WHR"), agreed to
purchase 510,121 shares of the Company's
Common Stock (the "Private Placement"),
which purchase was consummated on March 28,
1995. The 510,121 shares issued to WHR
constitute 24.9% of the Company's
outstanding Common Stock after such
issuance (without taking into
consideration shares to be issued in this
Subscription Offering). Pursuant to the
Stock Purchase Agreement (as defined
herein) and in lieu of
participating in the Subscription Offering,
WHR also agreed to purchase an additional
255,193 shares of Common Stock at $4.34
per share, for an aggregate purchase price
of $1,107,538, if the Subscription Offering
is fully subscribed, or such lesser
amount so that after such purchase WHR
will hold an aggregate of 24.9% of the
outstanding Common Stock of the Company,
taking into account the shares issued in
the Subscription Offering. See "THE
SUBSCRIPTION OFFERING - Private Placement."
Use of Proceeds The net proceeds from the
sale of the Common Stock will be used for
general corporate purposes, which may
include investments in or extensions of
credit to the Company's subsidiaries, the
reduction of existing debt, and financing
of possible future acquisitions of other
banking institutions or related
businesses. At the present time, the
Company does not have any specific plans,
agreements, or understandings, written or
oral, pertaining to the proposed acquisition
of any banking institution or related
business. See "USE OF PROCEEDS."
Underwriting Agreement On September 5, 1995, the Company and Torrey
Pines Securities, Inc., a California
corporation (the "Underwriter"), entered
into an agreement (the "Underwriting
Agreement"), pursuant to which the Underwriter,
on a best-efforts basis, will: (i) prior to
the Expiration Date (as defined below),solicit
the exercise by third parties of Subscription
Rights; and (ii) prior to the Termination Date
(as defined below), solicit the purchase by
third parties of any unsubscribed shares of
Common Stock offered in the Subscription
Offering at a purchase price equal to the
Subscription Price ($4.34 per share) (the
"Standby Purchase Commitment"). The
Underwriter has not agreed to purchase on
behalf of third parties any specific amount of
unsubscribed shares, nor can there be any
assurance given that the Underwriter will be
able to solicit the purchase by third parties of
any unsubscribed shares. In exchange for its
services, the Underwriter will be eligible to
receive certain commissions, fees, and stock
purchase warrants. The terms of the
Underwriting Agreement are subject to the
approval of the National Association of
Securities Dealers, Inc. See "THE UNDERWRITING
AGREEMENT."
Shares Currently
Outstanding 2,048,485 shares of Common
Stock, at September 6, 1995.
Subscription Agent The Subscription Agent is
American Stock Transfer & Trust Company
(the "Subscription Agent"). See "THE
SUBSCRIPTION OFFERING - Subscription
Agent" for addresses and information
relating to the delivery of Subscription
Warrants and the payment of the aggregate
Subscription Price.
Information Agent The Information Agent is
Western Financial Corporation. The
Information Agent's toll-free telephone
number is (800) 488-5990.
<PAGE>
Method of Exercising
Subscription Rights Basic Subscription Rights
and Oversubscription Rights may be
exercised by properly completing,
signing, and delivering the Subscription
Warrant accompanying this Prospectus,
together with payment in full of the
aggregate Subscription Price by either
bank certified check or cashier's check.
See "THE SUBSCRIPTION OFFERING - Method
of Exercising Subscription Rights."
Expiration Date Rights Holders will be able
to exercise their Subscription Rights
until 5:00 p.m., New York time, on
September 21, 1995, unless such period is
extended by the Company, at its
option, to a date not later than October 12,
1995. See "THE SUBSCRIPTION OFFERING -
Amendments and Waivers; Early Termination."
After the Expiration Date, Subscription Rights
will no longer be exercisable to purchase shares
of Common Stock and will have no
value. See "Foreign Restrictions and
Undeliverable Subscription Warrants"
below for a summary of the restrictions
on the method of exercising Subscription
Rights held by shareholders whose record
addresses are outside of the continental
United States or Canada, or are Army Post
Office ("A.P.O.") or Fleet Post Office
("F.P.O.") addresses.
Amendments, Early Termination The Company reserves the
right to amend the terms and conditions
of the Subscription Offering or to
terminate the Subscription Offering at
any time prior to delivery of the shares
of Common Stock offered hereby. See "THE
SUBSCRIPTION OFFERING - Amendments and
Waivers; Early Termination."
Termination Date Unless earlier terminated by the Company,
the Subscription Offering shall
automatically
terminate at 5:00 p.m., New York time, on
the eighth business day following the
Expiration Date.
Transferability of
Subscription Rights The Basic Subscription
Rights are transferable, and the right to
subscribe for additional shares of Common
Stock pursuant to the Oversubscription
Rights is transferable with each Basic
Subscription Right. DUE TO BURDENSOME
SECURITIES AND DEALER REGISTRATION
REQUIREMENTS OF THE FLORIDA SECURITIES
AND INVESTOR PROTECTION ACT, SUBSCRIPTION
RIGHTS MAY NOT BE TRANSFERRED TO, OR
EXCERCISED BY, A RESIDENT OF FLORIDA WHO
WAS NOT A SHAREHOLDER OF THE COMPANY'S
COMMON STOCK ON THE RECORD DATE (MAY 5, 1995).
The Basic Subscription Rights will be
tradable on the NASDAQ National Market
System (the "NASDAQ/NMS") until the end
of trading on the NASDAQ/NMS on the
Expiration Date. There is no assurance,
however, that a market for the Basic
Subscription Rights will develop.
The Subscription Agent
will attempt to sell Basic Subscription
Rights for the convenience of Rights
Holders, provided the Subscription
Warrant with the instructions for sale
properly executed is received by the
Subscription Agent before 11:00 a.m.,
New York time, on the Expiration Date.
No assurance can be given that the
Subscription Agent will be able to sell
any Basic Subscription Rights.
Foreign Restrictions and
Undeliverable Subscription
Warrants Subscription Warrants will
not be mailed to Shareholders whose
record addresses are outside the
continental United States or Canada, or
are A.P.O. or F.P.O. addresses. Such
Subscription Warrants will be held by the
Subscription Agent for such Shareholders'
accounts until instructions are received
to exercise or transfer the Subscription
Rights. If no
<PAGE>
instructions have been
received by 11:00 a.m., New York time, on
the Expiration Date, the Subscription
Agent will attempt to sell the
Subscription Rights of those Shareholders
together with the rights of Shareholders
whose addresses are not known by the
Company or the Subscription Agent or to
whom delivery of a Subscription Warrant
could not be made.
No Fractional Basic
Subscription Rights . . . No fractional Basic
Subscription Rights will be issued by the
Company. The number of Basic
Subscription Rights distributed by the
Company to each Shareholder will be
rounded up to the nearest whole number.
NASDAQ/NMS Symbols Common Stock - "SDNB."
Basic Subscription Rights - "SDNBR."
CUSIP Number . . . . Basic Subscription Rights -
784082-11-7.
Federal Income Tax
Considerations For United States federal
income tax purposes, receipt of the
Subscription Rights by Shareholders
pursuant to the Subscription Offering
should be treated as a nontaxable
dividend distribution. See "CERTAIN
FEDERAL INCOME TAX CONSIDERATIONS."
<PAGE>
RISK FACTORS
Dividend Limitations
The capital stock of San Diego National Bank (the "Bank") is one of
the Company's two principal assets. See "THE COMPANY." As a national
bank subject to the regulation of the Office of the Comptroller of the
Currency (the "Comptroller"), the Bank is subject to legal limitations
on the source and amount of dividends it is permitted to pay to the
Company. The approval of the Comptroller is required for any dividend
by a national bank if the total of all dividends declared by the bank
in any calendar year would exceed the total of its net profits, as
defined by the Comptroller, for that year, combined with its retained
net profits for the preceding two years. The Bank had a net loss (as
defined by the Comptroller) of approximately $1.49 million for 1993 and
1994, combined. Until the effects of that loss are overcome, the Bank
will be precluded from paying dividends to the Company without the
Comptroller's approval. The payment of dividends by the Bank may also
be affected by other factors, such as requirements for the maintenance
of adequate capital. In addition, the Comptroller and the Federal
Deposit Insurance Corporation (the "FDIC") are authorized to determine
under certain circumstances relating to the financial condition of a
national bank whether the payment of dividends would be an unsafe or
unsound banking practice and to prohibit payment thereof. Finally,
under the Federal Deposit Insurance Corporation Improvement Act
("FDICIA"), an insured depository institution is prohibited from making
any capital distribution to its owner, including any dividend, if,
after making such distribution, the depository institution fails to
meet the required minimum level for any relevant capital measure,
including the risk-based capital adequacy and leverage standards
discussed under "Capital" below.
The Company and the Federal Reserve Bank of San Francisco ("Reserve
Bank") entered into an agreement on November 20, 1992, pursuant to
which the Company must obtain the approval of the Reserve Bank prior to,
among other actions, the declaration of any cash dividends.
Capital
The Federal Reserve Board (the "Reserve Board") and the Comptroller
have adopted risk-based capital adequacy guidelines for bank holding
companies and banks under their supervision. Under the Comptroller's
guidelines, a bank is "well capitalized" (the highest rating) if its so
called "Tier 1 capital" and "total capital" as a percentage of risk-
weighted
assets and certain off-balance sheet instruments are at least 6% and 10%,
respectively. Under the Reserve Board guidelines, the Tier 1 capital and
total capital of all bank holding companies must be at least 4% and 8%,
respectively.
The Reserve Board and the Comptroller have also imposed a leverage
standard to supplement their risk-based ratios. This leverage standard
focuses on a banking institution's ratio of Tier 1 capital to average
total assets adjusted for goodwill and certain other items. Under
these guidelines, banking institutions that meet certain criteria,
including excellent asset quality, high liquidity, low interest rate
exposure, and good earnings, and have received the highest regulatory
rating must maintain a ratio of Tier 1 capital to total assets of at
least 3%. Institutions not meeting these criteria, as well as
institutions with supervisory, financial, or operational weaknesses,
along with those experiencing or anticipating significant growth, are
expected to maintain a Tier 1 capital to total assets ratio equal to at
least 4% to 5%.
As reflected in the following table, the risk-based capital ratios
and leverage ratios of the Company and the Bank, as of June 30,
1995, exceeded the fully phased-in risk-based capital adequacy
guidelines and the leverage standard.
<PAGE>
Capital Components and Ratios
(Dollars in Thousands)
June 30, 1995
Company Bank
Capital Components:
Tier 1 capital $ 11,414 $ 12,115
Total capital 12,890 13,547
Risk-weighted assets
and off-balance sheet
instruments 117,067 106,230
Regulatory Capital
Tier 1 capital risk-based:
Actual 9.75% 11.40%
Required 4.00 6.00
Excess 5.75% 5.40%
Total risk-based:
Actual 11.01% 12.67%
Required 8.00 10.00
Excess 3.01% 2.67%
Leverage:
Actual 7.15% 8.18%
Required 5.00 5.00
Excess 2.15% 3.18%
FDICIA requires each federal banking agency, including the Reserve
Board, to revise its risk-based capital standards to ensure that those
standards take adequate account of interest rate risk, concentration of
credit risk, and the risk of non-traditional activities, and reflect
the actual performance and expected risk of loss on multifamily
mortgages. The Reserve Board, the FDIC, and the Comptroller have issued
proposed rules whereby exposures to interest rate risk would be
measured as the effect that a specified change in market interest rates
would have on the net economic value of a bank. This economic
perspective considers the effect that changing market interest rates
may have on the value of a bank's assets, liabilities, and off-balance
sheet positions. Institutions with interest rate risk exposure in
excess of a threshold level would be required under the proposed rules
to hold additional capital proportional to that risk. The Reserve
Board, the FDIC, the Comptroller, and the Office of Thrift Supervision
have issued a final rule amending the risk-based capital guidelines to
take account of concentration of credit risk and the risk of
non-traditional activities. The final rule amends each agency's
risk-based capital standards by explicitly identifying concentration of
credit risk and the risk arising from non-traditional activities, as
well as an institution's ability to manage those risks, as important
factors to be taken into account by the agency in assessing an
institution's overall capital adequacy. The final rule became
effective on January 17, 1995. The final rule has not materially
impacted on the Company's capital requirements, but there can be no
assurance that the adoption of other proposals implementing FDICIA will
not have an adverse impact on the Company's capital requirements.
Bank regulators and legislators continue to indicate their desire to
raise capital requirements applicable to banking organizations beyond
their current levels. However, management is unable to predict whether
and when higher capital requirements would be imposed and, if imposed,
at what levels and on what schedule.
Dilution
Due to the Private Placement, Shareholders have suffered a dilution
in their voting rights and in their percentage interest in any future
net earnings of the Company. In addition, Shareholders who do not
exercise their Basic Subscription Rights in full will suffer an
additional dilution in their voting rights and in their percentage
interest in any future net earnings of the Company. All Shareholders
have suffered a reduction in the per share book value of the shares of
Common Stock currently held by them as a result of the sale of the
510,121 shares to WHR at less than book value in the Private Placement
and will suffer an additional reduction as a result of the sale of
shares to subscribing Rights Holders at less than book value in the
Subscription Offering and the sale of additional shares to WHR at less
than book value as discussed below under "Interests of WHR" and
"THE SUBSCRIPTION OFFERING - Private Placement."
<PAGE>
The following tables show the detail of such dilution (assuming,
respectively, all Subscription Rights are exercised and half of the
Subscription Rights are exercised):
Number of
Shares Shareholders' Per Share
Fully Subscribed Outstanding Equity Book Value
June 30, 1995 amounts 2,048,485 $11,414,555 $5.57
(includes initial issuance
to WHR at $4.34 per share)
Proforma Proforma
Shareholders' Per Share
Equity Book Value
Rights offering @ $4.34
per share 769,582 3,339,986
Additional issuance to
WHR @ $4.34 per share 255,193 1,107,538
Less estimated costs
and underwriting commissions
and fees (527,000)
Totals 3,073,260 $15,335,079 $4.99
Number of
Shares Shareholders' Per Share
Half subscribed Outstanding Equity Book Value
June 30, 1995 amounts 2,048,485 $11,414,555 $5.57
Proforma Proforma
Shareholders' Per Share
Equity Book Value
Rights offering @ $4.34
per share 384,791 1,669,993
Additional issuance to
WHR @ $4.34 per share 127,596 553,767
Less estimated costs
and underwriting commissions
and fees (443,500)
Totals 2,560,872 $13,194,815 $5.15
No Minimum Size of Offering
No minimum amount of proceeds is required for the Company to
consummate the Subscription Offering. As of July 21, 1995, the date
on which the Subscription Offering was previously scheduled to expire,
23,279 Subscription Rights, representing 23,279 shares of Common Stock,
had been exercised.
No assurance can be given regarding the amount of proceeds that
the Company will receive from the Subscription Offering. See "THE
SUBSCRIPTION OFFERING." The Company does not know if Holders will
exercise their Subscription Rights. The Company does not have a firm
commitment from any person to purchase any shares of Common Stock that
remain unsold after the termination of the Subscription Offering.
However, the Underwriter (as defined herein) has agreed, on a best-efforts
basis, to solicit the purchase by third parties of any unsubscribed shares
of Common Stock at a purchase price equal to the Subscription Price
($4.34 per share). The Underwriter has not agreed to purchase on behalf of
third parties any specific amount of unsubscribed shares, nor can there be any
assurance given that the Underwriter will be able to solicit the purchase by
third parties of any unsubscribed shares. See "THE UNDERWRITING AGREEMENT."
Market Considerations
It is possible that although a Rights Holder may subscribe for
shares at a time when the Subscription Price is less than the
prevailing market price, the market price of the Common Stock may
decline during the subscription period after such Rights
<PAGE>
Holder exercises its Subscription Rights. The election of a Rights
Holder to exercise Subscription Rights in the Subscription Offering is
irrevocable. In addition, there can be no assurance that, following
the Subscription Offering, a subscribing Rights Holder will be able to
sell shares purchased in the Subscription Offering at a price equal to
or greater than the Subscription Price. Moreover, until stock
certificates are delivered, subscribing Rights Holders may not be able
to sell the shares of Common Stock which they have purchased in the
Subscription Offering.
No interest will be paid to Rights Holders on funds delivered to
the Subscription Agent pursuant to the exercise of Subscription Rights.
The Company has been informed by the National Association of
Securities Dealers, Inc. ("NASD") that the Basic Subscription
Rights will not trade on a "when issued" basis (i.e., traded securities
having no settlement date at the time the trade is executed with
delivery at a future date to be determined by the Uniform Practice
Committee of the NASD after the date of the issuance or distribution
of the traded securities) but will trade "regular way" (i.e., prior
to June 7, 1995, traded securities to be delivered on the fifth
business day following the date of the transaction and, on or after
June 7, 1995, traded securities to be delivered on the third business
day following the date of the transaction) until the Expiration Date.
Litigation
In January 1993, the Bank was named as a defendant in an adversary
proceeding in Bankruptcy Court filed by Pioneer Liquidating Corporation
("PLC"), successor to six bankrupt Pioneer Mortgage Company entities
(collectively, "Pioneer"). Investors in Pioneer had previously filed
suit against the Bank, which litigation was settled in 1992. The PLC
case has been transferred to United States District Court. The PLC
complaint, which does not specify the amount of damages, alleges that
the Bank and five other banks received preferential payments and
voidable transfers from Pioneer prior to the filing of the Chapter 11
petition in January 1991. The attorneys for PLC have alleged recoverable
transfers from the Bank in excess of $14 million but have stated
informally that they are seeking recovery of approximately $1.75 million.
Of the $1.75 million, the sum of $250,000 would be in cash with the balance
in the form of charged-off Bank loans. PLC and the Bank have been
engaged in ongoing settlement negotiations, however, as yet no resolution
has been reached. As of June 30, 1995, the Bank has set aside a provision
of $250,000 for resolution of this litigation.
Interests of WHR
At September 6, 1995, there were 2,048,485 shares of
Common Stock of the Company outstanding and entitled to vote. As of
such date, WHR beneficially owned 510,121 shares of Common Stock,
representing 24.9% of the outstanding shares of Common Stock. Pursuant
to the Stock Purchase Agreement (as defined herein) and in lieu
of participating in the Subscription offering, WHR is obligated to
purchase an additional 255,193 shares of the Company's Common Stock at
$4.34 per share, for an aggregate purchase price of $1,107,538,
if the Subscription Offering is fully subscribed, or such lesser
amount so that after such purchase WHR will hold anaggregate of 24.9%
of the outstanding Common Stock of the Company, taking into account
the shares issued in the Subscription Offering. See "THE SUBSCRIPTION
OFFERING - Private Placement."
There is a pre-existing relationship between the Bank and Danielson
Trust Company ("Danielson"), an affiliate of WHR, in which the Bank refers
potential trust customers to Danielson for a referral fee. The Company
has been informed that Danielson has over $4 billion in trust assets under
administration. The referral fee arrangement is conducted on an arm's-
length basis and on market terms and conditions. It is not a significant
financial transaction for either the Bank or Danielson. The Company is
also advised that a corporation controlled by Charles I. Feurzeig, the
Chairman of the Company's Board of Directors, is a customer of Danielson,
with an account of approximately $800,000 under administration. There
are no other existing affiliations, other than those described herein,
between
WHR and the Company or any of the Company's officers and directors.
Special Considerations Affecting the San Diego National Bank Deferred
Savings Plan
On May 22, 1995, the Company submitted an exemption request with the
Department of Labor (the "DOL") with respect to the exercise of
Subscription Rights by the San Diego National Bank Deferred Savings
Plan (the "Plan"), which request, if approved, will be retroactively
effective to the Expiration Date. In the event that the exemption request
is not approved by the DOL, any Subscription Rights exercised by the Plan,
or Common Stock issued to the Plan pursuant to such exercise, will be
invalidated by the Company and the aggregate Subscription Price paid by
the Plan to exercise such Subscription Rights will be returned to the
Plan, without interest.
<PAGE>
Amendment of the Subscription Offering
The Company believes that the Subscription Offering and the agreement
by WHR to invest an additional amount based upon the aggregate
subscriptions
received in the Subscription Offering present an unusual capital-raising
opportunity for the Company. In order to take full advantage of that
opportunity, the Company has elected to amend the Subscription Offering
by extending the offering to September 21, 1995 (which date may be extended
at the Company's option to a date not later than October 12, 1995) and by
paying commissions on subscriptions in connection with a best-efforts
underwriting agreement. See "THE SUBSCRIPTION OFFERING - Amendments and
Waivers; Early Termination" and "THE UNDERWRITING AGREEMENT."
Right to Terminate and Amend the Subscription Offering
The Company expressly reserves the right, in its sole discretion,
at any time prior to delivery of the shares of Common Stock offered in
the Subscription Offering, to terminate the Subscription Offering by
giving oral or written notice thereof to the Subscription Agent and making
a public announcement thereof. If the Subscription Offering is so
terminated, all funds received from Rights Holders will be promptly
refunded, without interest. The Company also reserves the right to amend
the terms and conditions of the Subscription Offering. See "THE
SUBSCRIPTION OFFERING - Amendments and Waivers; Early Termination."
THE SUBSCRIPTION OFFERING
The Company is offering (the "Subscription Offering") up to
769,582 shares of its Common Stock, no par value ("Common Stock"), to
holders of record of its Common Stock (the "Shareholders") at the close
of business on May 5, 1995 (the "Record Date"), pursuant to
transferable subscription rights (the "Basic Subscription Rights" and,
together with the Oversubscription Rights, the "Subscription Rights").
The subscription price is $4.34 per share (the "Subscription Price").
Holders of Subscription Rights, including transferees of Shareholders
(collectively, the "Rights Holders" and, together with the
Shareholders, the "Holders"), will be able to exercise their
Subscription Rights until 5:00 p.m., New York time, on September 21,
1995 (such date, as it may be extended by the Company to a date not later
than October 12, 1995, being the "Expiration Date"). See "THE SUBSCRIPTION
OFFERING - Amendments and Waivers; Early Termination." Subscription Rights not
exercised by 5:00 p.m., New York time, on the Expiration Date will be void.
After the Expiration Date, Subscription Rights will no longer be
exercisable
to purchase shares of Common Stock and will have no value. The term
"Shareholder" includes financial institutions that are participants in
a securities depository, such as The Depository Trust Company, and that
held shares of Common Stock on the Record Date in such securities
depository.
Private Placement
On January 31, 1995, two limited partnerships, of which WHR
Management Corp. is the general partner (the two limited partnerships
and WHR Management Corp. are referred to herein, collectively, as
"WHR"), entered into an agreement (the "Stock Purchase Agreement") with
the Company whereby WHR agreed to purchase, in compliance with
regulatory requirements, shares of the Company's Common Stock in an
amount equal to 24.9% of the Company's outstanding Common Stock after
such issuance (without taking into consideration shares to be issued in
this Subscription Offering).
On March 28, 1995, the Company issued to WHR 510,121 shares of
Common Stock for an aggregate price of $2,213,925 ($4.34 per share).
At that date, the reported closing bid price for the Company's Common
Stock on the NASDAQ National Market System (the "NASDAQ/NMS") was
$3.25 per share. The book value of the Company's Common Stock on
June 30, 1995 was $5.57.
<PAGE>
Pursuant to the Stock Purchase Agreement, and in lieu of
participating in the Subscription Offering, WHR is obligated to
purchase an additional 255,193 shares of the Company's Common Stock at
$4.34 per share for an aggregate purchase price of $1,107,538, if the
Subscription Offering is fully subscribed, or such lesser amount so
that after such purchase WHR holds an aggregate of 24.9% of the
outstanding Common Stock of the Company, taking into account the shares
issued in the Subscription Offering.
Purpose of Offering
Common Stock qualifies as Tier I capital of the Company for
regulatory purposes, and the issuance of additional Common Stock
pursuant to the Subscription Offering will enhance the Company's
capital structure. See "USE OF PROCEEDS" for a discussion of the
Company's intended use of the proceeds from the Subscription Offering.
<PAGE>
Basic Subscription Rights
For each two shares of Common Stock held of record as of the close
of business on the Record Date, a Shareholder will receive one Basic
Subscription Right. No fractional Basic Subscription Rights will be
issued by the Company. The number of Basic Subscription Rights
distributed by the Company to each Shareholder will be rounded up to
the nearest whole number. Each Rights Holder will have the right to
purchase one share of Common Stock for each Basic Subscription Right.
Rights Holders are entitled to subscribe for all, or any portion of,
the shares of Common Stock underlying their Basic Subscription
Rights. Subscription Rights are evidenced by subscription warrants
("Subscription Warrants") which are being distributed to the Company's
Shareholders contemporaneously with the delivery of this Prospectus.
Oversubscription Rights
A Rights Holder who subscribes for the full number of shares of
Common Stock underlying the Basic Subscription Rights held by such
Rights Holder on the date of exercise (other than in his or her
capacity as a participant in the Plan) and evidenced by a Subscription
Warrant will have the right to subscribe for additional shares of
Common Stock (the "Oversubscription Rights"). Basic Subscription
Rights held by the Plan shall not be eligible for Oversubscription
Rights due to the prohibited transaction rules of the Internal Revenue
Code and the Employee Retirement Income Security Act of 1974.
Rights Holders will be entitled to purchase additional shares of
Common Stock to the extent available as a result of other Holders
electing not to subscribe, or subscribing for fewer shares than those
to which they are otherwise entitled, pursuant to their respective
Basic Subscription Rights. Subject to the aggregate number of shares
of Common Stock offered in this Subscription Offering, there is no
limitation on the number of shares of Common Stock for which an
eligible Rights Holder may elect to oversubscribe. However, if there
are shares available for sale pursuant to the exercise of
Oversubscription Rights, and if the number of such shares is not
sufficient to satisfy in full all oversubscriptions submitted pursuant
to such requests, the available shares of Common Stock will be
allocated among the Rights Holders who exercise such Oversubscription
Rights pro rata based upon the number of Basic Subscription Rights held
by each such Rights Holder on the Expiration Date. If the amount so
allocated exceeds the amount subscribed for pursuant to the exercise of
a Rights Holder's Oversubscription Rights, the excess will be
reallocated among those Rights Holders whose subscriptions are not
fully satisfied on the same principle, until all available shares have
been allocated or all exercises of Oversubscription Rights have been
satisfied. There can be no assurance, however, that any shares of
Common Stock will be available to satisfy in whole or in part any
Rights Holder's request to subscribe for additional shares in excess of
the shares underlying such Rights Holder's Basic Subscription Rights.
To exercise the Oversubscription Rights properly, the appropriate
section on the Subscription Warrant must be completed, and payment in
full of the aggregate Subscription Price for the additional shares of
Common Stock must accompany the Subscription Warrant. Payments for
oversubscriptions will be deposited upon receipt by the Subscription
Agent, and refunds will be made promptly after the Expiration Date,
without interest, to the extent oversubscriptions are not honored due
to proration or otherwise. Oversubscription Rights are exercisable by
all Rights Holders, other than the Plan, including transferees of
Shareholders.
No Fractional Basic Subscription Rights
No fractional Basic Subscription Rights will be issued by the
Company. The number of Basic Subscription Rights distributed by the
Company to each Shareholder will be rounded up to the nearest whole
number.
Method of Exercising Subscription Rights
Basic Subscription Rights and Oversubscription Rights may be
exercised by properly completing, signing, and delivering the
Subscription Warrant accompanying this Prospectus, together with
payment in full of the aggregate Subscription Price for shares of
Common Stock subscribed for pursuant to Basic Subscription Rights and
Oversubscription Rights. Subscription Warrants and payments must be
received by the Subscription Agent before 5:00 p.m., New York time, on
the Expiration Date, at the address provided below under "Subscription
Agent." Payment of the aggregate Subscription Price must be made in
United States dollars and must be made by bank certified check or
cashier's check, payable to the order of the Subscription Agent. ONCE
A HOLDER HAS EXERCISED A SUBSCRIPTION RIGHT, THE EXERCISE IS
IRREVOCABLE UNLESS, IN THE JUDGMENT OF THE COMPANY, THERE IS A MATERIAL
AMENDMENT TO THE SUBSCRIPTION OFFERING AND THE SUBSCRIPTION RIGHT IS
EXERCISED BEFORE SUCH AMENDMENT. See "Amendments and Waivers;
Early Termination" below. See "Foreign Restrictions and Undeliverable
Subscription Warrants" below for a discussion of restrictions on the
method of exercising Subscription Rights
<PAGE>
held by Shareholders whose record addresses are outside of the continental
United States or Canada, or are A.P.O. or F.P.O. addresses.
The method of delivery of Subscription Warrants and payments of
any Subscription Price to the Subscription Agent is at the risk of the
Rights Holder. The Company suggests that Express Mail or similar
overnight carrier be used to ensure timely delivery. If delivery is
made by regular mail service, the use of registered or certified mail,
return receipt requested, properly insured, is recommended. COMPLETED
SUBSCRIPTION WARRANTS AND PAYMENTS SHOULD BE MAILED OR DELIVERED TO THE
SUBSCRIPTION AGENT AND NOT TO THE COMPANY. QUESTIONS GENERALLY REGARDING
THE SUBSCRIPTION OFFERING SHOULD BE DIRECTED TO THE INFORMATION AGENT OR
THE SUBSCRIPTION AGENT AND QUESTIONS REGARDING THE PURCHASE OR SALE OF
SUBSCRIPTION RIGHTS OR UNSUBSCRIBED SHARES OF COMMON STOCK OR REGARDING
THE UNDERWRITER SHOULD BE DIRECTED TO THE UNDERWRITER. SEE "SUBSCRIPTION
AGENT," "INFORMATION AGENT," AND "UNDERWRITER" BELOW.
A Rights Holder who subscribes for fewer than all of the shares
represented by such Holder's Subscription Warrants may, under certain
circumstances, (i) direct the Subscription Agent to attempt to sell its
remaining Basic Subscription Rights, or (ii) receive from the
Subscription Agent a new Subscription Warrant representing the unused
Basic Subscription Rights. See "Partial Exercise or Sale of Rights"
below. A Rights Holder's election to exercise its Oversubscription
Rights must be made at the time such Rights Holder exercises fully the
Basic Subscription Rights.
Late Delivery of Subscription Warrants
If, prior to 5:00 p.m., New York time, on the Expiration Date, the
Subscription Agent has received full payment as specified above for the
total number of shares of Common Stock subscribed for, together with a
letter or telegram from a bank or trust company or a member of a
national securities exchange in the United States stating the name of
the subscriber, the number of Subscription Rights represented by the
Subscription Warrant, and the number of shares of Common Stock
subscribed for, and guaranteeing that the Subscription Warrant will be
delivered to the Subscription Agent within five business days after
Subscription Agent's receipt of payment, such subscription will be
accepted by the Subscription Agent, subject to the withholding of the
stock certificates representing the shares of Common Stock subscribed
for pending receipt of the duly executed Subscription Warrant within
such five day period.
Delivery of Stock Certificates; Refunds
Certificates representing shares of Common Stock subscribed for
and issued, together with any refund, without interest, of the
aggregate Subscription Price for shares of Common Stock subscribed for
pursuant to Oversubscription Rights but not issued, will be mailed
promptly after the Expiration Date (i.e., withing three business days
following the Expiration Date or, where permitted, within three business
days following the late delivery of Subscription Warrants). Certificates
for shares of Common
Stock issued pursuant to the exercise of Subscription Rights will be
registered in the name of the Rights Holder exercising such
Subscription Rights. The Subscription Agent will place all proceeds of
the Subscription Offering into an escrow account until such funds are
transferred to the Company or refunded to Rights Holders at the
completion or termination of the Subscription Offering. No interest
will be paid to Rights Holders on funds delivered to the Subscription
Agent pursuant to the exercise of the Subscription Rights. The shares
of Common Stock subscribed for pursuant to the Subscription Offering
will be issued and sold as of the Expiration Date.
Termination Date
Unless earlier terminated by the Company, the Subscription Offering
will automatically terminate at 5:00 p.m., New York time, on the eighth
business day following the Expiration Date. See "Amendments and Waivers;
Early Termination" below.
Transferability of Subscription Rights
Rights Holders may attempt to sell their Basic Subscription Rights
through transactions on the NASDAQ/NMS, by the delivery of sale
instructions to the Subscription Agent, or otherwise. Basic
Subscription Rights traded on the NASDAQ/NMS may be bought or sold
through usual investment channels, including banks or brokers. There
has been no prior trading in the Basic Subscription Rights, and no
assurance can be given that a trading market will develop for the
Basic Subscription Rights.
<PAGE>
DUE TO BURDENSOME SECURITIES AND DEALER REGISTRATION REQUIREMENTS
OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT, SUBSCRIPTION
RIGHTS MAY NOT BE TRANSFERRED TO, OR EXERCISED BY, A RESIDENT OF
FLORIDA WHO WAS NOT A SHAREHOLDER OF RECORD OF THE COMPANY'S COMMON STOCK
ON THE RECORD DATE (MAY 5, 1995).
Basic Subscription Rights may be transferred in whole by endorsing
the Subscription Warrant for transfer. Rights Holders who elect to
sell their Basic Subscription Rights in part may effect such sales in
the manner described in "Partial Exercise or Sale of Rights" below.
The right to subscribe for additional shares of Common Stock pursuant
to the Oversubscription Rights is transferable with each Basic
Subscription Right. All commissions, fees, and other expenses
(including brokerage commissions and any transfer taxes) incurred in
connection with the purchase or sale of Basic Subscription Rights are
for the account of the transferor or the transferee of the Basic
Subscription Rights, and none of such commissions, fees, or expenses
will be paid by the Company or the Subscription Agent. With respect
to underwriting commissions and fees payable to the Underwriter (as
defined herein), see "THE UNDERWRITING AGREEMENT" and "PLAN OF
DISTRIBUTION" below.
The Subscription Agent will attempt to sell Basic Subscription
Rights in the open market for the convenience of Rights Holders as soon
as practical after receipt by the Subscription Agent of an applicable
Subscription Warrant with the instructions for sale properly executed;
provided that such Subscription Warrant is received by the Subscription
Agent by 11:00 a.m., New York time, on the Expiration Date. A Rights
Holder for which the Subscription Agent sells Basic Subscription Rights
on any given day will receive for each of its Basic Subscription Rights
the net weighted average sales price of all Basic Subscription Rights
sold on that day by the Subscription Agent. The net weighted average
sales price will be calculated by dividing the total proceeds from all
sales realized by the Subscription Agent on the day of sale by the
total number of Basic Subscription Rights sold by the Subscription
Agent on that day and then subtracting a pro rata portion of any
applicable brokerage commissions, taxes, and other expenses. No
assurance can be given that the Subscription Agent will be able to sell
any Basic Subscription Rights.
Foreign Restrictions and Undeliverable Subscription Warrants
Because of the short exercise period for the Subscription Rights,
Subscription Warrants will not be mailed to Shareholders whose record
addresses are outside the continental United States or Canada, or are
A.P.O. or F.P.O. addresses. Subscription Warrants will be held by the
Subscription Agent for such Shareholders' respective accounts until
instructions are received to exercise or transfer the Subscription
Rights. If no instructions have been received by 11:00 a.m., New York
time, on the Expiration Date, the Basic Subscription Rights of those
Shareholders, together with the Basic Subscription Rights of those
Shareholders whose addresses are not known by the Company or the
Subscription Agent or to whom delivery of a Subscription Warrant could
not be made, will be sold, subject to the Subscription Agent's ability
to find a purchaser. See "Transferability of Basic Subscription
Rights" above for a description of how the Subscription Agent will
attempt to sell Basic Subscription Rights. The net proceeds, if any,
resulting from all sales of Basic Subscription Rights of Shareholders
whose addresses are not known by the Subscription Agent or to whom
delivery could not be made will be held in a non-interest bearing
account at the Bank. Any amounts remaining unclaimed on the second
anniversary of the Expiration Date will be turned over to the Company
and, after such date but before any such amounts become subject to the
unclaimed property law of any state, any person claiming such proceeds
will, as an unsecured general creditor of the Company, be able to look
only to the Company for payment thereof.
Partial Exercise or Sale of Rights
Rights Holders who elect to exercise their Basic Subscription
Rights in part or to sell their Basic Subscription Rights in part may
do so by delivering to the Subscription Agent at the address set forth
under "Subscription Agent" below, a Subscription Warrant that has been
properly endorsed for subscription or sale, or for part subscription
and part sale, with instructions to issue to the submitting Rights
Holder a Subscription Warrant representing Basic Subscription Rights
not sold or exercised. The right to subscribe for additional shares of
Common Stock pursuant to the Oversubscription Rights is transferable
with each Basic Subscription Right.
A new Subscription Warrant will be issued to a submitting Rights
Holder upon the partial exercise or sale of Basic Subscription Rights
only if the Subscription Agent receives a properly endorsed
Subscription Warrant not later than 11:00 a.m., New York time, on the
Expiration Date. After such time and date, no new Subscription
Warrants will be issued. Accordingly, after such time and date a
Rights Holder exercising less than all of such Holder's Basic
Subscription Rights will lose the power to sell or exercise any
remaining Basic Subscription Rights. A new Subscription Warrant will
be sent by first class mail to the submitting Rights Holder if the
Subscription Agent receives the properly completed Subscription Warrant
by 11:00 a.m.,
<PAGE>
New York time, on the fourth business day before the
Expiration Date. Unless the submitting Rights Holder makes other
arrangements with the Subscription Agent, a new Subscription Warrant
issued after 11:00 a.m., New York time, on the fourth business day
before the Expiration Date will be held for pick-up by the submitting
Rights Holder at the Subscription Agent's New York hand delivery address
provided under "Subscription Agent" below. All deliveries of newly
issued Subscription Warrants will be at the risk of the submitting
Rights Holder.
Amendments and Waivers; Early Termination
The Company reserves the right to automatically extend the Expiration
Date to a date not later than October 12, 1995, and to otherwise amend the
terms and conditions of the Subscription Offering, whether the amended terms
are less or more favorable to the Holders. If any such amendment to the terms
and conditions of the Subscription Offering constitutes, in the judgment of the
Company, a material adverse change to Holders, the Company will deliver to
Shareholders a new prospectus incorporating such amendment and the Company
will set a new expiration date which will be a minimum of ten business days
from the date of the amended prospectus and not later than October 12, 1995.
Properly completed subscriptions received or in transit prior to such
amendment, unless revoked before the new expiration date, will be honored.
All questions as to the validity, form, eligibility (including
time of receipt and record ownership), and acceptance of any exercise
of Subscription Rights shall be determined by the Company, in its sole
discretion, and its determination shall be final and binding. The
Company reserves the right to reject any exercise if such exercise is
not in accordance with the terms of the Subscription Offering or not in
proper form or if the acceptance thereof or the issuance of shares of
Common Stock pursuant thereto could be deemed unlawful. The Company
also reserves the right to waive any deficiency or irregularity with
respect to the exercise of any Subscription Warrant.
The Company reserves the right, in its sole discretion, at any
time prior to delivery of the shares of Common Stock offered hereby, to
terminate the Subscription Offering by giving oral or written notice
thereof to the Subscription Agent and making a public announcement
thereof. If the Subscription Offering is so terminated, all funds
received from Holders will be promptly refunded, without interest.
Determination of Subscription Price and Fairness Opinion
The Subscription Price was determined by the Company in
consultation with its financial advisor, Hoefer & Arnett, Incorporated
("Hoefer & Arnett"), and was based upon the price paid by WHR in the
Private Placement. In determining the price to be paid by WHR in the
Private Placement, and, thus, the Subscription Price, the Company
considered, among other things, such factors as the prevailing market
price and book value of the Company's Common Stock, the business
prospects of the Company, and the general condition of the securities
markets at the time of the Private Placement.
The Company has received from Hoefer & Arnett an opinion dated
May 26, 1995, to the effect that based on, among other things, the
trading history of the Common Stock, the publicly available financial
information regarding the Company, discussions with management regarding
the terms of the Subscription Offering, and a review of the terms and
conditions of rights offerings of other publicly traded companies, the
consideration to be received pursuant to the Subscription Offering and
the Private Placement and the terms and conditions that exist as of the
date of the opinion, taken as a whole, are fair from a financial point of
view to the shareholders of the Company. The full text of Hoefer &
Arnett's opinion is set forth as an Appendix to this Prospectus and should
be read in its entirety with respect to the assumptions made and other
matters considered and limitations on the review undertaken. The Company
has paid Hoefer & Arnett $35,000.00 as financial advisory fees for its
services. In addition, Hoefer & Arnett will be indemnified against
certain liabilities, including liabilities under the securities laws.
Market Conditions
It is possible that a Rights Holder may subscribe for shares of
Common Stock at a time when the Subscription Price is less than the
prevailing market price. The market price of the Common Stock,
however, may decline during the subscription period after such Rights
Holder exercises its Subscription Rights. The election of a Rights
Holder to exercise Subscription Rights in the Subscription Offering is
irrevocable unless, in the judgment of the Company, there is a material
amendment to the Subscription Offering and the Subscription Rights were
exercised before such amendment. See "Amendments and Waivers; Early
Termination" above. In addition, there can be no assurance that
following the Subscription Offering a subscribing Rights Holder will be
able to sell shares purchased in the Subscription Offering at a price
equal to or greater than the Subscription Price. Moreover, until
certificates are delivered, subscribing Rights Holders may not be able
to sell the shares of Common Stock which they have purchased in the
Subscription Offering. Certificates representing shares of Common
Stock issued in
<PAGE>
the Subscription Offering will be mailed to subscribing
Rights Holders at the addresses appearing on their Subscription Warrant
promptly following the Expiration Date (i.e., within three business days
following the Expiration Date or, where permitted, within three business
days following the late delivery of Subscription Warrants). See "Late
Delivery of Subscription Warrants" above.
Regulatory Limitation
The Company will not be required to issue Subscription Rights or
shares of Common Stock pursuant to the Subscription Offering to any
Holder to whom such issuance is prohibited by law or regulation or to
anyone who would be required to obtain prior clearance or approval from
any state or federal bank regulatory authority to own or control such
shares if, on the Expiration Date, such clearance or approval has not
been obtained. If the Company elects not to issue shares in such a
case, such shares will become available to satisfy the exercise of
Oversubscription Rights.
The Federal Change in Bank Control Act of 1978, as amended (the
"Act"), generally prohibits a person or group of persons "acting in
concert" from acquiring "control" of a bank holding company unless the
Reserve Board has been given 60 days' prior written notice of such
proposed acquisition and within that time period the Reserve Board has
not issued a notice disapproving the proposed acquisition or extending
for up to another 30 days the period during which such a disapproval may
be issued. An acquisition may be made prior to the expiration of the
disapproval period if the Reserve Board issues written notice of its
intent not to disapprove the action. Under a rebuttable presumption
established by the Reserve Board, the acquisition of more than 10% of a
class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Exchange Act (such as the
Common Stock of the Company) would, under the circumstances set forth in
the presumption, constitute the acquisition of control. WHR has filed a
written notice under the Act with respect to its acquisition of shares
in the Company, and the Company has been informed by the Reserve Board
that it does not object to the acquisition by WHR of 24.9% of the
Company's Common Stock based on the information contained in the notice.
In addition, any "company" would be required to obtain the
approval of the Reserve Board under the Bank Holding Company Act of
1956, as amended (the "BHCA") before acquiring 25% (5% in the case of
an acquiror that is a bank holding company) or more of the outstanding
Common Stock of, or such lesser number of shares as constitute control
over, the Company.
No Board or Financial Advisor Recommendation
An investment in the Common Stock must be made pursuant to each
investor's evaluation of its, his, or her best interests. ACCORDINGLY,
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR ITS FINANCIAL ADVISOR
MAKES ANY RECOMMENDATION TO THE RIGHTS HOLDERS REGARDING WHETHER THEY
SHOULD EXERCISE THEIR SUBSCRIPTION RIGHTS.
No Firm Commitment to Purchase Unsubscribed Shares
The Company does not have a firm commitment from any person to
purchase any shares of Common Stock which remain unsubscribed after the
Expiration Date. However, the Underwriter has agreed, on a best-efforts
basis, to solicit the purchase by third parties of any unsubscribed shares of
Common Stock at a purchase price equal to the Subscription Price ($4.34 per
share). The Underwriter has not agreed to purchase on behalf of third parties
any specific amount of unsubscribed shares, nor can there be any assurance
given that the Underwriter will be able to solicit the purchase by third
parties of any unsubscribed shares. See "THE UNDERWRITING AGREEMENT."
WHR does not have the right to participate in the Subscription
Offering. See "RISK FACTORS - Interests of WHR" and "Private Placement"
above.
<PAGE>
Subscription Agent
American Stock Transfer & Trust Company will act as the Company's
agent to accept exercises of Subscription Rights (the "Subscription
Agent"). All communications to the Subscription Agent, including the
delivery of Subscription Warrants and payment of the aggregate
Subscription Price, should be addressed as follows:
American Stock Transfer & Trust Company
6201 15th Avenue, Floor 3L
Brooklyn, New York 11219
Attn: Cynthia Trotman
Information Agent
Western Financial Corporation will serve as Information Agent for
the Subscription Offering. Any questions or requests for assistance
concerning the method of subscribing for shares of Common Stock or for
additional copies of this Prospectus or Subscription Warrants can be
directed to the Information Agent as follows:
Western Financial Corporation
600 "B" Street, Suite 1904
San Diego, California 92101
Attn: Howard B. Levenson
Underwriter
Subject to the approval of the NASD, Torrey Pines Securities, Inc.
will serve as a best-efforts underwriter (the "Underwriter") of the
Subscription Offering. See "THE UNDERWRITING AGREEMENT." Any questions
concerning the purchase or sale of Subscription Rights or unsubscribed
shares of Common Stock or concerning the Underwriter should be directed
to the Underwriter as follows:
Torrey Pines Securities, Inc.
140 Marine Drive, Suite 110
Solana Beach, California 92075
Attn: Jack C. Smith, President
THE UNDERWRITING AGREEMENT
On September 5, 1995, the Company and the Underwriter entered
into an agreement (the "Underwriting Agreement"), pursuant to which the
Underwriter, on a best-efforts basis, will: (i) prior to the Expiration
Date, solicit the exercise by third parties of Subscription Rights; and
(ii) prior to the Termination Date, solicit the purchase by third parties
of any unsubscribed shares of Common Stock offered in the Subscription
Offering at a purchase price equal to the Subscription Price ($4.34 per share)
(the "Standby Purchase Commitment"). The Underwriter has not agreed to
purchase on behalf of third parties any specific amount of unsubscribed shares,
nor can there be any assurance given that the Underwriter will be able to
solicit the purchase by third parties of any unsubscribed shares. The terms
of the Underwriting Agreement, which terms are more fully described below,
are subject to the approval of the NASD.
Underwriter's Compensation
Commissions Payable
The Underwriting Agreement establishes a two-tier commission structure
(collectively, the "Underwriting Commissions"). First, the Underwriter will
be entitled to a commission equal to 5% of: (a) the aggregate Subscription
Price attributable to Subscription Rights validly exercised through the
Underwriter, or any Participating Agent (as defined below) engaged by
the Underwriter, excluding Subscription Rights exercised prior to
July 21, 1995 (the date on which the Subscription Offering was previously
scheduled to expire) or exercised by the Plan or any officer or director
of the Company (collectively, the "Excluded Subscriptions"); and (b) any
unsubscribed shares of Common Stock purchased by the Underwriter prior to
the Termination Date pursuant to the Standby Purchase Commitment. See
"Participating Agents" below. Second, the Underwriter will be entitled
to a commission equal to 2% of the aggregate purchase price attributable
to any
<PAGE>
additional shares of Common Stock purchased by WHR after the
Termination Date pursuant to the Stock Purchase Agreement. See "THE
SUBSCRIPTION OFFERING - Private Placement."
Fee Payable
In addition to any commissions payable, the Company has also agreed to
pay the Underwriter a nonrefundable, nonaccountable expense allowance equal
to a maximum amount of $10,000.00 (the "Expense Fee"). Fifty percent (50%)
of the Expense Fee (or $5,000.00) was paid by the Company to the Underwriter
on September _, 1995, the effective date of the Underwriting Agreement.
The remaining 50% of the Expense Fee (or $5,000.00) is payable upon the
Termination Date of the Subscription Offering, subject to the valid exercise
of at least 100,000 Subscription Rights (exclusive of Excluded Subscriptions).
Underwriter Warrants
Subject to the valid exercise of at least 100,000 Subscription Rights
(exclusive of Excluded Subscription), the Company has also agreed to sell
to the Underwriter on the Termination Date, at an aggregate price of $10.00,
stock purchase warrants (the "Underwriter Warrants") evidencing the right
of the Underwriter to purchase, within the two-year period measured from the
Termination Date, the number of shares of Common Stock equal to 0.05
multiplied by the difference between (x) the number of the shares subscribed
for in the Subscription Offering less (y) the number of shares subscribed
for pursuant to the Excluded Subscriptions. The purchase price of the shares
of Common Stock evidenced by the Underwriter Warrants is equal to the
Subscription Price ($4.34 per share).
The Underwriter Warrants are transferable in certain limited
circumstances. Additionally, during the two-year period in which the
Underwriter Warrants are exercisable, any holder of more than 50% of the
Underwriter Warrants and the shares of Common Stock evidenced thereby has the
right, subject to certain restrictions, to: (i) make a one-time demand
that the shares of Common Stock evidenced by the Underwriter Warrants
be registered with the Commission at the Company's
expense; and (ii) request piggyback registration of such shares at the
Company's expense in connection with a public offering by the Company.
Participating Agents
Subject to the prior approval of the Company and, if applicable, the
NASD, the Underwriter may engage one or more broker-dealer firms (each, a
"Participating Agent") to: (i) prior to the Expiration Date, solicit the
exercise by third parties of Subscription Rights; or (ii) prior to the
Termination Date, solicit the purchase by third parties of any unsubscribed
shares of Common Stock offered in the Subscription Offering at a purchase
price equal to the Subscription Price ($4.34 per share). Each Participating
Agent exclusively will deal with, and exclusively will be employed by, the
Underwriter. The Underwriter will be credited for any Subscription Rights
exercised through any Participating Agent. Only the Underwriter is eligible
to purchase on behalf of third parties unsubscribed shares of Common Stock
from the Company; however, the number of unsubscribed shares so purchased by
the Underwriter may reflect third party commitments to purchase such
unsubscribed shares obtained by a Participating Agent.
No commissions, fees, or expenses will be paid by the Company to any
Participating Agent. Instead, the Participating Agents will be compensated
for their services directly by the Underwriter, which will reallocate to
the
Participating Agents a maximum of 80% of the Underwriting Commissions
payable to the Underwriter based upon: (i) the aggregate Subscription Price
attributable to Subscription Rights validly exercised through the
Participating Agents, exclusive of Excluded Subscriptions; or (ii) the
aggregate purchase price attributable to any unsubscribed shares of Common
Stock purchased by the Underwriter on behalf of third parties pursuant to the
Standby Purchase Commitment, where such unsubscribed shares are purchased on
behalf of customers solicited by the Participating Agents.
To be eligible to participate in the Subscription Offering, each
Participating Agent must execute an agreement in the form approved by the
Underwriter, the Company, and the NASD (the "Participating Agent
Agreement") evidencing, among other things, such Participating Agent's
agreement to adopt and become bound by the terms of the Underwriting
Agreement. No Participating Agent will be eligible to receive any
compensation or reimbursement in connection with its participation in
the Subscription Offering until a duly executed Participating Agent
Agreement has been delivered to, and accepted by, the Underwriter.
Indemnification of Underwriter and Participating Agents
The Underwriter and each Participating Agent, and any person who controls
the Underwriter or any member of the underwriting group within the meaning
of the Securities Act, will be indemnified by the Company against certain
liabilities arising under Federal or State securities laws and reimbursed for
any legal or other expenses reasonably incurred by the Underwriter or any
Participating Agent in connection with the investigation or the defense of
such liabilities.
THE COMPANY
The Company is a bank holding company incorporated under the laws
of the State of California and is registered under the BHCA. The
Company's principal assets are the capital stock of the Bank and its
joint venture interest in the office building which houses the Company
and the Bank (the "Bank Building"). As of June 30, 1995, the
Company had consolidated assets of approximately $156 million,
consolidated liabilities of approximately $145 million (which includes
total deposits through the Bank of approximately $125 million), and
shareholders' equity of approximately $11 million.
The Company, through the Bank, engages in a general commercial
banking business in the metropolitan San Diego area. The Bank was
granted its Charter by the Comptroller on November 12, 1981, and
commenced operations as a national bank on the same date. The Bank had
assets of approximately $145 million as of June 30, 1995. The Bank
focuses primarily upon wholesale commercial banking operations,
emphasizing the needs of small and medium size business firms and
corporations and the personal banking needs of business executives and
professional persons located in the Bank's immediate service area.
The Company is a joint venture partner in the San Diego National
Bank Building Joint Venture (the "Joint Venture"), a partnership formed
for the purpose of constructing and developing the Bank Building. The
Joint Venture is 62% owned by the Company and the Company is the
general partner. In addition, the Company owns SDNB Mortgage Bankers,
a California corporation, which is currently inactive.
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock in the
Subscription Offering will be used for general corporate purposes,
which may include investments in or extensions of credit to the
Company's subsidiaries, reduction of existing debt, or financing
possible future acquisitions of other banking institutions or related
businesses. At the present time, the Company does not have any
specific plans, agreements, or understandings, written or oral,
pertaining to the proposed acquisition of any banking institution or
related business.
The Company has utilized $250,000 of the proceeds
from the Private Placement to make a loan to the Joint Venture, which
in turn will use the funds to make a partial payment on a note (the
"PV Note") owed to Pacific View Construction Co., Inc. ("Pacific View"),
which is secured by a second trust deed (the "Second Trust Deed") on
the Bank Building. Pacific View is a corporation controlled by
Charles I. Feurzeig, Chairman of the Company's Board of Directors.
The PV Note and Second Trust Deed have been assigned to River Forest
Bank as collateral for other loans made by that bank to Pacific View
and other entities controlled by Mr. Feurzeig. Murray L. Galinson,
the Company's President and Chief Executive Officer, and his wife own
less than 2% of the outstanding shares of the holding company of River
Forest Bank. The family of Mr. Galinson's wife owns a controlling
interest in such holding company. The Joint Venture owes Pacific View
$1.9 million on the PV Note.
The PV Note originally was scheduled to mature on January 4, 1995,
at an interest rate of "prime" (8.5% at January 31, 1995) plus one and
one-half percent. The PV Note has been modified to fix the interest
rate at 10% per
<PAGE>
annum and extend the due date to April 1, 1997, and to
provide for a further mandatory payment of principal in the
event the Company realizes an aggregate of $4.447 million of gross
proceeds from the Subscription Offering and the subsequent additional
investment by WHR. In such event, the Company shall purchase from the
Bank and lend to the Joint Venture, which shall then assign and transfer
to Pacific View, without recourse or reserve of any type, certain notes
evidencing loans in the aggregate stated principal amount of approximately
$1.1 million and the amount of the PV Note shall be correspondingly reduced.
In addition, if the Company realizes less than the $4.447 million of gross
proceeds from the Subscription Offering and the subsequent additional
investment by WHR, but is still willing and able to purchase such notes
from the Bank and lend them to the Joint Venture, the Joint Venture shall
have the option to prepay the PV Note in the amount of the outstanding
principal balance of the notes purchased from the Bank.
<PAGE>
CAPITALIZATION
The following tables set forth the consolidated capitalization of
the Company as of June 30, 1995, and as adjusted to give effect to
the issuance of the Common Stock in the Private Placement, the Subscription
Offering, and the second issuance to WHR (assuming, respectively, all
Subscription Rights are exercised and half of the Subscription Rights are
exercised). The tables should be read in conjunction with the detailed
information and consolidated financial statements and related notes
incorporated by reference herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
As of June 30, 1995
As
Fully Subscribed Actual Adjusted(1)
(Dollars in Thousands)
Liabilities:
Deposit accounts $ 125,298 $ 125,298
Securities sold under agreement to repurchase 6,586 6,586
Accrued interest payable and other liabilities 800 800
Notes payable 12,198 12,198
Total liabilities 144,882 144,882
Shareholders' Equity:
Common stock, no par value;
authorized 15,000,000 shares,
issued and outstanding 2,048,485 shares
(as adjusted: 3,073,260) $ 16,648 $ 20,569
Accumulated deficit (5,132) (5,132)
Net unrealized holding losses in (102) (102)
available-for-sale securities
Total shareholders' equity 11,414 15,335
Total capitalization $ 156,296 $ 160,217
(1) Adjusted to reflect the issuance of 1,024,775 shares of Common Stock
offered by the Company assuming: (a) exercise of all Subscription
Rights; (b) an issue price of $4.34 per share in the Subscription
Offering; (c) the purchase of 255,193 shares of Common Stock by
WHR at $4.34 per share subsequent to the Subscription Offering;
and (d) aggregate estimated selling costs attributed to the
Subscription Offering and the second WHR issuance of $527,000,
assuming all Subscription Rights are exercised through the
Underwriter.
As of June 30, 1995
As
Half subscribed Actual Adjusted(1)
(Dollars in Thousands)
Liabilities:
Deposit accounts $ 125,298 $ 125,298
Securities sold under agreement to repurchase 6,586 6,586
Accrued interest payable and other liabilities 800 800
Notes payable 12,198 12,198
Total liabilities 144,882 144,882
Shareholders' Equity:
Common stock, no par value;
authorized 15,000,000 shares,
issued and outstanding 2,048,485 shares
(as adjusted: 3,073,260) $ 16,648 $ 18,428
Accumulated deficit (5,132) (5,132)
Net unrealized holding losses in (102) (102)
available-for-sale securities
Total shareholders' equity 11,414 13,194
Total capitalization $ 156,296 $ 158,076
(1) Adjusted to reflect the issuance of 512,387 of Common Stock
offered by the Company assuming: (a) exercise of half of the
Subscription Rights; (b) an issue price of $4.34 per share in the
Subscription Offering; (c) the purchase of 127,596 shares
of Common Stock by WHR at $4.34 per share subsequent to the
Subscription Offering; and (de) aggregate estimated selling costs
attributed to the Subscription Offering and the second WHR issuance
of $433,500, assuming half of the Subscription Rights are exercised
through the Underwriter.
<PAGE>
MARKET PRICE AND DIVIDENDS ON THE COMMON STOCK
The Common Stock is traded in the over-the-counter market on the
NASDAQ/NMS under the symbol "SDNB." The following table sets forth the
high and low sales prices of the Common Stock as quoted on the
NASDAQ/NMS and the cash dividends declared per share of the Common
Stock for the periods indicated.
Price Range
Dividends
High Low Per Share
1992
First Quarter $6.50 $4.75 ---
Second Quarter $4.75 $4.75 ---
Third Quarter $4.75 $2.75 ---
Fourth Quarter $4.50 $3.25 ---
1993
First Quarter $4.00 $3.50 ---
Second Quarter $4.38 $3.50 ---
Third Quarter $4.00 $2.50 ---
Fourth Quarter $3.38 $2.50 ---
1994
First Quarter $3.25 $2.50 ---
Second Quarter $3.25 $2.50 ---
Third Quarter $4.75 $2.50 ---
Fourth Quarter $4.75 $3.00 ---
1995
First Quarter $4.25 $3.25 ---
Second Quarter $4.25 $3.625 ---
Third Quarter (through
September 5, 1995) $4.25 $3.50 ---
On July 12, 1994, the last trading day before the Company's public
announcement that it was considering making a Subscription Offering,
the reported closing bid price of the Company's Common Stock as quoted
on the NASDAQ/NMS was $2.50. On September 5, 1995, the last trading day
before the filing of the Registration Statement with the Commission,
the last sale price of the Common Stock as quoted on the NASDAQ/NMS
was $4.25.
No dividends were paid to the Company by the Bank during 1994, nor
for the two preceding fiscal years, and no assurances can be given with
respect to the amount and timing of future dividends. For a discussion
of the Company's inability to pay dividends due to certain regulatory
restrictions, see "RISK FACTORS - Dividend Limitations." Due
to the Bank's financial condition and regulatory restrictions,
management does not anticipate the payment of dividends to holders of
Common Stock in the foreseeable future.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Federal Income Tax Consequences
The following discussion sets forth the material United States
federal income tax consequences associated with the receipt, ownership,
and exercise of Subscription Rights.
For United States federal income tax purposes, receipt of the
Subscription Rights pursuant to the Subscription Offering should be
treated as a nontaxable dividend distribution. A Shareholder will have
a zero basis in the Subscription Rights received in the Subscription
Offering, unless: (i) either the Shareholder elects under Section 307
of the Internal Revenue Code
<PAGE>
of 1986, as amended, to allocate a portion
of his basis in his existing shares of Common Stock to the Subscription
Rights (based on their relative fair market values on the date of
distribution) or the fair market value of the Subscription Rights at
the time of the distribution equals or exceeds 15% of the fair market
value of the Common Stock at that time, in which case the allocation of
basis (based upon relative fair market values) is required; and (ii)
the Shareholder sells or exercises such Subscription Rights.
Upon exercise of a Subscription Right, a Shareholder will not
recognize gain or loss. The basis of each share of Common Stock
acquired upon exercise of a Subscription Right will equal the sum of
the Subscription Price and the basis, if any, in the Subscription
Rights exercised. The holding period for such Common Stock will begin
on the date the Subscription Rights are exercised.
No loss will be recognized by a Shareholder who receives
Subscription Rights in the Subscription Offering and allows those
Subscription Rights to lapse.
Gain or loss will be recognized by a Shareholder who sells or
exchanges a Basic Subscription Right received in the Subscription
Offering. Such gain or loss will be measured by the difference between
the selling price and the basis, if any, of the Basic Subscription
Right. It will be a capital gain or loss if the Basic Subscription
Right is a capital asset in the hands of the Shareholder. The holding
period of the Basic Subscription Rights in such circumstances will
include the period for which the Common Stock with respect to which the
Basic Subscription Rights were distributed has been held.
THE ACTUAL TAX CONSEQUENCES TO SHAREHOLDERS MAY VARY DEPENDING UPON
THEIR OWN PARTICULAR CIRCUMSTANCES. ACCORDINGLY, SHAREHOLDERS ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE FEDERAL,
STATE, AND LOCAL TAX CONSEQUENCES OF THE DISTRIBUTION AND EXERCISE OF
THE SUBSCRIPTION RIGHTS.
DESCRIPTION OF CAPITAL STOCK AND RIGHTS OF SHAREHOLDERS
The authorized capital stock of the Company consists of 15,000,000
shares of Common Stock, no par value. As of September 6, 1995, there were
issued and outstanding 2,048,485 shares of Common Stock. The following
description of the Company's Common Stock and summary of the material
rights of the Company's shareholders does not purport to be complete and is
subject in all respects to the applicable provisions of the General
Corporation Law of the State of California and the Company's Restated
Articles of Incorporation.
Common Stock
Holders of Common Stock are entitled to: (i) receive ratably such
dividends, if any, as the Board of Directors may in its discretion
declare out of legally available funds; (ii) cast one vote for each
share held of record on all matters submitted to a vote of
shareholders; and (iii) receive ratably, in the event of liquidation,
dissolution, or winding up of the Company, all assets remaining
available for distribution to shareholders after payment of creditors.
See "RISK FACTORS - Dividend Limitations."
All of the issued and outstanding shares of Common Stock are fully
paid and nonassessable and the shares of Common Stock offered hereby
will be fully paid and nonassessable upon their due issuance, delivery,
and the receipt of payment therefor. The Articles of Incorporation do
not provide for any conversion rights, sinking fund provisions,
redemption provisions, or restrictions on alienability with respect to
the Common Stock.
The Transfer Agent and Registrar for the Common Stock of the Company
is American Stock Transfer & Trust Company, 40 Wall Street, New York,
New York 10005.
<PAGE>
Supermajority Voting Provisions
Anti-Takeover Provisions
Certain provisions of the Company's Restated Articles of Incorporation
may discourage an attempt to acquire control of the Company or the Bank
if a majority of the Company's shareholders determines that such attempt
is not in their best interest. Specifically, the Company's Restated
Articles of Incorporation generally require the affirmative vote of at
least 85% of the outstanding shares entitled to vote to approve certain
enumerated transactions, including, but not limited to: (i) a merger or
consolidation of the Company or the Bank; (ii) any disposition of all,
substantially all, or more than 5% of the total consolidated
assets of the Company and its subsidiaries; (iii) the issuance of any
securities, or of any rights, warrants, or options to acquire any
securities, of the Company or the Bank, 80% or more of which are issued
to a beneficial owner of 10% or more of the voting power or voting stock
of the Company; and (iv) any reclassification of the Company's voting stock,
or recapitalization of the Company, or any merger or consolidation of the
Company with any of its subsidiaries or any other transaction which has
the effect, directly or indirectly, of increasing the proportionate share
of the voting stock of the Company or any subsidiary which is directly or
indirectly owned by a beneficial owner of 10% or more of the voting power
or voting stock of the Company or any affiliate or associate of such
beneficial owner. The 85% approval requirement does not apply if the
subject transaction is approved by the affirmative vote of at least 66-2/3%
of the outstanding shares entitled to vote and certain other conditions
are satisfied.
Stock Repurchases
The Company's Restated Articles of Incorporation generally require the
affirmative vote of at least 66-2/3% of the outstanding shares entitled to
vote to approve any direct or indirect purchase or other acquisition by the
Company of any voting stock from a beneficial owner of 10% or more of the
voting power or voting stock of the Company who has beneficially owned such
securities for less than two years prior to the date of such purchase. No
affirmative vote shall be required, however, with respect to any purchase
or other acquisition of securities made as part of a tender offer, exchange
offer, or other offer by the Corporation to purchase securities of the same
class that is made on the same terms to all holders of such securities and
in compliance with the requirements of the Exchange Act.
Shareholder Action
The Company's Restated Articles of Incorporation provide that no action
shall be taken by the shareholders of the Company except in an annual or
special meeting of shareholders.
Amendments
Any amendment, change, or repeal of the Company's Restated Articles of
Incorporation which would have the effect of modifying or circumventing the
supermajority voting or shareholder action provisions of the Restated
Articles of Incorporation requires the affirmative vote of at least 80%
of the outstanding shares entitled to vote.
Indemnification
The Company's Restated Articles of Incorporation limit the liability of
directors for monetary damages and provide for the indemnification of
agents of the Company for breach of duty to the Company and its
shareholders.
PLAN OF DISTRIBUTION
The Common Stock offered hereby is being offered by the Company
directly to Shareholders on the Record Date. The Company has also
employed the Underwriter, on a best-efforts basis, to solicit the
exercise by third parties of Subscription Rights and the purchase by third
parties of unsubscribed shares of Common Stock, and certain underwriting
commissions, fees, or discounts will be paid in connection with the
Subscription Offering. The Underwriter has not agreed to purchase on behalf
of third parties any specific amount of unsubscribed shares, nor can there
be any assurance given that the Underwriter will be able to solicit the
purchase by third parties of any unsubscribed shares. The Underwriter may
engage Participating Agents to assist in its underwriting efforts, however,
no commission, fee, or discount will be paid by the Company to any
Participating Agent. See "THE UNDERWRITING AGREEMENT." Certain regular
employees in the Exchange Department of the Subscription Agent may solicit
responses from Holders to the Subscription Offering, but such employees will
not receive any commission or compensation for such services other than their
normal employment compensation.
<PAGE>
No directors or employees of the Company or the Subscription Agent
will solicit sales of the Common Stock or the Subscription Rights.
Shareholders or Rights Holders who desire to purchase shares of
Common Stock in the Subscription Offering are urged to complete, date,
and sign the Subscription Warrant accompanying this Prospectus and
return it to the Subscription Agent on or before the Expiration Date of
the Subscription Offering, together with payment in full of the
aggregate Subscription Price.
Any questions concerning the procedure for subscribing for the purchase
of shares of Common Stock should be directed to the Subscription Agent
or the Information Agent.
EXPERTS
The consolidated balance sheets as of December 31, 1994 and 1993 and
the consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended December 31,
1994, incorporated by reference in this Prospectus, have been
incorporated herein in reliance on the report, which includes an
explanatory paragraph related to the outcome of litigation, of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
OPINIONS
Arnold & Porter, Los Angeles, California, special counsel to the
Company, has rendered an opinion to the effect that the Subscription
Rights and the Common Stock offered hereby, when issued as contemplated
in the Prospectus, will be legally issued and the Common Stock, when sold
as contemplated in the Prospectus, will be fully paid and nonassessable.
<PAGE>
Subscription Warrants should be sent or delivered by each Rights
Holder or its broker, dealer, commercial bank, or trust company to the
Subscription Agent at the address set forth below:
The Subscription Agent for the Subscription Offering is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
American Stock Transfer & Trust Company
6201 15th Avenue, Floor 3L
Brooklyn, New York 11219
Attn: Cynthia Trotman
Facsimile No.: For Information:
(718) 234-5001 (718) 921-8200
(Call Collect)
Except as otherwise noted herein, any questions or requests for
assistance may be directed to the Information Agent at its address and
telephone numbers set forth below. Requests for additional copies of this
Prospectus and the related Letters of Transmittal and Instructions Booklet
may also be directed to the Information Agent. Any questions concerning
the purchase or sale of Subscription Rights or unsubscribed shares of
Common Stock or concerning the Underwriter should be directed to the
Underwriter at its address and telephone number set forth below. Rights
Holders may also contact their brokers, dealers, commercial banks, or trust
companies for assistance concerning the Subscription Offering.
The Information Agent for the Subscription Offering is:
WESTERN FINANCIAL CORPORATION
600 "B" Street, Suite 1904 Banks and Brokers call
San Diego, California 92101 (619) 234-0197
Attn: Howard B. Levenson
Toll Free 1-800-488-5990
The Underwriter for the Subscription Offering is:
TORREY PINES SECURITIES, INC.
Torrey Pines Securities, Inc.
140 Marine Drive, Suite 110
Solana Beach, California 92075
Attn: Jack C. Smith, President
(619) 259-9921
(Call Collect)
<PAGE>
APPENDIX
[HOEFER & ARNETT LETTERHEAD]
May 26, 1995
Board of Directors
SDNB Financial Corp.
1420 Kettner Blvd.
San Diego, CA 92101
Dear Members of the Board:
You have requested our opinion as to the fairness to the shareholders
of SDNB Financial Corp. ("SDNB" or the "Company") from a financial
point of view, of the terms and conditions of the proposed private
placement and rights offering (collectively, the "Offering") of common
stock by the Company as stated in the Registration Statement on Form S-3
(the "Registration Statement"), attached hereto as Exhibit A and
incorporated herein by this reference.
Qualifications of the Appraiser
Hoefer & Arnett, Incorporated ("H&A") conducts business in investment
banking and securities brokerage specific to independent financial
institutions. The analysis of securities and of mergers, acquisitions,
tender offers and other corporate transactions for the purpose of (i)
providing transactional advice and assistance, (ii) investment
research, (iii) capital financing activities, and (iv) rendering
opinions concerning fairness, is a normal part of this business. H&A
currently conducts dealer markets in the shares of more than 100
independent California financial institutions, but not SDNB. In
addition, the principals of H&A have substantially broader experience
in investment and commercial banking, some of which may be deemed
applicable to this evaluation and opinion.
Procedure
In connection with our opinion, we have, among other things: (i)
reviewed the Registration Statement (Exhibit A) including the terms and
conditions of the Offering; (ii) reviewed certain publicly available
financial and other data with respect to SDNB, including the financial
statements for recent years and interim periods to date and certain
other relevant financial and operating data relating to the Company
made available to us from published sources and from the internal
records of the Company including the 10-Q for the most recent quarter
ended March 31, 1995 and asset quality migration analysis dated
March 31, 1995; (iii) compared the Company from a financial point of view
with certain other companies in the financial services industry which we
deemed relevant; (iv) considered the financial terms and conditions, to
the extent publicly available, of selected common stock offerings of
financial institutions, which we deemed to be comparable, in whole or
in part, to the Offering and the Company; (v) reviewed and discussed
with representatives of the management of the Company certain information
of a business and financial nature regarding the Company, furnished to us
by them, including the related assumptions of the Company: (vi) discussed
the Registration Statement with the Company's counsel and (vii) performed
such other analyses and examinations as we have deemed appropriate. H&A
also conducted its own assessment of general economic, market and
financial conditions.
<PAGE>
In connection with our review, we have not independently verified any
of the foregoing information, have relied on all such information and
assumed that all such information is complete and accurate in all
material respects. We have also assumed that there has been no
material change in the Company's assets, financial condition, results
of operations, business or prospects since the date of the last
financial statements made available to us. In addition, we have not made
an independent evaluation, appraisal or physical inspection of the assets
or individual properties of the Company. Further, our opinion is based
on economic, monetary and market conditions existing as of the date
hereof.
Based upon the foregoing, and in reliance thereon, it is our opinion that,
as of the date hereof, the consideration to be received pursuant to the
Offering and the terms and conditions that exist as of the date hereof,
taken as a whole, are fair from a financial point of view to the
shareholders of SDNB Financial Corp. Our opinion should not be
construed in any way as a valuation of the Company nor as a
recommendation to participate in the Offering. Further any material
changes in the terms and conditions of the proposed Offering prior to
closing would render this opinion invalid.
We hereby consent to the inclusion of this opinion as the Appendix to the
Prospectus that is a part of the Registration Statement and to the
reference to our firm under the caption "THE SUBSCRIPTION OFFERING --
Determination of Subscription Price and Fairness Opinion" in the
Prospectus.
Very truly yours,
/S/ HOEFER & ARNETT, INCORPORATED
HOEFER & ARNETT, INCORPORATED
<PAGE>
No person has been authorized to
give any information or to make
any representation not contained
in this Prospectus and, if given
or made, such information or
representation must not be
relied upon as having been
authorized by the Company. This
Prospectus does not constitute
an offer to sell or a
solicitation of an offer to buy
any of the securities offered
hereby in any jurisdiction to SDNB FINANCIAL CORP.
any person to whom it is
unlawful to make such offer in
such jurisdiction. Neither the 769,582 Shares
delivery of this Prospectus nor
any sale made hereunder shall,
under any circumstances, create
an implication that the
information herein is correct as
of any time subsequent to the
date hereof or that there has Common Stock
been no change in the affairs of (no par value)
the Company since such date.
__________________
PROSPECTUS
__________________
TABLE OF CONTENTS
Page
Notice Regarding Residents
of Florida 2
Available Information 3
Incorporation of Certain Documents
by Reference 3
Prospectus Summary 4
Risk Factors 8
The Subscription Offering 12
The Underwriting Agreement 19
The Company 20
Use of Proceeds 20
Capitalization 22
Market Price and Dividends on
the Common Stock 23
Certain Federal Income
Tax Considerations 23
Description of Capital Stock
and Rights of Shareholders 24
Plan of Distribution 25
Experts 26
Opinions 25
Appendix -- Opinion of Hoefer &
Arnett, Incorporated.
September _, 1995
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Securities and Exchange Commission registration
fee $1,151.72
Fees and expenses of Subscription Agent,
Transfer Agent, and Registrar 10,000.00
Printing and engraving expenses 5,000.00*
Legal fees and expenses $175,000.00*
Accounting fees and expenses 10,000.00*
Blue Sky fees and expenses $8,000.00*
Fees and expenses of Company's Financial
Advisor $35,000.00
Fees and expenses of the Information
Agent $10,800.00
Underwriting commissions (if fully subscribed)* $166,999.30
Expense fee* $10,000.00
NASDAQ/NMS Listing Fees $17,500.00*
Miscellaneous expenses $77,548.98*
Total $527,000.00*
________________
* Estimated
Item 15. Indemnification of Directors and Officers
The Company has adopted provisions in its Restated Articles of
Incorporation which provide for indemnification of its officers and
directors in excess of the indemnification expressly permitted by
Section 317 of the California General Corporation Law, as amended (the
"Code"), subject to applicable limits in the Code with respect to
breach of duty to the Company and its shareholders. As authorized by
the Code, the Restated Articles of Incorporation limit the liability of
directors to the Company for monetary damages. The effect of this
provision is to eliminate the rights of the Company and its
shareholders (through shareholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of
the fiduciary duty of care as a director (including breaches resulting
from negligent behavior) except in certain limited situations. This
provision does not limit or eliminate the rights of the Company or any
shareholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care.
These provisions will not alter the liability of directors under
federal securities laws. In addition, the Company has entered into
Indemnification Agreements with each director and executive officer
which provide that the Company shall indemnify such directors and
executive officers to the fullest extent authorized by the Code. The
Company and its directors and officers are also insured up to
$3 million for liability arising from claims against the Company's
directors and officers in their capacities as such.
Item 16. Exhibits
3(a)* Restated Articles of Incorporation, as amended (incorporated by
reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1988, SEC File No. 0-11117).
3(b)* Bylaws, as amended through May 18, 1988 (incorporated by reference
from the Company's Annual Report on Form 10-K for the year ended
December 31, 1988, SEC File No. 0-11117).
4* Common Stock Specimen Certificate (incorporated by reference
from the Company's Registration Statement on Form S-14, filed
April 27, 1982, SEC File No. 2-77187).
5* Opinion of Arnold & Porter, dated May 24, 1995.
<PAGE>
23(a)* Consent of Coopers & Lybrand L.L.P., dated August 9, 1995.
23(b)* Consent of Arnold & Porter (included as part of Exhibit 5).
23(c)* Consent of Hoefer & Arnett, Incorporated (included as part of
Exhibit 99(g)).
24* Power of Attorney (incorporated by reference from the Company's
Registration Statement on Form S-3, filed April 3, 1995,
SEC File No. 33-58379)
99(a)* Form of Subscription Agent Agreement between the Company and
American Stock Transfer & Trust Company.
99(b)* Form of Subscription Warrant.
99(c)* Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies, and Other Nominees.
99(d)* Form of Transmittal Letter to Holders of Common Stock whose
addresses are within the continental United States or Canada and
who do not have A.P.O. or F.P.O. addresses.
99(e)* Instructions Booklet.
99(f)* Form of Letter of Transmittal to Holders of Common Stock whose
addresses are outside the continental United States and Canada or
who have A.P.O. and F.P.O addresses.
99(g)* Opinion of Hoefer & Arnett, Incorporated (included as a part of
the Prospectus filed herewith).
99(h) Form of Notice to Holders of Subscription Rights regarding
amendment of the Subscription Offering.
99(i) Form of Notice to Rights Holders Who Have Already Exercised
Subscription Rights regarding amendment of the Subscription
Offering.
99(j) Rights Agent Agreement between the Company and Torrey Pines
Securities, Inc., constituting the Underwriting Agreement.
99(k) Form of Participating Agent Agreement (included as part of
Exhibit 99(j)).
99(l) Form of Rights Agent Warrant Purchase Agreement, regarding the terms
and form of the Underwriter Warrants (included as part of
Exhibit 99(j)).
* Previously filed.
Item 17. 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;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of registattion 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 and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price
<PAGE>
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) 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 all the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
(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.
B. The Company hereby undertakes that, for purposes of determining
any liability under the Securities Act each filing of the Company's
annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (and, where
applicable, each filing of an 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. The Company hereby undertakes to supplement the Prospectus, after
the Expiration Date, to set forth the results of the Subscription
Offering, the transactions by the Underwriter prior to the Expiration
Date, the amount of unsubscribed shares of Common Stock to be purchased
by the Underwriter, and the terms of any subsequent reoffering thereof.
If any public offering by the Underwriter (including the Participating
Agents) is to be made on terms differing from those set forth on the cover
page of the Prospectus, a post-effective amendment will be filed setting
forth the terms of such offering.
D. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission 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 Company of expenses
incurred or paid by a director, officer, or controlling person of the
Company 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 Company 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3
and has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of San Diego, California, on September 6, 1995.
SDNB Financial Corp.
By /s/Murray L.Galinson
Murray L. Galinson
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
Chairman of the Board and
Director September _, 1995
CHARLES I. FEURZEIG
President, Chief Executive
/s/Murray L. Galinson Officer, and Director September 6, 1995
MURRAY L. GALINSON
Director September _, 1995
MARGARET COSTANZA
/s/Karla J. Hertzog* Director September 6, 1995
KARLA J. HERTZOG
/s/Robert B. Horsman* Director September 6, 1995
ROBERT B. HORSMAN
/s/Mark P. Mandell* Director September 6, 1995
MARK P. MANDELL
/s/Patricia L. Roscoe* Director September 6, 1995
PATRICIA L. ROSCOE
/s/Julius H. Zolezzi* Director September 6, 1995
JULIUS H. ZOLEZZI
Senior Vice President,
Secretary, and Chief
/s/Howard W. Brotman Financial Officer September 6, 1995
HOWARD W. BROTMAN
* By Howard W. Brotman, attorney-in-fact.
<PAGE>
INDEX OF EXHIBITS
3(a)* Restated Articles of Incorporation, as amended (incorporated by
reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1988, SEC File No. 0-11117).
3(b)* Bylaws (incorporated by reference from the Company's Annual Report
on Form 10-K for the year ended December 31, 1988, SEC File No.
0-11117).
4* Common Stock Specimen Certificate (incorporated by reference from
the Company's Registration Statement on Form S-14, filed
April 27, 1982, SEC File No. 0-11117).
5* Opinion of Arnold & Porter, dated May 24, 1995.
23(a)* Consent of Coopers & Lybrand L.L.P., dated August 9, 1995.
23(b)* Consent of Arnold & Porter (included as part of Exhibit 5).
23(c)* Consent of Hoefer & Arnett, Incorporated (included as part of
Exhibit 99(g)).
24* Power of Attorney (incorporated by reference from the Company's
Registration Statement on Form S-3, filed April 3, 1995,
SEC File No. 33-58379)
99(a)* Form of Subscription Agent Agreement between the Company and
American Stock Transfer & Trust Company.
99(b)* Form of Subscription Warrant.
99(c)* Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies, and Other Nominees.
99(d)* Form of Transmittal Letter to Holders of Common Stock whose
addresses are within the continental United States or Canada and
who do not have A.P.O. or F.P.O. addresses.
99(e)* Instructions Booklet.
99(f)* Form of Letter of Transmittal to Holders of Common Stock whose
addresses are outside the continental United States and Canada or
who have A.P.O. and F.P.O addresses.
99(g)* Opinion of Hoefer & Arnett, Incorporated.
99(h) Form of Notice to Holders of Subscription Rights regarding
amendment of the Subscription Offering.
99(i) Form of Notice to Rights Holders Who Have Already Exercised
Subscription Rights regarding amendment of the Subscription
Offering.
99(j) Rights Agent Agreement between the Company and Torrey Pines
Securities, Inc., constituting the Underwriting Agreement.
99(k) Form of Participating Agent Agreement (included as part of
Exhibit 99(j)).
99(l) Form of Rights Agent Warrant Purchase Agreement, regarding
the terms and form of the Underwriter Warrants (included as
part of Exhibit 99(j)).
* Previously filed.
EXHIBIT 99H
[SDNB Letterhead]
September _, 1995
NOTICE OF AMENDMENT OF
SDNB FINANCIAL CORP. SUBSCRIPTION OFFERING
To Holders of
Subscription Rights:
SDNB Financial Corp. (the "Company") has elected to amend the terms
of its offering (the "Subscription Offering") of up to 769,582 shares of
its Common Stock, no par value per share, to holders of record of the
Common Stock on May 5, 1995, to extend the offering and to pay
commissions on subscriptions in connection with a best-efforts
underwriting agreement. Unless otherwise specified, capitalized
terms used but not defined herein shall have the same meaning as set
forth in the Company's original Prospectus, dated May 30, 1995, which
Prospectus was supplemented on July 6, 1995.
The Company believes the Subscription Offering and the agreement by
WHR to invest an additional amount based upon the aggregate subscriptions
received from the Subscription Offering present an unusual capital-
raising opportunity for the Company. In order to take full advantage
of that opportunity, the Company has elected to amend the Subscription
Offering by extending the offering to September 21, 1995 (which date,
as it may be extended by the Company to a date not later than October 12,
1995, is the "New Expiration Date") and by paying commission on subscriptions
in connection with a best-efforts underwriting agreement. Enclosed is a new
Prospectus, dated September _, 1995, which incorporates the amendments to the
Subscription Offering. All other offering materials (including the form of
Subscription Warrant) and all other terms of the Subscription Offering
(including the ability of a Rights Holder, before the New Expiration Date, to
revoke completed subscriptions received or in transit prior to July 21, 1995,
the date of the amendment of the Subscription Offering) remain unchanged.
Very truly yours,
/s/Murray L. Galinson
Murray L. Galinson
President and Chief
Executive Officer
Exhibit 99(i)
[SDNB Letterhead]
September _, 1995
NOTICE OF AMENDMENT OF
SDNB FINANCIAL CORP. SUBSCRIPTION OFFERING
To Rights Holders Who Have
Already Exercised Subscription Rights:
SDNB Financial Corp. (the "Company") has elected to amend
the terms of its offering (the "Subscription Offering") of up to
769,582 shares of its Common Stock, no par value per share, to
holders of record of the Common Stock on May 5, 1995, to extend
the offering and to pay commissions on subscriptions in
connection with a best-efforts underwriting agreement. Unless
otherwise specified, capitalized terms used but not defined
herein shall have the same meaning as set forth in the Company's
original Prospectus, dated May 30, 1995.
The Company believes that the Subscription Offering and the
agreement by WHR to invest an additional amount based upon the
aggregate subscriptions received in the Subscription Offering
present an unusual capital raising opportunity for the Company.
In order to take full advantage of that opportunity, the Company
has elected to amend the Subscription Offering by extending the
offering to September 21, 1995 (which date, as it may be extended
by the Company to a date not later than October 12, 1995, is the
"New Expiration Date") and by paying commissions on subscriptions
in connection with a best-efforts underwriting agreement. Enclosed
is a new Prospectus, dated September _, 1995, which incorporates
the amendments to the Subscription Offering. All other offering
materials (including the form of Subscription Warrant) and all
other terms of the Subscription Offering (including the ability
of a Rights Holder, before the New Expiration Date, to revoke
completed subscriptions received or in transit prior to July 21,
1995, the date of the amendment of the Subscription Offering)
remain unchanged.
As a Rights Holder who exercised Subscription Rights on or
before July 21, 1995, you have the right to revoke your completed
subscriptions or to confirm your intention to exercise such
subscriptions. Accordingly, please indicate your decision on the
enclosed confirmation form and return the form to the
Subscription Agent in the enclosed, postage-paid envelope on or
before the New Expiration Date. If the Subscription Agent has
not received a completed confirmation form from you by the New
Expiration Date, your completed subscriptions will be presumed to
be revoked and the Subscription Agent will promptly return your
aggregate Subscription Price, without interest.
Very truly yours,
Murray L. Galinson
President and Chief
Executive Officer
<PAGE>
CONFIRMATION OF EXERCISED SUBSCRIPTIONS
Name of Rights Holder:__________________________________________
Number of Exercised Subscription Rights:________________________
[ ] I hereby affirmatively confirm my intention to exercise the
foregoing Subscription Rights.
[ ] I hereby revoke my exercise of the foregoing Subscription
Rights. I understand that by revoking my completed
subscriptions: (i) such subscriptions will be declared
invalid by the Subscription Agent; and (ii) the Subscription
Agent will promptly return to me the aggregate Subscription
Price paid for such Subscription Rights, without interest.
Date:__________
Rights Holder's Signature:________________________
EXHIBIT 99(J)
RIGHTS AGENT AGREEMENT
This Rights Agent Agreement (the "Rights Agent Agreement" or "this
Agreement") is entered into, on the date last shown below, by and among
SDNB FINANCIAL CORP., a California corporation (the "Company"), TORREY
PINES SECURITIES, INC., a California corporation (the "Rights Agent"), and
such Participating Agents (as defined in Section C of Article II hereof)
who expressly adopt this Agreement and agree to be bound hereby.
PREFACE
SDNB Financial Corp. is a bank holding company incorporated under the
laws of the State of California and registered under the Bank Holding
Company Act of 1956, as amended (the "BHCA"). The Company is offering (the
"Offering") up to 769,582 shares of its Common Stock, no par value (the
"Shares"), to holders of record of its Common Stock on May 5, 1995 (the
"Record Date"), pursuant to transferrable subscription rights (the "Basic
Subscription Rights" and, together with the "Oversubscription Rights",
hereinafter referred to as the "Subscription Rights") (the Shares and the
Subscription Rights are collectively referred to herein as the
"Securities"). The Shares are being offered at a price of $4.34 per share
(the "Subscription Price"). Holders of the Subscription Rights, including
transferees of shareholders (collectively, the "Rights Holders"), will be
able to exercise their Subscription Rights until 5:00 p.m., New York time,
on September 21, 1995 (such date as it may be extended by the Company, at
its option, to a date not later than October 12, 1995, being the "Expiration
Date").
In connection with the Offering, two (2) limited partnerships of which
WHR Management Corp. is the general partner (collectively referred to as
"WHR") have entered into an agreement with the Company whereby WHR is
obligated to purchase an additional 255,193 shares of the Company's common
stock at $4.34 per share in the event the Offering is fully subscribed, or
such lesser amount, so that after such purchase WHR will hold an aggregate
of 24.9% of the outstanding Common Stock of the Company, taking into
account the Shares issued in the Subscription Offering and the shares of
Common Stock issued immediately thereafter to WHR (the "WHR Share Purchase
Commitment").
The Company is making the Offering pursuant to its registration
statement on Form S-3, including all amendments and exhibits thereto, filed
with the Securities and Exchange Commission (the "Commission") pursuant to
the Securities Act of 1933, as amended (the "Act"). Said registration
statement first became effective on May 30, 1995, at which time the
Offering commenced. The Company's current prospectus is dated May 5, 1995,
and was supplemented on July 6, 1995. The terms used in this Agreement,
unless otherwise defined herein or otherwise required by the context within
which they are used, shall have same meaning as set forth in such
prospectus.
In consideration of the representations, warranties, and agreements
set forth herein, the parties hereto agree as follows:
I
A. Representations, Warranties, and Agreements of the Company. In
order to induce the Rights Agents to enter into this Agreement, the Company
represents and warrants to and agrees for itself with the Rights Agent
that:
1. (a) A registration statement on Form S-3 (File No. 33-58379)
with respect to the Securities, including the related form of prospectus
initially filed on April 3, 1995, and post-effective amendment nos. 1, 2,
and 3 thereto, filed on May 25, 1995, July 21, 1995, and August 9, 1995,
respectively, have been prepared by the Company in conformity with the
requirements of the Act and the applicable rules and regulations
promulgated by the Commission thereunder (the "Rules and Regulations") and
have been filed with and declared effective by the Commission and
post-effective amendment No. 4, filed on September 6 1995, and any other
amendments to such registration statement required prior to the date hereof
have been filed with the Commission and have been similarly prepared.
Copies of the registration statement and each amendment thereto, including
the related form of prospectus, have been delivered to the Rights Agent.
The Company will provide the Rights Agent copies of any proposed amendments
to the registration statement or to any form of prospectus before filing
them with the Commission, and the Company will not at any time hereafter
file any amendments to the registration statement or to any form of
prospectus if the Rights Agent shall provide the Company, within one day
after receipt of a copy of such proposed amendment or prospectus,
reasonable objections thereto in writing. The registration statement and
the prospectus relating to the Offering, in the forms in which they are
effective as of the Effective Date (as defined in Article VII) of this
Agreement, and as such registration statement and prospectus may be
hereafter appropriately amended, are herein respectively referred to as the
"Registration Statement" and the "Prospectus."
(a) The Company has filed all reports and other documents
required to be filed by it with the Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and each such
report or other document contained, at the time it was filed, such
information as was required to be included in such report or other
document and all such information was correct and complete in all
material respects. The Company has made all reports to shareholders
required by law to be made by the Company and each such report was
correct and complete in all material respects. To the Company's
best knowledge, except as disclosed in the Registration Statement, no
event has occurred that required an amendment to any report or document
referred to in this Subparagraph (b) that has not been filed or
distributed as required.
2. The Commission has not issued any order preventing or suspending
the use of any prospectus. Each prospectus has complied in all material
respects with the requirements of the Act and the Rules and Regulations,
and no prospectus has included an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein
not misleading. When the Registration Statement became effective and at
all times thereafter up to and at the Closing Date (as defined in Article
VI hereof): (a) the Registration Statement and the Prospectus, and any
amendments or supplements thereto, will contain all statements and
information that are required to be included therein in accordance with the
Act and the Rules and Regulations and will comply in all material respects
with the requirements of the Act and the Rules and Regulations; and (b)
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will include an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties
as to information contained in or omitted from the Registration Statement
or the Prospectus, or any amendment or supplement thereto, in reliance upon
and in conformity with written information furnished to the Company by the
Rights Agent specifically for use in the preparation thereof.
3. The Company has been duly incorporated and is now and, at the
Closing Date, will be validly existing as a corporation in good standing
under the laws of the State of California, with full power and authority
(corporate and other) to own, lease, and operate its properties and to
conduct its business as described in the Prospectus. The Company is now
and, at the Closing Date, will be duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except those jurisdictions where the failure
to be qualified would not have a material adverse effect on the business or
financial condition of the Company. The Company now holds and, at the
Closing Date, will hold all licenses, certificates, covenants, approvals,
and permits from state, federal, and other regulatory authorities, or
orders of any court, regulatory body, administrative agency, or other
governmental body, that are required to be obtained by the Company in
connection with, or are necessary for, the conduct of its business, except
those permits which, if not held by the Company, would not have a material
adverse effect on the Company. The Company has not received any notice of
proceedings relating to revocation or modification of any qualification,
license, certificate, consent, approval, or order referred to in this
Section 3. The Company is not in violation of its Articles of
Incorporation or Bylaws or in material default in the performance or
observance of any material bond, debenture, note, or other evidence of
indebtedness or in any lease, contract, or other agreement or instrument to
which the Company is a party or by which it or any of its properties may be
bound, nor is it in violation of any statute, law, order, rule, regulation,
writ, injunction, or court (domestic or foreign) having jurisdiction over
the Company or any of its properties, the result of which default would
have a material adverse effect on the Company.
4. This Rights Agent Agreement has been duly authorized, executed,
and delivered by the Company and is binding upon the Company in accordance
with its terms, except: (a) as the availability of the remedy of specific
enforcement, of injunctive relief, or of other equitable relief may be
subject to the discretion of the court before which any proceedings
therefore may be brought; or (b) as the enforceability of the rights and
remedies created hereby are subject to bankruptcy, insolvency,
reorganization, moratorium, and similar laws of general application
relating to or affecting the rights and remedies of creditors and secured
parties. The issuance and delivery of the Securities and the Rights Agent
Warrants (as defined in Section B.5 of Article II hereof), the execution,
delivery, and performance of this Agreement, and the consummation of the
transactions herein contemplated will not result in a breach or violation
of any of the terms and provisions of, or constitute a default under: (a)
any contract, indenture, mortgage, deed of trust, loan agreement, bond,
debenture, note, or other evidence of indebtedness or any lease, contract,
or other agreement or instrument to which the Company is a party or by
which it or any of its properties may be bound; (b) the Company's Articles
of Incorporation or Bylaws; or (c) any statute, law, order, rule,
regulation, writ, injunction, or decree of any court (foreign or domestic)
or governmental agency or body having jurisdiction over the Company or its
properties. No consent, approval, authorization, or order of any court or
governmental agency or body is required for the consummation by the Company
of the transactions contemplated herein, except as may be required under
the Act or under applicable state or other securities laws.
5. Coopers & Lybrand, L.L.P., Certified Public Accountants, who have
examined the financial statements incorporated by reference into the
Registration Statement and the Prospectus, are independent public
accountants within the meaning of the Act and the Rules and Regulations.
The financial statements incorporated by reference into the Registration
Statement and the Prospectus fairly present the consolidated financial
position, results of operations, stockholders' equity, and cash flows of
the Company at the respective dates and for the respective periods to which
they apply and have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved.
The financial statement schedules, if any, incorporated by reference into
the Registration Statement and the Prospectus present fairly the
information required to be stated therein.
6. The Company has not taken and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected
to, cause or result in the stabilization or the manipulation of the price
of the Securities or of the Common Stock of the Company.
B. Representations and Warranties of the Company and the Rights
Agent. The Company and the Rights Agent each represents and warrants to
the other that, except as set forth in this Rights Agent Agreement, no
person is entitled, directly or indirectly, to compensation from it for
services as a finder in connection with the Offering.
C. Representations, Warranties, and Agreements of the Rights Agent
and the Participating Agents.
1. By the Rights Agent. In order to induce the Company to enter
into this Agreement, the Rights Agent represents and warrants and agrees
for itself with Company that:
(a) The Rights Agent has been duly incorporated and is now and, at
the Closing Date, will be validly existing as a corporation in good
standing under the laws of the State of California, with full power and
authority (corporate and other) to own, lease, and operate its properties
and to conduct its business as described in this Agreement. The Rights
Agent is now and, at the Closing Date, will be duly qualified to do
business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except those
jurisdictions where the failure to be qualified would not have a material
adverse effect on the business or financial condition of the Rights Agent.
The Rights Agent now holds and, at the Closing Date, will hold all
licenses, certificates, covenants, approvals, and permits from state,
federal, and other regulatory authorities, or orders of any court,
regulatory body, administrative agency, or other governmental body, that
are required to be obtained by the Rights Agent in connection with, or are
necessary for, the conduct of its business, except those permits which, if
not held by the Rights Agent, would not have a material adverse effect on
the Rights Agent. The Rights Agent has not received any notice of
proceedings relating to revocation or modification of any qualification,
license, certificate, consent, approval, or order referred to in this
Subparagraph (a). The Rights Agent is not in violation of its Articles of
Incorporation or Bylaws or in material default in the performance or
observance of any material bond, debenture, note, or other evidence of
indebtedness or in any lease, contract, or other agreement or instrument to
which the Rights Agent is a party or by which it or any of its properties
may be bound, nor is it in violation of any statute, law, order, rule
regulation, writ, injunction, or court (domestic or foreign) having
jurisdiction over the Rights Agent or any of its properties, the result of
which default would have a material adverse effect on the Rights Agent.
(b) This Rights Agent Agreement has been duly authorized, executed,
and delivered by the Rights Agent and is binding upon the Rights Agent in
accordance with its terms except: (i) as the availability of the remedy of
specific enforcement, of injunctive relief, or of other equitable relief
may be subject to the discretion of the court before which any proceedings
therefore may be brought; or (ii) as the enforceability of the rights and
remedies created hereby are subject to bankruptcy, insolvency,
reorganization, moratorium, and similar laws of general application
relating to or affecting the rights and remedies of creditors and secured
parties. The Rights Agent's participation in the Offering, its receipt of
compensation therefor (including the Rights Agent Warrants) in the manner
contemplated in this Agreement, and the execution, delivery, and
performance of this Agreement will not result in a breach or violation of
any of the terms and provisions of, or constitute a default under: (i) any
contract, indenture, mortgage, deed of trust, loan agreement, bond,
debenture, note, or other evidence of indebtedness, lease, contract, or
other agreement or instrument to which the Rights Agent is a party or by
which it or any of its properties may be bound; (ii) the Rights Agent's
Articles of Incorporation or Bylaws; or (iii) any statute, law, order,
rule, regulation, writ, injunction, or decree of any court (foreign or
domestic) or governmental agency or body having jurisdiction over the
Rights Agent or its properties. No consent, approval, authorization, or
order of any court or governmental agency or body is required for the
consummation by the Rights Agent of the transactions contemplated herein,
except as may be required under the Act or under applicable state or other
securities laws.
(c) The information furnished by the Rights Agent or its counsel for
inclusion in the Registration Statement and the Prospectus, and in any
amendment or supplement thereto, is true and accurate in all material
respects and no material information has been omitted therefrom that would
be necessary in order to make the statements in the Registration Statement
or the Prospectus prepared in reliance on such information, in light of the
circumstances under which they were made, not misleading.
(d) The Rights Agent has not taken and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected
to, cause or result in the stabilization or the manipulation of the price
of the Securities or of the Common Stock of the Company.
(e) The Rights Agent is registered as a broker-dealer in securities
with the Commission and with applicable state securities commissions, is in
full and current compliance in all material respects with the rules and
regulations of the Commission and such state securities commissions, and is
a member in good standing of and in full and current compliance in all
material respects with the rules of the National Association of Securities
Dealers, Inc. (the "NASD").
(f) No proceeding is pending or, to the knowledge of the Rights
Agent, threatened against the Rights Agent or any director or officer
thereof in any court of competent jurisdiction, or before the Commission,
any state securities commission, or the NASD, concerning the Rights Agent's
activities as a broker and/or dealer. The Rights Agent has provided the
Company with a copy of its most recent report on Form BD, as amended, filed
with the Commission, the NASD, and various state securities commissions and
represents that such report contains a complete and accurate description of
all lawsuits, disciplinary proceedings, injunctive actions, administrative
actions, and other matters of a similar nature involving the Rights Agent
and its "control affiliates," as that term is defined on Form BD. The
Rights Agent will immediately advise the Company by telephone or telegraph
(and confirm in writing) of the initiation or threat of initiation of any
such actions or proceedings, any requests by such persons for additional
information, or of the initiation or threat of any steps or proceedings
which would impair or prevent the right to offer any of the Securities
proposed to be offered pursuant to this Agreement or the issuance of any
"stop orders" or any other prohibition impairing or preventing the
Offering.
(g) The Rights Agent will solicit the exercise of Subscription Rights
and the purchase of unsubscribed Shares only in those states which are
identified in Exhibit "A" hereto, which exhibit is attached hereto and by
this reference incorporated herein, as those states in which the
Shareholders of the Company reside and in which the Offering has either
been qualified for sale under, or is exempt from the registration
requirements of, the applicable statutes and regulations of such states.
Also, the Rights Agent may offer the Securities in any other state if: (i)
the transaction is exempt from the registration requirements of the
applicable statutes and regulations of that state; (ii) the Company's
counsel has been notified in writing of the proposed sale in such other
state; and (iii) the Company's counsel consents to the proposed sale in
such other state.
(h) The Rights Agent will not publish, issue, or circulate or
authorize the publication, issuance, or circulation of any circular,
notice, or advertisement regarding the Securities which shall not have
previously been approved by the Company and its counsel.
(i) The Rights Agent shall confirm sales to customers only in those
states in which it is licensed to do so as a securities broker or dealer
and shall ensure that all Participating Agents (as defined in Section C of
Article II hereof) similarly confirm sales to customers only in states in
which they are duly licensed to do so.
(j) The Rights Agent will instruct each Holder on behalf of whom the
Rights Agent solicits the exercise of, or on behalf of whom the Rights
Agent exercises, Subscription Rights that payment for the aggregate
Subscription Price attributable to any Subscription Rights so solicited or
exercised must be made by bank certified check or cashier's check, payable
to the order of the Subscription Agent.
(k) The Rights Agent will transmit to the Subscription Agent any
funds received from a Holder by 12:00 p.m., New York time, on the business
day following the date of the Rights Agent's receipt of such funds.
(l) If the Offering is terminated, the Rights Agent will be entitled
only to be reimbursed for its out-of-pocket expenses.
(m) The Rights Agent shall promptly provide the Company with an
executed copy of each Participating Agent Agreement (as hereinafter
defined), if any.
(n) During the duration of the Offering, the Rights Agent will
promptly notify the Company of any acquisition by the Rights Agent, any
Participating Agent, or any associated or affiliated person of the Rights
Agent or any Participating Agent, of any unregistered securities of the
Company. Such notification shall set forth complete details of any such
acquisition, including, but not limited to, the date of acquisition, the
acquisition price, and the amount of unregistered securities so acquired.
(o) During the duration of the Offering, the Rights Agent will
promptly notify the Company of any contractual or other relationship
between any Participating Agent and the Company.
(p) The Rights Agent will comply with the provisions of Sections 8,
24, 25, and 36 of Article III of the Rules of Fair Practice of the NASD.
(q) The Rights Agent is not directly or indirectly affiliated or
associated with any beneficial owner of any unregistered security of the
Company acquired within the 12 month period prior to April 3, 1995, the
initial filing date of the Registration Statement relating to the Offering.
(r) The Rights Agent does not have any direct or indirect affiliation
or association with any officer, director, or five percent (5%) or greater
shareholder of the Company.
(s) Neither the Rights Agent nor any associated person, parent, or
affiliate of the Rights Agent has a "Conflict of Interest" with the Company
within the meaning of Section 2(g) of Schedule E to the NASD By-Laws.
2. By Each Participating Agent. By agreeing to participate in the
Offering, each Participating Agent (as defined in Section C of Article II
hereof), if any, solely on behalf of and with respect to itself, represents
and warrants and agrees for itself with the Company that:
(a) The Participating Agent has not taken and will not take, directly
or indirectly, any action designed to, or that might reasonably be expected
to, cause or result in the stabilization or the manipulation of the price
of the Securities or of the Common Stock of the Company.
(b) The Participating Agent is registered as a broker-dealer in
securities with the Commission and with applicable state securities
commissions, is in full and current compliance in all material respects
with the rules and regulations of the Commission and such state securities
commissions, and is a member in good standing of and in full and current
compliance in all material respects with the rules of the NASD.
(c) No proceeding is pending or, to the knowledge of the
Participating Agent, threatened against the Participating Agent or any
director or officer thereof in any court of competent jurisdiction, or
before the Commission, any state securities commission, or the NASD,
concerning the Participating Agent's activities as a broker and/or dealer.
The Participating Agent has provided the Company with a copy of its most
recent report on Form BD, as amended, filed with the Commission, the NASD,
and various state securities commissions, and represents that such report
contains a complete and accurate description of all lawsuits, disciplinary
proceedings, injunctive actions, administrative actions, and other matters
of a similar nature involving the Participating Agent and its "control
affiliates," as that term is defined on Form BD. The Participating Agent
will immediately advise the Company by telephone or telegraph (and confirm
in writing) of the initiation or threat of initiation of any such actions
or proceedings, any requests by such persons for additional information, or
of the initiation or threat of any steps or proceedings which would impair
or prevent the right to offer any of the Securities proposed to be offered
pursuant to this Agreement or the issuance of any "stop orders" or any
other prohibition impairing and preventing the Offering.
(d) The Participating Agent will participate in the Offering subject
to and in accordance with the terms of this Rights Agent Agreement and the
Prospectus, the Act, the Exchange Act, the Rules of Fair Practice of the
NASD, and any applicable state securities laws and regulations.
(e) The Participating Agent will solicit the exercise of Subscription
Rights or the purchase of unsubscribed Shares only in those states which
are identified in Exhibit "A" hereto as those states in which the
Shareholders of the Company reside and in which the Offering has either
been qualified for sale under, or is exempt from the registration
requirements of, the applicable statutes and regulations of such states.
Also, the Participating Agent may offer the Securities in any other state
if: (i) the transaction is exempt from the registration requirements of the
applicable statutes and regulations of that state; (ii) the Company's
counsel has been notified in writing of the proposed sale in such other
state; and (iii) the Company's counsel consents to the proposed sale in
such other state.
(f) The Participating Agent will not publish, issue, or circulate or
authorize the publication, issuance, or circulation of any circular,
notice, or advertisement regarding the Securities which shall not have
previously been approved by the Company and its counsel.
(g) The Participating Agent shall confirm sales to customers only in
those states in which it is licensed to do so as a securities broker or
dealer and shall ensure that all selected dealers similarly confirm sales
to customers only in states in which they are duly licensed to do so.
(h) The Participating Agent will instruct each Holder on behalf of
whom the Participating Agent solicits the exercise of, or on behalf of whom
the Participating Agent exercises, Subscription Rights that payment for the
aggregate Subscription Price attributable to any Subscription Rights so
solicited or exercised must be made by bank certified check or cashier's
check, payable to the order of the Subscription Agent.
(i) The Participating Agent will transmit to the Subscription Agent
any funds received from a Holder by 12:00 p.m., New York time, on the
business day following the date of the Participating Agent's receipt of
such funds.
(j) If the Offering is terminated, the Participating Agent will be
entitled only to be reimbursed for its out-of-pocket expenses.
(k) During the duration of the Offering, the Participating Agent will
promptly notify the Rights Agent of any acquisition by the Participating
Agent or any associated or affiliated person of the Participating Agent, of
any unregistered securities of the Company. Such notification shall set
forth complete details of any such acquisition, including, but not limited
to, the date of acquisition, the acquisition price, and the amount of
unregistered securities so acquired.
(l) During the duration of the Offering, the Participating Agent will
promptly notify the Rights Agent of any contractual or other relationship,
other than the relationship evidenced hereby, between the Participating
Agent and the Company.
(m) The Participating Agent will comply with the provisions of
Sections 8, 24, 25, and 36 of Article III of the Rules of Fair Practice of
the NASD.
(n) The Participating Agent is not directly or indirectly affiliated
or associated with any beneficial owner of any unregistered security of the
Company acquired within the 12 month period prior to April 3, 1995, the
initial filing date of the Registration Statement on Form S-3 relating to
the Offering.
(o) The Participating Agent does not have any direct or indirect
affiliation or association with any officer, director, or five percent (5%)
or greater shareholder of the Company.
(p) Neither the Participating Agent nor any associated person,
parent, or affiliate of the Participating Agent has a "Conflict of
Interest" with the Company within the meaning of Section 2(g) of Schedule E
to the NASD By-Laws.
II
Engagement of the Rights Agent. In reliance upon the foregoing
representations, warranties, and agreements, and subject to the terms and
conditions of this Agreement, the Rights Agent is engaged on the following
terms:
A. Scope of Engagement. Subject to the provisions of this Agreement
and commencing with the Effective Date of this Agreement, the Rights Agent
agrees to serve as independent consultant to the Company to solicit the
exercise by third parties of the Subscription Rights and the purchase by
third parties of unsubscribed Shares in California and in those states
set forth in Exhibit "A." The solicitation of the exercise by third
parties of the Subscription Rights and the purchase by third parties of
unsubscribed Shares shall be made pursuant to the terms of this Rights
Agent Agreement and the Prospectus, and in accordance with the Act, the
Exchange Act, the Rules of Fair Practice of the NASD, any applicable
securities laws and regulations of the states enumerated in Exhibit "A",
and any other applicable state securities laws and regulations. Subject to
the terms and conditions of this Agreement, the Rights Agent agrees to
accept such agency and to use its best efforts during the term of this
Agreement to solicit the exercise of the Subscription Rights and the
purchase of unsubscribed Shares at the Subscription Price ($4.34 per
share). The Rights Agent shall deliver a copy of the Prospectus, together
with any supplement thereto furnished by the Company, to each prospective
subscriber or purchaser, and the Rights Agent is hereby authorized to
use only such documents and sales literature as are prepared by, or
otherwise authorized in writing by, the Company and furnished to the Rights
Agent from time to time. The Rights Agent is not authorized to engage in
any other type of solicitation activity in connection with the Offering
other than as expressly set forth in this Agreement or to make use of
any offering material or sales representations or furnish any information
other than that contained in the Prospectus or in any sales literature
authorized by the Company.
B. Commissions. As compensation for its services hereunder, the
Company shall compensate the Rights Agent as follows:
1. The Rights Agent shall be paid on the Closing Date a commission
equal to 5% of: (a) the aggregate Subscription Price attributable to
Subscription Rights validly exercised through the Rights Agent or any
Participating Agent engaged by the Rights Agent, other than Excluded
Subscriptions (hereinafter defined); or (b) any unsubscribed Shares
purchased by the Rights Agent prior to the Closing Date pursuant to the
Standby Purchase Commitment (as defined in Article VI hereof). For
purposes of this Rights Agent Agreement, "Excluded Subscriptions" shall
mean any and all Subscription Rights exercised: (a) from the commencement
of the Offering through July 21, 1995; (b) by the Company's 401(k) Plan; or
(c) by an officer or director of the Company.
2. Upon the valid exercise of the WHR Share Purchase Commitment, the
Rights Agent shall be paid a commission equal to 2% of the aggregate
purchase price in connection with the sale of any additional shares to WHR
pursuant to the valid exercise of the WHR Share Purchase Commitment.
3. The Rights Agent shall be paid on the Effective Date of this
Agreement a nonaccountable expense allowance equal to Five Thousand
Dollars ($5,000).
4. The Rights Agent shall be paid on the Closing Date an additional
nonaccountable expense allowance equal to Five Thousand
Dollars ($5,000) if the Minimum Subscriptions (hereinafter defined) shall
have been achieved. For purposes of this Rights Agent Agreement, "Minimum
Subscriptions" shall mean that a minimum of 100,000 Subscription Rights,
not including any Excluded Subscriptions, shall have been validly
exercised.
5. If the Minimum Subscriptions shall have been achieved, the
Company shall issue to the Rights Agent at the Closing Date, for an
aggregate price of $10.00, warrants to purchase Common Stock of the
Company (the "Rights Agent Warrants" or the "Warrants"). The Warrants
shall: (a) provide for the purchase of a number of shares of Common Stock
equal to 0.05 multiplied by the difference between (x) the number of Shares
subscribed for in the Offering less (y) the number of shares subscribed for
pursuant to the Excluded Subscriptions; (b) be exercisable at a price of
$4.34 per share; (c) be exercisable for a period of two (2) years following
the Closing Date; and (d) shall include such other terms and conditions as
are set forth in the form of Rights Agent Warrant Purchase Agreement
attached hereto as Exhibit "B" and by this reference incorporated herein.
It is specifically understood that the fairness of the amount,
price, and terms of the Rights Agent Warrants must be passed upon by the
Corporate Financing Department of the NASD and, accordingly, the Rights
Agent shall agree and consent to the modification of one or more of the
foregoing terms and conditions (including, without limitation, the exercise
price and the term of exercise of the Warrants) as required by the
Corporate Financing Department if legal counsel for the Rights Agent is
allowed to first discuss such proposed changes with the Corporate Financing
Department and such counsel determines that the modification is mandatory.
C. Engagement of Participating Agents. The Rights Agent may engage
one or more broker-dealer firms to participate in the Offering of the
Securities (each a "Participating Agent") subject to the prior approval of
such person's participation by the Rights Agent, the Company, and, as
applicable, the NASD and such person's express adoption and agreement to
become bound by the terms of this Agreement as evidenced by such person's
execution and delivery to, and the acceptance by, the Rights Agent of a
Participating Agent Agreement in the form attached hereto as Exhibit "C"
and by this reference incorporated herein. The Rights Agent shall not
permit any prospective Participating Agent to participate in the Offering
if the Rights Agent has any reason to believe that the representations and
warranties of such person set forth in this Agreement or the Participating
Agent Agreement are untrue. The Rights Agent shall compensate the
Participating Agent in accordance with the terms of the Participating Agent
Agreement.
D. Further Agreements of the Rights Agent. The Rights Agent
represents, warrants, and agrees with the Company that, in connection with
the Offering and the transactions contemplated hereby, it has complied and
will comply with all applicable laws, rules, and regulations (including,
without limitation, the Act, the Exchange Act, the BHCA, the rules and
regulations promulgated under those laws, and the provisions of Rule 10b-6
under the Exchange Act with regard to trading of the Securities). For the
purposes of the foregoing sentence, the Rights Agent agrees that, in
addition to the Subscription Rights and the Shares, other securities of the
Company or securities of a guarantor of the Securities or any other right
or option to purchase or otherwise acquire any securities of the Company
shall be considered securities of the same class and series as the
Securities.
III
Further Agreements of the Company. The Company agrees with the Rights
Agent that:
A. The Company will use its best efforts to cause the Registration
Statement to continue to be effective and will advise the Rights Agent
promptly and, if requested by the Rights Agent, will confirm such advice in
writing: (i) when any amendment to the Registration Statement or to the
Prospectus becomes effective; (ii) of any request by the Commission or
other governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii)
of the issuance by the Commission or other governmental authority of any
"stop order" suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose; and (iv) within the
period of time referred to in Section G below, of the happening of any
event that makes any statement of material fact made in the Registration
Statement or the Prospectus untrue or that requires the making of any
additions to statements of material fact in the Registration Statement or
the Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any time
the Commission or other governmental authority issues any "stop order" or
any similar order suspending the effectiveness of the Registration
Statement, the Company will make every reasonable effort to obtain the
withdrawal of that order at the earliest possible moment.
B. Prior to the Closing Date, counsel for the Rights Agent shall
have access to the Articles of Incorporation and the Bylaws of the Company,
any amendments thereto, all resolutions authorizing the issuance of the
Securities, and all material contracts to which the Company is a party.
There shall also be made available for inspection by attorneys for the
Rights Agent minutes of all meetings of incorporators, directors, and
stockholders of the Company from the date of incorporation of the Company
to the Closing Date. The Rights Agent shall be provided at or before the
Closing Date with certified copies of those of the above documents as it
reasonably requests, as well as with such assurances of the organization
and good standing of the Company as it reasonably requests.
C. Promptly after the Effective Date and thereafter from time to
time for such period as, in the opinion of counsel for the Rights Agent,
the Prospectus is required by law to be delivered in connection with sales
by an underwriter or dealer, the Company will deliver to the Rights Agent
without charge as many copies of the Prospectus (and of any amendments or
supplements thereto) as the Rights Agent may reasonably request. The
Company consents to the use of the Prospectus (and of any amendments or
supplements thereto) in accordance with the provisions of the Act and the
Rules and Regulations and with the securities laws and regulations of the
jurisdictions in which the Securities are offered by the Rights Agent and
by all dealers to which Securities may be sold, both in connection with the
Offering or sale of the Securities and for such period of time thereafter
as the Prospectus is required by law to be delivered in connection with
offers and sales of the Securities. If during this period of time any
event occurs which, in the judgment of the Company, should be set forth in
the Prospectus in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with the Act or
the Rules and Regulations or any other law or regulation, the Company will
promptly prepare and file with the Commission an appropriate amendment or
supplement thereto and will furnish to the Rights Agent, without charge, a
reasonable number of copies thereof.
D. The Company will use its best efforts to register or qualify the
Securities under the securities laws of such jurisdictions as the Rights
Agent may reasonably request and will file such consents to service of
process or other documents as may be necessary to effect such registration
or qualification and continue the same in effect for so long a period as
the Rights Agent may reasonably request; provided, however, that in no
event shall the Company be required to qualify to do business in any
jurisdiction in which it is not now so qualified. Public offerings will be
made only in those states which shall have approved the Offering or for
which there exists an exemption from registration of the Securities offered
or sold in the Offering. The Company, at its expense, will use its counsel
to prepare such filings and qualifications.
E. During the two-year period following the Closing Date, the
Company will furnish to the Rights Agent: (i) as soon as available, a copy
of each document or report of the Company mailed to stockholders or filed
with the Commission or any state securities administration or commission,
any national securities exchange upon which any Securities of the Company
become listed, or the NASD; and (ii) from time to time, such other
information concerning the business and financial condition of the Company
as the Rights Agent may reasonably request.
F. Except as contemplated herein or as described in the Prospectus,
the Company will not, for a period of 90 days after the Effective Date,
offer or sell, contract to sell, or otherwise dispose of any of its Common
Stock or Securities convertible into, or exercisable to purchase, its
Common Stock without the prior written consent (which consent will not be
unreasonably withheld or delayed) of the Rights Agent. The Company will
obtain commitments, prior to the execution and delivery of this Rights
Agent Agreement, from those of the Company's officers and directors and
beneficial holders of more than five percent (5%) of the Company's
outstanding common stock (other than street name holders and institutional
investors), who were such at the Record Date, providing that such persons
will not, for a period of 90 days after the Effective Date, offer to sell,
sell, contract to sell or otherwise dispose of any Shares of Common Stock
of the Company owned by them or with respect to which they have the power
of disposition otherwise than: (i) as a gift or gifts, provided the donee
or donees thereof agree to be bound by this restriction; or (ii) with the
Rights Agent's prior consent (which consent will not be reasonably withheld
or delayed).
G. The Company will use its best efforts to obtain and maintain the
qualification of the Subscription Rights and the Shares for quotation on
the NASDAQ National Market System ("NASDAQ/NMS").
H. The Company will refer to the Rights Agent all inquiries and
requests by persons desiring to purchase the Securities.
I. The Company shall at all times from the Effective Date through
the Closing Date remain in compliance with and in good standing under the
Federal Deposit Insurance Corporation Improvement Act, the BHCA, and the
rules and regulations promulgated thereunder. The Company has taken all
necessary and appropriate steps to continue such compliance and good
standing and shall, on a timely basis, and at all times during the term of
this Rights Agent Agreement, prepare and make such filings and otherwise
take such action as may be required or deemed necessary and appropriate to
maintain such compliance and good standing, except to the extent that the
failure to comply therewith would not have a material adverse effect on the
Company.
IV
Indemnity and Contribution Provisions. The Company, the Rights Agent,
and each Participating Agent hereby agree to the following indemnity
provisions:
A. The Company agrees to indemnify and hold harmless the Rights
Agent, any Participating Agent, and any person who controls the Rights
Agent or any member of the selling group within the meaning of the Act, and
each of their directors, officers, employees, and agents, against losses,
claims, damages, or liabilities, joint and several, to which any such
Rights Agent, or any director, officer, employee, or agent, may become
subject under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the Prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading. Subject to Section C of this Article IV, the Company agrees to
reimburse any legal or other expenses reasonably incurred by such Rights
Agent or Participating Agent, each member of the selling group, and such
controlling person, and each of their directors, officers, employees, and
agents, in connection with the investigation or the defense of any such
loss, claim, damage, liability, or action; provided, however, that the
Company will not be liable under this Article IV, Section A, if such loss,
claim, or liability arises out of or is based on an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Prospectus in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Rights Agent or any
Participating Agent specifically for use in preparation thereof. A person
who controls the Rights Agent, or any Participating Agent, or any of their
directors, officers, employees, or agents, will be covered by the indemnity
agreement in this Article IV, Section A, for all such losses, claims,
damages, liabilities, and expenses irrespective of whether they are based
on Section 15 of the Act. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
B. The Rights Agent and each Participating Agent agrees, jointly and
severally, to indemnify and hold harmless the Company, each of its
directors, each of its officers who signs the Registration Statement, and
any person who controls the Company within the meaning of the Act, against
any losses, claims, damages, or liabilities to which the Company or any
such director, officer, or controlling person may become subject, under the
Act or otherwise, if such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based on any untrue or
alleged untrue statement of material fact contained in the Prospectus or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case if, but only if, such
untrue statement or alleged untrue statement or omission or alleged
omission was made in the Prospectus in reliance upon and in conformity with
written information concerning the Rights Agent or any Participating Agent
furnished to the Company by or on behalf of the Rights Agent or such
Participating Agent specifically for use in the preparation thereof.
Subject to Section C of this Article IV, the Rights Agent and each
Participating Agent agrees, jointly and severally, to reimburse any legal
or other expense reasonably incurred by the Company or such director,
officer, or controlling person in connection with the investigation or the
defense of any such loss, claim, damage, liability, or action. This
indemnity agreement will be in addition to any liability which such person
may otherwise have.
C. Promptly after receipt by an indemnified party under this Article
IV of notice of the commencement of any action, the indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party
under this Article IV, notify the indemnifying party in writing of the
commencement thereof; but the omission to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Article IV. In case any such action is
brought against any indemnified party and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof
with counsel who shall be reasonably satisfactory to such indemnified
party; and after notice from the indemnifying party to such indemnified
party of its election to so assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under this Article IV
for any legal or other expense subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation. In any such action, any indemnified party shall have the
right to retain its own counsel, but the fees and expense of such counsel
shall be at the expense of such indemnified party unless: (i) the
indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel; or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
legal defenses or interests between them. The indemnifying party shall not
be liable for any settlement of any proceeding or claim effected without
its written consent; but if settled with such consent or if there is a
final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
D. If the indemnification provided for in Section A or B of this
Article IV is for any reason, other than as specified in such sections,
held by a court to be unavailable and the Company or the Rights Agent or
any Participating Agent has been required to pay damages as a result of a
determination by a court that the Prospectus contains an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, then
the Company shall contribute to the damages paid by the Rights Agent and
the Participating Agent and such persons shall contribute to the damages
paid by the Company (but in each case only to the extent that such damages
arise out of or are based upon such untrue statement or omissions): (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Rights Agent and the Participating
Agent on the other from the offering of the Securities; or (ii) if the
allocations provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect the relative fault of
the Company and the Rights Agent and the Participating Agents in connection
with statements or omissions which resulted in such damages, as well as any
other relevant equitable considerations. The relative benefits received by
the Company and the Rights Agent and the Participating Agents shall be
deemed to be in the same proportion as the total net proceeds from the
Offering (before deducting expenses) received by the Company bears to the
total commissions received by the Rights Agent and the Participating Agents
as set forth in the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the Company or the Rights Agent and the
Participating Agents and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such untrue statement or
omission. For purposes of this Article IV, Section D, the term "damages"
shall include any legal or other expenses reasonably incurred by the
Company or the Rights Agent or any Participating Agents in connection with
investigation or defending any action or claim which is the subject of the
contribution provisions of this Article IV, Section D. Notwithstanding the
provisions of this Article IV, Section D, the Rights Agent shall not be
required to contribute any amount in excess of the amount by which the
total Rights Agent compensation received by it under this Rights Agent
Agreement exceeds the amount of any damages which the Rights Agent has
otherwise been required to pay by reason of any such untrue statements or
omissions. No person adjudged guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the Act shall be entitled to
contribution from any person who was not adjudged guilty of such fraudulent
misrepresentation. Under this Article IV, Section D, the obligations of
the Rights Agent or any Participating Agent to contribute are several in
proportion to their respective Rights Agent obligations and not joint.
E. The agreements contained in this Article IV and the
representations and warranties of the Company and the Rights Agent or any
Participating Agent in this Rights Agent Agreement shall remain operative
and in full force and effect regardless of: (i) any investigation made by
or on behalf of: (a) the Rights Agent or any person controlling the Rights
Agent; or (b) the Company, any of its directors or officers, or any person
controlling Company or any of its directors or officers; (ii) acceptance of
any Securities and payment therefor hereunder; and (iii) any termination of
this Rights Agent Agreement. A successor of the Rights Agent or of the
Company, or any director or officer thereof, or any person controlling the
Rights Agent or the Company shall be entitled to the benefits of the
agreements contained in this Article IV.
V
A. Conditions to the Company's Obligations. The several obligations
of the Company to compensate the Rights Agent in the manner contemplated
herein are subject to the accuracy of, and compliance with, the
representations, warranties, and agreements of the Rights Agent and each
Participating Agent contained herein at and as of the Closing Date and to
the following further conditions:
1. The Corporate Financing Department of the NASD shall have
approved the participation in the Offering by the Rights Agent and, as
applicable, any Participating Agent, in the manner contemplated in this
Agreement.
2. The Rights Agent shall have complied in all material respects
with all agreements and satisfied all conditions on its part to be
performed at or prior to the Closing Date, including, without limitation,
those contained in Section D of Article II.
3. The representations and warranties of the Rights Agent set forth
in this Rights Agent Agreement shall be accurate in all material respects
as though expressly made at, and as of, all times from the Effective Date
through the Closing Date, including, without limitation, those contained in
Section D of Article II.
4. At the Closing Date, counsel for the Company shall have been
furnished with all such documents and certificates as such counsel may
reasonably request for the purpose of: (a) enabling such counsel to pass
upon the qualification of the Rights Agent or any Participation Agent to
participate in the Offering in the manner contemplated in this Agreement
and the matters referred to in Section C.1(b) of Article I hereof; and (b)
to evidence the accuracy and completeness of any of the representations,
warranties, or statements of the Rights Agent or any Participating Agent,
the performance of any of the covenants of the Rights Agent or any
Participating Agent, or the fulfillment of any of the conditions herein
contained. All proceedings taken by the Rights Agent or any Participating
Agent at or prior to the Closing Date in connection with the participation
by the Rights Agent or any Participating Agent in the Offering in the
manner contemplated in this Agreement shall be reasonably satisfactory in
form and substance to the Company and its counsel. Notwithstanding the
foregoing, the Company shall have received at the Closing Date a
certificate, dated as of the Closing Date and signed by the President and
by the Treasurer of the Rights Agent, as to: (a) the fulfillment of the
conditions set forth in this Section A of Article V; (b) the accuracy, to
the best of their knowledge, in all material respects, of the
representations and warranties of the Rights Agent and each Participating
Agent contained in Sections B and C of Article I hereof on and as of the
Closing Date; and (c) the effect that, to the best of their knowledge, all
of the agreements contained in this Agreement and required to be performed
or complied by the Rights Agent at or prior to the Closing Date shall have
been performed or complied with in all material respects.
5. Subsequent to the Effective Date and prior to the Closing Date,
there shall not have occurred any change or any development involving a
prospective change in or affecting the Rights Agent's or any Participating
Agent's participation in the Offering not contemplated by the Prospectus
which materially adversely affects the accuracy or adequacy of the
disclosure in the Prospectus.
B. Conditions to the Rights Agent's Obligations. The several
obligations of the Rights Agent to provide the services required herein,
including its best efforts to sell unsubscribed Shares pursuant to the
Standby Purchase Commitment, are subject to the accuracy of, and compliance
with, the representations, warranties, and agreements of the Company
contained herein at and as of the Closing Date and to the following further
conditions:
1. Post-Effective Amendment No. 4 to the Registration Statement
shall have become effective in accordance with the requirements of the Act
and of the Rules and Regulations thereunder and the Corporate Financing
Department of the NASD shall have approved the participation of the Rights
Agent in the Offering.
2. No "stop order" suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
have been taken or to the knowledge of the Company shall be contemplated by
the Commission at or prior to the Closing Date.
3. There shall not have been any change in the capital stock of the
Company as described in the Prospectus under the caption "Description of
Capital Stock and Rights of Shareholders."
4. There shall not have been, since the respective dates as of which
information is given in the Registration Statement, any material adverse
change in the condition (financial or other), earnings, business affairs or
business prospects of the Company, whether or not arising in the ordinary
course of business.
5. No action, suit, or proceeding at law or in equity shall be
pending or, to the knowledge of the Company's management, threatened
against the Company that would be required to be set forth in the
Prospectus other than as set forth therein and no proceedings shall be
pending or, to the knowledge of the Company's management, threatened
against the Company before or by any federal, state, or other commission,
board, or administrative agency wherein an unfavorable decision, ruling, or
finding could materially adversely affect the condition (financial or
other), earnings, business affairs, or business prospects of the Company,
other than as set forth in the Prospectus.
6. The Company shall have complied in all material respects with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Date.
7. The other representations and warranties of the Company set forth
in this Rights Agent Agreement shall be accurate in all material respects
as though expressly made at, and as of, all times from the Effective Date
through the Closing Date.
8. The Company shall not have any material liabilities or
obligations, direct or contingent (not in the ordinary course of business),
other than those reflected in the Prospectus.
9. At the Closing Date, counsel for the Rights Agent shall have been
furnished with all such documents and certificates as such counsel may
reasonably request for the purpose of: (a) enabling such counsel to pass
upon the issuance and sale of the Securities as herein contemplated and the
matters referred to in Section A.4 of Article I hereof; and (b) to evidence
the accuracy and completeness of any of the representations, warranties, or
statements of the Company, the performance of any of the covenants of the
Company, or the fulfillment of any of the conditions herein contained. All
proceedings taken by the Company at or prior to the Closing Date in
connection with the authorization, issuance, and sale of the Securities as
herein contemplated shall be reasonably satisfactory in form and substance
to the Rights Agent and its counsel. Notwithstanding the foregoing, the
Rights Agent shall have received at the Closing Date a certificate, dated
as of the Closing Date and signed by the Chief Executive Officer and by the
Chief Financial Officer of the Company, as to: (a) the fulfillment of the
conditions set forth in this Section B of Article V; (b) the accuracy, to
the best of their knowledge, in all material respects, of the
representations and warranties of the Company contained in Sections A and B
of Article I hereof on and as of the Closing Date; and (c) to the effect
that, to the best of their knowledge, all of the agreements contained in
this agreement and required to be performed or complied with by the Company
at or prior to the Closing Date shall have been performed or complied with
in all material respects.
10. Subsequent to the Effective Date and prior to the Closing Date,
there shall not have occurred any change or any development involving a
prospective change in or affecting the business or properties of the
Company not contemplated by the Prospectus which materially adversely
affects the accuracy or adequacy of the disclosure in the Prospectus, or
materially adversely affects the market for the Securities.
11. The Rights Agent shall have received at the Closing Date a signed
opinion, dated as of the Closing Date, in form and substance satisfactory
to the Rights Agent and its counsel, from Arnold & Porter, special counsel
for the Company, to the effect that:
(a) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of California;
(b) The Securities to be issued upon completion of this Offering have
been or will be duly authorized, legally and validly issued, and are, or
will be, fully paid and nonassessable;
(c) The holders of the Company's Common Stock do not have any
preemptive rights to subscribe to any additional issuances of the Company's
Common Stock, other than pursuant to the Subscription Rights or the WHR
Share Purchase Commitment;
(d) The Securities are registered in accordance with the requirements
of the Act, all requirements of the Act prerequisite to the Offering have
been complied with in all material respects, the Registration Statement
(except for the financial statements and other financial data incorporated
by reference into or included therein as to which such counsel need express
no opinion) complies as to form in all material respects with the
requirements of the Act and the Rules and Regulations, and, to the best of
such counsel's knowledge, such counsel has no reason to believe that the
Registration Statement or any other document filed with the Commission
contains any untrue statements of material facts or omits to state material
facts necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading; and
(e) This Agreement and the Rights Agent Warrants which are described
herein have been duly authorized and, when executed by the Company, will
constitute valid and binding agreements of the Company enforceable in
accordance with their terms, except: (i) as the availability of the remedy
of specific enforcement, of injunctive relief or of other equitable relief
may be subject to the discretion of the court before which any proceeding
therefore may be brought; or (ii) as the enforceability of the rights and
remedies created hereby are subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating
to or affecting the rights and remedies of creditors and secured parties.
Such opinion shall be to such further effect with respect to
other legal matters relating to this Rights Agent Agreement and the sale of
the Securities as counsel for the Rights Agent may reasonably request. In
rendering such opinion, counsel may rely as to matters of fact, to the
extent appropriate, upon certificates and representations of responsible
officers of the Company, of public officials, and of other third parties
reasonably satisfactory to Rushall & McGeever, legal counsel to the Rights
Agent.
VI
Standby Purchase Commitment. In connection with the Offering, the
Rights Agent shall have the right to purchase, for the account of one or
more of its customers, any Shares not subscribed for as of the Expiration
Date of the Offering by delivering to the Company by 12:00 p.m., New York
time, on the eighth business day following the Expiration Date (the
"Closing Date") good funds for such Shares (the "Standby Purchase
Commitment"). Such purchase shall be at the Subscription Price of $4.34 per
Share. The purchase of unsubscribed Shares pursuant to the Standby
Purchase Commitment may be made only by the Rights Agent on behalf of
third parties; provided, however, that the number of unsubscribed Shares so
purchased by the Rights Agent may reflect third party commitments to
purchase such unsubscribed Shares obtained by a Participating Agent. The
Company shall modify the Offering and the Prospectus to provide for the
appointment of the Rights Agent and the terms and conditions of the
Rights Agent's services.
VII
Effective Date of this Agreement. This Agreement will become
effective at 9:00 a.m., California time, on the first full business day
after Post-Effective Amendment No. 4 to the Registration Statement has
become effective (the "Effective Date"), unless prior to such time the
Rights Agent received written notice from the Company that it elects that
this Agreement shall not become effective or the Rights Agent gives notice
to the Company that the Rights Agent elects that this Agreement shall not
become effective; provided, however, that the provisions of this Article
and of Article IV hereof shall at all times be effective.
VIII
Cancellation of this Agreement. This Rights Agent Agreement and all
obligations of the Rights Agent or of the Company hereunder may be
cancelled at, or any time prior to, the Closing Date by the Rights Agent or
by the Company without liability on the part of the cancelling party to the
other parties to this Agreement except as set forth in this Article VIII,
if on or prior to the Closing Date: (a) trading on the New York Stock
Exchange, the American Stock Exchange, or the NASDAQ/NMS shall have been
wholly suspended; (b) minimum or maximum prices for trading shall have been
fixed or maximum ranges for prices for securities shall have been required
by the New York Stock Exchange, the American Stock Exchange, or the
NASDAQ/NMS, the NASD, or by order of the Commission or any other
governmental authority having jurisdiction; (c) a banking moratorium shall
have been declared by federal or state authorities; (d) the Dow Jones
Industrial Average shall have fallen by either 15 percent or more or 300
points from its closing price on the day immediately preceding the date
that the Registration Statement is declared effective by the Commission; or
(e) an outbreak of major hostilities in which the United States is involved
or a declaration of war by Congress shall have occurred since the execution
of this Agreement the effect of which, in the judgment of the cancelling party,
makes it impractical or inadvisable to proceed with the completion of the
sale of or any payment for the Securities. Notice of cancellation shall be
given by the cancelling party to the other parties to this Agreement by
telephone or telegraph and shall be subsequently confirmed by letter.
Within five business days after the date on which the cancelling party
first provides notice of such cancellation to the other parties, the
cancelling party will return all compensation received from any other party
under this Agreement, and shall forfeit its right to receive any other
compensation under this Agreement other than out-of-pocket expenses not
previously reimbursed.
IX
Certain Agreements Relating to Expenses.
A. By the Company. The Company will pay all costs and expenses
incident to the performance by the Company of its obligations hereunder,
including: (a) the preparation, printing, and filing of the Registration
Statement (including exhibits and amendments thereto) and the Prospectus
(including amendments and supplements thereto); (b) the preparation,
printing, and issuance of certificates for the Securities, including any
stamp taxes payable in connection with the original issuance of the
Securities; (c) the registration or qualification and fees of the Company's
counsel with respect to the matters referred to in Section H of Article III
hereof; (d) the fees and expenses of the Company's accountants and the fees
and expenses of counsel for the Company; and (e) furnishing such copies of
the Prospectus and all amendments or supplements to the Prospectus as may
be reasonably requested for use by the Rights Agent and the Participating
Agents in connection with the offering and sale of the Securities
(including postage, air freight charges, and charges for counting and
packaging).
B. By the Rights Agent. The Rights Agent will bear all costs and
expenses incident to the performance by the Rights Agent of its obligations
hereunder, other than the expenses set forth in Section A of this Article
IX, including the fees and expenses of its legal counsel.
X
Miscellaneous.
A. Notices. Except as otherwise provided in Sections C.1(f) or
C.2(c) of Article I, Section A of Article III, and Sections A and B of
Article VIII, notice given pursuant to any of the provisions of this Rights
Agent Agreement shall be in writing and shall be delivered personally, by
first class, certified, or registered mail, by facsimile transmission, or
by Federal Express or any other reputable overnight courier service,
addressed as set forth below (or in each case to such other address as the
person to be notified may have requested in writing):
1. If to the Company:
SDNB Financial Corp.
1420 Kettner Boulevard
San Diego, California 92101
Attention: Howard W. Brotman
Senior Vice President and Chief Financial Officer
With a copy to:
Theodore G. Johnsen, Esq.
Arnold & Porter
777 South Figueroa Street, 44th Floor
Los Angeles, California 90017
2. If to the Rights Agent:
Torrey Pines Securities, Inc.
140 Marine View Drive, Suite 110
Solana Beach, California 92075
Attention: Jack C. Smith
President
With a copy to:
Bruce J. Rushall, Esq.
RUSHALL & McGEEVER
2111 Palomar Airport Road, Suite 200
Carlsbad, California 92009
B. Successors and Assigns. This Rights Agent Agreement has been and
is made solely for the benefit of the Rights Agent, the Company, the
controlling persons, directors, and officers referred to in Article IV
hereof, and their respective successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Rights Agent
Agreement. The terms "successor" and "successor and assigns" as used in
this Rights Agent Agreement shall not include a purchaser from any Rights
Agent of any of the Securities in his, her, or its status as such
purchaser.
C. Counterparts. This Rights Agent Agreement may be executed in any
number of counterparts, each of which, when taken together, shall be deemed
the fully executed agreement between the parties.
D. Applicable Law. This Rights Agent Agreement shall be governed by
and construed in accordance with the laws of the State of California,
without reference to conflict of laws or principles thereunder.
E. Venue. All disputes relating to this Rights Agent Agreement
shall be tried before the court of appropriate jurisdiction of the State of
California located in San Diego County, California to the exclusion of all
other courts that might have jurisdiction.
IN WITNESS WHEREOF, the parties have entered into this Agreement on
and as of the __________ day of September, 1995, which Agreement shall be
effective on the Effective Date set forth in Article VII above.
COMPANY:
SDNB FINANCIAL CORP., By:
a California corporation Howard W. Brotman,
Senior Vice President
RIGHTS AGENT:
TORREY PINES SECURITIES, INC.,
a California corporation By:
Jack C. Smith,
President
<PAGE>
LIST OF EXHIBITS
Exhibit A. List of states in which the exercise of Subscription Rights
or the purchase of unsubscribed Shares may be solicited by the
Rights Agent or any Participating Agent.
Exhibit B. Form of Rights Agent Warrant Purchase Agreement.
Exhibit C. Form of Participating Agent Agreement.
<PAGE>
EXHIBIT A
States in Which the Rights Agent
and any Participating Agent May Solicit
the Exercise of Subscription Rights
or the Purchase of Unsubscribed Shares
Arizona
California
Connecticut
Idaho
Illinois
Iowa
Minnesota
Missouri
Nevada
New Jersey
New York
Pennsylvania
Tennessee
Texas
Virginia
<PAGE>
EXHIBIT B
FORM OF
RIGHTS AGENT WARRANT PURCHASE AGREEMENT
_____________, 1995
SDNB FINANCIAL CORP.
___________ Shares
No Par Value Common Stock
$4.34 Per Share
RIGHTS AGENT WARRANT PURCHASE AGREEMENT
This Warrant Purchase Agreement (the "Agreement") is made by
and between SDNB Financial Corp., a California corporation (the
"Company"), and Torrey Pines Securities, Inc., a California
corporation (the "Warrantholder").
In consideration of $10.00, the receipt of which is hereby
acknowledged, the Company hereby issues to the Warrantholder a
purchase warrant (the "Warrant") to purchase an aggregate of
__________________________________ (__________) shares of the
Company's Common Stock, no par value (the "Rights Agent Shares"),
subject to adjustment pursuant to Section 8 below. The Warrant
is being issued pursuant to Article II, Section B.5 of the Rights
Agent Agreement, dated effective as of __________________, 1995
(the "Rights Agent Agreement"), by and among the Company, the
Rights Agent, and each Participating Agent (as defined in Article
II, Section C of the Rights Agent Agreement) who expressly adopts
and agrees to be bound by the terms of the Rights Agent
Agreement, in connection with the offering ("Offering") by the
Company of up to 769,582 shares of its Common Stock to holders of
record of its Common Stock on May 5, 1995, pursuant to
transferable subscription rights. The Warrantholder is the
Rights Agent under the Rights Agent Agreement and is executing
this Agreement for its own behalf and as the representative of
the Participating Agent Group (as hereinafter defined) who may be
entitled to receive the Warrants pursuant to Section 1(d) hereof.
Capitalized terms used, but not defined herein, shall have the
meanings ascribed to such terms in the Rights Agent Agreement.
In consideration of the foregoing and for the purpose of
defining the terms and provisions of the Warrant and the
respective rights an obligations thereunder, the Company and the
Warrantholder, for value received, hereby agree as follows:
1. FORM AND TRANSFERABILITY OF WARRANT
(a) Registration. The Warrant (or Warrants should the
Warrant be divided and/or assigned as provided herein) shall be
numbered and shall be registered on the books of the Company when
issued.
(b) Form of Warrant. The text and the form of the Warrant
and of the election to purchase the Rights Agent Shares (the
"Election to Purchase") shall be substantially as set forth in
Exhibit "A" attached hereto and by this reference incorporated
herein. The price per share as determined in accordance with the
provisions of Section 7 hereof (the "Warrant Price") and the
number of the Rights Agent Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain
events, all as hereinafter provided in section 8 hereof.
The Warrant shall be executed on behalf of the Company by
its president or a vice president, under its corporate seal
reproduced thereon attested by its secretary or an assistant
secretary. A Warrant bearing the signature of an individual who
was at any time the proper officer of the Company shall bind the
Company, notwithstanding that such individual shall have ceased
to hold such office prior to the delivery of such Warrant or did
not hold such office on the date of this Agreement.
The Warrant shall be dated as of the date of signature
thereof by the Company either upon initial issuance or upon
division, exchange, substitution or transfer.
(c) Transfer. The Warrant shall be divisible and
transferable only on the books of the Company maintained at its
principal office in San Diego, California, or at the office of
the Company's stock transfer agent, upon delivery thereof duly
endorsed by the Warrantholder or by its duly authorized attorney
or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any
registration of transfer, the Company shall execute and deliver a
new Warrant to the person entitled thereto.
(d) Limitations on Transfer of Warrant. The Warrant shall
not be sold, transferred, assigned, exchanged or hypothecated by
the Warrantholder, except to: (i) broker-dealer firms which have
executed, and are not then in default of, their respective
Participating Agent Agreement regarding the Offering (the
"Participating Agent Group") and one or more persons, each of
whom on the date of transfer is an officer (including
officer-director) or partner of a member of the Participating
Agent Group or an officer (including officer-director) or partner
of a successor to a member of the Participating Agent Group; (ii)
one or more persons, each of whom on the date of transfer is an
officer (including officer-director) of a Warrantholder or an
officer (including officer-director) or partner of a successor to
a Warrantholder as provided herein; (iii) a partnership or
partnerships, all of the partners of which are a Warrantholder
and one or more persons, each of whom on the date of transfer is
an officer (including officer-director) of a Warrantholder or an
officer (including officer-director) or partner of a successor to
a Warrantholder; (iv) a successor to a Warrantholder through
merger or consolidation; (v) a purchaser of all or substantially
all of a Warrantholder's assets; (vi) the stockholders of a
Warrantholder or the stockholders or partners of its transferee
in the event of liquidation or dissolution; or (vii) any person
receiving the Warrant from one or more persons listed in this
Subsection (d) at such person's or persons' death pursuant to
will, trust or the laws of intestate succession. The Warrant may
be divided or combined, upon request to the Company by the
Warrantholder, into a certificate or certificates representing
the right to purchase the same aggregate number of Rights Agent
Shares.
(e) Exchange or Assignment of Warrant. Any Warrant
certificate may be exchanged without expense for another
certificate or certificates entitling the Warrantholder to
purchase a like aggregate number of Rights Agent Shares as the
certificate or certificates surrendered then entitled such
Warrantholder to purchase. Any Warrantholder desiring to
exchange a Warrant certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed,
the certificate evidencing the Warrant to be so exchanged.
Thereupon, the Company shall execute and deliver to the person
entitled thereto a new Warrant certificate as so requested. Any
Warrantholder desiring to assign a Warrant shall make such
request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate evidencing the Warrant to be
so assigned, with an instrument of assignment duly executed
accompanied by proper evidence of assignment, succession or
authority to transfer, and funds sufficient to pay any transfer
tax, whereupon the Company shall, without charge, execute and
deliver a new Warrant certificate in the name of the assignee
named in such instrument of assignment and the original Warrant
certificate shall promptly be cancelled. The text and form of
the request for assignment shall be substantially as set forth in
Exhibit "B" attached hereto and by this reference incorporated
herein.
(f) Warrantholder. Unless the context indicates otherwise,
the term "Warrantholder" shall include any transferee or
transferee of the Warrant pursuant to Subsection (d) above, and
the term "Warrant" shall include any and all Warrants outstanding
pursuant to this Agreement, including those evidenced by a
certificate or certificates issued upon division, exchange,
substitution, or transfer pursuant to this Agreement.
2. TERMS AND EXERCISE OF WARRANTS
Subject to the terms of this Agreement, the Warrantholder
shall have the right, at any time during the twenty-four (24)
month period (the "Exercise Period") commencing ________________,
1995 (the "Exercise Date") and ending at 5:00 p.m., California
time, on ___________________, 1997 (the "Warrant Expiration
Date"), or if any such date is a day on which banking
institutions are authorized by law to close, then on the next
succeeding day which shall not be such a day, to purchase from
the Company up to the number of fully paid and nonassessable
Rights Agent Shares which the Warrantholder may at the time be
entitled to purchase pursuant to this Agreement, upon surrender
to the Company, at its principal office in San Diego, California,
or at the office of the Company's stock transfer agent or at such
other address as the Company may designate by notice in writing
to the Warrantholder at the address of the Warrantholder
appearing on the books of the Company, of the certificate
evidencing the Warrant to be exercised, together with the form of
Election to Purchase duly completed and signed, and upon payment
to the Company of the Warrant Price (as determined in accordance
with the provisions of Sections 7 and 8 hereof), for the number
of Rights Agent Shares with respect to which such Warrant is then
exercised together with all taxes applicable upon such exercise.
Payment of the aggregate Warrant Price shall be made in cash or
by certified check or cashier's check, payable to the order of
the Company.
Upon such surrender of the Warrant certificate and payment
of such Warrant Price as aforesaid, the Company shall issue and
cause to be delivered with all reasonable dispatch to the
Warrantholder in such name or names as the Warrantholder may
designate in writing, a certificate or certificates for the
number of full Rights Agent Shares so purchased upon the exercise
of the Warrant, together with cash, as provided in Section 9
hereof, with respect to any fractional Rights Agent Shares
otherwise issuable upon such surrender. Such certificate or
certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become
a holder of such Rights Agent Shares as of the close of business
on the date of the surrender of the Warrant and payment of the
Warrant Price, as aforesaid, notwithstanding that the
certificates representing such Rights Agent Shares shall not
actually have been delivered or that the stock transfer books of
the Company shall then be closed. The Warrant shall be
exercisable, at the election of the Warrantholder, either in full
or from time to time in part, and, in the event that the
certificate evidencing the Warrant is exercised with respect to
less than all of the Rights Agent Shares specified therein at any
time prior to the Warrant Expiration Date, a new certificate
evidencing the remaining Rights Agent Shares shall be issued by
the Company.
3. MUTILATED OR MISSING WARRANT
In case the certificate or certificates evidencing the
Warrant shall be mutilated, lost, stolen or destroyed, the
Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of
the mutilated certificate or certificates, or in lieu of and in
substitution for the certificate or certificates lost, stolen or
destroyed, a new Warrant certificate or certificates of like
tenor and date and representing an equivalent right or interest,
but only upon receipt of evidence satisfactory the Company of
such loss, theft or destruction of such Warrant, and of
reasonable bond of indemnity, if requested, also satisfactory in
form and amount and at the applicant's cost. Applicants for such
other reasonable regulations and pay such other reasonable
charges as the Company may prescribe.
4. RESERVATION OF RIGHTS AGENT SHARES
There has been reserved, and the Company shall at all times
keep reserved so long as the Warrant remains outstanding, out of
its authorized Common Stock, such number of shares of its Common
Stock as shall be subject to purchase under the Warrant. Every
transfer agent for the Common Stock issuable upon the exercise of
the Warrant shall be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be
requisite for such purpose. The Company shall keep a copy of
this Agreement on file with every transfer agent for the shares
of Common Stock issuable upon the exercise of the Warrant. The
Company shall supply such transfer agent with duly executed stock
and other certificates for such purpose and shall provide or
otherwise make available any cash which may be payable as
provided in Section 9 hereof.
5. LEGEND ON CERTIFICATE FOR RIGHTS AGENT SHARES
Each certificate for Rights Agent Shares initially issued
upon exercise of the Warrant, unless at the time of exercise such
Rights Agent Shares are registered with the Securities Exchange
Commission (the "Commission"), under the Securities Act of 1933,
as amended (the "Act"), shall bear the following legend:
NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS
CERTIFICATE OR THE SECURITIES PURCHASABLE HEREUNDER
SHALL BE MADE EXCEPT PURSUANT TO REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT
REGISTRATION IS NOT REQUIRED. TRANSFER OF THIS
CERTIFICATE IS ALSO RESTRICTED BY THAT CERTAIN WARRANT
PURCHASE AGREEMENT DATED AS OF __________________,
1995, A COPY OF WHICH IS AVAILABLE FROM THE ISSUER.
Any certificate issued at any time in exchange or
substitution for any certificate bearing such legend (except a
new certificate issued upon completion of a public underwriting
pursuant to a registration statement under the Act of the
securities represented thereby) shall also bear the above legend
unless, in the opinion of such counsel as shall be reasonably
approved by the Company, the securities represented thereby need
no longer be subject to such restrictions.
6. PAYMENT OF TAXES
The Company shall pay all documentary stamp taxes, if any,
attributable to the initial issuance of the Warrant and
underlying shares of Common Stock evidenced thereby; provided,
however, that the Company shall not be required to pay any tax or
taxes which may be payable with respect to any secondary transfer
of the Warrant or such securities.
7. WARRANT PRICE
The price per share at which the Rights Agent Shares shall
be purchasable on the exercise of the Warrant (the "Warrant
Price") shall be four and thirty-four one-hundredths dollars
($4.34) per share, subject to adjustment pursuant to Section 8
hereof.
8. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF RIGHTS AGENT
SHARES
The number and kind of securities purchasable upon the
exercise of the Warrant and the Warrant Price shall be subject to
adjustment from time to time upon the happening of certain
events, as follows:
(a) In case the Company shall (i) pay a dividend in Common
Stock or make a underwriting in Common Stock, (ii) subdivide its
outstanding Common Stock, (iii) combine its outstanding Common
Stock into a smaller number of shares of Common Stock, or (iv)
issue by reclassification of its Common Stock other securities of
the Company, the number and kind of securities purchasable upon
the exercise of the Warrant immediately prior thereto shall be
adjusted so that the Warrantholder shall be entitled to receive
the number and kind of securities of the Company which it would
have owned or would have been entitled to receive after the
happening of any of the events described above had the Warrant
been exercised immediately prior to the happening of such event
or any record date with respect thereto. Any adjustment made
pursuant to this Subsection (a) shall become effective on the
effective date of such event retroactive to the record date, if
any, for such event.
(b) No adjustment in the number of Rights Agent Shares
purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent
(1%) in the number of Rights Agent Shares (calculated to the
nearest full share) then purchasable upon the exercise of the
Warrant or, if the Warrant is not then exercisable, the number of
Rights Agent Shares purchasable upon the exercise of the Warrant
on the first date thereafter that the Warrant becomes
exercisable; provided, however, that any adjustment which by
reason of this Subsection (b) is not required to be made
immediately shall be carried forward and taken into account in
any subsequent adjustment.
(c) Whenever the number of Rights Agent Shares purchasable
upon the exercise of the Warrant is adjusted as herein provided,
the Warrant Price payable upon the exercise of the Warrant shall
be adjusted by multiplying such Warrant Price immediately prior
to such adjustment by a fraction, of which the numerator shall be
the number of Rights Agent Shares purchasable upon the exercise
of the Warrant immediately prior to such adjustment, and of which
the denominator shall be the number of Rights Agent Shares so
purchasable immediately thereafter.
(d) For the purpose of this Section 8, the term "Common
Stock" shall mean: (i) the class of stock designated as the
Common Stock of the Company at the date of this Agreement; or
(ii) any other class of stock resulting from successive changes
or reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from
no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 8, the
Warrantholder shall become entitled to purchase any securities of
the Company other than Rights Agent Shares, thereafter the number
of such other securities so purchasable upon the exercise of the
Warrant and the Warrant Price of such securities shall be subject
to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect
to the Rights Agent Shares contained in this Section 8.
(e) Whenever the number of Rights Agent Shares purchasable
upon the exercise of the Warrant or the Warrant Price is adjusted
as herein provided, the Company shall cause to be promptly mailed
to the Warrantholder by first class mail, postage prepaid, notice
of such adjustment and a certificate of a firm of independent
certified public accountants selected by the board of directors
of the Company (who may be the regular accountants employed by
the Company) setting forth the number of Rights Agent Shares
purchasable upon the exercise of the Warrant or the Warrant Price
after such adjustment, a brief statement of the facts requiring
such adjustment and the computation by which such adjustment was
made.
(f) In case of any reclassification, capital reorganization
or other change in the outstanding shares of Common Stock of the
Company (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result
of an issuance of Common Stock by way of dividend or other
distribution, or of a subdivision or combination of the Common
Stock), or in case of any consolidation or merger of the Company
with or into another corporation or entity (other than a merger
with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification,
capital reorganization or other change in the outstanding shares
of Common Stock of the Company) as a result of which the holders
of the Company's Common Stock become holders of other shares or
securities of the Company or of another corporation or entity, or
such holders receive cash or other assets, or in case of any sale
or conveyance to another corporation of the property, assets or
business of the Company as an entirety or substantially as an
entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the
Warrantholder an agreement that the Warrantholder shall have the
right thereafter upon payment of the Warrant Price in effect
immediately prior to such action to purchase upon the exercise of
the Warrant the kind and number of securities and property which
it would have owned or have been entitled to have received after
the happening of such reclassification, capital reorganization,
change in the outstanding shares of Common Stock of the Company,
consolidation, merger, sale or conveyance had the Warrant been
exercised immediately prior to such action.
The agreement referred to in this Subsection (f) shall
provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this
Section 8. The provisions of this Subsection (f) shall similarly
apply to successive reclassifications, capital reorganizations,
changes in the outstanding shares of Common Stock of the Company,
consolidations, mergers, sales or conveyances.
(g) Except as provided in this Section 8, no adjustment
with respect to any dividends shall be made during the term of
the Warrant or upon the exercise of the Warrant.
(h) No adjustments shall be made in connection with the
public sale and issuance of Common Stock, or the options or
warrants issued in connection therewith, or for any warrants or
options outstanding on the date of this Agreement, including,
without limitation, the WHR Stock Purchase Commitment.
(i) Irrespective of any adjustments in the Warrant Price or
the number or kind of securities purchasable upon the exercise of
the Warrant, the Warrant certificate or certificates theretofore
or thereafter issued may continue to express the same price or
number or kind of securities stated in the Warrant initially
issuable pursuant to this Agreement.
9. FRACTIONAL INTEREST
The Company shall not be required to issue fractional Rights
Agent Shares upon the exercise of the Warrant. If any fraction
of a Rights Agent Share would, except for the provisions of this
Section 9, be issuable upon the exercise of the Warrant (or
specified portion thereof), the Company shall pay an amount in
cash equal to the then current market price of the Company's
Common Stock multiplied by such fraction. For purposes of this
Agreement, the term "current market price" shall mean: (a) if the
Common Stock is traded in the over-the-counter market and not on
the NASDAQ National Market System (the "NASDAQ/NMS") or on any
national securities exchange, the average between the per share
closing bid and asked prices of the Common Stock for the 30
consecutive trading days immediately preceding the date in
question, as reported by the NASDAQ/NMS or an equivalent
generally accepted reporting service; or (b) if the Common Stock
is traded on the NASDAQ/NMS or on a national securities exchange,
the average for the 30 consecutive trading days immediately
preceding the date in question of the daily per share closing
prices of the Common Stock on the NASDAQ/NMS or on the principal
national stock exchange on which it is listed, as the case may
be. The closing price referred to in clause (b) above shall be
the last reported sales price or, in case no such reported sale
takes place on such day, the average of the reported closing bid
and asked prices on the NASDAQ/NMS or on the principal national
securities exchange on which the Common Stock is then listed, as
the case may be.
10. NO RIGHTS AS SHAREHOLDER; NOTICES OF WARRANTHOLDER
Nothing contained in this Agreement or in the Warrant shall
be construed as conferring upon the Warrantholder or its
transferee any rights as a
shareholder of the Company, either at law or in equity, including
the right to vote, receive dividends, consent or receive notices
as a shareholder with respect to any meeting of shareholders for
the election of directors of the Company or for any other matter.
If, however, at any time prior to the Warrant Expiration Date and
prior to the exercise of the Warrant, any action which requires
an adjustment pursuant to Section 8 occurs, or a dissolution,
liquidation or winding up of the Company (other than in
connection with a consolidation, merger or sale of its property,
assets and business as an entirety) is proposed, then the Company
shall give notice in writing of such occurrence or proposal to
the Warrantholder, as provided in Section 13 hereof, at least 30
days prior to the date fixed as the record date or the date of
closing the transfer books for the determination of the
shareholders entitled to any relevant dividend, underwriting,
subscription rights or other rights or for the determination of
the shareholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record
date or such date of closing the transfer books, as the case may
be.
11. REGISTRATION RIGHTS
(a) Demand Registration. When so requested in writing at
any time during the Exercise Period by the holder or holders then
of record of more than 50% of the outstanding Warrant(s) and any
Rights Agent Shares issued upon the exercise of the Warrant(s)
(the "50% Holder"), the Company shall, as promptly as practicable
after receipt of such request, but in no event later than 90 days
therefrom, prepare and file with the Commission a registration
statement pursuant to Rule 415 of the Act on such form as may
then be available to the Company, for the registration under the
Act of a public offering by such 50% Holder of all or any portion
of the Rights Agent Shares. The preparation and filing of the first
registration statement requested pursuant to this Subsection (a)
shall be without any expense to such 50% Holder (other
than fees and expenses of counsel to such 50% Holder
and any underwriting discounts or commissions) for that
one time only. The Company shall be required to file only one
such registration statement hereunder, but shall use its best
efforts to keep such registration statement effective for a
period of not less than twenty-four (24) months.
Within ten (10) days after receiving any such request, the
Company shall give notice to any other holders of Warrants or
Rights Agent Shares advising them that the Company is filing such
registration statement, and offering to include therein all or
any portion of the Rights Agent Shares of such holders. The Company shall
not be obligated to any such other holder unless such other holder shall
accept such offer by notice in writing to the Company within
thirty (30) days after the receipt thereof. Notwithstanding any
provision to the contrary, the Company's obligation to file a
registration statement shall not be satisfied unless and until
the registration statement is declared effective by the
Commission and it is effective for a period of at least twenty-
four (24) months following such effective date. The registration
rights of the holder shall not be extinguished if the
registration statement is withdrawn for any reason.
The Company may include other of its securities in such
registration statement, unless the underwriter of such offering
reasonably advises the Company that the inclusion of such other
securities will materially and adversely affect the underwriting
of, or the market for, the Rights Agent Shares.
(b) Piggyback Registration. In addition to the rights of
the Warrantholder pursuant to Subsection (a) above, if the
Company shall at any time during the period commencing with the
Exercise Date and ending with the Warrant Expiration Date prepare
and file a registration statement under the Act with respect to
the public offering of any of its securities (other than on Forms
S-8, S-14 or S-15 or other similar form inappropriate to the
registration of the Rights Agents Shares), and pursuant to the then
applicable rules and regulations under the Act a secondary
offering of the Rights Agent Shares by the Warrantholder
may be combined with such public offering in a single
registration, the Company shall in every such instance
give reasonable written notice thereof to the Warrantholder
thirty (30) or more days prior to the filing of such registration
statement, and shall upon the written request of the
Warrantholder made within fifteen (15) days of the mailing of
said written notice by the Company, include in such registration
statement such number of Rights Agent Shares as the Warrantholder
may request. Any such registration statement shall remain
effective for a period of not less than ninety (90) days
following its effective date; provided, however, that if the
Warrantholder defers the sale of its Rights Agent Shares pursuant
to Subsection (c) below, then the Company shall keep such
registration statement current for an additional period of ninety
(90) days; provided further, that the Company shall have no duty
to file any amendment to any such registration statement at any
time that the Company reasonably believes that disclosure of the
information required to be included in such amendment would be
premature or contrary to the best interests of the Company and
its security holders. The inclusion of such Rights Agent Shares
in any registration statement shall be without any expense to the
Warrantholder, other than fees and expenses of counsel to the
Warrantholder and any underwriting discounts or commissions.
Neither the delivery of such notice by the Company nor such
request by the Warrantholder shall in any way obligate the
Company to file such registration statement, and notwithstanding
the filing of such registration statement, the Company may, at
any time prior to the effective date thereof, determine not to
offer the securities to which such registration statement
relates, without liability to the Warrantholder. In the event
the Company fails to receive written notice from the
Warrantholder within fifteen (15) days of the mailing of said
written notice by the Company, then the Company shall treat such
failure as having the same force and effect as if the Warrant
holder had advised the Company that the Warrantholder does not
intend to include any of its Rights Agent Shares in such
registration statement. If the Warrantholder shall advise or be
deemed to have advised the Company of its intention not to
include any of its Rights Agent Shares in such registration
statement, then the Warrantholder shall, for a period of ninety
(90) days thereafter, refrain from demanding its rights pursuant
to Subsection (a).
(c) Notwithstanding the provisions of Subsection (b) above,
if the offering subject to any registration statement referred to
in Subsection (b) is made by the Company and is underwritten, and
if the underwriter makes a written determination prior to the
effectiveness of such registration statement and so requests and
such request is based upon the opinion of the underwriter that
the sale of the Rights Agent Shares to be registered on such
registration statement by the Warrantholder pursuant to
Subsection (b) will materially and adversely interfere with such
planned offering, then: (i) the Warrantholder shall agree not to
sell any Rights Agent Shares, whether pursuant to such
registration statement or otherwise, for a period not to exceed
ninety (90) days following the effective date of such
registration statement, and the Company shall, at the expiration
of such ninety (90) day period, at its expense, maintain the
currency of the registration statement and take such other steps
as may be required to permit the Warrantholder to sell Rights
Agent Shares pursuant to such registration statement for an
additional period of ninety (90) days following the expiration of
such ninety (90) days period; provided, however, that the Company
shall have no duty to file any amendment to any such registration
statement at any time that: (A) the Company reasonably believes that
disclosure of the information required to be included in such
amendment would be premature or contrary to the best interests of
the Company and its security holders; or (B) the underwriter makes a
written determination prior to the filing of any such amendment requesting
that the Company not file such amendment and such request is based upon the
opinion of the underwriter that the sale of the Rights Agent Shares to be
registered on such amendment by the Warrantholder will materially and
adversely interfere with the Company's planned offering; and (ii) the
Warrantholder shall agree that the Rights Agent Shares shall be sold
through such underwriter in the same manner as the other securities that
are the subject of the registration, and shall pay to such
underwriter a commission in respect of such Rights Agent Shares
at the same rate as the commission to be paid to such underwriter
in respect of the other securities that are the subject of such
registration.
If securities are proposed to be offered for sale pursuant
to such registration statement by other security holders of the
Company, and the total number of securities to be offered by the
Warrantholder and such other selling security holders is required
to be reduced pursuant to a request from the underwriter (which
request shall be made only for the reasons and in the manner set
forth above in this Subsection (c)), then the number of Rights
Agent Shares to be offered by the Warrantholder pursuant to such
registration statement shall equal the number that bears the same
ratio to the maximum number of securities that the underwriter
believes may be included for all the selling security holders
(including the Warrantholder) as the original number of Rights
Agent Shares proposed to be sold by the Warrantholder bears to
the total original number of securities proposed to be offered by
the Warrantholder and the other selling security holders.
(d) The Company shall use its best efforts to cause any
registration statement covering all or any portion of the Rights
Agent Shares to become effective as promptly as possible and, if
any stop order shall be issued in connection therewith, to use
its best efforts to obtain the removal of such order. The
Company shall furnish the selling Warrantholder with copies of
preliminary prospectuses (together with any supplements thereto)
and other documents necessary or incidental to the offering being
made by the Warrantholder in such quantities as the Warrantholder
may reasonably request. The Warrantholder agrees to cooperate in
all respects with the Company in effectuating the foregoing. The
obligations of the Company to the Warrantholder hereunder are
expressly conditioned on the timely furnishing in writing by the
Warrantholder to the Company of such information concerning the
Warrantholder and the terms of the Warrantholder's proposed
offering as the Company may reasonably request.
(e) In connection with any registration of all or any
portion of the Rights Agent Shares (and the Warrant, if
applicable), the Company shall, without any expense to the
Warrantholder (other than fees and expenses of counsel to the
Warrantholder and any underwriting discounts or commissions),
prepare and file such documents as may be necessary to register
or qualify such Rights Agent Shares under the securities or blue
sky laws of such states as the Warrantholder shall reasonably
request, and use its best efforts to do any and all other acts
and things, consistent with its existing business practices, that
may reasonably be necessary or advisable to enable the
Warrantholder to consummate a public sale in such states of such
Rights Agent Shares; provided, however, that in connection with
any registration statement filed pursuant to Subsection (b)
above, the Company shall be required to make the Rights Agent
Shares eligible for public offering and sale only in such
additional states (including the District of Columbia) as any
other securities of the Company included in such registration
statement are eligible for public offering and sale. In no event
shall the Company be obligated to qualify to do business in any
state where it is not so qualified at the time of filing such
documents or to take any action which would subject it to
unlimited service of process in any state where it is not so
subject at such time. The Company shall keep any such filing
current for the time period it is obliged to keep any
registration statement current pursuant to Subsections (a), (b)
or (c).
(f) Nothing herein shall be construed to require the
Warrantholder to exercise the Warrant with respect to any Rights
Agent Shares which the Warrantholder is entitled to require the
Company to register pursuant to any provision of this Section 11
prior to the effective date of the registration statement
effecting such registration, and the Warrantholder, at its
election, to the extent permissible by law, may exercise such
Warrant against payment of the proceeds of the sale of the
registered Rights Agent Shares in the offering covered by such
registration statement.
(g) The provisions of this Section 11 and of Section 12
below shall apply to the extent provided herein if the Company
chooses to file an offering statement under Regulation A
promulgated under the Act.
(h) The Company agrees that until the Rights Agent Shares
have been sold under a registration statement or pursuant to Rule
144 under the Act, it shall keep current in filing all materials
required to be filed with the Commission in order to permit
holders of the Rights Agent Shares, if they otherwise comply with
the requirements of Rule 144, to sell Rights Agent Shares under
such Rule.
12. INDEMNITY AND CONTRIBUTION PROVISIONS
The Company, the Rights Agent, and each Participating Agent
hereby agree to the following indemnity provisions:
B. In the event of the filing of any registration
statement with respect to the Warrant or the Rights Agent Shares
pursuant to Section 11 above, the Company agrees to indemnify and
hold harmless the Warrantholder(s) and any person who controls
any such person within the meaning of the Act, and each of their
directors, officers, employees, and agents, against losses,
claims, damages, or liabilities, joint and several, to which any
such person, or any director, officer, employee, or agent, may
become subject under the Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading. Subject to Subsection C of
this Section 12, the Company agrees to reimburse any legal or
other expenses reasonably incurred by such Rights Agent, each
member of the selling group, and such controlling person, and
each of their directors, officers, employees, and agents, in
connection with the investigation or the defense of any such
loss, claim, damage, liability, or action; provided, however,
that the Company will not be liable under this Section 12,
Subsection A, if such loss, claim, or liability arises out of or
is based on an untrue statement or alleged untrue statement or
omission or alleged omission made in the Prospectus in reliance
upon and in conformity with written information furnished to the
Company by or on behalf of the Warrantholder(s) specifically for
use in preparation thereof. A person who controls the
Warrantholder(s) or any of their directors, officers, employees,
or agents, will be covered by the indemnity agreement in this
Section 12, Subsection A, for all such losses, claims, damages,
liabilities, and expenses irrespective of whether they are based
on Section 15 of the Act. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
C.
C. Each Warrantholder agrees, jointly and severally, to
indemnify and hold harmless the Company, each of its directors,
each of its officers who signs the Registration Statement, and
any person who controls the Company within the meaning of the
Act, against any losses, claims, damages, or liabilities to which
the Company or any such director, officer, or controlling person
may become subject, under the Act or otherwise, if such losses,
claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based on any untrue or alleged untrue
statement of material fact contained in the Prospectus or arise
out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, in each case if, but only if, such untrue
statement or alleged untrue statement or omission or alleged
omission was made in the Prospectus in reliance upon and in
conformity with written information concerning the
Warrantholder(s) furnished to the Company by or on behalf of the
Warrantholder(s) specifically for use in the preparation thereof.
Subject to Subsection C of this Section 12, the Rights Agent and
each Participating Agent agrees, jointly and severally, to
reimburse any legal or other expense reasonably incurred by the
Company or such director, officer, or controlling person in
connection with the investigation or the defense of any such
loss, claim, damage, liability, or action. This indemnity
agreement will be in addition to any liability which such person
may otherwise have.
D. Promptly after receipt by an indemnified party under
this Article IV of notice of the commencement of any action, the
indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party under this Section 12, notify
the indemnifying party in writing of the commencement thereof;
but the omission to notify the indemnifying party will not
relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 12. In case
any such action is brought against any indemnified party and it
notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and,
to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof with counsel who shall be reasonably satisfactory to such
indemnified party; and after notice from the indemnifying party
to such indemnified party of its election to so assume the
defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 12 for any legal or
other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs
of investigation. In any such action, any indemnified party
shall have the right to retain its own counsel, but the fees and
expense of such counsel shall be at the expense of such
indemnified party unless: (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of
such counsel; or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual
or potential differing legal defenses or interests between them.
The indemnifying party shall not be liable for any settlement of
any proceeding or claim effected without its written consent; but
if settled with such consent or if there is a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by
reason of such settlement or judgment.
E. If the indemnification provided for in Subsection A or
B of this Section 12 is for any reason, other than as specified
in such sections, held by a court to be unavailable and the
Company or the Warrantholder(s) has been required to pay damages
as a result of a determination by a court that the Prospectus
contains an untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, then the Company shall contribute to the damages paid
by the Warrantholder(s) and such persons shall contribute to the
damages paid by the Company (but in each case only to the extent
that such damages arise out of or are based upon such untrue
statement or omissions): (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the
one hand and the Warrantholder(s) on the other from the offering
of the Securities; or (ii) if the allocations provided by clause
(i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect the relative fault of the Company
and the Warrantholder(s) in connection with statements or
omissions which resulted in such damages, as well as any other
relevant equitable considerations. The relative benefits
received by the Company and the Warrantholder(s) shall be deemed
to be in the same proportion as the total net proceeds from the
Offering (before deducting expenses) received by the Company
bears to the total commissions received by the Warrantholder(s)
as set forth in the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the
untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company or
Warrantholder(s) and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such
untrue statement or omission. For purposes of this Section 12,
Subsection D, the term "damages" shall include any legal or other
expenses reasonably incurred by the Company or Warrantholder(s)
in connection with investigation or defending any action or claim
which is the subject of the contribution provisions of this
Article IV, Section D. Notwithstanding the provisions of this
Section 12, Subsection D, the Rights Agent shall not be required
to contribute any amount in excess of the amount by which the
total Rights Agent compensation received by it under the Rights
Agent Agreement exceeds the amount of any damages which the
Rights Agent has otherwise been required to pay by reason of any
such untrue statements or omissions. No person adjudged guilty
of fraudulent misrepresentation within the meaning of Section
11(f) of the Act shall be entitled to contribution from any
person who was not adjudged guilty of such fraudulent
misrepresentation. Under this Section 12, Subsection D, the
obligations of the Warrantholder(s) to contribute are several in
proportion to their respective obligations and not joint.
F. The agreements contained in this Section 12 and the
representations and warranties of the Company and the
Warrantholder in this Agreement shall remain operative and in
full force and effect regardless of: (i) any investigation made
by or on behalf of: (a) the Warrantholder or any person
controlling the Warrantholder; or (b) the Company, any of its
directors or officers, or any person controlling Company or any
of its directors or officers; (ii) acceptance of any Rights Agent
Shares and payment therefor hereunder; and (iii) any termination
of this Agreement.
13. NOTICES
G. Notices. Except as otherwise expressly provided
herein, notice given pursuant to any of the provisions of this
Agreement shall be in writing and shall be delivered personally,
by first class, certified, or registered mail, by facsimile
transmission, or by Federal Express or any other reputable
overnight courier service addressed as set forth below (or in
each case to such other address as the person to be notified may
have requested in writing:
1. If to the Company:
SDNB Financial Corp.
1420 Kettner Boulevard
San Diego, California 92101
Attention: Howard W. Brotman,
Senior Vice President and Chief Financial Officer
With a copy to:
Theodore G. Johnsen, Esq.
ARNOLD & PORTER
777 South Figueroa Street, 44th Floor
Los Angeles, California 90017
2. If to the Rights Agent:
Torrey Pines Securities, Inc.
140 Marine View Drive, Suite 110
Solana Beach, California 92075
Attention: Jack C. Smith
President
With a copy to:
Bruce J. Rushall, Esq.
RUSHALL & McGEEVER
2111 Palomar Airport Road, Suite 200
Carlsbad, California 92009
14. PARTIES IN INTEREST
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company, the Warrantholder,
and, to the extent expressed, any holder of Rights Agent Shares,
any person controlling the Company or the Warrantholder or any
holder of Rights Agent Shares, directors of the Company, nominees
for directors (if any) named in the final prospectus, or officers
of the Company who have signed the registration statement, any
legal or equitable right, remedy or claim under this Agreement,
and this Agreement shall be for the sole and exclusive benefit of
the aforementioned parties.
15. MISCELLANEOUS PROVISIONS
(a) Successors. All the covenants and provisions of this
Agreement by or for the benefit of the parties listed in Section
14 above shall bind and inure to the benefit of their respective
executors, administrators, successors and assigns hereunder;
provided, however, that the rights of the Warrantholder shall be
assignable only to those persons and entities specified in
Section 1, Subsection (d), hereof, in which event such assignee
shall be bound by each of the terms and conditions of this
Agreement.
(b) Merger or Consolidation of the Company. The Company
shall not merge or consolidate with or into any other corporation
or sell all or substantially all of its property to another
corporation, unless it complies with the provisions of Section 8,
Subsection (f), hereof.
(c) Survival of Representations and Warranties. All
statements contained in any schedule, exhibit, certificate or
other instrument delivered by or on behalf of the parties hereto,
or in connection with the transactions contemplated by this
Agreement, shall be deemed to be representations and warranties
hereunder. Notwithstanding any investigations made by or on
behalf of the parties to this Agreement, all representations,
warranties and agreements made by the parties to this Agreement
or pursuant hereto shall survive.
(d) Choice of Law. This Agreement and the rights of the
parties hereunder shall be governed by and construed in
accordance with the laws of the State of California, including
all matters of construction, validity, performance, and
enforcement, and without giving effect to the principles of
conflict of laws.
(e) Jurisdiction. The parties submit to the jurisdiction
of the Courts of the State of California or a Federal Court
empaneled in the State of California for the resolution of all
legal disputes arising under the terms of this Agreement.
(f) Entire Agreement. Except as provided herein, this
Agreement, including exhibits, contains the entire agreement of
the parties, and supersedes all existing negotiations,
representations or agreements and all other oral, written, or
other communications between them concerning the subject matter
of this Agreement.
(g) Severability. If any provision of this Agreement is
unenforceable, invalid, or violates applicable law, such
provision shall be deemed stricken and shall not affect the
enforceability of any other provisions of this Agreement.
(h) Captions. The captions in this Agreement are inserted
only as a matter of convenience and for reference and shall not
be deemed to define, limit, enlarge, or describe the scope of
this Agreement or the relationship of the parties, and shall not
affect this Agreement or the construction of any provisions
herein.
(i) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but
all of which shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the date first above written.
SDNB FINANCIAL CORP. TORREY PINES SECURITIES, INC.
a California corporation a California corporation
By: By:
Name and Title Name and Title
<PAGE>
EXHIBIT A
SDNB FINANCIAL CORP.
RIGHTS AGENT WARRANT
AND
ELECTION TO PURCHASE
SDNB FINANCIAL CORP.
1420 Kettner Boulevard
San Diego, California 92101
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the attached Rights Agent Warrant (the
"Warrant") and to purchase thereunder __________ Rights Agent
Shares provided for therein and hereby tenders
$_______________________ in payment of the actual exercise price
thereof, and requests that certificates evidencing the Rights
Agent Shares be issued in the name of
(Please Print Name, Address and SSN or EIN of Assignee)
and, if said number of Rights Agent Shares shall not be the total
possible number of Rights Agent Shares purchasable hereunder,
that a new Warrant certificate for the balance of the Rights
Agent Shares purchasable under the attached Warrant certificate
be registered in the name of the undersigned Warrantholder or his
or assignee as indicated below and delivered at the address
stated below:
Dated: , 19
Name of Warrantholder or Assignee:
(Please Print)
Address:
Signature:
Signature Guaranteed:
Note: The above
signature must correspond
with the name as written
upon the face of the
attached Warrant
certificate in every
particular respect,
without alteration or
enlargement any change
whatever, unless this
Warrant has been duly
assigned.
<PAGE>
SDNB FINANCIAL CORP.
RIGHTS AGENT WARRANT NO. 001
NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS WARRANT OR
THE SECURITIES PURCHASABLE HEREUNDER SHALL BE MADE EXCEPT
PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT REGISTRATION IS NOT REQUIRED. TRANSFER OF THIS
WARRANT IS ALSO RESTRICTED BY THAT CERTAIN RIGHTS AGENT WARRANT
PURCHASE AGREEMENT DATED AS OF AUGUST ___, 1995, A COPY OF WHICH
IS AVAILABLE FROM THE ISSUER.
WARRANT TO PURCHASE SHARES OF NO PAR VALUE COMMON STOCK
OF SDNB FINANCIAL CORP.
Exercisable upon issuance
Void after _______________, 1997
THIS CERTIFIES that, for value received, the undersigned holder (the
"Warrantholder"), or registered assigns, is entitled, subject to the terms
and conditions set forth in this warrant (the "Warrant"), to purchase from
SDNB Financial Corp., a California corporation (the "Company"), the above-
stated number of shares of the Company's no par value common stock (the
"Rights Agent Shares"). The Warrant may be exercised at any time during
the twenty-four (24) month period commencing on ________________, 1995, and
continuing up to 5:00 p.m., California time, on ___________________, 1997,
at a price of four and thirty-four one-hundredths dollars ($4.34) per
share, subject to adjustment from time to time as set forth in that certain
Rights Agent Warrant Purchase Agreement between Torrey Pines Securities,
Inc., a California corporation, and the Company, dated effective as of
August ___, 1995, and subject to all the terms thereof, including the
limitations on transferability set forth therein.
THIS WARRANT may be exercised by the holder thereof, in whole or in
part (but not as to a fractional Rights Agent Share), by the presentation
and surrender of this Warrant with the form of Election to Purchase duly
executed, with signature(s) guaranteed, at the principal office of the
Company or its stock transfer agent (or at such other address as the
Company may designate by notice to the holder hereof at the address of such
holder appearing on the books of the Company), and upon payment to the
Company of the purchase price in cash or by certified check or bank
cashier's check. The Rights Agent Shares so purchased shall be deemed to
be issued to the holder hereof as the record owner of such Rights Agent
Shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such Rights Agent Shares. The
Rights Agent Shares so purchased shall be registered to the holder (and, if
requested, certificates issued) promptly after this Warrant shall have been
so exercised and unless this Warrant has expired or has been exercised, in
full, a new Warrant identical in form, but representing the number of
Rights Agent Shares with respect to which this Warrant shall not have been
exercised, shall also be issued to the holder hereof.
NOTHING CONTAINED herein shall be construed to confer upon the holder
of this Warrant, as such, any of the rights of a shareholder of the
Company.
"WARRANTHOLDER"
TORREY PINES SECURITIES, INC., SDNB FINANCIAL CORP.
a California corporation a California corporation
By: By:
140 Marine View Drive, Suite 110 Name of President or Vice President
Solana Beach, California 92075
Name of Secretary or Assistant
Secretary
<PAGE>
EXHIBIT B
SDNB FINANCIAL CORP.
RIGHTS AGENT WARRANT
ASSIGNMENT
(To be signed only upon assignment of the Rights Agent Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto:
(Please Print Name, Address and SSN or EIN of Assignee)
the attached Warrant No. , to purchase shares of
the Common
(number)
Stock, no par value, of SDNB Financial Corp. (the "Company"),
hereby irrevocably constituting and appointing the Company and/or
its transfer agent as its attorney to transfer said Warrant on
the books of the Company, with full power of substitution.
By its signature below, the undersigned hereby represents
and warrants that to the best of its knowledge, after reasonable
investigation, this assignment is a permitted transfer under
Section 1(d) of the Rights Agent Warrant Purchase Agreement.
Dated: , 19
Signature of Registered Holder
Signature Guaranteed:
Note: The
above signature must correspond
with the name as written upon the
face of the attached Warrant
certificate in every particular
respect, without alteration or
enlargement any change whatever,
unless this Warrant has been duly
assigned.
<PAGE>
EXHIBIT C
FORM OF
PARTICIPATING AGENT AGREEMENT
PARTICIPATING AGENT AGREEMENT
SDNB FINANCIAL CORP.
RIGHTS OFFERING
____________, 1995
TORREY PINES SECURITIES, INC.
140 Marine View Drive, Suite 110
Solana Beach, California 92075
Dear Sirs:
We understand that, pursuant to the terms of an agreement,
executed as of August ___, 1995 (the "Rights Agent Agreement"),
between you and SDNB Financial Corp., a California corporation
(the "Issuer"), you serve as Rights Agent for the Issuer in
connection with the Issuer's offering (the "Offering") of up to
769,582 shares of its Common Stock, no par value (the "Shares"),
to holders of record of its Common Stock on May 5, 1995, pursuant
to transferable subscription rights (the "Basic Subscription
Rights" and, together with the "Oversubscription Rights,"
hereinafter referred to as the "Subscription Rights") (the
Subscription Rights and the Shares are collectively referred to
herein as the "Securities"). This Participating Agent Agreement
(the "Participating Agent Agreement" or "this Agreement") shall
evidence our agreement to act as a Participating Agent in the
Offering and our participation in the Offering shall be subject
at all time to the provisions of this Agreement. This Agreement,
as it may be amended or supplemented, shall become effective with
respect to our participation in the Offering upon the later of
the Effective Date hereof (as defined on the execution page of
this Agreement) or the Effective Date of the Rights Agent
Agreement. Our acceptance of this Agreement will constitute our
confirmation that, except as otherwise indicated in a written
communication previously furnished to you, each statement
included in the Participating Agent Questionnaire (in the form
attached hereto as Exhibit "A" and by this reference incorporated
herein or in the form otherwise furnished to us) is correct. All
references in this Agreement to "you" or to the "Rights Agent"
shall mean Torrey Pines Securities, Inc., a California
corporation. All other capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the
Rights Agent Agreement. This Agreement may be supplemented or
amended by you by written notice to us and any such supplement or
amendment to this Agreement will be effective with respect to the
Offering after this Agreement is so amended or supplemented.
1. Rights Agent Agreement; Authority of Rights
Agent. We authorize, consent to and ratify your execution and
delivery of the Rights Agent Agreement, of any amendment or
supplement thereto and of any associated agreement (collectively
referred to hereinafter as, the "Rights Agent Agreement") on our
behalf to the Issuer with respect to the Offering or the
Securities in such form as you determine. We expressly adopt and
agree to be bound by all terms of the Rights Agent Agreement as
executed, including, without limitation, the representations,
warranties, and agreements set forth in Section C.2 of Article I
thereof.
You are authorized to take such action as you deem necessary
or advisable to carry out this Agreement, the Rights Agent
Agreement and the sale of the Securities, and to agree to any
waiver or modification of any provision of the Rights Agent
Agreement. It is expressly understood and agreed that Torrey
Pines Securities, Inc. may act on behalf of all Participating
Agents.
2. Registration Statement and Prospectus. You will
furnish to us, upon our request, to the extent made available to
you by the Issuer, copies of the registration statement relating
to the Offering or the Securities which was filed with the
Securities and Exchange Commission (the "Commission") pursuant to
the Securities Act of 1933, as amended (the "1933 Act"), and Post-
Effective Amendment No. 4 thereto (excluding exhibits but
including any documents incorporated by reference therein). Such
registration statement(s), as amended, and the form of
prospectus(es) relating to the Offering or to the Securities
constituting a part thereof, including all documents incorporated
therein by reference, as from time to time amended or
supplemented by the filing of documents pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the
1933 Act or otherwise, are referred to herein as the
"Registration Statement" and the "Prospectus."
3. Public Offering. The sale of the Securities to the
public shall commence as soon as you deem advisable. When
notified by you that the Securities are publicly offered for
sale, we will offer and sell the Securities in conformity with
the terms of the Offering set forth in the Prospectus, in the
Rights Agent Agreement and in conformity with the following:
(a) We will instruct each Holder on behalf of whom we
solicit the exercise of, or on behalf of whom we exercise,
Subscription Rights that payment for the aggregate Subscription
Price attributable to any Subscription Rights so solicited or
exercised must be made by bank certified check or cashier's
check, payable to the order of the Subscription Agent.
(b) We will transmit to the Subscription Agent, as defined
in the Prospectus, any funds received from a Holder by 12:00
p.m., New York time, on the business day following the date of
our receipt of such funds.
(c) During the duration of the Offering, we will promptly
notify the Rights Agent, as defined in the Prospectus, of any
acquisition by us, or any of our associated or affiliated
persons, of any unregistered securities of the Issuer. Such
notification shall set forth complete details of any such
acquisition, including, but not limited to, the date of
acquisition, the acquisition price, and the amount of
unregistered securities so acquired.
(d) During the duration of the Offering, we will promptly
notify the Rights Agent of any contractual or other relationship,
other than the relationship evidenced hereby, between us and the
Issuer.
(e) We will not sell any Securities to any account over
which we have discretionary authority. We will also comply with
any other restrictions which may be set forth in the Rights Agent
Agreement. The initial public advertisement, if any, with
respect to the Securities shall appear on such date, and shall
include the names of such Participating Agents, as you may
determine.
4. Scope of Participation. Our participation in the
Offering and in the sale of the Securities offered thereby shall
be limited to: (i) prior to the Expiration Date of the Offering,
soliciting the exercise of Subscription Rights at the
Subscription Price of $4.34 per share; and (ii) prior to the
Termination Date of the Offering, soliciting the purchase of any
unsubscribed Shares at a purchase price of $4.34 per share.
5. Open Market Transactions. We represent, warrant and
agree that in connection with the Offering of the Securities we
have complied and will comply with the provisions of Rule 10b-6
under the 1934 Act with regard to trading in the Securities. For
purposes of the foregoing sentence, we agree that, in addition to
the Securities, other securities of the Issuer or securities of
any guarantor of the Securities or any other right or option to
purchase or otherwise acquire any securities of the Issuer shall
be considered securities of the same class and series as the
Securities.
6. Compensation. As compensation for our services in
the Offering, you agree to pay to us compensation attributable to
any Subscription Rights validly exercised through us, exclusive
of Excluded Subscriptions (as defined in the prospectus) or to
any unsubscribed Shares purchased on behalf of customers
solicited by us, which compensation is equal to four percent
(4.0%) of the aggregate Subscription Price, as defined in the
Prospectus, or aggregate purchase price, as applicable,
attributable to any shares of the Issuer's Common Stock placed by
us in the Offering other than Shares exercised pursuant to the
Excluded Shares Subscriptions or shares purchased by WHR pursuant
to the WHR Stock Purchase Commitment (as defined in the
Prospectus).
Subject to the Issuer's acceptance of each subscription, and
subject to and conditioned on your prior receipt of good funds in
payment of your commissions under the Rights Agent Agreement
(collectively, the "Rights Agent Commissions"), commissions will
be payable to us within three (3) business days after the Rights
Agent's receipt of good funds in payment of the Rights Agent
Commissions.
Under no circumstances may you withhold any portion of the
Rights Agent Commissions to be applied toward payment of our
compensation.
7. Legal Qualifications. You shall inform us, upon
request, of the states and other jurisdictions of the United
States in which it is believed that the Securities are qualified
for sale under, or are exempt from the requirements of, their
respective securities laws, but you assume no responsibility with
respect to our right to sell securities in any jurisdiction.
If we propose to offer Securities outside the United States,
its territories or its possessions, we will take, at our own
expense, such action, if any, as may be necessary to comply with
the laws of each foreign jurisdiction in which we propose to
offer Securities.
8. Membership in National Association of Securities
Dealers, Foreign Rights Agents and Banks. We understand that you
are a member in good standing of the NASD. We confirm that we
are actually engaged in the investment banking or securities
business and are either: (i) a member in good standing of the
NASD; (ii) a dealer with its principal place of business located
outside the United States, its territories and its possessions
and not registered under the 1934 Act who hereby agrees to make
no sales within the United States, its territories or its
possessions or to persons who are nationals thereof or residents
therein; or (iii) a bank not eligible for membership in the NASD.
We hereby agree to comply with Section 24 of Article III of the
Rules of Fair Practice of the NASD, and if we are a foreign
dealer or bank and not a member of the NASD we also hereby agree
to comply with the NASD's interpretation with respect to free-
riding and withholding, to comply, as though we were a member of
the NASD, with the provisions of Sections 8 and 36 of Article III
of such Rules of Fair Practice, and to comply with Section 25 of
Article III thereof as that section applies to a non-member
foreign dealer or bank.
9. Distribution of Prospectuses. We are familiar with
Securities Act of 1933 Release No. 4968 and Rule 15c2-8 under the
1934 Act, relating to the distribution of preliminary and final
prospectuses and we confirm that we will comply therewith, to the
extent applicable, in connection with any sale of the Securities.
You shall cause to be made available to us, to the extent made
available to you by the Issuer, such number of copies of the
Prospectus as we may reasonably request for purposes contemplated
by the 1933 Act, the 1934 Act and the rules and regulations
thereunder.
10. Net Capital. The incurrence by us of our obligations
hereunder and under the Rights Agent Agreement in connection with
the Offering of the Securities will not place us in violation of
the net capital requirements of Rule 15c3-1 under the 1934 Act,
nor will such incurrence, if we are a financial institution
subject to regulation by the Board of Governors of the Federal
Reserve System, the Comptroller of the Currency or the Federal
Deposit Insurance Corporation, place us in violation of the
capital requirements of such regulator or any other regulator to
which we are subject.
11. Termination. You may terminate any or all of the
provisions of this Agreement at any time by prior notice to us.
12. Expenses. We agree to bear our own expenses in
connection with our participation in the Offering without right
to reimbursement from you; provided, however, that the Offering
is terminated, we will only be entitled to be reimbursed for our
out-of-pocket expenses.
13. Indemnification. With respect to the Offering, we
will indemnify and hold harmless each other Participating Agent
and each person, if any, who controls a Participating Agent
within the meaning of Section 15 of the 1933 Act, to the extent
that and on the terms upon which we agree to indemnify and hold
harmless the Issuer and other specified persons as set forth in
the Rights Agent Agreement.
14. Claims Against Participating Agents. With respect to
the Offering, if at any time any person other than a
Participating Agent asserts a claim (including any commenced or
threatened investigation or proceeding by any governmental agency
or body) against one or more of the Participating Agents or
against the Rights Agent arising out of an alleged untrue
statement or omission in the Registration Statement (or any
amendment thereto) or any prospectus or any amendment or
supplement thereto, or relating to any transaction contemplated
by this Agreement, the indemnification provisions set forth in
the Rights Agent Agreement shall apply.
15. Legal Responsibility. As the Rights Agent, you shall
have no liability to us, except for your lack of good faith and
for obligations assumed by you in this Agreement and except that
we do not waive any rights that we may have under the 1933 Act or
the 1934 Act or the rules and regulations thereunder. No
obligation not expressly assumed by you in this Agreement shall
be implied herefrom.
Nothing herein contained shall constitute the Participating
Agents to be in association, or partnership, with you, or with
each other, or, except as otherwise provided herein or in the
Rights Agent Agreement, nor render any Participating Agent liable
for the obligations of any other Participating Agent; and the
rights, obligations and liabilities of the Participating Agents
are several in accordance with their respective obligations, and
not joint.
If the Participating Agents are deemed to constitute a
partnership for federal income tax purposes, we elect to be
excluded from the application of Subchapter K, Chapter 1,
Subtitle A, of the Internal Revenue Code of 1986, as amended (the
"Code"), and agree not to take any position inconsistent with
such election, and you, as the Rights Agent, are authorized, in
your discretion, to execute on behalf of the Participating Agents
such evidence of such election as may be required by the Internal
Revenue Service and to act as Tax Matters Partner, within the
meaning of the Code and Regulations promulgated thereunder, for
the Partnership.
16. Name and Address. Unless we have promptly notified
you in writing otherwise, our name as it should appear in the
Prospectus and our address are set forth on the signature pages
hereof.
17. Notices. Any notice from you shall be deemed to have
been duly given if mailed or transmitted to us at our address
appearing below.
18. Governing Law. This Agreement shall be governed by
the laws of the State of California applicable to agreements made
and to be performed in said State.
19. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when taken
together, shall be deemed a fully executed agreement between the
parties.
Please confirm your acceptance of this Agreement and deliver
a copy to us.
Very truly yours,
Name of Firm
By:
Authorized Officer or Partner
Address:
TORREY PINES SECURITIES, INC.
By:
Accepted as of:
_____________________, 1995 (the "Effective Date")
<PAGE>
EXHIBIT A
PARTICIPATING AGENT QUESTIONNAIRE
This Participating Agent Questionnaire constitutes a part
of, and is expressly incorporated by reference in, that certain
Participating Agent Agreement relating to the participation by
each Participating Agent in the offering (the "Offering") by SDNB
Financial Corp., a California corporation (the "Issuer"), of up
to 769,582 shares of its Common Stock, no par value (the
"Shares"), to holders of record of its Common Stock on May 5,
1995, pursuant to transferable subscription rights (the "Basic
Subscription Rights" and, together with the "Oversubscription
Rights," hereinafter referred to as the "Subscription Rights")
(the Subscription Rights and the Shares are collectively referred
to herein as the "Securities"). By accepting the Participating
Agent Agreement and except as otherwise indicated in a written
communication previously furnished to Torrey Pines Securities,
Inc., a California corporation (the "Rights Agent"), each
Participating Agent expressly confirms the following information.
Capitalized terms used but not defined herein shall have the same
meanings ascribed to such terms in the Participating Agent
Agreement.
(a) At or prior to the Closing Date of the Rights Agent
Agreement, such Participating Agent shall comply with all
agreements and shall satisfy all conditions on its part required
to be performed pursuant to the Participating Agent Agreement or
the Rights Agent Agreement.
(b) The representations and warranties of such
Participating Agent set forth in the Participating Agent
Agreement and the Rights Agent Agreement are accurate in all
material respects, and such Participating Agent shall maintain
compliance with such representations and warranties at, and as
of, all times from the Effective Date of the Participating Agent
Agreement through the Closing Date of the Rights Agent Agreement.
(c) Neither such Participating Agent nor any of its
directors, officers or partners have any material (as defined in
Regulation C under the 1933 Act) relationship with Issuer, its
parent (if any) or any other seller of the Securities.
(d) Except as described or to be described in the
Participating Agent Agreement, the Rights Agent Agreement or the
Prospectus, such Participating Agent does not know: (i) of any
discounts or commissions to be allowed or paid to dealers,
including all cash, securities, contracts, or other consideration
to be received by any dealer in connection with the sale of the
Securities, or of any other discounts or commissions to be
allowed or paid to the Participating Agents or of any other items
that would be deemed by the NASD to constitute underwriting
compensation for purposes of the NASD's Rules of Fair Practice;
(ii) of any intention to over-allot; or (iii) that the price of
any security may be stabilized or manipulated to facilitate the
offering of the Securities.
(e) No report or memorandum has been prepared for external
use (i.e., outside such Participating Agent's organization) by
such Participating Agent in connection with the proposed offering
of Securities and, in the case of a registered offering, such
Participating Agent has not prepared or had prepared for it any
engineering, management or similar report or memorandum relating
to the broad aspects of the business, operations or production of
the Issuer, its parent (if any) or any guarantor of any of the
Securities within the past twelve months (except for reports
solely composed of recommendations to buy, sell or hold the
securities of the Issuer, its parent (if any) and any guarantor
of the Securities, unless such recommendations have changed
within the past six months). If any such report or memorandum
has been prepared, such Participating Agent shall promptly
furnish to the Rights Agent three copies thereof, together with a
statement as to the actual or proposed use, identifying each
class of persons who have received or will receive the report or
memorandum, the number of copies distributed to each class and
the period of distribution.
(f) Neither such Participating Agent, nor any "group" (as
that term is defined in Section 13(d)(3) of the 1934 Act) of
which it is a member, is the beneficial owner (determined in
accordance with Rule 13d-3 under the 1934 Act) of more than 5% of
any class of voting securities of the Issuer, its parent (if
any), any other seller of the Securities or any guarantor of the
Securities, nor does such Participating Agent have any knowledge
that more than 5% of any class of voting securities of the Issuer
is held or to be held subject to any voting trust or other
similar agreement.
(g) The Participating Agent is not, directly or indirectly,
affiliated or associated with any beneficial owner of any
unregistered security of the Issuer acquired within the 12-month
period prior to April 3, 1995, the initial filing date of the
Registration Statement on Form S-3 relating to the Offering.
(h) The Participating Agent does not have any, direct or
indirect, affiliation or association with any officer, director
or five percent (5%) or greater shareholder of the Issuer.
(i) Neither the Participating Agent nor any associated
person, parent or affiliate of the Participating Agent has a
"Conflict of Interest" with the Issuer within the meaning of
Section 2(g) of Schedule E to the NASD Bylaws.
The undersigned hereby confirms and certifies that each of
the foregoing is true and correct.
Date Name of Participating Agent
By:
Signature
[Print Name and Title]
