UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
RULE 13D-1(A) AND AMENDMENTS THERETO FILED
PURSUANT TO RULE 13D-2(A).
(AMENDMENT NO. ______________)*
PNB FINANCIAL GROUP, INC.
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(Name of Issuer)
COMMON STOCK, NO PAR VALUE
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(Title of Class of Securities)
693470 10 6
---------------------------------
(CUSIP Number)
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ARNOLD C. HAHN STANLEY F. FARRAR
WESTERN BANCORP SULLIVAN & CROMWELL
4100 NEWPORT PLACE, SUITE 900 1888 CENTURY PARK EAST
NEWPORT BEACH, CALIFORNIA 92660 LOS ANGELES, CALIFORNIA 90067
(949) 863-2351 (310) 712-6600
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
OCTOBER 6, 1998
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(Date of Event which Requires Filing of this Statement)
Page 1 of 7 Pages
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[_].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
SEC 1746(12-91)
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CUSIP NO. 693470 10 6 PAGE 2 OF 7 PAGES
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1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
WESTERN BANCORP
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
WC; BK; OO
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e)
[ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
CALIFORNIA
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7. SOLE VOTING POWER
NUMBER OF 553,166 (1)
SHARES -----------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 0
EACH -----------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 553,166 (1)
WITH -----------------------------------------------------
10. SHARED DISPOSITIVE POWER
0
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
553,166 (1)
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9% (1)
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14. TYPE OF REPORTING PERSON*
HC; CO
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(1) See Item 5.
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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CUSIP NO. 693470 10 6 PAGE 3 OF 7 PAGES
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SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D (the "Statement") relates to the common
stock, no par value (the "Common Stock"), of PNB Financial Group, Inc., a
California corporation ("PNB" or the "Company"). The principal executive offices
of the Company are located at 4665 MacArthur Court, Newport Beach, California
92660.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is filed by Western Bancorp ("Western" or the "Reporting
Person").
(A), (B), (C) AND (F). The principal business offices of Western are
located at 4100 Newport Center Place, Suite 900, Newport Beach, California
92660.
Western is a California corporation.
(D) AND (E). During the last five years, neither the Reporting Person
nor, to the best knowledge of the Reporting Person, any of the persons listed on
Schedule 1 hereto (i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) has been a party to any
civil proceeding of a judicial or administrative body of competent jurisdiction,
and is or was, as a result of such proceeding, subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws, or finding any
violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
It is presently anticipated that, should any purchase of shares of
Common Stock be made by Western pursuant to the Option Agreement described below
in Item 4, the source of any funds used in any such purchase would be Western's
available cash, cash equivalents available for sale securities and bank
financing.
ITEM 4. PURPOSE OF TRANSACTION.
A. THE MERGER AGREEMENT
On October 6, 1998, Western and the Company entered into an Agreement
and Plan of Merger (the "Merger Agreement") pursuant to which the Company agreed
to merge with and into Western (the "Merger"). The Merger is subject to receipt
of regulatory and shareholder approvals, as well as other closing conditions,
and it is estimated that the merger will be consummated not later than the first
quarter of 1999, subject to satisfaction of such closing conditions.
Under the terms of the Merger, each shareholder of PNB will receive one
share of common stock, no par value ("Western Common Stock"), of Western. Upon
consummation of the Merger, the certificate of incorporation and bylaws and
directors and officers of Western shall be the certificate of incorporation and
bylaws and directors and officers of the surviving corporation.
The Merger is subject to the approval of the Board of Governors of the
Federal Reserve Board (the "Federal Reserve Board"), the approval of the
shareholders of PNB, and the satisfaction of various other terms and conditions
set forth in the Merger Agreement.
B. THE OPTION.
As an inducement and a condition to Western's entering into the Merger
Agreement, on October 6, 1998, PNB and Western entered into a Stock Option
Agreement (the "Option Agreement"), pursuant to which PNB granted Western an
option (the "Option") entitling Western to purchase up to 553,166 (or such
lesser amount as shall constitute 19.9% of the outstanding shares of Common
Stock on the date of exercise) fully paid and nonassessable shares of Common
Stock at a price per share equal to $29.625 per share, subject to adjustment in
certain circumstances. In the event of any change in the Common Stock by reason
of stock dividends, split-ups, recapitalizations, or the like, the type and
number of shares of Common Stock subject to the Option shall be increased so
that, after such issuance and together with shares of Common Stock previously
issued pursuant to the exercise of the Option, the number of shares of Common
stock subject to the Option equals 19.9% of the number of shares of Common Stock
then issued and outstanding.
Subject to applicable law and regulatory restrictions, Western may
exercise the Option, in whole or in part, at any time following the occurrence
of a Purchase Event (as defined below) and prior to an Exercise Termination
Event (as defined below).
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CUSIP NO. 693470 10 6 PAGE 4 OF 7 PAGES
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As defined in the Option Agreement, "Purchase Event," means the
occurrence of either of the following events or transactions:
1. The acquisition by any Person other than PNB or any PNB Subsidiary of
beneficial ownership of shares of Common Stock, such that, upon the
consummation of such acquisition, such Person would have beneficial
ownership, in the aggregate, of 25% or more of the then outstanding shares
of Common Stock; or
2. The occurrence of a Preliminary Purchase Event described in Section 2(b)(i)
or (ii) of the Option Agreement except that he percentage referred to in
either such case shall be 25%.
As defined in the Option Agreement, "Exercise Termination Event" means
any one of the following events:
1. The time immediately prior to the effective time of the Merger;
2. Twelve months after the first occurrence of a Purchase Event;
3. Eighteen months after the termination of the Merger Agreement following the
occurrence of a Preliminary Purchase Event (as defined below);
4. The termination of the Merger Agreement in accordance with the terms
thereof prior to the occurrence of a Purchase Event or a Preliminary
Purchase Event (other than a termination of the Merger Agreement by PNB
pursuant to Section 8.1(b)(i) or (ii) thereof, by PNB and Western pursuant
to Section 8.1(a) thereof if PNB shall at the time have been entitled to
terminate the Merger Agreement pursuant to Section 8.1(b)(9) or (ii)
thereof or by PNB pursuant to 8.1(g) thereof; or
5. Eighteen months after the termination of the Merger Agreement by PNB
pursuant to Section 8.1(b)(i) or (ii) thereof, by PNB and Western pursuant
to Section 8.1(a) thereof if PNB shall at the time have been entitled to
terminate the Merger Agreement pursuant to Section 8.1(b)(9) or (ii)
thereof or by PNB pursuant to 8.1(g) thereof.
As defined in the Option Agreement, "Preliminary Purchase Event" means
any one of the following events:
1. PNB or any of its subsidiaries (each, a "PNB Subsidiary") shall have
entered into an agreement to engage in an Acquisition Transaction (as
defined below) with any Person (the term "Person" for purposes of the
Option Agreement having the meaning assigned thereto in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"),
and the rules and regulations thereunder) other than Western or any of its
subsidiaries (each, a "Western Subsidiary") or the Board of Directors of
PNB shall have recommended that the shareholders of PNB approve or accept
any Acquisition Transaction with any Person other than Western or any
Western Subsidiary. For purposes of the Option Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving PNB or any PNB Subsidiary, (y) a purchase, lease or
other acquisition of all or substantially all of the assets of PNB or
assumption of all or substantially all the deposits of PNB or any PNB
Subsidiary or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of PNB or any PNB Subsidiary,
provided that the term "Acquisition Transaction" does not include any
internal merger or consolidation involving only PNB and/or PNB
Subsidiaries;
2. Any Person (other than Western or any Western Subsidiary or any PNB
Subsidiary acting in a fiduciary capacity in the ordinary course of
business) shall have acquired Beneficial Ownership or the right to acquire
Beneficial Ownership, of shares of Common Stock (the term "Beneficial
Ownership" for purposes of the Option Agreement having the meaning assigned
thereto in Section 13(d) of the Exchange Act, and the rules and regulations
thereunder) such that, upon the consummation of such acquisition, such
Person would have Beneficial Ownership, in the aggregate, of 10% or more of
the then outstanding shares of Common Stock;
3. Any Person other than Western or any Western Subsidiary shall have made a
bona fide proposal to PNB or its shareholders, by public announcement or
written communication that is or becomes the subject of public disclosure,
to engage in an Acquisition Transaction (including, without limitation, any
situation in which any Person other than Western or any subsidiary of
Western shall have commenced (as such term is defined in Rule 14d-2 under
the Exchange Act) or shall have filed a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to,
a tender offer or exchange offer to purchase any shares of Common Stock
such that, upon consummation of such offer, such Person would own or
control 10% or more of the then outstanding shares of Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively));
<PAGE>
4. After a proposal is made by a third party to PNB or its shareholders to
engage in an Acquisition Transaction or such third party states its
intention to make such a proposal if the Merger Agreement terminates and/or
the Option expires, PNB shall
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CUSIP NO. 693470 10 6 PAGE 5 OF 7 PAGES
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have breached any covenant or obligation contained in the Merger Agreement
and such breach would entitle Western to terminate the Merger Agreement
(without regard to the cure period provided for therein);
5. The holders of Common Stock shall not have approved the Merger Agreement by
the requisite vote at the meeting of such shareholders held for the purpose
of voting on the Merger Agreement, or such meeting shall not have been held
or shall have been canceled prior to termination of the Merger Agreement,
in each case after it shall have been publicly announced that any Person
(other than Western or any Western Subsidiary) shall have (A) made, or
disclosed an intention to make, a bona fide proposal to engage in an
Acquisition Transaction, (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an Exchange
Offer or (C) filed an application (or given a notice) with, whether in
draft or final form, the Federal Reserve Board or any other governmental
authority or regulatory or administrative agency or commission (each, a
"Governmental Authority"), for approval to engage in an Acquisition
Transaction;
6. Any Person (other than Western or any Western Subsidiary), other than in
connection with a transaction to which Western has given its prior written
consent, shall have filed an application or notice with the Federal Reserve
Board or other Governmental Authority for approval to engage in an
Acquisition Transaction; or
7. PNB's Board of Directors shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in any
respect to Western its recommendation that the shareholders of PNB approve
the transactions contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Proposal, or PNB or any PNB Subsidiary shall
have authorized, recommended, proposed (or publicly announced its intention
to authorize, recommend or propose) an agreement to engage in an
Acquisition Transaction with any person other than Western or a Western
Subsidiary.
As provided in the Option Agreement, in the event that Western is
entitled and wishes to exercise the Option, it must send to PNB a written notice
(the date of which is referred to in the Option Agreement as the "Notice Date")
specifying (1) the total number of shares of Common Stock which Western intends
to purchase pursuant to such exercise, (2) the aggregate purchase price as
provided herein, and (3) a period of time (not less than three business days,
nor more than 60 business days) running from the Notice Date and a place at
which the closing of such purchase shall take place; provided, however, that if
prior notification to or approval of the Federal Reserve Board or any other
Governmental Authority is required in connection with such purchase, Western
will promptly file, and expeditiously process the required notice or application
for approval.
Under the BHC Act, Western may not directly or indirectly acquire more
than 5 percent of the outstanding shares of any class of voting securities of
PNB without application to and prior approval from the Federal Reserve Board.
If PNB enters into certain agreements relating to the consolidation or
merger of PNB or the sale of substantially all of its assets or deposits, PNB is
required to make proper provision so that the Option will, upon consummation of
such transaction, be converted into, or exchanged for, an option (the
"Substitute Option") in the surviving corporation in a consolidation or merger
or in the transfer of substantially all of PNB's assets or deposits, as the case
may be. The Substitute Option will have the same terms and conditions as the
Option; provided, however, that to the extent terms and conditions of the
Substitute Option cannot legally be identical to those of the Option, they will
in no event be less advantageous to Western.
In certain circumstances related to the exercise of the Option, the
time period specified in the Option Agreement will be extended at the request of
Western (1) to the extent necessary to obtain all regulatory approvals and for
the expiration of all statutory waiting periods and (2) to the extent necessary
to avoid liability under Section 16(b) of the Exchange Act by reason of such
exercise; provided, however, that in no event shall any closing date occur more
than six months after the related Notice Date.
The Option may be assigned by Western in certain circumstances, subject
to the terms and conditions described in the Option Agreement.
<PAGE>
Other than as described herein, the Reporting Person has no present
plans or proposals which relate to or would result in: (i) the acquisition by
any person of additional securities of the Company, or the disposition of
securities of the Company; (ii) an extraordinary corporate transaction, such as
a merger, reorganization or liquidation, involving the Company or any of its
subsidiaries; (iii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries; (iv) any change in the present Board or
management of the Company, including any plans or proposals to change the number
or term of directors or to fill any existing vacancies on the Board; (v) any
material change in the present capitalization or dividend policy of the Company;
(vi) any other material change in the Company's business or corporate structure;
(vii) changes in the Company's certificate of incorporation or by-laws or other
actions which may impede the acquisition of control of the Company by any
persons; (viii) causing a class of securities of the Company to be delisted from
a national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(ix) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended; or (x) any action similar to those enumerated
above (collectively, the "Specified Actions"). However, the Reporting Person
intends to evaluate the proposed Merger on an ongoing basis and, depending on
its evaluation of the business and
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CUSIP NO. 693470 10 6 PAGE 6 OF 7 PAGES
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prospects of the Company and other factors that it may deem relevant, the
Reporting Person may determine to dispose of such shares or acquire additional
shares or take other actions if market conditions or other business
considerations, in the judgment of the Reporting Person, warrant. Such
additional acquisitions may be effected through open market purchases, privately
negotiated transactions, tender offers to existing holders or through direct
negotiation with the Company. Such further acquisitions, dispositions or other
actions may or may not result in any of the Specified Actions.
All references to the Option Agreement are qualified in their entirety
by the full text of such agreement, a copy of which is attached as Exhibit B
hereto and is incorporated by reference herein. See also Item 7.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(A) AND (B). As result of entry into the Option Agreement and the
granting of the Option thereunder, pursuant to Rule 13d-3 under the Exchange
Act, Western may be deemed to own beneficially 553,166 shares of Common Stock
(or such lesser amount as shall constitute 19.9% of the outstanding shares of
Common Stock on the date of exercise), constituting approximately 19.9% of the
shares of Common Stock issued and outstanding as of October 6, 1998. Western
expressly disclaims any beneficial ownership of the 553,166 shares of Common
Stock which are obtainable by Western upon exercise of the Option because the
Option is exercisable only under the limited circumstances set forth in the
Option Agreement, none of which has occurred as of the date hereof, and only
then with regulatory approval (if, as a consequence, Western would own more than
5% of the outstanding shares of Common Stock).
(C). Neither the Reporting Person, nor, to the best knowledge of the
Reporting Person, any of the persons listed on Schedule 1 hereto, has effected
any transactions in the securities of the Company during the past 60 days other
than those transactions described above.
(D) AND (E). Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
In connection with the execution of the Merger Agreement, Western
entered into shareholder agreements, all dated as of October 6, 1998 (each, a
"Shareholder Agreement")(a form of which is attached hereto as Exhibit C), with
Allan C. Barbieri, Doug Heller, Martin T. Hart, James K. Schuler, Bernard F.
Schneider, and Barney Whitesell, each solely in their capacities as shareholders
of PNB. Messrs. Barbieri, Heller, Hart, Schuler, Schneider and Whitesell each
agreed to vote or cause to be voted, or execute a written consent with respect
to, all shares of Common Stock then held of record or beneficially owned,
directly or indirectly, by such shareholder in favor of adoption and approval of
the principal terms of the Merger Agreement and all transactions contemplated
thereby at every meeting of shareholders of the Company at which such matters
are considered. The Shareholder Agreements terminate upon the termination of the
Merger Agreement prior to the effective time of the Merger or upon the effective
time of the Merger, as more fully described in the Shareholder Agreements.
All references to the Shareholder Agreements are qualified in their
entirety by the full text of such agreements, a form of which is attached as
Exhibit C hereto and is incorporated by reference herein. See also Item 7.
Except as set forth above, neither Western nor, to the best knowledge
of Western, any of the persons listed on Schedule 1 hereto has any contracts,
arrangements, understandings, or relationships (legal or otherwise) with any
person with respect to any securities of PNB, including, but not limited to,
transfer or voting of any securities of PNB, finder's fees, joint ventures, loan
or option agreements, put or calls, guarantees of profits, division of profits
or loss, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 2.1 Agreement and Plan of Merger, dated as of October 6, 1998,
between Western and PNB.
Exhibit 99.1 Option Agreement, dated as of October 6, 1998, between PNB
and Western.
Exhibit 99.2 Form of Shareholder Agreement.
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CUSIP NO. 693470 10 6 PAGE 7 OF 7 PAGES
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
October 20, 1998 WESTERN BANCORP
By: /s/ Arnold C. Hahn
--------------------------------------
Name: Arnold C. Hahn
Title: Executive Vice President
and Chief Financial Officer
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SCHEDULE 1
DIRECTORS AND EXECUTIVE OFFICERS OF WESTERN
Each of the individuals listed below is an American citizen.
<TABLE>
<CAPTION>
NAME PRESENT AND PRINCIPAL OCCUPATION BUSINESS ADDRESS
<S> <C> <C>
Hugh S. Smith, Jr. Chairman of the Board and Director of Western 1251 Westwood Blvd.
Los Angeles, CA 90024
Matthew P. Wagner Chief Executive Officer, President and Director of Western 1251 Westwood Blvd.
Los Angeles, CA 90024
Arnold C. Hahn Executive Vice President, Chief Financial Officer and 4100 Newport Place, Suite 900
Director of Western Newport Beach, CA 92660
Robert M. Borgman Executive Vice President and Chief Credit Officer 4100 Newport Place, Suite 900
Newport Beach, CA 92660
Suzanne G. Brennan Executive Vice President - Operations 4100 Newport Place, Suite 900
Newport Beach, CA 92660
Julius G. Christensen Executive Vice President, General Counsel & Secretary of 4100 Newport Place, Suite 900
Western Newport Beach, CA 92660
Rice E. Brown President of Rice Brown Financial Services Inc. and 27127 Calle Arroyo, Suite 1907
Director of Western San Juan Capistrano, CA 92675
John M. Eggemeyer President of Belle Plain Partners, Inc. and Castle Creek 6051 El Tordo
Capital L.L.C.; and Director of Western P.O. Box 1329
Rancho Santa Fe, CA 92067
William C. Greenbeck Managing General Partner of Downey Land Limited and 9530 East Imperial Highway
Director of Western Downey, CA 90242
Robert L. McKay Director of Western 11551 Plantero Drive
Santa Ana, CA 92705
Mark H. Stuenkel President and Chief Executive Officer of Southern 4100 Newport Place, Suite 900
California Bank and Director of Western Newport Beach, CA 92660
Dale E. Walter Operator of Golf Holidays and Director of Western 50855 Washington St., Suite E211
La Quinta, CA 92253
</TABLE>
AGREEMENT AND PLAN OF MERGER
=======================================================
dated as of October 6, 1998
between
Western Bancorp
and
PNB Financial Group, Inc.
=======================================================
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of October 6, 1998 (this
"Agreement"), between Western Bancorp ("Western") and PNB Financial Group, Inc.
("PNB").
RECITALS
A. PNB is a California corporation, having its principal place of
business in Newport Beach, California. PNB is a bank holding company duly
registered with the Board of Governors of the Federal Reserve System ("Federal
Reserve") under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). PNB has one subsidiary bank, PNB Bank Subsidiary, a national banking
association (the "PNB Bank Subsidiary").
B. Western is a California corporation, having its principal place of
business in Newport Beach, California. Western is a multi-bank holding company
duly registered with the Federal Reserve under the BHC Act.
C. Concurrently herewith, PNB and Western are entering into a stock
option agreement (the "Stock Option Agreement"), to be dated the date hereof,
whereby PNB will grant to Western the option to purchase up to 19.9% of the
outstanding shares of the PNB Common Stock (as defined herein) upon the
occurrence of certain events.
D. It is the intention of the parties to this Agreement that the
business combination contemplated hereby be accounted for under the
"pooling-of-interests" accounting method and be treated as a "reorganization"
under Section 368 of the Internal Revenue Code of 1986 as amended (the "Code").
E. The respective Boards of Directors of each of Western and PNB have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the strategic business combination transaction
provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. Certain Definitions. The following terms are used in this
Agreement with the meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving PNB or any of its
Subsidiaries or any proposal or offer to
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<PAGE>
acquire in any manner a substantial equity interest in, or a substantial portion
of the assets or deposits of, PNB or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
"Agreement" means this Agreement, as amended or modified from time to time in
accordance with Section 9.2.
"Alta" has the meaning set forth in Section 5.3(b).
"Benefit Plans" has the meaning set forth in Section 5.3(n).
"BHC Act" has the meaning set forth in the Recitals to this Agreement.
"Business Combination" has the meaning set forth in Section 3.5.
"CGCL" means the California General Corporation Law.
"California Secretary" means the California Secretary of State.
"Code" has the meaning set forth in the Recitals to this Agreement.
"Computer System" has the meaning set forth in Section 5.3(p).
"Conversion Number" has the meaning set forth in Section 3.1(a).
"Costs" has the meaning set forth in Section 6.13(a).
"Disclosure Schedule" has the meaning set forth in Section 5.1.
"Dissenters' Shares" means shares of PNB Common Stock with respect to which the
holder or holders thereof perfect their rights to dissent under Chapter 13 of
the CGCL.
"Dissenting Shareholders" means holders of shares of PNB Common Stock who
perfect their rights to dissent under Chapter 13 of the CGCL.
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the effective time of the Merger, as provided for in
Section 2.2.
"Employees" has the meaning set forth in Section 5.3(n).
"Entrust" has the meaning set forth in Section 5.3(x).
"Entrust Agreement" has the meaning set forth in Section 5.3(x).
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<PAGE>
"Environmental Law" has the meaning set forth in Section 5.3(q).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate" has the meaning set forth in Section 5.3(n).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.4(a).
"Exchange Fund" has the meaning set forth in Section 3.4(a).
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve" has the meaning set forth in the Recitals to this Agreement.
"GAAP" has the meaning set forth in Section 5.3(h).
"Governmental Authority" means any court, administrative agency or commission or
other federal, state or local governmental authority or instrumentality.
"Hazardous Substance" has the meaning set forth in Section 5.3(q).
"Indemnified Parties" has the meaning set forth in Section 6.13(a).
"Insurance Policies" has the meaning set forth in Section 5.3(u).
"Liens" means any charge, mortgage, pledge, security interest, restriction,
claim, lien or encumbrance.
"Loan Property" has the meaning set forth in Section 5.3(q).
"Material Adverse Effect" means, with respect to Western or PNB, any effect that
(i) is material and adverse to the financial position, results of operations or
business of Western and its Subsidiaries taken as a whole or PNB and its
Subsidiaries taken as a whole, respectively, or (ii) would materially impair the
ability of either Western or PNB, respectively, to perform its obligations under
this Agreement or otherwise materially threaten or materially impede the
consummation of the Merger and the other transactions contemplated by this
Agreement; provided, however, that Material Adverse Effect shall not be deemed
to include the impact of (a) changes in banking and similar laws of general
applicability or interpretations thereof by courts or governmental authorities,
(b) changes in generally accepted accounting principles or regulatory accounting
requirements applicable to banks and their holding companies generally, (c)
changes caused by fluctuations in market interest
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rates or changes in economic conditions affecting the banking industry generally
in the markets in which the respective party operates and (d) any modifications
or changes to valuation policies and practices in connection with the Merger or
restructuring charges taken in connection with the Merger, in each case in
accordance with generally accepted accounting principles.
"Maximum Amount" has the meaning set forth in Section 6.13(c).
"Merger" has the meaning set forth in Section 2.1.
"Merger Consideration" has the meaning set forth in Section 2.1.
"Multiemployer Plans" has the meaning set forth in Section 5.3(n).
"Nasdaq" means The Nasdaq Stock Market, Inc.'s National Market.
"Nasdaq Bank Index" has the meaning set forth in Section 8.1(f).
"Nasdaq 80% Index Percentage" has the meaning set forth in Section 8.1(f).
"Nasdaq 90% Index Percentage" has the meaning set forth in Section 8.1(f).
"New Certificates" has the meaning set forth in Section 3.4(a).
"OCC" means the Office of the Comptroller of the Currency.
"PNB" has the meaning set forth in the preamble to this Agreement.
"PNB Affiliate" has the meaning set forth in Section 6.7(a).
"PNB Articles" means the Articles of Incorporation of PNB, as amended.
"PNB Bank Subsidiary" has the meaning set forth in the Recitals to this
Agreement.
"PNB Board" means the Board of Directors of PNB.
"PNB Bylaws" means the Bylaws of PNB, as amended.
"PNB Common Stock" means the common stock of PNB.
"PNB Meeting" has the meaning set forth in Section 6.2.
"Old Certificates" has the meaning set forth in Section 3.4(a).
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"Pension Plan" has the meaning set forth in Section 5.3(n).
"Person" means any individual, bank, corporation, partnership, association,
joint-stock company, business trust or unincorporated organization.
"Plans" has the meaning set forth in Section 5.3(n).
"Previously Disclosed" by a party shall mean information set forth in its
Disclosure Schedule.
"Proxy Statement" has the meaning set forth in Section 6.3.
"Registration Statement" has the meaning set forth in Section 6.3.
"Regulatory Agencies" has the meaning set forth in Section 5.3(g).
"Regulatory Approval Date" means the date of approval by the Federal Reserve
pursuant to Section 3 of the BHC Act.
"Regulatory Documents" has the meaning set forth in Section 5.4(f).
"Representatives" means, with respect to any Person, such Person's directors,
officers, employees, legal or financial advisors or any representatives of such
legal or financial advisors.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments relating
to, or any stock appreciation right or other instrument the value of which is
determined in whole or in part by reference to the market price or value of,
shares of capital stock of such Person.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and rules and
regulations thereunder.
"Shareholder Agreements" has the meaning set forth in Section 6.17.
"Stock Option Agreement" shall have the meaning set forth in the Recitals to
this Agreement.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to them in
Rule 1-02 of Regulation S-X of the SEC, provided, however, Alta shall not be a
Subsidiary of PNB for purposes of this Agreement.
"Surviving Corporation" has the meaning set forth in Section 2.1.
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"Tax" and "Taxes" means all federal, state, local or foreign taxes, charges,
fees, levies or other assessments, however denominated, including, without
limitation, all net income, gross income, gains, gross receipts, sales, use, ad
valorem, goods and services, capital, production, transfer, franchise, windfall
profits, license, withholding, payroll, employment, disability, employer health,
excise, estimated, severance, stamp, occupation, property, environmental,
unemployment or other taxes, custom duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority whether arising before, on
or after the Effective Date.
"Tax Returns" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with respect to any Tax.
"Twenty Day Average Nasdaq Bank Index" has the meaning set forth in Section
8.1(f).
"Twenty Day Average Price" has the meaning set forth in Section 8.1(f).
"Twenty Day Period" has the meaning set forth in Section 8.1(f).
"Treasury Stock" shall mean shares of PNB Common Stock held by PNB or any of its
Subsidiaries or by Western or any of its Subsidiaries, in each case other than
in a fiduciary (including custodial or agency) capacity or as a result of debts
previously contracted in good faith.
"Western" has the meaning set forth in the preamble to this Agreement.
"Western Board" means the Board of Directors of Western.
"Western Common Stock" means the common stock, no par value per share, of
Western.
"Western Common Stock Price Percentage" has the meaning set forth in Section
8.1(f).
"Western Preferred Stock" means the preferred stock, no par value per share, of
Western.
"Year 2000 Compliant" has the meaning set forth in Section 5.3(p).
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ARTICLE II
THE MERGER
2.1. The Merger.
(a) General. At the Effective Time, PNB shall merge with and into
Western (the "Merger"), the separate corporate existence of PNB shall cease and
Western shall survive and continue to exist as a California corporation (Western
sometimes being referred to herein as the "Surviving Corporation"). Western may
at any time prior to the Effective Time change the method of effecting the
combination with PNB (including, without limitation, the provisions of this
Article II) if and to the extent it deems such change to be necessary,
appropriate or desirable; provided, however, that no such change shall (i) alter
or change the amount or kind of consideration to be issued to holders of PNB
Common Stock as provided for in this Agreement (the "Merger Consideration"),
(ii) adversely affect the tax treatment of PNB's shareholders as a result of
receiving the Merger Consideration, (iii) prevent the Merger from qualifying for
a pooling-of-interests accounting treatment, or (iv) materially impede or delay
consummation of the transactions contemplated by this Agreement. Subject to the
satisfaction or waiver of the conditions set forth in Article VII, the Merger
shall become effective upon the occurrence of the filing in the office of the
California Secretary of an agreement of merger in accordance with the CGCL or
such later date and time as may be set forth in such agreement. The Merger shall
have the effects prescribed in the CGCL.
(b) Articles of Incorporation and Bylaws. The articles of incorporation
and bylaws of the Surviving Corporation immediately after the Effective Time
shall be those of Western as in effect immediately prior to the Effective Time.
(c) Directors and Officers of the Surviving Corporation.
(i) At the Effective Time, the directors of Western immediately
prior to such Effective Time shall be the directors of the Surviving
Corporation, in each case, until such time as their successors shall be duly
elected or appointed and qualified.
(ii) The officers of Western immediately prior to the Effective
Time shall be the officers of the Surviving Corporation as of the Effective Time
until such time as their successors shall be duly elected and qualified.
2.2. Effective Date and Effective Time. As soon as practicable
following, but not later than ten days after the last to occur of, (i) the
expiration of all applicable waiting periods in connection with approvals of
Regulatory Agencies and the receipt of all approvals of Regulatory Agencies and
(ii) satisfaction or waiver of all conditions to the consummation of the Merger
(or, at the election of Western, provided such election would not cause the
Effective Date to occur later than February 28, 1999, on the last business day
of the month in which such tenth day occurs, or, if
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such tenth day occurs on one of the last ten business days of such month, on the
last business day of the succeeding month), or on such earlier or later date as
may be agreed in writing by the parties, an agreement of merger shall be
executed in accordance with all appropriate legal requirements and shall be
filed in the office of the California Secretary as required by law, and the
Merger provided for herein shall become effective upon such filing or on such
date as may be specified in such agreement of merger. The date of such filing or
such later effective date is herein called the "Effective Date". The "Effective
Time" of the Merger shall be the time of such filing or as set forth in such
agreement of merger.
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.1. Merger Consideration. Subject to the provisions of this Agreement,
at the Effective Time, automatically by virtue of the Merger and without any
action on the part of any Person:
(a) Outstanding PNB Common Stock. Each share of PNB Common Stock
(excluding Treasury Stock and Dissenters' Shares), issued and outstanding
immediately prior to the Effective Time shall become and be converted into one
(1) (the "Conversion Number") share of Western Common Stock.
(b) Outstanding PNB Options. At the Effective Time, each option granted
by PNB to directors, officers and employees of PNB and the PNB Bank Subsidiary
to purchase shares of PNB Common Stock which, at the Effective Time, is
outstanding and has not been exercised (a "PNB Option"), shall be converted into
an option to purchase shares of Western Common Stock in accordance with the
terms of the applicable PNB stock option plan and the stock option agreement by
which it is evidenced. From and after the Effective Time, (i) each PNB Option
may be exercised solely for shares of Western Common Stock, (ii) the number of
shares of Western Common Stock subject to such PNB Option shall be equal to the
product (rounded down to the nearest whole share) of multiplying the number of
shares of PNB Common Stock subject to such PNB Option immediately prior to the
Effective Time by the Conversion Number and (iii) the per share exercise price
under each such PNB Option shall be equal to the quotient (rounded down to the
nearest cent) of dividing the per share exercise price under each such PNB
Option by the Conversion Number.
(c) Outstanding Western Common Stock. Each share of Western Common
Stock issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding and unaffected by the Merger.
(d) Treasury Shares. Each share of PNB Common Stock held as Treasury
Stock immediately prior to the Effective Time shall be canceled and retired at
the Effective Time and no consideration shall be issued in exchange therefor.
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(e) Dissenting Shareholders. Any Dissenting Shareholder who shall be
entitled to be paid the "fair value" of his or her Dissenters' Shares, as
provided in Chapter 13 of the CGCL, shall not be entitled to the Merger
Consideration as set forth in Section 3.1(a) in respect thereof unless and until
such Dissenting Shareholder shall have failed to perfect or shall have
effectively withdrawn or lost such Dissenting Shareholder's right to dissent
from the Merger under the CGCL, and shall be entitled to receive only the
payment provided for by Chapter 13 of the CGCL with respect to such Dissenters'
Shares. Upon the payment by the Surviving Corporation of the "fair value" of any
Dissenters' Shares in accordance with Chapter 13 of the CGCL, such Dissenters'
Shares shall be canceled and retired and shall cease to exist, and no exchange
or further payment shall be made with respect thereto. If any Dissenting
Shareholder shall fail to perfect or shall have effectively withdrawn or lost
such right to dissent, the Dissenters' Shares held by such Dissenting
Shareholder shall thereupon be treated as though such Dissenters' Shares had
been converted into the right to receive the Merger Consideration as set forth
in Section 3.1(a) pursuant to such Section 3.1(a).
3.2. Rights as Shareholders; Stock Transfers. At the Effective Time,
holders of PNB Common Stock shall cease to be, and shall have no rights as,
shareholders of PNB, other than to receive any dividend or other distribution
with respect to such PNB Common Stock with a record date occurring prior to the
Effective Time and the consideration provided under this Article III. After the
Effective Time, there shall be no transfers on the stock transfer books of PNB
or the Surviving Corporation of shares of PNB Common Stock.
3.3. Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of Western Common Stock and no certificates or scrip therefor,
or other evidence of ownership thereof, will be issued in the Merger; instead,
Western shall pay to each holder of PNB Common Stock who would otherwise be
entitled to a fractional share of Western Common Stock (after taking into
account all Old Certificates delivered by such holder) an amount in cash
(without interest) determined by multiplying such fraction by the average of the
closing prices of Western Common Stock, as reported on Nasdaq (as reported in
the Western Edition of The Wall Street Journal or, if not reported therein, in
another authoritative source), for the five Nasdaq trading days immediately
preceding the Effective Date.
3.4. Exchange Procedures.
(a) At or prior to the Effective Time, Western shall deposit, or shall
cause to be deposited, with such bank or trust company as Western shall elect
(which may include a subsidiary of Western) (in such capacity, the "Exchange
Agent"), for the benefit of the holders of certificates formerly representing
shares of PNB Common Stock ("Old Certificates"), for exchange in accordance with
this Article III, certificates representing the shares of Western Common Stock
("New Certificates") and an estimated amount of cash (such cash and New
Certificates, together with any dividends or distributions with a record date
occurring after the Effective Date with respect thereto, without any interest on
any such cash, dividends or distributions, being hereinafter referred to as the
"Exchange Fund") to be paid pursuant to this Article III in exchange for
outstanding shares of PNB Common Stock.
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(b) As soon as practicable after the Effective Date, Western shall send
or cause to be sent to each former holder of record of shares of PNB Common
Stock immediately prior to the Effective Time transmittal materials for use in
exchanging such shareholder's Old Certificates for the consideration set forth
in this Article III, which transmittal materials PNB shall have had the
opportunity to review prior to the Effective Date. Western shall cause the New
Certificates into which shares of PNB Common Stock are converted on the
Effective Date and any check in respect of any fractional share interests or
dividends or distributions which the holder of such shares shall be entitled to
receive upon delivery to the Exchange Agent of Old Certificates representing
such shares (or an affidavit of lost certificate and, if required by the
Exchange Agent, indemnity reasonably satisfactory to Western and the Exchange
Agent, if any of such certificates are lost, stolen or destroyed) owned by such
shareholder. No interest will be paid on any such cash to be paid in lieu of
fractional share interests or in respect of dividends or distributions which any
such person shall be entitled to receive pursuant to this Article III upon such
delivery. In the event of a transfer of ownership of any shares of PNB Common
Stock not registered in the transfer records of PNB, the exchange described in
this Section 3.4(b) may nonetheless be effected and a check for the cash to be
paid in lieu of fractional shares may be issued to the transferee if the Old
Certificate representing such PNB Common Stock is presented to the Exchange
Agent, accompanied by documents sufficient, in the discretion of Western and the
Exchange Agent, (i) to evidence and effect such transfer but for the provisions
of Section 3.2 hereof and (ii) to evidence that all applicable stock transfer
taxes have been paid.
(c) If Old Certificates are not surrendered or the consideration
therefor is not claimed prior to the date on which such consideration would
otherwise escheat to or become the property of any governmental unit or agency,
the unclaimed consideration shall, to the extent permitted by abandoned property
and any other applicable law, become the property of the Surviving Corporation
(and to the extent not in its possession shall be paid over to the Surviving
Corporation), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, neither the Exchange
Agent nor any party hereto shall be liable to any former holder of PNB Common
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(d) At the election of Western, no dividends or other distributions
with respect to Western Common Stock with a record date occurring after the
Effective Time shall be paid to the holder of any unsurrendered Old Certificate
representing shares of PNB Common Stock converted in the Merger into the right
to receive shares of such Western Common Stock until the holder thereof shall be
entitled to receive New Certificates in exchange therefor in accordance with the
procedures set forth in this Section 3.4, and no such shares of PNB Common Stock
shall be eligible to vote until the holder of Old Certificates is entitled to
receive New Certificates in accordance with the procedures set forth in this
Section 3.4. After becoming so entitled in accordance with this Section 3.4, the
record holder thereof also shall be entitled to receive any such dividends or
other distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Western Common Stock such holder had the right
to receive upon surrender of the Old Certificate.
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(e) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of PNB for six months after the Effective Time shall be returned by
the Exchange Agent to Western. Any shareholders of PNB who have not theretofore
complied with this Article III shall thereafter look only to Western for payment
of the shares of Western Common Stock, cash in lieu of any fractional shares and
unpaid dividends and distributions on Western Common Stock deliverable
hereunder, in each case, without any interest thereon.
3.5. Anti-Dilution Provisions. In the event Western changes (or
establishes a record date for changing) the number of shares of Western Common
Stock issued and outstanding prior to the Effective Date as a result of a stock
split, stock dividend, recapitalization or similar transaction with respect to
the outstanding Western Common Stock and the record date therefor shall be prior
to the Effective Date, the number of shares of Western Common Stock the holders
of PNB Common Stock or options exercisable for same shall be entitled to receive
under this Agreement shall be proportionately adjusted. If, between the date
hereof and the Effective Time, Western shall merge, be acquired or consolidate
with, by or into any other corporation (a "Business Combination") and the terms
thereof shall provide that Western Common Stock shall be converted into or
exchanged for the shares of any other corporation or entity, then provision
shall be made as part of the terms of such Business Combination so that
shareholders and optionholders of PNB who would be entitled to receive shares of
Western Common Stock pursuant to this Agreement shall be entitled to receive, in
lieu of each share of Western Common Stock issuable to such persons as provided
herein, the same kind and amount of securities or assets as shall be
distributable upon such Business Combination with respect to one share of
Western Common Stock (provided that nothing herein shall be construed so as to
release the acquiring entity in any such Business Combination from its
obligations under this Agreement as the successor to Western).
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.1. Forbearances of PNB. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of Western, PNB will not, and will cause each of its
Subsidiaries not to:
(a) Ordinary Course. Conduct the business of PNB and its Subsidiaries
other than in the ordinary and usual course or fail to use reasonable best
efforts to preserve intact their business organizations and assets and maintain
their rights, franchises and existing relations with customers, suppliers,
employees and business associates, take any action that would adversely affect
or delay the ability of PNB or any of its Subsidiaries to perform any of their
obligations on a timely basis under this Agreement, or take any action that is
reasonably likely to have a Material Adverse Effect on PNB or its Subsidiaries,
taken as a whole.
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(b) Capital Stock. Except for Previously Disclosed contractual
obligations, issue, sell or otherwise permit to become outstanding, or authorize
the creation of, any additional shares of PNB Common Stock or any Rights or
enter into any agreement with respect to the foregoing.
(c) Dividends, Etc. Make, declare, pay or set aside for payment any
dividend on or in respect of, or declare or make any distribution on any shares
of PNB Common Stock, directly or indirectly, adjust, split, combine, redeem,
reclassify, purchase or otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of PNB or its Subsidiaries,
or grant any salary or wage increase or increase any employee benefit (including
incentive or bonus payments), except (i) for normal individual increases in
compensation to employees in the ordinary course of business consistent with
past practice, (ii) for other changes that are required by applicable law, (iii)
to satisfy Previously Disclosed contractual obligations existing as of the date
hereof or (iv) for grants of awards to newly hired employees consistent with
past practice.
(e) Benefit Plans. Enter into, establish, adopt or amend (except (i) as
may be required by applicable law or (ii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof) any pension, retirement,
stock purchase, savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or welfare contract,
plan or arrangement, or any trust agreement (or similar arrangement) related
thereto, in respect of any director, officer or employee of PNB or its
Subsidiaries, or take any action to accelerate the vesting or exercisability of
any compensation or benefits payable thereunder.
(f) Dispositions. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its assets,
deposits, business or properties, except in the ordinary course of business and
in a transaction that is not material to it and its Subsidiaries taken as a
whole.
(g) Acquisitions. Except as Previously Disclosed, acquire (other than
by way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith, in
each case in the ordinary and usual course of business consistent with past
practice) all or any portion of, the assets, business, deposits or properties of
any other entity except in the ordinary course of business consistent with past
practice and in a transaction that is not material to PNB and its Subsidiaries,
taken as a whole.
(h) Capital Expenditures. Except as Previously Disclosed, make any
capital expenditures other than capital expenditures in the ordinary course of
business consistent with past practice in amounts not exceeding $50,000
individually or $100,000 in the aggregate.
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(i) Governing Documents. Amend the PNB Articles, PNB By-Laws or the
articles of incorporation or by-laws (or similar governing documents) of any of
PNB's Subsidiaries.
(j) Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by generally
accepted accounting principles.
(k) Contracts. Except in the ordinary course of business consistent
with past practice, enter into or terminate any material contract (as defined in
Section 5.3(k)) or amend or modify in any material respect any of its existing
material contracts.
(l) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any claim,
action or proceeding involving solely money damages in an amount, individually
or in the aggregate for all such settlements, that is not material to PNB and
its Subsidiaries, taken as a whole.
(m) Adverse Actions. (i) Take any action while knowing that such action
would, or is reasonably likely to, prevent or impede the Merger from qualifying
(A) for "pooling-of-interests" accounting treatment, or (B) as a reorganization
within the meaning of Section 368 of the Code; or (ii) knowingly take any action
that is intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time at or prior to the Effective Time,
(B) any of the conditions to the Merger set forth in Article VII not being
satisfied including, but not limited to, any action which would reasonably be
expected to adversely affect or delay the ability of Western or PNB to obtain
any necessary approvals, consents or waivers of any Regulatory Agencies required
for the transactions contemplated by this Agreement or (C) a material violation
of any provision of this Agreement, except, in each case, as may be required by
applicable law or regulation.
(n) Risk Management. Except as required by applicable law or
regulation, (i) implement or adopt any material change in its interest rate and
other risk management policies, procedures or practices; (ii) fail to follow its
existing policies or practices with respect to managing its exposure to interest
rate and other risk in any material respect; or (iii) fail to use commercially
reasonable means to avoid any material increase in its aggregate exposure to
interest rate risk.
(o) Indebtedness. Incur any indebtedness for borrowed money other than
in the ordinary course of business consistent with past practice.
(p) Loans. Make any loan, loan commitment or renewal or extension
thereof to any person in an amount greater than $100,000 which would, when
aggregated with all outstanding loans, commitments for loans or renewals or
extensions thereof made by PNB and PNB Bank Subsidiary to such person and any
affiliate or immediate family member of such person, exceed $500,000 without
submitting loan package information to the chief credit officer of Western for
review with a right of comment at least one full business day prior to taking
such action.
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(q) Commitments. Agree or commit to do any of the foregoing.
4.2. Forbearances of Western. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of PNB, Western will not, and will cause each of its
Subsidiaries not to:
(a) Ordinary Course. Take any action that would adversely affect or
delay the ability of PNB or Western to perform any of their obligations on a
timely basis under this Agreement, take any action that is reasonably likely to
have a Material Adverse Effect on Western or its Subsidiaries, taken as a whole,
or take any action while knowing that such action is, or is reasonably likely to
be, other than in the best interests of Western and its shareholders.
(b) Adverse Actions. (i) Take any action while knowing that such action
would, or is reasonably likely to, prevent or impede the Merger from qualifying
(A) for "pooling-of-interests" accounting treatment, or (B) as a reorganization
within the meaning of Section 368 of the Code; or (ii) knowingly take any action
that is intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time at or prior to the Effective Time,
(B) any of the conditions to the Merger set forth in Article VII not being
satisfied including, but not limited to, any action which would reasonably be
expected to adversely affect or delay the ability of Western or PNB to obtain
any necessary approvals, consents or waivers of any Regulatory Agencies required
for the transactions contemplated by this Agreement, or (C) a material violation
of any provision of this Agreement, except, in each case, as may be required by
applicable law or regulation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Disclosure Schedule. On or prior to the date hereof, PNB has
delivered to Western and Western has delivered to PNB a schedule (respectively,
its "Disclosure Schedule") setting forth, among other things, items the
disclosure of which is necessary or appropriate either in response to an express
disclosure requirement contained in a provision hereof or as an exception to one
or more representations or warranties contained in Section 5.3 or 5.4; provided,
that (a) no such item is required to be set forth in a Disclosure Schedule as an
exception to a representation or warranty if its absence would not be reasonably
likely to result in the related representation or warranty being deemed untrue
or incorrect under the standard established by Section 5.2, and (b) the mere
inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party that such
item represents a material exception or fact, event or circumstance or that such
item is reasonably likely to result in a Material Adverse Effect. Each party
hereto agrees that with respect to the representations and warranties of such
party, such party shall have the right to supplement and amend their Disclosure
Schedule with respect to any events occurring after the date of this Agreement
and prior to the Effective Time. In the event any such
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supplement or amendment discloses new events that are reasonably likely to have
a Material Adverse Effect on the party making such supplement or amendment or on
the Surviving Corporation, the other party shall have the right to terminate the
Agreement pursuant to Section 8.1(h).
5.2. Standard. No representation or warranty of PNB or Western
contained in Section 5.3 or 5.4 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Section 5.3 or 5.4 has had or is reasonably likely to have a
Material Adverse Effect on the party making such representation or warranty.
5.3. Representations and Warranties of PNB. Subject to Sections 5.1 and
5.2 and except as Previously Disclosed in a paragraph of its Disclosure Schedule
corresponding to the relevant paragraph below, PNB hereby represents and
warrants to Western:
(a) Organization, Standing and Authority. PNB is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. PNB is duly qualified to do business and is in good standing in the
states of the United States and any foreign jurisdictions where its ownership or
leasing of property or assets or the conduct of its business requires it to be
so qualified.
(b) Subsidiaries.
(i) (A) PNB has Previously Disclosed a list of all of its
Subsidiaries together with the jurisdiction of organization of each such
Subsidiary, (B) PNB owns, directly or indirectly, all the issued and outstanding
equity securities of each of its Subsidiaries, (C) no equity securities of any
of its Subsidiaries are or may become required to be issued (other than to it or
its wholly owned Subsidiaries) by reason of any Right or otherwise, (D) there
are no contracts, commitments, understandings or arrangements by which any of
such Subsidiaries is or may be bound to sell or otherwise transfer any equity
securities of any such Subsidiaries (other than to it or its wholly-owned
Subsidiaries), (E) there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such securities,
and (F) all the equity securities of each Subsidiary held by PNB or its
Subsidiaries are fully paid and nonassessable and are owned by PNB or its
Subsidiaries free and clear of any Liens.
(ii) PNB does not own beneficially, directly or indirectly, any
equity securities or similar interests of any Person or any interest in a
partnership or joint venture of any kind, other than its Subsidiaries, except
for a 4.9% interest in Alta Residential Mortgage, Inc. ("Alta").
(iii) Each of PNB's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do
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business and in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified.
(c) Alta.
(i) PNB and its Subsidiaries, in the aggregate, beneficially own,
directly or indirectly, not more than 4.9% of any class of outstanding voting
equity securities of Alta and do not have non-voting equity interests in, loans
to or other arrangements with Alta which would cause the ownership in Alta to be
ineligible for the exemption set forth in Section 4(c)(6) of the BHC Act.
(ii) There are no contracts, commitments, understandings or
arrangements by which PNB or any Subsidiary is or may be bound to purchase, sell
or otherwise transfer any equity securities of Alta.
(d) Capital Stock. As of the date hereof, the authorized capital stock
of PNB consists solely of 20,000,000 shares of PNB Common Stock, of which no
more than 2,779,733 shares were outstanding as of the date hereof. As of the
date hereof, no shares of PNB Common Stock were held in treasury by PNB or
otherwise beneficially owned by PNB or its Subsidiaries. The outstanding shares
of PNB Common Stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, subject to no preemptive rights and
were not issued in violation of any preemptive rights. As of the date hereof,
there are 266,210 shares of PNB Common Stock authorized and reserved for
issuance pursuant to outstanding options to purchase shares of PNB Common Stock,
PNB does not have any other Rights issued or outstanding with respect to its
capital stock, and PNB does not have any commitment to authorize, issue or sell
any other shares of its capital stock or any other Rights except pursuant to
this Agreement and the Stock Option Agreement. All outstanding shares of capital
stock of PNB Bank Subsidiary have been duly authorized and validly issued, are
fully paid and (subject to 12 U.S.C. ss.55) non-assessable and are not subject
to preemptive rights.
(e) Corporate Power. PNB and each of its Subsidiaries has the corporate
power and authority to carry on its business as it is now being conducted and to
own all its properties and assets; and PNB has the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and the
Stock Option Agreement and to consummate the transactions contemplated hereby
and thereby.
(f) Corporate Authority. Subject in the case of this Agreement to
receipt of the requisite approval of the agreement of merger set forth in this
Agreement by the holders of a majority of the outstanding shares of PNB Common
Stock entitled to vote thereon (which is the only shareholder vote required
thereon), this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby have been authorized by all necessary corporate
action of PNB and the PNB Board on or prior to the date hereof. This Agreement
is a valid and legally binding obligation of PNB, enforceable in accordance with
its terms (except as enforceability may be limited by 12 U.S.C. ss.1818(b)(6)(D)
or applicable bankruptcy, insolvency, reorganization, moratorium,
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fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles). The PNB Board has
received the written opinion of Lehman Brothers Inc. to the effect that as of
the date hereof the consideration to be received by the holders of PNB Common
Stock in the Merger is fair to the holders of PNB Common Stock from a financial
point of view.
(g) Consents and Approvals; No Defaults.
(i) No consents or approvals of, or filings or registrations with,
any Governmental Authority or with any third party are required to be made or
obtained by PNB or any of its Subsidiaries or Alta in connection with the
execution, delivery or performance by PNB of this Agreement, the Stock Option
Agreement, or to consummate the Merger except for (A) filings of applications,
registrations, statements, reports or notices with the Federal Reserve, the SEC
and state securities authorities (collectively the "Regulatory Agencies"), (B)
the approval of this Agreement by the shareholders of PNB and (C) the filing of
an agreement of merger with the California Secretary pursuant to the CGCL. As of
the date hereof, PNB is not aware of any reason why the approvals set forth in
Section 7.1(b) will not be received without the imposition of a condition,
restriction or requirement of the type described in Section 7.1(b).
(ii) Subject to receipt of the regulatory approvals referred to in
the preceding paragraph, and the expiration of related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the Stock Option Agreement and
the consummation of the transactions contemplated hereby and thereby do not and
will not (A) constitute a breach or violation of, or a default under, or give
rise to any Lien, any acceleration of remedies or any right of termination
under, any law, rule or regulation or any judgment, decree, order, governmental
permit or license, or agreement, indenture or instrument of PNB or of any of its
Subsidiaries or to which PNB or any of its Subsidiaries or properties is subject
or bound, (B) constitute a breach or violation of, or a default under, the PNB
Articles or the PNB Bylaws, or (C) require any consent or approval under any
such law, rule, regulation, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument.
(h) Financial Reports and Regulatory Documents.
(i) PNB's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and all other reports, registration statements, or definitive
proxy statements filed or to be filed by it or any of its Significant
Subsidiaries subsequent to December 31, 1997 under the Securities Act, or under
Sections 13(a), 13(d), 14 or 15(d) of the Exchange Act, in the form filed or to
be filed (collectively, the "Regulatory Documents"), as of the date filed, (A)
complied and will comply in all material respects as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case may be,
and (B) did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and each of the balance sheets contained in or
incorporated by reference into any such Regulatory
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Document (including the related notes and schedules thereto) fairly presents, or
will fairly present, the financial position of PNB and its Subsidiaries as of
its date, and each of the statements of income and changes in shareholders'
equity and cash flows or equivalent statements in such Regulatory Documents
(including any related notes and schedules thereto) fairly presents, or will
fairly present, the results of operations, changes in shareholders' equity and
changes in cash flows, as the case may be, of PNB and its Subsidiaries for the
periods to which they relate, in each case in accordance with generally accepted
accounting principles ("GAAP") consistently applied during the periods involved,
except in each case as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements.
(ii) Since December 31, 1997, no event has occurred or circumstance
arisen that, individually or taken together with all other facts, circumstances
and events (described in any paragraph of Section 5.4 or otherwise), is
reasonably likely to have a Material Adverse Effect with respect to PNB and
Subsidiaries.
(iii) PNB and Subsidiaries have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since December 31, 1996
with the Regulatory Agencies, and all other material reports and statements
required to be filed by them since December 31, 1996, including, without
limitation, any report or statement required to be filed pursuant to the laws of
the United States or the State of California, and have paid all fees and
assessments due and payable in connection therewith. As of their respective
dates, such reports, registrations and statements complied in all material
respects with all the laws, rules and regulations of the applicable Regulatory
Agency with which they were filed.
(i) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against PNB or any of its Subsidiaries
and, to PNB's knowledge, no such litigation, claim or other proceeding has been
threatened.
(j) Regulatory Matters.
(i) Neither PNB nor any of its Subsidiaries or any of their
properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter
or similar submission to, or extraordinary supervisory letter from any
Regulatory Agency.
(ii) Neither PNB nor any of its Subsidiaries has been advised by
any Regulatory Agency that such Regulatory Agency is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, commitment letter,
supervisory letter or similar submission.
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(k) Compliance with Laws. PNB and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as presently conducted;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to PNB's knowledge, no suspension or cancellation
of any of them is threatened; and
(iii) has received, since December 31, 1996, no notification or
communication from any Governmental Authority (A) asserting that PNB or any of
its Subsidiaries is not in compliance with any of the statutes, regulations or
ordinances which such Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit or governmental authorization (nor, to
PNB's knowledge, do any grounds for any of the foregoing exist).
(l) Material Contracts; Defaults. Neither PNB nor any of its
Subsidiaries is a party to, bound by or subject to any agreement, contract,
arrangement, commitment or understanding (whether written or oral) (i) that is a
"material contract" within the meaning of Item 601(b)(10) of the SEC's
Regulation S-K, or (ii) that materially restricts the conduct of business by it
or any of its Subsidiaries that has not been filed with or incorporated by
reference in reports files under the Securities and Exchange Act of 1934, as
amended. Neither PNB nor any of its Subsidiaries is in default under any
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its respective assets, business, or
operations may be bound or affected, or under which it or its respective assets,
business, or operations receives benefits, and there has not occurred any event
that, with the lapse of time or the giving of notice or both, would constitute
such a default.
(m) No Brokers. No action has been taken by PNB or any Subsidiary that
would give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, excluding a Previously Disclosed fee to be paid
to Lehman Brothers Inc.
(n) Employee Benefit Plans.
(i) All benefit and compensation plans, contracts, policies or
arrangements covering current employees or former employees of PNB and its
Subsidiaries (the "Employees") and current or former directors of PNB,
including, but not limited to, "employee benefit plans" within the meaning of
Section 3(3) of ERISA, and deferred compensation, stock option, stock purchase,
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stock appreciation rights, stock based, incentive and bonus plans (the "Benefit
Plans"), are Previously Disclosed. True and complete copies of all Benefit
Plans, including, but not limited to, any trust instruments and insurance
contracts forming a part of any Benefit Plans, and all amendments thereto have
been provided or made available to Western.
(ii) All employee benefit plans, other than "multiemployer plans"
within the meaning of Section 3(37) of ERISA, covering Employees (the "Plans"),
to the extent subject to ERISA, are in substantial compliance with ERISA. PNB is
not a party to any "employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code. There is no material pending or threatened
litigation relating to the Plans. Neither PNB nor any of its Subsidiaries has
engaged in a transaction with respect to any Plan that, assuming the taxable
period of such transaction expired as of the date hereof, could subject PNB or
any Subsidiary to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be material.
(iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by PNB or any of its Subsidiaries with
respect to any ongoing, frozen or terminated "single-employer plan", within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any
of them, or the single-employer plan of any entity which is considered one
employer with PNB under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). Neither PNB, any of its Subsidiaries nor an ERISA Affiliate
has contributed to a "multiemployer plan", within the meaning of Section 3(37)
of ERISA. No notice of a "reportable event", within the meaning of Section 4043
of ERISA for which the 30-day reporting requirement has not been waived, has
been required to be filed for any Pension Plan or by any ERISA Affiliate within
the 12-month period ending on the date hereof or will be required to be filed in
connection with the transactions contemplated by this Agreement.
(iv) All contributions required to be made under the terms of any
Plan have been timely made or have been reflected on the consolidated financial
statements of PNB included in the Regulatory Documents. Neither any Pension Plan
nor any single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding funding
waiver. Neither PNB nor any of its Subsidiaries has provided, or is required to
provide, security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan, as of
the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Plan, and there has
been no material change in the financial condition of such Plan since the last
day of the most recent plan year.
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(vi) Neither PNB nor any of its Subsidiaries has any obligations
for retiree health and life benefits under any Benefit Plan. PNB or its
Subsidiaries may amend or terminate any such Benefit Plan at any time without
incurring any liability thereunder.
(vii) The consummation of the transactions contemplated by this
Agreement will not (x) entitle any employees of PNB or any of its Subsidiaries
to severance pay, (y) accelerate the time of payment or vesting or trigger any
payment of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any of the Benefit Plans or
(z) result in any breach or violation of, or a default under, any of the Benefit
Plans. Without limiting the foregoing, as a result of the consummation of the
transactions contemplated by this Agreement, neither PNB nor any of its
Subsidiaries will be obligated to make a payment to an individual that would be
a "parachute payment" to a "disqualified individual" as those terms are defined
in Section 280G of the Code, without regard to whether such payment is
reasonable compensation for personal services performed or to be performed in
the future.
(o) Labor Matters. Neither PNB nor any of its Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is PNB
or any of its Subsidiaries the subject of a proceeding asserting that it or any
such Subsidiary has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel PNB or any such
Subsidiary to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving it or any
of its Subsidiaries pending or, to PNB's knowledge, threatened, nor is PNB aware
of any activity involving its or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other organizational
activity.
(p) Year 2000 Compliance. Except as Previously Disclosed, (i) the
computer software and related hardware of the PNB Bank Subsidiary (the "Computer
System") used for the storage and processing of data are, or will be prior to
the year 2000, Year 2000 Compliant; (ii) to the best of PNB's knowledge after
due inquiry, all of the suppliers, customers and third party providers of the
PNB Bank Subsidiary are, or will be prior to year 2000, Year 2000 Compliant; and
(iii) to the best of PNB's knowledge after due inquiry, the PNB Bank Subsidiary
is taking or has taken, all commercially reasonable and appropriate action to
address and remedy any deficiencies in its Computer System which would keep it
from becoming Year 2000 Compliant. As used herein, "Year 2000 Compliant" shall
mean the ability of a Computer System to provide the following functions,
without human intervention, individually and in combination with other products
or systems: (i) consistently handle, record, store, process and present dates
and date-related information before, during and after January 1, 2000, including
but not limited to accepting date input, performing calculations on dates or
portion of dates, and providing date output; (ii) function accurately in
accordance with the published specifications and without undue interruption,
before, during, and after January 1, 2000 (including leap year computations)
without any adverse change in operation associated with the advent of the year
2000; (iii) respond to two-digit or four-digit dates and date-related input in a
way that resolves any ambiguity as to the year 2000 in a disclosed, defined and
predetermined manner, and store and provide output of dates and date-related
information in ways
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that are unambiguous as to the year 2000; and (iv) suitably interact with other
software and related hardware in a way which does not compromise its year 2000
compliance capability.
(q) Environmental Matters.
(i) PNB and each of its Subsidiaries has complied at all times with
applicable Environmental Laws; (ii) no real property (including buildings or
other structures) currently or formerly owned or operated by PNB or any of its
Subsidiaries, or any property in which PNB or any of its Subsidiaries has held a
security interest, lien or a fiduciary or management role ("Loan Property"), has
been contaminated with, or has had any release of, any Hazardous Substance;
(iii) neither PNB nor any of its Subsidiaries could be deemed the owner or
operator of any Loan Property under any Environmental Law which such Loan
Property has been contaminated with, or has had any release of, any Hazardous
Substance; (iv) neither PNB nor any of its Subsidiaries is subject to liability
for any Hazardous Substance disposal or contamination on any third party
property; (v) neither PNB nor any of its Subsidiaries has received any notice,
demand letter, claim or request for information alleging any violation of, or
liability under, any Environmental Law; (vi) neither PNB nor any of its
Subsidiaries is subject to any order, decree, injunction or other agreement with
any Governmental Authority or any third party relating to any Environmental Law;
(vii) to the best of PNB's knowledge, there are no circumstances or conditions
(including the presence of asbestos, underground storage tanks, lead products,
polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or
automotive services) involving PNB or any of its Subsidiaries, any currently or
formerly owned or operated property, or any Loan Property, that could reasonably
be expected to result in any claims, liability or investigations against PNB or
any of its Subsidiaries or result in any restrictions on the ownership, use, or
transfer of any property pursuant to any Environmental Law; and (viii) PNB has
delivered to Western copies of all environmental reports, studies, sampling
data, correspondence, filings and other environmental information in its
possession or reasonably available to it relating to PNB, any Subsidiary of PNB,
any currently or formerly owned or operated property or any Loan Property.
As used herein, the term "Environmental Law" means any federal, state
or local law, regulation, order, decree, permit, authorization, opinion, common
law or agency requirement relating to: (A) the protection or restoration of the
environment, health, safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, indoor air, pollution, contamination or any injury or
threat of injury to persons or property in connection with any Hazardous
Substance and the term "Hazardous Substance" means any substance in any
concentration that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is or may be
the subject of regulatory action by any Governmental Authority in connection
with any Environmental Law.
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(r) Tax Matters.
(i) (A) All Tax Returns that are required to be filed (taking into
account any extensions of time within which to file) by or with respect to PNB
and its Subsidiaries have been duly filed, (B) all Taxes due have been paid in
full, (C) all deficiencies asserted or assessments made as a result of such
examinations have been paid in full, (D) no issues that have been raised by the
relevant taxing authority in connection with the examination of any of the Tax
Returns referred to in clause (A) are currently pending, and (E) no waivers of
statutes of limitation have been given by or requested with respect to any Taxes
of PNB or its Subsidiaries. PNB has made available to Western true and correct
copies of the United States federal income Tax Returns filed by PNB and its
Subsidiaries for each of the three most recent fiscal years ended on or before
December 31, 1997. Neither PNB nor any of its Subsidiaries has any liability
with respect to income, franchise or similar Taxes that accrued on or before the
end of the most recent period covered by PNB's Regulatory Documents filed prior
to the date hereof in excess of the amounts accrued with respect thereto that
are reflected in the financial statements included in PNB's Regulatory Documents
filed on or prior to the date hereof. Neither PNB nor any of its Subsidiaries is
a party to any Tax allocation or sharing agreement, is or has been a member of
an affiliated group filing consolidated or combined Tax returns (other than a
group the common parent of which is or was PNB) or otherwise has any liability
for the Taxes of any person (other than PNB and its Subsidiaries). As of the
date hereof, neither PNB nor any of its Subsidiaries has any reason to believe
that any conditions exist that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the Code.
(ii) No Tax is required to be withheld pursuant to Section 1445 of
the Code as a result of the transfer contemplated by this Agreement.
(s) Risk Management Instruments. All interest rate swaps, caps, floors,
option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for PNB's own account, or for the
account of one or more of PNB's Subsidiaries or their customers (all of which
are listed on PNB's Disclosure Schedule), if any, were entered into (i) in
accordance with prudent business practices and all applicable laws, rules,
regulations and regulatory policies, and (ii) with counterparties believed to be
financially responsible at the time; and each of them constitutes the valid and
legally binding obligation of PNB or one of its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and are in full force and effect. Neither PNB
nor its Subsidiaries, nor to PNB's knowledge, any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement.
(t) Books and Records. The books and records of PNB and its
Subsidiaries have been fully, properly and accurately maintained in all material
respects, and there are no material inaccuracies or discrepancies of any kind
contained or reflected therein, and they fairly present the financial position
of PNB and its Subsidiaries.
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(u) Insurance. PNB has Previously Disclosed all of the insurance
policies, binders, or bonds maintained by PNB or its Subsidiaries ("Insurance
Policies"). PNB and its Subsidiaries are insured with reputable insurers against
such risks and in such amounts as the management of PNB reasonably has
determined to be prudent for its business, operations, properties and assets.
All the Insurance Policies are in full force and effect; PNB and its
Subsidiaries are not in material default thereunder; and all claims thereunder
have been filed in due and timely fashion.
(v) Accounting Treatment. As of the date hereof, PNB is not aware of
any reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment.
(w) Allowance for Possible Loan Losses. To the best of PNB's knowledge,
PNB's allowance for loan and lease losses and level of indemnification reserves
on its mortgage portfolio is, and will be as of the Effective Date, adequate and
in accordance with GAAP in all material respects and in accordance with all
applicable regulatory requirements.
(x) Trust Business. Neither PNB nor PNB Bank Subsidiary serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor for any fiduciary accounts. Except as set forth in PNB's
Disclosure Schedule or such violations which individually or in the aggregate
would not give rise to a Material Adverse Effect, (i) each of the relationships
between PNB, Entrust Administration, Inc. ("Entrust") and another Person which
constitute part of the business conducted by PNB or Entrust pursuant to the
Contract for Services, dated as of April 1, 1997, as amended (the "Entrust
Agreement"), between PNB Bank Subsidiary and Entrust (whether PNB or Entrust
acts or has acted as trustee, agent, custodian, personal representative,
guardian, conservator, investment advisor or in another similar capacity) (the
"Trust Relationships") is governed by a written agreement, contract, indenture,
instrument of trust or other similar document (the "Trust Instruments") and, to
the knowledge of PNB, all of the Trust Instruments that are presently in effect
are in the possession of Entrust and have been made, or are, available to
Western and no Trust Instrument has been amended except by an instrument in
writing; and (ii) each Trust Relationship has been conducted, operated and
managed by PNB and, to the knowledge of PNB, Entrust in accordance with the
terms of the governing Trust Instrument and applicable law.
5.4. Representations and Warranties of Western. Subject to Sections 5.1
and 5.2 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, Western hereby
represents and warrants to PNB as follows:
(a) Organization, Standing and Authority; Subsidiaries. Western is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. Western is duly qualified to do business and is in
good standing in the states of the United States and foreign jurisdictions where
its ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified. Western has in effect all federal, state, local,
and foreign governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now conducted. Each
of Western's Significant Subsidiaries has been duly organized and is validly
existing in good standing under the laws of the jurisdiction of its
organization, and is duly
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qualified to do business and is in good standing in the jurisdictions where its
ownership or leasing of property or the conduct of its business requires it to
be so qualified.
(b) Western Capital Stock. As of the date hereof, the authorized
capital stock of Western consists solely of 100,000,000 shares of Western Common
Stock, of which no more than 15.8 million shares were outstanding as of the date
hereof and 5,000,000 shares of Western Preferred Stock, of which no shares were
outstanding as of the date hereof. As of the date hereof, Western does not have
any Rights issued or outstanding with respect to its capital stock and Western
does not have any commitment to authorize, issue or sell any shares of its
capital stock or any Rights. Western has a sufficient number of duly authorized,
unissued and reserved shares of its Common Stock necessary to permit Western to
satisfy its obligations under this Agreement without the need to seek approval
of Western's shareholders.
(c) Corporate Power. Western and each of its Significant Subsidiaries
has the corporate power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; and Western has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
(d) Corporate Authority. This Agreement and the transactions
contemplated hereby have been authorized by all necessary corporate action of
Western and its Board of Directors. This Agreement is a valid and legally
binding agreement of Western enforceable in accordance with its terms (except as
enforceability may be limited by 12 U.S.C. ss.1818(b)(6)(D) or applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles).
(e) Consents and Approvals; No Defaults.
(i) No consents or approvals of, or filings or registrations with,
any Regulatory Agencies or with any third party are required to be made or
obtained by Western or any of its Subsidiaries in connection with the execution,
delivery or performance by Western of this Agreement or to consummate the Merger
except for (A) the filing of applications, registrations, statements, reports or
notices, as applicable, with the Regulatory Agencies; (B) approval of the
listing on the Nasdaq of Western Common Stock to be issued in the Merger; (C)
the filing and declaration of effectiveness of the Registration Statement; (D)
the filing of an agreement of merger with the California Secretary pursuant to
the CGCL; and (E) such filings as are required to be made or approvals as are
required to be obtained under the securities or "Blue Sky" laws of various
states in connection with the issuance of Western Common Stock in the Merger. As
of the date hereof, Western is not aware of any reason why the approvals set
forth in Section 7.1(b) will not be received without the imposition of a
condition, restriction or requirement of the type described in Section 7.1(b).
(ii) Subject to receipt of the consents and approvals referred to
in the preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state
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securities laws, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby do not and will not (A)
constitute a breach or violation of, or a default under, or give rise to any
Lien, any acceleration of remedies or any right of termination under, any law,
rule or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of Western or of any of its
Subsidiaries or to which Western or any of its Subsidiaries or properties is
subject or bound, (B) constitute a breach or violation of, or a default under,
the articles of incorporation or by-laws (or similar governing documents) of
Western or any of its Subsidiaries, or (C) require any consent or approval under
any such law, rule, regulation, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument.
(f) Financial Reports and Regulatory Documents; Material Adverse
Effect.
(i) Western's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and all other reports, registration statements, or definitive
proxy statements filed or to be filed by it or any of its Significant
Subsidiaries subsequent to December 31, 1997 under the Securities Act, or under
Sections 13(a), 13(d), 14 or 15(d) of the Exchange Act, in the form filed or to
be filed (collectively, the "Regulatory Documents"), as of the date filed, (A)
complied and will comply in all material respects as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case may be,
and (B) did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and each of the balance sheets contained in or
incorporated by reference into any such Regulatory Document (including the
related notes and schedules thereto) fairly presents, or will fairly present,
the financial position of Western and its Subsidiaries as of its date, and each
of the statements of income and changes in shareholders' equity and cash flows
or equivalent statements in such Regulatory Documents (including any related
notes and schedules thereto) fairly presents, or will fairly present, the
results of operations, changes in shareholders' equity and changes in cash
flows, as the case may be, of Western and its Subsidiaries for the periods to
which they relate, in each case in accordance with GAAP consistently applied
during the periods involved, except in each case as may be noted therein,
subject to normal year-end audit adjustments in the case of unaudited
statements.
(ii) Since December 31, 1997, no event has occurred or circumstance
arisen that, individually or taken together with all other facts, circumstances
and events (described in any paragraph of Section 5.4 or otherwise), is
reasonably likely to have a Material Adverse Effect with respect to it.
(iii) Western has timely filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that they were required to file since December 31, 1996 with the
Regulatory Agencies, and all other material reports and statements required to
be filed by it since December 31, 1996, including, without limitation, any
report or statement required to be filed pursuant to the laws of the United
States or the State of California, and
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has paid all fees and assessments due and payable in connection therewith. As of
their respective dates, such reports, registrations and statements complied in
all material respects with all the laws, rules and regulations of the applicable
Regulatory Agency with which they were filed.
(g) Compliance with Laws. Western and each of its Significant
Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as presently conducted;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to Western's knowledge, no suspension or
cancellation of any of them is threatened; and
(iii) has received, since December 31, 1996, no notification or
communication from any Governmental Authority (A) asserting that Western or any
of its Subsidiaries is not in compliance with any of the statutes, regulations
or ordinances which such Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit or governmental authorization (nor, to
Western's knowledge, do any grounds for any of the foregoing exist).
(h) No Brokers. No action has been taken by Western that would give
rise to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions contemplated
by this Agreement, excluding Previously Disclosed fees payable to Belle Plaine
Partners, Inc.
(i) Year 2000 Compliance. Except as Previously Disclosed, (i) Western's
Computer System used for the storage and processing of data are, or will be
prior to the year 2000, Year 2000 Compliant; (ii) to the best of Western's
knowledge after due inquiry, all of the suppliers, customers and third party
providers of Western are, or will be prior to year 2000, Year 2000 Compliant;
and (iii) to the best of Western's knowledge after due inquiry, Western is
taking or has taken, all commercially reasonable and appropriate action to
address and remedy any deficiencies in its Computer System which would keep it
from becoming Year 2000 Compliant.
(j) Books and Records. The books and records of Western and its
Significant Subsidiaries have been fully, properly and accurately maintained in
all material respects, and there are no material inaccuracies or discrepancies
of any kind contained or reflected therein, and they fairly present the
financial position of Western and its Significant Subsidiaries
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(k) Accounting Treatment; Tax Matters. As of the date hereof, Western
is aware of no reason why the Merger will fail to qualify for
"pooling-of-interests" accounting treatment. As of the date hereof, neither
Western nor any of its Subsidiaries has any reason to believe that any
conditions exist that might prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code.
ARTICLE VI
COVENANTS
6.1. Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each of PNB and Western agrees to cooperate with the other
parties hereto and to use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or desirable, or advisable under applicable laws, so as to
permit consummation of the Merger as promptly as practicable and otherwise to
enable consummation of the transactions contemplated hereby and shall cooperate
fully with the other party hereto to that end.
6.2. Shareholder Approval. PNB agrees to take, in accordance with
applicable law and the PNB Articles and the PNB Bylaws, all action necessary to
convene an appropriate meeting of its shareholders to consider and vote upon the
approval of the principal terms of the Merger and adoption of this Agreement and
any other matters required to be approved by PNB's shareholders for consummation
of the Merger (including any adjournment or postponement, the "PNB Meeting"), in
each case as promptly as practicable after the Registration Statement is
declared effective. Except to the extent legally required for the discharge by
the PNB Board of its fiduciary duties as advised by counsel to the PNB Board,
the PNB Board shall recommend such approval, and PNB shall take all reasonable,
lawful action to solicit such approval by its shareholders.
6.3. Registration Statement.
(a) Western agrees to prepare a registration statement on Form S-4 or
other applicable form (the "Registration Statement") to be filed by Western with
the SEC in connection with the issuance of Western Common Stock in the Merger,
including the prospectus and other proxy solicitation materials of PNB
constituting a part thereof (the "Proxy Statement") and all related documents.
PNB shall have the right to review such Registration Statement and PNB agrees to
cooperate, and to cause its Subsidiaries to cooperate, with Western, its counsel
and its accountants, in preparation of the Registration Statement and the Proxy
Statement. PNB agrees to file the Proxy Statement in preliminary form with such
of the Regulatory Authorities as may be required as soon as reasonably
practicable, and Western agrees to file the Registration Statement with the SEC
as soon as reasonably practicable. Each of PNB and Western agrees to use all
reasonable efforts to cause the Registration Statement and any required
amendments or supplements thereto to be declared effective under the Securities
Act and distributed to PNB shareholders as promptly as reasonably practicable
after filing thereof. Western also agrees to use all reasonable efforts to
obtain all
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necessary state securities laws or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. PNB agrees to furnish
to Western all information concerning PNB, its Subsidiaries, officers, directors
and shareholders as may be reasonably requested in connection with the
foregoing.
(b) Each of PNB and Western agrees, as to itself and its Subsidiaries,
that the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Registration Statement will, at the time
the Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act, not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and (ii) the Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to shareholders and at the time of the PNB Meeting, not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, in
the light of the circumstances under which such statement is made, necessary to
correct any statement in any earlier statement in the Proxy Statement or any
amendment or supplement thereto. Each of PNB and Western further agrees, that if
it shall become aware prior to the Effective Date of any information furnished
by it that would cause any of the statements in the Registration Statement or
the Proxy Statement to be false or misleading with respect to any material fact,
or to omit to state any material fact necessary to make the statements therein
not false or misleading, promptly to inform the other party thereof and to take
the necessary steps to correct the Registration Statement or the Proxy
Statement.
(c) Western agrees to advise PNB, promptly after Western receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of Western Common Stock for offering or
sale in any jurisdiction, of the initiation or threat of any proceeding for any
such purpose, or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information.
6.4. Press Releases. Each of PNB and Western agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or Nasdaq rules (provided that the issuing party shall nevertheless
provide the other party with notice of, and the opportunity to review, any such
press release or written statement).
6.5. Access; Information.
(a) Each of PNB and Western agrees that upon reasonable notice, and
subject to applicable laws relating to the exchange of information, each party
shall afford the other party and the other party's officers, employees, counsel,
accountants and other authorized representatives, such access during normal
business hours throughout the period prior to the Effective Time to the books,
records (including, without limitation, tax returns and work papers of
independent auditors), properties, personnel and to such other information as
the requesting party may reasonably request
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and, during such period, the providing party shall furnish promptly to the
requesting party (i) a copy of each material report, schedule and other document
filed by it pursuant to the requirements of federal or state securities or
banking laws, and (ii) all other information concerning the business, properties
and personnel of it as the requesting party may reasonably request.
(b) Each party agrees that it will not, and will cause its
representatives not to, use any information obtained pursuant to this Section
6.5 (as well as any other information obtained prior to the date hereof in
connection with the entering into of this Agreement) for any purpose unrelated
to the consummation of the transactions contemplated by this Agreement. Subject
to the requirements of law, each party will keep confidential, and will cause
its representatives to keep confidential, all information and documents obtained
pursuant to this Section 6.5 (as well as any other information obtained prior to
the date hereof in connection with the entering into of this Agreement) unless
such information (i) was already known to such party, (ii) becomes available to
such party from other sources not known by such party to be bound by a
confidentiality obligation, (iii) is disclosed with the prior written approval
of the providing party, or (iv) is or becomes readily ascertainable from
published information or trade sources. In the event that this Agreement is
terminated or the transactions contemplated by this Agreement shall otherwise
fail to be consummated, each party shall promptly cause all copies of documents
or extracts thereof containing information and data as to the other party to be
returned to the other party. No investigation by either party of the business
and affairs of the other party shall affect or be deemed to modify or waive any
representation, warranty, covenant or agreement in this Agreement, or the
conditions to either party's obligation to consummate the transactions
contemplated by this Agreement.
6.6. Acquisition Proposals. PNB agrees that it shall not, and shall
cause its Subsidiaries and its Subsidiaries' officers, directors, agents,
advisors and affiliates not to, solicit or encourage inquiries or proposals with
respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any person relating
to, any Acquisition Proposal, except to the extent legally required for the
discharge by the PNB Board of its fiduciary duties as advised by counsel to the
PNB Board. PNB shall immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than Western with respect to any of the
foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to an Acquisition Proposal. PNB
shall promptly (within 24 hours) advise Western following the receipt by PNB of
any Acquisition Proposal and the substance thereof (including the identity of
the person making such Acquisition Proposal), and advise Western of any
developments with respect to such Acquisition Proposal immediately upon the
occurrence thereof.
6.7. Affiliate Agreements.
(a) Not later than the 15th day prior to the mailing of the Proxy
Statement, PNB shall deliver to Western a schedule of each person that, to the
best of its knowledge, is or is reasonably likely to be, as of the date of the
PNB Meeting, deemed to be an "affiliate" of PNB (each, a "PNB
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Affiliate") as that term is used in Rule 145 under the Securities Act or SEC
Accounting Series Releases 130 and 135.
(b) PNB shall use its reasonable best efforts to cause each person who
may be deemed to be a PNB Affiliate to execute and deliver to Western on or
before the date of mailing of the Proxy Statement an agreement in the form
attached hereto as Exhibit A.
6.8. Board Attendance and Appointment. Allen C. Barbieri, or in his
absence another representative of PNB selected by him, shall be invited by
Western and the Western bank Subsidiaries to attend all regular and special
meetings of the Western Board and the Boards of the Western bank Subsidiaries
and the Executive Committees of the Western Board and the Boards of the Western
bank Subsidiaries from the date hereof until the Effective Date. Western shall,
to the extent reasonably practicable, inform PNB of each such meeting at least
two business days in advance of each such meeting; provided, however, that the
attendance of Allen C. Barbieri shall not be permitted at any meeting, or
portion thereof, for the purpose of discussing transactions contemplated by this
Agreement or the obligations of Western under this Agreement. Matthew P. Wagner
or in his absence another representative of Western selected by him, shall be
invited by PNB to attend all regular and special meetings of the PNB Board, the
Executive Committee of the PNB Board and the PNB Bank Subsidiary Board from the
date hereof until the Effective Date. PNB shall, to the extent reasonably
practicable, inform Western of each such meeting at least two business days in
advance of each such meeting; provided, however, that the attendance of Matthew
P. Wagner shall not be permitted at any meeting, or portion thereof, for the
purpose of discussing transactions contemplated by this Agreement or the
obligations of PNB under this Agreement.
6.9. Certain Policies. On or after the Regulatory Approval Date, PNB
shall, consistent with GAAP and on a basis mutually satisfactory to it and
Western, modify and change its loan, litigation and real estate valuation
policies and practices (including loan classifications, levels of credit
reserves, and levels of indemnification reserves) so as to be applied on a basis
that is consistent with that of Western .
6.10. Indemnification Reserves On Mortgage Portfolio. On or before
December 31, 1998, the level of indemnification reserves on PNB's mortgage
portfolio shall not be less than $1.25 million.
6.11. Nasdaq Listing. Western agrees to use its reasonable best efforts
to list, prior to the Effective Date, on the Nasdaq, subject to official notice
of issuance, the shares of Western Common Stock to be issued to the holders of
PNB Common Stock in the Merger.
6.12. Regulatory Applications.
(a) Western and PNB and their respective Subsidiaries shall cooperate
and use their respective reasonable best efforts to prepare all documentation,
to effect all filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities
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necessary to consummate the transactions contemplated by this Agreement. Western
and PNB shall use their reasonable best efforts to make all required bank
regulatory filings, including the appropriate filing with the Regulatory
Authorities. Each of Western and PNB shall have the right to review in advance,
and to the extent practicable each will consult with the other, in each case
subject to applicable laws relating to the exchange of information, with respect
to all material written information submitted to any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. Each party hereto agrees that
it will consult with the other party hereto with respect to the obtaining of all
material permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party appraised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with
all information concerning itself, its Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
6.13. Indemnification; Director and Officers' Insurance.
(a) From and after the Effective Time through the sixth anniversary of
the Effective Date, Western agrees to indemnify and hold harmless each present
and former director and officer of PNB or any Subsidiary of PNB determined as of
the Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time (including with respect to this Agreement or any
of the transactions contemplated hereby) (but excluding any Costs arising out of
any violation or alleged violation of the Exchange Act or the rules and
regulations thereunder with respect to insider trading), whether asserted,
claimed or arising prior to, at or after the Effective Time, to the extent to
which such Indemnified Parties were entitled under California law and the PNB
Articles or the PNB Bylaws in effect on the date hereof, and Western shall also
advance expenses as incurred to the extent permitted under California law and
the PNB Articles and the PNB Bylaws.
(b) Any Indemnified Party wishing to claim indemnification under
Section 6.13(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall as promptly as possible notify Western thereof, but the
failure to so notify shall not relieve Western of any liability it may have to
such Indemnified Party if such failure does not materially prejudice Western. In
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) Western shall have the right to
assume the defense thereof and Western shall not
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be liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if Western elects not to assume
such defense or counsel for the Indemnified Parties advises in writing that
there are issues which raise conflicts of interest between Western and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and Western shall pay the reasonable fees and expenses of one such counsel
for the Indemnified Parties in any jurisdiction promptly as statements thereof
are received, (ii) the Indemnified Parties will cooperate in the defense of any
such matter, and (iii) Western shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld); and provided, further, that Western shall not have any obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final and
nonappealable, that the indemnification of such Indemnified Party in the manner
contemplated hereby is not permitted or is prohibited by applicable law.
(c) For a period of six years after the Effective Time, Western shall
use its reasonable best efforts to cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by PNB
(provided that Western may substitute therefor policies of comparable coverage
with respect to claims arising from facts or events which occurred before the
Effective Time); provided, however, that in no event shall Western be obligated
to expend, in order to maintain or provide insurance coverage pursuant to this
Section 6.13(c), any amount per annum in excess of 125% of the amount of the
annual premiums paid as of the date hereof by PNB for such insurance (the
"Maximum Amount"). If the amount of the annual premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, Western shall use
all reasonable efforts to maintain the most advantageous policies of directors'
and officers' insurance obtainable for an annual premium equal to the Maximum
Amount. Notwithstanding the foregoing, prior to the Effective Time, Western may
request PNB to, and PNB shall, purchase insurance coverage, on such terms and
conditions as shall be acceptable to Western, extending for a period of six
years PNB's directors' and officers' liability insurance coverage in effect as
of the date hereof (covering past or future claims with respect to periods
before the Effective Time) and such coverage shall satisfy Western's obligations
under this Subsection (c).
(d) If Western or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then and in each such
case, proper provision shall be made so that the successors and assigns of
Western shall assume the obligations set forth in this Section 6.13.
(e) The provisions of this Section 6.13 are intended to be for the
benefit of, and shall be enforceable by each Indemnified Party and his or her
heirs and representatives.
6.14. Benefit Plan. Western shall, from and after the Effective Time,
(i) provide former employees of PNB who remain as employees of Western or any of
its Significant Subsidiaries with
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employee benefit plans no less favorable in the aggregate than those provided to
similarly situated employees of Western or its Significant Subsidiaries,
including, but not limited to, allowing such employees to participate in
Western's stock option plan in accordance with the policies of Western with
respect to such stock option plan, and (ii) with respect to former employees of
PNB who remain as employees of Western or any of its Significant Subsidiaries,
cause each employee benefit plan of Western or its Significant Subsidiaries in
which such employees are eligible to participate to take into account for
purposes of eligibility and vesting thereunder the service of such employees
with PNB as if such service were with Western or its Significant Subsidiaries,
to the same extent such service was credited under a comparable plan of PNB.
Western agrees that all accrued bonuses for 1998 will be paid to employees of
PNB in accordance with PNB's past practices. Notwithstanding the foregoing, PNB
consents and covenants that from and after the Effective Date, PNB's Benefit
Plans will be governed, managed and/or terminated by Western, all within
Western's sole discretion.
6.15. Accountants' Letters. Each of PNB and Western shall use its
reasonable best efforts to cause to be delivered to the other party, and to
Western's directors and officers who sign the Registration Statement, a letter
of their respective independent auditors, dated (i) the date on which the
Registration Statement shall become effective and (ii) a date shortly prior to
the Effective Date, and addressed to such other party, and such directors and
officers, in form and substance customary for "comfort" letters delivered by
independent accountants in accordance with Statement of Accounting Standards No.
72.
6.16. Notification of Certain Matters. Each of PNB and Western shall
give prompt notice to the other of any fact, event or circumstance known to it
that (i) is reasonably likely, individually or taken together with all other
facts, events and circumstances known to it, to result in any Material Adverse
Effect with respect to it or (ii) would cause or constitute a material breach of
any of its representations, warranties, covenants or agreements contained
herein.
6.17. Shareholder Agreements. Certain directors and certain officers
who are shareholders of PNB, in their capacities as shareholders, in exchange
for good and valuable consideration, have executed and delivered to Western
shareholder agreements substantially in the form of Exhibit B hereto (the
"Shareholder Agreements"), committing such persons, among other things, (i) to
vote their shares of PNB Common Stock in favor of the Agreement at the PNB
Meeting and (ii) to certain representations concerning the ownership of PNB
Common Stock.
6.18. Reservation of Shares. Western shall at all times from and after
the date of this Agreement maintain a sufficient number of duly authorized,
unissued and reserved shares of Western Common Stock necessary to permit Western
to satisfy its obligations under this Agreement without the need to seek
approval of Western's shareholders.
6.18. Employment Agreements. Western acknowledges and agrees that after
the consummation of the Merger, the Surviving Corporation will continue to be
obligated to perform its obligations under the employment agreements set forth
in PNB's Disclosure Schedule, in accordance with the respective terms thereof.
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6.19. Merger of PNB Bank Subsidiary. PNB shall take promptly, or cause
to be taken promptly, all actions reasonably requested by Western to cause PNB
Bank Subsidiary to merge with a subsidiary of Western, including, without
limitation, joining in the filing of all necessary regulatory applications.
6.20. Entrust. As promptly as practicable after the date hereof, PNB
shall communicate with Entrust for the purpose of terminating the Entrust
Agreement, and shall make commercially reasonable efforts to effect the
termination of the Entrust Agreement and the substitution of another custodian.
PNB agrees to cause an audit to be performed on Entrust on or prior to the date
of termination in form acceptable to Western, such acceptance not to be
unreasonably withheld, consistent with the terms of the Entrust Agreement.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of Western and PNB to consummate the Merger is
subject to the fulfillment or written waiver by Western and PNB prior to the
Effective Time of each of the following conditions:
(a) Shareholder Approval. This Agreement and the principal terms of the
Merger shall have been duly adopted and approved by the requisite vote of the
shareholders of PNB.
(b) Regulatory Approvals. All regulatory approvals or waivers required
to consummate the transactions contemplated hereby shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals or waivers shall
contain any conditions, restrictions or requirements which the Western Board
reasonably determines would (i) following the Effective Time, have a Material
Adverse Effect on the Surviving Corporation and its Subsidiaries taken as a
whole or (ii) reduce the benefits of the transactions contemplated hereby to
such a degree that Western would not have entered into this Agreement had such
conditions, restrictions or requirements been known at the date hereof.
(c) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
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(e) Blue Sky Approvals. All permits and other authorizations under
state securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of Western Common Stock to be issued in the
Merger shall have been received and be in full force and effect.
(f) Listing. The shares of Western Common Stock to be issued in the
Merger shall have been approved for listing on the Nasdaq, subject to official
notice of issuance.
7.2. Conditions to Obligation of PNB. The obligation of PNB to
consummate the Merger is also subject to the fulfillment or written waiver by
PNB prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Western set forth in this Agreement (subject to the standard set forth in
Section 5.2) shall be true and correct as of the date of this Agreement and as
of the Effective Date as though made on and as of the Effective Date (except
that representations and warranties that by their terms speak only as of the
date of this Agreement or some other date shall be true and correct as of such
date), and PNB shall have received a certificate, dated the Effective Date,
signed on behalf of Western by the Chief Executive Officer and the Chief
Financial Officer of Western to such effect.
(b) Performance of Obligations of Western. Western shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time, and PNB shall have received a
certificate, dated the Effective Date, signed on behalf of Western by the Chief
Executive Officer and the Chief Financial Officer of Western to such effect.
(c) Tax Opinion. PNB shall have received an opinion of McDermott, Will
& Emery, dated the Effective Date, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (i) the Merger
constitutes a "reorganization" within the meaning of Section 368 of the Code and
(ii) no gain or loss will be recognized by shareholders of PNB who receive
shares of Western Common Stock in exchange for shares of PNB Common Stock,
except with respect to cash received in lieu of fractional share interests. In
rendering its opinion, McDermott, Will & Emery may require and rely upon
representations contained in letters from PNB, Western and shareholders of PNB.
(d) Accountants' Letters. PNB shall have received the letters referred
to in Section 6.14 from Western's independent auditors.
(e) Director. Western shall have adopted resolutions sufficient to
appoint Allen C. Barbieri as a director of Western as of the Effective Time, or,
if such person is unable to serve, such other current director of PNB as shall
be mutually satisfactory to Western.
(f) Fairness Opinion. PNB shall have received the written opinion of
Lehman Brothers Inc. to the effect that, as of a date within five days of the
mailing of the Proxy Statement to the shareholders of PNB in connection with the
PNB Meeting, the consideration to be received by the
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<PAGE>
holders of the PNB Common Stock in the Merger is fair to such holders from a
financial point of view.
7.3. Conditions to Obligation of Western. The obligation of Western to
consummate the Merger is also subject to the fulfillment or written waiver by
Western prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of PNB set forth in this Agreement (subject to the standard set forth in Section
5.2) shall be true and correct as of the date of this Agreement and as of the
Effective Date as though made on and as of the Effective Date (except that
representations and warranties that by their terms speak only as of the date of
this Agreement or some other date shall be true and correct as of such date) and
Western shall have received a certificate, dated the Effective Date, signed on
behalf of PNB by the Chief Executive Officer and the Chief Financial Officer of
PNB to such effect.
(b) Performance of Obligations of PNB. PNB shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time, and Western shall have received a
certificate, dated the Effective Date, signed on behalf of PNB by the Chief
Executive Officer and the Chief Financial Officer of PNB to such effect.
(c) Opinion of Western's Counsel. Western shall have received an
opinion of Sullivan & Cromwell, special counsel to Western, dated the Effective
Date, to the effect that, on the basis of facts, representations and assumptions
set forth in such opinion, the Merger constitutes a reorganization under Section
368 of the Code. In rendering its opinion, Sullivan & Cromwell may require and
rely upon representations contained in letters from PNB, Western and
shareholders of PNB.
(d) Accountants' Letters. Western shall have received the letters
referred to in Section 6.14 from PNB's independent auditors.
(e) PNB and Subsidiaries Financial Tests. As of the month end preceding
the Effective Time, but without giving effect to any costs related to the Merger
or any changes effected as a result of Section 6.9 hereof, PNB's shareholder's
equity and allowance for credit losses shall not be less than the respective
amounts set forth on PNB's quarterly report on Form 10-Q for the quarter ended
June 30, 1998, and Western shall have received a certificate, dated the
Effective Date, signed on behalf of PNB by its Chief Financial Officer to such
effect.
(f) Director Resignations. Western shall have received the written
resignation of each director (in such director's capacity as director) of PNB
and PNB Bank Subsidiary effective as of the Effective Time.
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ARTICLE VIII
TERMINATION
8.1. Termination. This Agreement may be terminated, and the Merger may
be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Western and PNB, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(b) Breach. At any time prior to the Effective Time, by Western or PNB,
if its Board of Directors so determines by vote of a majority of the members of
its entire Board, in the event of either: (i) a breach by the other party of any
representation or warranty contained herein (subject to the standard set forth
in Section 5.2), which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such breach; or
(ii) a breach by the other party of any of the covenants or agreements contained
herein, which breach cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of such breach, provided that
such breach (whether under (i) or (ii)) would be reasonably likely, individually
or in the aggregate with other breaches, to result in a Material Adverse Effect.
(c) Delay. At any time prior to the Effective Time, by PNB, if its
Board of Directors so determines by vote of a majority of the members of its
entire Board, in the event that the Merger is not consummated by May 30, 1999,
except to the extent that the failure of the Merger then to be consummated
arises out of or results from the knowing action or inaction of PNB pursuant to
this Section 8.1(c).
(d) No Approval. By PNB or Western, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in the
event (i) the approval of any Governmental Authority required for consummation
of the Merger and the other transactions contemplated by this Agreement shall
have been denied by final nonappealable action of such Governmental Authority or
(ii) the shareholder approval required by Section 7.1(a) herein is not obtained
at the PNB Meeting.
(e) Failure to Recommend, Etc. At any time prior to the PNB Meeting, by
Western if the PNB Board shall have failed to make its recommendation referred
to in Section 6.2, withdrawn such recommendation or modified or changed such
recommendation in a manner adverse in any respect to the interests of Western.
(f) Western Stock. By PNB in the event that, with respect to the Twenty
Day Period (as defined below) both (i) either (A)(1) the Twenty Day Average
Price (as defined below) shall be less than 90% of $29.625 per share (the
"Execution Date Price") and (2) the Western Common Stock Price Percentage (as
defined below) shall be less than the Nasdaq 90% Index Percentage (as defined
below) or (B)(1) the Twenty Day Average Price shall be greater than 90% of the
Execution Date Price and (2) the Western Common Stock Price Percentage shall be
less than the Nasdaq 80% Index
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Percentage (as defined below) and (ii) in any such case PNB has delivered
written notice to Western of its intention to terminate this Agreement within
forty-eight (48) hours following the date of such event (it being understood
that, if an event set forth in clause (i) shall have occurred and PNB fails to
timely deliver the notice referred to in this clause (ii), PNB shall have the
right to terminate if any such event subsequently occurs and PNB timely delivers
such notice); provided, however, that, if Western effects a stock dividend,
reclassification, recapitalization, stock split, combination, exchange of shares
or similar transaction after the date hereof and prior to the Effective Time,
the provisions of this Section 8.1(f) shall be appropriately adjusted.
As used in this Section 8.1(f), (u) "Western Common Stock Price
Percentage" means the percentage determined by dividing the Twenty Day Average
Price by the Execution Date Price; (v) "Nasdaq 80% Index Percentage" means the
percentage determined by dividing (i) the product of (A) the Twenty Day Average
Nasdaq Bank Index times (B) 0.80 by (ii) the Nasdaq Bank Index as of the date of
this Agreement, (w) "Nasdaq 90% Index Percentage" means the percentage
determined by dividing (i) the product of (A) the Twenty Day Average Nasdaq Bank
Index times (B) 0.90 by (ii) the Nasdaq Bank Index as of the date of this
Agreement; (x) "Twenty Day Average Price" means the volume weighted average
sales price per share of Western Common Stock for the Twenty Day Period; for
purposes of determining the "volume weighted average," the aggregate of the
daily sales of Western Common Stock for each of the twenty (20) consecutive days
Western Common Stock is traded shall be divided by the aggregate number of
shares of Western Common Stock traded on Nasdaq during such Twenty Day Period;
(y) "Twenty Day Average Nasdaq Bank Index" means the average of the Nasdaq Bank
Index (the "Nasdaq Bank Index") for the Twenty Day Period; and (z) "Twenty Day
Period" means any twenty (20) consecutive days on which shares of Western Common
Stock are actually traded during the period commencing twenty (20) trading days
prior to the receipt of the last regulatory approval required to be obtained
pursuant to Section 7.1(b) and ending on the trading day that is forty-eight
(48) hours prior to the Effective Time.
(g) Acquisition Proposal. This Agreement may be terminated by PNB by
written notice to Western if PNB (i) receives an Acquisition Proposal, (ii)
receives the advice of its outside counsel that to proceed with the Merger will
violate the fiduciary duties of the PNB Board to PNB's shareholders in light of
such Acquisition Proposal, and (iii) after receiving such advice, determines to
accept such proposal; provided, however, that PNB shall not be entitled to
terminate this Agreement pursuant to this Section 8.1(g) unless it shall have
provided Western with written notice of such a possible determination (which
written notice will inform Western of the material terms and conditions of the
proposal, including the identity of the proponent) not less than two business
days prior to such determination.
(h) Disclosure Schedule Amendment or Supplement. At any time prior to
the Effective Time by Western or PNB if its Board of Directors so determines by
vote of a majority of the members of its entire Board, in the event the other
party amends their Disclosure Schedule pursuant to Section 5.1 and discloses
events that would be reasonably likely to result in a Material Adverse Effect on
the other party or the Surviving Corporation.
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<PAGE>
8.2. Effect of Termination and Abandonment. In the event of termination
of this Agreement and the abandonment of the Merger pursuant to this Article
VIII, no party to this Agreement shall have any liability or further obligation
to any other party hereunder except (i) as set forth in Section 9.1, and (ii)
that termination will not relieve a breaching party from liability for any
willful breach of this Agreement giving rise to such termination.
ARTICLE IX
MISCELLANEOUS
9.1. Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 6.13 and 6.14 and this Article IX which shall survive the Effective
Time) or the termination of this Agreement if this Agreement is terminated prior
to the Effective Time (other than Sections 6.3(b), 6.5(b), 8.2 and this Article
IX which shall survive such termination).
9.2. Waiver; Amendment. Prior to the Effective Time, any provision of
this Agreement may be (i) waived by the party benefitted by the provision, or
(ii) amended or modified at any time, by an agreement in writing between the
parties hereto executed in the same manner as this Agreement, except that after
the PNB Meeting, this Agreement may not be amended if it would violate the CGCL
or reduce the consideration to be received by PNB shareholders in the Merger.
9.3. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.4. Governing Law; Waiver of Jury Trial. This Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of
California applicable to contracts made and to be performed entirely within such
State (except to the extent that mandatory provisions of Federal law are
applicable). Each of the parties hereto hereby irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or related to this
Agreement or the transactions contemplated hereby.
9.5. Expenses. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby.
9.6. Notices. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
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<PAGE>
If to PNB, to: PNB Financial Group, Inc.
4665 MacArthur Court
Newport Beach, California 92660
Attention: Allen C. Barbieri
Facsimile: (949) 833-9207
With a copy to: McDermott, Will & Emery
1301 Dove Street, Suite 1500
Newport Beach, California 92660
Attention: Gregory W. Preston
Facsimile: (949) 851-9348
If to Western, to: Western Bancorp
4100 Newport Place
Suite 900
Newport Beach, CA 92660
Attention: Julius G. Christensen
Facsimile: (949) 757-5845
With a copy to: Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067-1725
Attention: Stanley F. Farrar
Facsimile: (310) 712-8800
9.7. Entire Understanding; No Third Party Beneficiaries. This Agreement
and the Stock Option Agreement represent the entire understanding of the parties
hereto with reference to the transactions contemplated hereby and thereby, and
this Agreement supersedes any and all other oral or written agreements
heretofore made (other than any such Stock Option Agreement). Except for Section
6.13, nothing in this Agreement expressed or implied, is intended to confer upon
any person, other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.8. Interpretation; Effect. When a reference is made in this Agreement
to Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." No provision of this Agreement shall
be construed to require PNB, Western or any of their respective Subsidiaries,
affiliates or directors to take any action which would violate applicable law
(whether statutory or common law), rule or regulation.
* *
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[SIGNATURES BEGIN ON FOLLOWING PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
PNB FINANCIAL GROUP, INC.
By: /s/ Allen C. Barbieri
-----------------------------------------
Name: Allen C. Barbieri
Title: President and Chief Executive Officer
WESTERN BANCORP
By: /s/ Arnold C. Hahn
-----------------------------------------
Name: Arnold C. Hahn
Title: Executive Vice President and Chief
Financial Officer
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================================================================================
STOCK OPTION AGREEMENT
DATED AS OF THE 6TH DAY OF OCTOBER, 1998
BY AND BETWEEN
WESTERN BANCORP
AND
PNB FINANCIAL GROUP, INC.
================================================================================
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of the 6th day of October, 1998 (this
"Agreement"), between , a California corporation ("Grantee"), and PNB Financial
Group, Inc., a California corporation ("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer are entering into an Agreement and Plan of
Merger dated as of the date hereof (the "Plan"), which is being executed by the
parties hereto simultaneously with the execution of this Agreement;
WHEREAS, as a condition and inducement to Grantee's entering into the
Plan and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as defined below); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Plan prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Plan, the parties hereto
agree as follows:
SECTION 1. GRANT OF OPTION. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 553,166 fully paid and nonassessable shares of Common Stock
("Common Stock") of Issuer at a fixed price per share of $29.625 (the "Initial
Price"); provided, however, that in no event shall the number of shares of
Common Stock for which the Option is exercisable exceed 19.9% of the number of
shares of Common Stock then issued and outstanding without giving effect to any
shares subject or issued pursuant to the Option. The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option Price
are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that after such issuance such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of any provision of the Plan.
<PAGE>
SECTION 2. EXERCISE OF OPTION.
(a) Timing of Exercise, Termination. Provided that (i) Grantee shall
not be in material breach of the agreements or covenants contained in this
Agreement or the Plan and (ii) no preliminary or permanent injunction or other
order against delivery of shares covered by the Option issued by any court of
competent jurisdiction in the United States shall be in effect, Grantee may
exercise the Option, in whole or part, at any time and from time to time
following the occurrence of a Purchase Event (as defined below); provided that
the Option shall terminate and be of no further force and effect upon the
earliest to occur of (i) the time immediately prior to the Effective Time, (ii)
12 months after the first occurrence of a Purchase Event, (iii) 18 months after
the termination of the Plan following the occurrence of a Preliminary Purchase
Event (as defined below), (iv) termination of the Plan in accordance with the
terms thereof prior to the occurrence of a Purchase Event or a Preliminary
Purchase Event (other than a termination of the Plan by Grantee pursuant to
Section 8.1(b)(i) or (ii), by Grantee and Issuer pursuant to Section 8.1(a)
thereof if Grantee shall at that time have been entitled to terminate the Plan
pursuant to Section 8.1(b)(i) or (ii) thereof or by Issuer pursuant to 8.1(g)),
or (v) 18 months after the termination of the Plan by Grantee pursuant to
Section 8.1(b)(i) or (ii), by Grantee and Issuer pursuant to Section 8.1(a)
thereof if Grantee shall at that time have been entitled to terminate the Plan
pursuant to Section 8.1(b)(i) or (ii) thereof or by Issuer pursuant to 8.1(g)).
The events described in clauses (i) - (v) in the preceding sentence are
hereinafter collectively referred to as an "Exercise Termination Event."
Anything herein to the contrary notwithstanding, any purchase of shares upon
exercise of the Option shall be subject to compliance with applicable law. The
rights set forth in Section 7 hereof shall terminate when the right to exercise
the Option terminates (other than as a result of a complete exercise of the
Option) as set forth herein.
(b) Preliminary Purchase Event. The term "Preliminary Purchase Event"
shall mean any of the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its subsidiaries (each, an "Issuer
Subsidiary") shall have entered into an agreement to engage in an
Acquisition Transaction (as defined below) with any Person (the term
"Person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934 (the "Exchange Act"), and the rules and regulations thereunder)
other than Grantee or any of its subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer shall have recommended
that the shareholders of Issuer approve or accept any Acquisition
Transaction with any Person other than Grantee or any Grantee
Subsidiary. For purposes of this Agreement, "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving Issuer or any Issuer Subsidiary, (y) a purchase, lease or
other acquisition of all or substantially all of the assets of or
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<PAGE>
assumption of all or substantially all the deposits of Issuer or any
Issuer Subsidiary or (z) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or
any Issuer Subsidiary, provided that the term "Acquisition Transaction"
does not include any internal merger or consolidation involving only
Issuer and/or Issuer Subsidiaries;
(ii) Any Person (other than Grantee or any Grantee Subsidiary or
any Issuer Subsidiary acting in a fiduciary capacity in the ordinary
course of business) shall have acquired Beneficial Ownership or the
right to acquire Beneficial Ownership, of shares of Common Stock (the
term "Beneficial Ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and the
rules and regulations thereunder) such that, upon the consummation of
such acquisition, such Person would have Beneficial Ownership, in the
aggregate, of 10% or more of the then outstanding shares of Common
Stock;
(iii) Any Person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its shareholders, by
public announcement or written communication that is or becomes the
subject of public disclosure, to engage in an Acquisition Transaction
(including, without limitation, any situation in which any Person other
than Grantee or any Grantee Subsidiary shall have commenced (as such
term is defined in Rule 14d-2 under the Exchange Act) or shall have
filed a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to, a tender offer or
exchange offer to purchase any shares of Common Stock such that, upon
consummation of such offer, such Person would own or control 10% or
more of the then outstanding shares of Common Stock (such an offer
being referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively));
(iv) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, or such third
party states its intention to make such a proposal if the Plan
terminates and/or the Option expires, Issuer shall have breached any
covenant or obligation contained in the Plan and such breach would
entitle Grantee to terminate the Plan (without regard to the cure
period provided for therein);
(v) The holders of Common Stock shall not have approved the Plan
by the requisite vote at the meeting of such shareholders held for the
purpose of voting on the Plan, or such meeting shall not have been held
or shall have been canceled prior to termination of the Plan, in each
case after it shall have been publicly announced that any Person (other
than Grantee or any Grantee Subsidiary) shall have (A) made, or
disclosed an intention to make, a bona fide proposal to engage
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<PAGE>
in an Acquisition Transaction, (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect to an
Exchange Offer or (C) filed an application (or given a notice) with,
whether in draft of final form, the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") or any other governmental
authority or regulatory or administrative agency or commission (each, a
"Governmental Authority"), for approval to engage in an Acquisition
Transaction;
(vi) Any Person (other than Grantee or any Grantee Subsidiary),
other than in connection with a transaction to which Grantee has given
its prior written consent, shall have filed an application or notice
with the Federal Reserve Board or other Governmental Authority for
approval to engage in an Acquisition Transaction; or
(vii) The Issuer's Board of Directors shall have withdrawn or
modified (or publicly announced its intention to withdraw or modify) in
any manner adverse in any respect to Grantee its recommendation that
the shareholders of Issuer approve the transactions contemplated by the
Plan in anticipation of engaging in an Acquisition Proposal, or Issuer
or any Issuer Subsidiary shall have authorized, recommended, proposed
(or publicly announced its intention to authorize, recommend or
propose) an agreement to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary.
(c) Purchase Event. The term "Purchase Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any Person other than Grantee or any
Grantee Subsidiary of Beneficial Ownership of shares of Common Stock,
such that, upon the consummation of such acquisition, such Person would
have Beneficial Ownership, in the aggregate, of 25% or more of the then
outstanding shares of Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i) or (ii) hereof except that the percentage referred to
in either such case shall be 25%.
(d) Notice by Issuer. Issuer shall notify Grantee promptly in writing
of the occurrence of any Preliminary Purchase Event or Purchase Event; provided,
however, that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option.
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<PAGE>
(e) Notice of Exercise. In the event that Grantee is entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice (the
"Option Notice" and the date of which being hereinafter referred to as the
"Notice Date") specifying (i) the total number of shares of Common Stock it will
purchase pursuant to such exercise, (ii) the aggregate purchase price as
provided herein and (iii) a period of time (that shall not be less than three
business days nor more than sixty business days) running from the Notice Date
(the "Closing Date") and a place at which the closing of such purchase shall
take place; provided, that, if prior notification to or approval of the Federal
Reserve Board or any other Governmental Authority is required in connection with
such purchase (each, a "Notification" or an "Approval," as the case may be), (a)
Grantee shall promptly file, or cause to be filed, the required notice or
application for approval ("Notice/Application"), (b) Grantee shall expeditiously
process, or cause to be expeditiously processed, the Notice/Application and (c)
for the purpose of determining the Closing Date pursuant to clause (iii) of this
sentence, the period of time that otherwise would run from the Notice Date shall
instead run from the later of (x) in connection with any Notification, the date
on which any required notification periods have expired or been terminated and
(y) in connection with any Approval, the date on which such approval has been
obtained and any requisite waiting period or periods shall have expired. For
purposes of Section 2(a) hereof, any exercise of the Option shall be deemed to
occur on the Notice Date relating thereto. On or prior to the Closing Date,
Grantee shall have the right to revoke its exercise of the Option in the event
that the transaction constituting a Purchase Event that gives rise to such right
to exercise shall not have been consummated.
(f) Payments. At the closing referred to in Section 2(e) hereof,
Grantee shall present and surrender this Agreement and pay to Issuer the
aggregate Option Price for the shares of Common Stock specified in the Option
Notice in immediately available funds by wire transfer to a bank account
designated by Issuer; provided, however, that failure or refusal of Issuer to
designate such a bank account shall not preclude Grantee from exercising the
Option.
(g) Delivery of Common Stock. At such closing, simultaneously with the
delivery of immediately available funds as provided in Section 2(f) hereof,
Issuer shall deliver to Grantee a certificate or certificates representing the
number of shares of Common Stock specified in the Option Notice and, if the
Option should be exercised in part only, a new Option evidencing the rights of
Grantee thereof to purchase the balance of the shares of Common Stock
purchasable hereunder.
(h) Holder of Record. Upon the giving by Grantee to Issuer of an Option
Notice and the tender of the applicable purchase price in immediately available
funds on the Closing Date, Grantee shall be deemed to be the holder of record of
the number of shares of Common Stock specified in the Option Notice,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of
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<PAGE>
Common Stock shall not then actually be delivered to Grantee. Issuer shall pay
all expenses and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of Grantee.
SECTION 3. ISSUER'S COVENANTS.
(a) Available Shares. The Issuer agrees that it shall at all times
until the termination of this Agreement have reserved for issuance upon the
exercise of the Option that number of authorized and reserved shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and from
time to time issuable hereunder, all of which shares will, upon issuance
pursuant hereto, be duly authorized, validly issued, fully paid, nonassessable,
and delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights.
(b) Compliance. The Issuer agrees that it will not, by amendment of its
articles of incorporation or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Issuer.
(c) Certain Actions, Applications and Arrangements. Issuer shall
promptly take all action as may from time to time be required (including (i)
complying with all pre-merger notification, reporting and waiting period
requirements specified in 15 U.S.C. ss. 18a and regulations promulgated
thereunder and (ii) in the event, under the Bank Holding Company Act of 1956, as
amended ("BHCA"), or the Change in Bank Control Act of 1978, as amended, or any
California banking law, prior approval of or notice to the Federal Reserve Board
or to any other Governmental Authority is necessary before the Option may be
exercised, cooperating with Grantee in preparing such applications or notices
and providing such information to each such Governmental Authority as it may
require) in order to permit Grantee to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto, and to protect the
rights of Grantee against dilution.
SECTION 4. EXCHANGE OF OPTION. This Agreement and the Option granted
hereby are exchangeable, without expense, at the option of Grantee, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other agreements providing for Options of different denominations entitling
the holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used in this Section 4 include any agreements and related options for which this
Agreement and the Option granted hereby may be
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exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
SECTION 5. ADJUSTMENTS. The number of shares of Common Stock
purchasable upon the exercise of the Option shall be subject to adjustment from
time to time as follows:
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Common Stock are to be
issued or otherwise to become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after such
issuance and together with shares of Common Stock previously issued pursuant to
the exercise of the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), it represents the same proportion of the number of
shares of Common Stock then issued and outstanding as such proportion before the
applicable event described in this Section 5(a).
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
SECTION 6. REGISTRATION RIGHTS. (a) Upon the occurrence of a Purchase
Event that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee (whether on its own behalf or on behalf of any subsequent
holder of the Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto), promptly take such action as may be required under
applicable federal or state laws, including if applicable registering or
qualifying any shares issued and issuable pursuant to the Option for sale or the
sale of any such shares or otherwise securing any necessary governmental permits
or approvals for the sale of such shares (any and all such actions are
hereinafter referred to as a "Registration"), in order to permit the sale or
other
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disposition of any shares of Common Stock issued upon total or partial exercise
of the Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use commercially reasonable efforts to cause
such Registration to remain in effect for such period not in excess of 180 days
from the day such Registration is first effected. Grantee shall have the right
to demand two such Registrations at the Issuer's expense. The foregoing
notwithstanding, if, at the time of any such request by Grantee as provided
above, Issuer is in the process of a Registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering, the offering or inclusion of
the Option Shares would interfere materially with the successful marketing of
the shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in such Registration contemplated hereby may be reduced;
provided, however, that after any such required reduction, the number of Option
Shares to be included in such Registration for the account of Grantee shall
constitute at least 33 1/3% of the total number of shares of Common Stock held
by Grantee and Issuer covered in such Registration; provided further, however,
that if such reduction occurs, then Issuer shall effect a Registration for the
balance of such shares as promptly as practicable thereafter as to which no
reduction shall thereafter occur. In addition, if the Issuer proposes to effect
a Registration with respect to its Common Stock or any other securities in such
a manner that would permit the Registration of the Shares or a sale of the
Shares for public sale (whether proposed to be offered for sale by the Issuer or
any other Person) it will give prompt written notice to Grantee of its intention
to do so, specifying the relevant terms of such proposal, including the proposed
maximum offering price thereof. Upon the written notice of Grantee (whether on
its own behalf or on behalf of any subsequent holder of the Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto) delivered
to the Issuer within 20 business days after the giving of any such notice, which
request shall specify the number of Shares desired to be disposed by Grantee,
the Issuer will use commercially reasonable efforts to effect, in connection
with such proposed action, the Registration of the Shares or a sale thereof set
forth in such request. Grantee shall be entitled to two such Registrations at
the Issuer's expense. Grantee shall provide all information reasonably requested
by Issuer for inclusion in connection with any such Registration. In connection
with any such Registration, Issuer and Grantee shall provide each other with
representations, warranties, indemnities and other agreements customarily given
in connection with such Registrations. If requested by Grantee in connection
with such Registration, Issuer and Grantee shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating themselves in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements.
(b) In the event that Grantee requests Issuer to effect a Registration
following the failure to obtain any approval required to exercise the Option as
described
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in Section 9 hereof, the closing of the sale or other disposition of the Common
Stock or other securities pursuant to such Registration shall occur
substantially simultaneously with the exercise of the Option.
(c) Except where applicable state law prohibits such payments, Issuer
will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), legal expenses, including the reasonable fees and expenses of one
counsel to the holders of Option Shares the subject of a Registration, printing
expenses and the costs of special audits or "cold comfort" letters, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each Registration pursuant to this Section 6 (including the related
offerings and sales by holders of Option Shares) and all other qualifications,
notification or exemptions pursuant to this Section 6.
(d) In connection with any Registration under this Section 6, Issuer
hereby indemnifies the Grantee, and each officer, director and controlling
person of Grantee, and each underwriter thereof, including each person, if any
who controls such holder or underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement contained in any registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged omission, to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Grantee, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement, that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such holder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 6(d) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 6(d), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall
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not relieve it of any liability which it may otherwise have to any indemnified
party under this Section 6(d). In case notice of commencement of any such action
shall be given to the indemnifying party as above provided, the indemnifying
party shall be entitled to participate in and, to the extent it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense of such action at its own expense, with counsel chosen by it and
reasonably satisfactory to such indemnified party. The indemnified party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the indemnified party unless
(i) the indemnifying party either agrees to pay the same, (ii) the indemnifying
party fails to assume the defense of such action with counsel reasonably
satisfactory to the indemnified party, or (iii) the indemnified party has been
advised by counsel that one or more legal defenses may be available to the
indemnifying party that may be contrary to the interests of the indemnified
party. No indemnifying party shall be liable for the fees and expenses of more
than one separate counsel for all indemnified parties or for any settlement
entered into without its consent, which consent may not be unreasonably
withheld.
If the indemnification provided for in this Section 6(d) is unavailable
to a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the indemnifying
party, in lieu of indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to be indemnified
as a result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of Issuer, the
Grantee and the underwriters in connection with the statements or omissions
which resulted in such expenses, losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The amount paid or payable by a
party as a result of the expenses, losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim; provided, however, that in no case shall the Grantee be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Any obligation by any Grantee
to indemnify shall be several and not joint with other holders of Option Shares.
SECTION 7. OPTION REPURCHASE. (a) Upon the occurrence of a Purchase
Event that occurs prior to an Exercise Termination Event, (i) at the request
(the date of such request being the "Request Date") of Grantee, delivered within
30 days of the Purchase Event (or such later period as may be provided pursuant
to Section 9 hereof), Issuer shall repurchase the Option from Grantee at a price
(the "Option Repurchase Price") equal to (x) the amount by which (A) the
market/offer price (as
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defined below) exceeds (B) the Option Price, multiplied by the number of shares
for which the Option may then be exercised and (ii) at the request (the date of
such request being the "Request Date") of the owner of Option Shares from time
to time (the "Owner"), delivered within 30 days of a Purchase Event (or such
later period as may be provided pursuant to Section 9 hereof), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to (x) the
market/offer price multiplied by the number of Option Shares so designated. The
term "market/offer price" shall mean the highest of (i) the price per share of
Common Stock at which a tender offer or exchange offer therefor has been made
after the date hereof and on or prior to the Request Date, (ii) the price per
share of Common Stock paid or to be paid by any third party pursuant to an
agreement with Issuer (whether by way of a merger, consolidation or otherwise)
or (iv) in the event of a sale of all or substantially all of Issuer's assets,
the sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a nationally-recognized
independent investment banking firm mutually selected by Grantee or the Owner,
as the case may be, on the one hand, and Issuer, on the other hand, divided by
the number of shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the market/offer price, the value of consideration other
than cash shall be determined by a nationally-recognized independent investment
banking firm mutually selected by Grantee or Owner, as the case may be, on the
one hand, and Issuer, on the other hand, whose determination shall be conclusive
and binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
immediately as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price or the portion thereof that Issuer is not then
prohibited from so delivering under applicable law and regulation or as a
consequence of administrative policy.
(c) Issuer hereby undertakes to use commercially reasonable efforts to
obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to accomplish any repurchase
contemplated by this Section 7. Nonetheless, to the extent that Issuer is
prohibited under applicable law or regulation from repurchasing the Option
and/or the Option Shares in full, Issuer shall immediately so notify Grantee
and/or the Owner and thereafter deliver or cause to be
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delivered, from time to time, to Grantee and/or the Owner, as appropriate, the
portion of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five
business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to Section 7(b) is prohibited under applicable law or
regulation from delivering to Grantee and/or the Owner, as appropriate, the
Option Repurchase Price and the Option Share Repurchase Price, respectively, in
full Grantee or Owner may revoke its notice of repurchase of the Option or the
Option Shares either in whole or in part whereupon, in the case of a revocation
in part, Issuer shall promptly (i) deliver to Grantee and/or the Owner, as
appropriate, that portion of the Option Purchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering after taking into
account any such revocation and (ii) deliver, as appropriate, either (A) to
Grantee, a new Agreement evidencing the right of Grantee to purchase that number
of shares of Common Stock equal to the number of shares of Common Stock
purchasable immediately prior to the delivery of the notice of repurchase less
the number of shares of Common Stock covered by the portion of the Option
repurchased or (B) to the Owner, a certificate for the number of Option Shares
covered by the revocation.
(d) Issuer shall not enter into any agreement with any party (other
than Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the
other party thereto assumes all the obligations of Issuer pursuant to this
Section 7 in the event that a Grantee or Owner elects, in its sole discretion,
to require such other party to perform such obligations.
SECTION 8. SUBSTITUTE OPTION.
(a) Grant of Substitute Option. In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to consolidate or
merge with any Person, other than Grantee or a Grantee Subsidiary, and shall not
be the continuing or surviving corporation of such consolidation or merger, (ii)
to permit any Person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other Person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its or any Issuer Subsidiary's assets to any Person,
other than Grantee or a Grantee Subsidiary, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the Acquiring
Corporation (as defined below) or
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(y) any Person that controls the Acquiring Corporation (the Acquiring
Corporation and any such controlling Person being hereinafter referred to as the
"Substitute Option Issuer").
(b) Exercise of Substitute Option. The Substitute Option shall be
exercisable for such number of shares of the Substitute Common Stock (as is
hereinafter defined) as is equal to the market/offer price (as defined in
Section 7 hereof), multiplied by the number of shares of the Common Stock for
which the Option was theretofore exercisable, divided by the Average Price (as
is hereinafter defined). The exercise price of the Substitute Option per share
of the Substitute Common Stock (the "Substitute Purchase Price") shall then be
equal to the product of the Option Price multiplied by a fraction in which the
numerator is the number of shares of Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares for which
the Substitute Option is exercisable.
(c) Terms of Substitute Option. The Substitute Option shall otherwise
have the same terms as the Option, provided, however, that if the terms of the
Substitute Option cannot, for legal reasons, be the same as the Option, such
terms shall be as similar as possible and in no event less advantageous to
Grantee.
(d) Substitute Option Definitions. The following terms have the
meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a merger in which Issuer is the
continuing or surviving Person, and (iii) the transferee of all or any
substantial part of the Issuer's assets (or the assets of any Issuer
Subsidiary);
(ii) "Substitute Common Stock" shall mean the common stock issued
by the Substitute Option Issuer upon exercise of the Substitute Option;
and
(iii) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of the Substitute
Common Stock on the day preceding such consolidation, merger or sale;
provided, however, that if such closing price is not ascertainable due
to an absence of a public market for the Substitute Common Stock,
"Average Price" shall mean the higher of (i) the price per share of
Substitute Common Stock paid or to be paid by any third party pursuant
to an agreement with the issuer of the Substitute Common Stock and (ii)
the book value per share, calculated in accordance with generally
accepted accounting principles,
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of the Substitute Common Stock immediately prior to exercise of the
Substitute Option; provided, further, that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by Issuer, the Person merging into
Issuer or by any company which controls or is controlled by such
merging Person, as Grantee may elect.
(e) Cap on Substitute Option. In no event, pursuant to any of the
foregoing paragraphs, shall the Substitute Option be exercisable for more than
that proportion of the outstanding Substitute Common Stock equal to the
proportion of the outstanding Common Stock of the Issuer which Grantee had the
right to acquire immediately prior to the issuance of the Substitute Option. In
the event that the Substitute Option would be exercisable for more than the
proportion of the outstanding Substitute Common Stock referred to in the
immediately preceding paragraph but for this clause (e), the Substitute Option
Issuer shall make a cash payment to Grantee equal to the excess of (i) the value
of the Substitute Option without giving effect to the limitation in this clause
(e) over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by Grantee and reasonably
acceptable to the Acquiring Corporation.
SECTION 9. EXTENSION OF EXERCISE RIGHT. Notwithstanding Sections 2, 6
and 7 and 11 hereof, if Grantee has given the notice referred to in one or more
of such Sections, the exercise of the rights specified in any such Section shall
be extended (a) if the exercise of such rights requires obtaining regulatory
approvals (including any required waiting periods) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, and (b) to the
extent necessary to avoid liability under Section 16(b) of the Exchange Act by
reason of such exercise; provided, however, that in no event shall any closing
date occur more than 6 months after the related Notice Date, and, if the closing
date shall not have occurred within such period due to the failure to obtain any
required approval by the Federal Reserve Board or any other Governmental
Authority despite the commercially reasonable efforts of Issuer or the
Substitute Option Issuer, as the case may be, to obtain such approvals, the
exercise of the Option shall be deemed to have been rescinded as of the related
Notice Date. In the event (a) Grantee receives official notice that an approval
of the Federal Reserve Board or any other Governmental Authority required for
the purchase and sale of the Option Shares will not be issued or granted or (b)
a closing date has not occurred within six months after the related Notice Date
due to the failure to obtain any such required approval, Grantee shall be
entitled to exercise the Option in connection with the resale of the Option
Shares pursuant to a registration statement as provided in Section 6.
SECTION 10. ISSUER'S REPRESENTATIONS AND WARRANTIES. Issuer hereby
represents and warrants to Grantee as follows:
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(a) Corporate Authority. Issuer has full corporate power and authority
to execute and deliver this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of Issuer and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly authorized, executed and delivered by
the Issuer.
(b) Availability of Shares. Issuer has taken all necessary corporate
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option, that
number of shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly issued, fully
paid, non-assessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
(c) No Violations. The execution, delivery and performance of this
Agreement does not or will not, and the consummation by Issuer of any of the
transactions contemplated hereby will not, constitute or result in (A) a breach
or violation of, or a default under, its articles of incorporation or by-laws,
or the comparable governing instruments of any of the Issuer Subsidiaries, or
(B) a breach or violation of, or a default under, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation of it or
any of the Issuer Subsidiaries (with or without the giving of notice, the lapse
of time or both) or under any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit or license to
which it or any of the Issuer Subsidiaries is subject, that would, in any case
give any other person the ability to prevent or enjoin Issuer's performance
under this Agreement in any material respect.
SECTION 11. Grantee's Representations and Warranties. Grantee hereby
represents and warrants to issuer as follows:
(a) Corporate Authority. Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and deliver of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Grantee. This Agreement has been duly authorized, executed and
delivered by Grantee.
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(b) Investment Intent. The Option is not being, and any shares of
Common Stock or other securities acquired by Grantee upon exercise of the Option
will not be, acquired with a view to the public distribution thereof and will
not be transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Act.
SECTION 12. Assignment. Neither of the parties hereto may assign any of
its rights or delegate any of its obligations under this Agreement or the Option
created hereunder to any other Person without the express written consent of the
other party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event; provided, however,
that until the date at which both the Federal Reserve Board has approved an
application by Grantee under the BHCA and the California Commissioner of
Financial Institutions (the "Commissioner") has approved or exempted an
application by Grantee under Section 700 et. seq. of the California Financial
Code to acquire the shares of Common Stock subject to the Option, other than to
a wholly owned subsidiary of Grantee, Grantee may not assign its rights under
the Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf, or (iv) any other manner approved by
the Federal Reserve Board and the Commissioner. The term "Grantee" as used in
this Agreement shall also be deemed to refer to Grantee's permitted assigns. Any
attempted assignment prohibited by this Section 12 is void and without effect.
SECTION 13. Filings and Consents. Each of Grantee and Issuer will use
its reasonable efforts to make all filings with, and to obtain consents of, all
third parties and Governmental Authorities necessary to the consummation of the
transactions contemplated by this Agreement, including, without limitation,
making application if necessary, for listing of the shares of Common Stock
issuable hereunder on any exchange or quotation system and applying to the
Federal Reserve Board under the BHCA and to state banking authorities for
approval to acquire the shares issuable hereunder.
SECTION 14. Remedies. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties shall hereto be enforceable by either
party hereto through injunctive or other equitable relief. Both parties further
agree to waive any requirement for the securing or posting of any bond in
connection with the obtaining of any such equitable relief and that this
provision is without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
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SECTION 15. Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated. If for any reason such
court or regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the
full number of shares of Common Stock provided in Section 1(a) hereof (as
adjusted pursuant to Section 1(b) or Section 5 hereof), it is the express
intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
SECTION 16. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in Person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Plan.
SECTION 17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement and shall be effective at the time
of execution.
SECTION 18. Expenses. Except as otherwise expressly provided herein,
each of the parties hereto shall bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
SECTION 19. Entire Agreement. Except as otherwise expressly provided
herein or in the Plan, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
except as assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
SECTION 20. Definitions. Capitalized terms used in this Agreement and
not defined herein but defined in the Plan shall have the meanings assigned
thereto in the Plan.
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SECTION 21. Effect on Plan. Nothing contained in this Agreement shall
be deemed to authorize Issuer or Grantee to breach any provision of the Plan.
SECTION 22. Selections. In the event that any selection or
determination is to be made by Grantee hereunder and at the time of such
selection or determination there is more than one Grantee, such selection shall
be made by a majority in interest of such Grantees.
SECTION 23. Further Assurances. In the event of any exercise of the
option by Grantee, Issuer and such Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
SECTION 24. Voting. Except to the extent Grantee exercises the Option,
Grantee shall have no rights to vote or receive dividends or have any other
rights as a shareholder with respect to shares of Common Stock covered hereby.
SECTION 25. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
WESTERN BANCORP
By: /s/ Arnold C. Hahn
--------------------------------------------
Name: Arnold C. Hahn
Title: Executive Vice President and Chief
Financial Officer
PNB FINANCIAL GROUP, INC.
By: /s/ Allen C. Barbieri
--------------------------------------------
Name: Allen C. Barbieri
Title: President and Chief Executive Officer
-19-
FORM OF
SHAREHOLDER AGREEMENT
Shareholder Agreement (the "Agreement"), dated as of October 6, 1998,
by and among (i) ___________________________________, a shareholder (the
"Shareholder") of PNB Financial Group, Inc., a California corporation (the
"Company"), and (ii) Western Bancorp, a California corporation ("Western"). All
terms used herein and not defined herein shall have the meanings assigned
thereto in the Merger Agreement (defined below).
Whereas, Western and the Company have entered into an Agreement and
Plan of Merger, dated as of the date hereof (the "Merger Agreement"), providing
for the business combination transaction contemplated therein in which the
Company will merge with and into Western pursuant to the terms and conditions of
the Merger Agreement (the "Merger") and Western will pay consideration to the
shareholders of the Company in the form of Western Common Stock;
Whereas, the Shareholder owns shares of Company Common Stock (such
shares, together with all shares of Company Common Stock subsequently acquired
by the Shareholder during the term of this Agreement, being referred to as the
"Shares"); and
Whereas, in order to induce Western to enter into the Merger Agreement
and in consideration of the substantial expenses incurred and to be incurred by
Western in connection therewith, the Shareholder, solely in such Shareholder's
capacity as a shareholder of the Company and not in any other capacity, has
agreed to enter into and perform this Agreement.
Now, therefore, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. Agreement to Vote Shares. Shareholder shall vote or cause to be
voted, or execute a written consent with respect to, the Shares then held of
record or beneficially owned, directly or indirectly, by such Shareholder in
favor of adoption and approval of the principal terms of the Merger Agreement
and all transactions contemplated thereby including any agreement of merger
contemplated thereby at every meeting of the shareholders of the Company at
which such matters are considered and at every adjournment thereof and in
connection with every proposal to take action by written consent with respect
thereto.
2. Delivery of Schedule. Shareholder shall deliver to Western not more
than seven (7) days after the date of this Agrement a schedule that identifies
the total number of
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shares held of record or beneficially owned, directly or indirectly, by such
Shareholder on the date hereof.
3. No Voting Trusts. Shareholder agrees that Shareholder will not, nor
will Shareholder permit any entity under Shareholder's control to, deposit any
Shares in a voting trust or subject the Shares to any agreement, arrangement or
understanding with respect to the voting of the Shares inconsistent with this
Agreement.
4. Representations and Warranties of Shareholder. Shareholder
represents and warrants to and agrees with Western as follows:
a. Capacity. Shareholder has all requisite capacity and authority
to enter into and perform his or her obligations under this Agreement.
b. Binding Agreement. This Agreement constitutes the valid and
legally binding obligation of Shareholder, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
c. Non-Contravention. The execution and delivery of this Agreement
by Shareholder does not, and the performance by Shareholder of his or
her obligations hereunder and the consummation by Shareholder of the
transactions contemplated hereby will not, violate or conflict with, or
constitute a default under, any agreement, instrument, contract or
other obligation or any order, arbitration award, judgment or decree to
which Shareholder is a party or by which Shareholder is bound, or any
statute, rule or regulation to which Shareholder is subject or, in the
event that Shareholder is a corporation, partnership, trust or other
entity, any charter, bylaw or other organizational document of the
Shareholder.
d. Ownership of Shares. Shareholder has good title to all of the
Shares as of the date hereof, and, except as set forth on Annex A
hereto (to be delivered to Western not more than seven (7) days after
the date of this Agreement), the Shares are so owned free and clear of
any liens, security interests, charges or other encumbrances.
5. Non-Competition; Disclosure; Solicitation. Neither Shareholder nor
any corporation, partnership, trust or other entity "controlled" by Shareholder
(as that term is defined in the Securities Exchange Act of 1934, as amended)
shall:
a. at any time within a one-year period immediately following the
Effective Time, be employed at a senior level by, acquire greater than
10% of the capital stock of or serve as an organizer or promoter of any
business which provides banking
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services, including, but not limited to, deposit and operational
services, loans, trust services, escrow services and electronic banking
services ("Banking Businesses"), in the county of Orange in the State
of California so long as Western, any of its subsidiaries or any of
their respective assigns remain engaged in any Banking Businesses;
b. at any time following the Effective Date, disclose confidential
information regarding the Company to any third parties, except as
required by law, regulation, a court order, in the defense of
litigation for which the Company may be liable, or in any actions
relating to this Agreement or the Merger Agreement and the transactions
contemplated hereby or thereby; and
c. for a period of three years following the Effective Date,
solicit, directly or indirectly, on its own behalf or on behalf of any
other person or entity, management personnel employed by Western or its
subsidiaries, including the Company immediately after the Effective
Time for employment with any other business;
provided, however, that with respect to any of the matters covered in this
Section 5, to the extent that any restriction set forth in this Section 5 is
adjudicated to be invalid or unenforceable in any jurisdiction, the court making
such determination shall have the power to limit, construe or reduce the
duration, scope, activity or area of such provision to the extent necessary to
render such provision enforceable to the maximum extent permitted by applicable
law, such limited form to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made.
6. Specific Performance and Remedies. Shareholder acknowledges that it
will be impossible to measure in money the damage to Western if Shareholder
fails to comply with the obligations imposed by this Agreement and that, in the
event of any such failure, Western will not have an adequate remedy at law or in
damages. Accordingly, Shareholder agrees that injunctive relief or other
equitable remedy, in addition to remedies at law or in damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that Western has an adequate remedy at law. Shareholder
agrees that it will not seek, and agrees to waive any requirement for, the
securing or posting of a bond in connection with Western's seeking or obtaining
such equitable relief. In addition, after discussing the matter with
Shareholder, Western shall have the right to inform any third party that Western
reasonably believes to be, or to be contemplating, participating with
Shareholder or receiving from Shareholder assistance in violation of this
Agreement, of the terms of this Agreement and of the rights of Western
hereunder, and that participation by any such persons with Shareholder in
activities in violation of Shareholder's agreement with Western set forth in
this Agreement may give rise to claims by Western against such third party.
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7. Term of Agreement; Termination. a. The term of this Agreement shall
commence on the date hereof.
b. This Agreement shall terminate upon the date, if any, of the
termination of the Merger Agreement prior to the Effective Time in accordance
with its terms. Upon such termination, no party shall have any further
obligations or liabilities hereunder; provided, however, such termination shall
not relieve any party from liability for any breach of this Agreement prior to
such termination.
c. If the Merger Agreement is not terminated prior to the Effective
Time, this Agreement (except for the provisions of Sections 4, 5, 6, 9, 10 and
11, which shall survive the Effective Time) shall terminate upon the Effective
Time. Upon such termination, no party shall have any further obligations or
liabilities under this Agreement; provided, however, such termination shall not
relieve any party from liability for any breach of such Section prior to such
termination.
8. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by each party hereto. No waiver of any provisions
hereof by either party shall be deemed a waiver of any other provisions hereof
by any such party, nor shall any such waiver be deemed a continuing waiver of
any provision hereof by such party.
9. Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation if sent by
telecopy or like transmission and on the next business day when sent by a
reputable overnight courier service to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
If to Western:
4100 Newport Place
Suite 900
Newport Place, CA 92660
Attention: Julius G. Christensen
Telecopier: (949) 757-5845
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With a copy to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
Attention: Stanley F. Farrar
Telecopier: (310) 712-8800
If to the Shareholder:
10. Miscellaneous.
a. Severability. If any provision of this Agreement or the
application of such provision to any person or circumstances shall be
held invalid or unenforceable by a court of competent jurisdiction,
such provision or application shall be unenforceable only to the extent
of such invalidity or unenforceability, and the remainder of the
provision held invalid or unenforceable and the application of such
provision to persons or circumstances, other than the party as to which
it is held invalid, and the remainder of this Agreement, shall not be
affected.
b. Capacity. The covenants contained herein shall apply to
Shareholder solely in his or her capacity as a shareholder of the
Company, and no covenant contained herein shall apply to Shareholder in
his or her capacity as a director or officer of the Company.
c. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all
of which together shall constitute one and the same instrument.
d. Headings. All Section headings herein are for convenience of
reference only and are not part of this Agreement, and no construction
or reference shall be derived therefrom.
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E. CHOICE OF LAW. THIS AGREEMENT SHALL BE DEEMED A CONTRACT MADE
UNDER, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO ITS CONFLICTS OF
LAW PRINCIPLES.
11. Attorney's Fees. The prevailing party or parties in any litigation,
arbitration, mediation, bankruptcy, insolvency or other proceeding
("Proceeding") relating to the enforcement or interpretation of this Agreement
may recover from the unsuccessful party or parties all fees and disbursements of
counsel (including expert witness and other consultants' fees and costs)
relating to or arising out of (a) the Proceeding (whether or not the Proceeding
proceeds to judgment), and (b) any post-judgment or post-award proceeding
including, without limitation, one to enforce or collect any judgment or award
resulting from the Proceeding. All such judgments and awards shall contain a
specific provision for the recovery of all such subsequently incurred costs,
expenses, and fees and disbursements of counsel.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
WESTERN BANCORP
By:
-----------------------------------
Name: Arnold C. Hahn
Title: Executive Vice President and
Chief Financial Officer
SHAREHOLDER:
--------------------------------------
(Print or type name)
--------------------------------------
(Signature)
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